Learning from exporting in China

Do exports increase the firm's productivity causally? Focusing on the matched information of highly disaggregated transaction and firm‐level data from 2000 to 2006 in China, we construct a new measure of firm‐specific demand shock as an instrument for firm exports, based on the GDP growth rate of destination countries. We find that a one percentage point expansion in exports raises firm total factor productivity (estimated by the Olley–Pakes method) by approximately 0.224 percentage points on average. Moreover, we find that exports to high‐income countries, more processing exports and scope expansion about variety contribute to the learning effect.     

Growth in fragile states in Africa: Conflict and post‐conflict capital accumulation

This article analyses the pattern of capital accumulation in Africa and its interaction with political fragility. Political fragility, defined as armed conflict or civil war, retards or reverses gains with respect to capital accumulation, slowing long‐term economic growth. Many countries experience negative rates of capital accumulation, particularly during periods of acute political instability. In post‐war periods, countries generally continue to experience capital destruction, lending support to the “war ruin hypothesis.” This has implications for long‐term economic growth in view of the strong association between capital accumulation and economic performance. The main policy implication of the analysis is that African countries and their international partners should pay more attention to capital accumulation, including capital reconstruction after periods of political instability, to lay the foundations for sustainable economic growth.     

Macroeconomic consequences of state fragility in sub‐Saharan Africa

Are poor macroeconomic outcomes primarily the result of economic policies, or of deeper underlying state fragility problems in sub‐Saharan Africa? We attempt to answer this question by using carefully specified dynamic panel regression techniques to show how state fragility conditions help to explain the differences in the macroeconomic performance of sub‐Saharan African economies, and to identify the most plausible mechanisms of transmission. We find that countries with greater fragility suffer higher macroeconomic volatility and crisis; they also experience weaker growth. When we disaggregate state fragility into its various components, we find that it is the security and social components that have the strongest causal impact on macroeconomic outcomes, while the political component is, at best, weak. Therefore, we conclude that it is state fragility conditions, and not necessarily macroeconomic policies, that are of first‐order importance in explaining the differences in macroeconomic performance for African countries. The knock‐on effects are mostly mediated through the fiscal channel, the aid channel, and the finance channel. Accordingly, we recommend that interventions in fragile states should best focus on exploiting the potential for using fiscal policy, aid, and finance as instruments to improve macroeconomic outcomes in sub‐Saharan Africa.     

管理者政治关联、制度环境与企业绩效间关系的实证研究

以2008—2013年中国沪深两市的上市公司为研究样本,采用最小二乘法实证检验了管理者政治关联对企业绩效的影响,探讨了不同层面的政治关联对企业绩效影响的差异,揭示了管理者的政治关联在制度环境不完善时的替代效应。研究结果表明:管理者有政治关联会显著提高企业绩效;中央级政治关联对企业绩效的推动作用显著大于省市县级政治关联;管理者政治关联是一个有效的制度外替代机制,制度环境不完善地区的企业管理者拥有政治关联可有效提高企业绩效。     

The “sugar rush” from innovation subsidies: a robust political economy perspective

The governments of most advanced countries offer some type of financial subsidy to encourage firm innovation and productivity. This paper analyzes the effects of innovation subsidies using a unique Swedish database that contains firm level data for the period 1997–2011, specifically informa tion on firm subsidies over a broad range of programs. Applying causal treatment effect analysis based on matching and a diff-in-diff approach combined with a qualitative case study of Swedish innovation subsidy programs, we test whether such subsidies have positive effects on firm performance. Our results indicate a lack of positive performance effects in the long run for the majority of firms, albeit there are positive short-run effects on human capital investments and also positive short-term productivity effects for the smallest firms. These findings are interpreted from a robust political economy perspective that reveals that the problems of acquiring correct information and designing appropriate incentives are so complex that the absence of significant positive long-run effects on firm performance for the majority of firms is not surprising.     

The effects of fragility and financial inequalities on inclusive growth in African countries

Africa has the largest number and proportion of fragile states in the world. Fragile states are characterized by slower economic growth, higher incidences of poverty, and persistent inequality. Thus, there is a circular relationship between fragility, inequality, and slow economic growth. This study examines the relationship between fragility, financial inequalities, and inclusive growth in African countries. We introduce a novel way of examining inclusive growth in African countries by developing a unified measure of inclusive growth that captures the two dimensions of inclusive growth: income growth and income distribution. This enables us to adequately assess not just increased opportunities arising from economic growth, but also see how those new opportunities are distributed across all segments of the population. We captured the fragile status of African countries by using an index of fragility. We measured financial inequalities using new data on financial inclusion. The data analysis suggested negative relationships between fragility and inclusive growth in African countries. In addition, the results suggest positive relationships between financial inclusion and inclusive growth. Thus, inclusive growth can be fostered through policies that reduce financial inequalities. Therefore, a less fragile environment is conducive to inclusive growth both directly and indirectly through financial inclusion.     

The Missing Link: China's Contracted Engineering Projects in Africa

This paper examines the driving forces of China's contracted engineering projects in Africa. Using data on contracted engineering projects in 52 African countries over the period 1991–2010, three groups of hypotheses are tested: (1) economic motives; (2) political ties between China and Africa; and (3) host country characteristics. We find that countries get more projects if they have large market potential and are political allies of China. Our results also suggest that Forums on China–Africa Cooperation promote projects in Africa. In contrast, host country characteristics are hardly related to the amount of engineering projects received.     

基于竞争态模型的中国FDI引进格局分析与战略选择

将竞争态模型引入FDI研究,并以2000--2009年中国外资利用情况进行实证。结果显示：①竞争态是分析外资引进变化趋势和特征的有效方法,能深人把握外资引进目标地的时空结构特征,有利于政府决策;②长期以来,中国外资引进竞争态格局结构基本健全,类型分布虽不理想但日趋合理,外资引进重心稳定于亚太地区和美国等;③未来中国外资引进目标地分为三级,第一级定位于亚太地区的香港、韩国、日本、新加坡、台湾和俄罗斯等,应将收获性和开拓性战略并举;第二级定位于美国和加拿大等发达北美洲国家,应实施扩张性战略;第三级定位于英、法、德、意、瑞士、瑞典、丹麦和荷兰等欧洲发达国家,应实施选择性战略;关于非洲国家外资引入,除政治因素外应采取撤退性战略。     

Democratic Accountability,Regulation and Inward Investment Policy

We examine the effect of domestic political accountability on leaders' strategies for attracting foreign direct investment to less developed countries. We consider two policy areas: the tax burden imposed on firms and the regulatory environment in which they operate. We find that democratic governments are more likely to offer relatively lower tax rates to foreign investors, whereas autocratic governments are more likely to offer relatively lax regulation. This result is driven by the greater elasticity of the political survival function to environmental and labor regulations in more democratic countries. Analyses of firm‐level survey data confirm our main theoretical conclusions.     

Poverty decompositions with counterfactual income and inequality dynamics

Traditional poverty accounting decomposes changes in a country's poverty headcount ratio into changes in income and inequality. We argue that this approach is unsatisfactory from the perspective of policy analysis because it compares a country in two points of time without taking the country's initial situation, and hence its potential for poverty reduction, into account. We thus suggest comparing traditional poverty decompositions with a counterfactual situation. This counterfactual indicates what a country starting from its initial situation could be expected to achieve in terms of income, inequality, and, hence, poverty developments. We construct those counterfactuals by modeling income and inequality trends characterized by convergence and a “Kuznets” relationship between inequality and development. Parameters in those relationships are estimated using PovcalNet survey data from 144 countries and we construct our counterfactual poverty predictions for 71 developing countries. While there is overall a tight relationship between actual developments and counterfactuals, we identify several cases, where both deviate from each other and discuss the policy implications. We also check for commonalities in differently performing countries and find that those who fell particularly short of expectations often underwent political transition and state fragility.     

Does financial inclusion empower women in Africa?

This paper examines the effect of financial inclusion on women's empowerment. We contribute to the growing interest in financial inclusion effectiveness literature by conducting an empirical analysis of 42 African countries to examine the role of financial inclusion in empowering women. We also examine and compare the effectiveness of the three dimensions of financial inclusion viz. usage, access, and quality, and the first most influential indicators, based on their PCA score, of these dimensions. Our findings suggest that financial inclusion has a significantly positive effect on women's empowerment-measured by females' human development index. Examining the relative importance of financial inclusion dimensions, we find access to financial services has a higher effect on women's empowerment. These results are robust to alternative measures of women's empowerment and financial inclusion, and alternative estimation procedures. We also find that the effect of financial inclusion on women's empowerment is higher in low and lower-middle-income countries compared with upper-middle-income countries in the region. This study provides evidence of one of the channels through which financial inclusion contributes to reducing gender inequality, and thereby enhancing economic development.     

Shouldn't Physical Capital Also Matter for Multinational Enterprise Activity?

The foreign direct investment (FDI) literature has generally failed to find strong systematic evidence of “vertical” motivations in bilateral aggregate FDI and foreign affiliate sales (FAS) data, despite recent evidence of vertical FDI in firm‐level data. Moreover, a Bayesian analysis of the empirical determinants of FDI (and FAS) flows reveals that the parent country's physical capital per worker has a strong positive effect on FDI alongside typical gravity‐equation variables; however, this variable is ignored in the knowledge‐capital (KC) model and most empirical work. We address these two puzzles by introducing relative factor endowment differences into the three‐factor, three‐country knowledge and physical capital extension of the 2 × 2 × 2 KC model. Using a numerical version of our model, we show that horizontal and vertical multinational enterprises' (MNEs') headquarters surface in different parts of the Edgeworth box relating the parent country's skilled labor share relative to its physical capital share (of the parent's and host's endowments). The key economic insight is that horizontal MNE headquarters will be relatively more abundant than vertical MNE headquarters in countries that are abundant in physical capital relative to skilled labor, because of the multi‐plant (single‐plant) structure of horizontal (vertical) MNEs—assuming plants (headquarters) use physical capital (skilled labor) relatively intensively in their setups. The theoretical relationships suggest augmenting empirical FAS gravity equations with (polynomials of) the parent's skilled labor share alongside the parent's physical capital share to explain in aggregate bilateral data the coexistence of horizontal and vertical FAS. The theoretical and empirical results shed light on the positive effect of parent's physical capital share on FAS flows, but also suggest that MNE headquarters may be prominent in parent countries with relatively high and low skilled labor shares—once physical capital is accounted for—a result not suggested by the two‐factor KC model.     

Status Incentives and Corporate Giving: Evidence From China's Political Reform On Private Enterprises

In this paper, we estimate the effect of status incentives on charitable giving by exploiting a natural experiment during China's political reform in 2002 that significantly improved the status of private entrepreneurs and their enterprises. We find that exogenous changes in social, political and economic status of private entrepreneurs led to a significant increase in the corporate giving of their privately owned firms. The findings are robust when we use different samples of the data and when we control for a large set of entrepreneurs and firm characteristics in the regression analysis.     

The relationship between remittances and macroeconomic variables in times of political and social upheaval: Evidence from Tunisia's Arab Spring

If Tunisia is hailed as a success story with its high rankings on economic, educational, and other indicators relative to other Arab countries, the popular 2011 uprisings underscored the fragility of its main economic pillars, including those of tourism and foreign direct investment. This paper examines the economic impact of migrants’ remittances, which are expected to exhibit relatively countercyclical behaviour during periods of intense upheaval. This study is novel in its methodological approach, which is used to pinpoint the dynamic effects of remittances on key macroeconomic variables within an unstable framework. The analysis reveals that the effect of remittances on Tunisia's economy has varied over time. Prior to the Arab Spring, remittances had a short‐term negative influence on economic growth, varying effects on domestic investment and positive impacts on consumption. In considering the post‐Arab uprisings, positive and strong impacts of remittances on growth and consumption are found in the long run while negative and moderate investment effects of remittances are shown over the short and medium term.     

International Labor Mobility,Redistribution, and Domestic Political Liberalization

Do international labor flows influence the prospects for democratization both in the countries that export their excess workers and in the countries that import them? This paper argues that emigration should have a positive effect on political liberalization in net source countries because it decreases the amount of redistribution that would occur in a more democratic regime. Conversely, immigration should have a negative effect on political liberalization in net destination countries through the same causal channel: by increasing the amount of redistribution that would occur in a more democratic regime. South Korea and Singapore are considered as illustrative examples, and the paper provides statistical evidence to support the hypothesis that emigration (immigration) has been positively (negatively) related to future political liberalization.     

ISO Standards: A Certificate to Expand Exports? Firm‐Level Evidence from Argentina

Does standard adoption help firms in developing countries overcome information barriers and thereby perform better in international markets? What are the channels through which certification affects firms' exports, the intensive margin, or the extensive margin? We provide evidence on the impact of certification on export performance using a unique firm‐level dataset for Argentina over the period 1998–2006. We find that ISO certification is associated with increased exports, along the extensive margin—primarily in terms of destination countries—and the intensive margin.     

Is trade in electrical and electronic products sensitive to IPR protection? Evidence from China’s exports

This article attempts to provide the first empirical evidence on the effect of intellectual property rights (IPRs) on China’s export of electrical and electronic products. It adopts a gravity model for unbalanced panel data of China’s 146 important trading partners over the period of 2002–2012. To eliminate the effects of FDI in determining the linkage between IPR and exports, the panel excludes the destination countries and territories that invest in China. The results reveal that the level of IPR protection in destination countries has a positive impact on China’s flow of exports. Further analysis on data disaggregated by IPR score demonstrates that a higher level of IPR protection in destination countries and territories is positively linked with China’s exports of these items in each of the IPR protection clusters and indicates a strong market power effect by the interplay between R&D expenditure and IPR in the destinations. Finally, both market power and market expansion effects are found to be prevalent in the destinations, as implied by the coefficient of IPR protection disaggregated by income level of China’s export destinations. The results generally resemble those in the literature that describe the linkage between IPR protection and trade flows.     

Income inequality and export prices across countries

This paper provides theory and evidence on the links between income inequality within a destination country and the patterns of trade and export prices. The theoretical framework relates income inequality to product quality and prices using a simple demand composition effect. The model predicts that a more unequal income distribution in a destination country leads to higher average prices, though the effect is nonlinear and disappears for rich enough countries. The predictions are tested using detailed firm‐level data. Controlling for income per capita, prices are systematically higher in more unequal destinations, and the strength of this effect depends on income per capita. Results are particularly important for middle‐income countries and hold only for differentiated goods, and in particular for products with a high degree of vertical differentiation.     

Who Exports Better Quality Products to Smaller or More Distant Markets?

The role of across‐firm differences in product quality and firms' competitiveness in determining the spatial patterns of within‐product export unit values across destinations is examined in this paper. Using product level export data, it is shown that the average export unit value of a product shipped from the USA or Korea increases with distance and decreases with destination market's size. However, within‐product average unit values for products exported from China and India decrease with distance and increase with market size. To interpret these different spatial patterns of unit values across exporting countries, model of quality heterogeneity is developed in which firms differ in their workers' skill level and higher‐skilled workers show greater productivity in performing tasks that improve product quality. The model predicts that in relatively skill‐abundant countries, exporting firms specialize in high‐quality products using relatively cheap skilled labor, whereas, in relatively skill‐scarce countries, firms that produce lower‐quality products are more competitive.     

The effect of regulating political connections: Evidence from China's board of directors ban

There is a great deal of variation in how countries regulate the relationships between politicians and public-traded firms, but little evidence about how such policies affect firm performance. In 2013, China passed a new regulation that banned politicians from serving on the boards of directors of companies. Using a novel data set that links board members, government officials, and forced resignations, I estimate the effect of the policy on firm performance and stock returns. I find that the loss of a high-level politician significantly reduces a firm’s cumulative stock return and future profits. The effect is driven by officials from government-controlled public sectors and is larger when the firm is in low-marketized areas. The analysis provides important evidence about the efficacy of a commonly used policy tool for reducing political influence in the private sector.