Do exporters have anything to learn from foreign multinationals?

International technology diffusion through FDI has been examined mainly at macro or industry level whereas micro studies have been concerned mostly with spillovers. Using recent data on the UK manufacturing firms, this paper uncovers evidence that acquisition FDI is an important channel of direct technology transfer from foreign multinationals to domestic exporters. This finding accords with the prediction of the internalisation theory of FDI which postulates that multinational firms transfer a range of intangible proprietary assets to their affiliates.     

Foreign direct investment, competition and industrial development in the host country

This paper analyses the impact of foreign direct investment (FDI) on the development of local firms. We focus on two likely effects of FDI: A competition effect which deters entry of domestic firms and positive market externalities which foster the development of local industry. Using a simple theoretical model to illustrate how these forces work we show that the number of domestic firms follows a u-shaped curve, where the competition effect first dominates but is gradually outweighed by positive externalities. Evidence for Ireland tends to support this result. Specifically, applying semi-parametric regression techniques on plant level panel data for the manufacturing sector we find that while the competition effect may have initially deterred local firms’ entry, this initial effect has been outpaced by positive externalities making the overall impact of FDI largely positive for the domestic industry.     

A brief technology assessment of the Carbon Dioxide effect

Significant increases in atmospheric carbon dioxide are occuring as a result of fossil fuel combustion. More than a four-fold increase over preindustrial levels may occur by the year 2100. Heating of the atmosphere, changes in precipitation patterns and global storm paths, and other resulting effects are sure to cause significant social changes. This article is essentially a methodological case study demonstrating a useful but inexpensive type of technology assessment. It summarizes current research findings on “the CO₂ effect,” and presents hitherto unpublished findings that resulted from a brief but systems-oriented approach. These findings suggest that most published forecasts of phenomena associated with a CO₂ buildup may be systematically low because various positive feedback relationships are not reflected.     

Financial liberalization,financial sector development and growth: Evidence from Malaysia

The objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of Malaysia. Using time series data from 1960 to 2001, we conduct cointegration and causality tests to assess the finance-growth link by taking the real interest rate and financial repression into account. The empirical evidence suggests that financial liberalization, through removing the repressionist policies, has a favorable effect in stimulating financial sector development. Financial depth and economic development are positively related; but contrary to the conventional findings, our results support Robinson's view that output growth leads to higher financial depth in the long-run.     

What a Difference Immigration Policy Makes: A Comparison of PISA Scores in Europe and Traditional Countries of Immigration

Abstract. The purpose of this article is to evaluate the importance of different immigration policies associated with corresponding migration backgrounds, command of national languages and intergenerational mobility, for the PISA school performance of teenagers living in European countries (France, Finland, Germany, United Kingdom and Sweden) and traditional countries of immigration (Australia, Canada, New Zealand and the US). Econometric results show that the influence of the socioeconomic background of parents differs strongly across nations, with the highest impact found for Germany, the UK and US, whereas intergenerational transmission of educational attainment is less likely in Scandinavian countries and in Canada. Moreover, for all countries our estimations imply that for students with a migration background a key for catching up is the language spoken at home. We conclude that educational policy should focus on integration of immigrant children in schools and preschools, with particular emphasis on language skills at the early stage of childhood.     

Tax Competition, Capital Mobility and Innovation in the Public Sector

Abstract. The paper analyses the impact of tax competition on innovation in the public sector. It is shown that the effects of increased mobility of the tax base on innovation and growth are ambiguous. The negative relationship is more likely, however. Moreover, it is shown that a Leviathan government may be induced to spend a larger share of its budget on unproductive activities.     

Total factor productivity differences: Appropriate technology vs. efficiency

Recent development and growth accounting studies have established that total factor productivity is an important source of cross-country differences in income levels and growth rates. This paper makes two contributions. First, it examines the sensitivity of the development accounting results to the Cobb-Douglas specification of the production function. Second, within the Cobb-Douglas framework, it weighs evidence of the two alternative explanations of total factor productivity differences: the inefficiency view and the appropriate technology view. To accomplish these tasks, the world production frontier is estimated using a nonparametric deterministic approach known as data envelopment analysis. I find that the fraction of income differences explained by physical and human capital increases from 32% to 55% when departing from the Cobb-Douglas assumption. There is also evidence consistent with the appropriate technology view; countries with an inadequate mix of inputs are unable to access the most productive technologies. Moreover, the world technology frontier appears to be shifting out faster at input combinations close to that of the R&D leader. However, inefficiency appears to be the main explanation for low incomes throughout the world; it explains 43% of output variation in 1995, and its importance has increased over time.     

A SEARCH FOR CLOSER ECONOMIC RELATIONS IN EAST ASIA

In recent years, growing interdependence in East Asia through trade and financial cooperation heightened the need for East Asian Economies to engage in closer regional economic relations. This paper attempts to discuss emerging economic integration efforts in East Asia with special reference to bilateral and regional free trade agreements. It discusses backgrounds for recent developments of East Asian regionalism in terms of deepening intraregional economic dependence and financial cooperation, and South Korea's position towards FTAs with major trading partners as well as East Asian economic integration. Important issues and challenges for an East Asian FTA are presented.     

RESEARCH AND DEVELOPMENT IN SMALL AND MEDIUM-SIZED ENTERPRISES: THE ROLE OF FINANCIAL CONSTRAINTS AND PUBLIC FUNDING

This paper presents microeconometric evidence on financing constraints for research and development activities in German small‐ and medium‐sized firms (SME). Special attention is paid to the role of public research and development (R&D) subsidies. For this purpose SMEs in West and East Germany are compared because these regions are very different in their supply of public R&D funding. The empirical evidence suggests that West German SMEs are financially constrained in their R&D activities by both internal and external resources. In East Germany, firms are not sensitive to external constraints, possibly due to high public R&D subsidies. The results show that R&D in East Germany is to a large extent driven by public subsidies and that the usual financial market mechanisms are dysfunctional with respect to R&D in this region.     

Estimating spatial differences in the Brazilian cost of living with household location choices

This paper uses a model of optimal household residential decisions to construct a comprehensive “true” spatial cost of living index with readily available Brazilian census data. We find evidence of a decreasing or U-shaped relationship (differing with education level and region) between the cost of living and urbanization, suggesting that both market disintegration and congestion play roles in raising costs. Controlling for spatial differences in the cost of living is shown to have important consequences for the determinants of poverty and (contrary to many previous results) to increase income inequality.