Double-edged effects of the technology gap and technology spillovers: Evidence from the Chinese industrial sector

This paper proposes a new insight that the technology gap plays double-edged roles in the technology spillovers of foreign direct investment (FDI) through two channels, technology choice set and technology absorptive capability. Applying a multiple-threshold model, we examine the non-linear relationship between the technology gap and technology spillovers based on the provincial panel data of the Chinese industrial sector during 1993–2006. The empirical results support the hypothesis of two thresholds, which are 0.3071 and 0.5214 in terms of the technology gap respectively. The estimated thresholds indicate the sufficient absorptive capability is the premise for FDI technology spillovers. Moreover, it implies the marginal decrease of FDI technology spillover effects in the long run.     

Inertial linkages between wages and inflation: Evidence from Brazil

Many observers of the Brazilian economy have suggested that wage growth causes inflation. Because wage growth is linked to past price growth, an inertial component is said to exist. The relationship between wage growth and inflation in Brazil over the period 1981–89 is examined. A model of wage growth and inflation is developed. Lagged effects of inflation on wage growth and a structural break in 1986 are tested for. The estimates suggest a lagged response of wages to prices in the pre-1986 period. However, in the post-1986 period, the response of wages to lagged inflation is not statistically different from zero and the contemporaneous response is not different from one.A preliminary version of this paper was presented at Fundacão Getulio Vargas and CEBRAP in São Paulo in August 1991. The author wishes to thank Tomàs Malaga, Carola Lame, Gesner Olivera, and Luis Bresser Periera for helpful comments. As well, the author wishes to acknowledge some critical input from Ann Witte and Alejandra Edwards. All errors, however, are the author's own.     

Economic structural changes and rural income: Evidence from Chinese provinces during the reform period

During the reform period, the Chinese rural economy has experienced deep structural changes: cropping adjustment, agro-forestry adjustment and agro-industrial adjustment. At the same time, rural per capita income rose sharply despite some fluctuations. Using a panel data of 29 provinces from 1982 to 2001, effects of these structural changes upon both income level and income instability are assessed. The empirical results show that crop adjustment and agro-industrial adjustment can increase rural income and reduce income instability, while agro-forestry adjustment reduces both income and its instability, as a risk-management strategy.     

Evidence of panel stationarity from Chinese provincial and regional income

The aim of this paper is to examine whether Chinese provincial and regional real GDP and per capita real GDP are panel stationary for the period 1952–2003. We allow for multiple structural breaks based on a technique developed by Carrion-i-Silvestre et al. [Carrion-i-Silvestre, J. L., Barrio-Castro, T, D., & Lopez-Bazo, E. (2005). Breaking the panels: An application to the GDP per capita. Econometrics Journal, 8, 159–175]. Allowing for at most five structural breaks, we find that for 67% of the provinces, per capita real GDP is stationary; while we only find stationarity of real GDP for 17% of the provinces. However, when we extend the analysis to panel data models, we find statistically strong evidence of panel stationarity of Chinese provincial and regional income.     

The effect of mergers on employment and wages: Evidence from Japan

This study investigates the impact of mergers on employment and employees’ wages in Japan, based on 111 mergers between listed firms observed between 1990 and 2003. Typically, the number of employees decreases by 4.45% three years after a merger, even after changes in sales and other variables are controlled. Firms that experience related mergers, and rescue mergers are more likely to decrease the number of workers. At the same time, wages increase by 5.46% per employee. These results suggest that the main motivation behind mergers is not to divest employees of their wealth.     

Foreign direct investment and productivity spillovers: Evidence from the Spanish experience

Foreign Direct Investment and Productivity Spillovers: Evidence from the Spanish Experience. — The aim of this paper is to analyse the impact of foreign direct investment (FDI) on firms’ productivity using a panel of Spanish manufacturing firms for the period 1990–1998. Firstly, we show that for countries, like Spain, that are undergoing significant structural changes over the period in question it is important to control for both time-invariant as well as time-variant sectoral characteristics. Secondly, we confirm previous findings that one needs to take into account the “absorptive capacity” of firms when considering whether they are able to avail of externalities associated with FDI presence. For the Spanish case we find that only firms with sufficient levels of such capacity experience positive spillovers.     

Labor market concentration and heterogeneous effects on wages: Evidence from Japan

This study provides empirical evidence of the impact of labor market concentration on wages. We find that (1) wages are suppressed in more concentrated labor markets, (2) labor rigidity is associated with wage responsiveness to labor market concentration, (3) the impact of labor market concentration on wages is smaller for firms with more competitive downstream product markets, and (4) greater job opportunities outside the manufacturing sector weaken the relationship between concentration and wages. In sum, our findings indicate that labor rigidity and the degree of competition in downstream product markets, as well as outside options, affect the relationship between market concentration and wages.     

Technology spillovers from Chinese outward direct investment: The case of Ethiopia

The present study uses firm survey data of 1033 manufacturing firms operating in Ethiopia in 2011 to examine the impact of Chinese outbound direct investment on the productivity of domestic firms. Particularly, we attempt to answer two questions. Firstly, are Chinese-owned (henceforth foreign) firms more productive than local ones? Secondly, does the presence of foreign firms generate technology spillovers on domestic firms operating in the same industry? Our empirical results show that foreign firms are more productive and that their presence has different spillover effects on the productivity of domestic firms. In particular, we find that domestic firms with higher absorptive capacity experience positive spillovers, while those with low absorptive capacity witness negative spillover. We also find that small firms and non-exporting firms benefit more from spillovers than do other types of domestic firms. In this study, instrumental variables are used to address the potential endogeneity between foreign firm presence and domestic firm productivity.     

Job tasks and wages in the Japanese labor market: Evidence from wage functions

Based on the microdata from the Basic Survey on Wage Structure and the original survey, we estimate the Mincerian wage function, incorporating job tasks, to examine the importance of job task wage premiums as well as long-term changes in the Japanese labor market. In the estimation, we found that the association between abstract tasks and wages is positive and that a one standard deviation increase in the abstract task scores was associated with a 21.2% wage premium, while that of routine and manual task wage premiums are negative. We also found that the total explanatory power of three task scores (routine, abstract, and manual tasks) is higher than that of the education dummies or the major occupation group dummies. We also confirmed two testable implications from the Roy model regarding the workers’ self-selection into occupations in the Japanese labor market. These findings are similar to those obtained by Autor and Handel (2013). On the other hand, we found no major changes between 2005 and 2016 in the coefficients of routine, abstract, or manual task scores as well as their explanatory powers in the wage function. We then observed that demand for labor increased in many occupations involving many non-routine or manual tasks, but at the same time, the supply of labor to those occupations also increased. Therefore, we discussed that the change in labor demand and supply may be one of the reasons for the stable relationship between job tasks and wages.     

Economic growth,local industrial development and inter-regional spillovers from foreign direct investment: Evidence from China

In many countries inward foreign direct investment (FDI) typically concentrates in a few regions. However, there is little empirical evidence on whether spatially concentrated FDI boosts economic growth in other regions within the same country. We use a dataset that covers 96% of Chinese cities from 1996 to 2004 and find that “inter-regional spillovers” from FDI concentrated in China's coastal cities have a positive and significant effect on the growth of inland cities. In addition, an inland city's industrial development affects its absorptive capacity to gain such inter-regional spillovers from coastal FDI.     

Knowledge spillovers from foreign direct investment in R&D: Evidence from Japanese firm-level data

This study uses firm-level panel data from the Japanese manufacturing industries and examines whether foreign direct investment generates intra-industry knowledge spillovers to domestic firms. The analysis found positive effects of R&D stocks of foreign firms on the productivity of domestic firms, while effects of capital stocks of foreign firms were absent, suggesting that knowledge of foreign firms spills over through their R&D activities, but not through their production activities. In addition, we found that the extent of spillovers from R&D stock of foreign firms is substantially larger than spillovers from R&D stock of domestic firms.     

The role of regional knowledge spillovers on China's innovation

The new economic geography has increased attention on the spatial dimension of knowledge spillovers and innovation. In this paper, we test the hypothesis that regional knowledge spillovers positively influence China's innovation growth from 2001 to 2008. As knowledge is subjected to spatial decay, innovation of a region is enhanced when location in neighboring regions encourages the formation of regional knowledge and information flows. Applying a spatial autoregressive model to China's provinces, the paper finds that regional knowledge spillovers have a favorable effect on design, invention and utility patents. This indicates that proximate location to innovative neighbors can help to raise the innovation capability of a province. In addition, evidence also shows that R&D expenditure and skilled personnel of research institutes and universities positively affect invention and utility patents. This suggests a favorable role for the government in enhancing indigenous innovation capability.     

The effect of foreign competition on UK employment and wages: Evidence from firm-level panel data

The Effect of Foreign Competition on UK Employment and Wages: Evidence from Firm-Level Panel Data. —This paper contributes to the sparse empirical literature on the effects of foreign competition on domestic employment and wages. The authors estimate a structural labour demand equation on UK firm-level panel data between 1982 and 1989 and several wage equations. When they restrict the sample to the manufacturing sector only, they find for the unionized firms that foreign competition has a negative effect on both wages and on employment. However, when UK manufacturing firms face only a few rivals, foreign competition has a positive effect on wages, but no effect on employment.     

Rigid wages or small equilibrium adjustments? Evidence from the contraction of 1893

Contrary to the conclusions drawn from some macroeconomic studies, U.S. labor markets could exhibit considerable cyclical wage rigidity even before World War I. Using disaggregated data from Cincinnati manufacturing firms during the 1893 contraction, I estimate a threshold or friction model of wage adjustment that distinguishes between impediments to wage cuts and wage cuts that were small but possibly market clearing. The wage adjustment process exhibited friction which was both statistically and economically significant and which varied with establishment size, capital intensity, and payment method. Worker resistance to wage cuts was a factor contributing to this pattern of wage rigidity.     

Bureaucratic integration and synchronization of regional economic growth: Evidence from China

We analyze the impact of the central-local bureaucratic relation on the synchronization of regional economic growth in China using pairwise panel data of 31 provincial-level administrative units (465 pairs) from 1993 to 2014. We identify a significant positive impact of bureaucratic integration (top provincial-level government officials who have served in the central government) on regional output synchronization. Results from the estimations of instrumental variable, generalized method of moments, and subsample remain robust. However, bureaucratic rotation (top provincial-level government officials with prior working experience in other province) has no effects on regional output synchronization.     

Human capital quality and the regional economic growth: Evidence from China

China's economic development has advanced from a high-speed to a high-quality growth stage in recent years. The optimization and upgrading of the economic structure require high-quality human capital to support an innovation-driven economy. In this paper, a general equilibrium model of human capital (Xiang & Yeaple, 2018) is applied to estimate the cognitive and non-cognitive productivities based on Chinese provincial-level macro-data and individual labor's micro-data from 2008 to 2017. The weighted power mean of cognitive and non-cognitive productivities helps calculate the provincial-level human capital quality index (HCQI), which provides a realistic estimate of human capital quality. We find that the improvement of the HCQI leads to convergence in economic growth in China's provinces. HCQI can help explain the differences in economic growth levels in different regions of China. Our study provides a constructive step in understanding cognitive and non-cognitive abilities and HCQI in China, which could help guide education investment policy in China and its provinces.     

Union and Debt: Evidence from Chinese Private Firms

Do unions really matter in China? Using a dataset containing more than 110 thousand Chinese private manufacturing firms, this paper is the first attempt to examine how unions' bargaining power affects firms' capital structures. We find that: (1) the firms' debt levels are often positively associated with their unions' bargaining powers; (2) when a firm is in financial distress, the management is more likely to issue more debt to strengthen its bargaining power against the union and increase its residual income; (3) compared with long-term debt, short-term debt is a better option for the management to increase its bargaining power and residual income. Our research indicates that the unions of private Chinese firms are an important policy instrument for the management rather than useless decorations, which provides valuable insights for us to understand the employee–employer relations and firms' capital structures in emerging economies.     

Extreme heat and exports: Evidence from Chinese exporters

Does extreme heat have causal effects on exports? If so, how do the effects evolve? This paper exploits monthly fluctuations in the number of extremely hot days within a city to identify their effects on firm-level exports in that city. We find robust evidence that hot temperatures have persistent adverse effects on firm-level exports. Specifically, export losses gradually arise following a heat shock, beginning from an undetectable impact and eventually accumulating to a large and significant impact. An additional >30 °C day in a month could generate cumulative losses up to 0.83% of a firm's annual exports twenty-four months later. The negative effects of extreme heat are mainly through its adverse impacts on the firm's investment, capital, and production output. Capital-intensive sectors and FDI-related enterprises are among the most affected by high temperatures. Our findings support the “no-recovery” hypothesis after weather extremes and have implications for future climate change policies.     

Valuing research output: Evidence from a Chinese university

Exploring the economic value of research output is a crucial but neglected issue and thus is worth gaining attention. Using data concerning the promotion from a medium-ranked university in China during 2011–2019, this paper proposes a novel methodology that combines a regression discontinuity design and the theory of “Value of a Statistical Life” to quantify the monetary value of research output. Our findings suggest that each unit of research score is worth $467 for a promotion to associate professor and $515 for full professors. Based on the rate for full professors, the computed economic values for a publication in ordinary journals, famous journals, and top journals are around $1,538, $5,154, and $20,615, respectively. Additionally, the economic value of a book publication is approximately $7,723. These research outputs are significantly undervalued compared to the faculty's own total income, the income of peers in similar sectors, or the income of peers from other countries' higher education. Our analysis provides not only insights for incentive system reform for Chinese higher education but also a methodology that can be universally applicable to any higher institutions that use the scoring system or set implicit research standards in the promotion and merit process.     

Panel data, cointegration, causality and Wagner's law: Empirical evidence from Chinese provinces

This paper tests Wagner's law of increasing state activity using panels of Chinese provinces. The paper's main methodological contribution is in that we employ for the first time in the literature on Wagner's law a panel unit root, panel cointegration and Granger causality testing approach. Overall, we find mixed evidence in support of Wagner's law for China's central and western provinces, but no support for Wagner's law for the full panel of provinces or for the panel of China's eastern provinces.