Formal targets, central bank independence and inflation dynamics in the UK: A Markov-Switching approach

We examine inflation and uncertainty in the UK with a version of the Markov Switching model, which allows for changes in the variance as well as in the mean and persistence of a series. We find that the UK’s attempts at exchange rate pegs in the form of shadowing the deutschmark and entering the ERM were ineffective, and in the latter case counterproductive in lowering inflation uncertainty. The 1981 budget, however, greatly lowered uncertainty, and the adoption of a formal inflation target also had a palpable, negative impact on inflation uncertainty. As a suggestive exercise, we examine inflation uncertainty in the US, and find that, over 2005–2008, in the absence of an inflation target, uncertainty rose in the US, while uncertainty remained low in the UK over this period of rising commodity prices and financial turmoil.     

Productivity and efficiency of state-owned enterprises in China

The purpose of this paper is to evaluate the variations in SOE efficiency and productivity from the perspectives of macroeconomic fluctuations and systematic reform in China during 1986–2003. We use Data Envelopment Analysis to measure SOE efficiency. Subsequently, we use the Malmquist Index of Productivity change to measure productivity growth. The empirical results show that SOE efficiency and productivity exhibited obvious improvements during periods of strong systematic reform and a prosperous economy. The systematic reform after 1998 had a clear-cut impact on SOE performance.

Would a North-South Free Trade Agreement Hurt Unskilled Labor in the North?

I present a simple model to examine the impact of international outsourcing on the welfare of skilled and unskilled labor. In this model, specialized business services are to facilitate manufacturing production, creating additional welfare gains in the presence of positive production externalities. Policies that favor the business service sector contribute to the development of a larger bundle of specialized business services, generating more welfare gains to not only skilled but also unskilled labor. Thus, a country’s unskilled labor is not necessarily worse off with open trade if the country is prosperous in business service provisions.     

Why India is mainly engaged in offshore service activities,while China is disproportionately engaged in manufacturing?

We extend the model of Antràs and Helpman (Antràs, P., Helpman, E., 2004. Global Sourcing. Journal of Political Economy 112(3), 552–580) by incorporating the merits of Zhang and Markusen (Zhang, K.H., Markusen, J.R., 1999. Vertical Multinationals and Host-country Characteristics. Journal of Development Economics 59(2), 233–252.) to demonstrate why China has been so successful in disproportionately attracting foreign offshore manufacturing activities, while India has been engaged mainly in offshore service activities. We argue that the host country's industry-specific technology capabilities make the difference in FDI composition between China and India. In addition to incomplete contract frictions, the host country's technological capabilities, which affect technology transfer costs, are essential to FDI inflows. We also find that, after excluding overseas Chinese investment, India is almost on par with China in terms of the market size it offers to marketing-seeking FDI.     

On the distribution of job characteristics: an analysis of the DOT data

We analyse the information in the Dictionary of Occupational Titles to characterize the structure of labour demand. Two dimensions, an intellectual factor and a dexterity factor, capture two-thirds of the variance in job requirements; the remaining (co-)variance cannot be easily structured. Simple linear relationships go a long way in describing the matching between job activities and required worker qualities (Intellect for complex relations to Data and to People, Dexterity for complex relations to Things). There is no dichotomy between mathematical and verbal required skills. Poor working conditions are not restricted to workers in low-level jobs; we find strong support for compensating wage differentials. At more intellectual jobs, men receive less wage compensation for working conditions, while in jobs requiring greater dexterity they receive more. Such a relationship is absent for women.     

The participation decision versus the level of participation in an environmental treaty: a spatial probit analysis

This paper represents treaty participation as a two-stage game, for which nations first decide whether or not to participate and then they choose their level of participation. The resulting subgame perfect equilibrium is used to derive a reduced-form equation for estimating and separating the influences of the variables at the two decision stages. This spatial probit equation forms the basis for a full-information maximum likelihood estimator that accounts for the simultaneity bias associated with public good spillins at both stages. When the procedure is applied to the Helsinki Protocol, we find that the strategic influence of a variable may drastically differ depending upon which stage is scrutinized.     

Mexico's Business Cycles and Synchronization with the USA in the Post‐NAFTA Years

A number of papers have investigated the increasing macroeconomic ties between Mexico and the USA. These studies have relied on linear models, however, making their results suspect. Other papers have investigated nonlinearity over the Mexican business cycle, but have not studied the links between the Mexican and US economies. In this paper a Markov‐switching model is employed to investigate the changing macroeconomic effect of the USA on Mexico. The findings show that the USA indeed appears to have a much larger impact since the passage of the North Atlantic Free Trade Association (NAFTA) than in previous years. Results also indicate that the level of foreign exchange reserves has much less predictive power for the Mexican economy since NAFTA. This suggests that the greater synchronization with the US business cycle may be more attributable to better macroeconomic management in Mexico than to the closer trade links.