Technological spillover through industrial and regional linkages: Firm-level evidence from China

This paper provides new insights into the study of technology spillover effects through the interaction between industrial and spatial linkages. We develop a theoretical model that provides a useful modeling framework for spillover research, and then empirically test the model inferences using Chinese firm-level data. Input-output tables and spatial decay measurements are combined to construct the key spillover variables. Using seemingly unrelated regressions, the paper finds that vertical spillover effects are more significant than horizontal spillover effects, both within- and between-regions; regional characteristics have greater impacts on vertical spillovers than on horizontal spillovers; and regional spillover effects vary across different regions. Regional policies and regional endowments, including human capital, transportation infrastructure, and enterprise ownership, are crucial in explaining these heterogeneities in regional technology spillover. Our empirical results provide many policy implications including strengthening the connection between upstream and downstream industries and devoting more R&D to upstream industries.     

Public debt in a basic endogenous growth model

We work out the mechanism that makes public debt affect the allocation of resources in the long-run. To do so we analyze an AK growth model with elastic labor supply and a government sector. The government levies a distortionary income tax and issues bonds to finance lump-sum transfers and non-distortionary public spending. We show that the long-run growth rate is the smaller the higher the debt ratio if the government adjusts public spending to fulfill its inter-temporal budget constraint. If the government adjusts lump-sum transfers the public debt ratio does not affect the balanced growth rate.     

Redistribution policy: A European model

Following the rationale for regional redistribution programs described in the official documents of the European Union, this paper studies a simple multicountry model built around two regions: a core and a periphery. Technological spillovers link firms' productivity within each of the two regions, and each country's territory falls partly in the core and partly in the periphery, but the exact shares vary across countries. In line with the official view of the European Union, we find that the efficient regional allocation requires both national and international transfers. If migration is fully free across all borders, the optimal redistribution policy results from countries' uncoordinated policies. However, if countries have the option of setting even imperfect border barriers, then efficiency is likely to require coordination on both barriers and international transfers (both of which will be set at positive levels). The need for coordination increases as the Union increases in size.     

Inequality and convergence in Europe's regions: reconsidering European regional policies

In this paper we take a critical look at current European regional policies. First, we document the motivation for such policies, that is, the large income disparities across the regions of the EU15. Large disparities are certainly present. Second, we illustrate the various instruments adopted and discuss their underpinnings in established economic theories. Next, we look at available data, searching for three kinds of evidence: (1) if disparities are either growing or decreasing, we conclude they are neither; (2) which are the major factors explaining such disparities and, in particular, if they are the factors predicted by the economic models adopted by the Commission to justify current policies, we conclude this is most certainly not the case; (3) if there are clear signs that EU policies, as opposed to other social and economic factors, are actually reducing such disparities, we cannot find any clear sign of such desired impact. Our conclusion is that regional and structural policies serve mostly a redistributional purpose, motivated by the nature of the political equilibria upon which the European Union is built. They have little relationship with fostering economic growth. This casts a serious doubt on their social value and, furthermore, strongly questions extending such policies to future members of the European Union. A successful EU enlargement, in our view, calls for an immediate and drastic revision of regional economic policies.
— Michele Boldrin and Fabio Canova     

Home sweet host: A cross‐country perspective on prudential and monetary policy spillovers through global banks

Prudential regulation of banks is multi‐layered: policy changes by home‐country authorities affect banks’ global operations across many jurisdictions; policy changes by host‐country authorities shape banks’ operations in the host jurisdiction regardless of the nationality of the parent bank. Do these policies create (unintended) cross‐border spillovers? Similarly, monetary policy actions by major central banks may also have effects on the behaviour of banks in other countries. This paper examines the effect that changes in home‐ and host‐country prudential measures have on cross‐border dollar credit provision, and how these interact with US monetary policy. We first run panel regressions with both layers of regulation, to examine which has a greater effect on cross‐border lending. We then use a novel approach to decompose growth in cross‐border bank lending into separate home, host and common components, and then match each with the corresponding home or host policies. Our results suggest that prudential policies can have spillover effects, which depend on the instrument used and on whether a bank's home or host country implemented them. Home policies tend to have larger spillovers on cross‐border US dollar lending than host policies. We also find that a tightening of US monetary policy can compound the spillovers of some prudential measures.     

Proximity,networking and knowledge production in Europe: What lessons for innovation policy?

This paper aims at investigating the role of different types of proximity on the technological activity of a region within the context of a knowledge production function, where R&D expenditure and human capital are the main internal inputs. We thus assess to what extent the creation of new ideas in a certain region is enhanced by knowledge flows coming from proximate regions. In particular, we examine in detail different kinds of proximity by combining the usual geographical dimension with the institutional, technological, social and organizational proximity. The analysis is implemented for an ample dataset referring to 276 regions in 29 European countries (EU27 plus Norway, Switzerland) over the last decade. Results show that human capital and R&D are clearly essential for innovative activity with the former being much more effective in driving the production of knowledge. As for the proximity and network effects, we find that technological proximity outperforms the geographic one, whilst a limited role is played by social and organizational networks. As a result, the first policy message is that European regions still need to focus on policies aimed at increasing the endowments of well-educated labour force and therefore their knowledge base. Furthermore, we need innovation policies based on each region's specific innovation potential, due to the existing differences in geographical, cognitive, institutional, social and organizational structures and networks.     

Can regional policy in a federation improve economic efficiency?

In the European Union and in many federal and non-federal countries, the central government pays subsidies to poor regions. These subsidies are often seen as a redistributive measure which comes at the cost of an efficiency loss. This paper develops an economic rationale for regional policy based on economic efficiency. We consider a model of a federation consisting of a rich and a poor region. The economy is characterized by imperfect competition in goods markets and unemployment. Firms initially produce in the rich region but may relocate their production to the poor region. We show that a subsidy on investment in the poor region unambiguously increases welfare if labour markets are competitive. If there is unemployment in both regions, the case for regional subsidies is weaker.     

Strategic Trade and Industrial Policy Towards Dynamic Oligopolies

We characterise optimal trade and industrial policy in dynamic oligopolistic markets. If governments can commit to future policies, optimal first-period intervention should diverge from the profit-shifting benchmark to an extent which exactly offsets the strategic behaviour implied by Fudenberg and Tirole's 'animal spirits' taxonomy of business strategies. Without government commitment, there is an additional basis for intervention, whose sign depends on the strategic substitutability between future policy and current actions. We consider a variety of applications (to R&D spillovers, consumer switching costs, etc.) and also extensions to constrained second-best policies.     

Fiscal risk in a monetary union

We present a dynamic and quantitative model of a fiscal solvency crisis in a monetary union. Diverse fiscal policies, which are subject to fiscal limits and stochastic shocks, can threaten a monetary union. The fiscal limits arise due to distortionary taxation and political will. Stochastic shocks are random and could push a fiscally sound policy towards its limit. In equilibrium agents refuse to lend along a path which violates the fiscal limits, creating a fiscal solvency crisis. The dynamics leading to the crisis depend on the policy response to restore lending. We focus on two responses, default and policy switching. We simulate our model to quantify the probability of a fiscal solvency crisis in the European Monetary Union with fiscal variables at end of 2009 values. Our model predicts the Greek crisis which occurred and warns of an Italian one.     

The Downside of Knowledge Spillovers: An Explanation for the Dispersion of High-tech Industries

Both theoretical work on knowledge spillovers and regional policy initiatives often assume that there exists a general and unanimous advantage for firms to cluster. But opposed to the benefit is the disadvantage of sharing knowledge with other (rival) firms. This paper highlights the “downside” associated with knowledge spillovers and presents a four-stage game of location choice where spillovers result from labour poaching and where the strategic interaction between firms may make them avoid co-location with spillovers. The model provides an explanation for the dispersion of German high-tech industries found in a companion paper.     

Europe '92. Decentralizing environmental policy in the single market

The creation of the EC's internal market by the end of 1992 appears to necessitate a harmonization of environmental policies in the European Community. Against this background, the paper analyzes the options for decentralizing environmental policy in Europe and indicates some limitations of this approach.It is shown that, in the case of stationary sources, a harmonization is not required whereas, in the case of international spillovers and global environmental systems, a decentralization of policies is possible if countries can agree on international diffusion norms or national emission quantities, respectively. A harmonization seems to be unavoidable if product norms have to be applied, e.g. in the case of pollutants in consumption goods. Generally, however, price instruments should be used wherever possible, since they allow for a regional differentiation of environmental qualities without segmenting European markets.     

Spillover from private energy research

Technological progress is generally considered a key element in the move towards a less carbon-intensive energy use, and therefore public energy research expenditure has increased in many countries. The purpose of this paper is to investigate whether relatively high subsidies to private energy research can be justified by higher external knowledge spillovers from private energy research compared to knowledge spillovers from other private research. Estimation of spillover effects is carried out using an unbalanced panel of more than a thousand Danish private companies observed over the period 2000–2007. We reject that there are higher spillovers from private energy research compared to other types of private research. Instead the results suggest that the external knowledge spillovers from energy research may be lower than for other types of private research. This implies that high subsidies earmarked for private energy research should not be an element in a first best policy to reduce CO₂ emissions.     

中国制造业外资生产率溢出的条件性研究

FDI生产率溢出存在与否的问题实际上是东道国企业有无条件吸收溢出的问题,本研究从行业内溢出和地区行业间溢出两个方面进行溢出条件性考察。通过对1998—2003年中国制造业分地区四位码行业水平上的面板数据分析后发现,生产率溢出更多地从本地区其他行业的外资参与中获得,行业内的溢出相对并不显著,两类溢出由于机理不同,影响条件有一定差异,对于地区行业间溢出,吸收空间是最大的影响因素。另外,吸收能力、内外资合作程度和适度竞争都是溢出发生的重要条件。     

Should Education be Publicly Provided?

This study suggests that a subsidy in the form of public provision has the potential to be the most efficient educational policy because it stimulates investment in human capital, which would otherwise be inefficiently low because of distortionary income taxation and possible external benefits. Moreover, it can potentially do this without grossly distorting the mix of investments in human capital. Other policies do not have the potential to achieve both these ends without introducing additional, perhaps overwhelming, problems. Thus public provision of education appears to provide incentives for human capital accumulation which are more efficient than any other feasible policy.     

Housing market dynamics and macroprudential policies

In this paper, we analyze the implications of macroprudential and monetary policies for credit cycles, housing market stability and spillovers to consumption. We consider a countercyclical loan‐to‐value (LTV) policy that responds to a credit‐to‐income ratio, and we compare its effectiveness with a permanent tightening of the LTV ratio and a monetary policy rule that responds to credit. To this end, we construct a dynamic stochastic general equilibrium model with housing market, household debt and collateral constraints, and we estimate it with Canadian data using Bayesian methods. Our study suggests that a countercyclical LTV ratio is a useful policy to reduce spillovers from the housing market into consumption and to lean against housing market boom–bust cycles. It performs better than the permanent tightening of the LTV ratio—a policy that has been used in a number of countries—and the monetary policy rule, both in terms of the stabilization of household indebtedness and spillovers into consumption. Monetary policy that leans against the wind is the least desirable due to its large adverse consequences on the real economy.     

The effects of integration on regional disparities: Convergence, divergence or both?

This paper offers an explanation for the coexistence of convergence across countries and the lack thereof at the regional level in the European Union. The model shows that, even if it accelerates growth and brings convergence across countries, the intensification of international knowledge spillovers due to more cross-country interaction may exacerbate within-country regional disparities, if regions with different specialization do not benefit evenly from the exchange of knowledge. The empirical evidence supports the implications of the model. In particular, the data show that regions specialized in advanced sectors at the beginning of the sample period became more similar in terms of per capita income, while regions specialized in traditional sectors lagged.     

Government debt and optimal monetary and fiscal policy

How do different levels of government debt affect the optimal conduct of monetary and fiscal policies? And what do these optimal policies imply for the evolution of government debt over time? To provide an answer, this paper studies a standard monetary policy model with nominal rigidities and monopolistic competition and adds to it a fiscal authority that issues nominal non-state contingent debt, levies distortionary labor income taxes and determines the level of public goods provision. Higher government debt levels make it optimal to reduce public spending, so as to dampen the adverse incentive effects of distortionary taxes, but also strongly influence the optimal stabilization response following technology shocks. In particular, higher debt levels give rise to larger risks to the fiscal budget and to tax rates. This makes it optimal to reduce government debt over time. The optimal speed of debt reduction is missed when using first-order approximations to optimal policies, but is shown to be quantitatively significant in a second-order approximation, especially when technology movements are largely unpredictable in nature.     

产业集聚、知识溢出与地区创新-基于中国工业行业的实证检验

本文利用我国1999—2007年间30个地区21个工业行业数据,实证检验区域内知识溢出和企业竞争对地区产业创新的影响。区域内知识溢出包括产业内知识溢出(MAR外部性)和产业间知识溢出(Jacobs外部性)两类,本文对后者从产业多样性与产业互补性两方面进行刻画,一定程度上弥补了现有文献对产业间关联程度差异的忽视。此外,我们基于动态面板数据的计量方法有利于克服模型的内生性问题。研究发现MAR外部性与Jacobs外部性对我国地区产业创新的影响均显著为正,但影响程度不同:Jacobs外部性中的产业互补对创新的推动作用最大,它大约为产业多样性或产业内MAR外部性作用的两倍;区域内企业竞争对创新的影响显著为负。     

Cross-country fiscal policy spillovers and capital-skill complementarity in integrated capital markets

The 2010 European sovereign debt crisis has renewed discussions on fiscal policy coordination. One rationale for coordination is fiscal policy cross-country spillovers. A common finding in the literature is that spillovers tend to be small in normal circumstances but can be large if monetary policy is at the zero lower bound. Orthogonal to the existing literature, we document a novel channel that generates cross-country spillovers over the medium run. We assume perfect capital markets integration and find that capital-skill complementarity can lead to large spillovers without the zero lower bound nor a large import share in government expenditures. As capital markets have become increasingly integrated in the Eurozone, the current degree of fiscal policy coordination between its members, low, may be insufficient. We also find that the smoothing benefits from a temporary rise in public debt spill over to other countries.     

Issues in environmental justice within the European Union

This paper surveys pressing issues facing current and future social policies in the European Union (EU) at the juncture of social justice demands and environmental concerns. European policy-makers have in fact only recently acknowledged the notions of environmental justice and environmental inequalities, which have been part of the US policy arsenal for almost two decades. Yet, challenges to equality and fairness in the environmental domain are many and growing within the European Union. After having defined environmental justice and environmental inequalities in the European context, the paper addresses two contemporary dimensions of those challenges for EU social policies: vulnerability and exposure to environmental disaster and risk; and fairness in environmental taxation and the related issue of fuel poverty.