‘Unproductive’ sectors and economic growth: a theoretical analysis

This paper examines the role of service, nonmarket and unproductive activity sectors in causing stagnation. The literature on this subject is critically discussed and it is argued that although these three sectors are not the same, the discussion of their roles raises similar theoretical issues regarding the nature of sectoral distinctions and macroeconomic structure. Three simple models are developed to illustrate how these ‘unproductive’ sectors may or may not cause stagnation. It is concluded that more attention should be given to sectoral distinctions and macroeconomic structures before these sectors are dismissed as being ‘unproductive’.     

市场化转型、风险偏好与中国商业银行的盈利性

在控制了影响银行盈利性的主要宏观经济及其他个体特征变量的条件下,本文考察了样本期间内全要素生产率变化、国有控股、公开上市、市场势力及风险偏好等因素对中国商业银行盈利性的影响程度与方向。研究发现:在当前金融制度安排下,商业银行向以提升全要素生产率为核心的内涵式发展模式的转变,反而轻微地降低了银行的盈利性;国有控股与公开上市对银行的盈利性均具有正向影响;随着多元化竞争体系的形成,商业银行的盈利能力获得了大幅提升;而中国商业银行在经营活动中的风险态度越是谨慎,风险承担越是适度,其盈利性就表现得越好。在推进商业银行市场化转型的进程中,需要关注国家整体金融制度的顶层设计问题,同时有效控制银行的经营风险,以实现其盈利性的可持续增长。     

Quality-oriented growth: a new trend for Chinese firms

ABSTRACT

Based on data from the China Employer-Employee Survey (CEES), this study analyses the actual effect of quality-driven growth on firms’ performances in the economic transition of recent years. The results show positive and significant effects between the firms’ performance and quality-oriented growth, which is defined as a strategy that supports the spirit of greater entrepreneurial innovation, the advancement of input quality, and corporate governance improvement. Using a quality-driven growth mode, firms can effectively relieve the adverse effect of downward macroeconomic growth pressure on performance. This study proposes that China’s macroeconomic policy should shift from demand-oriented management to supply-oriented management, with a particular focus on quality development strategy. Moreover, firms should establish a quality-driven development strategy, facilitating a spirit of entrepreneurial innovation, advancing input quality, and improving corporate governance. This strategy will increase the firm’s performance, and effectively relieve the macroeconomic downward pressure.

Abbreviations: CEES: China Employer-Employee Survey, TFP: Total factor productivity     

Productivity growth patterns in US dairy products manufacturing plants

We analyse the productivity growth patterns in the US dairy products industry using the Census Bureau's plant-level data set. We decompose Total Factor Productivity (TFP) growth into the scale and technical change components and analyse variability of plants’ productivity by constructing transition matrices. We observe a cross-sectional dispersion in plant-level productivity growth in the industry. Even though the industry aggregate shows a small TFP growth rate ?0.3%, quartile rank analysis shows that while the lowest productivity quartile plants average 1.9% loss in productivity, the highest productivity quartile plants average 1.1% growth annually. Our results show considerable movements of plants in their productivity rank categories overall and across age groups, and we find that the scale effect contribution to TFP growth accounts for about 90% of TFP growth on average in the industry. These plants extract scale efficiencies over technological progress to fuel TFP growth. The youngest plants start with the lowest productivity growth at the initial time period, but they catch up older plants productivity, which present the highest average growth rate through years. This may indicate a ‘learning-by-doing’ process for the industry.     

Estimating ‘gamma’ for tail-hedge discount rates when project returns are cointegrated with GDP

Martin Weitzman has suggested a method for calculating social discount rates for long-term investments when project returns are covariant with consumption or other macroeconomic variables, so-called ‘tail-hedge discounting’. This method relies on a parameter called ‘real project gamma’ that measures the proportion of project returns that is covariant with the macroeconomic variable. We compare two approaches for estimation of this gamma when the project returns and the macroeconomic variable are cointegrated. First, we use Weitzman’s own approach, and second a simple data transformation that keeps gamma within the zero to one interval. In a Monte-Carlo study, we show that the method of using a standardized series is better and robust under different data-generating processes. Both approaches are examined in a Monte-Carlo experiment and applied to Swedish time-series data from 1950–2011 for annual time-series data for rail freight (a measure of returns from rail investments) and GDP.     

The impact of foreign direct investment on productivity: New evidence for developing countries

We provide new empirical evidence on the relationship between inward foreign direct investment (FDI) and total factor productivity (TFP) growth using cross-country data for 51 developing countries over the period 1984–2010. Our results suggest a weak direct effect of FDI on TFP growth but, after accounting for the roles of human capital and institutions as contingencies in the FDI-TFP growth relationship, we find a robust FDI-induced productivity growth response dependent on these ‘absorptive capacities’. However, the relevance of the human capital contingency effect diminishes when the effect of institutions is also considered, which suggests that improving institutions is relatively more important than human capital development for developing countries to realise productivity gains from FDI.     

全要素生产率及其在农业领域的研究进展

全要素生产率在农业经济领域得到了广泛应用,成为观察中国农业增长模式和结构的重要分析工具。本文在对全要素生产率及其增长进行概念性阐释的基础上,重点对目前应用较为广泛的核算方法及其进展进行归纳、比较和述评,讨论了这一分析工具仍然存在的一些问题和技术性争议,进而从全要素生产率及其增长因素两个方面,对中国农业全要素生产率的研究进展进行综述性总结。     

ChinHow R&D Investments Influence TFP Growth: Evidence from China’s Large and Medium- Sized Industrial Enterprises

This paper investigates the potential channels through which R&D may influence TFP growth using industry-level panel data of China’s large and medium-sized industrial enterprises over the period of 2000–2007. Comparing with existing literature, we provide a closer look of the relationship between R&D and TFP growth by decomposing TFP growth into efficiency change and technical change components using Malmquist productivity index and distinguishing between upstream R&D spillovers and downstream R&D spillovers. We find TFP grow slightly during 2000–2007, and R&D investment indeed serves as an engine of productivity growth just as endogenous growth theories argued, which is largely because R&D accelerates technical progress even it also results in enlarging technical inefficiency. However, we find a robust negative effect of downstream R&D spillovers on TFP growth, the effects of upstream is positive but not statistically significant. In addition, we do not find the positive effects of human capital on TFP as endogenous growth theories indicated, but find human capital severs as “assimilation device” for R&D spillovers both in promoting TFP growth and increasing technical efficiency even the effects on technical progress is adverse.     

Shocks,financial dependence and efficiency: Evidence from U.S. and Canadian industries

This paper investigates how changes in industries’ funding costs affect total factor productivity (TFP) growth. Based on panel regressions using data for U.S. and Canadian industries and industries’ dependence on external funding as an identification mechanism, we show that increases in the cost of funds affect TFP growth negatively. The effect is non‐monotonic depending on a sector's external finance need. This paper presents a theoretical model that produces the observed non‐monotonic effect of financial shocks on TFP growth and suggests that financial shocks distort the allocation of factors across firms even within an industry, thus reducing TFP growth.     

Engines of growth in the US economy

There is good reason to believe that R&D influences on TFP growth in other sectors are indirect. For R&D to spill over, it must first be successful in the home sector. Indeed, observed spillovers conform better to TFP growth than to R&D in the upstream sectors. Sectoral TFP growth rates are thus inter-related. Solving the intersectoral TFP equation resolves overall TFP growth into sources of growth. The solution essentially eliminates the spillovers and amounts to a novel decomposition of TFP growth. The top 10 sectors are designated ‘engines of growth’ led by computers and office machinery. The results are contrasted with the standard, Domar decomposition of TFP growth.     

The Facts and the Values of the Lucas Critique

In his influential 1976 paper, ‘Econometric Policy Evaluation: A Critique,’ Robert E. Lucas, Jr. presented the policy non-invariance argument, also known as the Lucas critique (LC). Drawing on the work of Putnam and Walsh, this paper discusses how the LC, like all works of scientific inquiry, contains values entangled with scientific facts, and argues that the Lucas critique devalued and revalued the highest values in macroeconomic science, a process known as ‘transvaluation.’ Most importantly, the LC worked to operationalize a shift in values that undermined belief in economists’ ability and responsibility to make meaningful interventions in the economy. Employing the language and concepts of continental philosophy, this paper discusses the meaning and effect of the LC on the values embedded in contemporary macroeconomic science.     

The Shape of ‘Rising Powers’ to Come? The Antinomies of Growth and Neoliberal Development in Turkey

ABSTRACT

The short-term GDP growth-based economic success of the BRICS has spawned a trend of grouping large emerging market economies under shared monikers. The proliferation of a wide array of labels – from MINTs to VISTAs – within political and financial circles has been accompanied by a growing scholarly interest in the study of these ‘emerging markets’ and future ‘rising powers’. This paper discusses the literature on Turkey’s ‘rising power’ status to problematise the conceptual and analytical parameters that shape these wider debates. Accordingly, I argue that the established parameters are wholly based in, and in turn reproduce, a neoliberal conception of development which prioritises a narrowly construed metric of economic progress based on GDP growth, while simultaneously ignoring the associated socio-economic and environmental costs. The paper interrogates the ways in which select macroeconomic indicators have been deployed to legitimise neoliberal reform in Turkey and utilises this case study to mount a methodological challenge to the relevant IR/IPE literatures that conceptualise ‘emerging markets’ and ‘rising powers’ from growth-oriented perspectives.     

The productivity challenge. What to expect from better-quality labour and capital inputs?

The aim of this article is to develop and implement an analytical framework assessing whether better-quality inputs, via a rise of TFP, could compensate an ageing-induced slowing of economic growth. Here ‘better-quality’ means more educated and older/more experienced workforces; and also better-quality capital proxied by its ICT content. Economic theory predicts that these trends should raise TFP. To assess these predictions, we use EU-KLEMS data, with information on the age/education mix of the workforce, as well as the importance on ICT in total capital, for 34 industries within 16 OECD countries, between 1970 and 2005. We generalize the Hellerstein–Neumark labour-quality index method to simultaneously capture workers’ age/experience or education contribution to TFP growth, alongside that of ICT. The conclusion of the article is that the quality of inputs matters for TFP. We find robust microeconometric evidence that better-educated and older/more experienced workers are more productive than their less-educated and younger/less-experienced peers. Also, ICT capital turns out to be more productive than other forms of capital. And when used in a growth accounting exercise covering the 1995–2005 period, these estimates suggest that up to 40% of the recorded TFP growth could be ascribed to the rising quality of inputs.     

Robust determinants of health care expenditure growth

Our aim is to disclose robust explanatory variables for health care expenditure (HCE) growth by introducing to this field of research a method that is especially well suited for situations of ‘model uncertainty’: the Extreme Bounds Analysis (EBA). We analyse data for 33 OECD countries over the period 1970–2010 and include – as far as it is statistically feasible – all macroeconomic and institutional determinants of HCE growth in the EBA that have been suggested in the literature. Furthermore, we analyse to what extent outliers in the data influence the results. Our results confirm earlier findings that GDP growth and a variable representing Baumol’s ‘cost disease’ theory emerge as robust and statistically significant determinants of HCE growth. Depending on whether or not outliers are excluded, we find up to six additional robust drivers: the growth in expenditure on health administration, the change in the share of inpatient expenditure in total health expenditure, the (lagged) government share in GDP, the change in the insurance coverage ratio, the growth in land traffic fatalities and the growth in the population share undergoing renal dialysis.     

The impact of the Great Recession on TFP convergence among EU countries

This article provides evidence on the effect of the Great Recession on productivity convergence among European Union (EU) economies. We use firm data, aggregated at the country-year level, to analyse the evolution of beta-convergence on total factor productivity (TFP) for 2003–2014. We obtain a positive impact of the recession on TFP (unconditional and conditional) beta-convergence across EU economies. These results support the existence of a catching-up process within the EU during the recent financial crisis. Other macroeconomic and institutional characteristics are important in fostering TFP growth, namely R&D intensity and quality of governance.     

Firm value in commonly uncertain times: the divergent effects of corporate governance and CSR

Economic uncertainty disrupts firms’ ability to create value. Most related literature examines how various organizational characteristics affect value under extreme conditions – the global financial crisis. However, recent work in quantifying economic uncertainty now makes it possible to take a more nuanced approach in investigating the conditions under which this value reduction can be mitigated during more ‘commonly uncertain’ periods. In this paper we analyze the effects of corporate governance mechanisms and social responsibility investments on Tobin’s q across 13 years and 40 countries. Evidence suggests that shareholder-centric corporate governance policies restrict board and executive flexibility during uncertain times, and therefore stifle their ability to react effectively to adverse macroeconomic changes. We also find that CSR initiatives serve as insurance in that they preserve value under uncertainty by acting as a reservoir of social capital.     

Understanding the Effect of Productivity Changes on International Relative Prices: The Role of News Shocks

The US real exchange rate and terms of trade have been found to appreciate when US labour productivity increases relative to the rest of the world. This finding is at odds with predictions from standard international macroeconomic models. In this paper, we find that incorporating news shocks to total factor productivity (TFP) in an otherwise standard open‐economy sticky‐price dynamic stochastic general equilibrium (DSGE) model with variable capital utilization can help the model replicate the above empirical finding. Labour productivity increases in our model after a positive news shock to TFP because of an increase in capital utilization. Under some plausible calibrations, the wealth effect of good news about future productivity can increase domestic demand strongly and induce an increase in home goods prices relative to foreign goods prices.     

Input versus output taxation in an experimental international economy

This paper presents the results of a policy oriented macroeconomic experiment involving an ‘international’ economy with a relatively small ‘home’ country and a large ‘foreign’ country. It compares the economic performance of two alternative tax systems: a wage tax system and a sales-tax-cum-labor-subsidy system. The two systems are applied to the small country, while the wage tax system always obtains in the large country. The main result is that the sales tax system outperforms the wage tax system, using standard economic indicators. Moreover, it turns out that under the sales tax system economic activities appear to be moving toward the ‘better’ of two theoretical equilibria. It is argued that producers’ reluctance to incur costs up-front while being uncertain about product prices can explain these results. Several pieces of evidence are provided to support this claim. The results strongly suggest that behavioral aspects should be taken into account also in applied macroeconomic models.     

ENDOGENOUS DEBT‐EQUITY RATIO AND BALANCE‐SHEET CHANNEL: IMPLICATIONS FOR GROWTH AND WELFARE

This paper endogenizes the debt‐equity ratio and embodies financial leverage in a cash‐in‐advance model of endogenous growth. Our analysis finds that the debt‐equity ratio is positively related to the balanced‐growth rate, since it serves as a ‘financial accelerator’ to stimulate investment projects. Compared to previous studies, this positive relationship gives rise to an additional balance‐sheet effect, which substantially affects the macroeconomic consequences of monetary and taxation policies. Due to the existence of the balance‐sheet effect, we also find that the Friedman rule is not necessarily optimal.     

THE IMPACT OF MANUFACTURING FIRMS’ USE OF ACADEMIC WORKERS ON THEIR PRODUCTIVITY LEVEL

We examine how firms’ productivity level, measured by the total factor productivity (TFP), is affected by their use of academic workers. A panel dataset of Norwegian manufacturing firms is used. Firms’ production level is shown to be negatively affected by their share of academic workers, but we find no clear relationship between this share and the TFP. If we account for the fact that there is an interaction between the share of academic workers and the capital stock, we find that this share has a non‐significant effect on the production level.