Does Trade Integration Contribute to Peace?

We investigate the effect of trade integration on interstate military conflict. Our empirical analysis, based on a large panel data set of 243,225 country‐pair observations from 1950 to 2000, confirms that an increase in bilateral trade interdependence significantly promotes peace. It also suggests that the peace‐promotion effect of bilateral trade integration is significantly higher for contiguous countries that are likely to experience more conflict. More importantly, we find that not only bilateral trade but global trade openness also significantly promotes peace. It shows, however, that an increase in global trade openness reduces the probability of interstate conflict more for countries far apart from each other than it does for countries sharing borders. The main finding of the peace‐promotion effect of bilateral and global trade integration holds robust when controlling for the simultaneous determination of trade and peace.     

Labor Law in China: How Does It Contribute to the Economic Security of the Workforce? A Commonsian Reading

By adopting the “reasonable value” notion applied to the labor relationship as proposed by John R. Commons, I study the way in which labor legislation in China can be understood as the search for a status of employment security for rural migrant workers. However, the Chinese labor market is experiencing growth in a particular form of informal labor: delegated and temporary labor. I analyze this contradiction not as a failure of the legislation itself, but as the product of a particular institutional context which provides a way to skirt the law, and thereby diminish its effectiveness. Finally, in a non-democratic state, labor law — which has been instrumentalized and mobilized within a form of state corporatism — reveals that very significant challenges exist for building a truly secure status for employees.     

Does Intelligence Affect Economic Diversification?

This paper extends the growing literature on knowledge economy by investigating the effect of intelligence on economic diversification. Using a battery of estimation techniques that are robust to endogeneity, we find that human capital has positive correlations with export diversification, manufactured added value and export manufactures. This empirical evidence is based on a world sample of 170 countries for the year 2010. The findings have significant implications for the fight against the Dutch disease. In essence, investing in human capital could bring economic diversity and therefore dampen negative external shocks related to resource‐dependence. Other knowledge‐economy implications are discussed.     

Does Globalization Foster Economic Growth?

This article examines the effects of globalization, by especially focusing on the relaxation of local equity requirements (LERs) in developing countries. By constructing an endogenous growth model, where profit leakage to the South through LERs plays a key role, we obtain the following results. First, the relaxation of LERs in the South drives the relocation of firms from the North to the South, yielding a U‐shaped growth rate. Second, our numerical simulations suggest that a sufficient relaxation of LERs is beneficial for the South, although the shared profit of joint ventures is maximized through the use of LERs.     

Is Economic Integration the Solution to African Development?

In the African continent, several regional initiatives have been launched or executed. These gave rise to several groupings including COMESA consisting of 19 countries, ECOWAS (15 countries), ECCAS (10 countries), and SADC with 15 countries. These groupings are not exclusive in that several countries belong to more than one regional group. The road to full integration clearly begins with a regional arrangement. The many groupings in Africa had the long term goal of creating an all inclusive African Economic Union. The objective is to promote the African continent’s economic growth, political stability, and good governance. The paper examines the effectiveness of some of these regional grouping in the context of an all-inclusive African club with the aid of the club model. Using data for the period 1986–2005, costs and benefits of membership are evaluated using the gravity Model. The Helpman’s size dispersion index is used to identify a potential anchor for a regional grouping.

When Does Everyone Contribute in the Private Provision of Local Public Goods?

When does everyone genuinely contribute in the private provision of a local public good? We first introduce a monotonic condition to characterize the relationship between the structure of the network that underlie the noncooperative game of private provision of local public goods on the one hand, and the preferences of the agents on the other, showing that the monotonic condition is a sufficient and necessary condition of existence of a distributed Nash equilibrium (DNE) in which each agent exerts a positive amount of effort to provision of the public good (Theorem 1). We then study the number of equilibria, and, by using the monotonic condition, characterize the condition under which the DNE set is a singleton, a continuum, or null (Theorem 2). As it turns out, the structure of the network and the agents’ preferences jointly shape the effort profile in the provision of local public goods.     

Does economic freedom increase income inequality? Evidence from the EU countries

This paper examines the relationship between economic liberalization and income inequality in the EU using panel data for the 2000s. The empirical evidence suggests that economic freedom is strongly related to income inequality. However, not all areas of economic freedom affect income distribution similarly. Government size is robustly associated with inequality, and also when controlling for potential endogeneity in a dynamic panel data analysis. Regulation is linked to income inequality as well, whereas legal system and sound money have no significant effects on income distribution. In the case of freedom to trade internationally, the relationship differs between old (EU-15) and new (former socialist) EU countries.     

Does the Law of One Price Hold within the EU? A Panel Analysis

This paper empirically tests the law of one price by applying unit root tests to three panels consisting of data on 90 consumer price indices for the EU-25, the EU-15 and the 10 new EU member countries that joined the EU in 2004. The four major findings of this paper are: (1) panel unit root tests find evidence of price convergence for about 70% of all product groups, (2) the results are sensitive to the choice of the numeraire country implying that any conclusions must be based on all bilateral combinations, (3) the average half life across all product groups is 2.0 years, (4) the overall evidence for the law of one price is weaker in the 10 new EU member countries than in the EU-15.

Shipping the good fish out? An empirical study on the EU seafood imports under the EU’s Generalized System of Preferences

The impact of the EU (European Union) Generalized System of Preference (GSP) on the relative EU’s demand for seafood quality was evaluated in the study. We first explored the theoretical Alchian–Allen result of change in ad valorem tariffs in an n–good world, and then tested this result in the empirical study. The theoretical analysis suggests that whether a reduced ad valorem tariff in an n–good case raises the relative demand for high-value goods depends not only on the substitutability between high-value and low-value goods but also on the substitutability between these similar goods with their weak substitutes. In the empirical sections, we first estimated the elasticities of the substitutions and then used these elasticities to evaluate the quality composition of the EU’s seafood imports from the beneficiary countries. The empirical results in general confirm the occurrence of ‘shipping the good fish out’ due to the reduced tariff rates under the EU’s GSP arrangements.     

Rejuvenating Northeastern Area and Reforming the System of Investing and Financing

The system of investing and financing in northeastern area has the character of planned economy. Project conducting is our main strategy in any large-scale area rejuvenating plan, which has been proved lack of sustainable development. This paper proposes some suggestion to reform the system of investing and financing.     

Equity Markets and Economic Development: Does the Primary Market Matter?

This article examines the role played by primary and secondary equity markets in economic growth. It departs from standard literature to integrate both markets and to explicitly acknowledge the primary equity market. By employing a variety of dynamic panel estimators for 54 countries over the period 1995‐2010, we show that the primary equity market is not an important determinant of economic growth, although it facilitates the development of the secondary market. This study also confirms the importance of liquidity provided by the secondary market. The evidence here calls for further investigation into the capital‐raising function of equity markets.     

An EU Recycling Target: What Does the Dutch Evidence Tell Us?

The European Union (EU) advocates a household waste recycling rate of more than 65 %. Although the Netherlands has already invested heavily in recycling policies, this is still a big challenge as nowadays this rate is approximately 50 % on average and very few no municipalities have a rate above 65 %. Given this practice, it is possible to learn from the Dutch experience which policies are effective in increasing recycling rates. Based on a large panel data set for the Netherlands, we show that unit-based pricing, avoiding a duo-bin for unsorted and compostable waste, and reducing the frequency of collecting unsorted and compostable waste at the curbside are effective in raising the recycling rate. However, only a bag-based pricing system has a substantial effect, but this policy can have some adverse effects. Other unit-based pricing systems have effects of less than 10 % points. In nearly all cases, changing the frequency of collection of recyclables has no or very small effects. Moreover, the complementarity between unit-based pricing and curbside service is low. Overall, it seems very difficult to reach the EU goal of 65 % with the policies applied.     

Economic policy uncertainty in the US: Does it matter for the Euro area?

We investigate the effects of a US economic policy uncertainty shock on some Euro area macroeconomic aggregates via Structural VARs. We model the indicators of economic policy uncertainty recently developed by  Baker et al. (2013) jointly with the aggregate price indexes and alternative indicators of the business cycle for the two above indicated economic areas. According to our SVARs, a one standard deviation shock to US economic policy uncertainty leads to a statistically significant fall in the European industrial production and prices of −0.12% and −0.06%, respectively. The contribution of the US uncertainty shock on the European aggregates is shown to be quantitatively larger than the one exerted by an Euro area-specific uncertainty shock.     

An Exploration of the Greek Shadow Economy: Can Its Transfer into the Official Economy Provide Economic Relief Amid the Crisis?

We explore the determinants of the Greek shadow economy, its interaction with the official economy, and its relationship with corruption. In doing so, we undertake — for the first time — an interdisciplinary review of economic and political studies on the size and determinants of the shadow economy, tax evasion, undeclared work and, moreover, of their relation with corruption in Greece in order to reveal the extent and complexity of these phenomena. We estimate the size and determinants of the shadow economy via a multiple-indicators-multiple-causes (MIMIC) approach. Our findings indicate that the important determinants are factors related to macroeconomic conditions, such as unemployment and GDP growth, and institutional factors, such as tax morale and the rule of law. We also indicate that the shadow economy and corruption are complementary and that the official and the shadow economy substitute each other over the business cycle. An adoption of policy based on these findings would lead to a successful transfer of part of the shadow economy to the official economy, would boost government revenue, and would eventually lead the Greek economy out of the depression that emerged as a result of the sovereign debt crisis.     

Does integration and economic policy coordination promote business cycle synchronization in the EU?

Previous studies have discounted important factors and indirect channels that might contribute to business cycle synchronization (BCS) in the EU. We estimate the effects of market integration and economic policy coordination on bilateral business cycle correlations over the period 1995–2012 using a simultaneous equations model that takes into accounts both the endogenous relationships and unveils direct and indirect effects. The results suggest that (1) trade and FDI have a pronounced positive effect on BCS, particularly between incumbent and new EU members. (2) Rising specialization does not decouple business cycles. (3) The decline of income disparities in EU27 contributes to BCS, as converging countries develop stronger trade and FDI linkages. (4) There is strong evidence that poor fiscal discipline of EU members is a major impediment of business cycle synchronization. (5) The same argument holds true for exchange rate fluctuations that hinder BCS, particularly in EU15. Since BCS is a fundamental prerequisite and objective in an effective monetary union, the EU has to promote market integration and strengthen the common setting of economic policies.     

How Much Did Oil Market Developments Contribute to the 2009 Recession in Germany?

In this paper, we use a structural vector autoregressive model to study the effects of oil market developments on the German economy. We find that higher oil prices are always associated with a decline in private consumption expenditures, but the response of gross domestic product (GDP) crucially depends on the underlying shock. While a disruption in oil supply provokes a recession, positive world demand shocks prompt a temporary increase in exports and investment, which initially outweigh the cutback on consumption. In a counterfactual analysis, we show that the world demand shocks that led to the 2007/2008 oil price rise triggered a delayed 0.8 percent decrease in German GDP in 2009, and therefore notably contributed to the recession of that year.     

Matching Economic Development Policy to the Local Context: Must We?

This paper examines 2013 data on high-tech manufacturing employment across metropolitan statistical areas in the United States. The purpose is to discover how a broad set of social/demographic/economic variables relate to varying densities of high-tech manufacturing employment. Two questions are asked: Do social and industrial circumstances evolve together, as suggested by institutionalist theories? Is there any evidence to suggest that economic development policy is likely to be effective at creating the conditions that might invite local development of high-tech manufacturing?