Endogenous market structure and the growth and welfare effects of economic integration

This paper studies the growth and welfare effects of integration in a world economy populated by global oligopolists. In economies that move from autarky to trade, growth and welfare rise because exit of domestic firms is more than compensated by entry of foreign firms so that integration generates a larger, more competitive market where firms have access to a larger body of technological spillovers that support faster growth. The effects of a gradual reduction of tariffs are different because economies start out from a situation where all firms already serve all markets. In this case, the global number of firms falls so that the variety of consumption goods and the diversity of innovation paths fall. The surviving firms, on the other hand, are larger and exploit static and dynamic economies of scale to a larger degree. These homogenization and rationalization effects work in opposite directions. Under plausible conditions, the rationalization effect dominates and growth and welfare rise.     

Wage convergence and trade

We examine differences in wage rates across countries for workers employed in the same industry, distinguishing workers in the low, medium and high‐skill groups. These differences are large and show persistence over time. We ask, nonetheless, whether there is evidence of convergence, much as is done in studies of convergence in per capita income across countries. With our focus on the micro level, we expect convergence to reflect, at least in part, the degree of integration of a country or industry into the world economy and examine particularly the role of market integration and trade. Our results show strong evidence of convergence in a diverse sample of 39 countries, which includes most large economies whether rich or poor. The estimated convergence rate over the period from 1995 to 2008 is about 4% per year for workers in all skill groups, higher in the more integrated economies of the EU than in other economies without such open borders and lower in industries supplying services rather than manufactures. Also, we find evidence that the rate of growth of domestic output impacts positively on the growth of wages in an industry, providing a source for ongoing deviations from the convergence prediction.     

Solar Energy in Sub‐Saharan Africa: The Challenges and Opportunities of Technological Leapfrogging

For decades, Africa was generally perceived as the dumping ground for obsolete technologies. In recent years, technological leapfrogging, which is associated with the newly industrialized economies in Asia, has transpired in some key industries. In this article, we present the solar photovoltaic industry as one such industry and an integrated model of scaling up solar technologies. We identified five unique models aimed at scaling up solar energy in Africa: state‐led, nongovernmental organization and other agency–led, emerging‐market multinational enterprises–led, Avon, and pay‐as‐you‐go models. Our analysis focused on four countries in particular (Ghana, Nigeria, South Africa, and Kenya) and Africa in general. Despite the promising opportunities of this industry, a number of factors such as high up‐front capital costs and limited end‐user financing schemes have limited the technological process. We conclude by outlining the implications of the findings for theory and practice. © 2014 Wiley Periodicals, Inc.     

大数据、人工智能与厂商竞争路径

经济学对市场竞争路径的学理性分析,主要集中在价格确定、产量确定、规模经济、产业组织等方面,而对科技进步引发市场竞争路径的变化并没有足够的关注。其实,市场竞争路径变化的底蕴是科技进步,只是经济学家在分析市场竞争路径时偏好于将科技因素作为外生变量处理。大数据和人工智能等的发展可谓是一场史无前例的科技革命,它对人类经济活动产生广泛而深刻的影响主要表现为：大数据及其运用怎样影响厂商投资经营,大数据与机器学习等人工智能手段相融合会在哪些方面改变厂商竞争路径,厂商如何提高数据智能化和实现网络协同化,在什么样的条件下会出现行业垄断,等等。文章的基本分析观点是：厂商竞争路径变化是贯穿于大数据、互联网和人工智能等相互融合过程的一种现象,这种现象对应于新科技进步和运用的不同层级;微观经济分析需要将新科技因素作为内生变量,通过分析大数据、机器学习与厂商竞争路径之间的关联,揭示厂商竞争路径变化机理以及由此引致的产业组织等问题。     

Can deunionization lead to international outsourcing?

We analyze unionized firms' incentives to outsource intermediate goods production to foreign (low-cost) subcontractors. Such outsourcing leads to increased wages for the remaining in-house production. We find that stronger unions, which imply higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a theoretical reconciliation of the empirically observed trends of deunionization and increased international outsourcing in many countries. We further show that globalization - interpreted as either market integration or increased product market competition - will increase incentives for international outsourcing.     

The Impact of Capital Market Integration on Educational Choice and the Consequences for Economic Growth

This paper examines the impact of capital market integration on higher education and the link to economic growth. The analysis takes into account that participation in higher education is non‐compulsory and depends on individual choice. Due to capital–skill complementarity, integration increases (reduces) the incentives to participate in higher education in capital‐importing (‐exporting) economies, all other things equal. From a national policy point of view, public education expenditure should increase after integration of similar economies in order to attract mobile capital. Using foreign direct investment as a measure of capital flows, we present empirical evidence which largely confirms our main hypothesis: an increase in net capital inflows in response to capital market integration raises participation in higher education. In addition, we show that the adjustment in educational attainment is an empirically relevant channel through which capital inflows foster economic growth.     

Trade Liberalisation,Exit, and Output and Employment Adjustments of Australian Manufacturing Establishments

This paper investigates three potential sources of Australia’s manufacturing productivity gains from trade liberalisation in the mid‐1990s: the exit of inefficient establishments, economies of scale, and the reduction in x‐inefficiency via employment reduction. We use manufacturing establishment level data and exploit the intersectoral variation in the effective rates of assistance (ERA) to see how businesses adjusted to trade liberalisation during the period. We find the documented productivity gains to be mostly accounted for by the reduction in x‐inefficiency through employment shedding in industries experiencing a high degree of trade liberalisation. We find little evidence that the exit of inefficient establishments in highly liberalised industries contributes to productivity gains. In fact, we find that the more productive establishments are more likely to exit, perhaps reflecting product switching by these businesses to make more profitable use of inputs. Similarly, there does not appear to be a strong relationship between the extent of trade liberalisation and output adjustments. However, we do find indicative evidence of an overall productivity‐enhancing effect through economies of scale. These findings suggest that, at least for the case of Australia, the ease of making employment adjustments can be crucial for policies such as trade liberalisation to have the desired effect. In addition, trade liberalisation may provide incentives for domestic producers to seek more profitable use of their inputs and to move further downward along their cost curves. We think further studies assessing the productivity gains from product switching and economies of scale effects in both liberalised and non‐liberalised industries and focusing on the interplay between labour market policy and firm adjustments would be valuable.     

Enterprises,incentives and networks: The formative years of the electrical network in Portugal, 1920–1947

Path-dependence, the formation of technological irreversibilities and ownership patterns, have recently been salient aspects in the study of historical networks. This article analyses the formative years of public utilities in a period where the advantages of co-ordination, interconnection or integration between enterprises was still incipient. The purpose is to understand what happens when the competition to expand the physical extensions of nodes and links is suddenly blocked, and the enterprises can only compete to increase supply. The theme is thus of network enterprises operating without some of the standard incentives to economies of scale. The allocational and distributional consequences of this particular situation are exposed through an examination of the case study of Portuguese electrification in the first half of the twentieth century.     

An exploration of multinational enterprise knowledge resources and foreign subsidiary performance

Successful international expansion requires that parent firms simultaneously transfer multiple MNE knowledge resources and their foreign subsidiaries effectively absorb and utilize the knowledge. In this study, we examine the relationships between multiple knowledge resources (technological and marketing knowledge), the relatedness between parents and foreign subsidiaries, and subsidiary performance. Relatedness is specifically linked to the type of knowledge being transferred from the parent (i.e., technological relatedness versus market relatedness). We hypothesize that subsidiary performance improves with (1) the integration of a parent firm's technological and marketing knowledge resources, (2) high technological (market) relatedness between a parent firm and subsidiaries for transfer of parent technological (market) knowledge and (3) the co-presence of high technological and market relatedness. We find general support in our analysis of pooled cross-sectional data on more than 4000 observations of foreign subsidiaries from 572 Japanese MNEs across 47 countries. Theoretical implications and future research are discussed.     

The Effects of Integration on R&D Incentives in Systems Markets

We consider a systems market where two complementary components must be used in combination to provide valuable services. The market for the first component is monopolized whereas the market for the second is potentially served by multiple firms. We show that integration of the monopolist into the competitive complementary market may distort incentives for R&D, reducing total economic welfare.     

The Effects of the Global Financial Crisis on Supply Chain Members in Non‐BRIC Emerging Markets

The global economic crises that began in 2008 had profound effects on the supply chains of many multinational firms across all industries including altering some fundamental supply chain characteristics. This study discusses the effects of the crises on lower‐level supply chain members in the context of the textile and garment industry in emerging markets. The fieldwork for this research and the integration of new United Nations data provide evidence for the vulnerability of those supply chain members that provide only commoditized basic services that do not depend on talent skills or resource availability. Most of these, less sophisticated supply chain members are located in non‐BRIC emerging economies, including Vietnam, Bangladesh, Pakistan, Haiti, Honduras, and so on. We present a framework that is transferable across industries. The framework is useful for managers when evaluating the feasibility and reliability of different suppliers from emerging and developing countries in particular. © 2013 Wiley Periodicals, Inc.     

Innovation dynamics and labor force restructuring with asymmetrically developed national innovation systems

The concept of National Innovation System (NIS) has gained a great deal of intellectual and practical attention over the past three decades. We present an endogenous growth model where the NIS of a country determines its accumulation of technological knowledge and the arrival rate of innovations depends on the distance from the technological frontier to the current technological development level (TDL) of the country. We show how, even within an ideal common market environment and despite the compensatory mechanism provided by migration and the advantage of backwardness enjoyed by the laggard countries, differences in TDLs among countries foster the economic stagnation of technological laggards. That is, the structural consequences derived from technological underdevelopment are persistent and not simply due to the depreciation of human capital, but to the absence of innovation incentives that follows. Numerical simulations and an empirical analysis are performed to illustrate the main results and relate them to the current European common market setting and the innovation policies of its members.     

Economies as an Antitrust Defense Revisited: The Welfare Trade-offs and Safe Harbors

This paper incorporates a Cournot model of oligopoly pricing into Williamson’s (1968a) model to assess the welfare effect of a merger that yields economies and market power simultaneously. The results show: (i) in most cases, economies from mergers can offset price increases due to market power such that there are positive net allocative effects, and (ii) the safe harbors in the merger guidelines may fail to screen out mergers correctly. The reliability, however, can be improved by considering cost savings and price elasticities in addition to the current use of increases in HHI and post-merger HHIs.     

Does new product growth accelerate across technology generations?

The academic literature on the growth acceleration of new products presents a paradox. On the one hand, the diffusion literature concludes that more recently introduced products show faster diffusion than older ones. On the other hand, technology generation literature argues that growth rate, at least as measured by diffusion parameters, remains constant across generations. We resolve this apparent paradox by testing whether growth acceleration occurs across technology generations while controlling for the passing of time. We check acceleration across 39 distinct technology generations in 12 product markets. The results show that intergeneration acceleration occurs in time to takeoff but not with respect to diffusion parameters (i.e., p and q). We show that takeoff acceleration is mostly driven by technology vintage (i.e., the passage of time) rather than generational shifts. Thus, time is a factor that accelerates early growth, but generational shifts do not. This result also holds when controlling for the effects of market vintage when the market is either business-to-business or business-to-consumer as well as when the technology is process- or product-based.     

Banking systems,innovations, intellectual property protections,and financial markets: Evidence from China

One unique feature of the emerging economies in Asia is the rich variation in the development of financial systems and technological sectors across different geographical areas. This unbalanced evolution provides us a potentially more powerful setting to investigate the dynamics among banking systems, innovations, intellectual property (IP) protections, and stock market reactions that are especially useful in understanding the policy–finance–innovation nexus in emerging economies. Using newly available data from China, this study confirms the nurturing role of financial systems on innovations, the value-enhancing function of firms' innovative activities, and the lead–lag predictive role of innovations on stock returns, in the context of emerging economies. More importantly, the study documents that stronger provincial IP protections reduce patent piracy and hence enhance local firms' market values.     

Exchange Rate Effects on Domestic Prices in Bulgaria and Poland: Progress in Making Markets?

The economic liberalization which has occurred in Central and Eastern Europe (CEE) over the past 15 years generally has involved establishing domestic markets and privatizing state‐owned firms, both with the intention of integrating the CEE economies into the global economy and allowing the benefits of competition to be realized. We explore how well this has been accomplished in two countries, Poland and Bulgaria, and the domestic conditions that contribute to its accomplishment. The sensitivity of domestic markets to international shocks, as reflected in exchange rate effects on domestic prices, may be viewed as an indicator of how integrated a country’s markets are into the global economy, and a proxy for competition in those markets. In explaining variation in exchange‐rate pass‐through, we examine the impact of market structure, economic liberalization and infrastructure as factors contributing to the development of competitive markets. We find that although integration into global markets can significantly increase market competitiveness, domestic factors also play a significant role.     

Incentives and Impacts of Vertical Coordination in a Food Production-Marketing Chain: A Non-cooperative Multi-Stage,Multi-Player Analysis

Vertical coordination in the form of contracts and integration is common where changing consumer preferences require producers to adapt to changing market situations that require a steady supply of quality controlled products. We identify two vertical coordination mechanisms that are common in the real world but often ignored by the literature due to their inherent complexity. Using economic models, we measure the incentives and impact of market agents’ strategic behavior and strategies along a hypothetical food production-marketing chain. Our results reestablish the importance and value of open market and contracts in a world where both are gradually replaced by consolidation and integration. We also find that in most types of vertical coordination there is a critical limit to the levels of coordination beyond which it is not profitable to coordinate. We recommend that competitive policies could focus more on market structure where independent firms thrive rather than on the degree of coordination per se.     

Factors Influencing Growth Potential of E‐Commerce in Emerging Economies: An Institution‐Based N‐OLI Framework and Research Propositions

Given the tremendous success of the Internet and e‐commerce in developed countries, emerging economies are quickly embracing information technology as well. The purpose of this study is to examine factors (both determinants and deterrents) influencing the growth potential of e‐commerce in emerging economies from a multitheoretical perspective (namely, institution‐based network‐ownership, location, and internalization, i.e., i‐based N‐OLI framework). Factors are identified at three levels. At the global level, we identify multilateral agreements, strategic behavior of multinational enterprises (MNEs), and technological innovation as the key factors. At the national level, institutional environment, infrastructure, and culture are identified. The transactional level examines the role of integrity of transactions, online intermediaries, and network externalities and value clustering as the key factors for growth of e‐commerce in emerging economies. Based on the multitheoretical framework, the study advances several propositions and highlights implications for MNEs, both from developed markets and emerging markets, operating in emerging economies. © 2015 Wiley Periodicals, Inc.     

Immigration,uncertainty and macroeconomic dynamics

This paper examines the macroeconomic effects of rising migration uncertainty in four advanced economies (i.e. US, UK, Germany and France). Migration uncertainty is first captured by the Migration Policy Uncertainty (MPUI) and the Migration Fear (MFI) news-based indexes developed by Baker et al. (Immigration fears and policy uncertainty, 2015), and then by a novel Google Trend Migration Uncertainty Index (GTMU) based on the frequency of Internet searches for the term ‘immigration’. VAR investigations suggest that the macroeconomic implications of rising migration uncertainty differ across countries. Moreover, news-based and Google search-based migration fear shocks generate different macroeconomic effects. For instance, in the US (France), MPUI, MFI and GTMU shocks all improve (undermine) production and labour market conditions in the medium run. For Germany and the UK, mixed evidence is found, suggesting that increasing media attention on migration phenomena and rising population's interest in migration-related issues influence people's mood differently. The observed heterogeneity in the macroeconomic effects of rising migration uncertainty can be explained by cross-country gaps in (a) the level of labour market rigidity, (b) the degree of people's happiness and life satisfaction and (c) the percentage of graduates.     

Separation versus Affiliation with Partial Vertical Ownership in Network Industries

Abstract

The separation of integrated monopolies and new market entrants has changed vertical interactions between suppliers and dealers. Firms have substituted full integration with vertical restraints, leading to collusive behaviour harmful to competition. We examine how a partial vertical ownership (an affiliation) of one of the competing downstream retailers by the upstream monopoly could help internalise the production decision after a complete divestiture. Our results in a Cournot framework confirm the positive role of partial integration on firms’ profits and consumer surplus in increasing social welfare. These results are consistent with empirical studies of economies after vertical separation in network industries.