The international competitiveness of Chinese manufacturing firms and the exit of the renminbi–dollar peg

This paper evaluates the implications of a shift from a pegged to a floating exchange rate regime for the international competitiveness and the economic behavior of Chinese manufacturing firms. Using a conceptual framework that characterizes the relationship between the exchange rate regime and the potential source of a firm's competitive advantage, it yields two key analytical results. First, Chinese manufacturing firms may increase their reliance on a low-margin pricing strategy as the exchange rate regime shifts towards a more flexible one. As a corollary, a low-margin pricing strategy may discourage Chinese manufacturing firms from undertaking costly research and development (R&D) activities, and investments in human capital development. Second, Chinese manufacturing firms have the incentive to employ various wage restraint measures under a floating exchange rate regime at least in the short term. These key analytical results provide insights into a number of policy-relevant issues that may arise at the firm-level. It concludes by providing some general directions on the timing of a complete transition to a floating exchange rate regime.     

Executives’ preference for integrity and product quality: Evidence from the Chinese food industry

This study tests whether and how top executives’ preference for integrity affects product quality, using manually collected data for executive birthplace and media coverage related to food quality. We find, using ordered logistic regressions and ordinary least squares based on propensity score matching, that a preference for integrity among food industry executives has a positive effect on food quality. Further, executive power significantly regulates this effect. Valuing integrity helps top executives to overcome the temptation to misuse power. Thus, a concentration of power among executives in the Chinese food companies plays a positive role in propagating integrity within the firms they lead, further strengthening the inhibitory effect on quality failure and the positive effect on quality and safety. Finally, we find that internal control is a channel through which the top executives’ preference for integrity can positively influence product quality.     

Unconventional monetary policy and the dollar–euro exchange rate: first results from time-series analysis

This article examines the impact on the US dollar–euro (USD–EUR) exchange rate of the unconventional monetary policy conducted by the US Federal Reserve (Fed) and the European Central Bank (ECB). To that end, we make use of time-series analysis to obtain a reasonable long-run and short run representation of the data generation process and use dummy variables to study how announcements about monetary policy changes can affect the USD–EUR exchange rate. Our results indicate that the announcement and subsequent implementation of such measures by the ECB would have caused an appreciation of the dollar, while those by the Fed would have caused a depreciation of the dollar.     

Media’s role in the making of a democrat: Evidence from East Germany

This paper explores the causal influence of media content on voting behavior. We exploit a natural experiment involving access to West German TV within the German Democratic Republic. Focusing on federal and state election outcomes in the post-reunification decade (i.e., a time at which TV content was harmonized), we find that municipalities that had access to Western TV broadcasts before reunification have lower vote shares for left-wing and right-wing extremist parties. With regard to potential channels, we provide evidence based on survey data that GDR citizens with access to West German TV were less loyal to the socialist regime, less hostile toward foreigners, and exhibited higher levels of social capital. Our findings thus support the notion that access to free media influences political attitudes and facilitates the consolidation of democracy.     

Home-country environment and firms’ outward foreign direct investment decision: Evidence from Chinese firms

This paper takes a holistic view and examines the environmental effect of the home country on firms’ outward foreign direct investment (OFDI) decisions. We construct an economic growth index to assess the overall economic environment of Chinese regions and find that the home country’s business environment is negatively associated with firms’ decisions to invest abroad, and that such a negative relationship can be intensified for firms with state ownership or without an export network. Moreover, unlike previous literature, we look at both the environmental effect on OFDI decisions and the consequential impact of OFDI on firm performance. We employ propensity score matching and difference-in-differences methods, as well as the Heckman two-step model, for our estimations. Our results show that OFDI does indeed improve Chinese firms’ productivity and sales. This paper, therefore, contributes to the literature by identifying a range of home country business environmental factors that have a combined effect on firms’ OFDI decisions, adding to a more comprehensive understanding of OFDI originating from emerging economies.     

Study on the price co-movement among the Asia Pacific,European and Chinese coal markets – based on the empirical analysis of MS-VEC model

In this article, based on weekly data of the three major coal markets (the Asia Pacific, Europe and China) from March 2008 to November 2014, an empirical research on their mutual influence and price co-movement effect among the three major coal markets is conducted by using the Co-integration Theory, Granger Causality Test and markov switching-Vector Error Correction (MS-VEC) model. The conclusions are as follows. (1) There exists a long-term cointegration relationship and bidirectional causality relationship between coal prices at home and abroad, and the influences of foreign coal markets on the domestic coal markets are stronger than the influences of domestic coal markets on foreign coal markets, and thus the interaction between the two markets leads to asymmetric linkage effects. (2) Compared with the VEC model, the MS-VEC model can reflect the nonlinear feature of price co-movement effects. (3) There exists an inherent adjustment mechanism between domestic and foreign coal markets, i.e. the coal prices will be self-revised continuously until a long-term equilibrium state is achieved when a deviation from the equilibrium state occurs. (4) There exists a co-movement effect which varies with the change of regime among the three coal prices, and the self-maintenance is strong and the status transfer phenomenon is clear in different regimes.     

Cost and outcomes associated with rivaroxaban vs enoxaparin for the prevention of postsurgical venous thromboembolism from a US payer’s perspective

Abstract

Objective:

The objective of this analysis was the evaluation of the outcomes and costs associated with rivaroxaban and enoxaparin for the prevention of postsurgical venous thromboembolism (VTE) in patients undergoing total hip replacement (THR) and total knee replacement (TKR) from the US payer perspective.

Methods:

VTE event rates have been reported in three Phase III clinical trials that compared rivaroxaban and enoxaparin for VTE prevention after orthopedic surgery during the prophylaxis (≤35 days for THR patients and 10–14 days for TKR patients) and post-prophylaxis periods (≤90 days following surgery). These data were used in this decision-analytic model to estimate and compare health outcomes and costs associated with rivaroxaban and enoxaparin. The base-case analysis considered the number and costs of symptomatic VTE events during the prophylaxis period only. A 90-day horizon was considered in the sensitivity analysis.

Results:

Following THR, when extended durations of prophylaxis (35 days) were compared, rivaroxaban was associated with lower costs than enoxaparin, with total saving costs of $695/patient. When an extended duration of rivaroxaban prophylaxis (35 days) was compared with a short duration (10–14 days) of enoxaparin prophylaxis, rivaroxaban was estimated to prevent 9.9 additional symptomatic VTE events per 1000 patients, while saving $244/patient (rate/1000 patients). In the TKR population, short duration of rivaroxaban prophylaxis was estimated to prevent 13.1 additional symptomatic VTE events per 1000 patients. It was also less costly than short duration enoxaparin prophylaxis, with a saving of $411/patient (rate/1000 patients).

Limitations:

Only statistically significant differences were captured in the base-case economic analysis, and, therefore, differences in pulmonary embolism (PE) and bleeding events were not captured.

Conclusions:

In this model, rivaroxaban reduced total treatment payer costs vs enoxaparin for the prevention of VTE in THR or TKR patients.     

Who Secures Job Opportunities in the Chinese Government? Evidence Based on the First Jobs of Graduates from a Chinese College

Using a unique data set obtained from a Chinese college, the present paper investigates the determinants of obtaining a job in the Chinese Government. Despite the significant amount of attention paid to this issue by the media, academic study on this subject has been limited. We find that the parents' social capital, membership to the Communist Party, gender and personal ability significantly affect the possibility of a graduate obtaining a job in the public sector. Moreover, although acquiring a job in the government is difficult, no significant wage premium exists for graduates working in this sector. Finally, these results still hold after conducting the Heckman tests to validate the self‐selection bias. This study identifies the determinants of young Chinese people's aspirations to be civil servants, which raises significant policy implications for the government.     

ECB monetary policy and the DM–dollar exchange rate: evidence from a Bayesian VAR

Since the start of the European Monetary Union (EMU) in January 1999, the DM has depreciated considerably against the currencies of major industrial countries. Whether there is a systematic failure of vector autoregressive (VAR) models fitted to the pre-EMU period to predict forward looking variables in the year 1999 is investigated. Conditional forecasts are used in order to capture the potential effects of real shocks and to assess the ECB's reaction to these shocks. The findings suggest that neither real shocks nor the actual ECB-policy reaction can explain the exchange-rate devaluation. This points to important effects of increased uncertainty following the regime shift resulting in an increased risk premium in the foreign exchange market.     

Was there a Portfolio Effect of the Micro-economic Leverage ？ Some Empirical Evidence from the Chinese Stock Market

The study is on a linear model of the relationship between the systematic risk and the micro-economic leverage and analyzed the data from the steel, energy source and chemical fibre industry listed companies in the Chinese stock market in 2002 and 2001. Using the linear regression method, empirical equations were found. The portfolio effect was shown so that some empirical evidence had been found to support the micro-economic leverage portfolio effect theory, which was that the listed companies balanced the operating and financial leverage to minimize the systematic risk.     

Italy’s decline and the balance-of-payments constraint: a multicountry analysis

According to the literature, the decline experienced by the Italian economy in the last two decades depends on a slowdown of its labour productivity, starting in the 1990s. The supply-side explanations of this slowdown are inconsistent with the major stylised facts. In this paper, we verify whether a better explanation is provided by the effect of a negative demand shock, through Italy’s external constraints, in the framework of Kaldor-Dixon-Thirlwall’s cumulative growth model. To this end, we use a multi-country generalisation of Thirlwall’s balance-of-payments-constrained growth model, which allows us to investigate the contribution of Italy’s main trade partners to Italy’s long-run growth from 1970 to 2010. The trade partners are disaggregated into seven groups: Eurozone core, Eurozone periphery, United States, other European countries, OPEC countries, BRIC, and the rest of the world. The results show that Italy’s long-run growth has been consistent with the Bop-constraint, that its decline can be explained by a progressive tightening of this constraint, that the sudden slowdown of labour productivity in the 1990s corresponds to a major shock on Italy’s external constraint, and that the major contributions to this shock came, through different channels of transmission, from the core Eurozone countries and from OPEC countries.     

Trade and the environment: from a ‘Southern’ perspective

The relationship between free trade and the environment is one of the main issues of contention between environmental and ecological economics. Environmental economics assumes a positive relationship between free trade, economic growth and environmental policies. Environmental externalities may cause important damage. However, trade is not to be blamed for this. Instead, the fault lies with policy inadequacies at the national level. On the other hand, some ecological economists criticise the assumptions of environmental economics, especially the immobility of production factors and the positive correlation between income and environmental quality. They plead for measures to prevent deterioration of ‘Northern’ environmental standards in a ‘race to the bottom’ due to ‘ecological dumping” from the South. In this paper, we argue that neither environmental economics nor ‘Northern’ ecological economics take into account the structural conditions determining the international trade system. Based on some new empirical evidence on material flows, we stress the notion of environmental cost-shifting. If physical and political ecology perspectives are adopted, a ‘Southern’ approach to the trade-and-environment issue may arise.     

Does having a cadre parent pay? Evidence from the first job offers of Chinese college graduates

We estimate the wage premium associated with having a cadre parent in China using a recent survey of college graduates carried out by the authors. The wage premium of having a cadre parent is 15%, and this premium cannot be explained by other observables such as college entrance exam scores, quality of colleges and majors, a full set of college human capital attributes, and job characteristics. These results suggest that the remaining premium could be the true wage premium of having a cadre parent.     

Biases in patent examination and firms’ responses: Evidence from the pharmaceutical industry

Empirical analysis of matched patent application data in the world’s major patent offices has shown considerable variation in patent granting probability and examination duration across different countries. This phenomenon is attributed to institutional misclassifications or patent examiners’ mistakes by some authors. Others argued that cross-country heterogeneity could also be caused by deliberate manipulation of patent examination procedures with the goal to foster native inventors through suppressing foreign patent applicants. To explore whether manipulation exists, this study presents a case study of pharmaceutical patents granted by the US patent office and approved by the US FDA. Especially it focuses on the filing behavior of pharmaceutical companies in Korea, Japan and China. The regression results show that the granting ratio of the previous applications of a foreign company is correlated with the company’s probability of lodging a new patent application, which provides a supplementary evidence of the existence of the manipulated patent examination procedures.     

Quantifying the impacts of China’s currency depreciation and capital control: a CGE analysis

A dynamic global multi-regional computable general equilibrium (CGE) model is built to study the effects of Renminbi (RMB) depreciation and capital account liberalization. The simulation results suggest that although the depreciation of RMB can promote China’s trade surplus, it will nevertheless discourage domestic investment, consumption and lead to a decrease of real GDP.     

Governments’ Fiscal Squeeze and Firms’ Pollution Emissions: Evidence from a Natural Experiment in China

Environmental and Resource Economics - We investigate whether and how government fiscal squeeze affects local firms’ pollution emissions. To establish causality, we introduce a policy shock...     

Hollowing out of the Real Economy: Evidence from China’s Listed Firms

The paper studies an often-observed phenomenon of diversification of manufacturing firms into real estate development in East Asian economies. Utilizing a sudden change in China’s accounting standards that requires firms to disclose information about their real estate holdings for investment purpose (or investment property), we examine both the impact of such diversification on firms’ investment in their original business and the stock market response to such diversification. Our results confirm there exists underinvestment in original business (or hollowing out of the real economy) for firms diversifying into real estate, and that there is a lack of investor response to such diversification, in both short-run and long-run. Our study calls for further research on the role of real estate development in the long-run competitiveness of developing economies.     

Productivity and misallocation of energy resources: Evidence from Korea’s manufacturing Sector

This paper analyzes the role of allocative efficiency of energy resources with respect to total factor productivity (TFP) in the Korean manufacturing sector. Using firm-level data for Korea, we extend the framework of Hsieh and Klenow (2009) to measure allocative inefficiency of energy markets as a function of energy price distortions. Our results indicate that between the years 2000 and 2014, intra-industry misallocation has increased. With respect to energy resources, this is truer in the low-oil-price periods than in other periods. An improvement in allocative efficiency could be attained by equalizing total factor revenue productivity across firms within an industry. In reallocating capital, labor, and energy resources, hypothetical TFP increases of 51.3 % and 71.7 % above actual levels in 2000 and 2014, respectively, could have been achieved. The evolution of firm productivity has been shaped by energy (electricity and fuel) market distortion and capital market distortion. Our evidence suggests that government (energy) price intervention is likely to have played an important role in productivity loss and in allocative inefficiency observed in energy markets.     

Changes in cyclical patterns of the USA labor market: from the perspective of nonlinear Okun’s law

The validity of Okun’s law has been debated because of the increase in cyclicality in aggregate hours after 1985. To investigate this, I measure Okun’s coefficients in three phases of the business cycle – recession, early, and late expansions. I found that an increased coefficient for aggregate hours is due to the increased responsiveness of the employment rate during late expansions and to the increased responsiveness of hours per employee during early expansions. These findings question the flexible labor market hypothesis focusing on firms’ firing behaviors during recessions. Rather, working hours’ flexibility represents a more prominent feature of the post-1985 USA labor market.