Natural Resources,Wage Growth and Institutions – a Panel Approach

This paper exam,ines the effect of nat,u,ral resource export depen,dence and fis,cal respon,si,bil,ity on wage growth, which is derived from the labour first‐order con,di,tion and esti,mated using a panel growth‐account,ing frame,work. Using annual data, the study accounts for the var,i,abil,ity of resource rev,e,nues, one of the major dif,fi,cul,ties of man,ag,ing these resources. The con,trol vari,ables include the most cru,cial growth fac,tors. Due to insuf,fi,cient annual data, human cap,i,tal is only con,sid,ered inside wages as in many endog,e,nous growth mod,els. We esti,mate the influ,ence on real wage growth aris,ing from the growth‐impacts of nat,u,ral resources through labour and cap,i,tal effi,ciency while con,trol,ling for fis,cal respon,si,bil,ity, which proves a suit,able proxy for pol,i,cies and insti,tu,tions in a sin,gle‐panel case. The results show that respon,si,ble fis,cal pol,icy, assessed by the bud,get bal,ance, pre,vents (var,i,able) dif,fuse and point‐source resources from hin,der,ing real wage growth (through labour effi,ciency), a result also sig,nif,i,cant in a sub‐sam,ple of un‐free coun,tries. The hypoth,e,sis of a resource curse work,ing through insti,tu,tions and reflected on real wage growth holds for resource export shares, but not adjust,ing for re‐expor,ta,tion. Over,all, resource effects are jointly insig,nif,i,cant, even though point‐source resources show a positive impact through cap,i,tal effi,ciency.     

Small Hubs,Large Spokes and Overlapping Free Trade Agreements

The proliferation of overlapping free trade agreements (FTA) in recent years has led to pair‐wise hub‐and‐spokes (HAS) throughout the world. Being avid subscribers to FTAs, many countries in the Asia‐Pacific region, including the United States, Japan, Singapore, South Korea, Thailand and Australia, have become trade hubs to their partners who are in turn relegated to spoke status. In this paper, we question whether being a hub is welfare optimal for a small and open economy such as Singapore compared to membership in a single bilateral FTA or a multi‐member free trade zone. Within this context, we use a computable general equilibrium model to examine the welfare implications of the triangular trade relationship of the United States, Singapore and Japan. This is facilitated by the Japan–Singapore Economic Partnership Agreement, the USA–Singapore Free Trade Agreement, and a hypothetical USA–Japan Economic Partnership Agreement. The analysis is extended to incorporate ‘super‐hub’ effects, that is, the spoke countries could be trade hubs in other HAS systems. Our experiment reveals that hub status generates positive welfare gain and is the highest Singapore can get from the trade configurations considered. Meanwhile, Japan loses more than the USA when both are relegated to spoke status. These findings prove to be robust under different market structures and production technologies, deeper economic integration, ‘super‐hub’ effects, as well as uncertainty in the key model parameters and the extent of trade liberalisation shocks.