HOW THE GLOBALIZATION OF R&D COMPETITION AFFECTS TRADE AND GROWTH

The implications of international R&D competition on trade and growth are investigated. The model is one in which a separate R&D sector competes with the manufacturing sector to secure human capital, and technology is licensed to manufacturers by the winner of a pre-emptive R&D competition. The results show that globalization of R&D competition leads to trade between countries (even identical countries), because the result of competition leads to a reallocation of human capital between sectors. The winning country exports technology and traditional goods, while the loser exports manufactured goods. Globalization with indiscriminate technology licensing increases the world's economic growth rate.     

Rate of growth and sector specialisation coevolution in a Kaldorian export-led growth model

This paper describes and simulates the way in which the growth rate and specialisation coevolve in an export-led growth model of Kaldorian type. The feedback from growth to exports is based on the causal chain ‘growth-profits-technology-income elasticity of exports’. The strength of this feedback differs among sectors, which are heterogeneous. Given the feedback from growth to the income elasticity of exports, growth and specialisation coevolve: sector specialisation determines aggregate growth, while aggregate growth modifies sector specialisation. An economic system converges towards a medium-period macro equilibrium where the rate of growth and sector specialisation are constant. After a certain period endogenous structural changes emerge, the system changes its growth regime and shifts towards another equilibrium. The result is strongly path and time dependent.JEL classification: F43, O31, O41     

Economic Integration,Growth and Income Distribution

This paper constructs a two‐sector growth model with heterogeneous labour, to explore the impact of the economic integration on growth and income distribution. There are two sectors in each country, including the consumption‐good sector and the R&D sector. We suppose that the R&D sector produces new blueprints or ideas for these innovations, and hence provides the engine of growth. Assume that the talent's distribution of workers is the uniform distribution. We show that the economic integration will stimulate the developing countries' economic growth and then decrease its income inequality. In addition, we also demonstrate that if the growth rate of the advanced country rises after the integration, then income inequality of that will increase, and vice versa.     

Exempted sectors in free trade agreements

Almost all participants in free trade agreements (FTAs) exclude at least a few products or sectors from complete tariff removal on the exports of their FTA partners. The positive tariffs that remain within an FTA are often the highest tariffs that the countries apply on an MFN basis. It seems plausible that such exclusions may be chosen because the domestic producers of these products are viewed as especially vulnerable to competition from imports from the partner country. In brief, they are especially “sensitive sectors.” We develop this idea theoretically and then test it empirically on data from 37 countries in 240 importer–exporter pairs within FTAs. We find support for the sensitive‐sector hypothesis only in the high‐income countries. We find that low‐income countries, in contrast, exempt sectors where bilateral tariff removal would be more likely trade‐diverting and therefore harmful. Our explanation for this, supported empirically, is not that they are following the advice of trade economists, but rather that they are avoiding loss of tariff revenue and may also perhaps be influenced by the greater bargaining power of richer and/or larger partners in their FTAs.     

Impact of oil price changes on Turkey’s exports

Substantial decline in oil prices observed since the second half of 2014 has brought forward discussions on the impact of oil prices on the external balance. This decline is expected to shift real income from oil exporter countries to oil importer countries. In this context, we study the effect of change in oil prices on Turkey’s exports taking into account the fact that Turkey’s export to oil exporting countries has approximately one-third share in total exports, while export to oil importing countries has a share of two-thirds. At the first step, we analyse the effect of oil prices on economic growth of trade partners of Turkey, where countries are grouped according to their net oil export position. We find that the effect of oil prices on different country groups’ growth is asymmetric. In the second stage, for two groups of countries, we estimate growth-export elasticity through Turkey’s export demand function. Finally, we calculate the net effect of oil prices on exports considering different income effects caused by oil price change on each country groups. Results indicate that the net effect of oil prices on the exports is limited given the current export shares.     

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.     

TRANSPORTATION COSTS,AGRICULTURAL PRODUCTIVITY,AND CROSS‐COUNTRY INCOME DIFFERENCES*

I study the role of transportation for development by introducing regional trade and a transportation sector into the standard two‐sector model of agriculture–nonagriculture. Low transport productivity can distort the allocation of resources across geographically dispersed production units within sectors and between agriculture and nonagriculture. I infer cross‐country transport productivity disparities from observed domestic transport costs and transport infrastructure stocks. “Endowing” rich countries with the transport productivity of poor countries would reduce their income by 10%. Combining transport productivity disparities with disparities in nonagricultural productivity and arable land the model yields a 50% higher rich–poor income ratio than the two‐sector model.     

Structural changes in exports of an emerging economy: Case of Turkey

This paper indicates that Turkish exports are subject to structural changes as Turkey integrates into global production networks. Integration, which leads vertical specialization in production and changes in the commodity composition of Turkish exports in favor of non-traditional commodities, paces up during economic reform periods. As the export shares of non-traditional commodities, which have higher import and income sensitivity but lower real exchange rate elasticity, increases, coefficients of the aggregate export function change accordingly. Nevertheless, high import and income elasticity of exports imply that the global growth pattern plays a significant role in determining exports of Turkey.     

Sectoral Income

What is the income of each sector of an economy? E.g., in the case of a country endowed with petroleum resources, what is the income of its petroleum sector? Here we present a definition of sectoral income, which is compatible with an important line of theoretical literature on comprehensive national accounting. We do so first by splitting national income into individual income and then defining sectoral income by considering the contributions to individual income that the sectors give rise to.     

The European Single Currency and MENA's Exports to Europe

The paper investigates future exchange rate policy of the Middle East and North African (MENA) countries vis‐à‐vis the euro aimed at fostering their manufactured exports towards Euroland. The exchange rate policy is captured through three different indicators: the real effective exchange rate changes, volatility, and misalignment. The investigation is conducted for 11 sectors over the period 1970–1997. The sample includes four North African countries (Algeria, Morocco, Tunisia, Egypt) and Turkey. The results show that exchange rate management plays a crucial role in providing incentives for manufactured exports toward Euroland. The food sector is weakly responsive to real exchange rate changes while the textile sector is highly responsive. Four growing sectors (electronic, electrical, mechanical, and vehicles) were also found to be highly sensitive to exchange rate changes. The results suggest that policymakers should be more concerned with misalignment than with volatility.     

TOURISM AND INDUSTRIAL AGGLOMERATION

Tourism generates considerable income and employment in host countries and regions, which substantially improves local economies. Meanwhile, the manufacturing sector remains the most important part in regional and national economies. This paper investigates their interdependence through a general‐equilibrium analysis. On the one hand, a tourism boom is pro‐industrialization because the income generated by tourism attracts more manufacturing firms and, on the other hand, de‐industrialization for attracting labour from the manufacturing sector. We clarify conditions of trade balances in three sectors. The welfare analysis clarifies conditions for the smaller country to be better off, and conditions for the equilibrium to be optimal.     

Foreign direct investment and inequality in developing countries: Does sector matter?

Scholars have studied the relationship between inward foreign direct investment (FDI) and within‐country income inequality in cross‐national contexts, but have not empirically investigated how FDI in different sectors might affect inequality in different ways. We use error correction models to analyze sectoral FDI data compiled from UNCTAD investment reports in 60 middle‐income countries from 1989 to 2010, arguing that FDI in services is more likely to be associated with inequality than FDI in other sectors. We argue that skill biases and changes in employment patterns associated with service sector investments can help explain these findings.     

Trade Sophistication Indicators: Balancing Diversity and Specialization

Motivated by the important role of trade in driving and reflecting economic transformation, we focus on the export structure of two small export-oriented economies, Ireland and Finland 2000–2009, from the perspective of the sophistication of both economies’ exports, i.e., the extent to which high-value products characterise each country’s export profile. The Product Space method is used as the basis of our comparison of the economies in terms of their sectors, activities, and structural transformation of the economies. The method focuses attention on the estimated density of the product space as evident in patterns of revealed comparative advantage (RCA) in goods exports. The Information and Communication Technology (ICT) sector, as a significant export sector for both economies, is examined specifically to investigate its further export potential.     

The impact of foreign direct investment on the relative return to skill

Since the early 1980s, China has adopted favourable economic policies to attract FDI in order to facilitate technology development. Since inward FDI induces either sector‐ or factor‐biased technical progress, the impact of FDI on the distribution of income between skilled and unskilled labour is not trivial. This paper introduces vertical product differentiation to analyze the impact of FDI on the return to skill and concludes that, for a labour abundant country, this impact depends on whether the FDI‐induced technology transfer is skill‐ or labour‐biased, regardless of which sector receives FDI. The analysis shows that FDI with relatively labour‐biased technology will decrease the wage gap while FDI with relatively skill‐biased technology will increase the profit margin of the host country’s exports as well as its wage gap. The findings provide policy insights for FDI recipient countries in balancing wage growth between skilled and unskilled workers by managing inward FDI with relatively labour‐biased and skill‐biased technologies. This is particularly important for China given the expected further increase of inward FDI following its imminent membership of the WTO. JEL classification: F23, J31, P33.     

Extensive and Intensive Margins of Exports and Labor Heterogeneity

This paper investigates how changes in skilled and unskilled labor supply affect different margins of exports. Using bilateral trade data in manufacturing sectors of 34 countries from 1995 to 2010, we find that most of the impact of skilled labor on exports goes through the intensive margin, whereas most of the effect of unskilled labor works through the extensive margin. These outcomes result from the impact of labor skill composition on the productivity cut‐off of exporters. We also find that the impact of skilled and unskilled labor on trade margins depends on the income level of countries and on the type of products. The results indicate that the effect of skilled labor is greater for low‐income countries and differentiated products, while that of unskilled labor is greater for high‐income countries and homogeneous products.     

Extending the Sectoral Coverage of an International Emission Trading Scheme

In a model inspired by the EU Emissions Trading Scheme, non-cooperative countries allocate their emissions to internationally trading and non-trading sectors. Each country is better off with trading than without, and aggregate welfare is maximized with all sectors in the trading scheme. We analyze the effects of extending the sectoral coverage of the trading scheme in a two-country model with quadratic abatement costs. If only the original trading sector is asymmetric between countries, the welfare change is always positive and the same in both countries. If the original and additional trading sectors are asymmetric, one country might lose, but there is an aggregate welfare gain. If the original trading sector and the non-trading sector are asymmetric, both countries always gain.     

The impact of technological opportunity on the dynamics of trade performance

The paper examines statistically whether the degree to which countries are specialised in and/or increasingly move into sectors with above average levels of technological opportunity has any impact on growth in aggregate market shares of exports. A novelty of the paper is that it applies structural decomposition (SD) analysis not only on trade statistics, but also on US patent statistics. Nineteen countries and 17 manufacturing sectors for the period 1965–1988 are considered. A number of variables, in addition to the effects from the SD analysis, are included as explanatory variables. In this context, it is shown that there is a positive relationship between trade performance and the individual country’s ability to move into technological sectors offering above average technological opportunity.     

Is wealth found in the soil or in the brain? Investing in farm people in Malawi

Should a typical developing country invest more in agriculture or education? At what stage of development is it optimal to invest more in each of these sectors? These are important questions that governments of developing countries grapple with when designing investment plans. In this paper, I propose a soil–human capital conceptual framework of development and use it to explain estimates of agricultural returns to schooling in Malawi. I use panel survey data for Malawi and rely on the exogenous education policy changes and spatial variation in access to schooling to identify effects of schooling on agricultural incomes. In addition, I correct for selection into income activities within a panel data and instrumental variables estimation framework. I find annual agricultural returns to schooling in Malawi of 3%–4% after correcting for selection and unobserved heterogeneity and 7% in the uncorrected specifications. I also find consistently higher returns to schooling in the nonagricultural sector for those not living in the village of birth and higher returns in the agricultural sector for those living in the village of birth. Given the size of the farm sector, wealth in Malawi is still in the soil, but that future growth in wealth depends on human capital investments.     

贸易自由化与增加值贸易*——WTO对中国出口的真实影响

国际贸易的中间品贸易的兴起,使传统关境贸易统计无法准确衡量全球价值链下一国的实际贸易利得。本文基于增加值贸易视角重新评估加入WTO对于中国出口的真实影响,以及关境统计下WTO贸易促进作用与真实状况的偏离。基于引力模型的实证结果表明：（1）总体上,中国加入WTO显著促进其增加值出口,但关境统计明显高估了WTO贸易促进作用。（2）分行业看,WTO对中国增加值出口的贸易促进作用存在显著的行业差异：加入WTO显著地促进了中国非制造业工业、制造业和服务业增加值出口,却抑制了中国农林牧渔业的增加值出口。（3）进一步研究发现,关境统计数据对于WTO贸易促进作用的高估问题仅存在于制造业,对于农林牧渔业等其他三个行业反而存在低估问题。     

Productive Capacity, Product Varieties, and the Elasticities Approach to the Trade Balance

Most macroeconomic models imply that faster income growth tends either to lower a country’s trade balance by raising its imports with little change to its exports or to reduce its terms of trade in order to maintain balanced trade. Krugman (1989 ) proposed a model in which countries grow by producing new varieties of goods. In his model, faster‐growing countries are able to export these new goods and maintain balanced trade without suffering any deterioration in their terms of trade. This paper analyzes the growth of US imports from different source countries and finds strong support for Krugman’s model.