The transatlantic productivity gap: Is R&D the main culprit?

The literature has pointed to different causes to explain the productivity gap between the EU and the US in the last decades. This paper tests the hypothesis that the lower European productivity performance in comparison with the US can be explained not only by a lower level of corporate R&D investment but also by a lower capacity to translate R&D investment into productivity gains. The proposed microeconometric estimates are based on a unique longitudinal database covering the period 1990–2008 and comprising 1,809 US and EU companies for a total of 16,079 observations. Consistent with previous literature, we find robust evidence of a significant impact of R&D on productivity; however, using different estimation techniques, the R&D coefficients for the US firms always turn out to be significantly higher. To see to what extent these transatlantic differences in the R&D/productivity relationship may be related to the different sectoral structures in the US and the EU, we differentiated the analysis by sectors. The result is that bothin manufacturing, services and high‐tech manufacturing sectors US firms are more able to translate their R&D investments into productivity increases.     

The income inequality curve in the last 100 years: What happened to the Inverted-U?

This paper examines the shape of the curve that represents the long-run relationship between income inequality and economic growth, using data from four developed countries (USA, UK, France, and Germany) over the period 1915 – 2014. The analysis is carried using a panel data technique (fixed, random, and interactive effects) that takes into account common shocks. We find that in the long-term, this curve has the shape of an “N-shape” and that the Kuznets curve does not explain this path. We also present many factors that may affect the path of inequality up or down, the most important is political, economic and demographic, specifically technological change, globalization, social transfers, economic policies, trade unions, taxation, education, war, and epidemics.     

Labor productivity forecasts based on a Beveridge–Nelson filter: Is there statistical evidence for a slowdown?

In this paper, I assess the evidence for a structural break in labor productivity growth in the years before the Great Recession with the use of out-of-sample forecasting exercises for the years 2010 to 2019 and the recently developed Beveridge–Nelson filter. Models based on a Beveridge–Nelson filter with no structural breaks outperform those allowing for a structural break, and there is statistically significant evidence that they outperform the random walk, though all models were too optimistic about labor productivity growth. Recently developed statistical tests do point to the presence of a structural break before the Great Recession, but uncertainty about the data-generating process for labor productivity growth or the timing and magnitude of the break may be too great to be helpful in forecast preparation.     

Equilibrium urban unemployment in developing countries: is migration the culprit?

"This paper challenges the prediction of Todaro's model of rural-to-urban migration that an 'increase in urban employment increases urban unemployed.' It is shown that if the urban demand for labor is isoelastic or inelastic, creation of urban jobs causes urban unemployment to decline and urban-to-rural migration to take place. Moveover, urban job creation always reduces the rate of urban unemployment. The paper then remodels the urban job search process and derives the result that equilibrium urban unemployment would not vanish even if the urban-rural wage gap were eliminated." The geographical focus is on developing countries.     

The ‘Rise of the South’: Global Convergence at Last?

This article offers a political economy review of the literatures and the empirical evidence concerning the ‘Rise of the South’. The study focuses on global convergence (in the long-term, in the last 30 years, and in the aftermath of the 2008 global crisis), economic decoupling between developing and advanced economies, and the economic strategies which may help catching-up, especially the ‘flying geese’ paradigm and industrial policies supporting manufacturing sector growth. It shows that the mainstream literature suffers from significant weaknesses; that empirical claims concerning convergence and decoupling have been exaggerated, and that flying geese-type strategies are severely limited. Examination of the drivers of growth in the South and the policies implemented in key converging countries support the claim that political economy approaches can offer valuable policy insights to countries grappling with the challenges of long-term growth and development.     

The impact of hiring top workers on productivity: what is the role of absorptive capacity?

We examine the heterogeneous productivity impacts of hiring top workers on small and medium-sized enterprises, exploiting matched employer–employee panel data and employing within-firm as well as matching and difference-in-difference estimators. The results provide robust evidence that the productivity impact is stronger for firms with higher absorptive capacity. Technological laggards within an industry benefit more strongly from hiring top workers if their workforce is more well-educated.     

Post-crisis credit slowdown in South-East Europe: return to normality?

What explains the post-crisis slowdown in bank credit to private sector in the South-East European economies? We try to answer this question, by comparing the actual credit growth to the fundamental and equilibrium growths. The fundamental growth is defined as the growth justified by the fundamentals, the equilibrium growth—as the growth consistent with the economy being in medium-term equilibrium. Results suggest that the slowdown reflects both return of the credit activity to its fundamental value, and return of the fundamental values to their equilibrium levels, after years of excessiveness during the pre-crisis period. Rapid credit growth, as in the pre-crisis period, should not be expected in the near future.     

An EU Recycling Target: What Does the Dutch Evidence Tell Us?

The European Union (EU) advocates a household waste recycling rate of more than 65 %. Although the Netherlands has already invested heavily in recycling policies, this is still a big challenge as nowadays this rate is approximately 50 % on average and very few no municipalities have a rate above 65 %. Given this practice, it is possible to learn from the Dutch experience which policies are effective in increasing recycling rates. Based on a large panel data set for the Netherlands, we show that unit-based pricing, avoiding a duo-bin for unsorted and compostable waste, and reducing the frequency of collecting unsorted and compostable waste at the curbside are effective in raising the recycling rate. However, only a bag-based pricing system has a substantial effect, but this policy can have some adverse effects. Other unit-based pricing systems have effects of less than 10 % points. In nearly all cases, changing the frequency of collection of recyclables has no or very small effects. Moreover, the complementarity between unit-based pricing and curbside service is low. Overall, it seems very difficult to reach the EU goal of 65 % with the policies applied.     

Does the Canadian economy suffer from Dutch disease?

We argue that the failure to disentangle the evolution of the Canadian currency from the U.S. currency leads to potentially incorrect conclusions regarding the case of Dutch disease in Canada. We propose a new approach that is aimed at extracting both currency components and energy- and commodity-price components from observed exchange rates and prices. We first analyze the separate influence of commodity prices on the Canadian and the U.S. currency components. We then estimate the separate impact of the two currency components on the shares of manufacturing employment in Canada. We show that between 33 and 39 per cent of the manufacturing employment loss that was due to exchange rate developments between 2002 and 2007 is related to the Dutch disease phenomenon. The remaining proportion of the employment loss can be ascribed to the weakness of the U.S.     

Why does the peso-dollar exchange rate show a depreciation trend? The role of productivity differentials

Over the last three decades, Mexico's macroeconomic policy has been driven by a sound orthodox strategy: an open economy via many trade agreements signed since the mid-1980s, a nominal exchange rate under a flexible regime since 1994, central bank autonomy, and responsible fiscal policy, among other benchmarks. Nevertheless, the exchange rate has continued on a path of depreciation against the US dollar. In this paper, we show that although an equilibrium relationship exists between the exchange rate and prices in Mexico and the US (its main commercial partner), there are other forces affecting the former. The main factor in this relentless long-term depreciation is the loss of productivity in Mexico relative to the US. In addition, we show that the extraordinary liquidity supplied by the US during the 2008 crisis caused the Mexican peso to appreciate against the dollar.     

The East-West German gap in revenue productivity:Just a tale of output prices?

East German manufacturers’ revenue productivity is substantially below West German levels, even three decades after German unification. Using firm-product-level data with product quantities and prices, we analyze the role of product specialization and show that the prominent “extended work bench hypothesis” cannot explain these sustained productivity differences. Eastern firms specialize in simpler product varieties generating less consumer value and being manufactured with less or cheaper inputs. Yet, such specialization cannot explain the productivity gap because Eastern firms are physically less productive for given product prices. Hence, there is a genuine price-adjusted physical productivity disadvantage of Eastern compared to Western firms.JEL: D24, L11, L2, O47     

The productivity impact of R&D investment: are high-tech sectors still ahead?

Our aim is to investigate the relationship between a firm's R&D expenditures and its productivity, looking at sectoral peculiarities. We use a unique longitudinal database consisting of 1809 US and European manufacturing and service firms over the period 1990–2008. Our main findings can be summarised as follows. Consistently with previous literature, the knowledge stock has a significant positive impact on a firm's productivity. More interestingly, the coefficient turns out to be significantly larger in the R&D-user services and high-tech manufacturing sectors than in the non-high-tech manufacturing sectors. Contrary to the ‘latecomer advantage’ approach, these outcomes suggest that firms in high-tech sectors are still ahead in terms of impact on productivity of R&D investments.     

Efficiency and productivity in the Indian unorganized manufacturing sector: did reforms matter?

This paper analyzes total factor productivity growth of the unorganized manufacturing sector in India using several rounds of the large scale national sample survey state level data for 15 major Indian states for the period 1978–1979 to 2000–2001. Data envelopment analysis is used to compute Malmquist total factor productivity index and its components. The impact of economic reforms on efficiency and productivity is examined. Evidence suggests that total factor productivity registered a positive growth during the period in the country as a whole. Most states in the country witnessed higher total factor productivity growth in the post 1990s reforms period than in the pre-reforms period. Decomposition of the Malmquist productivity index shows that improvement in technical efficiency rather than technical progress had contributed to the observed acceleration in the growth rate. Econometric analysis of the determinants of total factor productivity growth demonstrates that ownership, literacy, farm growth and infrastructure availability significantly influence total factor productivity growth in the sector.

Does the new digital infrastructure improve total factor productivity?

Improving total factor productivity (TFP) is essential to achieving high-quality and sustainable economic development. The existing literature mainly focuses on the impact of traditional infrastructure on TFP but generally ignores the role of new digital infrastructure in TFP and does not test impact mechanisms and whether there is heterogeneity in effects. Using panel data of 30 regions in China from 2006 to 2017, this paper analyzes the impact of new digital infrastructure on TFP and its mechanisms. The results are as follows: (1) New digital infrastructure can significantly improve regional TFP. After the robustness test, the results still support the findings. (2) New digital infrastructure can promote technological innovation, optimize factor allocation, and achieve economies of scale, thus improving TFP. (3) Further analysis shows that the positive effect of new digital infrastructure on TFP shows significant heterogeneity. In regions with high economic development levels, high research and development ( R&D) levels, and high traditional infrastructure development levels, the positive effect of new digital infrastructure on TFP is more obvious. These findings not only enrich the literature on digital infrastructure and economic growth but also serve as a reference for governmental departments as they optimize their strategy for developing digital infrastructure and realizing sustainable economic development.     

Is a little sunshine all we need? On the impact of sunshine regulation on profits,productivity and prices in the Dutch drinking water sector

This paper analyzes the performance of Dutch drinking water utilities before and after the introduction of sunshine regulation, which involves publication of the performance of utilities but no formal price regulation. By decomposing profit change into its economic drivers, our results suggest that, in the Dutch political and institutional context, sunshine regulation was effective in improving the productivity of publicly organised services. Nevertheless, while sunshine regulation did bring about a moderate reduction in water prices, sustained and substantial economic profits suggest that it may not have the potential to fully align output prices with economic costs in the long run. In methodological terms, the DEA based profit decomposition is extended to robust and conditional non-parametric efficiency measures, so as to account better for both uncertainty and differences in operating environment between utilities.     

What are the drivers of total factor productivity in the European Union?

This paper examines the evolution of total factor productivity (TFP) over time, as well as across countries and sectors, and investigates its determinants. To this end, a panel data set of 17 European Union (EU) countries and 13 sectors over the period 1995–2007 is used as part of a twofold approach. First, we estimate aggregate and sectoral TFP for 17 EU countries by means of the augmented mean group estimator to control for endogeneity, cross-section dependence and heterogeneous production technologies. Second, we investigate the relative importance of the drivers of predicted TFP using a dynamic ordinary least-squares estimator. The results indicate that rationalization, human capital and information and communication technologies are the main drivers of TFP.     

Nonlinear adjustment in the real dollar–euro exchange rate: The role of the productivity differential as a fundamental

In this paper we analyze the influence of productivity differentials in the dynamics of the real dollar–euro exchange rate. Using nonlinear procedures for the estimation and testing of ESTAR models during the period 1970–2009 we find that the dollar–euro real exchange rate shows nonlinear mean reversion towards the fundamentals represented by the productivity differential. In addition, we provide evidence about the ability of this variable to capture the overvaluation and undervaluation of the dollar against the euro.