Export Market Participation,Investments in R&D and Worker Training,and the Evolution of Firm Productivity

This paper uses micro panel data for firms in the Taiwanese electronics industry in 1986, 1991 and 1996 to investigate a firm's decision to invest in two sources of knowledge – participation in the export market and investments in R&D and/or worker training – and assess their effect on the firm's future productivity. The firm's decisions to export and invest in R&D and/or worker training are modelled with a bivariate probit model that recognises the interdependence of the decisions. The effect of these investments on the firm's future productivity trajectory is then modelled while controlling for the selection bias introduced by endo‐genous firm exit. The findings indicate a significant interaction effect between exporting and R&D investments and future productivity, after controlling for size, age and current productivity. Firms that undertake both investment activities have significantly higher future productivity than firms that do one or neither. In addition, these firms are more likely to continue investing in these activities leading to further productivity gains. These findings are consistent with the hypothesis that export experience is an important source of productivity growth for Taiwanese firms and that firm investments in R&D and worker training facilitate their ability to benefit from their exposure to the export market.     

Auctions for transferable objects: Theory and evidence from the vehicle quota system in Singapore

This paper studies the hypothesis that auctions with resale markets result in higher prices. The vehicle quota system introduced in Singapore in May 1990 provides the setting. The Certificates of Entitlement (COEs) necessary to purchase new cars were initially transferable for all quota categories. After October 1991, COEs for four major categories became non-transferable. Our results indicate that while the conversion to non-transferability eliminated speculation, it has also intensified competition among car distributors. Auctions for non-transferable COEs in fact led to higher COE prices in three of the four categories.An earlier version of this paper was presented at the Symposium on Law and the Social Sciences, 7 August 1992, at the Regional English Language Centre, Singapore. We want to thank our colleagues for discussions on the subject, the Chief Editor and two anonymous referees of the journal for their constructive comments and suggestions, and the Registry of Vehicles of Singapore for providing us with the data for this study. Financial Support from NUS Grant RP900048 is gratefully acknowledged. We are solely responsible for the errors in the paper.     

Factor substitution,ex ante and ex post

The amount of labor used per unit of capital stock (or investment) can be varied by any one of four quite different mechanisms. Two of these – changes in crew size and in capital utilization – are variable even ex post. These mechanisms are systemmatically related and all induce factor substitution in the same (neoclassical) direction with a change in relative factor prices. The conditions necessary to support the view that ‘factor prices don't matter’ are shown to be terribly stringent.     

About the authors

Calls for the banning of tobacco advertising rely heavily on the belief that advertising contributes towards children starting or continuing the habit. A number of research studies which claim to demonstrate this connection have been reviewed. Some of these studies have been extensively quoted in anti-smoking literature. This paper is based on a detailed review.

The review found that the studies tended to show a degree of correlation between awareness/approval of advertising and propensity to smoke, but failed to establish a causal link, relying instead on emotive language to convey the impression of cause and effect. From evidence quoted in the studies themselves, it can be demonstrated that, even if advertising can lead children to smoke (which can neither be proved nor disproved), it is likely to be an influence of only minor importance, and much less relevant than other factors such as family environment and peer pressure.

There is no evidence in any of the studies to suggest that, if advertising were banned, it would make the least difference to the propensity of children to smoke. The major weakness of the studies reviewed is that they pay virtually no attention to the more important question of what, in fact, motivates the minority of children who start to smoke. It is hard to resist the conclusion that advertising is selected for attack mainly because it is a relatively easy target.     

MONOPOLISTIC COMPETITION AND PRODUCT DIVERSITY: REVIEW AND EXTENSION

Abstract The modeling of monopolistic competition has contributed to rapid developments in numerous fields of economics, notably macroeconomics, international trade, industrial organization, economic growth and economic geography. This paper provides a systematic review and some extensions of various path‐breaking models of monopolistic competition and their subsequent developments, including the works of Spence, Dixit and Stiglitz that are based on the ‘love‐of‐variety’ approach, the works of Lancaster that are based on the ‘love‐of‐characteristic’ approach, and the large‐group monopolistic competition models of Hart, among others. The paper also examines the properties of some utility functions frequently used in the literature on models of monopolistic competition. Perhaps owing to the complexity of these models, the literature lacks a broad and systematic coverage of this essential subject. The paper aims to help fill the gap.     

Analyzing the relationships between information technology, inputs substitution and national characteristics based on CES stochastic frontier production models

This research examines four interrelated issues at the country level: the value of information technology (IT), inputs substitution and complement, the complementarity phenomenon created by IT and national characteristics, and the productivity paradox, jointly and critically from a global perspective, using the so-called productive efficiency as the performance measure. To that end, we develop the three-factor constant elasticity of substitution (CES) stochastic production frontier model and apply it to a set of panel data from 15 countries over the period 1993–2003, along with the traditional two-factor CES models, within the one- and two-equation frameworks. In the two-equation setting, six national characteristics are selected as the contributing factors of the productive efficiency. The findings include: (i) the value of IT as measured by the productive efficiency is duly recognized: (ii) the productivity paradox is found to be absent from the production process in a majority of developed and developing countries considered, rejecting the existing argument that the paradox exists only in developing economies but does not exist in developed countries; however, the developed countries have used IT capital in their production systems more productively efficiently than the developing nations; (iii) traditional capital (non-IT capital), traditional labor, and IT capital are not pairwise substitutable, contrary to the notion that they are pairwise substitutable at the firm level; (iv) constant returns to scale, as commonly assumed, are not supported by the data; (v) different national characteristics affect a country's output (represented by gross domestic product or GDP) and its productive efficiency differently; and (vi) the complementarity phenomenon is observed in most of the countries (developed and developing) under study.     

World Trade and the Environment: Issues and Policies

This paper provides an overview of trade, environmental and related public issues and policies. It discusses the pollution problem, the recent global warming trend, the attempts of various institutions, including the United Nations, the World Trade Organization, regional, national and other organizations, to solve the global trade and environmental issues. The paper also discusses a number of basic theoretical issues and empirical findings, such as the free‐rider problem, the tragedy of the commons, the theory of second best, the relative efficacy of price and quantity control, carbon leakage, border carbon adjustments, the cap‐and‐trade system, the pollution haven hypothesis, the optimal social discount rate and the environmental Kuznets curve. Some computable general equilibrium models are reviewed and several notable World Trade Organization environmental and health‐related trade dispute cases are analysed, including the tuna–dolphin, shrimp–turtle, eco‐labelling, beef‐hormone and genetically modified organism cases.     

International Diversification and Performance: Evidence from Singapore

This study focuses on how international diversification affects a firm in terms of multiple performance measures (accounting-based, market-based, and intangible value creation). The study is unique as it uses segment data made available only recently, which enables the examination of both product and international diversification with performance. The period studied coincided with Singapore firms performance during the Asian Financial Crisis. In contrast to previous studies on Singapore, our results show that product diversification is negatively correlated to all measures of performance, while international market diversification is positively correlated. We attribute the difference to the time period which covers both upswings and downturns of the economy, unlike previous studies which considered only the former. Other control measures were incorporated; firm size is highly significant in explaining all measures of performance but not so for firm age, leverage, risk and industry. For top managers, we suggest that regardless of economic climate, the dominant diversification strategy is to take a focused approach to product diversification, but a broad approach to international diversification.Dr. Er and Dr. Kwok are assistant professors in the Department of Finance & Accounting, National University of Singapore (NUS). Mr Lin recently graduated with a B.B.A. honours (1st class) degree from NUS.