The effects of cross‐border M&As on the acquirers’ domestic performance: firm‐level evidence

Abstract This paper provides empirical evidence on the effects of cross‐border mergers and acquisitions (M&As) on the acquiring firms’ domestic performance in the U.K. and France. We build a new firm‐level data set that combines a global M&A database with balance sheet data for the years 2000 to 2007. Combining matching techniques with a difference‐in‐differences estimator, we find that cross‐border M&As boost on average acquirers’ domestic sales and investment, and they are not accompanied by a downsizing of the domestic labour force in either country. Further, cross‐border M&As in knowledge‐intensive industries lead to improvements in domestic productivity. Our results display some heterogeneity across industries and types of acquisitions, suggesting a connection between the motives for international M&As and their resulting effects.     

Some New Approaches to Evolutionary Economics

This paper examines the relationship between energy production and economic growth in New Mexico using cross section data for the state's 33 counties in Census years 1960, 1970, 1980, 1990 and 2000. The central question is whether or not New Mexico's counties are subject to the resource curse, a phenomenon documented frequently in the literature. Most empirical studies of the resource curse hypothesis have used national or state level data and a broad definition of natural resources. In contrast, this analysis uses county level data with a focus on oil and gas extraction. The estimated models suggest that oil and gas extraction in New Mexico counties has had a small but positive effect on income, employment and population. Similar results were obtained when the model was estimated for 925 counties in 13 energy producing states for the year 2000.     

A Downward‐Sloping Labor Supply Curve: The Case of Peru

The author finds evidence of a downward‐sloping labor supply curve for urban areas in Peru from cross‐sectional household data for 2002 and pooled data for available years from 1985 to 2000. Individuals respond to lower hourly earnings with an increase in the quantity supplied of work hours. This behavior would help to explain the increasing trend in average work hours in Peru (this average for male workers in Lima, the capital city, rose from 50.5 to 53.9 weekly hours between 1985 and 2000; meanwhile, 33.4% of workers had weekly schedules above 60 hours in 2002). Another finding is the increase in hours supplied due to pressure from the more numerous cohorts recently entering the Peruvian labor market.     

The Boom and Bust of the RMB's Internationalization: A Perspective from Cross‐Border Arbitrage

The RMB's internationalization developed very quickly from 2010 to 2015H1, but it slowed down significantly since 2015H2. This paper argues that cross‐border arbitraging activities played a significant role in both the boom and the bust of the RMB's internationalization. A slower pace of the RMB's internationalization based more on real demand might become a new norm in the future. To pursue a more sustainable RMB internationalization in the next decade, the Chinese government should maintain a relatively high economic growth rate, avoid the burst of systemic financial crisis, continue to liberalize the capital account in a gradual and cautious way, accelerate the reform and opening up of the domestic financial market, and integrate the RMB's internationalization with Asian monetary cooperation.     

Self‐employment Dynamics in Australia and the Importance of State Dependence

Using Australian labour force data, both cross‐sectional and longitudinal, this study examines the dynamics of self‐employment with a particular focus on workers transitioning between self‐employment and salaried employment, and the extent to which self‐employment is the result of workers’ observed and unobserved characteristics or is instead determined by their prior employment experience itself. Probability models of self‐employment using both pooled‐panel probit and dynamic random‐effects panel probit methods are estimated, and the results are found to be extremely sensitive to the differences in the econometric methods. Once unobserved heterogeneity and initial conditions are controlled for in the dynamic model, the importance of observed characteristics in determining self‐employment is greatly diminished. Instead, workers’ past experience in self‐employment (as opposed to salaried employment) is found to have a large favourable effect on their future self‐employment prospects. The influence of this state dependence is also considerably more important in determining self‐employment outcomes than salaried ones. Despite establishing the importance of state dependence, however, what this effect implies about why individuals choose to become self‐employed or the role that self‐employment plays in the labour market remains unresolved.     

Uncovered Interest Parity: Cross‐Sectional Evidence

Uncovered interest parity (UIP) is estimated for short‐term horizons from one month to 12 months using a large number of cross‐sectional bilateral exchange rates. In contrast to conventional time‐series UIP, cross‐sectional UIP is examined with a single‐equation estimation and panel regression model estimation. The exchange rates analyzed here include a broad spectrum of countries: developed, developing, low‐inflation, and high‐inflation countries. Based on the empirical evidence, there does not appear to be a well‐publicized UIP puzzle for cross‐sectional UIP, and the slope estimates remain largely between zero and one throughout the sample periods, with a few exceptions. Evidence of UIP is more clear for low inflation countries than for high inflation countries. As interest rate maturity becomes longer from one month to 12 months, the UIP relationship becomes weaker.     

Cross‐Subsidies,and the Elasticity of Informality to Social Expenditures: The Case of Mexico's Seguro Popular

How is the size of the informal sector affected when the distribution of social expenditures across formal and informal workers changes? How is it affected when the tax rate changes along with the generosity of these transfers? In our search model, taxes are levied on formal‐sector workers as a proportion of their wage. Transfers, in contrast, are lump‐sum and are received by both formal and informal workers. This implies that high‐wage formal workers subsidize low‐wage formal workers as well as informal workers. We calibrate the model to Mexico and perform counterfactuals. We find that the size of the informal sector is quite inelastic to changes in taxes and transfers. This is due to the presence of search frictions and to the cross‐subsidy in our model: for low‐wage formal jobs, a tax increase is roughly offset by an increase in benefits, leaving the unemployed approximately indifferent. Our results are consistent with the empirical evidence on the recent introduction of the “Seguro Popular” healthcare program.     

RESTRICTING EMPLOYMENT OF LOW‐PAID IMMIGRANTS: A GENERAL EQUILIBRIUM ASSESSMENT OF THE SOCIAL WELFARE IMPLICATIONS FOR LEGAL U.S. WAGE‐EARNERS

This paper builds on earlier work that used a general‐equilibrium model to show that reducing employment of unauthorized immigrants in the United States through a tighter border‐security policy lowers the average income of legal residents. Here we exploit further the detail available in the general‐equilibrium model to look at distributional effects, recognizing that the policy increases wage rates for low‐paid legal workers. We assess the social welfare effect on legal workers using a constant elasticity of substitution social welfare function. We contrast our general‐equilibrium approach to immigration analysis with the more commonly used partial‐equilibrium, econometric approach. (JEL D63, J61, C68)     

Asymmetric effect of exchange rate volatility on India's cross‐border trade: Evidence from global financial crisis and multiple threshold nonlinear autoregressive distributed lag model

This paper examines the asymmetric effect of exchange rate volatility on India's cross‐border trade with its major trading partners: Japan, Germany, the United States, and China. We extend previous studies in two ways. First, we examine whether global financial crisis changes the asymmetric effect of exchange rate volatility on India's cross‐border trade. Next, we divide exchange rate volatility into quintiles and examine the effect of each quintile on cross‐border trade by using the multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model. Our findings from standard nonlinear ARDL (NARDL) indicate that the asymmetric relationship between exchange rate volatility and cross‐border trade changes as a result of global financial crisis. In addition, findings from MTNARDL indicate that in short‐run, exchange rate volatility symmetrically affects India's cross‐border trade with all sample countries whereas in long‐run it asymmetrically affects cross‐border trade. Overall, these findings are very important for policy implications and open a new dimension to exchange rate volatility and trade flows.     

CROSS‐BORDER MARRIAGE COSTS AND MARRIAGE BEHAVIOR: THEORY AND EVIDENCE

This article analyzes cross‐border marriages between mainland China and Hong Kong (HK). We examine the effects of a reduction in cross‐border marriage costs following an increase in marriage‐migration quotas and the handover of HK to China. We find that cross‐border marriages mainly involve men from the low tail of the HK attribute distribution. We also find that HK women's position in the marriage market and within households deteriorated following the reduction in cross‐border marriage costs and that their disadvantaged position exerts an incentive effect on their labor market behavior. These outcomes are consistent with our matching model.     

Immigration Policy,Self‐selection,and the Quality of Immigrants*

This paper investigates the effects of immigration quotas on the average quality of immigrants by developing a human capital migration model where efficiency in migration depends on skills and emigration rates are higher among skilled workers. Studying the joint determination of the domestic level of wages and immigrants' self‐selection, we find a negative relationship between the wage level and the percentage of educated workers among immigrants, which results in a nonstandard downward‐sloping labor supply. In our framework, a higher quota increases the skill mix of immigrants through its negative effect on wages and raises aggregate national income.     

中国资本账户开放进程中跨境证券投资对国内金融市场的影响*

随着中国资本项目开放进程的推进,跨境证券投资对国内金融市场的冲击日益增强。在此背景下,本文首先通过构建考虑了资本市场收益率以及有管理浮动汇率制度的IS LM BP模型对跨境证券投资与中国国内金融市场的相互影响机理进行了理论探究,并基于中国2005年7月—2016年8月的月度数据,运用马尔科夫区制转移向量自回归模型对中国资本账户开放进程中跨境证券投资与人民币汇率、股票市场收益率、短期利率的联动关系进行了实证分析。研究结果表明：第一,四者的关联性存在明显的区制特征,区制1主要包括次贷危机时期（2007—2008年）、欧债危机时期（2010—2012年）以及后金融危机时期（2015—2016年）,经济呈现“股票市场收益率较低、跨境证券投资较少、短期利率较高、金融市场波动性大”的状态;区制2主要包括次贷危机前夕（2005—2006年）、次贷危机后的量化宽松时期（2009—2010年）以及欧债危机后的调整期（2013—2014年）,经济呈现“股票市场收益率较高、跨境证券投资较多、短期利率较低、金融市场波动性小”的状态。第二,当处于资本市场化进程较快、金融市场波动性较大的区制阶段（区制1）时,跨境证券投资与国内金融市场的联动关系更加明显。本文研究结论对于我国进一步开放资本市场具有借鉴价值和政策启示。     

Re‐vitalizing money demand in the Euro area. Still valid at the zero‐lower bound

The analysis of monetary developments has always been a cornerstone of the ECB's monetary analysis and, thus, of its overall monetary policy strategy. In this respect, money demand models provide a framework for explaining monetary developments and assessing price stability over the medium term. It is a well‐documented fact in the literature that, when interest rates are at the zero‐lower bound, the analysis of money stocks become even more important for monetary policy. Therefore, this paper re‐investigates the stability properties of M3 demand in the euro area in the light of the recent economic crisis. A cointegration analysis is performed over the sample period 1983 Q1 and 2015 Q1 and leads to a well‐identified model comprising real money balances, income, the long‐term interest rate and the own rate of M3 holdings. The specification appears to be robust against the Lucas critique of a policy dependent parameter regime, in the sense that no signs of breaks can be found when interest rates reach the zero‐lower bound. Furthermore, deviations of M3 from its equilibrium level do not point to substantial inflation pressure at the end of the sample. Excess liquidity models turn out to outperform the autoregressive benchmark, as they deliver more accurate CPI inflation forecasts, especially at the longer horizons. The inclusion of unconventional monetary policy measures does not contradict these findings.     

The relationship between inequality and innovative activity: a Schumpeterian theory and evidence from cross‐country data

This article examines the effect of inequality on technological progress when innovations are protected by patents of finite length. It provides a Schumpeterian theory of the non‐linear relationship between income distribution and innovative activity in a dynamic general equilibrium setting. Additionally, the theory is empirically tested by investigating how inequality affects innovative activities in a cross‐country setting. Using two new data sets on inequality, one linear and two non‐linear dynamic panel data models are estimated. The results are robust to two common inequality measures. They support the hypothesis that there is an overall negative relationship between inequality and innovative activity and the relationship is non‐linear but not necessarily an inverted‐U.     

Human capital and the re‐employment of retrenchment labor in urban China

The inefficiency of state‐owned enterprises, followed by the economic reform in urban China, resulted in large‐scale retrenchment during the late1990s. The laid‐off workers were middle‐aged, not well educated and had accumulated a lot of firm‐specific human capital that was unlikely to be of value in the product market. In this study, we investigate how differently human capital affects laid‐off workers’ occupation choices: self‐employment, re‐employment and remaining unemployed. Using 2002 Chinese Household Income Project and 2009 Urban Household Survey datasets, we find that although general human capital measured by education is positively related to the probability of finding a job, it is negatively associated with the probability of self‐employment. Displaced workers with more sector‐specific work experience are more likely to be self‐employed than to be employed by others. Government‐sponsored training significantly increases the likelihood of finding a job. Health is positively associated with re‐employment.     

Exports and left‐behind children: Empirical evidence from the China Migrants Dynamic Survey

The opportunity for jobs and high wages induced by exports have attracted rural laborers in China to work in the cities temporarily, and some parents must leave behind their children in rural areas, called left‐behind children (LBC). Notably, the cause of LBC has not been investigated carefully. In this study, we combine the 2010 to 2015 Chinese trade data with the data from the 2010 to 2015 China Migrants Dynamic Survey(CMDS) to identify LBC based on the young children of migrants not living with their parents in the cities, and empirically test the effects of exports on LBC. The results show that under the same income level and other circumstances, the increase in export dependency significantly increases the probability of the migrants’ young children becoming LBC. We construct an instrumental variable to manage the potential endogeneity problems and conduct many other robustness checks, and all the results are consistent. We also examine the heterogeneous effects of exports on LBC and observe that migrants with low income, low education, rural hukou (area of origin) status, and in manufacturing sectors are more vulnerable to exports.Key Words: Exports; Internal Migration; Left‐behind children     

Location decisions of non‐bank financial foreign direct investment: Firm‐level evidence from Europe

The non‐bank financial sector in Europe has more than doubled in size between 2005 and 2015 reflecting the substantial growth in shadow banking activities. However, a large proportion of the non‐bank financial sector that remains unmapped as granular balance sheet information is not available for over half of the sector. Motivated by these data gaps and employing firm‐level data, this paper examines the location decisions of newly incorporated foreign affiliates in the non‐bank financial sector across 27 European countries over the period 2004 to 2012. The probability of a country being chosen as the location for a new foreign affiliate is found to be negatively associated with higher corporate tax rates and geographic distance but increases with the size and financial development of the host country. The financial regulatory regime in the host country and gravity related controls such as the home and host country sharing a common legal system, language, border, and currency are also found to impact the likelihood of non‐bank financial FDI.     

A Regional Analysis of the Impact of Trade and Foreign Direct Investment on Wages in Mexico, 1984–2000

The conventional Heckscher–Ohlin model of trade predicts an equalizing effect of trade on wages in developing countries abundant in less‐skilled labor. Contrary to these predictions, skill premiums and skill demand increased in Mexico following trade liberalization. “New” trade theories have offered several channels through which trade can increase relative wages and demand for skilled workers. One such channel is foreign direct investment and outsourcing. Using the Mexican Household Income and Expenditure Survey (ENIGH) covering 1984–2000, the author examines the relationship between the demand for skill and maquiladora employment across regions and states. In contrast to previous studies based on manufacturing data for the 1980s, little evidence is found that growth in maquiladora employment is positively related to the increase in relative wages or wage‐bill share of more educated workers.     

COMPARING FEDERAL AND PRIVATE‐SECTOR WAGES WITHOUT LOGS

I use Current Population Survey data from 2005 through 2010 to compare the wages of federal employees and workers in the private sector who have similar observable characteristics. The distribution of wages differed drastically between the federal and private sectors. In particular, I find that federal employees with no more than a high school diploma earned 21% more, on average, than their private‐sector counterparts, whereas those with a professional degree or doctorate earned 23% less. Overall, the average of federal wages was about 2% higher than the average wage of similar private‐sector workers. Other researchers have found larger differences because they used log‐linearized models, which result in comparisons of geometric means. I show that arithmetic means are more relevant in the context of the relationship between a government's compensation policy and its budget. The discrepancy between differences in arithmetic and geometric means occurs because the wages of federal employees were much less dispersed than those of employees with similar characteristics in the private sector. (JEL J31, J38, J45)