Towards a European urban policy

In the face of some opposition from those who plead subsidiarity as the central plank of European policies, the emergence of an urban dimension to European policies has been significant in the last five years. Now, reinforced by a research base, with the European Parliament and the Committee of the Regions providing a political route to influence, and with a modest programme of experimentation in urban projects in progress, the “urban” appears genuinely fixed on the political agenda of Europe. From a UK perspective the substance of the programmes is limited; small in scale and following many of the lines established within City Challenge or the Urban Partnerships, the new European urban initiatives are substantively modest and marginal. Much more important is the symbolic importance of a European urban perspective. This gives impetus to the policy debate at both European and national levels with the Commission's Community Initiative directing attention not simply to growing polarisation, marginalisation and exclusion in cities, but also to issues of urban fiscal crisis — the interaction of heavy expenditure needs with inadequate tax or grant base. Increasingly fierce competition between cities for investment and growth, with both Brussels and nation states involved as regulators and/or co-competitors is certain to exacerbate inter urban differentials and to reinforce the salience of questions of social exclusion and urban fiscal crisis.     

Czechoslovakia and comecon

Summary The article follows official statements and theoretical discussions in Czechoslovakia in order to explain the role of foreign trade in Czechoslovak economic reforms. After an outline of the historical background, stressing the dependence of Czechoslovak economy and of her industrial structure on external relations, the position of Czechoslovakia is assessed during Khrushchev's attempts to integrate the East European countries. The main attention, however, is paid to the period after December 1966 when top Czechoslovak organs took the decision to start profound economic reforms in the field of foreign trade—as the first East European country and without consulting other COMECON members. The most important instrument, the so-called “inner price adjustment”, has been employed since January 1st, 1967, i.e. one year before Hungary has introduced it, too. It interconnects the domestic wholesale prices with the foreign trade prices in such a way as to make the difference part of the financial results of the enterprises instead of former budgetary financing. Within the framework of other measures this device would make it ultimately possible to reach convertibility of the Czechoslovak crown. During the first half of 1968 theoretical efforts were aimed at foreign trade liberalization and such a policy was partly executed. Finally, two theories of “socialist integration” are sketched which have emerged in Eastern Europe on both official and theoretical levels since august 1968 as a consequence of the above-mentioned Czechoslovak developments. The author is a research fellow at the Netherlands School of Economics in Rotterdam.     

Investments in fixed assets and human capital: Two interconnected drivers of socioeconomic growth

This paper highlights the great importance of increasing the share of the knowledge economy in the GDP, which is currently 13% in Russia, compared to 30% in Western Europe and the United States. The accelerated growth in the fixed asset and investment in the knowledge economy at levels of 20–25% and 20%, respectively, by 2020 have been justified. Attention is drawn to the inadequately low, declining level of investment in healthcare in Russia, the GDP share of which is twice as low as in 25 developed countries and 1.5 times lower than in 30 developing countries, which is reflected in the increased mortality rate. The WHO data on the average life expectancy of men has been analyzed; it amounts to only 58.7 years, which is below the age of retirement in Russia. In developed countries, the average life expectancy of men is 13–14 years higher. It has been concluded that, in order to tackle the long-term challenges in human capital, it is necessary to boost labor productivity and increase wages by reducing the groundless differentiation of the population’s income to the level of Western European countries.     

Russia’s invasion of Ukraine: assessment of the humanitarian,economic, and financial impact in the short and medium term

What are the economic effects of the Ukraine war for Ukraine, Russia, and the rest of Europe? In this study, the Vienna Institute for International Economic Studies (wiiw) sheds light on the immediate consequences on the one hand, but also on the medium-term structural changes caused by the largest armed conflict in Europe since the Second World War. The Russian invasion of Ukraine has triggered a humanitarian crisis. Pre-war, almost 19 m people lived in those regions that are currently directly affected. Refugee inflows to the rest of Europe are likely to be at least three times greater than in 2015/2016. As Black Sea ports come under Russian assault, Ukraine has lost its ability to sell more than half of its exports, primarily agricultural commodities and metals. Western financial support will become ever more important as the war continues. Turning to Russia, sanctions will have a very serious impact on that country’s economy and financial sector. Despite being partly hamstrung by the fact that a large proportion of Russian reserve assets are frozen in the EU and G7, the central bank managed to stabilise financial markets by a combination of confidence-building and hard-steering measures: capital controls, FX controls, regulatory easing for financial institutions, and a doubling of the key policy rate. The medium-term and long-term outlook is negative. As a result of the war and the sanctions, the rest of Europe faces a surge in already high inflation; this will weigh on real incomes and will depress economic growth. Many European countries rely heavily on Russia for oil and gas imports: import shares are over 75% in Czechia, Latvia, Hungary, Slovakia, and Bulgaria with respect to natural gas; Slovakia, Lithuania, Poland, and Finland with respect to oil and petroleum; and Cyprus, Estonia, Latvia, Denmark, Lithuania, Greece, and Bulgaria with respect to solid fuels. Aside from energy, the fallout via trade for the rest of Europe is likely to be small. Non-energy trade and investment links between Russia and many European countries have declined in importance since 2013. There are four main areas of structural change and lasting impact for the EU (and Europe more broadly) as a result of Russia’s invasion of Ukraine. First, the EU will get more serious about defence. Second, the green transition will gather pace. Third, broader Eurasian economic integration will be unwound. And fourth, the EU accession prospects for countries in Southeast Europe could (and should) improve.

     

The changing remittance behaviour of United States manufacturing firms in Latin America

An examination of the remittances made in 1966–1979 by US manufacturing firms operating in Latin America has clearly shown that intra-firm technology payments have been reduced in absolute terms since 1975. This has been a result of government regulations in this area. The total record of repatriated dividends and interest payments does not suggest a shift from technology payments to other normal types of remittances.Lower remittances have not resulted from lower overall earnings. On the contrary, earnings have been growing faster than remittances, have been mainly reinvested in the region and have led to higher investments in fixed assets. Such higher investment requirements in the 1970s can be explained by oligopolistic reaction to specific economic policies aimed at fostering the industrialization process with the participation of TNCs based not only in the US but also in Europe and Japan and to the less attractive prospects in traditional investment destinations.     

De noordse economische integratie

Summary The post-war attempts to achieve a Nordic regional economic integration have not yet been successful, partly as a result of the establishment of the European Free Trade Association. These attempts were apparently shelved when two of the four Nordic countries — Denmark and Norway — applied for a membership of the European Common Market. However pending the negotiations for entry to the EEC, a draft Treaty for the establishment of the Organization for Nordic Economic Co-operation (Nordec) was drawn up on the instruction of the governments of the Nordic countries. In this paper the possible effects of this regional Nordic Common Market, when established, are briefly analyzed. The author also investigates the increase in intra-Nordic trade since EFTA was created. In view of the interprenetation of Nordic trade flows resulting from EFTA, it is highly unlikely, that Sweden could remain outside a large, integrated European market, which Denmark and Norway had joined.      

Japanese foreign direct investment and regional trade

We examine the relationship between Japanese FDI outflows, domestic and foreign fixed investment, and the exchange rate. The results indicate that aggregate FDI outflows have been driven by investment in Japan and the exchange rate, while the geographic distribution of such investment has been influenced by foreign economic conditions. We also find that FDI outflows have a temporary impact on exports but a permanent effect on imports. We find no evidence that behavior with respect to East Asia differs from that with respect to North America or Europe.     

欧债危机对中国的影响及中国的态度与举措

文章认为,欧洲主权债务危机双重影响着中国:从消极方面来说,它影响中国对欧洲的商品出口,会导致人民币汇率大幅波动,加大了中国对欧洲投资的风险,加剧了中国金融市场的波动,影响中国的汇率机制改革;从积极方面来说,它有利于中国大规模进行海外投资,有利于提高中国的国际地位。面对欧债危机,中国一方面应积极参与解决欧债危机的行动,另一方面必须强调欧债危机的解决关键在欧洲自身的努力。     

Conjunctuur,structuur en economische groei

Summary In cross section analyses of economic growth, based on the Cobb-Douglas production function, only a minor part of the differences between the growth rates of the countries is explained by changes in the volumes of labour and capital input. In this article an effort has been made to reduce the unexplained residuals with the help of a simple growth model, containing four new elements as compared with the traditional analyses, based on the application of the Cobb-Douglas production function only. Firstly, to the concept of investment has been added a qualitative dimension, which represents its more or less traditional or “progressive” character, with which is meant the extent to which the latest technological findings have been applied in it. Secondly, the change in volume and quality of capital input has been considered as an endogenous variable. Thirdly, thefluctuation in economic growth has been introduced,via the investment equation, as an explaining variable of thepace of economic growth. The underlying philosophy is that the entrepreneurs base their quantitative and qualitative investment decisions on the pace of economic growth, corrected by the extent to which they fear set-backs in that growth. This fear is assumed to be founded on their past experience in this respect, as represented by a fluctuation-index. Finally, the sectorial structure of the economy has been introduced into the aggregate production function as an explaining variable of the autonomous trend of gross national product. The model has been tested in a cross section analysis for 17 Western European and North American countries, with the least squares method. The result was very satisfactory.

---

---

Dit artikel vormt gedeeltelijk een weerslag van door de schrijver op het Nederlandsch Economisch Instituut onder auspici?n van N.V. Philips en Unilever N.V. verrichte groeistudies.     

Horizontal and vertical intra-industry trade between Eastern Europe and the European union

Horizontal and Vertical Intra-Industry Trade Between Eastern Europe and the European Union. — The share of intra-industry trade (IIT) in total trade between central and east European nations and the EU is broken down into various components. Vertical IIT is found to account for 80 to 90 percent of total IIT. Controlling for country-specific effects, it is positively associated with product differentiation, labor intensity of production, economies of scale, and foreign direct investment (FDI). Horizontal IIT is also positively correlated with FDI and product differentiation; however, a significant negative relationship is found for scale and labor intensity.     

Financial Globalization and Banking Crises in Emerging Markets

Bank crises in emerging economies have been a feature of the recent global crisis, and their incidence has increased in the post-Bretton Woods era. This paper investigates the impact of financial globalization on the incidence of systemic bank crises in 20 emerging markets over the years 1976–2002 using measures of de facto and de jure financial openness. An increase in foreign debt liabilities contributes to an increase in the incidence of crises, but foreign direct investment and portfolio equity liabilities have the opposite effect. A more liberal de jure capital regime lowers the incidence of banking crises, while a regime of fixed exchange rates increases their frequency. The results of the econometric analysis is consistent with the experience of East European and central Asian emerging markets, which attracted a relatively large proportion of capital flows in the form of debt in recent years and have been particularly hard hit by the global financial crisis.     

Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects

This paper uses a proportional hazard model to study foreign direct investment by Japanese manufacturers in Europe between 1970 and 1994. We divide each firm’s investment total into a sequence of individual investment decisions and analyze how firm-specific characteristics affect each decision. We find that total factor productivity is a significant determinant of a firm’s initial and subsequent investments. Parent-firm size does not have a significant influence on the initial decision to invest. Large firms simply have more investments than smaller firms. Other firm-specific characteristics, such as the R&D intensity, export share and keiretsu membership, also play a role in the investment process. JEL no. F23, L20     

Neutrality and free trade: Sweden and trade liberalisation, 1948–1958

Abstract

This article discusses the Swedish attitude to European economic cooperation, an attitude that has been described as reluctant. The traditional explanation for this has been Sweden's neutrality. This explanation has been challenged by researchers, who have claimed that a nationally self-sufficient social democracy was responsible for the reluctance towards Europe. In this article, neutrality is still seen as the main explanatory factor. Swedish strategies for dealing with European integration linked the concepts of neutrality and global free trade. Nordic cooperation was also seen as a strategy to meet demands for European integration. Swedish activities within the European organisations were limited by neutrality concerns. Within these limits Sweden worked for economic policy solutions, which might be called social democratic.     

The International Business Cycle in a Changing World: Volatility and the Propagation of Shocks in the G-7

The changing relationships between the G-7 countries are examined through VAR models for quarterly growth, estimated over sub-periods and using a rolling data window. Trivariate models are employed, each including the US and a European (E15) aggregate. The results show that conditional volatility of growth has declined relatively more since 1980 for E15 than for the US, aggregate European shocks have increased impact on “core” European countries from around 1980, the effects of the US on Europe are largest during the 1970s and the late 1990s, and E15 has a steadily increasing impact on the US economy over time. JEL Classification Numbers: E32, F02, F43     

The Contribution of the Italian Liberal Thought to the European Union: Einaudi and His Heritage from Leoni to Alesina

The Italian classical liberal tradition of Federalism and European integration is well founded. Starting with Luigi Einaudi, who took up the heritage of Carlo Cattaneo, it has continued with Giovanni Malagodi, Giovanni Demaria, and Bruno Leoni, not to mention the liberals of Einaudi’s times. The same reflection continues today. Alberto Alesina is a prominent personality among the scholars who can be considered as full heirs of Einaudi. A foresight, often impressive, is the thread linking Einaudi’s writings on European federation. Between the twenties and the early fifties of the 20th century, Einaudi traced with great precision the profile and many details of a politically and economically unified Europe. Today, we do not have the federation that he wished for, but the economic sovereignty among EU countries has been shared to a great extent. Other prominent Italian liberal thinkers and politicians have reflected on the idea of a federal Europe and on the incipient European construction: thinkers such as Bruno Leoni, Giovanni Malagodi and Giovanni Demaria. Giovanni Malagodi, for many years a member of the Italian Parliament and secretary general of the Italian Liberal party, in his speech for the ratification of the Treaty of Rome, advocated a European monetary union with a single currency substituting those of the Member States of the EEC. Both Giovanni Demaria and Bruno Leoni warned against the danger of Government interventionist policies in the European common market. Alesina, in various scholarly contributions on European integration and in the essay The Future of Europe, adopts a liberal perspective for his critical analysis of EU policies.     

The Euro and the Dollar, 1998

There is no immediate prospect for the euro to become an anchor currency outside Central Europe and the Mediterranean. Still, a successful euro could deepen European financial markets and attract more international investment to the euro area. The prospect of substantial portfolio shifts into the euro, however, does not justify forecasts that the new currency will appreciate against the dollar over an extended time horizon. Liability managers outside the euro area should also find the enhanced liquidity and improved diversification possibilities of euro-denominated debt attractive.     

The Effect of the Exchange Rates on Investment in Mexican Manufacturing Industry

This paper, considering revenue and cost exposure channels, investigates the effects of exchange rate on fixed capital investment in Mexican manufacturing sector over 1994–2003. We find that i) currency depreciation has a positive (negative) effect on fixed investment through the export (import) channel; ii) exchange rate volatility impacts mostly export oriented sectors; iii) the sensitivity of investment to exchange rate movements is stronger in non-durable goods sectors and industries with low mark-up ratios.     

Openness, Investment and Growth

In the empirical growth literature both investment and opennessto international trade have been identified as important determinantsof growth. These relationships appear to be robust in a numberof specifications. However, Sachs and Warner claim that opennessis such an important determinant of investment that the coefficienton investment will be insignificant in growth regressions, whichalready account for openness. I re-examine this result and canonly support it if I use their model specification and estimationmethod. I suggest that their ordinary least squares estimationsuffers from both endogeneity and omitted variable bias. Usingpanel data analysis, I show that ignoring unobserved country-specificeffects and endogeneity problems cause investment to be insignificant.Estimating the model with the Blundell and Bond system generalmethod of moments estimator, which allows me to address theomitted variable as well as the endogeneity bias, I find thatinvestment is significant in the Sachs–Warner model despitecontrolling for openness. Thus, my regressions confirm thatopenness has a significant, positive effect on income. However,this variable is not so important that it drives investmentout of the model. My re-examination of the Sachs–Warnermodel shows that results from single cross-country growth regressionscan be misleading when unobserved country-specific effects andendogeneity problems are ignored.     

Regional Economic Integration and the Location of Multinational Firms

A theoretical model of international location is applied to a process of regional economic integration in which a set of countries mutually removes barriers to trade and investment, thus overcoming the traditional ‘hub and spoke’ setup of regional agreements. The theoretical results are matched with actual trade and foreign investment data from a sample of some 4,200 multinational firms who have invested in Central and Eastern Europe over the 1990–1999 period. Controlling for the effects of the reduction in trade barriers through a proper specification of a gravity model, it is found that the conventional outcome of an agglomeration of economic activities in the centre of the integrating area does not necessarily hold. Multilateral regional integration agreements can act as an important dispersion force significantly driving the location of multinational firms. A panel probit econometric exercise confirms the findings. JEL no. F12, F15, F21     

Patterns of technology imports: interregional comparison

There is not much direct trade between the major Latin American economies (Argentina, Brazil, Mexico) and Eastern Europe. However, these regions are increasingly interacting as borrowers of money and technology from western sources. During the last two decades the Latin Americans have been importing much more western technology—as documented in patent and license data—than Eastern Europe, one reason being that the former gain from large-scale direct investment by western firms, whereas Eastern Europe does not. Eastern Europe outspends Latin America on domestic research and it generates more endogenous technology as well, but this factor does not compensate for its smaller imports of western technology. This is demonstrated by the progressive erosion of Eastern European exports of technologically complex manufactures to the West by the aggressive exporters from the large Latin American and other newly industrializing countries. As recent developments indicate—including the contrasting response by the two regions to the debt crisis—it is likely that the heavier involvement of the Latin Americans in technology imports will continue with obvious implications for the competitiveness of these two regions in the western market for manufactures.