Intraindustry Specialization and the Proposed Korea–United States Free Trade Agreement

Changes in intraindustry specialization indicators over the 2000–2007 period are used to assess factor adjustment pressures that may arise in Korea from the proposed Korea–United States Free Trade Agreement (KORUS FTA). There is considerable scope for intraindustry specialization between Korea and the United States. Results show few industries in Korea are candidates for adjustment problems. The 14 industries that may face adjustment pressures account for 13% of all Korean imports from the United States. Long tariff phase-out periods, tariff-rate quotas and import safeguards will be used to ease factor adjustment pressures in import-sensitive industries.     

Would a North-South Free Trade Agreement Hurt Unskilled Labor in the North?

I present a simple model to examine the impact of international outsourcing on the welfare of skilled and unskilled labor. In this model, specialized business services are to facilitate manufacturing production, creating additional welfare gains in the presence of positive production externalities. Policies that favor the business service sector contribute to the development of a larger bundle of specialized business services, generating more welfare gains to not only skilled but also unskilled labor. Thus, a country’s unskilled labor is not necessarily worse off with open trade if the country is prosperous in business service provisions.     

Resisting Protectionism after the Crisis: Strategic Economic Discourse and the EU–Korea Free Trade Agreement

In 2006 the European Commission announced its Global Europe strategy, which proposed pursuing a series of ambitious Free Trade Agreements (FTAs) premised on exchanging the EU's remaining ‘pockets of protection’ for market access. The first of these agreements was signed with South Korea in October 2010. This article asks how the Commission's Directorate-General (DG) for Trade could successfully conclude this agreement in the aftermath of the Financial Crisis. Given a strong mobilisation of protectionists with access to policy-makers, this liberal policy outcome cannot be explained purely in terms of institutional insulation, as in much of the literature on EU trade policy, nor be simply ‘read off’ from the material interests of societal actors. This article, therefore, develops a constructivist framework which broadens our understanding of the power of strategically invoked economic discourses. By developing a novel analytical strategy to determine the intentional invocation of such discourses, it is able to show how DG Trade constructed an ideational imperative for liberalisation in Global Europe, enabling it to overcome opposition to the EU–Korea FTA. Beyond its contribution to constructivist scholarship, this article draws attention to the neglected dimension of ideas in trade policy and highlights the continued purchase of neoliberalism after the crisis.     

Australian–Thai Trade: Has the Free Trade Agreement Made a Difference?

This article examines the impact of the Thailand–Australia Free Trade Agreement (TAFTA) on bilateral trade between the two countries, paying attention to the implications of rules of origin and the utilisation of tariff preferences. It is found that trade has expanded faster since TAFTA came into effect, but the impact has heavily concentrated in a few product lines in Australian imports from Thailand, reflecting the influence of commodity‐specific, supply‐side factors which have a bearing on the rate of preference utilisation. The findings, inter alia, suggest that the use of officially announced preference rates in trade flow modelling is likely to exaggerate trade flow effects of free trade agreements.     

Shifting Taxes from Labor to Consumption: More Employment and more Inequality?

This paper investigates the effect of shifting taxes from labor income to consumption on labor supply and the distribution of income in Germany. We simulate stepwise increases in the value‐added tax (VAT) rate, which are compensated by revenue‐neutral reductions in income‐related taxes. We differentiate between the personal income tax (PIT) and social security contributions (SSC). Based on a dual data base and a microsimulation model of household labor supply behavior, we find a regressive impact of such a tax shift in the short run. When accounting for labor supply adjustments, the adverse distributional impact persists for PIT reductions, while the overall effects on inequality and progressivity become lower when payroll taxes are reduced. This is partly due to increases in aggregate labor supply, resulting from higher work incentives.     

Inequality in Pre-Industrial Europe (1260–1850): New Evidence From the Labor Share

The dynamics of economic inequality and its relationship with economic growth in the preindustrial world is increasingly attracting the attention of both economists and economic historians. In this paper, we tackle this theme by introducing new estimates of the labor share in five major European countries (England, France, Holland, Spain, and Portugal) for the period 1250–1850. Our estimates are constructed using an innovative method based on the conversion of real wages in 2011 PPP $. Overall, we find a complex pattern of evolution of the labor share with major fluctuations. Furthermore, using the inequality possibility frontier (IPF) framework, our results suggest that preindustrial Europe was characterized by a negative relationship between the extraction ratio and GDP.     

Changes in Employment and Hours,and Family Income Inequality in the United.States, 1969–1989

This paper estimates how much changes in employment and hours worked for family heads and spouses contributed to the rise in the family income inequality between 1969 and 1989. Change in labor market activity of family heads accounts for half of the increase in the income gap between the top and bottom 10th families. The effect of change in work effort on the income inequality is considerably weaker where four-fifths of families in the middle of income distribution are considered. This result is robust to changes in the selection of the population. The rise in the inequality of labor market activity occurred largely within families headed by prime-age men. The rise in the percentage of families headed by female and the decline in employment rate for older family heads are relatively minor factors. [J2, E2, N3]     

UK business cycle synchronization with Germany and the US: New evidence from time–frequency domain and structure of economic growth

This article uses a time–space approach to check the UK business cycle synchronization with Germany and the US. As a novelty, we consider the co-movements in terms of economic growth rate structure. In line with the existing studies, we discover that the UK business cycle is more synchronized with the US then with Germany, and that the co-movements have intensified lately. We also show that co-movements are reduced in terms of business cycle structure and are time–frequency-dependent. Finally, we point out that the UK business cycle became more synchronized with the US cycle given the contribution of investments and external balance to the real growth rate.     

Trade and the environment: from a ‘Southern’ perspective

The relationship between free trade and the environment is one of the main issues of contention between environmental and ecological economics. Environmental economics assumes a positive relationship between free trade, economic growth and environmental policies. Environmental externalities may cause important damage. However, trade is not to be blamed for this. Instead, the fault lies with policy inadequacies at the national level. On the other hand, some ecological economists criticise the assumptions of environmental economics, especially the immobility of production factors and the positive correlation between income and environmental quality. They plead for measures to prevent deterioration of ‘Northern’ environmental standards in a ‘race to the bottom’ due to ‘ecological dumping” from the South. In this paper, we argue that neither environmental economics nor ‘Northern’ ecological economics take into account the structural conditions determining the international trade system. Based on some new empirical evidence on material flows, we stress the notion of environmental cost-shifting. If physical and political ecology perspectives are adopted, a ‘Southern’ approach to the trade-and-environment issue may arise.     

Regime switching and the (in)stability of the price–rent relationship: evidence from the US

Present value models of house prices assert that in the absence of self-fulfilling bubbles, a house price is equal to the present discount value of all future rents, which implies a linear relationship between house price and rent, and hence a stable price-to-rent ratio. Using a Markov switching error correction model, we re-examine this relationship in the US housing market and find two distinctive regimes: one with a long-run relation between house price and rent predicted by the present value models and the other in which the relation is nonlinear. Furthermore, we find evidence that deviations of house prices from the present value models’ predictions are caused by the overreaction of house prices to movements in rents rather than speculative bubbles attributable to extraneous factors.     

How do Labor Unions Influence the Gender Earnings Gap? A Comparative Study of the US and Korea

Abstract

This paper provides a comparative study of the United States and Korea regarding the effects of unions on gender earnings gaps in 2004. Using datasets representative of the population of the US and Korea, this contribution shows that gender differences in the workers' observed characteristics and the unobserved component reduce gender earnings gaps in union jobs in both the US and Korea. Fringe benefits in the union sector attract women workers with higher labor market qualifications into the union sector and thereby reduce the gender earnings gap in this sector. The study finds that this self-selection process in the union sector is stronger in Korea than in the US, but the seniority-based wage system that prevails in the Korean union sector widens the gender earnings gap.     

CO2 Emissions and Income Dynamics: What Does the Global Evidence Tell Us?

This paper analyzes the co-evolution of two major determinants of social welfare, namely, income and carbon emissions. In particular, by using a distribution dynamics approach based on Markov chains, we investigate the shape and behavior of the joint distribution of per-capita income and carbon dioxide emissions. We arrive at several interesting conclusions, especially in the context of international negotiations on climate change. First, evidence does not support theoretical models predicting the existence of a poverty-environment trap. Specifically, in the long-run two main groups of countries will emerge: poor versus polluting countries. Second, the typical development path leads initially to high emission levels and, subsequently, to high income. Third, the convergence process towards the stationary distribution is very slow. Finally, for carbon emissions, whenever it is observed, the environmental Kuznets curve seems to be only a transitory phenomenon.     

S-Curve at the industry level: evidence from US–UK commodity trade

Backus et al. in (Am Econ Rev 84(1): 84–103, 1994) found that the cross-correlation function between terms of trade and trade balance resembles the letter S and labeled it the S-curve. Support for S-curve is rather weak in some cases, most notably US when aggregate trade data are used. Empirical regularities based on aggregate trade data may suffer from a potential bias stemming from aggregation. Indeed, by employing US bilateral trade data excellent support for the S-curve is recovered. The support, however, was rather weak at the level of US–UK bilateral trade. Suspecting aggregation bias again, we employ US–UK trade data at the industry level and find overwhelming support for the S-curve. Furthermore, commodity attributes play no role. Valuable comments of an anonymous referee are greatly appreciated. Any error, however, is ours.     

A discrete-time hazard model of the adoption of legislative television: evidence from the US Congress, 1961–1986

The present study examines the probability of the adoption of legislative television over time (1961–1986) in the US Congress using a discrete-time hazard model. Against a theoretical construct where political services are modelled as search/experience goods, evidence is provided suggesting that constituent homogeneity, relative power struggles involving the legislative branches of Congress and the White House, and the potential prowess of legislators in Congress regarding skilful use of television are all important facets in this probability model. Use of alternative data sources and statistical techniques, such as those presented here, works to provide a greater foundation of knowledge regarding the relationship between representative democracy and modern means of communication.     

Business regulation and business investment: evidence from US manufacturing 1970–2009

Regulation is often portrayed as placing a substantial burden on US businesses and the overall US economy. Moreover, policy options of “cutting red tape” and “reducing federal bureaucracy” are often asserted to be a way to stimulate investment and, through this channel, a way to promote economic growth. This paper examines the relationship between growth in regulatory restrictions in the Code of Federal Regulations and manufacturing investment in the United States over the 1970–2009 period. An industry-level dataset is constructed by mapping the novel industry-specific RegData dataset from the Mercatus Center at George Mason University to the comprehensive industry-specific manufacturing data in the NBER-CES Manufacturing Industry Database. In total, the constructed dataset includes 337 manufacturing industries. This approach yields substantial evidence that increased business regulation is associated with decreased business investment.     

Pareto–lognormal distributions: Inequality,poverty, and estimation from grouped income data

The (double) Pareto–lognormal is an emerging parametric distribution for income that has a sound underlying generating process, good theoretical properties, and some limited favorable evidence of its fit to data. We extend existing results for this distribution in 3 directions. (1) We derive closed form formula for its moment distribution functions, and for various inequality and poverty measures. (2) We show how it can be estimated from grouped data using GMM. (3) Using grouped data from ten countries, we compare its performance with that of another leading 4-parameter income distribution, the generalized beta-2 distribution. The results confirm that, when using grouped data, both distributions provide a good fit, with the double Pareto–lognormal distribution outperforming the beta distribution in 4 out of 10 cases.     

The Energy-Bias of North–South Technology Spillovers: A Global,Bilateral, Bisectoral Trade Analysis

We examine variations in the South–North ratios (emerging vs. industrialized countries) of energy and labor intensities driven by imports. We use the novel World input-output database that provides bilateral and bisectoral data for 40 countries and 35 sectors for 1995–2009. We find South–North convergence of energy and labor intensities, an energy bias of import-driven convergence and no robust difference between imports of intermediate and investment goods. Accordingly, trade helps emerging economies follow a ‘green growth’ path, and trade-related policies can enhance this path. However, the effects are economically small and require a long time horizon to become effective. Trade-related policies can become much more effective in selected countries and sectors: China attenuates labor intensity via imports of intermediate goods above average. Brazil reduces energy intensity via imports of intermediate and investment goods above average. Production of machinery as an importing sector in emerging countries can immoderately benefit from trade-related reductions in factor intensities. Electrical equipment as a traded good particularly decreases energy intensity. Machinery particularly dilutes labor intensity. Our main results are statistically highly significant and robust across specifications.