Share ribs redux

Attempts to examine how commodity price changes affect internal income distribution in competitive Heckscher–Ohlin settings have typically focused on factor-intensity differences among sectors, with each sector having a different factor being used most intensively, as captured by its factor distributive share having maximal value. This paper adopts this specification, but adds the restriction that the  shape  of the profile of distributive factor shares, from most to least intensively used, be the same among commodities. The focus is on the importance of the amount by which the most intensively used factor differs from the next as well as the rate of decline of shares for the less intensively used factors in any industry. Strong Stolper–Samuelson results are obtained for some share ribs, and oscillating factor returns for others.     

WAGNER'S LAW REVISITED: A NOTE FROM SOUTH AFRICA

The aim of this note is to reassess the validity of Wagner's law for South Africa for the period 1950‐2007 using cointegration and causality tests. The evidence shows causality running from income to government expenditure, thus supporting the Wagnerian proposition of an expanding public sector. Using five different long‐run estimators, we found that the size of South Africa's public sector was positively and significantly related to South Africa's national income. The elasticity ranges from 1.12 to 1.57, implying that a 1% increase in income leads to a 1.12‐1.57% increase in government expenditure.     

Liberalizing rural-to-urban construction land transfers in China: Distribution effects

China's land market is characterized by a dual urban-rural system, with the government in control of rural-urban land transfers. In recent years, different types of pilot projects have been implemented to experiment with liberalizing markets for rural-urban construction land transfers. The objective of this study is to gain insights into the distributional effects of three different types of land liberalization rules by making a comparative analysis of three pilot projects carried out under each of these liberalization rules. We find that transfers facing more liberalized rules result in higher shares of land revenue flowing to the rural sector and thereby reduce the ruralurban income gap. But direct transfers between rural and urban land users also contribute to growing income inequality within the rural sector, as households living in urban fringes benefit relatively more from such transfers. A tradable quota system can reduce the impact of location on the price of land, and thereby contribute to a more equal distribution of the revenues of rural-urban land transfers within the rural sector.     

Dairy farming,cooperatives and livelihoods: lessons learned from six indian villages

India's dairy sector has emerged as the world's largest dairy producer and has enabled 70 million farmers to generate income through its rapid growth. This success is linked to broad national policy support through the Operation Flood program and the emergence of an inclusive model of cooperatives. However, the informal sector is still the marketing channel most used by dairy producers, and with the liberalization of the dairy sector, the cooperative model is also facing competition from the private sector. By surveying 244 dairy farmers in two major but heterogeneous states in India, this paper examines the inclusiveness of the sector and the impact of dairy cooperative membership on farmers’ income and livelihood. The originality of the paper concerns its systematic perspective on households’ assets and activities. The results indicate that cooperative membership is associated with caste membership and farmers collection centers. Better incomes are associated with membership, particularly among farmers with less land and among smallholders, who are more dependent on their dairy income to lift themselves out of poverty.     

Understanding High Saving Rate in China

This paper presents a detailed analysis of the Chinese saving rate based on the flow of funds data. It finds that the most widely adopted view of precautionary saving, which is regarded as the top reason for maintaining a high saving rate in China, is misleading because this conclusion is drawn from the household survey data. In fact, the household saving rate has declined dramatically since the mid‐1990s, as is observed from the flow of funds framework. The high national saving rate is attributed to the increasing shares of both government and corporation disposable incomes. Insufficient consumption demand is caused by the persistent decrease in percentage share of household to national disposable income. Government‐ directed income redistribution urgently needs to be improved to accelerate consumption, which in turn would make the Chinese economy less investment‐led and help to reduce the current account surplus. (Edited by Zhinan Zhang)     

The Impact of Foreign Agricultural Aid and Total Foreign Aid on Agricultural Output in African Countries: New Evidence from Panel Data Analysis

Official Development Assistance may play an important role in increasing the resources to finance the agriculture sector and improve agricultural outcomes in African countries. Although this is a relevant issue, very few studies have investigated the link between foreign agricultural aid and national agricultural output. Using advanced econometrics techniques, this paper examines the impact of foreign agricultural aid and foreign aid on agriculture output in the panel data set of 29 African countries over the period of 1975–2013. In particular, we employed two estimation methods: Augmented Mean Group and Common Correlated Effects‐2SLS. The first method accounts for heterogeneous slope coefficients across group members and cross‐sectional dependency among variables, whereas the second method accounts for endogenous regressors. Our main findings indicate a small and positive impact of foreign agricultural aid and total foreign aid on agricultural output for low‐ and middle‐income countries. Furthermore, the Pairwise Dumitrescu‐Hurlin Panel Causality test shows evidence of a bidirectional causal relationship between agricultural aid and agricultural output for the full sample, noting that the result changes at the different group income level. Based on the empirical results, recommendations for future policy are given.     

Saving,productivity and national income: a discrete-time geometric framework

This paper proposes an alternative geometric framework for analysing the inter-relationship between domestic saving, productivity and income determination in discrete time. The framework provides a means of understanding how low saving economies like the United States sustained high growth rates in the 1990s whereas high saving Japan did not. It also illustrates how the causality between saving and economic activity runs both ways and that discrete changes in national output and income depend on both current and previous accumulation behaviour. The open economy analogue reveals how international capital movements can create external account imbalances that enhance income growth for both borrower and lender economies.     

Intersectoral Transfer,Growth, and Inequality in Rural Ecuador

In this paper we study intersectoral transfer and its impact on the distribution of income in Ecuador. We find that income shares between farm and nonfarm activities are roughly equal, on average, although the rich in rural areas typically receive a greater share of income from nonfarm sources. Thus decomposing inequality by income source reveals that a rise in nonfarm incomes increases inequality. Drawing on a new method to estimate local-level distributional outcomes, growth of the high-productivity nonfarm sector is observed to have a strong and positive association with average consumption and inequality. Growth of the low-productivity nonfarm sector is associated with little change in either average income or income inequality. Irrespective of subsector, growth of the nonfarm sector is associated with a substantial fall in poverty.     

Concepts and Measures of Saving: Selected Issues for South Africa

South African household savings rates have been declining steadily over the last five decades, raising concerns that the population structurally under‐saves. Against the background of new saving‐enhancing policy initiatives, this paper asks to what extent the concern is founded, and whether the measurement of saving is really appropriate to guide economic policy. Comparing different macroeconomic concepts and measurements of saving, we show that the measure of saving in the national accounts (the residual between income and expenditure) understates the household savings rate compared to other measures. Specifically, an alternative measure from the balance sheets (the change in wealth) yields a significantly higher and non‐declining figure. While households have not been “putting aside” their incomes, they have nevertheless grown richer, driven largely by the appreciation of asset valuations. We also examine the impact of taking non‐financial saving and wealth into account, and conclude that household sector saving on the aggregate is significantly higher than the national accounts suggest. However, these adjusted measures are most relevant for the upper tail of the income and wealth distribution, raising important distributional concerns.     

What happened to Irish industry after the British industrial revolution? Some evidence from the first UK Census of Production in 19071

This article examines Ireland's relative position within the UK industrial sector in the early twentieth century, by critically evaluating the Irish component of the First UK Census of Production. Firstly, Ireland's employment, net output shares, and net output per person are compared to the UK results. Secondly, by supplementing and adjusting the census evidence, a new estimate of the size of the industrial workforce is constructed, which is then used to produce a new estimate of Irish industrial output. From this it is possible to estimate the contribution of industry to Irish GDP, which can then be compared to its contribution in other European economies.     

Poverty Effects of the Philippines’ Tariff Reduction Program: Insights from a Computable General Equilibrium Analysis*

A computable general equilibrium micro‐simulation model is used to assess the economic and poverty impacts of tariff reduction in the Philippines. Tariff reduction induces consumers to substitute cheaper imported agricultural products for domestic goods, thereby resulting in a contraction in agricultural output. In contrast, tariff reduction reduces the domestic cost of production, benefiting the outward‐oriented and import‐dependent industrial sector. The national poverty headcount decreases marginally as lower consumer prices outweigh the nominal income reduction experienced by the majority of households. However, both the poverty gap and severity of poverty worsens, implying that the poorest of the poor become even poorer.     

The Contribution of Sectoral Productivity Differentials to Inflation in Greece

This paper estimates the magnitude of the Balassa-Samuelson effect for Greece. We calculate the effect directly, using sectoral national accounts data, which permits estimation of total factor productivity (TFP) growth in the tradeables and nontradeables sectors. Our results suggest that it is difficult to produce one estimate of the BS effect. Any particular estimate is contingent on the definition of the tradeables sector and the assumptions made about labour shares. Moreover, there is also evidence that the effect has been declining through time as Greek standards of living have caught up on those in the rest of the world and as the non-tradeables sector within Greece catches up with the tradeables.

Engels’ pause: Technical change, capital accumulation, and inequality in the british industrial revolution

The paper reviews the macroeconomic data describing the British economy from 1760 to 1913 and shows that it passed through a two stage evolution of inequality. In the first half of the 19th century, the real wage stagnated while output per worker expanded. The profit rate doubled and the share of profits in national income expanded at the expense of labour and land. After the middle of the 19th century, real wages began to grow in line with productivity, and the profit rate and factor shares stabilized. An integrated model of growth and distribution is developed to explain these trends. The model includes an aggregate production function that explains the distribution of income, while a savings function in which savings depended on property income governs accumulation. Simulations with the model show that technical progress was the prime mover behind the industrial revolution. Capital accumulation was a necessary complement. The surge in inequality was intrinsic to the growth process: technical change increased the demand for capital and raised the profit rate and capital’s share. The rise in profits, in turn, sustained the industrial revolution by financing the necessary capital accumulation. After the middle of the 19th century, accumulation had caught up with the requirements of technology and wages rose in line with productivity.     

ADJUSTING SOUTH AFRICA'S FISCAL BALANCE FOR TERMS-OF-TRADE EFFECTS

Standard output gap‐based calculations and interpretations of the cyclical component of the fiscal balance may convey a misleading picture in countries such as South Africa which experience substantial movements in their terms of trade. This paper therefore adjusts South Africa's general government primary balance for terms‐of‐trade effects by means of an alternative calculation of the transitory component based on a measure of the real income gap rather than the real output gap. The results indicate that measures of the cyclical component of the budget balance based on real income and real output gaps generally yield broadly similar results over history, but during exceptional periods of rapid changes in commodity prices, the measures can be very different.     

Revisiting the Phillips curve for Indonesia: What can we learn from regional data?

This study seeks new empirical evidence of the Phillips curve in Indonesia, an emerging and geographically diversified economy. There are three important contributions from this research. First, applying panel econometric method to exploit regional variation, the study resolves the issue of using on-target national inflation rates that potentially causes weakening inflation-output link. Second, the research examines the relevance of mining industry for output gap measurement at regional level. Third, it highlights the differences in the Phillips curve between the west and east regions owing to their different underlying economic structures. Our estimation using regional data support the validity of the Phillips curve relationship in Indonesia. Backward-looking inflation expectations, exchange rate dynamics and international prices also significantly affect inflation. In addition, the effect of output gap on inflation is larger if the mining sector is excluded from output gap measurement. Finally, we find apparent differences between the west and the eastern regions in the slope of Phillips curve, as well as in the degree of inflation persistence and exchange rate pass-through. The results are robust to alternative specification. Our study adds significantly to the empirical literature on the Phillips curve and have meaningful policy implications.     

The role of small enterprises in the household and national economy in Kenya: A significant contribution or a last resort?

Based on a nationwide survey, this article addresses the contribution of micro and small enterprises (MSEs) to employment, national income, and household income in Kenya. One-third of all working persons are employed in MSEs and the sector contributes 13% to national income. Despite their large contribution as a whole, returns to individual MSEs vary tremendously. Among those MSEs that represent the sole source of income for the household, 72% make less than the absolute poverty line in urban areas and none of the MSEs in rural areas make above the absolute poverty line. Comparing hourly MSE returns to average earnings in the private sector, the majority make below the average earnings while a minority make significantly higher earnings.     

The determinants and effectiveness of industrial policy in china: A study based on Five-Year Plans

This paper examines industrial policy in China over the period of the 9th - 12th Five-Year Plans (FYPs). Based on China's national and provincial FYPs and data disaggregated to the four-digit manufacturing sector level, it finds that the central government's preferences act as a key determinant of the provincial FYPs. It also shows that policy significantly improves output while it is in effect but there is no evidence of a beneficial effect beyond the end of the particular FYP. The results are consistently robust across a number of tests.     

Does the Domestic Value Added Induced by China＇s Exports Really Belong to China？

Since 2001, the exports of foreign‐invested enterprises (FIEs) have accounted for more than 50 percent of China's total exports. As foreign capital occupies a high proportion of the total capital of FIEs, most FIEs' capital gains are foreign factor income. Although these gains are calculated as a part of China's GDP, they do not belong to China's national income. To determine the real contribution of exports to China's welfare, the present paper analyses the impact of exports on China's national income using a non‐competitive input–output model capturing processing trade. The results show that every US$1000 of China's exports generates US$506.8 of national income. The real contribution of exports to China's welfare is much smaller than what we expected. This suggests that China should endeavor to improve the gains from international markets or find another engine to maintain its economic growth.