Using complex networks analysis to assess the evolution of international economic integration: The cases of East Asia and Latin America

This paper exploits recently-developed indicators based on network analysis to investigate the pattern of international integration followed by East Asian countries and compares it with the Latin American performance. Standard trade openness indicators fall short of portraying the peculiarity of the Asian experience, and of explaining why other emerging markets with similar characteristics have been less successful over the last 25 years. The analysis offers an alternative perspective on the issue regarding international economic integration by taking into account the whole structure of international trade relationships and by determining both the position of countries in the world trade network, and its evolution over time. We find that East Asian countries are more integrated into the world economy, as they have moved from the periphery of the network towards its core. Our results support the idea that the degree of openness matters but it is not enough to characterize economic integration. The number and identity of trade partners, and the specific individual structure of trade for each country, need to be incorporated in order to fully characterize international economic integration. By doing so, it is possible to argue that the integration process of the East Asian countries mirrors their high economic performance, while the lower degree of integration of Latin America can be related to the lack of economic development of the region, even though their degree of openness has increased.     

External Public Debt,Trade Linkages and Contagion During the Eurozone Crisis

Against the backdrop of the contagion literature, the paper analyses the impact of financial and trade linkages on sovereign bond spreads in the Eurozone crisis. Using quarterly data for a sample of EMU countries during the period 2000–13, we estimate fixed‐effect panel models with Driscoll and Kraay standard errors that are robust to general forms of spatial and temporal dependence. Our main results can be summarised as follows: first, we suggest that the ‘sudden stop’ of capital inflow towards the peripheral sovereign debt triggered a re‐segmentation of financial markets and economic systems along national borders, with negative implications for risk‐sharing and the efficient allocation of capital. The ‘home bias’ effect – that is the increase in the share of sovereign debt held by domestic banks – worsened the country‐specific risk because the twin crisis (sovereign and banking) began to be conceived as more closely intertwined within countries than before. Second, the structure of international trade helps to account for the geographic scope of contagion, even after controlling for macroeconomic and fiscal vulnerabilities. Finally, the ‘substitution effect’ of public debt securities of stand‐alone emerging countries has affected more the sovereign spreads in the core than in the periphery.     

Compulsory Schooling Laws and the Cure for Child Labour

This paper provides an explanation for the existence of child labour which relies on the imperfect enforcement of compulsory schooling laws. In the presence of complementarities in the production of human capital that justify legislative intervention, mandatory measures ensure that coordination failures are solved so that all parents send their children to school and the socially optimal equilibrium is reached. However, if enforcement of legislation is too low, multiple equilibria emerge. In this case, compulsory schooling laws may have adverse welfare effects on all households.     

THE RELATIONSHIP BETWEEN SUPERVISION AND PAY: EVIDENCE FROM THE BRITISH NEW EARNINGS SURVEY†

ABSTRACTS This paper looks at the relationship between supervision and pay using British data, that refer to a different institutional context. The analysis is based on information provided by the British New Earnings Survery over the period 1975–1982. The empirical investigation reveals that the relationship between supervision and pay is likely to be affected in a significant way not only by the estimation technique, as stressed by the existing literature, but also by errors in the measurement of the main variables.     

Cost of Capital for Exempt Foreign Private Issuers: Information Risk Effect or Earnings Quality Effect? It Depends

We examine whether the information risk accompanying Foreign Private Issuers' (FPIs) exemptions from the U.S. Securities and Exchange Commission (SEC) reporting requirements is associated with capital market penalties (measured by a higher cost of equity capital) and, further, the extent to which this information risk is mitigated by earnings quality. Our overall results indicate that exempt FPIs exhibit a higher cost of equity capital than reporting FPIs, and this relation still persists after controlling for earnings quality. Furthermore, we partition our sample into firms from strong and weak investor protection environments. Interestingly, similar to the results in Francis et al. (2008), for FPIs from strong investor protection regimes we find no difference in the cost of capital between exempt and filing FPIs, even after controlling for earnings quality. To the contrary, for FPIs from weak investor protection regimes, we find that the exemption is associated with a higher cost of equity capital, and that earnings quality does not significantly reduce the premium paid by these issuers.     

The evolution of the world trade web: a weighted-network analysis

This paper employs a weighted network approach to study the empirical properties of the web of trade relationships among world countries, and its evolution over time. We show that most countries are characterized by weak trade links; yet, there exists a group of countries featuring a large number of strong relationships, thus hinting to a core-periphery structure. Also, better-connected countries tend to trade with poorly-connected ones, but are also involved in highly-interconnected trade clusters. Furthermore, rich countries display more intense trade links and are more clustered. Finally, all network properties are remarkably stable across the years and do not depend on the weighting procedure.     

Multiple attractors and global bifurcations in a Kaldor-type business cycle model

We consider a Kaldor-type discrete-time nonlinear business cycle model in income and capital, where investment is assumed to depend both on the difference between normal and current levels of capital stock, and on the difference between the current income and its normal level, through a nonlinear S-shaped increasing function. As usual in Kaldor business cycle models, one or three steady states exist, and the standard analysis of the local stability and bifurcations suggests that endogenous oscillations occur in the presence of only one unstable equilibrium, whereas the coexistence of three equilibria is characterized by bi-stability, the central equilibrium being on the boundary which separates the basins of the two stable ones. However, a deeper analysis of the global dynamic properties of the model in the parameter ranges where three steady states exist, reveals the existence of an attracting limit cycle surrounding the three steady states, leading to a situation of multistability, with a rich and complex dynamic structure.     

What to do in globalised economies if global governance is missing? The vicarious role of competition in social responsibility

In this article, we present a model that seeks to illustrate mechanisms that have fostered the diffusion of socially responsible corporate practices with specific reference to Fair Trade. We do so with a simple standard Hotelling approach of competition on product differentiation between a profit-maximising producer (PMP) and a “socially responsible” not for profit “fair trader” (FT) over prices and (costly) “socially and environmentally responsible” features of their products. We show that, under reasonable conditions concerning consumers’ costs of ethical distance, the fair trader’s entry into the market triggers the partial adoption of socially responsible practices by the profit-maximising competitor. We finally compare the ethical choices of the two players with the optimal ones of a domestic benevolent planner. Our findings show that competition between the fair trader and the PMP leads to a level of transfers to marginalised producers in the South, which is above the optimal level fixed by a planner maximising the welfare of the consumers in the North. This finding shows that the competition in social responsibility triggered by fair traders partially compensates for the lack of global governance and global institutions properly representing marginalised producers.     

Does real U.K. GDP have a unit root? Evidence from a multi-century perspective

ABSTRACT

We employ linear and nonlinear unit-root tests to examine the stationarity of five multi-century historical U.K. series of real output compiled by the Bank of England. Three series span 1270 to 2016 and two series span 1700 to 2016. These datasets represent the longest span of historical real output data available and, thus, provide the environment for which unit-root tests are most powerful. A key feature of our test is its simultaneous allowance for two types of nonlinearity: time-dependent (structural breaks) nonlinearity and state-dependent (asymmetric adjustment) nonlinearity. The key finding of the test, contrary to what other more popular nonlinear unit-root tests suggest, provides strong evidence that the main structure of the five series is a stationary process characterized by an asymmetric nonlinear adjustment and a permanent break affecting both the intercept and the trend. A major policy implication of this finding is fiscal and/or monetary stabilization policies have only temporary effects on the output levels of the United Kingdom.