Exports,capabilities, and industrial policy in India

An extensive literature argues that India’s manufacturing sector has underperformed, and that the country has failed to industrialize; in particular, it has failed to take advantage of its labor–abundant comparative advantage. India’s manufacturing sector is smaller as a share of GDP than that of East Asian countries, even after controlling for GDP per capita. Hence, its contribution to overall GDP growth is modest. Without greater participation of the secondary sector, the argument goes, the country will not be able to develop and become a modern economy. Standard arguments blame the “license-permit raj”, the small-scale industrial policy, and the labor laws. All these were part of the industrial policy regime instituted after independence. This regime favored the heavy-machinery subsector. We argue that despite its shortcomings and misallocations, the bias towards machinery, metals, chemicals, and other capital- and skilled labor-intensive products allowed Indian manufacturing to accumulate a wide range of capabilities. We show that India’s manufacturing sector is more diversified and sophisticated than one would expect given the country’s income per capita. This positions India well to continue expanding its exports of other sophisticated products. India’s failure, however, lies in not being able to diversify into labor-intensive sectors and generate the type of structural transformation seen in China.     

Recent developments in China's labor market: Labor shortage,rising wages and their implications

China's abundant supply of cheap labor has played an important role in its remarkable economic and social development. Recently, however, China has experienced a labor shortage and rising wages, implying that the country's long‐lasting competitive advantage based on its “unlimited” labor supply and low costs is vanishing. We find that structural demographic changes, regional economic growth disparities and the household registration system may have caused the labor shortage. Furthermore, China's continued low wages, relatively low labor share of gross national income, declining proportion of household consumption to GDP , and productivity improvements as well as increasing unit labor costs can be used to explain the recent wage increases. The dramatic development of its labor market signals that China is entering a new stage of economic development. The country's prior successful model of economic development needs to be adjusted to adapt to the new situation in its labor market to achieve sustainable economic development.     

What is the real size of China's economy?

On 20 December 2005, China's National Bureau of Statistics adjusted China's nominal GDP by CNY 2.3 trillion. The bulk of this upward adjustment was attributed to improved coverage of value added by services. The service industry now makes up 40% of GDP. Based on previous studies and other observations, this paper point outs that there is still significant underreporting of the service industry and, hence, China's GDP is likely to be underestimated. We find a plausible share of service industry in GDP to be in the range of at least 45% to 55%.     

Is PMI Useful in Quarterly GDP Growth Forecasts for India? An Exploratory Note

This paper examines the relationship between India’s quarterly overall GDP, manufacturing GDP and services GDP and the corresponding monthly data on overall manufacturing and services PMI for the period January 2006 to July 2014. The objective is to see if the two overall PMIs are related to the level and quarterly growth rate of overall GDP and its chosen components. Considering the quarterly time series nature of the data set, the HEGY equation of Hylleberg et al. (J Econom 44:215–238, 1990) extended by adding the PMI variables as exogenous regressors is used as the regression mode to relate a GDP level/growth rate variable to the two overall PMI variables. The results show that the three GDP level variables, but none of the GDP growth rate variables, have significant positive correlation with services PMI, but not with manufacturing PMI. Finally, the marginal effect of services PMI on manufacturing GDP level is found to be the largest, followed by that for overall GDP level and services GDP level.

     

Technological progress,structural change and productivity growth: a comment

In a recent article, Fagerberg [Struct. Change Econ. Dyn. 11 (2000) 393] finds changes in the employment share of the electrical machinery industry to positively impact the manufacturing sector productivity growth. Fagerberg's approach has some methodological drawbacks, however. This note seeks to complement Fagerberg's analysis by estimating the impact of the employment share of technologically progressive industries using a more adequate methodology. Fagerberg's claim that the share of the ‘electronics’ industry positively affects manufacturing is confirmed. However, the size of the impact, and as a consequence the extent of spill-overs, is found to be much smaller than estimated by Fagerberg.     

Business Cycle Co‐movement between Australia and East Asia

This article analyses business cycle co‐movement between Australia and 10 major economies in the East‐Asian region by using two measures: concordance indices and correlation coefficients. The results from the concordance index suggest that Australia's business cycle is becoming increasingly synchronised with those in East Asia, particularly with China and Japan. The correlation coefficients of gross domestic product (GDP) growth and the deviation of real GDP from its trend between Australia and its East‐Asian neighbours are also significantly higher since 2000, relative to the correlation coefficients found for the 1990s. The growing importance of East Asia in Australia's economic future implies that the risks facing the economy have changed and Australia needs to engage in more macroeconomic policy dialogues with its neighbouring economies to improve their policy responses.     

COMPARING PER CAPITA INCOME IN THE HELLENISTIC WORLD: THE CASE OF MESOPOTAMIA

Until quite recently, GDP growth between ca. 1 ce and the late Middle Ages was considered non‐existent or even negative. Recently, largely on account of increasing interest in historical national accounting, the late‐medieval figures have been revised upward, in line with an upward adjustment in the estimated shares of manufacturing and pasture. Leaving GDPs dating from the ancient world unaltered would consequently generate figures indicating increased economic growth during the first millennium ce . A considerable number of studies of the late‐medieval period (the object of increasing attention on the part of specialists in early economic history) have caused estimates for the ancient one to be revised upwards, essentially leaving estimates of the changes in economic development over time unaltered. These studies, however, have focused on the Roman Empire and Italia while there is a consensus in the literature that it was quite unrepresentative of all ancient societies with its relatively high share of GDP from the manufacturing sector of the economy. We therefore estimate a new per capita income for another contemporary agrarian society: ancient Mesopotamia. In addition, by examining manufacturing and pasture—the two main reasons for higher income which have been identified in the literature—we have found a tentative explanation for the fact that ancient Mesopotamia's per capita income deviated from that of Rome.     

On the measurement and analysis of aggregate economic activity for China: the coincident economic indicators approach

This paper reviews some of China's high-frequency economic indicators and our principal findings on their selection and use. Our aim is to develop a composite index of coincident economic indicators (coincident economic index, CEI) which can be used to obtain timely information on the present state of the China's economy and provide an appropriate measure to analyze China's short-term macroeconomic dynamics. Notably, combining industrial production, retail sales, manufacturing employment, income of financial institutions and passenger traffic volume, they work well as the method for dating business cycles for China. It shows that, over the past two decades, there was one marked recession which occurred in 1988:8 to 1989:12. In addition to this business cycle chronology we also develop a growth cycle chronology based on the deviations from trend of the CE which shows that there have been four cyclical slowdowns since 1986. Whereas GDP growth lacks cyclical movements and appears to be dominated by trend and irregular movements, in contrast to GDP, the CEI works well as a measure of cyclical dynamics and can contribute to the analysis of short-term fluctuations of Chinese economic activity relative to its long-term growth.     

Is World Trade Becoming More Regionalized?*

The rise in intraregional trade shares and the proliferation of regional trade agreements does not necessarily mean economies excluded from those agreements are harmed. Trade data show that the share of each region's GDP that is traded extraregionally has been growing steadily following its fall in the 1930s. That is, the rapid growth of OECD countries' trade among neighbors has been accompanied by (albeit somewhat less rapid) growth in extraregional trade. This does not constitute proof that regional agreements benefit outsiders, but it at least throws doubt on the opposite conclusion.     

A reconsideration of the public sector's contribution to growth

A recent development in macroeconomic theory suggests that public investmentper se is relevant to economic growth, without regard to the means of financing government activity. This study undertakes an empirical investigation of this proposition, comparing two subperiods of the manufacturing sector's performance in Greece. Our test results support the conventional view that the size of public capital formation and the real intertemporal allocation of public sector may be important for determining manufacturing costs and profits but public deficits are likely to be of comparable or even dominating importance in determining manufacturing output. The emphasis on the financial as opposed to the real aspects of the government's decisions allows the establishment of a benchmark model as an appealing alternative to the newclassical analysis.     

Dual Circulation and China's Development

In 2020, China proposed a new development paradigm centered on domestic circulation with a "dual circulation" model in which domestic circulation and international circulation promote each other. This new paradigm reflects a clear understanding of China's development trend that saw its share of exports in the GDP declining steadily since 2006. However, the new paradigm does not necessarily mean that China should change its past policy of fully utilizing domestic and international markets and resources in economic development. Because of large economies of scale in modern manufacturing sector, China should continue to make full use of international markets.     

Environmental Protection and Trade Liberalization in a Small Open Dual Economy

The author investigates the conditions under which environmental protection and trade liberalization might improve urban unemployment and welfare in a small open Harris–Todaro model with polluting urban manufacturing. While a tariff reduction decreases manufacturing employment, a rise in the pollution tax rate may increase it when a dirty input is complementary to capital. Environmental protection and trade liberalization are consistent in reducing the level of urban unemployment because they lower it under the same condition. They are consistent in increasing GDP if a rise in the pollution tax rate decreases manufacturing employment. Otherwise, trade liberalization will mitigate a decrease in GDP because of environmental protection if the degree of urbanization is low and if rural technology exhibits weak diminishing returns to labor. This GDP effect plays a central role in welfare improvement.     

The Impact of Chinese Exports on Global Import Prices*

This paper evaluates the evidence bearing on the question of whether China's buoyant export growth has led to significant changes in the import prices, and thus inflation performance, of its trading partners. This evidence suggests that the impact of Chinese exports on global import prices has been, while non‐ negligible, fairly modest. We identify a statistically significant effect of US imports from China on US import prices, but given the size of this effect and the relatively low share of imports in US GDP, the ultimate impact on US consumer prices has likely been quite small. Moreover, imports from China had little apparent effect on US producer prices. Finally, using a multi‐country database of trade transactions, we estimate that, since 1993, Chinese exports lowered annual import inflation in a large set of economies by 0.25 percentage point or less on average.     

Modeling of the impact of the financial crisis and China's accession to WTO on China's exports to Germany

We focus on discussing the impact of China's accession to WTO and the financial crisis on China's exports to Germany, particularly in agricultural products, based on some most recent proposals. Firstly, structural breaks caused by those events are detected. Then the Box–Cox model and a new tree-form Constant Market Share (CMS) model are fitted to discover the long-term impact of those events on the trade relationship between China and Germany and the growth causes of China's exports to Germany. We found that China's accession to WTO had a negative short-term impact on China's exports and its market share in agricultural products, but a positive short-term impact on its market share in industrial products and a positive long-term impact on its exports and market share in both classes. The tree-form CMS model shows the growth of China's exports to Germany due to competitiveness after this event was much higher than before. The financial crisis exhibited a negative short-term impact on China's exports to Germany, but a positive short-term impact on China's market share and the trade relationship between both countries in industrial products. China's market share in agricultural products was not affected by the financial crisis.     

Foreign direct investment, regional market conditions and regional development

This paper uses regional panel data to investigate the mechanism whereby foreign direct investment (FDI) has contributed to China's regional development through quantifying regional marketization levels. It is found that FDI inflow generates a demonstration effect in identifying regional market conditions for investment in fixed assets and hence affects industrial location. In addition, its effects on regional export and regional income growth have varied across east, central and west China since the second half of the 1990s, depending on differences in FDI orientation between different regions. In east China, geographical advantage in exports attracts FDI inflow and FDI promotes exports. In addition, the rise of the FDI–GDP ratio increases east China's share in national industrial value added. These effects contribute positively to regional income growth in east China although there is a direct crowding‐out effect between FDI and domestic investment (as input) in growth. In contrast, the negative impact of FDI inflow on regional export orientation in central China weakens its contribution to regional income growth. Furthermore, the contribution of the improvement in the market mechanism to regional development is evidenced in attracting FDI, in promoting export and directly contributing to regional income growth.     

The Australian Economy on the Hinge of History

The article traces the origins of the Australian economic crisis of the 1980s, and suggests that many problems can be related to the special character of the country's long-term economic development. The dominance of two exceptional commodities, wool and gold, created a remarkably high standard of living in the nineteenth century. But there were dangers. High labour productivity was achieved without the underpinnings of modem technology, and it was difficult to achieve sustained industrialisation from a high income base in a small, open society. Further, the efficiency of traditional commodity production helped create an inward-looking urban-industrial sector. Gradually fundamental change in the composition of global trade has marginalised Australia's traditional export sector. The urgent need now is for an aggressive exploitation of the country's considerable resources in science and technology. If this is achieved the 1980s could see a basic shift in Australia's economic history.     

Comparisons of real output and productivity of Chinese and Indian manufacturing, 1980–2002

The principal objective of this paper is to compare the real output and labour productivity of Chinese and Indian manufacturing from 1980 to 2002. Using an industry-of-origin approach, purchasing power parities (PPPs) for the benchmark year 1985 are derived from the Chinese and Indian industrial censuses. In turn, the PPPs are used to convert Indian manufacturing GDP into Chinese yuan for direct comparisons. Secondary objectives are twofold: first, to set this direct comparison within the general context of the economic policy reform process followed in each country, and second, to compare and contrast the organisation and structure of both countries' manufacturing sectors. The analysis shows that since 1980, real value added and labour productivity growth for Chinese manufacturing has been well above Indian levels.     

Time series explanations of merger activity: some econometric results

Existing papers which have attempted to test explanations of time series patterns in merger behaviour suffer from the defects that, first, they usually consider only one hypothesis and, secondly, none use a moderm econometric methodology. Consequently, their results may be subject to the spurious correlation problem. In this paper we argue that four well-known approaches to explaining time series data in acquisitions (Gort's disturbance theory, King's Trapped Equity model, disequilibrium hypotheses and ad hoc approaches) can all be nested within a capital budgeting decision-making framework. Using a co-integration methodology, a long-run relationship was found between the quarterly number of acquisitions and the growth rate of GDP, Tobin's Q, the balance of payments, the unemployment rate and share prices. Some of the previously proposed theories were found to explain the short-run dynamic variation in acquisition activity. No support was found for Gort's disturbance theory or for King's Trapped Equity model. Conclusions for antitrust policy are suggested.     

Spillover effects of FDI inflows on output growth: An analysis of aggregate and disaggregated FDI inflows of 13 MENA economies

This paper examines the effect of foreign direct investment (FDI) inflows on overall growth, as well as its sector-specific spillovers in the Middle Eastern and North African region during the period from 2000 to 2020. Our major innovation is our ability to disaggregate FDI into primary, secondary and tertiary and examine their individual impact on growth, as well as their sector-specific spillovers by using dynamic panel GMM methodology. We find prima facie evidence that total FDI significantly stimulates growth. However, when we turn to the disaggregated FDI data, primary sector FDI adversely affects the gross domestic product (GDP) growth in the service sector and overall GDP growth. On the other hand, secondary FDI has a ‘double-edged’ effect, benefiting its own sector (the service sector's GDP growth), but not other sectors. In contrast, service sector FDI stimulates GDP growth in mining, manufacturing and service sectors, thereby enhancing overall economic growth. Our findings have important policy implications regarding the incentives provided by governments to encourage FDI, which need to be fine-tuned to attract certain types of FDI (tertiary), with less focus on the primary sector