Convergence or divergence in cross-country growth?

In the traditional empirical convergence literature, a negative coefficient on initial income in a cross-country growth regression is interpreted as evidence of poor countries growing faster than richer ones. A key assumption in this work is that the relationship between initial income and income growth is linear. The linearity assumption is challenged in some new growth theories, and studies adopting an alternative (semi-parametric or nonlinear) econometric methodology provide support for a nonlinear specification. This paper finds evidence for nonlinear convergence. Using semi-parametric estimation we find that convergence occurs among countries with very low and very high initial incomes, suggesting that convergence clubs characterize the cross-country growth process. Our results provide further evidence for multiple-regime steady states.     

Dynamic implications of tourism and environmental quality

Many studies draw attention to the rising number of tourists seeking destinations in environmental hotspots. However, it is also recognized that tourism activities significantly deteriorate the environment. Our paper investigates the dynamic interaction between tourism and environmental quality, focusing on its effect on the development of tourism‐driven economies. We use a theoretical model to study the dynamic implications of this interaction. In this respect, we point out the role played by environmental maintenance activities and ecotourism. Ecotourism allows the economy to improve welfare in the long‐term, but we identify a social cost regarding current generations’ welfare. Finally, the existence of imbalance effects between tourism infrastructures and environmental quality provides new insights into the transitional dynamics of tourism destinations.     

Multinational companies, backward linkages, and labour demand elasticities

Abstract .  This paper investigates the link between nationality of ownership and wage elasticities of labour demand at the level of the plant. In particular, we examine whether labour demand in multinationals becomes less elastic with respect to the wage if the plant has backward linkages with the local economy. Our empirical evidence, based on a rich plant level dataset, shows that the extent of local linkages does indeed generally reduce the wage elasticity of labour demand. This result is economically important and holds for a number of different specifications.     

KNOWLEDGE ACCUMULATION, AND PRODUCTIVITY: EVIDENCE FROM PLANT-LEVEL DATA FOR IRELAND

This paper investigates whether knowledge accumulating activities, such as exporting, R&D, or worker training, can enhance plants' productivity. To this end, we use plant‐level panel data for Irish manufacturing. Our results importantly indicate that productivity enhancing effects of these factors are found only for domestic firms, but not for foreign multinationals located in Ireland. We postulate a number of potential reasons inherent to multinational activity possibly driving this result.     

Aid,Policy and Growth: Does Aid Modality Matter?

This paper contributes to the empirics of aid and growth by investigating whether aid modality matters in explaining its effectiveness. For this purpose, we include the four main aid modalities (project aid, financial program aid, technical assistance grants, and food aid) as explanatory variables in an endogenous growth model. We find that project aid affects positively and significantly growth, albeit with diminishing returns. Our results also show that financial program aid generally impacts on growth negatively, while the impacts of technical assistance and food aid are statistically insignificant. Moreover, we find that climate-related conditions influence the effect of project aid. JEL no.  C2, F3     

Good Governance and Growth in Developing Countries: A Case Study of Regulatory Reforms in the Telecommunications Industry

We investigate whether good governance, measured in terms of the regulatory structure, has a positive impact on the development of the telecommunications industry in developing countries. To this end we construct a data set on a panel of developing countries with information on the number of mainlines per capita and proxies for certain aspects of regulatory structure argued in the literature to be important for optimum development. Our results indicate that if the regulator is given certain functions with which to carry out telecommunications policy, this can enhance growth, but that there is no similar evidence in terms of operational separation of the regulator from the government.     

Spillovers through backward linkages from multinationals: Measurement matters!

We argue that the measures of backward linkages used in recent papers on spillovers from multinational companies are potentially problematic, as they depend on a number of restrictive assumptions, namely that (i) multinationals use domestically produced inputs in the same proportion as imported inputs, (ii) multinationals have the same input sourcing behaviour as domestic firms, irrespective of their country of origin, and (iii) the demand for locally produced inputs by multinationals is proportional to their share of locally produced output. We discuss why these assumptions are likely to be violated in practice, and provide alternative measures that overcome these drawbacks. Our results, using plant level data for Ireland, clearly show that the choice of backward linkage measure and thus, the assumptions behind it, matters greatly in order to draw possible conclusions regarding the existence of foreign direct investment (FDI)-related spillovers. Using the standard measure employed in the literature we fail to find robust evidence for spillovers through backward linkages. However, when we use alternative measures of backward linkages that relax assumptions (i)–(iii), we find robust evidence for positive FDI backward spillover effects.     

Hurricane strikes and local migration in US coastal counties

We examine the effects of hurricane shocks on key migration variables in US coastal counties. Results show that hurricane strikes increase the outward migration rate and that these migrants were somewhat wealthier, but that there was no impact on inward migration.     

Does Corporate Taxation Deter Multinationals? Evidence from a Historic Event in Ireland

We use a unique exogenous corporate tax policy change in the Republic of Ireland to investigate how corporate taxation affects foreign direct investment at the extensive and intensive margin. To this end, we construct exhaustive sectoral and plant level panel data and use difference‐in‐differences strategies. Our results do not provide strong evidence that the increase in corporate tax rates for exporters did affect the entry or exit of plants from the US or UK in Ireland. Entry rates of German firms seem to be negatively affected, however. At the intensive margin, there is evidence that foreign plants in Ireland reduce the size of their operations in response to the tax change.     

The effect of grant receipt on start-up size: Evidence from plant level data

In this paper, we use plant level data on the start-up size of new plant entries and detailed information on the grants received by such plants in order to investigate whether grant receipt encourages plants to start-up with more employment than without support. The data relate to manufacturing plants in the Republic of Ireland, where industrial policy has a long history of using discretionary grants to encourage employment growth. We use a matching procedure to deal with the issue of selectivity into grant receipt and a quantile regression estimator to allow for different effects of grants on plants depending on their position in the start-up size distribution. Our results provide evidence that grants do indeed encourage plants to start-up larger. We also find that this effect is generally higher for foreign than for domestic plants and that it differs for plants at different quantiles of the start-up size distribution.