The Japanese information economy: Its quantification and analysis in a macroeconomic framework (with comparisons to the U.S.)

Japan is one of the leading information societies and there is official policy promotion of its information economy image. In this study the information sector of Japan is measured and analysed within a macroeconomic framework, using input-output techniques. Important benchmark statistics on both the primary and secondary information sectors are derived and compared to those obtained in an earlier study of the U.S. The analysis reveals the high growth potential of both information sectors in the two economies. However, important inter-country differences also emerge, in particular in regard to the amount of resources devoted to the information task at the disaggregated sector level. This leads to a discussion of the relationship between investment in the information sector, organisational design, informational efficiency and productivity growth, which is seen to be of crucial importance for the future success or failure of the two economies. Limitations of the approach adopted in this study and areas for further research are indicated.     

Construction industry in Spain,is it guilty of the current crisis?

This article presents an analysis of the construction sector in Spain over the last decade. Several indicators are constructed based on Input–Output tables that demonstrate that the importance attributed to this sector does not correspond to its true role in the overall Spanish economy. Although it is true that the construction industry is important for other sectors of the economy, it is also true that the sector shows indicators that are average for the Spanish economy and lower than those of the industrial sector.     

The network of the Iranian techno-economic system

This is a quantitative study of Iranian techno-economic system at the disaggregated industry level. We measure interindustry technology diffusion in the manufacturing sector of Iranian economy in the framework of the Iranian interindustry transaction table and R&D-embodied product flows among the industries. Moreover, we used network analysis to gain a better understanding of the technological network of the manufacturing sector of the economy.Based on several indices that describe the aggregate technological network, we classify Iranian manufacturing sector as a dispersed, hierarchic system.We identified Chemicals and Chemical Products and Rubber and Plastics as the sectors with most powerful contacts in the network, and hence with the highest capability to diffuse technology in the network.We discovered that a large number of sectors in the Iranian innovation network do not diffuse or receive innovation from the other sectors of the economy, and present potential opportunities for widespread diffusion of innovations.     

Effect of subsidy and entry into the informal sector with interlinkage

The present paper focuses on the dualism that exists within the industrial sector. It develops a model of informal sector incorporating its linkage with the formal sector. In this paper the products of the two sectors are imperfect substitutes as products of informal firms are deemed to be of inferior quality compared to the formal sector product. Also the formal sector producer is the dominant producer whereas the informal producers constitute a competitive fringe. In this framework the effect of entry within the informal sector and the effect of a subsidy provided to the informal producers are studied.     

The effect of output growth volatility on output growth: empirical evidence from Turkey

This article assesses the effect of output growth volatility on output growth within a stochastic-volatility-in-mean model with a time-varying framework for an open small economy: Turkey. Until now, the empirical evidence on industrial production mainly reveals that this relationship is negative. However, in further examining different sectors and sub-sectors of industrial production, we find the sign of the relationship changes depending on the sector. Moreover, there is limited evidence that the sign of the relationship changes over time. Thus, the evidence reveals that the nature of the output growth volatility–output growth relationship is not uniform across sectors.     

Does it matter (for equilibrium determinacy) what price index the central bank targets?

What inflation rate should the central bank target? We address determinacy issues related to this question in a two-sector model in which prices can differ in equilibrium. We assume that the degree of nominal price stickiness can vary across the sectors and that labor is immobile. The contribution of this paper is to demonstrate that a modified Taylor Principle holds in this environment. If the central bank elects to target sector one, and if it responds with a coefficient greater than unity to price movements in this sector, then this policy rule will ensure determinacy across all sectors. The results of this paper have at least two implications. First, the equilibrium-determinacy criterion does not imply a preference to any particular measure of inflation. Second, since the Taylor Principle applies at the sectoral level, there is no need for a Taylor Principle at the aggregate level.     

Getting income shares right in agriculture

Most economic studies assume that factor shares are constant across countries and sectors. This article calculates factor shares in the agricultural sector across all US states and shows that there are huge differences, which can be explained by crop composition. In states that focus on more labour-intensive crops, such as fruits, the share of income going to labour is larger than in grain-growing states.     

Dynamics of CDS spread indexes of US financial sectors

This article examines the Credit Default Swap (CDS) spread index for three sectors, banking, financial services and insurance, in the short and long run. In the long run, the results show that the index of the insurance sector which sells the long term CDS contracts has the highest adjustment, while the banking sector is not error correcting. In the short run, although the insurance sector CDS spread index has general predictive power of all sector CDS spreads, the evidence suggests that the banking sector particularly leads the financial services and this in turn leads the insurance sector, implying a leading sector CDS pricing role for the banking spreads in the short run. The short run sensitivity Generalized Impulse Response Function (GIRF) and Generalized Variance Decomposition (GVDC) analyses also demonstrate that the sectors’ credit risk responds more to credit events in the banking sector than in the other two sectors other than their own over a 50 day horizon. However, the lowest cross sector CDS shock impacts in the short run come from the insurance sector. These results are useful for regulators wishing to embark on new regulations of these financial institutions such as Basel III.     

Evolutionary targeting for inclusive development

Many studies articulate a theoretical conceptual change—that is, a change from neo-classical economics and “Picking Winners” policy frameworks to a systemic-evolutionary targeting framework. Within such an intellectual context, this paper attempts to expand the evolutionary targeting framework to facilitate the process of inclusive industrial development. We present a unitary industrial development trajectory which is used as a narrative to articulate the evolutionary paths of Taiwan and Malaysia in making their respective sectoral changes (from informal to formal, and then to high technology sectors) endogenous. Building on both cases, we elucidate how the organization of subsistence farming contributes to development, and hence paves the way for new industrial takeoff. In this regard, the targeting programs that focus on the Schumpeterian segment are improved upon to offer support for (re)organization of the informal sector. This study, therefore, proposes a new analytical grid theorizing the current observations in inclusive development studies. It thus explicitly acknowledges the importance of transforming the informal sector to achieve inclusive development.     

Interaction of formal and informal financial markets in quasi-emerging market economies

The primary objective of this paper is to investigate the interaction of formal and informal financial markets and their impact on economic activity in quasi-emerging market economies. Using a four-sector dynamic stochastic general equilibrium model with asymmetric information in the formal financial sector, we come up with three fundamental findings. First, we demonstrate that formal and informal financial sector loans are complementary in the aggregate, suggesting that an increase in the use of formal financial sector credit creates additional productive capacity that requires more informal financial sector credit to maintain equilibrium. Second, it is shown that interest rates in the formal and informal financial sectors do not always change together in the same direction. We demonstrate that in some instances, interest rates in the two sectors change in diametrically opposed directions with the implication that the informal financial sector may frustrate monetary policy, the extent of which depends on the size of the informal financial sector. Thus, the larger the size of the informal financial sector the lower the likely impact of monetary policy on economic activity. Third, the model shows that the risk factor (probability of success) for both high and low risk borrowers plays an important role in determining the magnitude by which macroeconomic indicators respond to shocks.     

Incidence theory and the shifting of protection across sectors: the South Asian experience

Using the theoretical framework of a simple general equilibrium model, this paper examines whether strategies aimed at protecting or promoting manufacturing industries indirectly taxed the agricultural and service sectors. A panel data set consisting of five South Asian countries over a 26 year time period is employed in the analysis. Three different estimation procedures are used to account for factors that are country specific and those that are common to all countries. The results indicate that the agricultural sector indirectly felt the brunt of the net protection provided to manufactures due to the ‘shifting of protection’ across sectors. The service sector, on the other hand, indirectly benefited from the general equilibrium spillover effects.     

Appropriate technology assessment: A note on policy considerations

This paper summarizes various positions on appropriate technology and its relation to technological dependence, and certain contradictions within the concept are pointed out. An alternative approach to policy questions in appropriate technology assessment and independence is then proposed using a framework involving three economic sectors—the consumer goods sector, capital goods sector, and technological change sector.     

An econometric model of structural change: a case study of Canada

The study postulates that structural change in a resource-based economy can, in large part, be explained by the behaviour of the relative wages. Different wage responses in tradeable and non-tradeable sectors create, over the course of the business cycle, a ‘ratchet effect’ which gradually squeezes the tradeable sector relative to the non-tradeable sector. Although the analysis is undertaken mainly within the Dutch-disease framework, an econometric model incorporating key elements of various views on the subject is tested for Canada. The results are consistent with the predictions of the model.     

银行业综合化经营研究

首先通过回顾国内外银行综合化经营的主要文献,然后构建了银行综合化经营的理论研究框架,并进一步对美国银行业综合化经营与总收益的关系做了OLS回归、协整、脉冲响应以及方差分解分析。研究发现:综合化指标、传统业务收益增幅、银行规模、资本结构均与总收益之间存在正相关关系,且存在长期均衡的关系;脉冲响应分析结果表明:在第1-9期、第18-24期,美国银行业综合化指标对银行业总收益的冲击为正,第10-17期,对银行业总收益的冲击为负;综合化指标对美国银行业总收益的贡献率最大,其次是银行规模,然后是传统业务收益增幅,资本结构的贡献率最小。     

Economic Takeoffs in a Dynamic Process of Globalization*

The paper develops a dynamic general‐equilibrium framework to illustrate that trade liberalization may speed up the process of globalization and industrialization by enabling a small open economy to reallocate production factors to modern export sectors where increasing returns to experience are present. The authors emphasize the role of knowledge in service activities related to the export of modern sector goods, which has the form of a public good that can be utilized in exporting of other modern sector goods. As a consequence of this knowledge accumulation, the economy begins to take off and exhibits more rapid rates of wage and output growth. The accumulation of knowledge also shifts comparative advantage in the modern sector to more service‐intensive goods, thus leading to a natural evolution of comparative advantage. These results lend theoretical support to the different development experiences in the 1960s between East Asia and Latin America.     

Corporate sector liability dollarization and exchange rate balance sheet effect in Turkey

In this study, we investigate the causes and balance sheet effect consequences of Liability Dollarization (LD) of nonfinancial sectors in Turkey. The dynamic panel data Generalized Method of Moments (GMM) results suggest that both sector specific and macroeconomic variables are significant in explaining the corporate sector LD. Industries appear to partially match the currency composition of their debt with their income streams. Devaluations are found to be contractionary, in terms of investments and profits, for sectors with higher LD. Macroeconomic instability affects the performance of the industries negatively. Our results also stress the importance of strong macroeconomic policy stance for an endogenous dedollarization process.     

Structural Change and Economic Growth in China

This study develops a new analytical framework to account for sources of rapid economic growth in China. The traditional Solow approach is expanded to include another source of economic growth—structural change. The empirical results show that structural change has contributed to growth significantly by reallocating resources from low‐productivity sectors to high‐productivity sectors. It is found that the returns to capital investment in both agricultural production and rural enterprises are much higher than those in urban sectors, indicating underinvestment in rural areas. On the other hand, labor productivity in the agricultural sector remains low, a result of the still large surpluses of labor in the sector. Therefore, further development of rural enterprises and an increase in labor flow among sectors and across regions are key to improvements in overall economic efficiency.     

The economic impacts of drought on the economy of Iran: An integration of linear programming and macroeconometric modelling approaches

In this paper, we provide economy-wide estimates of the costs of drought in the cropping sector of the Iranian economy, using a linear programming model to estimate the direct costs on agriculture, and a macroeconometric model to trace the indirect impacts on the rest of the economy. The results indicate that a severe drought such as the one that occurred in the crop year 1999-2000 imposes a direct cost of 1605 million USD, equivalent to 30.3% of the total value added of the cropping sector in Iran. This, in turn, leads to a 12.7% reduction in the value added of other agricultural sub-sectors (livestock, fisheries and forestry). In the rest of the economy, the manufacturing and service sectors experience value added declines of 7.8 and 3.7%, respectively. In addition, there is a substantial decrease in investment in the agricultural, manufacturing and service sectors. Thus, such a drought reduces overall GDP by about 4.4%, and it would also result in decreased non-oil exports, increased food imports, and a rise in inflation. The results of some drought mitigation simulations are reported in brief. Such estimates strengthen the case for increased attention to drought strategies and management in agriculture in Iran and elsewhere.     

The dual economy in long-run development

A salient feature of developing economies is the coexistence of a modern commercial sector alongside a traditional subsistence sector—the dual economy. The apparent differences in productivity between sectors imply substantial losses in aggregate productivity. Existing theories of the dual economy rely on exogenous price distortions, and cannot explain why or if these distortions evolve over the course of development. This paper provides a model of the dual economy in which the productivity differences arise endogenously because of a non-separability between the value of market and non-market time in the traditional sector. Incorporating endogenous fertility, the model then demonstrates how a dual economy will originate, persist, and eventually disappear within a unified growth framework. An implication is that traditional sector productivity growth will exacerbate the inefficiencies of a dual economy and produce slower overall growth than will modern sector productivity improvements.     

The impact of regulatory change on EU energy utility returns: the three liberalization packages

The European Union’s (EU) energy sector is changing due to major policy reforms. In this article, we examine the impact of major legislative changes which were designed to induce competition in the energy sector: the three liberalization packages. Competition was expected to benefit the industry by phasing out inefficient firms. EU citizens were also expected to benefit as competition was likely to promote a more efficient energy sector and more consumer choice of energy products and services. However, this legislative change occurred during a period of extreme market turmoil. We examine the impact of all these changes on the risk profile of the sector. Our results show that the liberalization legislation significantly increased systematic risk exposure of the sector, reducing its role as a defensive investment asset. We also show that commodities had relatively little impact on sector returns, but this was expected as utilities can offset commodity risk in hedging markets. We compare our results to those obtained in neighbouring EU sectors and find the impacts are isolated to the energy sector. This article makes a major contribution to energy policy by empirically showing the change in risk as a result of sector liberalization.