Assessing structural change: the case of Austria

In recent years in many OECD countries the view became popular that a country has a healthy industrial structure if it has a high share of high-tech industries and a low share of traditional industries like textiles and steel. Therefore, industrial policy in these countries introduces programmes for reallocating from traditional sectors to high-tech sectors in order to increase national welfare. This paper questions this view by taking into account recent insights of international trade theory and shows, in the case of Austria, why conventional concepts of measuring and assessing structural change (used, e.g. by the OECD) are misleading and thus lead to wrong conclusions in the assessment whether structural adjustment has gone in the ‘right’ direction. More specifically, the ‘popular’ criteria ‘share and shift’, ‘high-tech versus traditional products’, and ‘R & D intensity’ are discussed and an alternative interpretation suggested by economic theory is given. Additionally, the paper illustrates the alternatie interpretation of these popular criteria on the example of the textile industry which, as a traditional consumer goods industry, managed to modernize largely without R & D of its own and was able to meet international competition successfully.     

PRODUCTIVITY GROWTH IN LATIN AMERICA OVER THE LONG RUN

The low pace of Latin American productivity growth in recent decades, despite extensive economic reforms, has yet to be understood in a longer‐run context where factors such as demographic changes, structural shifts, and investment levels can be taken fully into account. The OxLAD database provides comparable sectoral output and workforce series over 1900–2000 for the six leading economies in the region for the first time. Our analysis of this new dataset shows that: intersectoral resource reallocation reduced aggregate productivity growth in all three periods; total factor productivity growth was low throughout the century, and even negative in the closing three decades; and thus factor accumulation—investment in fixed capital and skilled labor—was the main source of productivity growth in Latin America during the twentieth century.     

Geopolitics and territorial issues: Relevance for South America

This paper surveys the impact of geopolitical thinking as applied to issues of territory in Latin America, with special emphasis upon its Southern Cone. The relevance of geopolitics is examined as an ideological doctrine and as a normative framework to understand territorial changes, territorial conflicts that have not escalated into fully‐fledged wars, and rare cases of actual wars fought in the twentieth century in South America. I question the changing meaning of geopolitical doctrines following the ‘third wave’ of democratization in Latin America by suggesting more ‘positive’ avenues for the former pernicious “implications of geopolitical doctrines, including economic development and regional integration. Finally, I juxtapose ‘conventional’ geopolitics with more recent ideas of ‘critical’ geopolitics and its potential implementation in the region.     

OUTPUT GROWTH AND STRUCTURAL REFORM IN LATIN AMERICA: HAVE BUSINESS CYCLES CHANGED?

This paper documents important changes in real gross domestic product (GDP) growth of six large Latin American countries. The main results can be summarized as follows. First, there is evidence of a structural break in real GDP toward stronger mean growth and a substantial reduction in volatility. Second, the timing of the breaks suggests that the important changes in economic policies of the 1980s and 1990s have been effective in permanently improving economic growth in the region. These changes in the growth processes imply recessions that are shorter in duration and milder in amplitude. The sustained increase in commodity prices observed in recent years explains an important share of growth in the region since 2003. But after accounting for the effect of commodity prices, there is even stronger evidence of a structural break in real GDP growth. (JEL E32)     

Accumulation of reserves and keeping up with the Joneses: The case of LATAM economies

In this paper we explore the ‘Mrs. Machlup's Wardrobe’ hypothesis to understand the growing trend of Latin American economies amassing large stocks of international reserves. Using annual data from 1980 to 2007, we examine the relevance of the argument that economies continue to add to their existing reserves stock in order to keep up with the Joneses. We find strong evidence of presence of the Joneses effect. The effect is robust to the inclusion of traditional determinants of reserve accumulation as well as region specific factors including commodity exports that set the Latin American economies apart from other emerging economies.     

Spillover Effects of the 2008 Financial Crisis in Latin America Stock Markets

This paper examines the transmission of the 2008 US financial crisis to four Latin American stock markets using daily stock returns from 2006 to 2010, analyzing before, during and after the 2008 financial crisis. The empirical evidence presents a financial contagion by showing persistently higher and more volatile pair-wise conditional correlations during the crisis period. This indicates there are structural changes in mean and volatility of the correlation coefficients due to the 2008 financial crisis in Latin American markets. The results here could be useful in international portfolio diversification decision-making in Latin American region. In addition, the predicting the volatility in different markets could be a useful input for reducing financial instability in crisis episodes to policy makers.     

The high road and the low road to international competitiveness: Extending the neo‐Schumpeterian trade model beyond technology

Extending the neo‐Schumpeterian trade model, we estimate a ‘social‐gap’ model for a group of 17 OECD countries over the period 1975–1995. We find that government spending on social protection, employment protection regulations, union density, strike activity, and income security in the labor market (all measured in ‘gap’ form) are statistically significantly related to changes in international competitiveness. Specifically, we find some support for a Calmfors–Driffil, nonlinear, relation between cooperative labor relations and social spending patterns on the one hand, and international trade (and inward foreign investment) competitiveness on the other, implying that countries with relatively stronger institutional arrangements have better international economic performance than countries in the middle of the scale of conflict and cooperation. Our results indicate that models focusing solely on innovative effort are misspecified, and may suffer from an omitted variable bias caused by the absence of consideration of other institutional factors influencing international trade and investment.     

Spectrum allocation in Latin America: An economic analysis

As elsewhere, wireless markets play a crucial role in Latin American economic growth. Mobile telephone networks increasingly provide the communications infrastructure that has largely been lacking throughout the region. Yet, governments have generally made only modest allocations of bandwidth available to Latin American wireless operators, either absolutely (in terms of spectrum each country could allocate at modest opportunity cost) or relative to countries in North America, Asia and the European Union. Using an empirical model estimated on mobile phone data for international markets, we show that very large social benefits are available to countries that make more spectrum available for mobile phone markets. We conduct simulations using our calibrated model to provide lower bounds for country-by-country gains from larger allocations. We also discuss the impact of alternative regulatory regimes on the feasibility to achieve those social gains.     

‘Geopolitics of Integration’ and the Imagination of South America

The main tenet of this article is to argue that the process of regionalisation in Latin America is entering into a new phase, where South America is consolidating an own process of regional integration. From being not more than a geographical expression, South America is rapidly becoming a political and economic entity with increasing international actorhood. One important difference to the past is that there is now a ‘core state’, Brazil, with a clear strategy directed towards deepening South American integration. Yet, Brazil is not alone; there is also an increasing convergence with other South American states and old rivalries are being substituted for increased cooperation in areas such as economy, infrastructure, energy, security or aid. As this article explains, the logic of action of the forces behind the process of integration can be understood by analysing the evolution of South American geopolitical current called ‘geopolitics of integration’.     

中国拉美石油能源战略与拉美石油能源国有化

我国自20世纪90年代以来实施的拉美石油能源战略已经初现成效,但近年来,拉关一些主要产油国的石油能源国有化对我国拉关石油能源战略产生了强烈的冲击。因此,我国拉关石油能源战略在实施中应注重经济关系改善,巩固和扩大市场;淡化政治,突出合作的企业行为;采取多种战略组合开发模式,提高规避和抗击各类风险的能力。     

WHAT MAKES INTERNATIONAL CAPITAL FLOWS PROMOTE ECONOMIC GROWTH? AN INTERNATIONAL CROSS‐COUNTRY ANALYSIS

This paper re‐examines the relationship between international capital flows and economic growth within the context of various ‘conditional factors’ that possibly have the potential to influence such relationships. It achieves this by employing panel data for 80 countries that cover 1976–2007. International capital inflow is broken down into foreign direct investments (FDI) and foreign portfolio investments (FPI). We find interesting evidence that only FDI has a positive effect on growth and that FPI has an unfavorable, if not negative, effect on growth. The conditional variables of banking liberalization, high‐income level, twin crises, lower corruption, and human capital mitigate the positive impacts of FDI on growth. In contrast, the middle‐income level and good shareholder protection have a positive effect. As concerns FPI, the level of financial liberalization, being in a Latin American region, the wealth of countries, and market governance all influence the way that FPI affects growth, whereas the conditional variables of twin crises and human capital do not influence the effect of FPI on economic growth.     

Cyclicality of Fiscal Policy in Latin America over the period 1990 ‐ 2015

Latin American countries experienced important changes in the 2000s. The implementation of fiscal reforms, public debt reduction and the high level of accumulated reserves gave them more policy space than in the past. As a result, Latin American countries were able to implement countercyclical policies to face the negative economic and social consequences associated with the recent macroeconomic shock. Some countries performed better than others. In particular, Social Democratic and Centrist governments enjoyed more fiscal space; they had realized larger budget surpluses over the good years and were able to cope with the crisis without impairing their fiscal conditions. Yet, Latin America has experienced a public finance deterioration in the most recent years. While governments are showing an increasing ability on taxation they are still facing some problems on the expenditure side. As a result, fiscal policy returned acyclical after the period of the crisis. The sustainability of public accounts may be strengthened increasing tax pressure on the richest, reducing tax evasion and improving current spending efficiency. However, the increasing political problems are putting many questions about future trends of public finance in the region.     

Return of industrial policy?

For the sake of freedom, economic growth and poverty reduction the state in market economies should limit itself to regulating markets and (sometimes) correcting ‘market failures’. This neoliberal conception has been the near-consensus for the past two to three decades in the West and in western-led international organizations such as the World Bank. But as of recently, the consensus has been challenged by circumstances with which it cannot contend. This article spells out key ideas behind the consensus – in particular, its rejection of industrial policy. It then argues that the US government has long practised – to good effect – a hitherto little noticed type of industrial policy focused neither on the individual firm nor on the geographic region but on networks of firms, and that a (small) change in the American normative climate has occurred post 2008 in favour of a government steering role in markets. Moreover, some middle-income countries, with manufacturing sectors shrinking in the face of East Asian competition, have recently shown renewed interest in industrial policy. Finally, parts of the World Bank have recently begun to operationalize industrial policy, under the banner of ‘building competitive industries’ (industrial policy by another name), as has not been the case since the mid 1980s. The combination of these several forces may herald the emergence of new global norms in favour of a more ‘developmental’ role of the state.     

Book Reviews

Abstract

This paper argues that exchange rate models rooted in the theory of Purchasing Power Parity (PPP) and balanced trade are fundamentally mis-specified, as evidenced by the disjuncture between: (1) the empirical evidence, which largely refutes PPP; and (2) the empirical result that ‘real’ productivity shocks are associated with observed secular trends in exchange rates. In the former case we have a theory without convincing evidence, and in the latter case we have empirical evidence in want of a consistent theory. If looked at from the perspective of a ‘cost of production’ theory of prices, such empirical results might not be so theoretically anomalous. So-called ‘real’ variables (especially productivity and unit labor costs), let in through the side door as ‘shocks’ to PPP equilibrium, may in fact be part and parcel of the formation of prices of production on an international scale through capitalist competition. The primary conclusion is that the empirical evidence supports a cost of production theory of the terms of trade and the real exchange rate. The empirical evidence in support of the Balassa–Samuelson model of the exchange rate is re-interpreted in this light. In this interpretation, parity holds only in terms of rates of return on investment which, in the classical tradition, are presumed to equalize across industries internationally.     

The poverty of democracy in Latin America

This paper reviews recent Latin American presidential elections as a means of examining the quality of democracy in the region. Its principal hypothesis is that, notwithstanding the claims of mainstream analysis, the (re)introduction of formal democratic procedure has not represented a meaningful advance in authentic, broad-based political and economic enfranchisement of the region’s working class and peasant majorities. In many cases the so-called democratic transition has merely disguised the adaption of previously authoritarian mechanisms of social control.     

Spillovers to low-income countries: importance of systemic emerging markets

This article documents the expanding economic linkages between low-income countries (LICs) and a narrow group of ‘Emerging Market (EM) leaders’ that have become major players in international trade and financial flows. VAR models show that these linkages have increased the share of growth volatility that can be attributed to foreign shocks in LICs. Dynamic panel models further analyse the impact of LIC trade orientation and production structure on the sensitivity to foreign shocks. The empirical results demonstrate that the elasticity of growth to trading partners’ growth is high for LICs in three out of the five regions: Asia, Latin America and the Caribbean, and Europe and Central Asia. However, for commodity-exporting LICs in Sub-Saharan Africa and the Middle East, terms of trade shocks and demand from the EM leaders are the main channels of transmission of foreign shocks     

Persistence and determinants of income inequality: The Brazilian case

Latin America, which is a region known for its high and persistent income inequality levels, experienced a significant decline in income inequality since the second half of the 1990s. Brazil is a particularly interesting case in Latin America. While the country presented notable economic growth and improvements in income distribution in the early 2000s, Brazil continues to experience high levels of income inequality in comparison with other Latin American or advanced economies. This research contributes to the literature by examining the key drivers of income distribution and the degree of persistence of income inequality among Brazilian states. This research also improves upon previous works by using more recent and comprehensive data and addressing concerns regarding heterogeneity and endogeneity by using the system GMM estimation method. Our findings show that income inequality is highly persistent across Brazilian states and that government policies including income transfer programs made important contributions to reduce income inequality in Brazil. This study also shows that the decline in labor income ratios between different ethnic groups and the increase of the share of formal jobs in the labor market contributed to reduce income inequality.     

贸易增长、劳动力市场刚性与产业间劳动力转移——基于面板数据门槛效应模型的实证研究

劳动力市场刚性的存在是决定国际贸易能否促进产业间劳动力转移的关键因素之一,然而现有的实证研究却忽视了劳动力市场刚性的决定性作用。本文基于国外文献的度量方法构建劳动力市场刚性和产业间劳动力转移的度量指标,并利用面板数据门槛效应模型研究当劳动力市场刚性存在差异时贸易增长对产业间劳动力转移所产生的不同影响。本文的研究发现,当劳动力市场刚性程度低于门槛值时,贸易增长能加速产业间劳动力转移;而当劳动力市场刚性程度高于门槛值时,贸易增长则会阻碍产业间劳动力转移。由此得出结论,欲使中国的贸易增长起到促进产业间劳动力转移的效果,必须先在劳动力市场领域进行改革,消除劳动力市场刚性。     

中印信息技术产业的比较研究

在经济全球化和国际分工迅速发展的今天，信息技术产业在很大程度上体现了一国的经济发展水平。关注和研究中印信息技术产业的发展，对中国发展信息技术，改造传统产业，促进国民经济信息化，推动经济结构调整将具有非常重大的借鉴意义。     

The determinants of Latin American exchange rate regimes

The experience of the last thirty years suggests that a wide range of factors affects policymakers’ choice of exchange rate regime. The initial explanation was that changes in the international sphere dominated domestic policies and strongly influenced how governments decided among the trade-offs. More recently, domestic political factors’ influence on the choice of exchange rate regimes have been emphasized, providing detailed and rich insights into the dynamics of the choice. Neither approach has been entirely successful. Both internal and external factors must be taken into account. This article builds on previous empirical work and takes into account domestic and international influences on the choice of exchange rate regimes in Latin America between 1964 and 1996. In addition, we highlight a variety of ‘interactions’, choices of economic policy that are affected by both national and international pressures and that, in turn, influence the choice of exchange rate regime. The empirical model uses multinomial ordered logit analysis to determine the factors in exchange rate determination and to compare the explanatory of the models with and without the interaction variables.