Does the EU Financing System Contribute to Shadow Economic Activity?

Financial contributions to the EU budget depend basically on official GDP. This means that countries with higher shadow economic activity contribute less than they should contribute in a system based on actual GDP and therefore could reduce their incentive to fight against such activities. In this paper we investigate if the EU financing system really has an influence on the intensity with which governments in EU member states fight against shadow economic activity. We find that the EU net contributors significantly fight more intensively against shadow economic activity while EU net receivers fight less. As a result, shadow economic activity is higher in net receiver and lower in net contributor countries than it were in comparison with a scenario of nationally balanced EU funding. Quantitatively and averaged over the time period 2001–2007, the diagnosed effect amounts to a stimulation of hidden economic activity by almost 10% for particular economies.     

China: A Major Economic Power?

For almost quarter of a century since the U.S. normalization of diplomatic relations with China and the beginning of economic reforms under the leadership of Deng Xioaping, two incidents virtually coinciding together, the PRC has achieved impressive, although not unprecedented, rates of economic growth. The future rate of growth of the Chinese economy will depend not only on continuing economic reforms, but also having a tolerable level of social unrest, and achieving a reasonable level of entrepreneurial and bureaucratic efficiency. On the international side, growth will require access to world markets for Chinese exports, continued access to foreign capital and technology, and regional peace. On current reckoning it seems that economic growth of anything between five and seven percent may continue for the forseeable future. This paper tries to analyze the problems and the prospects of China emerging as a major economic power and it's economic and political implications.     

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.     

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 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.

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.     

What Role Does the Political Environment Play in Economic Development? —A Case Study of Fujian Province

Uncertainty induced by the political environment affects investment risk, and thus affects investment decisions, which have a close relationship with economic development. This paper investigates the economic cost of political instability using the case study of the tense relationship across-Strait in China. We use a synthetic control method to better model the counterfactual analysis of this case study. The intense situation of the relations across-Strait has great influence on the economic development of Fujian province. Fujian province is the closest province in proximity to Taiwan and also possesses the greatest preferential policies for Taiwanese direct investment. The empirical results of this study reveal that during 2001-2008 Fujian province’s average annual loss in GDP per capita was 682.54 yuan. In other words, GDP per capita in Fujian has declined about 12.1 percent annually during this period compared with GDP per capita as calculated by the synthetic control method.     

A Short‐Cut Method of Estimating Capital Stocks: When Can It be Used and How Well Does It Work?

Relatively few countries currently publish estimates of capital stocks because of the difficulty of applying the Perpetual Inventory Method. A short‐cut method which we term the Steady Growth Model (SGM) can produce plausible capital stock estimates provided certain conditions are met. Starting with a database covering 146 countries we conclude that the SGM can legitimately be used to calculate capital stocks for 53 of them. The 53 include equal numbers of high‐income and low‐income countries. The SGM requires only data on gross fixed capital formation for the base year, information about past growth rates of real GFCF, and assumptions about rates of depreciation. Despite its apparent simplicity, we show that our SGM stock estimates compare well with official stock estimates generated by the PIM. Other tests on capital–output ratios and capital‐stocks per head confirm the plausibility of stock estimates generated by SGM.     

Does the Confucius institute impact international travel to China? A panel data analysis

This article examines the impact of Confucius Institutes on inbound travel to China. We estimate a panel gravity model of inbound tourism flows to China between 2004 and 2010. We use a Poisson pseudo-maximum likelihood estimator to control for heteroscedasticity endemic in gravity models (Santos Silva and Tenreyro, 2006). We find that the presence of Confucius Institute(s) in the source country increases overall tourism in general and business and worker tourists in particular.     

How do Labor Unions Influence the Gender Earnings Gap? A Comparative Study of the US and Korea

Abstract

This paper provides a comparative study of the United States and Korea regarding the effects of unions on gender earnings gaps in 2004. Using datasets representative of the population of the US and Korea, this contribution shows that gender differences in the workers' observed characteristics and the unobserved component reduce gender earnings gaps in union jobs in both the US and Korea. Fringe benefits in the union sector attract women workers with higher labor market qualifications into the union sector and thereby reduce the gender earnings gap in this sector. The study finds that this self-selection process in the union sector is stronger in Korea than in the US, but the seniority-based wage system that prevails in the Korean union sector widens the gender earnings gap.     

Brazil and China: Two Routes of Economic Development?

We look at two emerging economies, Brazil and China, and propose an evaluation of their recent development in terms of growth performance and the evolution of income inequality. Our analysis, therefore, is related to the literature on their recent vast growth and also to the much debated Kuznets curve and theory. However, we claim that neither the growth nor the Kuznets approach capture recent relevant phenomena characterizing such countries' dynamics: namely, the presence of at least two distinct growth models. Cointegration analysis and empirical evidence seem to corroborate our interpretation. They also offer some further insights. We surmise that while contributing to press for a further re‐examination of convergence in the light of the issue of income distribution, such findings have interpretative relevance and policy implications for other less developed countries.     

How do dimensions of proximity relate to the outcomes of collaboration? A survey of knowledge-intensive networks in the Dutch water sector

There is a growing body of literature on the importance of proximity for innovation and other knowledge-related outcomes. We examine the impact of geographical, social, organisational, and cognitive proximity for a heterogeneous population, including people from academia, knowledge institutes, industry, and government. We analyse data on 1020 ego–alter relationships, derived from a survey among water professionals in the Netherlands. The use of survey data allows for more refined indicators of proximity and more diverse collaboration outcomes than those common in the literature. Social and cognitive proximity have a positive effect for all outcomes examined. Geographical and organisational proximity have a negative effect on hard (tangible) outcomes yet a weak positive (if any) effect on soft (intangible) outcomes. We do not find evidence for the suggestions in the conceptual literature that proximity follows an inverted U-curve where most outcomes are achieved in relations with some but not too much proximity.     

PPPs in China: Does the Growth in Chinese PPPs Signal a Liberalising Economy?

ABSTRACT

This study provides insight into the nature of public-private partnerships (PPPs) in China, a country that has invested more in PPPs than any other over the last two decades. It is puzzling that China, as a state-led economy, has turned to embrace PPPs. Pundits have taken this as evidence of a liberalising Chinese economy. However, our findings suggest that PPPs in China do not reflect a break from earlier, state-centric modes of governance; rather, the state essentially uses such partnerships as a mechanism to strengthen its own hand. We argue that the difference between how PPPs are being implemented in China compared to the West reflects differences in political economic contexts, both materially and ideologically. In both cases, the ambiguity surrounding the PPP model has been used to advance particular interests, serving as a reminder of both the ways in which power shapes the character of such policy tools and the differences in the relative power underpinning state-market relations in each context. By challenging mainstream interpretations of what PPPs are and what their proliferation means, studying the political economy of PPPs in a rising China further exposes the Western-centric nature of prevailing wisdom in political economy scholarship.     

Does Communist party membership pay? Estimating the economic returns to party membership in the labor market in China

Many studies have found that Chinese Communist party membership brings economic benefits to party members, but some studies also argue that the premium associated with party membership is merely due to members’ higher levels of ability and advantageous family backgrounds. The lack of consensus on the economic returns of party membership implies that the role of party membership is not well understood. This study estimates the economic returns to Chinese Communist party membership using complementary approaches to address the endogeneity of party membership status: propensity score matching and instrumental variable. Although the magnitudes of these estimates vary across estimators, all the estimates show positive economic returns to party membership. This paper also examines possible mechanisms for how party membership may bring benefits to members and provides evidence that party membership may generate political capital, but not social capital in the labor market in China.     

How do investors respond to Green Company Awards in China?

We find that firms winning Green Company Awards in China from 2008 to 2011 experienced on average insignificant and in some cases significantly negative effects on shareholder value. Various robustness checks suggest that these findings are not driven by the inefficiency of the Chinese stock market or a lack of perceived credibility of the award. In addition, we find important variation in the responses across firms: shareholders of firms in low-pollution industries and firms with primarily private ownership responded more negatively to award announcements. Furthermore, the peers of winning firms showed higher announcement returns than the award winners. Our results suggest that a key benefit of corporate environmentalism in China comes through building stronger relationships with government, and that otherwise the market generally discourages firms from environmental leadership.     

Labor market assimilation of immigrants in Spain: employment at the expense of bad job-matches?

During the last decade, Spain has experienced an unprecedented increase of immigration from three localized areas: Eastern Europe, Latin America, and Africa. Using data from the Labour Force Survey for the period 1996–2006, we study the labour characteristics of recent immigrants, identifying the major differences with the native population at arrival and tracking whether these differences fade away as their years of residence in Spain increase. We allow the returns to human capital and the sensitivity to the business cycle to differ between immigrants and natives. Overall, our results show that, compared to natives, immigrants face initially higher participation and unemployment rates, as well as higher incidence of overeducation and temporary contracts. However, 5 years after arrival immigrants’ participation rates start to converge to natives’ rates, unemployment rates decrease to levels even lower than those of natives, and the incidence of overeducation and temporary contracts remains roughly constant: no reduction of the gap with Spanish workers is observed. We are grateful to Christian Dustmann, Juan F. Jimeno, Claudio Michelacci, an anonymous referee, and seminar participants at the 2006 EALE Conference, 2006 Simposio de Análisis Económico, BBVA Economic Research Department, FEDEA, CReAM, INSIDE and LECG for helpful comments and suggestions.     

How Does the Minimum Wage Affect Firm Investments in Fixed and Human Capital? Evidence from China

This paper empirically analyzes the impact of Chinese minimum wage regulations on the firm decision to invest in physical and human capital. We exploit the geographical and inter‐temporal variations of county‐level minimum wages in a panel data set of all state‐owned and all above‐scale non‐state‐owned Chinese firms covering the introduction of the new Chinese minimum wage regulations in 2004. In our basic regressions including all Chinese firms, we find significant negative effects of the minimum wage on human capital investment rates and no overall effects on fixed capital investment rates. When grouping firms by their ownership structure, we find that these results hold for most firms. Foreign‐owned firms are an exception to some extent, because the likelihood that they invest in human capital has not decreased in response to the policy.     

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.     

Air Pollution and ‘Dirty’ Industries: How and Why Does the Composition of Manufacturing Output Change with Economic Development?

This paper examines the impact on air pollution ofchanges in the composition of manufacturing output indeveloped and developing countries. Pollutionemissions from manufacturing output are estimated ina manner which holds constant the effect of technologyand regulations allowing the impact of compositional changes alone on pollution to beestimated. The paper has three main findings; (1) theinverted-U estimated between per capita income and thepollution intensity of GDP arises due to both thecomposition of manufacturing becoming cleaner and theshare of manufacturing output in GDP falling.Compositional changes alone are not responsible forthe inverted-U between per capita income and percapita emissions; (2) changes to the composition ofmanufacturing output are consistent with the pollutionhaven hypothesis, however there is clear evidence thatrising per capita incomes are associated with afalling income elasticity of demand for `dirty'products. This fact may explain the compositionalchanges that occur with development; (3) in additionto the income elasticity effect, the analysis suggeststhat land prices and to a lesser extent the prices oflabour and capital, determine the proportion of dirtyindustry within a country's manufacturing sector.     

A Research on Approach to the Development Strategy of Tourism Economic Growth

As the tourism is improving, the economy growth can be obtained. Therefore, to improve tourism is to improve the economy. In fact, some supplies of tour could not meet the demands, which brings out conflict. It is obvious that solving the problem of supply and demand of tour is the approach to the development strategy of tourism economic growth.