On wage- and profit-led demand regimes: learning from the evidence

Abstract

This paper contributes to the empirical research around the “wage-led” or “profit-led” demand regimes. It first reviews how Kalecki, and then Steindl, approached the relationship between economic growth and income distribution. Then, empirical analysis carried out under the probabilistic approach to econometric modeling shows statistical evidence, estimated through cointegration analysis, that in the long run, in three very open economies—Mexico, France, and Korea—the wage share is positively associated with demand and output. It finally discusses the macroeconomic dilemma that almost all countries have to face, i.e., a positive effect of a high-wage policy on demand and employment may diverge from a negative effect on output compatible with external equilibrium.     

Influence of policy,operational and market conditions on seaport efficiency in newly emerging economies: the case of Vietnam

ABSTRACT

Located in Southeast Asia as one of the most dynamic economic regions in the world and close to north-south shipping routes, Vietnam’s seaports play a vital role in promoting its international trade and economic growth. And yet, most ports are small and owned by the public sector. Their performance is subject to various factors relating to government policy, operational and market conditions. Although the Government has been trying to improve the sector’s performance through corporatization, its corporatization model is unique in many ways compared with reform models in other countries. This study seeks to analyse the effects of government policy, operational and market conditions among other factors, on Vietnamese seaports’ efficiency. Double-bootstrap data envelopment analysis (DEA) and univariate and multivariate analyses were conducted using the data sample of 41 ports for years 2015 and 2016. The analysis results show that the factors of production, regional location and reform policy had a significant impact on port performance.     

Growth in transition countries

This study analyzes the impact of the speed of transition reforms on economic growth in transition countries in the context of the debate on ‘big‐bang vs. gradualist approach’. It builds a new indicator for the speed of transition reforms based on a three‐way principal component analysis. It shows that: (i) the speed of transition reforms Granger‐causes economic growth and there is no reverse causation; (ii) the impact of contemporaneous speed of transition reforms on economic growth is negative, but becomes positive in the longer horizon; and (iii) other factors, such as initial conditions and macroeconomic stabilization programmes, also drive economic growth. Although the first two results are robust to different estimators, the impact of control variables depends on the econometric specification.     

奖章与陷阱:渐进转轨中的腐败

中国在1970年代后期开始推进以市场化为导向的改革战略，国民经济和社会福利得到迅速的改善和提高，但腐败现象也比较严重；同时，市场化的推进并未能遏制住腐败的扩散，市场化程度较高的地区反而面临着更为严重的腐败现象。通过分析中国的经济转轨过程，本文对此作出了解释。与其他处于经济转轨过程中的经济体相比，中国经济发展所具有的特殊的制度安排既促成了经济的迅速成长，也引发了普遍的腐败问题。它们包括：经济决策的地方分权、双轨制市场化和集体所有的产权形式，这些要素既提高了官员推动经济增长的激励，也促使许多官员以腐败的形式分享经济增长的红利，而以“关系”为基础的社会文化背景、中央政治权威的稳定性有助于减少官员在抽租过程中对经济增长可能产生的负面影响。另外，我们认为，市场化改革对腐败可能产生两方面效应，一方面，市场化通过培育新型的企业家阶层促使大量资源由市场配置，这有助于减少腐败发生的可能性；另一方面．市场化进程通过促进经济增长提高了经济中的租金总量，这成为诱发寻租行为的因素。最终的净效应取决于政府部门的改革。发生在中国的现象可以归结为政府改革的不彻底性。     

Globalization and economic growth: Evidence from two decades of transition in CEE

This paper examines the role of various aspects of globalization for economic growth in ten CEE economies. In contrary to previous papers, we restrict our analysis solely to the first two decades of transition. Using the globalization indexes published by the Swiss Economic Institute, we found strong and robust evidence of growth-stimulating effect of globalization processes, especially in social and economic dimensions. On the other hand, the role of political dimension of globalization was not found to be statistically significant in any research variant.The result, which seems to be particularly interesting, is that the development of the internet, television and trade in newspapers (the social dimension of globalization) had at least as strong positive impact on economic development in CEE economies in the first two decades of transition as the rise in international trade, growth of foreign investment, reduction of import barriers and development of a tax policy (the economic dimension).     

Economic reforms and human development: evidence from transition economies

Do market-oriented economic reforms result in higher levels of human well-being? This article studies the impact of macro-level institutional and infrastructure reforms on the economic, educational and health dimensions of human well-being among 25 transition economies. We use panel data econometrics based on the LSDVC technique to analyse the effects of market-oriented reforms on the human development index (HDI), as a measure of human well-being, from 1992 to 2007. The results show the complexity of reform impacts in transition countries. They show that institutional and economic reforms led to positive economic effect and significant impacts on other dimensions of human development. We find some positive economic impacts from infrastructure sectors reforms. However, not every reform measure appears to generate positive impacts. Large-scale privatizations show negative effects in health and economic outcomes. The overall results show the importance of the interaction among different reform measures and the combined effect of these on human development.     

Optimal Stabilization Policy in the Presence of Learning by Doing

This paper analyses the optimal stabilization policy when growth is driven by learning by doing. If benefits of learning by doing are not fully internalized, the optimal policy is to tax labor during expansions and to subsidize it during recessions. The long-term impact of this policy depends critically on initial conditions: If stabilization starts during an expansion, it has a positive effect on long-term production. When stabilization starts during a recession, its long-term effect is negative. The paper makes a methodological contribution in its analytical derivation of the optimal policy along the transition path as well as in the steady state.     

Barking Up the Wrong Tree: A Reply to Haynes & Husan

The Albanian economy in the 1990s experienced a rapid recovery from its near-collapse in 1992. The rapid economic growth between 1993 and 1996 was exceptional by East European standards, and represented the highest rate of sustained economic growth of all transition economies. This investigation indicates that the standard explanations for recovery and growth in transition economies, such as the pace of economic reform or the levels of domestic and foreign investment, do not adequately explain the rapid growth of the Albanian economy. Factors specific to Albania also need to be considered. The main conclusion drawn here is that the success of the Albanian economy in the mid-1990s rested largely upon the inflow of remittances from Albanians working abroad. These remittances are shown to have been much greater in value than was previously assumed by the IMF: in the region of $700 million per annum rather than $400 million. Remittances are also found to have played a much greater role in Albania's economic recovery than was previously recognised. It is demonstrated that the rise of pyramid investment schemes in 1996 was closely linked to the inflow of remittances. Such schemes are also found to have played a part in fuelling the rapid economic growth in the Albanian economy, before their collapse in 1997.     

Does too much government spending depress the economic development of transition economies? Evidences from dynamic panel threshold analysis

This paper investigates the relationship between government size and economic growth and determines the optimal level of government spending to maximize economic growth. The paper applies a dynamic panel data analysis based upon a threshold model to test the threshold effect of government spending in 26 transition economies over the period spanning 1993–2016. According to the analysis results, government expenditures have a threshold effect on economic growth, and there is a non-linear relationship depicted as an Armey curve in these transition economies. The findings indicate that a government size above the threshold government spending level adversely affects economic growth, while a government size below the threshold level has a positive effect. Furthermore, there is a statistically significant relationship between the two variables above and below that optimal level, even if we divide the sample into developed and developing countries. Our findings suggest that governments in transition economies should consider optimal government size at around the estimated threshold level to support sustainable economic growth.     

Exchange Rate Flexibility and the Effect of Remittances on Economic Growth

This paper studies the question of whether exchange rate policy affects the impact of remittances on economic growth in recipient countries. The findings indicate that more flexible exchange rate regimes are associated with a greater increase in economic growth following an increase in remittances, but also that the impact of remittances on growth is positive under a fixed regime. The results further show that the effect of remittances under a fixed exchange rate regime is positive in less financially developed countries as well, but do not provide conclusive evidence that this effect varies inversely with exchange rate flexibility in such economies as theorized; the results being sensitive to the choice of financial development indicator.     

Adjustment,trade policy and investment slumps: evidence from east asia ∗

This paper presents a model of investment in five East Asian economies over the 1970s and 80s, paying particular attention to the impact of the policy reforms which have accompanied Structural Adjustment Programmes. A priori, the impact of trade reform on investment can be positive or negative; in practise, it is found to be negative.     

Intergenerational Mobility and the Process of Development

This paper offers an explanation for some evidence that intergenerational earnings mobility is higher in more developed economies and that mobility is positively correlated with wage equality. In the model mobility promotes economic growth via its effect on the accumulation and allocation of human capital. Growth influences mobility via its effect on incentives to acquire education and its effect on liquidity constraints upon such acquisition. In the process of development mobility increases and the distribution of education becomes better correlated with ability. Redistributive policy has a negative effect on growth in developed economies and a positive effect in developing economies.     

Fiscal Deficit and Economic Growth Nexus in India: A Simultaneous Error Correction Approach

This paper examines the impact of fiscal deficit on economic growth in India, during the period from 1970–71 to 2018–19. Using a combination of Autoregressive Distributed Lag and Simultaneous Error Correction Approach, this study shows that fiscal deficit and revenue deficit have an adverse effect on economic growth both in the long run and in the short run. The empirical analysis confirms that fiscal deficit influences economic growth both directly, and indirectly through the routes of investment, interest rate, current account deficit and composition of government expenditure. Further, gross investment has a positive and inflation rate has a negative impact on economic growth. For a policy perspective, the government should control fiscal deficit and revenue deficit as suggested by the FRBM Act. The composition of government expenditure should be altered to devote more resources for the formation of productive capital in India.

     

Reform reversals and output growth in transition economies*

This paper tests whether reform reversals during transition carry an economic cost. Reform is measured by an average reform index, while reform reversals are characterized by a drop in the average reform index. In the standard empirical framework the current level of reform affects growth negatively, while the lagged level affects growth positively. This non‐linear effect implies a counterintuitive, short‐lived positive effect of a reversal. In a simultaneous equation system with growth and the level of reform as dependent variables we explicitly introduce a reversal parameter. Empirical results suggest that reversals have an immediate negative impact on real output growth. Controlling for the level of reform shows that reversals are more costly at higher levels of reform.     

发展中国家内、外资银行信贷行为差异分析

众多发展中国家的金融改革实践表明,银行业开放的正负效应并不具有显著的国别一般性,特别是在信贷稳定性上,在东道国和外资银行母国经济运行的不同时期,外资银行与东道国国内银行的信贷行为可能存在较大的差异性,进而对东道国的经济金融稳定带来不同的影响。本文从全球范围内抽取了21个发展中国家（地区）和转轨国家中的400余家内、外资银行为样本,以其在2002～2010年间的相关数据构成面板数据集,来对内、外资银行在此期间的信贷行为差异进行检验。研究发现,外资银行的信贷行为确实与国内银行存在着差异性,主要表现在外资银行的信贷增长既表现出与东道国的经济增长显著正相关,又明显受到母国经济状况的影响;在经济正常的年份里,外资银行的信贷表现更多的取决于东道国的经济状况,而当外资银行母国发生经济危机时,却会对外资银行的信贷增长造成较大的负向冲击。     

The effects of economic policy uncertainty on China’s economy: evidence from time-varying parameter FAVAR

ABSTRACT

This article explores the effects of China’s economic policy uncertainty (EPU) on its fiscal policy, monetary policy and a wide range of macro-economic variables using a time-varying parameter FAVAR model. Based on monthly data from 07/2003 to 08/2017, the time-varying structure of the model allows us to capture the time-varying characteristics of the macro-economic variables and which channel is relevant. Empirical results reveal that the reaction of monetary and fiscal policies to EPU is highly asymmetric across macro-economic circumstances. Loose monetary and fiscal policies are adopted in response to EPU shocks during the financial crisis, while policies are moderately tightened after the crisis. The China Interbank Offered Rate (Chibor) responds more sensitively and severely than M2 to EPU shocks. Additionally, EPU shocks have a significant and negative impact on economic growth, consumption, exchange rates, bonds and the stock market, but showing a positive impact on credit, real estate and fixed asset investment (which might be due to China’s special economic market environment and the high investment return). The results indicate that EPU shocks significantly affect macroeconomic fundamentals through precautionary savings and financial market channels but lose their effectiveness through a ‘real options’ effect.     

Producing Airpower: The Rise and Fall of Neo-Liberalism’s Defence Agenda

ABSTRACT

Few policy issues are more challenging than complex weaponry’s procurement and employment. Technology drives weapon costs upwards faster than economies are growing and militaries struggle to maintain increasingly sophisticated arms. Certain governments have adopted a reform agenda rooted in neo-liberal economic theory to address these challenges. Two broad policies – enhancing inter-firm competition for contracts and outsourcing activities to the private sector – emerged as central to this reform agenda. Although rarely presented as such, these reforms present a significant intellectual challenge to the hitherto predominant statist model for military power’s provision. Surprisingly, in light of neo-liberal policies’ adoption by militarily active states, no study has systematically examined these reforms’ content and impact. My article fills this lacuna by examining the state – the United Kingdom – that most consistently enacted neo-liberal defence reforms. To preview the conclusion, neo-liberal reforms initially generated small initial efficiencies, but then produced significant adverse consequences when pursued beyond a certain minimal level. Britain’s competition policy, for example, ultimately incentivized firms to consolidate into monopolies, which narrowed the scope for future competition and prevented the state from upholding fixed price contracts. Outsourcing, likewise, proved detrimental once policymakers sought to extend its scope beyond a limited range of simple services.     

Agriculture and the Transition to the Market in Asia

This paper examines the role of agriculture in the transition from central planning to market-based economies in Asia through an analysis of the experience of countries in Southeast Asia, i.e., Lao PDR and Viet Nam, and Central Asia, i.e., Kazakstan and the Kyrgyz Republic. In Southeast Asia, reforms met with a very rapid and positive supply response in agriculture that helped to sustain the broader economy. In Central Asia, economic reforms have thus far failed to arrest a deep and widespread economic depression across all sectors, including agriculture. Focusing on the significant differences in the initial conditions and structure of agriculture, the reasons for this contrasting experience are analyzed. The likely prospects and the problems posed by the unfinished reform agenda are also examined.J. Comp. Econom.,October 1997,25(2), pp. 256–280. Asian Development Bank, Manila, 0980, Philippines.     

The Uzbek Model of Economic Development, 1991–91

Uzbekistan has been difficult to classify among the thirty-plus economies in transition during the 1990s and has posed a puzzle, because it is a slow reformer but relatively good performer. This paper argues that there is no simple Uzbek model. Uzbekistan's economic reform process has been inconsistent gradualism through three different phases during the 1990s. Economic performance was due to favourable external conditions during the first half of the 1990s and to reasonably good policy-making, although policy errors in late 1996 led to negative effects. Uzbekistan illustrates the importance of policy, but sheds little light on a debate framed in terms of rapid reform versus gradualism.     

Knowledge Disparity and Regional Inequality in Post-reform China

This article investigates China's knowledge disparity and its association with economic inequality, an issue little attended in Chinese regional studies. It focuses on the 1990s, the period when the economic reform and open door policy started to have their full impact on all aspects of social and economic development. The article reveals that knowledge advancement is uneven in China, with a regional pattern similar to economic inequality but also unique in several ways. The association between knowledge disparity and economic inequality is found not to be as strong as one would expect. The implications of the findings in terms of the impact of reform policies are discussed.