ARE THERE PRODUCTIVITY SPILLOVERS FROM FOREIGN DIRECT INVESTMENT IN CHINA?

We review previous literature on productivity spillovers of foreign direct investment (FDI) in China and conduct our own analysis using a firm‐level data set from a World Bank survey. We find that the evidence of FDI spillovers on the productivity of Chinese domestic firms is mixed, with many positive results largely due to aggregation bias or failure to control for endogeneity of FDI. Attempting over 6000 specifications that take into account forward and backward linkages, we fail to find evidence of systematic positive productivity spillovers from FDI in China.     

CAN FINANCING CONSTRAINTS EXPLAIN THE ASSET PRICING PUZZLES IN PRODUCTION ECONOMIES?*

General Equilibrium asset pricing models have a difficult time simultaneously delivering a sizable equity premium, a low and counter cyclical real risk free rate, and cyclical variation in return volatility. To explain these stylized facts, this article introduces occasionally binding financing constraints that impede producers’ ability to invest. The financial frictions drive a wedge between the marginal rate of substitution and firms’ internal stochastic discount factors so that the shadow value of capital is not tied to the average price of capital. The model delivers higher and more volatile asset returns during recessions as well as a counter cyclical equity premium.     

HOW TO VALUE THE POORER PROSPECTS OF YOUTH IN THE EARLY 1990s?

Young workers in the 1990s can expect greater economic insecurity, as well as lower average earnings, compared to older workers, or compared to the youth of previous decades. The cost of greater insecurity depends upon an individual's probability of unemployment, marginal utility of income gains/losses and the extent to which individuals can smooth consumption over time by borrowing and drawing down assets. Since unemployment insurance cutbacks and higher unemployment have increased the risk exposure of youth, changes in the expected value of their income may understate utility losses as measured by the change in certainty equivalent income.
This paper uses a behavioural microsimulation model to compare the impacts of 1971 and 1994 unemployment insurance legislation and unemployment rates in Canada. It calculates both the expected value of income changes and, using a Stone-Geary utility function, the change in inequality of well-being (as measured by certainty equivalent income) for youth and for prime age workers. Both calculations reveal that youth were disproportionately affected by Canada's changing labour market environment. Very few youth have enough assets to finance consumption during spells of unemployment.     

DETERMINANTS OF PRIVATE INVESTMENT IN MALAYSIA: WHAT CAUSES THE POSTCRISIS SLUMPS?

This paper examines the determinants of private investment in Malaysia, with an emphasis on the postcrisis investment slumps. A static private investment function is derived from the neoclassical framework, with appropriate modifications to account for the structural features observed in the country. To introduce dynamics into the model, we adopt a cost minimization problem, which assumes firms optimize investment levels with respect to a quadratic loss function. The results suggest that the availability of financial resources in the economy has a significant positive impact on private investment. Macroeconomic uncertainty exerts a negative influence on the investment climate in the private sector. Both foreign direct investment and public investment are found to have a complementary effect on private investment. Consistent with the prediction of the neoclassical model, a higher level of aggregate output raises private investment, whereas the user cost of capital has the opposite impact. (JEL O16, O53)     

PRODUCTIVITY OR UNEXPECTED DEMAND SHOCKS: WHAT DETERMINES FIRMS' INVESTMENT AND EXIT DECISIONS?

We investigate the roles played by unexpected demand shocks, besides productivity, on firms' capital investment and exit decisions. We propose a practical approach to recover unexpected firm‐level demand shocks using inventory data. The recognition of demand shocks and inventory also improves the productivity estimation. The empirical results indicate that although productivity and demand shocks are both significant factors determining firm behavior, the former is more dominant for investment decision and the latter is more salient for firm exit. These findings confirm that unexpected demand shocks, besides persistent productivity, are important factors when analyzing capital investment and firm exit decisions.     

ARE WAGE INCREASES IN CHINESE STATE INDUSTRY EFFICIENT? PRODUCTIVITY IN NANJING'S MACHINE-BUILDING INDUSTRY

Since China's economic reform began, wages in state enterprises have increased at rates much faster than the rate of price inflation. This paper investigates the source of this rapid wage increase for a sample of Chinese state-owned machine-building enterprises to determine whether increased wages can be best explained by changes in productivity, changes in the output market, or changes in input markets. CES production function estimates find the marginal product of labor was stagnant between 1980 and 1992 but initially higher than wages. Rising wages were therefore consistent with other evidence that the reform process cost the state sector its labor monopsony. ( JEL P31)     

EXPLOSIVE BEHAVIOR IN THE 1990s NASDAQ: WHEN DID EXUBERANCE ESCALATE ASSET VALUES?*

A recursive test procedure is suggested that provides a mechanism for testing explosive behavior, date stamping the origination and collapse of economic exuberance, and providing valid confidence intervals for explosive growth rates. The method involves the recursive implementation of a right‐side unit root test and a sup test, both of which are easy to use in practical applications, and some new limit theory for mildly explosive processes. The test procedure is shown to have discriminatory power in detecting periodically collapsing bubbles, thereby overcoming a weakness in earlier applications of unit root tests for economic bubbles. An empirical application to the Nasdaq stock price index in the 1990s provides confirmation of explosiveness and date stamps the origination of financial exuberance to mid‐1995, prior to the famous remark in December 1996 by Alan Greenspan about irrational exuberance in the financial market, thereby giving the remark empirical content.

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HOW BIASED ARE MEASURES OF CYCLICAL MOVEMENTS IN PRODUCTIVITY AND HOURS?

The movement of hours worked over the business cycle is an important input into the estimation of many key parameters in macroeconomics. Unfortunately, the available data on hours do not correspond precisely to the concept required for accurate inference. We study one source of mismeasurement—that the most commonly used source data measure hours paid instead of hours worked. In particular, we focus our attention on salaried workers, a group for whom the gap between hours paid and hours worked is likely to be large. We show that the measurement gap varies significantly and positively with changes in labor demand. As a result, we estimate that the standard deviations of the workweek and of total hours worked are 27 and 5 percent larger, respectively, than published measures of hours suggest. We also find that this measurement gap is unlikely to be the source of the acceleration in published measures of productivity in the early 2000s.     

SOCIAL INVESTMENT IN SPAIN: HOW DO SOLIDARITY MUTUAL FUNDS DECIDE THE ALLOCATION OF SOLIDARITY FUNDING BETWEEN SOCIAL ECONOMY ORGANIZATIONS?

Solidarity mutual funds (SMFs) are a financial product oriented toward funding social economy organizations (SEOs). The main characteristic of these mutual funds, known in other countries as social investment, is that part of their management fees is allocated to support SEOs. In Spain, the criteria used in the allocation process of these funds have not been studied. The aim of this paper is to analyze the decision model of SMFs. To this end, we developed a logit regression model. The obtained results show that the decision model of SMFs promotes the development of commercial activity and favors a specific ideology and values and an exclusive relationship with the main funders.     

IS CORPORATE R&D INVESTMENT IN HIGH‐TECH SECTORS MORE EFFECTIVE?

This paper discusses the link between R&D and productivity across the European industrial and service sectors. The empirical analysis is based on both the European sectoral OECD data and on a unique micro‐longitudinal database consisting of 532 top European R&D investors. The main conclusions are as follows. First, the R&D stock has a significant positive impact on labor productivity; this general result is largely consistent with previous literature in terms of the sign, the significance, and the magnitude of the estimated coefficients. More interestingly, both at sectoral and firm levels the R&D coefficient increases monotonically (both in significance and magnitude) when we move from the low‐tech to the medium‐ and high‐tech sectors. This outcome means that corporate R&D investment is more effective in the high‐tech sectors and this may need to be taken into account when designing policy instruments (subsidies, fiscal incentives, etc.) in support of private R&D. However, R&D investment is not the sole source of productivity gains; technological change embodied in gross investment is of comparable importance on aggregate and is the main determinant of productivity increase in the low‐tech sectors. Hence, an economic policy aiming to increase productivity in the low‐tech sectors should support overall capital formation.     

DEFENDING THE INDEFENSIBLE? CULTURE'S ROLE IN THE PRODUCTIVE/UNPRODUCTIVE DICHOTOMY

Abstract

The purpose of this article is to reveal the justifications for different production boundaries historically. It finds that the boundaries were and are predicated on an untenable productive/unproductive dichotomy that was justified on select and shifting cultural norms. Furthermore, the production boundary informed other categories like labor, capital, income, and wealth. Hence, this article exposes the degree to which economic categories were and are unstable, fragile, contested, and culturally embedded constructs. It then explores feminist-inspired production boundaries based on third-person criterion and finds that these boundaries are likewise culturally contingent. However, these new production boundaries merely do what economics has always attempted to do, which is to theorize production under different cultural circumstances. This article reaffirms the mutually constitutive role of culture and economic categories.     

IS THE PHILLIPS CURVE DIFFERENT IN POOR COUNTRIES?

It has been suggested that the Phillips curve (positive output‐inflation correlation) is inverted in poor countries. It is argued here that the truth is more complex. In poor countries temporary supply‐side shocks, for example to agricultural output, induce a negative correlation between prices and output rather than between inflation rates and output. Empirical evidence supports this hypothesis.     

DOES MONOPOLISTIC COMPETITION EXIST IN THE MENA REGION? EVIDENCE FROM THE BANKING SECTOR

The goal of this paper is to empirically assess the level of banking competition in selected Middle East and Northern African (MENA) countries. The analysis employs the estimation of a non‐structural indicator (H‐statistic) introduced by Panzar and Rosse and draws upon a panel dataset of eight MENA countries (Algeria, Egypt, Israel, Jordan, Morocco, Oman, Saudi Arabia, and United Arab Emirates) over the period 1997–2012. The empirical findings are robust towards three different panel data econometric techniques (Ordinary Least Squares, Pooled Generalized Least Squares with Fixed Effects, and Generalized Method of Moments) and consistent with other similar studies, providing sufficient evidence in favour of a banking monopolistic competition regime. Furthermore, the estimation of three other alternative measures of competition (Lerner index, adjusted Lerner index, and conduct parameter) provides similar results, revealing that the banking sector in the MENA region is characterized by a low level of Significant Market Power (SMP). Overall, the analysis shows that, despite similarities in the process of financial regulatory reforms undertaken in the eight MENA countries, the observed competition levels of banks vary substantially, with Algeria and Morocco consistently outperforming the rest of the region.     

WHAT CAUSES THE EFFICIENCY AND THE TECHNOLOGY GAP UNDER DIFFERENT OWNERSHIP STRUCTURES IN THE CHINESE BANKING INDUSTRY?

This paper estimates and compares the cost efficiency of the Chinese banking industry among different ownership types for the period 2003–2014, using the stochastic metafrontier model. We find that foreign banks have the lowest cost frontier, while state‐owned commercial banks undertake the least sophisticated technology. Moreover, the results of the upward trend in the technology gap ratio (TGR) and in metafrontier cost efficiency support that a more open financial market is able to enhance banking efficiency. As for the role of environmental conditions, off‐balance sheet items, non‐performing loans, and financial market structure significantly impact the TGRs of different bank types. (JEL C51, G21, D24)     

DOES SIZE MATTER? THE IMPACT OF CHANGES IN HOUSEHOLD STRUCTURE ON INCOME DISTRIBUTION IN GERMANY

Income inequality in Germany has been continually increasing during the past 20 years. One cause of this development, among others, could be structural shifts in household formation due to long‐term societal trends. These affect per capita incomes, which has repercussions for the income distribution even if wages remain constant. The aim of this paper is to quantify the proportion of changing household structures in the increase in inequality. We find that the growth of the income gap in Germany (for both East and West from 1991 to 2007) is indeed strongly related to changes in household structure and employment behavior, and a large part of this increase is compensated by the welfare state.     

WHAT HAS BEEN HAPPENING TO AGGREGATE CONCENTRATION IN THE U.S. ECONOMY IN THE TWENTY‐FIRST CENTURY?

This paper extends earlier data series on aggregate concentration in the U.S. economy—the percentage of aggregate economic activity that could be attributed to the largest “X” companies—into the first two decades of the twenty‐first century. We find that there has been a moderate but continued increase in aggregate concentration since the mid‐1990s. This increase appears in data on employment and payrolls that have been compiled by the U.S. Bureau of the Census, as well as employment and profits data that are drawn from the annual “Fortune 500” lists. This increase does not, however, appear to have raised aggregate concentration above the levels of the early 1980s. (JEL L10, L11, L19)     

WHAT DRIVES EXPORT COMPETITIVENESS? THE ROLE OF FDI IN CHINESE MANUFACTURING

Export competitiveness (XC) is a country's ability to compete globally through expanding export capacity and upgrading export sophistication. How does foreign direct investment (FDI) affect XC? This article studies the issue based on evidence from Chinese manufacturing. Using data on 21 manufacturing sectors for 31 regions over 2005–2011, we construct the XC index and its three composite indicators, following the Organization for Economic Co‐operation and Development (OECD) and United Nations Industrial Development Organization (UNIDO). Four findings emerge from the estimates: (a) FDI is a key driver of China's export success; (b) China's absorptive capacity reinforces the effects of FDI through domestic learning efforts; (c) FDI seems to contribute more to export capacity than export upgrading, especially in labor‐intensive/low‐tech products; and (d) high‐tech FDI from the western world seems to be more conducive to export upgrading than low‐tech FDI from developing economies. (JEL F21, F23, O14, O53)     

SAILING THROUGH THIS STORM? CAPITAL FLOWS IN ASIA DURING THE CRISIS

The 2007–2009 crisis has led to an unprecedented collapse in international capital flows. Asian economies were, however, relatively unaffected: the contraction in their capital flows was limited to the most acute phase of the crisis in late 2008, followed by a rapid rebound. We show that this reflects both Asia's structural characteristics, such as limited reliance on international banking, and Asian specificities in the form of a limited impact of international bank exposure on capital flows. We also find evidence of a connection between the use of reserves and variations in net private capital inflows.     

WHERE ARE THE WOMEN? GENDER,LABOR, AND DISCOURSE IN THE NOIDA EXPORT PROCESSING ZONE AND DELHI

Abstract

Export processing zones (EPZs) are like islands of globalization. Much of the literature on EPZs and export-oriented industries (EOIs) notes a preponderance of women who are constructed as “cheap,” “nimble fingered,” and “docile” labor. This literature is dominated by socialist feminist thinkers, and this paper argues that there is a need to incorporate the insights of postmodern feminist thinkers. The article focuses on the role that language, discourse, and subjectivity play in the gendering process in handmade jewelry production in the Noida Export Processing Zone (NEPZ) and in the ranch production units related by common ownership in Delhi, India. It thus gives “voices” to women and men, and brings out their agency in structuring the labor market. The study confirms that gender division of labor is a product of discursive and material practices that are reproduced through discourses into which different actors invest, and that feed into the gendered subjective identities of these actors.