Intrafirm trade,input–output linkage,and contractual frictions: evidence from Japanese affiliate-level data

Review of World Economics - This paper revisits how vertical linkages between overseas affiliates and their parents are related to intrafirm trade by shedding light on variations in contractibility...     

Exploring the effects of capital mobility on the saving–investment nexus: evidence from Icelandic historical data

We explore the effects of capital mobility on the relationship between saving and investment using historical data for Iceland. First, we analyse the saving–investment (S-I) correlation for the period of restricted capital mobility using data from 1960 and 1994. We then add a period of free capital mobility between 1994 and 2008 and estimate the correlation for the period 1960–2008. Finally, we extend our analysis to the 2008 to 2016 period, when capital controls were imposed in response to the crisis. Institutions matter: We find institutional changes, in particular, Iceland’s entry into the European Single Market in 1994, coincided with a fall in the long-run correlation between saving and investment. However, the correlation weakens further when we include the post-crisis regime of capital controls, suggesting a weaker relationship between savings and investment in this regime. We discuss the possible reasons for this pattern and also the implications of our findings for post-crisis policy in small open economies.     

Energy prices and investment in energy efficiency: evidence from Chinese industry 1997–2004

The paper develops and implements a methodology for assessing the role of energy prices and new investment in reducing energy intensity in Chinese industry. Analysing a unique panel data set which reports firm-level energy consumption and price from 1997 to 2004, the paper finds: the energy prices, not only the current but also the past energy prices, are key factors that driving down firms' energy intensity for all three types of firms: state-owned enterprises (SOEs), domestic non-SOEs (NSOEs) and foreign-funded firms (FFEs); furthermore, SOEs exhibit a robust price-investment channel: responding to rising energy prices, SOEs tend to invest in new energy-efficient capital, through which SOEs reduce energy intensity; the same price-investment channels are less robust for non-SOEs or foreign-funded firms.     

Geographical location and urbanisation of the Swedish manufacturing industry, 1900–1960: evidence from a new database

Abstract

This article introduces a new database, based on official statistics, of regional manufacturing industries in Sweden. We employ this database to examine the distribution of manufacturing activity across Swedish regions and cities, 1900–1960. Over this period we observe an increasing concentration of manufacturing activities, reaching a peak around 1940, across the northern, southern and western parts (NUTS-I areas) of Sweden. Over the same period, the North-South divide in terms of manufacturing employment grew larger. Across counties (NUTS-III) and cities we, however, observe two shorter periods of convergence of manufacturing activities, in the early twentieth century and in the post-war period, whereas the inter-war period was characterised by divergence. These developments occurred to the backdrop of the urbanisation of industry in Sweden, as the rural share of manufacturing employment declined from roughly 60 to 25% between 1900 and 1960. We also find that the regional patterns of individual industries over time followed different trajectories, suggesting that that the determinants of industry location differed significantly across industries.     

Global competition and cooperation in the electronics industry: the case of X-ray equipment, 1900–1970

The electronics industry is often regarded by scholars as an example of a sector driven by endless technological innovation and major competition between a few large companies, thus embodying the common view whereby the free market leads firms to innovate. On the other hand, some business historians have also emphasised that, since the beginning of the twentieth century, most of these companies were engaged in various international cartel agreements. The business and economic history literature on this industry reveals a clear-cut divide between the inter-war years and the post-war era. In this paper, however, we argue that technical and commercial cooperation between large electronics companies continued in various forms despite the spread of anti-trust policies after 1945. In this case study, we explore the global X-ray equipment industry from its beginnings around 1900 to the advent of the CT scanner in the early 1970s. The paper focuses on Siemens and Philips, the two largest manufacturers of radiological equipment. It demonstrates that both companies pursued their commercial and technical cooperation at least until the 1970s, although it was much less overt as during the interwar years.     

Musket War and Musket trade: The New South Wales to New Zealand firearms trade, 1829–1840

The intertribal Musket wars that spread throughout Māori society in the 1820s and 1830s have received much attention from historians. This is also true of the history of trade between New South Wales and New Zealand occurring at the same time. However, at present, the link between these two phenomena remains poorly established. This article draws on the primary material available about the trans-Tasman arms trade from a relatively untapped source, Sydney newspapers, revealing the surprising extent of this commerce and the fact that firearms imports peaked in the early 1830s. This information necessarily requires revision of our understanding of the Musket wars themselves.     

How does trade affect the labor market? Evidence from Japanese manufacturing

This paper investigates how increased trade has affected labor demand at different levels of skills in Japanese manufacturing since the 1980s. First, the estimated loss of employment in aggregate manufacturing attributable to increased imports between 1980 and 1990 is 4.7 percent of the 1980 level of employment. Second, the rate of change in the relative wage of non-production to production workers attributable to the change in trade between 1980 and 1990 is 2.4 percent or less. These findings suggest that the effect of increased trade on the Japanese manufacturing labor market in the 1980s is not yet very large.     

The measurement of production movements: Lessons from the general engineering industry in Italy, 1861–1913

In the literature the (Italian) engineering industry is seen as one that transformed metal into machines; its time path is inferred from that of its consumption of metal. Newly recovered evidence indicates that far more metal was turned into (traditional) hardware than into (modern) machines. Machine production grew rapidly from a very small base: metal consumption fails to capture this change in the product mix, and understates the growth of new production at constant prices. Moreover, maintenance activity was in general as significant as new production. Maintenance was labor-intensive rather than metal-intensive, trend-dominated rather than cyclical, and relatively larger, next to new production, in 1861 than in 1913: metal consumption overstates the growth rate of the industry’s total product at constant prices, and much overstates its cyclical volatility. Technical progress was negligible in maintenance, but rapid in new production: constant-price-weighted physical measures fail to capture productivity growth, and even late-weighted series overstate the growth of the industry’s real product. These results are not tied to conditions peculiar to pre-War Italy: the new estimates presented here pave the way for emending, or at least reevaluating, the engineering-industry product series reconstructed for other times or places.     

The innovation–trade nexus: Italy in historical perspective (1861–1939)

This work investigates the relationship between trade and technological specialisation in Italy, during the long time span ranging from Unification to the eve of the Second World War. To do this, new series of Italy’s indices of specialisation in trade and technology are calculated based on official data. Empirical analysis, based on Spearman rank correlation coefficients and fixed-effects regression, shows the emergence of a positive relationship between specialisation in technology and specialisation in trade after the start of the country’s modern economic growth, around the turn of the twentieth century. This, however, was uniquely driven by a negative relationship between technological specialisation and import shares, while no significant relationship between the former and export shares emerges. Furthermore, this finding excludes the most important sector, leading Italian industrialisation, that is, textiles, the outstanding performance of which can be seen as largely determined by its being particularly suited to the country’s factor endowment.     

Designing wartime economic controls: Productivity and firm dynamics in the Japanese cotton spinning industry, 1937–9

In 1937, the Japanese government accelerated the expansion of its military expenditure and began to impose controls on the economy to maintain the balance of international payments. The controls were developed through trial and error. The cotton spinning industry was one of the industries most deeply affected by these controls. Initially, the government simply reduced the allocation of foreign exchange for raw cotton imports. However, because this measure prevented the export of cotton products, especially to countries outside the yen bloc, a new scheme of control, the ‘export–import link system’, was adopted from the second half of 1938. This scheme was intentionally designed to give firms incentives to export to non-yen bloc countries and to incorporate elements of market mechanisms into the system of economic controls. Analysing firm-level data, we find that under the link system, firms with higher labour productivity (LP) tended to grow faster, as occurs under a market economy. This relationship was not observed during the early stage of the controls. This difference is reflected in the pattern of change in aggregate LP. Under the export–import link system, the positive reallocation effect was substantial, similar to a market economy, whereas it was almost zero under the early controls. These findings indicate that the design of controls matters for the performance of controlled economies.     

Neutrality and free trade: Sweden and trade liberalisation, 1948–1958

Abstract

This article discusses the Swedish attitude to European economic cooperation, an attitude that has been described as reluctant. The traditional explanation for this has been Sweden's neutrality. This explanation has been challenged by researchers, who have claimed that a nationally self-sufficient social democracy was responsible for the reluctance towards Europe. In this article, neutrality is still seen as the main explanatory factor. Swedish strategies for dealing with European integration linked the concepts of neutrality and global free trade. Nordic cooperation was also seen as a strategy to meet demands for European integration. Swedish activities within the European organisations were limited by neutrality concerns. Within these limits Sweden worked for economic policy solutions, which might be called social democratic.     

Exports,imports and growth: New evidence on Italy: 1863–2004

The nexus between trade and economic growth in Italy has been widely debated by historiography. However, there are no long run analyses on this topic that cover the whole span from Unification to present days. This paper contributes to fill this gap by investigating the relationship between real exports, imports and GDP in Italy from 1863 to 2004 by using cointegration analysis and causality tests. The outcome suggests that these variables comove in the long run but the direction of causality varies across time. In the period prior to the First World War import growth led GDP growth that in turn led export growth. Conversely, in the post-Second World War period we have a strong bidirectionality between imports and exports consequent on the increase in intra-industry trade. We also find a weak support for export-led growth and growth-led imports. This suggests that exports were not the only or the main driver of economic growth. There was probably a multiplicity of factors at work, among which high rates of capital formation and the expansion of internal demand probably stood out.     

When is privatization better facilitated? Global evidence from the telecom sector

This paper attempts to identify the telecom-sector performance indicators, relevant economic variables, and institutional characteristics of a country that affect the process of privatization of state-owned telecom enterprises. Using standard duration analysis of a panel data, it is demonstrated that the privatization incentives are not only shaped by a country's fiscal conditions but are also influenced by the degree of competitiveness of private sector participation in policy-making process. The empirical results also reveal the significant impact of efficiency in telecom service provision on its course to privatization.     

The other trade war: Quantifying the Korea–Japan trade dispute

In mid-2019 a new trade war between Korea and Japan started heating up, while the U.S.–China trade war held the spotlight. This paper documents the recent Korea–Japan trade dispute and quantifies its economic impacts. We consider a set of non-tariff distortions—Japanese export controls combined with Korean boycotts of Japanese goods. We simulate the impact of these actions using a multi-region general equilibrium model calibrated to the GTAP version 10 accounts and observed trade responses in the Korea Customs Service data. We find a welfare loss of 0.144% ($1.0 billion) for Korea and 0.013% ($346 million) for Japan. Sectoral impacts include a 0.25% reduction in chemical production in Japan. In Korea the reduction in imports from Japan is offset by increases in domestic production and imports from other countries.     

China's economic development: does exchange rate and FDI nexus matter?

This study aims to investigate the relationship between China's exchange rate, foreign direct investment (FDI) inflows, and economic development. We applied the bound testing approach on aggregate level data from 1981 to 2013. The results showed that the Chinese economy benefitted from a lower exchange rate over this period, and that there was a direct link between FDI inflows and economic development on an aggregate level both in the long and short run. The results of the Granger causality test identified a long‐ and short‐run association among these variables. The GMM estimations with dummies for financial crises and RMB exchange rate policy fluctuations also confirmed the growth enhancing impact of the exchange rate and FDI inflows. To promote sustainable economic development in the future, China should focus on improving the levels of domestic investment and human capital, as well as supervising the level of openness and capital controls.     

Does economic growth affect urbanization? New evidence from China and the Chinese National Congress

Using a panel of Chinese provinces during 1985–2008, we propose an estimation strategy to study the within-province effect that per capita GDP growth may have on the urbanization rate. Our approach exploits the timing of the National Congress of the Communist Party, which is a 5-yearly meeting where national economic policies are debated. Because economic growth is a key policy objective and given that the Chinese fiscal system is highly decentralized, the recurring National Congress may encourage a systematic pattern of spending by provincial governments to foster growth. We find that per capita GDP growth is associated with the timing of the National Congress, and exploiting instrumental variables that convey this timing information, we also find that growth has a statistically significant effect on the urbanization rate.     

Balancing the Baltic trade: colonial commodities in the trade on the Baltic, 1773–1856

Abstract

This article attempts to look at the connection between the Atlantic and the Baltic economies during the transition from early modern to the modern era. Previous research has seriously underestimated the importance of colonial commodities traded on the Baltic during this period. Colonial commodities, particularly from the American plantation complex, became ever more important for the Western European balance of payments on the Baltic. Already by the late eighteenth century, these commodities were on aggregate worth approximately as much as the exports of strategic commodities such as grains or iron from the Baltic at the same time. By the middle of the nineteenth century, the value of colonial commodities imported to the region far surpassed the value of such key exports from the Baltic. The colonial commodities thus constituted an important part of the balance of payments for the trade on the Baltic.     

Most-favoured-nation treaty in service of trade? Case: early trade policy relations between Finland and Japan and their impact on the sales networks of the Finnish forest industry

This article scrutinises the significance of the most-favoured-nation (MFN) treaty in promoting the development of commercial activity and its results in transnational trade. As cardinal agents of trade policy, governments act as ‘umpires’ in formulating and guarding the rules of international trade, while the ‘players’ are private corporations which conduct commercial operations in the playing field of international trade. Within the framework of Finno-Japanese trade relations, the players established and developed their trade networks (corporate interconnections) regardless of the umpires and their official rules, meaning the commercial treaties. Through a close examination of the early trade policy relations between Finland and Japan along with the formation and development of the Finnish forest industry’s sales networks into the Japanese market in the early twentieth century, this study demonstrates that there was no explicit causal connection between MFN treaties and the evolution of the Finnish forest industry’s export efforts – and their results.