The importance of technology-based intersectoral linkages for market share dynamics

The Importance of Technology-Based Intersectoral Linkages for Market Share Dynamics. — The paper introduces technology-based intersectoral linkages (or technological spillovers) in an empirical model of international market share dynamics. The Pavitt taxonomy is applied as a yardstick for interpreting the empirical results. Overall, the results appear to be broadly consistent with the criteria behind the taxonomy, on the relative importance of the different factors of competitiveness in the different sectors. In particular, unit labour costs appear to play the largest role in supplier-dominated industries, ‘own sector’ technological activity plays the largest role in science-based industries, upstream linkages in scale-intensive and downstream linkages in specialized-supplier types of industries.     

What’s trade got to do with it? Relative demand for skills within Swedish manufacturing

What’s Trade Got to Do with It? Relative Demand for Skills within Swedish Manufacturing. — This paper seeks to identify the contribution of trade and technological change to the increase in inequality between skilled and unskilled workers in Sweden since the 1970s. An empirical approach is adopted which allows for the outsourcing of the low-skill parts of the production chain to low-wage locations and is applied to detailed industry and bilateral trade data, the latter distinguishing between low-wage sources of imports and OECD countries. The paper finds that, in contrast to previous studies, trade with low-wage countries may have contributed to the rise in inequality in Swedish manufacturing. The empirical results also suggest that the increased use of technology also played a role in creating greater inequality between skilled and unskilled workers in Sweden, with the magnitude of this impact increasing in the 1990s.     

HECKSHER-OHLIN IN CANADA: NEW ESTIMATES OF REGIONAL WAGES AND LAND PRICES

Many immigrant-receiving and land-abundant countries experienced a diminishing ratio of wages to land prices during the globalisation era from 1870 to 1910. Factor price evidence suggests that Canada does not fit the pattern. We present the first Canadian estimates of region-specific wages and land prices that span the period from 1871 to 1925. Our evidence indicates that while Canada as a nation looks like an anomaly in the era of convergence, this is largely an artefact of aggregating the experience of the labour-abundant eastern provinces with the late-settling and land-abundant western provinces.     

Simple credibility tests of the ERM bands for the pound sterling and the Italian lira

This article presents evidence that the European Monetary System (EMS) bands for the Italian lira and the pound sterling were not credible for most of the period 1990–1992, and especially during the week prior to their withdrawal from the EMS system. Using a simple test, developed by Svensson, domestic interest rates for both Italy and the United Kingdom have been found to be mostly outside the rate-of-return bands implied by the official arrangements of the EMS target zone system. Furthermore, comparing implied forward rates for various maturities with the official EMS bands of both currencies, we again found that the followed monetary policies in both countries were not in general consistent with those needed to maintain an orderly functioning of the (EMS) system. The Svensson test can further be used as an indicator of potential speculative attacks on an EMS currency, and, in turn, as a signal of an emerging need to adjust the corresponding country's monetary policy.     

Misalignments of real exchange rates and the credibility of nominal currency bands

Misalignments of Real Exchange Rates and the Credibility of Nominal Currency Bands. — This paper analyzes a sticky-price target zone model in which realignment risk is modeled endogenously as a function of the degree of real exchange rate misalignments. The implications of the model are used to investigate the credibility of selected nominal ERM exchange rate bands. We find that a lack of credibility of the ERM currency bands occurs mostly in countries with substantial swings and persistent misalignments of real exchange rates. These findings suggest that the major real appreciations in some European bilateral real exchange rates between 1987 and 1992 have been pivotal in triggering the ERM currency crises of 1992 and 1993.     

Excess returns in the EMS: Do “weak” currencies still exist after the widening of the fluctuation bands?

Excess Returns in the EMS: Do “Weak” Currencies Still Exist after the Widening of the Fluctuation Bands? — The authors analyze the issue of how the different institutional arrangements within the ERM have affected the behaviour of excess returns on DM-denominated assets and contribute to the debate on the future of the EMS. Their approach consists in estimating simple forecasting models for interest differentials, and testing for the presence of significant (negative) mean prediction errors. The comparison between predicted and actual outcome indicates that the new system might be characterized by the virtual disappearance of “weak” currencies, as the widening of the bands has removed the expectations of realignments which resulted in high interest differentials.     

Sign predictions of exchange rate changes: Charts as proxies for Bayesian inferences

Sign Predictions of Exchange Rate Changes: Charts as Proxies for Bayesian Inferences. - One recurrent and controversial feature of high-frequency exchange rate returns is the apparent profitability of simple chartist rules. This paper attests the relevance of these rules for predicting the upward and downward tendencies in speculative prices. First, it is shown by means of a variant to the standard Markov switching model that there are swings in the mean for various weekly exchange rate returns. The paper proceeds by showing that certain chartist rules detect these regime shifts quite accurately. As such, these rules can be interpreted as workable proxies for the Bayesian filtering rule of Hamilton.     

Is the European union a natural currency area, or is it held together by policy makers?

Is the European Union a Natural Currency Area, or Is It Held Together by Policymakers? — In 1999, EMU started with 11 members, but with considerable uncertainty about the depth of the convergence between them. The optimal currency area literature stresses the need for shocks which are symmetric and of similar size across countries. Our results show that symmetries in the core are only marginally stronger than those in the periphery; and that these symmetries have been increasingly maintained by policy interventions. Consequently, Europe may evolve into an optimal currency area; but the symmetries will be policy-induced rather than a market phenomenon. This suggests a fragility which could be reflected in the value of the new currency.     

RELATIVE FACTOR PRICES IN THE PERIPHERY DURING THE FIRST GLOBAL CENTURY: ANY LESSONS FOR TODAY?

Globalisation before 1939 had profound effects on factor prices and income distribution, especially between the industrialising core economies and the economies of periphery. Jeffrey Williamson reflects briefly on: the impact of globalisation on relative factor price convergence; the interaction between commodity market convergence and convergence in labour and capital markets; and whether the nineteenth history of the periphery was a different history from that of the industrialising European core. Williamson concludes with observations on why the blacklash against globalisation is less severe today than it was during the first global century.     

COMMENTS ON FACTOR PRICES AND INCOME DISTRIBUTION IN LESS INDUSTRIALISED ECONOMIES, 1870–1939: REFOCUSING ON THE FRONTIER

A great deal of the current research into nineteenth- and twentieth-century globalisation has been focused through a neoclassical trade theory lens. Applying the Stopler-Samuelson paradigm from Heckscher-Ohlin trade theory, the result is an approach that sees price convergence as pivotal in defining, identifying, and measuring globalisation. This focus, however, obscures the implications of frontier incorporation and other insights achieved by viewing nineteenth-century globalisation as a mechanism whereby peripheral economies were incorporated into the core of organised economic activity. A frontier-centred perspective also reintroduces the role of economic institutions as a crucial element of economic growth and development.     

What Caused the Korean Currency Crisis in 1997?*: Weak Fundamentals or Self‐fulfilling Expectations*

The present paper investigates which factor is primarily responsible for the sharp depreciation of the Korean won against the US dollar in 1997, using a bivariate vector autoregressive model of real and nominal exchange rates. In the present study, we directly identify the relative importance of fundamental and non‐fundamental factors from the raw data series on exchange rates. This approach is different from most previous studies on the Korean currency crisis, which use proxy variables to represent the two factors. The empirical results show that the collapse of the Korean currency in 1997 appears to be mostly a result of the weakened macroeconomic fundamentals of the economy with, to a limited extent, some non‐fundamental factors.     

In search of FDI-transmitted R&D spillovers: A study based on Swedish data

In Search of FDI-Transmitted R& D Spillovers: A Study Based on Swedish Data. — This paper analyzes empirically whether inward and outward foreign direct investment (FDI) work as channels for international R&D spillovers. The authors utilize firm-level and industry-level data for Swedish manufacturing. Hardly any evidence of FDI-related R&D spillovers is found. But while the results do not provide support for the hypothesis that the activity level of MNEs’ affiliates matters for the extent of FDI-transmitted international spillovers, they suggest that utilizing foreign affiliates’ employment as a weighting scheme may be too crude a measure. The authors’ analysis shows indeed that the type of activity — R&D or assembly — carried out in the affiliates matters significantly for technology sourcing.     

Human capital,trade, and economic growth

Human Capital, Trade, and Economic Growth. — Human capital, because of its special role in innovative activity and technological progress, has formed the bedrock of the new theories of endogenous growth. However, it not only serves as an engine of growth but also as a productive input along with labor and physical capital. In this study, the authors find evidence of the importance of both roles of human capital. They also find that the relationship between growth and the external effects of human capital vary according to trade regime. When literacy rates are relatively high, open economies grow about 0.65 to 1.75 percentage points more than closed economies.     

FACTOR PRICES AND INCOME DISTRIBUTION IN LESS INDUSTRIALISED ECONOMIES 1870–1939

Global trade expansion after 1870 had potentially powerful effects on income distribution, especially in land-abundant less industrialised economies, by increasing land prices relative to wages. The papers in this issue add evidence on wage–rentals for a range of countries, specifically Australia, Canada, Ghana, India, and Sweden. These new data offer partial support for Jeffrey Williamson's view that the distributional effects of booming global trade to 1914 were powerful and ubiquitous, but they highlight that more attention might be given to geographical boundaries and to other distribution forces including technology and wage bargaining conditions.     

More similar and less equal: Economic growth in the European regions

More Similar and Less Equal: Economic Growth in the European Regions. — This paper examines the growth process of 109 European regions using a new data base. Applying various statistical tools, it concentrates on per capita income and labor productivity. The main results are the following: There has been a clear process of aggregate productivity convergence across the European regions over the 1980s. At the sectoral level, there has not been convergence in agriculture, while the industrial and services sectors show ß-convergence. Most crucially, the regional dispersion in per capita income has remained almost constant so that the differences in wealth conditions of the European citizens are still extremely high.     

How international outsourcing drives up Eastern European wages

How International Outsourcing Drives Up Eastern European Wages. — This paper analyzes the effects of intermediate goods trade on the development of real wages in Central and Eastern European manufacturing. The empirical findings show that world exports in intermediate goods of the CEEC exhibit a negative impact on wages, and imports a positive one. Since 1993, intermediate goods trade between the EU and the CEEC accounted for an increase in wages being most pronounced in Slovakia, Poland and the Czech Republic.