A cost function analysis of import demand and growth in South Africa

This study investigates the substitutability relationships among capital, labor, and imported inputs for South Africa, utilizing the estimates obtained from an aggregate cost function. Our results are consistent with the hypothesis that capital is a substitute for both domestic labor and imports, but that labor and imports are complementary inputs. This latter result suggests that relaxing South African trade restrictions may have a positive impact, in both the long and the short run, on the demand for domestic labor. Other results suggest that the reduction of market impediments may also positively impact the production of investment goods and economic growth.     

European Integration and Production in the French Economy

Effects of greater European integration on the French economy are explored with an aggregate cost function. Input direct price elasticities are inelastic, but greatest (absolute value) for capital and lowest for imports. Cross-price elasticities suggest inputs are substitutes and are higher for domestic inputs than domestic input and imports pairs. As trade restrictions fall, effects on domestic input demand may increase as substitution elasticities rise. Inverse output supply price elasticities indicate domestic input prices are relatively important factors affecting consumption goods prices and import prices more important for investment goods. Thus, import price decreases may stimulate investment and growth. (JEL F14 , O10 , O12 )     

The Effects of Trade Liberalization in a Vertical Structure

Despite the importance of international trade on intermediate goods, the literature did not pay much attention to this aspect in determining the effects of trade liberalization in the presence of a labor union. We take up this issue here and show the effects of trade liberalization on the final goods and/or the intermediate goods, where the domestic firm pays unionized wage and imports intermediate goods. We show that trade liberalization on the intermediate goods (final goods) increases (decreases) the unionized wage, labor union's utility and domestic profit. Trade liberalization on both the final goods and intermediate goods may either increase or decrease the domestic unionized wage, labor union's utility and domestic profit depending on the input coefficients and the initial tariff levels. Our qualitative results are robust with respect to the intermediate goods market structure, the pricing strategy of the intermediate goods producers and the union's objective function.     

The Energy-Bias of North–South Technology Spillovers: A Global,Bilateral, Bisectoral Trade Analysis

We examine variations in the South–North ratios (emerging vs. industrialized countries) of energy and labor intensities driven by imports. We use the novel World input-output database that provides bilateral and bisectoral data for 40 countries and 35 sectors for 1995–2009. We find South–North convergence of energy and labor intensities, an energy bias of import-driven convergence and no robust difference between imports of intermediate and investment goods. Accordingly, trade helps emerging economies follow a ‘green growth’ path, and trade-related policies can enhance this path. However, the effects are economically small and require a long time horizon to become effective. Trade-related policies can become much more effective in selected countries and sectors: China attenuates labor intensity via imports of intermediate goods above average. Brazil reduces energy intensity via imports of intermediate and investment goods above average. Production of machinery as an importing sector in emerging countries can immoderately benefit from trade-related reductions in factor intensities. Electrical equipment as a traded good particularly decreases energy intensity. Machinery particularly dilutes labor intensity. Our main results are statistically highly significant and robust across specifications.     

The Spanish Textile Industry Sans ATC Quota Protection

The Spanish textile and apparel manufacturing sectors have been badly impacted by the global recession as well as the removal of quotas that were in place with the Agreement on Textiles and Clothing (ATC). This study employs a cost function to investigate the presence of scale economies and the interrelationships among inputs of domestic capital, labor, and intermediate goods as well as outsourced (imported) intermediate products for the Spanish textile industry in a global environment that has become increasingly competitive. While there is evidence of scale economies at low output levels, there is also some evidence consistent with diseconomies of scale at the highest output levels. All of the inputs appear to be substitutes for one another except for domestic capital and outsourced intermediate goods. An important finding is that the demands for both labor and domestic intermediate goods have become increasingly sensitive to the prices of outsourced inputs. The estimated coefficients of dummy variables indicate that reduced international trade restrictions have put downward pressure on unit cost for the industry in recent years. These results suggest that the Spanish textile industry and its domestic suppliers will be increasingly challenged by international competitive pressures.     

Trade,Growth, and Environmental Quality*

This paper examines linkages between international trade, environmental degradation, and economic growth in a dynamic North–South trade game. Using a neoclassical production function subject to an endogenously improving technology, North produces manufactured goods by employing labor, capital, and a natural resource that it imports from South. South extracts the resource using raw labor, in the process generating local pollution. We study optimal regional policies in the presence of local pollution and technology spillovers from North to South under both non‐cooperative and cooperative modes of trade. Non‐cooperative trade is inefficient due to stock externalities. Cooperative trade policies are efficient and yet do not benefit North. Both regions gain from improved productivity in North and faster knowledge diffusion to South regardless of the trading regime.     

Cost relationships and challenges in the Spanish apparel industry

In the twenty-first century, the Spanish textile and apparel industries have faced substantial challenges, resulting in declining sales and employment. This study concentrates on the apparel industry, since its economic challenges and opportunities differ from those of the textile industry. The analysis employs a transcendental logarithmic cost function to investigate the presence of scale economies and the interrelationships among inputs of domestic capital, labour and intermediate goods as well as outsourced intermediate products for the Spanish apparel industry and discusses the implications for its future competitiveness and the demand for domestic inputs. The results are consistent with diseconomies of scale or, in the case of one model, possibly constant returns to scale, indicating that some contraction of the industry due to international competition will not raise unit costs. All of the inputs except for capital and intermediate goods were found to be substitutes. An important finding is that the cross elasticity values of both labour and domestic intermediate goods with respect to the price of outsourced goods have risen over time, indicating an increased sensitivity of the quantity demanded of these home-country inputs to the price of imported intermediate goods. It follows that domestic input markets will be more substantially affected by international prices for outsourced inputs as the industry tries to maintain its competitiveness in the global environment.     

CHALLENGES FOR FRANCE IN THE EMERGING INTERNATIONAL ENVIRONMENT: A DYNAMIC ANALYSIS

France faces substantial challenges as the economic integration of Europe and the international economy continues. This article uses a dynamic aggregate translog cost function with inputs of capital, labor, and imports to examine the likely impact of closer world economic ties on France. This technique allows one to estimate short- as well as long-run direct price elasticities of demand for the inputs and cross-price elasticities for each respective input pair. The findings of the article include that (1) the French economy is becoming more sensitive to changes in import prices and (2) all the inputs are substitutes for one another. These results suggest that continuing international economic integration will present substantial challenges to the French economy. The short-run estimates of direct and cross-price elasticities are consistent with the Le Châtelier principle, except for the cross-price elasticities between capital and labor. Some possible reasons for the latter result are discussed in the article. (JEL F14, O10, O12)     

Trade liberalization and the Mexican steel industry

The impact of the North American Free Trade Agreement (NAFTA) on the competitive positions of Mexican and U.S. steel producers is investigated employing a translog cost function with four inputs (capital, labor, domestic intermediate goods, and foreign intermediate goods) to examine scale characteristics and input substitution in Mexican steel production. Results are consistent with diseconomies of scale at high levels of output and with substitute relationships between all input pairs except labor and domestic intermediate goods. Thus, output growth will likely result in cost reductions for Mexican producers only if the industry reaps significant benefits from substitution of foreign inputs for domestic. Recent increases in Mexico's imports of finished steel have much exceeded those of steel industry inputs, and it therefore does not seem likely that a Mexican cost advantage over steel producers in the United States will soon emerge as a result of economies of scale.     

South African trade policy mattersTrade performance and trade policy*

South African trade policy has exerted a major influence on the composition and aggregate growth of trade. In the Apartheid period, South Africa developed a comparative advantage in capital‐intensive primary and manufactured commodities partly because of its natural resource endowments, but also because the pattern of protection was particularly detrimental to exports of non‐commodity manufactured goods. By contrast, trade liberalization from 1990 not only increased imports, but by reducing both input costs and the relative profitability of domestic sales also boosted exports. This evidence suggests that additional trade liberalization and policies that afford South African firms access to inputs at world prices could well be part of the strategy to enhance export diversification.     

出口与中国的经济增长:需求导向的分析

出口的增长除了能够直接推动经济增长之外,还对消费、投资、政府支出、进口造成影响,从而间接刺激经济增长。完整地考察出口与经济增长之间的关系必须同时考虑出口增长对经济增长的直接和间接推动作用。按此方法估计的结果表明,20世纪90年代以来外贸出口每增长10%,基本上能够推动GDP增长1%。     

Economic Growth with Foreign Capital

In growth theory, foreign investment places a small open economy in the international steady state. In applied growth theory, foreign investment is assumed to shift technology. The present growth model separates foreign from domestic capital and develops the steady state where both capital/labor ratios are stationary. A capital scarce country would attract foreign investment and may arrive at a steady state with perpetual foreign investment. Such a steady state foreign investment host is characterized by low saving and high labor growth rates, and source countries the opposite. Incomplete convergence characterizes economic growth with foreign capital.     

Globalization challenges for the Mexican textile industry

The Doha round and full integration of the textile industry into the GATT have the potential to dramatically affect the Mexican textile industry. This study investigates the nature of scale economies and input relationships for that industry using a cost function with capital, labor, domestic intermediate goods, and imported intermediate goods as inputs. The findings suggest that significant economies of scale exist, and that most inputs are substitutes, although for some years some inputs are complements. Increased domestic input sensitivity to the price of foreign inputs may present challenges for the industry as it struggles to be internationally competitive.     

The Spanish automotive industry: scale economies and input relationships

This paper investigates the existence of economies of scale in the Spanish automobile industry as well as the substitution possibilities between input pairs and the direct and cross price elasticities of demand for the various inputs by estimating a translog cost function for both a three input model involving capital, labour, and intermediate goods as well as a four input model where energy is separated from other intermediate goods. The results of this study are consistent with the hypothesis of economies of scale in the Spanish automobile industry, particularly at the low and mean levels of output. These results also are consistent with the hypothesis that capital is a substitute for the other inputs, but that labour and intermediate goods are complements. Labour and energy also appear to have a complementary relationship over most of the data points in this study. The significance of a complementary relationship between labour and intermediate goods is that any attempt by the Spanish government to restrict imports of these inputs, resulting in higher domestic prices for them, may aggravate an already serious domestic unemployment problem.     

Factor Endowments,Democracy, and Trade Policy Divergence

We develop a stochastic model of electoral competition in order to study the economic and political determinants of trade policy. We model a small open economy with two tradable goods, each of which is produced using a sector‐specific factor (e.g., land and capital) and another factor that is mobile between these tradable sectors (labor); one nontradable good, which is also produced using a specific factor (skilled labor), and an elected government with the mandate to tax trade flows. The tax revenue is used to provide local public goods that increase the economic agents’ utility. We use this general equilibrium model to explicitly derive the ideal policies of the different socioeconomic groups in society (landlords, industrialists, labor, and skilled workers). We then use those ideal policies to model the individual probabilistic voting behavior of the members of each of these socioeconomic groups. We use this model to shed light on how differences in the comparative advantages of countries explain trade policy divergence between countries as well as trade policy instability within countries. We regard trade policy instability to mean that, in equilibrium, political parties diverge in terms of the political platforms they adopt. We show that in natural resource (land)–abundant economies with very little capital, or in economies that specializes in the production of manufactures, parties tend to converge to the same policy platform, and trade policy is likely to be stable and relatively close to free trade. In contrast, in a natural resource–abundant economy with an important domestic industry that competes with the imports, parties tend to diverge, and trade policy is likely to be more protectionist and unstable.     

The domestic content of imports and the foreign content of exports

When a country imports goods that have been assembled abroad, some amount of the labor and capital services embodied in those goods may originally be from the country that is now importing them. Similarly, some of the value added of a country's exports may be foreign in origin. For the median country in my sample of 14, I calculate that 21.5% of imported labor services are domestic labor, 17.7% of imported capital services are domestic capital, 12.3% of exported labor services are foreign labor, and 23.3% of exported capital services are foreign capital.     

Imports and growth in China

In this paper, we analyze the role played by imports and investment on labor productivity and output in China from 1964 to 2004. In doing so, our analysis focuses on the role of technological progress incorporated into the Chinese economy through capital accumulation and imports, which could be a cause of significant technology transfer from abroad that facilitated industrialization and rapid growth in China. However, as we know that there could be other factors influencing economic development, we have also considered the role played by domestic innovation activities, competitiveness and foreign economic conditions. We focus on examining the short- and long-run effects of the considered variables as well as the direction of their causality. In addition, we investigate the role played by the exchange rate on growth and discuss some policy implications of this effect on the current debate on the appreciation of the Yuan. The empirical results provide evidence that both imports and investment encourage output and labor productivity in the long run, but neither investment causes imports nor imports cause investment. Moreover, we found that during the period considered the real exchange rate influenced output, but not productivity. These findings provide interesting insights on the future Chinese economic policy.     

Growth,expectations and tariffs

We present a growth model of international trade in which expectations about profitability and growth influence innovation and investment. Adaptive learning dynamics determine transition paths for countries with differing structural parameters. Countries limiting trade by tariffs on imports of capital goods can experience gains in growth and perceived utility for a finite time, whereas the rest of the world is adversely affected. Asymmetric gains persist longer when structural advantages of the country applying tariffs are larger. Substantial differences in levels of innovation, output and utility can appear within our asymmetric country setting.     

Foreign Management,International Capital,and Income Redistribution

This paper examines the impact of foreign management as a separate input in a competitive economy open to both international trade and international movement of productive capital. Three inputs (capital, labor, management) are used to produce two final goods in a model characterized by competition, homogeneous products, and full employment. This model provides a simple starting point for the study of multinational firm activity, building on the fundamental competitive factor proportions model of production and trade. A clear distinction arises between international movements of capital and management, and international movements of the two inputs are linked. [F 11, F 23]     

The influence of international trade on labour productivity in services: The case of Brazil in the 1990s

In the developing world, services account for a rising share of domestic employment and international trade. Thus, it is important to know whether trade liberalization contributes to labour productivity in services. We explore this question, examining the 1990–2000 Brazilian trade liberalization. We find that growth of imports and exports strengthened labour productivity in services, but the contribution was smaller in subsectors with more college graduates, and this negative offset was larger in subsectors that received large foreign direct investment (FDI) inflows. Improved access to imported manufactured intermediate inputs raised downstream services' labour productivity and downstream manufacturing firms benefitting from tariff cuts enacted by trade partners generated spillovers that improved the labour productivity of upstream service subsectors. However, FDI inflows and investments in human and physical capital modified these downstream factors. We conclude that the Brazilian trade liberalization strengthened productivity in services, but unequally across subsectors.