PRODUCTIVITY GROWTH IN THE HUNGARIAN ECONOMY1

This paper analyses productivity growth in the Hungarian economy over the two decades between 1950 and 1970 with the aim of establishing what help can be provided in such analyses by the use of total factor productivity index numbers. After the introductory sections the paper deals first with the rates and factors of Hungarian productivity growth, and then with some methodological lessons of the investigation.     

Resurrecting the size effect: Evidence from a panel nonlinear cointegration model for the G7 stock markets

Firm size is known to be an important factor affecting stock returns. This study proposes a panel threshold cointegration model to investigate the impact of the size effect on stock returns for the panel of G7 countries: Canada, France, Germany, Italy, Japan, the U.K., and the U.S. over the period 1991:1–2012:12. The empirical analysis is based upon the nonlinear cointegration framework using the asymmetric ARDL cointegration methodology (Shin et al., 2011). This methodological approach permits a much richer degree of flexibility in the dynamic adjustment process toward equilibrium, than in the classical linear model. Our findings indicate the presence of asymmetric adjustment around a unique long-run equilibrium. In particular, the empirical analysis provides evidence of asymmetric effects between stock returns and the size effect, while controlling for the book-to-market ratio and the price-to-earnings ratio.     

Inequality and Income Distribution in Global Value Chains

Global value chains (GVCs), led by transnational corporations (TNCs), have reshaped the world division of labor over the past two decades. GVCs are pervasive in low technology manufacturing, such as textile and apparel, as well as in more advanced industries like automobiles, electronics, and machines. This hierarchical division of labor generates wild competition at the lower value-added stages of production, where low wages and low profit margins prevail for workers and contract manufacturers in developing countries. At the top of the hierarchy another kind of competition prevails, centered on the ability to monitor and control intellectual property rights related to innovation, finance, and marketing. We argue that GVCs have had crucial effects on income inequality and the appropriation of rents in modern capitalism.     

Economic forecast quality: information timeliness and data vintage effects

This paper investigates the impact of the timeliness of information releases and data vintage variation on economic forecast quality. Specifically, using a set of 63 key US economic series, we provide a concise measure of the forecast accuracy associated with use of economic activity indices with different publication lags. A forecasting model based on an economic activity index that is subject to a short publication lag (viz. the Aruoba-Diebold-Scotti index) is more efficient than competing models. Moreover, if this publication lag advantage is removed (by artificially imposing a publication lag restriction comparable to that of a competing indicator) this efficiency largely disappears. The final part of the analysis employs a novel (simulation-based) method of assessing the impact of data vintage variation on forecast accuracy, and finds that the results are somewhat sensitive to such variation.     

ASSESSING THE EFFECT OF PUBLIC SUBSIDIES ON FIRM R&D INVESTMENT: A SURVEY

This survey examines the empirical literature on the relationship between public R&D subsidies and private R&D investment over the past five decades. The survey reveals a considerable heterogeneity of empirical results that cannot be explained fully by methodological issues. We aim to provide further explanations of the possible causes of that heterogeneity. In particular, we emphasise a set of issues that, in our view, are critical to understanding the potential effect of public R&D subsidies on private R&D spending. Special attention is paid to the dynamic aspects and composition of firm R&D, the constraints faced by the firm (such as financial constraints), and the amount and source of public subsidies. None of these issues have been investigated in depth. We formulate a set of research assumptions to guide future empirical research in this field.     

A Dynamic Study on Ecological Disaster,Government Regulation,and Renewable Resources

This article develops a dynamic model to investigate renewable resource markets under different property rights. We find that different property rights regimes in renewable resource markets yield very different equilibria. Under private property rights, the valve point increases with the natural growth rate, productivity, number of firms, and marginal costs. Under common property rights, “the tragedy of the commons” inescapably occurs. This study suggests how to avoid ecological disaster by implementing a set of public policies.     

An empirical test of the Balassa-Samuelson hypothesis: Evidence from eight middle-income countries in Africa

The paper tests the validity of the Balassa-Samuelson hypothesis (BSH) using the within-effects and the dynamic panel generalised methods of moment (GMM) techniques for a panel of eight middle-income African countries over the period 1960–2009. We selected these countries because they exhibited a mixture of relative productivity growth and real exchange rate misalignment that fits the characterization of the BSH well. The results strongly support the BSH for this group of countries. The results are valid even after we controlled for potentially omitted variables and endogeneity. The implication is that as these countries become more productive, their currencies appreciate in real terms.