Market-Channel Choices of Indonesian Potato Farmers: A Best–Worst Scaling Experiment

We present an empirical analysis of how buyer (and trader) attributes influence decisions of market participation and channel choice among smallholder potato farmers in West Java, Indonesia. We use a best–worst scaling experiment to evaluate the determinants of these decisions and gauge the influence of buyer attributes. Our latent-class cluster analysis reveals that producers have heterogeneous preferences for buyer attributes, which address classic smallholder constraints such as access to inputs, credit, and information. This heterogeneity can be somewhat explained by household characteristics and assets. The broad mass of our sample sought buyers whose attributes imply lower market risk for farmers. Yet roughly a quarter of our sample, a portion that included farmers with large, specialised farms, sought buyers who could provide inputs such as high-quality seeds.     

A Simple Empirical Measure of Central Banks' Conservatism

In this article we suggest a simple empirical and model‐independent measure of Central Banks' Conservatism based on the Taylor curve. This new indicator can easily be extended in time and space, whatever the underlying monetary regime of the countries considered. We demonstrate that our measure evolves in accordance with the monetary experiences of 32 OECD member countries from 1980 and is largely equivalent to the model‐based measure provided by 2005 for the post‐1985 period. We finally present the relevance of such an indicator for further empirical analysis addressing the preferences of Central Banks.     

The saving–investment correlation and origins of productivity shocks

This paper shows how savings and investment can be positively correlated despite capital being perfectly mobile across countries. The saving-investment (SI) correlation depends on the origin and the volatility of macroeconomic (productivity) shocks, the persistence of these shocks and country-size. Simulating a two-country Real Business Cycle (RBC) model we show that as the variance of common shocks increases (relative to country-specific shocks), as the persistence of these shocks decreases and as country-size increases, the SI correlation increases. Using annual data from 1960 to 2002, productivity changes in 11 OECD countries are decomposed into common and country-specific shocks (from which foreign shocks are also constructed). The empirical findings show that the 11 countries share a statistically significant common component in productivity changes and common shocks generally account for at least half of the variations in the countries’ productivity changes. We then use the estimated variances of the shocks, in addition to each country's size, in the RBC model to compute the predicted SI correlation for each country, under the assumption that capital is perfectly mobile. The predicted SI correlation is then compared to the actual correlation to assess the relative degree of capital mobility in the 11 countries. The findings indicate that Norway, the Netherlands and the US have the highest degree of capital mobility whereas in Canada, Sweden, Belgium and Japan capital mobility has been the lowest.     

Equipping immigrants: migration flows and capital movements in small open economies

This paper explores the extent to which migration-related capital flows can explain the variation in investment rates and current and capital account imbalances in OECD countries. We begin with a general equilibrium model of a small open economy in which migration is exogenous. Migrants must be equipped with capital, and the resulting demands for capital will generate cross-border flows of capital. Next, we move to an empirical exercise in which we allow both capital and labor flows to be endogenous. We test this model using data from a panel of OECD countries. We conclude that migration flows do in fact generate substantial matching capital flows. We calculate that increased migration may have accounted for as much as one-fifth of the increase in the US current account deficit since 1960.     

Technology transfer on a two-way street: R&D spillovers through intermediate input usage and supply

Intermediate input usage is known to channel R&D spillovers across countries and industries. This paper highlights that technology also diffuses across countries and industries through intermediate input supply. Technology transfer to intermediates suppliers ensues from R&D that induces a demand for technologically advanced intermediates. I analyze R&D spillovers through intermediate input usage and supply for 18 manufacturing industries in 20 OECD countries over 1987–2009. Results support both use- and supply-driven R&D spillovers. Comparing their effects reveals interesting variations. Among domestic industries, intermediate input supply is the dominant channel. For international relations, both use- and supply-driven R&D spillovers are found.     

The geographic extent of global supply chains: evidence from Southeast Asia

We study the extent to which inter‐firm relationships are locally concentrated and what determines firm differences in geographic proximity to domestic or foreign suppliers and customers. From micro‐data on self‐reported customer and supplier data of firms in Indonesia, the Philippines, Thailand, and Vietnam, we measure the distances between firm pairs, that is, the distance to the main supplier and the distance to the main customer for the surveyed firms. The distances to suppliers and customers are shorter for indigenous firms in these Southeast Asian countries; but the arm's length differs across countries. The distance between firm pairs differs widely across firms within narrowly defined industries and countries. We find that both firm‐level transaction costs and capabilities affect the distances between customers and suppliers. The distance to suppliers is longer for firms that have accepted guest engineers from the main supplier to maintain production processes. Further, we find that the distances to suppliers and customers are longer for firms that have undertaken organisational change or improved marketing practices.     

Regulatory Policy: OECD Experience and Evidence

In the past 20 years a key topic of public-sector reform inOECD countries has been the emergence of regulatory policy.During this period, the nature of regulation has undergone profoundand rapid change. This paper reviews the development of regulatorypolicy in OECD countries over the last quarter-century. It identifiesa range of tools and institutions that have been used by OECDcountries to develop high-quality regulation. The analysis attemptsto show that while there is considerable commonality on broadobjectives of regulatory policy, considerably diversity remainsin the implementation of regulatory policy across OECD countries. Footnotes ¹ E-mail address: nikolai.malyshev{at}oecd.org     

Convergence in Revealed Preferences for Automobiles as Differentiated Goods: U.S. and OECD Countries: 1970–1999

Attributes of differentiated goods in personal consumption have both conceptual and policy importance in macroeconomic applications that include obsolescence rates of capital stock, the savings rate, and environmental issues. While there is both direct and indirect evidence of variation in preferences for these attributes across countries, there is also conjecture that recent global integration has reduced this variation. We examine convergence between the U.S. and four OECD countries in the levels of automobile attributes over the 1970–1999 period. Results of panel unit root tests with the U.S. as the comparison country showed convergence in the constructed measures of size, performance and efficiency. In pairwise comparisons between the U.S. and OECD countries, results of our model estimations indicated convergence in size and efficiency with estimated half lives to convergence of between four to six years. Disaggregating the definitional components of performance, results show convergence in horsepower when selected economic variables are controlled. We find that measures of trade, per capita income and price appear to be among the mechanisms through which increasing global integration relates to convergence. Directions for further study of convergence preferences for attribute profiles across countries are discussed.     

Exporting against Risk? Theory and Evidence from Public Export Insurance Schemes in OECD Countries

This paper endeavours to find out in how far public export insurance schemes foster international trade. Thereto, a gravity equation is derived, which accounts for the risk of financial losses in case firms contract defaulting foreign buyers. Empirical results suggest that OECD countries issuing trade credits with generous state-guarantees did not, during the 1999 to 2005 period, witness more exports towards politically and commercially more unstable low-income countries. Rather, publicly indemnified trade finance has promoted exports, to a modest degree, towards high and middle-income countries, where financial intermediaries and markets provide viable alternatives to hedge against payment risks.     

The Convergence of Price–cost Margins

This paper provides estimates of sectoral price–cost margin (PCM) trends in thirteen OECD countries over the last three decades, once controlled for inflation and cycle effects. It concludes with the absence of a decrease in average PCM. More strikingly, it establishes a clear pattern of PCM convergence both across countries and sectors. This convergence means that high margins have shrunk and low margins grown. Better capital market efficiency might be a driving force in the PCM convergence. These results point to a need to search for factors countervailing the pro-competitive effect on markups. The views expressed in this paper are those of the author and do not necessarily represent those of the OECD or its member countries.     

Bringing Unemployed Back to Work: Effective Active Labor Market Policies

We present a theoretical analysis of different types of active labor market policies in the context of a search-matching model. We find that labor market training is effective in bringing down unemployment while public employment services and subsidized jobs are not effective at all. This theoretical finding is confirmed in an explorative empirical analysis using data from 20 OECD countries.     

Political competition and debt trajectories in Japan and the OECD

Public debt has accumulated rapidly in OECD countries since 1970. We assess the political explanations for debt accumulation, paying particular attention to the US and Japan. The key finding is that political competition explains variation in debt accumulation. Political competition encourages fiscal prudence. Hence, non-competitive countries will build up debt. Thirty years of OECD experience provides strong empirical support for this conjecture, and suggests that high debt levels in Japan are more due to political than economic factors.     

Assessing convergence to purchasing power parity: A panel study for ten OECD countries

Assessing Convergence to Purchasing Power Parity: A Panel Study for 10 OECD Countries. — The paper analyzes whether post-Bretton Woods real exchange rates of ten OECD countries are nonstationary so that long-run purchasing power parity (PPP) can be considered to hold. A test procedure is proposed which treats the various real exchange rates as a panel but still allows to assess the rate of convergence to PPP for each pair of currencies separately. It is shown that long-run (tradables-) PPP holds between all countries analyzed. Rates of convergence to PPP, however, are found to be quite different across countries. For most of the OECD countries convergence takes place faster than previously indicated.     

VICIOUS AND VIRTUOUS CIRCLES – THE POLITICAL ECONOMY OF UNEMPLOYMENT

We develop an empirical non-linear model of equilibrium unemployment and test its policy implications for a number of OECD countries. The model here sees the natural rate and the associated equilibrium path of unemployment as endogenous, pushed by the interaction of shocks and the institutional structure of the economy; the channel through which these two forces feed on each other is a political economy process whereby voters with "limited information" on the natural rate of unemployment react to shocks by demanding more or less social protection. The reduced form results from a dozen OECD economies give support to the model prediction of a pattern of unemployment behaviour in which unemployment moves between high and low equilibria in response to shocks and the model specification is superior in forecasting performance out of sample to alternative models of "generalised hysteresis".     

EXPLORING THE SPECTRUM OF EXPORT DESTINATION: THE GEOGRAPHIC SPREAD OF KOREAN EXPORTS,ITS DETERMINANTS,AND POLICY IMPLICATIONS

Recent research in international trade has explored the stylized facts and causes and effects of export diversification. A simple model in this paper drawing on the work of Melitz suggests that there is an order in which a country spreads its goods to foreign countries. We estimate the order by using a methodology which takes account of the fact that most goods are not exported to several countries in our sample (unbalanced panel). We find that Korea exports its new goods first to the United States, followed by Japan, Hong Kong, and Singapore, and most recently to Bosnia-Herzegovina. Finally we find that the countries that Korea has exported to first are those with large GDP, low tariff rates, geographic proximity, language familiarity, in-country Korean export promotion offices, and high-quality institutions.     

Testing Heckscher-Ohlin-Vanek in the G-7

Testing Heckscher-Ohlin-Vanek in the G-7. —This paper extends previous tests of the Heckscher-Ohlin-Vanek (H-O-V) model by restricting testing to a group of countries expected to best conform to the assumptions of the model. Specifically, this study restricts the sample to the G-7 countries which are similar in relative endowments and technology. In this sample, limited empirical support for H-O-V is found in the “rank” test of factors across countries and the regressions. The results suggest that serious consideration of the assumptions of the model may improve the concordance of the theory to the data.     

Real Exchange Rates,the Trade Balance and Net Foreign Assets: Long-Run Relationships and Measures of Misalignment

In this paper we estimate equilibrium exchange rates for 23 OECD countries and four less mature economies in a panel data setting. Our empirical analysis demonstrates significant links between the trade balance and net foreign assets, and between real exchange rates and the trade balance, rather than between real exchange rates and net foreign asset, as predicted by the model of Lane and Milessi-Ferretti (2002). Our study indicates that, in terms of the association between real exchange rates and trade balance, there is heterogeneity between the emerging market economies and the OECD countries. Finally, we construct various measures of exchange rate misalignment for all the exchange rates included in our panels.     

Has China displaced the outward investments of OECD countries?

As China has rapidly emerged as one of the world's largest investors abroad, there has been a hectic debate in the literature on whether its emergence as a major foreign investor may have undermined the importance of western industrialised economies, including those in the Organisation for Economic Cooperation and Development (OECD). This paper aims to investigate whether this is the case. The study uses a panel dataset covering 155 countries, including 33 in the OECD, where China had invested during 2003–09. This is by far the most comprehensive dataset of China's outward foreign direct investment (OFDI). A two-stage least squared (TSLS) regression approach is adopted for our econometric models according to an established augmented gravity model in the literature. The empirical results show clear evidence that China's OFDI displaces that of the OECD countries, but the argument that China's emergence is a ‘new colonialism’ is not supported as OECD countries' OFDI in resource abundant host countries, particularly that in Africa and Latin America, does not appear to have been displaced by China's OFDI.     

Testing for horizontal and vertical foreign investment spillovers in China, 1998–2007

As with many developing countries, the Chinese government hopes that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In this paper, we show that foreign investment originating outside of Hong Kong, Macau, and Taiwan has positive effects on individual firm level productivity, while foreign investment from HKMT firms does not. We also test for both horizontal (within the same industry) and vertical (upstream or downstream) linkages from foreign investment. Using a manufacturing firm-level panel for 1998 through 2007, we find zero or weak positive horizontal externalities. However, our results show that foreign direct investment (FDI) has generated positive productivity spillovers to domestic firms via backward linkages (the contacts between foreign affiliates and their local suppliers in downstream sectors) as well as forward linkages (between foreign suppliers and their local buyers in the upstream sectors).     

Are China's Exports Crowding Out or Being Crowded Out? Evidence from Japan's Imports

Previous studies have investigated whether Chinese exports have crowded out those from other countries. However, what has yet to be considered is the evidence based on different quality varieties. Using the most detailed Harmonized System 9‐digit product‐level data, the present paper provides evidence of crowding‐out and crowded‐out effects across different product quality segments and across manufacturing sectors by quality segments. The empirical evidence presented in this paper shows that the crowding‐out effects of Chinese exports have been greatest at the lower end of the quality spectrum but less significant at the higher quality spectrum. Moreover, since 2007, China's own exports of lower quality manufactured goods have been increasingly crowded out. The key policy implication is that China's export path is in line with that taken by other Asian economies in previous decades; the crowded‐out effect could achieve win–win outcomes for countries involved; and lower income countries would do well to be open to receive those relocated low value‐added industries from China. However, the relocation policy in China is best implemented gradually as climbing up the product quality ladder takes time.