FACTOR DETERMINANTS OF TOTAL FACTOR PRODUCTIVITY GROWTH FOR THE JAPANESE MANUFACTURING INDUSTRY

This study uses industrial panel data for Japanese manufacturing to estimate the sources of productivity growth by simultaneously considering embodied technical progress, spillover effects, and openness, after controlling for returns to scale, imperfect competition, and capacity utilization. Estimation results show the existence of considerable embodied technical progress and interindustry externalities of capital investments positively affecting productivity growth. Furthermore, embodied technical progress causes research and development (R&D) capital to affect productivity growth insignificantly, suggesting that the impact of R&D is realized only after being embodied into other capitals. From sector‐wise estimations, we notice differences in factors affecting productivity growth between the durable and nondurable manufacturing sectors. (JEL D24, O30)     

Demand shocks and productivity growth

This paper presents evidence on the relationship between cyclical shocks and productivity growth, for 20 2-digit SIC US manufacturing industries and a set of monetary policy, fiscal policy, and oil price shocks. The paper uses as a measure of productivity change a Solow residual corrected for a wide range of non-technological effects due to imperfect-competition, non-constant returns to scale, and cyclical utilization rates of capital and labor services. The empirical framework identifies policy shocks independently of productivity measurement issues via a two-step procedure. While the typical industry shows weak responses of productivity to the shocks considered, in some industries temporary contractionary policy shocks lead to increases in productivity. In addition, the results reveal that there are localized asymmetries, with contractionary policy shocks having larger productivity effects than their expansionary counterparts. The results support the thesis that job reallocation is an important channel linking contractionary policy shocks and productivity growth. These results support the pit-stop view of downturns.Received: April 200, Accepted: March 2005, António Gomes de Menezes: I thank participants at seminars at Boston College, University of Alberta and Simon Fraser University and two anonymous referees for helpful comments.     

ASSESSING RETURNS TO EDUCATION AND LABOR SHOCKS IN MEXICAN REGIONS AFTER NAFTA

This article examines Mexico's (real) wage movements across its 32 subnational entities for post‐North American Free Trade Agreement years. Employing dynamic panel data methods, we obtain the following results. First, education (or labor productivity) has slightly higher wage effects in the Border‐North region. Second, allowing for foreign capital and labor to respond to wages, returns to education have higher effects in South‐Center Mexico, the region with (average) lower education levels. Third, convergence rates become lower with endogenous foreign capital and migration flows: wages move faster in the South‐Center region than in Border‐North. Overall, migration flows have greater effects on wages than foreign direct investment inflows. (JEL F15, F21, F22, F43, O47)     

Markups and fiscal transmission in a panel of OECD countries

This paper studies the role of the markup of price over marginal cost for the transmission of fiscal policy shocks. We construct time series of markups allowing for fluctuations in capacity utilization and total factor productivity and use an aggregate production function that is more general than Cobb–Douglas. Including the constructed markup series in a bias-corrected panel vector autoregression with annual OECD data, we find that a positive shock to government spending tends to lower markups while raising output. The positive output response appears to result less from increases in hours worked than from the positive reaction of capital utilization.     

What role for human capital in the growth process: new evidence from endogenous latent factor panel quantile regressions

The estimates for the human capital effect in cross‐country growth regressions have been subject of considerable controversy. We argue that human capital is intrinsically a multidimensional construct. We construct human capital measure by combining available alternative proxies via confirmatory factor analysis. Using panel data endogenous quantile regression methods we analyse the whole conditional growth distribution by simultaneously accounting for the potential endogeneity of human capital and country‐specific effects. Our results conform to theoretical expectations and we are able to demonstrate the beneficial effect of both the measurement approach and the endogeneity correction on the derivation of theoretically consistent estimates.     

INTERACTIONS BETWEEN WELFARE CASELOADS AND LOCAL LABOR MARKETS

This paper provides an empirical examination of interactions between welfare caseloads and local labor markets using data on caseload stocks, entries, and exits. Granger‐causality tests show that unemployment rates Granger‐cause caseload activity but caseload activity does not Granger‐cause unemployment rates. The results also reveal differential dynamics between caseloads and labor market conditions for rural versus metropolitan markets. Several models of one‐way association between caseload activity and unemployment rates are presented. The results show that higher unemployment rates are positively associated with welfare caseloads and entries and negatively related to exits. (JEL I38, R23)     

Do Natural Resources Depress Income Per Capita?

Most evidence for the resource curse comes from cross‐country growth regressions suffers from bias originating from the high and ever‐evolving volatility in commodity prices. These issues are addressed by providing new cross‐country empirical evidence for the effect of resources in income per capita. Natural resource dependence (resource exports) has a significant negative effect on income per capita, especially in countries with bad rule of law or bad policies, but these results weaken substantially once we allow for endogeneity. However, the more exogenous measure of resource abundance (stock of natural capital) has a significant negative effect on income per capita even after controlling for geography, rule of law and de facto or de jure trade openness. Furthermore, this effect is more severe for countries that have little de jure trade openness. These results are robust to using alternative measures of institutional quality (expropriation and corruption instead of rule of law).     

Management Behaviour in Vietnamese Commercial Banks

This study identifies managerial behaviour in Vietnamese banks between the years 2000 and 2014, based on the managerial framework of banks, as identified by Rossi et al. ( 2009 ). This framework is built on the interrelationships between efficiency, risk, capital and diversification. This study uses the Z‐score to measure insolvency risk, the SFA to estimate cost efficiency, the ratio of total equity to total assets to capture bank capital and the HHI index to measure the diversification of revenue and earning assets. The results from the 3SLS estimator indicate that revenue diversification has an insignificant impact on insolvency risk, capital ratio and cost efficiency, but earning assets diversification has a negative effect on these three variables, supporting ‘classical diversification’, ‘economic capital’ and ‘monitoring’ behaviours. Moreover, a decline in cost efficiency leads to a rise in insolvency risk, implying ‘bad management’ behaviour; an increase in risk results in a reduction in cost efficiency, indicating ‘bad luck’ behaviour; and a reduction in capital ratio in the poorly capitalised banks leads to a growth in risk, suggesting ‘moral hazard’ behaviour. The results remain strongly robust when using an alternative risk measurement (the loan loss provision ratio) and an alternative SFA model.     

Profitability and accumulation in Greek manufacturing

This paper examines long-term trends in profitability and capital accumulation for the Greek manufacturing industry from 1955 to 1989, using the growth accounting framework introduced by Weisskopf (1979) and further developed by Glyn et al. (1990). The results show that the overall 7% annual decline in profit rate in Greek manufacturing is attributed primarily to falling profit share and secondarily to falling productivity of capital. The effect of capacity utilization was negligible. The analysis is carried out for different subperiods and the relative importance of each of the constituent components of profitability is evaluated.     

COSTLY INTERMEDIATION AND THE POVERTY OF NATIONS*

This article has two goals: (i) to reduce the 7‐fold productivity differential required to explain the observed 33‐fold income difference between the richest and poorest countries of the world; and (ii) to explain cross‐country differences in the capital‐output ratio. To achieve the first goal we modify the production function of the standard neoclassical growth model to include public capital whose provision is subject to intermediation costs. For the second goal we distort private investment by introducing credit frictions. The model, quantified using cross‐country data, generates an income gap of 33 with productivity differences of only 3 under the measured variations in public and private capital. The required productivity gap declines even further, to 2.1, when we introduce a home‐production sector. On the second goal, however, credit frictions do a poor job of explaining cross‐country variations in the capital‐output ratio.     

Non‐linear finance–growth nexus

This paper revisits the question of whether the finance–growth nexus varies with the stages of economic development. Using a novel threshold regression with the instrumental variables approach proposed by Caner and Hansen (2004) to the dataset used in Levine et al. (2000) we detect overwhelming evidence in support of a positive linkage between financial development and economic growth, and this positive effect is larger in the low‐income countries than in the high‐income ones. The data also reveal that financial development tends to have stronger impacts on capital accumulation and productivity growth in the low‐income countries than in the high‐income ones. The findings are robust to alternative financial development measures and conditioning information sets.     

VENTURE CAPITAL AND INNOVATION: WHICH IS FIRST?

Policy‐makers typically interpret positive relations between venture capital (VC) investments and innovations as evidence that VC investments stimulate innovation (VC‐first hypothesis). This interpretation is, however, one‐sided because there may be a reverse causality that innovations induce VC investments (innovation‐first hypothesis): an arrival of new technology increases demand for VC. We analyze this causality issue of VC and innovation in the US manufacturing industry using both total factor productivity growth and patent counts as measures of innovation. We find that, consistent with the innovation‐first hypothesis, total factor productivity growth is often positively and significantly related with future VC investment. We find little evidence that supports the VC‐first hypothesis.     

Institutions and Cultural Heterogeneity as Determinants of National Income: A Random‐coefficients Stochastic Frontier Model

Previous research on total factor productivity (TFP) shows that cross‐country differences in income cannot be fully explained by stocks of capital (K), labor (L) and human capital (E). In addition, the omission of major production inputs or the use of proxies to estimate unobservable inputs leads to biased estimation results. This study addresses the above issues by employing a novel econometric approach and provides empirical evidence that a fixed production input, and therefore a country's income, is positively correlated with the existence of British‐style institutions and negatively correlated with cultural heterogeneity and Spanish‐style institutions. Our methodology is twofold. First, using data for 62 countries from 1980 to 2004, we regressed a random‐coefficients stochastic production frontier that allows estimating a fixed unobservable production input without using proxies. Second, the estimated fixed production input is shown to be related to colonial institutions and cultural heterogeneity by means of ordinary least squares and feasible generalized least squares regressions.     

Estimation of R&D depreciation rates: a suggested methodology and preliminary application

Abstract The 2008 version of the SNA has recommended capitalization of R&D expenditures. To implement this recommendation, we need to determine the depreciation rate of R&D capital. In this paper, we develop a simple model, based on a production function method that allows for monopolistic competition, to estimate the annual depreciation rate of R&D capital. We treat R&D capital as a technology shifter instead of as an explicit input factor. Both the R&D stock and the time variable are used to capture technological progress. Estimated R&D depreciation rates and markup factors are presented for the U.S. manufacturing sector and four U.S. knowledge‐intensive industries.     

Increasing Returns,Financial Capital Mobility and Real Exchange Rate Dynamics*

The late 1990s saw a US IT investment boom, large capital flows into the USA and an appreciation of the US$. At the time, this appeared to be driven by expectations of continued IT‐related knowledge spillover externalities and associated productivity and profit growth. Using a two‐region dynamic general equilibrium model with externalities, we find a once‐off productivity shock leads to capital inflow and a real appreciation only in the short term. In the long term, capital flows stabilise and the real exchange rate depreciates. For a single shock to trigger long‐term growth in capital flows requires unrealistically large externalities.     

MACROECONOMIC POLICY REFORMS AND PRODUCTIVITY GROWTH IN AFRICAN AGRICULTURE

This article employs a two‐stage procedure to investigate the impact of macroeconomic policy reforms on the agricultural productivity growth of 33 African countries from 1981 to 2001. In the first stage, we measure agricultural productivity using a nonparametric Malmquist productivity index. In the second stage, we build a generalized method of moments (GMM) model with a measure of structural adjustment program (SAP) intensity as a key instrument for macroeconomic policy reforms. We also control for the effects of globalization, civil violence, level of development of physical and financial infrastructure, and other economic variables as well as natural resource factors that directly affect agricultural productivity. Our results indicate a strong positive correlation between the extent of SAP intensity and agricultural productivity, suggesting that the macroeconomic policy reforms improved agricultural productivity growth in the sample countries. (JEL E6, O13, O41)     

Is there really a gap between aggregate productivity and technology?

The important contribution by Basu and Fernald (2002 Basu, S and Fernald, JG. 2002. Aggregate productivity and aggregate technology. European Economic Review, 46: 963–91.  [Google Scholar]) shows that, in practice, there is a statistically significant gap between aggregate productivity and technology that can be attributed to inefficient product and labour markets. This is important, as it implies that the Solow residual is an imperfect index for aggregate technology change. We take a related approach and find that when we control for capacity utilization, time varying markup and account for externalities between industries, by employing a superior system estimator, the gap between the aggregate productivity and technology is shown to narrow considerably.     

Sectoral and aggregate technology growth in Spain

In this paper we analyze technological change in the Spanish economy by constructing adjusted Solow residuals, where the adjustment attempts to correct for the bias associated with the potential presence of imperfect competition, increasing returns, variable input utilization and, especially, sectoral reallocation of inputs across sectors. We refer to this modified Solow residual as a technology index. Sectoral reallocations and variable input utilization are key determinants of the differences between the aggregate Solow residual and the technology index resulting from the aggregation of estimated sectoral technological growth. We show that starting in the mid nineties, there has been a deceleration in the aggregate growth rate of technology which is basically due to the behaviour of the manufacturing sectors. Finally, our results imply that aggregate technology growth is less volatile than aggregate productivity as measured by the Solow residual.     

THE DETERMINANTS OF PRIVATE CAPITAL FLOWS IN EMERGING ECONOMIES: THE ROLE OF THE FED'S UNCONVENTIONAL MONETARY POLICY

Previous studies on the effect of the Fed's Unconventional Monetary Policy on capital flows in Emerging Economies have not been conclusive. I analyze if the effect of these policies on capital flows is heterogeneous between countries. This approach could be the smoking gun in this debate as I attempt to find evidence of a specific mechanism by which Unconventional Monetary Policy could affect the pattern of capital flows in Emerging Economies. The results suggest that Unconventional Monetary Policy has a significant effect on capital flows which depends on the type of measure adopted and the degree of financial exposure of each country to the United States. (JEL C23, E52, E58, F21, F32)     

A MATCHED PAIRS ANALYSIS OF STATE GROWTH DIFFERENCES

The American states have provided a rich laboratory in which to examine influences on economic growth, physical capital, human capital, and a variety of policy variables. Existing studies typically use broad cross sections of all states or particular regional subsamples. Pairwise matching is an alternative design for better controlling of omitted variables. We estimate a growth model of U.S. states for 1997–2005 before and after applying different pairwise matching techniques. Our results indicate that sample estimates based on pairwise matching substantially improve the overall ability of the growth model to identify the growth‐enhancing effects of lower tax burdens in general and lower individual income‐tax rates in particular. These effects are more pronounced with narrower matching criteria. (JEL H00, C29, O40)