Law,Finance and Investment: Does Legal Origin Matter in Africa?

This paper assesses if legal origin explains domestic, foreign, private and public investments through financial intermediary channels of depth, efficiency, activity and size. The findings show that legal origin matters in the finance-investment nexus, though its ability to explain aggregate investment dynamics only through financial intermediary channels is limited in the cases of private and public investments.     

What Does a High School Diploma Get You? Employment, Race, and the Transition to Adulthood

We compare the employment of African American and white youth as they transition to adulthood from age 18 to 22, focusing on high school graduates and high school dropouts who did not attend college. Using OLS and hazard models, we analyze the relative employment rates, and employment consistency, stability, and timing, controlling for a number of factors including family income, academic aptitude, prior work experience, and neighborhood poverty. We find white high school graduates work significantly more than all other youth on most measures; African American high school graduates work as much and sometimes less than white high school dropouts; African American dropouts work significantly less than all other youth. Findings further suggest that the improved labor market participation associated with a high school diploma is higher over time for African Americans than for white youth.     

Inequality and Unemployment Patterns in Europe: Does Integration Lead to (Real) Convergence?

The economic convergence criteria adopted in the Maastricht Treaty and the fiscal discipline of the Stability and Growth Pact enforced nominal convergence, leaving aside real convergence indicators. In this paper, we use cluster analysis to examine the convergence patterns of income inequality, absolute redistribution (a measure of governments’ effectiveness in correcting for inequality) and unemployment. The expected outcome after years of economic integration was, ex-ante, convergence to a single cluster. Our results, however, uncover a variety of groups, implying that economic integration has not led to real economic convergence. Moreover, the existence of different patterns suggests: (i) that traditional classifications (Anglo-Saxon, Continental European, European Periphery, and Nordic models) remain broadly valid; (ii) that there is no unemployment-inequality trade-off to be exploited in terms of economic policy; and (iii) that the redistributive capacity of governments plays a pivotal role in coping with inequality without negative effects in terms of unemployment.     

Innovation,learning, and exporting in China: Does R&D or a technology index matter?

This paper undertakes econometric analysis of innovation, learning, and exporting in automobiles and electronics firms in China using a large-scale 2003 dataset to identify the most appropriate innovation proxy. Drawing on recent literature on innovation and learning in developing countries, it tests two alternative proxies: (i) a technology index (TI) to capture a variety of minor activities involved in using imported technologies efficiently; and (ii) the research and development (R&D)-to-sales ratio, which represents formal technological efforts to create new products and processes, often at world frontiers. A higher TI increases the probability of exporting in both industries, while the R&D-to-sales ratio was not significant. Foreign ownership, technical manpower, and the characteristics of the general manager/chief executive officer also matter. The findings suggest that China's remarkable success in the export of automobiles and electronics since initiating an open-door foreign direct investment (FDI) policy in 1978 is linked to technology transfer from multinationals; systematic investments in and upgrading of minor technological activities (like search, engineering, quality management and design); and human capital. As China's per capita income rises over time, however, formal R&D activities are likely to become more important to sustain competitiveness and technological upgrading in automobiles and electronics.     

Financial Development,Growth Volatility and Information Asymmetry in Sub‐Saharan Africa: Does Law Matter?

We re‐examine the law–finance theory relying on 33 countries in sub‐Saharan Africa over the period 2004–2011. Our evidence suggests that legal origin significantly explains cross‐country differences in financial development and economic volatility. More importantly, relative to civil law, English common law countries and those in Southern Africa have higher financial sector development both in terms of financial activity and banking efficiency on the back of lower volatility. While private credit bureau positively (negatively) affects financial development (economic volatility) with economically large impact for English legal legacy countries, the latter effect is contingent on the form of legal origin suggesting that, the establishment of information sharing offices per se may be insufficient in taming growth vagaries.     

Differences in returns to FDI between China's coast and interior: One country,two economies?

In principle, returns to factors of production within single economic systems should exhibit relatively uniform returns. Notwithstanding the fact that over the past 30 years China's economy has increasingly liberalized both internally and externally, it is widely understood that wages received by industrial workers in the coast and interior have widely diverged. However, less is known about how, between China's coast and interior, relative returns to domestic capital and foreign investment have fared, although we do know that the surge of foreign direct investment in China in recent decades has been overwhelmingly concentrated in the coastal region. This paper investigates comparative factor returns within China's industrial sector as measured by the marginal productivities of labor, domestic capital, and foreign capital. Using balanced and unbalanced samples of enterprise data during 1998–2004, we find significant differences between the returns to each of these factors. This paper explores the differences in estimates of factor returns that arise from the use of balanced versus unbalanced samples and least squares versus fixed effects estimators. We conclude that while returns to labor and domestic capital are higher in China's coastal economy, returns to foreign-owned capital are higher in the interior region. Indeed, the differences are indicative of those found in the literature that estimates cross-country comparisons between OECD and developing economies, suggesting that China's economy exhibits some of the differences found between the world's more and less developed economies.     

Foreign Aid,Governance and Economic Growth in Sub‐Saharan Africa: Does One Cap Fit All?

Sub‐Saharan Africa (SSA) has been receiving foreign aid for many decades; nonetheless, it ranked among the poorest regions in the world. This study revisits the aid effectiveness debate quantitatively by investigating the relationship among foreign aid, governance and economic growth in SSA using more recent data from 1996 to 2012 and testing for heterogeneity in aid recipient countries. Fundamental questions raised in this study are: does aid work the same way in all regions and group of countries in SSA? Do governance and size of aid matter? Employing the system generalized methods of moments (system GMM) technique, results show that foreign aid has an insignificant negative relationship with economic growth in aggregate SSA. However, one cap does not fit all in SSA as heterogeneity across aid recipients has implications for aid effectiveness. Moreover, governance and size of aid complement each other to improve growth in SSA. This study has been able to show quantitatively that a general policy for countries in SSA is not good enough for aid effectiveness; donors should increase the size of aid, and governance in recipient countries must improve. In conclusion, heterogeneity, governance and size of aid matter for aid effectiveness in SSA.     

Aging Workforce,Firm Productivity and Labor Costs in Korea: Are Older Workers Costly to Firms?

Are older workers costly to firms? This study aims to investigate the relationship between an aging workforce on firm productivity and labor costs using a unique Korean firm‐level panel dataset (WPS) covering the period from 2007 to 2011. The primary results show no evidence of a negative relationship between the proportion of older workers and firm productivity, and no significant relationship between the proportion of older workers and labor costs. In addition, the findings of this study implies that failure to account for unobserved firm heterogeneity and endogeneity of changes in age structure biases the results toward finding a correlation between the age structure of workers and firm productivity and labor costs. Consequently, there is a tendency to underestimate the true value of older workers for firms.     

The COVID‐19 Pandemic and Its Impact on the Global Economy: What Does It Take to Turn Crisis into Opportunity?

The COVID‐19 pandemic broke out at a time when there were heightened uncertainties in the global economy. Understanding these uncertainties provides an important background for analyzing the impact of the pandemic on the global economy, assessing the effectiveness of policy measures in combating the pandemic and reviving the global economy, and predicting the trajectory of the economic recovery in the post‐pandemic era. We analyze how COVID‐19 would likely deepen an existing malaise in the global economy, and what could be done to address these problems while managing the economic recovery. We argue that three fundamental factors that could lead to a solid recovery in the post pandemic era are structural reform, new technology and re‐integration. They could be managed by instituting a new “global social contract.” Supported by strong public policies at all levels, especially at national level, these three factors could bring about the salvation of the global economy as it recovers or re‐emerges from the pandemic crisis.     

Farm Strategy,Self-Selection and Productivity: Can Small Farming Groups Offer Production Benefits to Farmers in Post-Socialist Romania?

This paper addresses two questions: why are Romanian farmers continuing to place land in cooperative forms of farming when theory suggests that private farming is more productive and, are there efficiency gains to be had from cooperative farming endeavors? Results from an econometric selection model suggest that smaller, endogenously developed farming cooperatives, such as family societies, provide benefits over private farming strategies under certain conditions. This paper questions the wholesale rejection of cooperation around production and challenges policy to move away from the typically dichotomized presentation of agrarian structure as being a trade off between private small-scale farming and large-scale collective farming.