Comparison of Important Laws Governing the Macroeconomies of Taiwan and China

This is a comparative study of the important laws governing the macroeconomies of Taiwan and China. The laws are concerned with consumption, investment and fiscal and monetary policies of the government. Following similar studies on China, the present paper focuses on the case of Taiwan. Using annual data from 1961 to 2014 we find that the consumption function satisfies the permanent income hypothesis of Friedman and the investment function satisfies the accelerations principle as in the case of China. Money supply does not affect GDP but government expenditure has a positive effect on consumption and a negative effect on investment. These results are opposite to those obtained for China. Explanations of the differences are given.     

NONLINEAR AUTOREGRESSIVE DISTRIBUTED LAG APPROACH AND BILATERAL J‐CURVE: INDIA VERSUS HER TRADING PARTNERS

The J‐curve studies related to India have mostly either used aggregate trade flows of India with the rest of the world or between India and its trading partners. They have all assumed exchange rate changes have symmetric effects on Indian trade balance. In this article, we use partial sum concept combined with the nonlinear autoregressive distributed lag approach of Shin et al. to show that indeed in some instances, there are evidences of asymmetry effects of currency depreciation. This new nonlinear approach provides more support for the J‐curve than the previous linear approaches. (JEL F31)     

Fiscal and Monetary Policies in a Transactions‐Based Endogenous Growth Model with Imperfect Competition

This paper's model is capable of explaining the empirical evidence on the mixed growth‐rate effects of fiscal and monetary policies and a nonlinear inflation–growth relation. When monopoly power in the product market is strong/weak, an increase in the money growth rate or the income tax rate promotes/reduces the output growth rate through lowering/raising the equilibrium gross markup and increasing/reducing the net rate of return on capital. The fact that money can generate a positive growth rate effect allows for the appearance of a nonlinear inflation–growth relation. Such a nonlinear relation cannot be caused by changes in the income tax rate.     

Binary choice under social interactions: an empirical study with and without subjective data on expectations

This paper examines two methods of modeling binary choice with social interactions: models assuming homogeneous rational expectations and models using subjective data on expectations. Exploiting a unique survey conducted during the 1996 US presidential election that was designed to study voting behavior under social context, we find that in various model specifications using subjective expectations consistently improves models' goodness‐of‐fit; and that subjective expectations are not rational as formulated by Brock and Durlauf. Specifically, members' characteristics are individually important in forming expectations. We also include correlated effect in the rational expectation model. This extension provides a remedy to the selection issues that often arise in social interaction models. Copyright © 2008 John Wiley & Sons, Ltd.     

Does foreign aid really raise per capita income? A time series perspective

Abstract. We analyze the relationship between per capita income and foreign aid. We employ annual data and five‐year averages and carefully examine the time‐series properties of the data. Panel estimations with dynamic feasible generalized least‐squares (DFGLS) show that aid generally has an insignificant or minute negative significant impact on per capita income (particularly in highly aid‐dependent countries). This holds true for countries with different levels of human development and income, as well as for different regions. We also find that aid has a small positive impact on investment, but a significant negative impact on domestic savings (crowding out) and the real exchange rate (appreciation). JEL classification: F35, O11, C23, C51     

Productivity dynamics and the cleansing effect of two recessions: Evidence from the manufacturing sector in Korea

In general, recessions provoke the exit of a greater number of firms from the market. Less productive firms are more likely to exit and release their former resources to the remaining, more productive firms. The present study investigates two recessions in Korea: the Asian financial crisis and the global financial crisis. The main objective of the present study is to analyse the process of creative destruction in a recession, specifically the cleansing effect. We measured total factor productivity using micro‐level manufacturing plant data from 1993 to 2013. We decomposed the source of the changes in total factor productivity to measure the cleansing effect in two large recessions. During the first recession in the 1990s, there was no evidence to support a cleansing effect hypothesis. In contrast, during the second recession in the 2000s, there was evidence of a cleansing effect. In addition, we found differences in market selection criteria in the two recessions; by the second crisis, the market selection criteria had changed to enable a more conducive environment for the creative destruction process.     

Firm‐Level Evidence for the Language Investment Effect on SME Exporters

Both analysis of international trade and the knowledge resource theory of the firm imply that language skills should play a vital role in exporting. This may be apparent to large multinationals with sites in many different linguistic locations, but we show it is less obvious to smaller companies. With data on the language used by each of a large sample of European small‐ and medium‐sized enterprises in their export markets, we test and estimate the effects of language assets on language performance in export markets and on export sales. Controlling for the possibility that language skills may be acquired by exporting, we find a very substantial export return to linguistic expertise, indicative of unexploited gains from investment in languages. There is also evidence of greater under‐investment in language skills in English‐speaking Europe.     

Does Tax Competition Reduce Corruption?

A vast literature asserts that competition among jurisdictions can mitigate corruption. However, empirical studies do not fully support such a conventional view. This paper points out a drawback of the conventional view, that is, it ignores the role played by the owners of immobile factors. Within a standard tax competition model, we amend the conventional view by incorporating the lobbying of the immobile factor owners, and show that fiscal decentralization can aggravate corruption. We also demonstrate that social welfare can be higher under decentralization than under centralization in some cases, whereas the immobile factor owners' lobbying will prevent such a superiority of decentralization from being the outcome. Moreover, we provide an example to show that a better policy outcome and a higher level of corruption can co‐exist, which contrasts with the general belief.     

Exploring New Product Development Project Review Practices*

Most organizations use new product development (NPD) processes that consist of activities and review points. Activities basically solve problems and gather and produce information about the viability of successfully completing the project. Interspersed between the development activities are review points where project information is reviewed and a decision is made to either go on to the next stage of the process, stop it prior to completion, or hold it until more information is gathered and a better decision can be made. The review points are for controlling risk, prioritizing projects, and allocating resources, and the review team typically is cross‐disciplinary, comprising senior managers from marketing, finance, research and development (R&D), or manufacturing. Over the past four decades, research has greatly advanced knowledge with respect to NPD activities; however, much less is known about review practices. For this reason, the present paper reports findings of a study on NPD project review practices from 425 Product Development & Management Association (PDMA) members. The focus is on three decision points in the NPD process common across organizations (i.e., initial screen, prior to development and testing, and prior to commercialization). In this paper, the number of (1) review points used, (2) review criteria, (3) decision makers on review committees and the proficiency with which various evaluation criteria are used are compared across incremental and radical projects and across functional areas (i.e., marketing, technical, financial). Furthermore, the associations between these NPD review practices and new product performance are examined. Selected results show that more review points are used for radical NPD projects than incremental ones, and this is related to a relatively lower rate of survival for radical projects. The findings also show that the number of criteria used to evaluate NPD projects increases as NPD projects progress and that the number of review team members grows over the stages, too. Surprisingly, the results reveal that more criteria are used to evaluate incremental NPD projects than radical ones. As expected, managers appear to more proficiently use evaluation criteria when making project continuation/termination decisions for incremental projects; they use these criteria less proficiently during the development of radical projects, precisely when proficiency is most critical. At each review point, technical criteria were found to be the most frequently used type for incremental projects, and financial criteria were the most commonly used type for radical ones. Importantly, only review proficiency is significantly associated with performance; the number of review points, review team size, and number of review criteria are not associated with new product performance. Furthermore, only the coefficient for proficiently using marketing criteria was significantly related to new product program performance; the proficiency of using financial and technical information has no association with performance. Finally, across the three focal review points of the NPD process in this study, only the coefficient for proficiency at the first review point, (i.e., the initial screen) is significantly greater than zero. The results are discussed with respect to research and managerial practice, and future research directions are offered.