The China-OECD trade divide: building bridges

ABSTRACT

Today’s largest trade frictions stem from differences between China and the OECD regarding the appropriate role of government. There are two types of differences. The first are legitimate attitudinal differences towards industrial policy (the use of subsidies), competition policy (the use of forced industry consolidation), and innovation policy (weak protections of intellectual property). China and the OECD will have to reach an accommodation on these differences if the end game is a rules-based trading system. Accommodation is possible, but unfortunately, both the US and China are adopting bullying tactics that diminish the effectiveness of the WTO and threaten the current rules-based system. The second class of differences is political and reflects China’s intentional lack of policy transparency and its generosity towards favoured firms. These differences will never be WTO compliant and China must either reform or give up its access to OECD markets.     

Long-term impact of trade liberalization on human capital formation

While a growing line of research has assessed the effect of trade liberalization on human capital formation, most of these studies focus on its short-term effect on individual’s school attendance. Much less is known about its long-run effect, as well as the impact on other aspects of human capital formation such as labor market and noncognitive outcomes. This paper studies the impact of trade liberalization on individuals’ long-term human capital accumulation, including school attendance, cognitive abilities, labor market performance, and noncognitive outcomes. By constructing prefecture-year-level tariff barriers, our identification strategy exploits variations in different cohorts’ exposure to a trade shock at age 16 for individuals within the same prefecture. Empirical results suggest that trade liberalization leads to decreased completed years of schooling, cognitive abilities, wage, and noncognitive outcomes. We provide suggestive evidence that this observed pattern is explained by the expansion of job opportunities in relatively low-skilled and labor-intensive sectors.     

Research and development and trade policies for product innovation in the presence of foreign competition

This paper examines two policy instruments — a matching grant and import tariffs — for encouraging research and development (R&D) in product innovation by a domestic firm when it faces foreign competition. We do so by developing a theoretical model of product innovation where R&D effort is endogenous and its outcome uncertain. We examine the effects of a reduction in import tariffs on private expenditure on R&D, on public support for such R&D, and on total R&D expenditure. We find that in response to a reduction in import tariffs, the domestic firm always reduces its private R&D investments, but the total level of R&D expenditure (i.e., including public support) might go up depending on the level of tariffs. In particular, we find that it will go up if the initial level of tariff is higher than a critical level. When tariff is endogenous, we find that the socially optimal level of tariffs is positive. One finding that is of particular interest is that supporting private attempts to product innovate in the form of a matching grant program leads to a socially optimal level of product R&D.     

Foreign currency borrowing surrounding the global financial crisis: Evidence from Korea

We present a complete profile of firms’ foreign currency borrowing surrounding the 2007 global financial crisis. Employing extensive data from Korean firms during 2002–2012, we find that foreign currency borrowing is significantly related to firm attributes of export revenues, firm size, tangible assets and asset growth, as well as to macro-level factors. These results offer two important implications. First, macroeconomic factors alone cannot fully explain firms’ foreign currency borrowing. Second and more importantly, these firm attributes are indicative of a lower default probability and larger collateral value, which would not only facilitate borrowers’ access to foreign currency debt markets but also offer lenders a better protective cushion from possible loan defaults in the face of exchange rate changes and information asymmetry on borrowers’ credits. Period wise, asset-related firm attributes have more pronounced effects in the post- than pre-crisis period. We further show that banking regulations following the crisis effectively limit the access to foreign currency borrowing by Korean firms, most significantly by those belonging to large business groups.     

一种16倍采样的Gardner定时同步方法

DVB-S2X(The second generation Digital Video Broadcasting by Satellite Extensions)标准给出了高至256阶的APSK(Amplitude Phase Shift Keying)调制方式，对解调端的符号定时同步、帧同步和载波恢复都提出了更高的要求。结合DVB-S2X技术手册的建议，在经典的基于4倍符号速率采样的Gardner定时同步的基础上，提出了一种在定时同步环路前端加预滤波器并将原来的单路插值扩展到4路插值的基于16倍采样的同步方法。介绍了该方法的思想和结构并进行了仿真实验，结果表明该方法相比于经典Gardner方法有更好的误码性能，在高阶调制的情况下表现尤为突出。     

Expected work experience and the gender wage gap: A new human capital measure

Work experience is a key variable in earnings function estimates and wage gap decompositions. Because data on actual work experience are rare, studies commonly use proxies, such as potential experience. But potential experience is identical for all individuals of the same age and level of education, so it ignores labor market intermittency because of childbirth and child rearing—a critical omission when analyzing gender differences in earnings. This paper constructs a better proxy: expected work experience, which is the sum of the annual probabilities that an individual worked in the past. This measure can be generated using commonly available data on labor force participation rates by age and gender to gauge the probability of past work. Applying the measure to labor force survey data from the Philippines shows that conventional proxies underestimate the contribution of gender differences in work experience in explaining the gender wage gap.     

The effects of lower mobile termination rates in South Africa

The effects of a 90% reduction in mobile termination rates (MTRs) are evaluated over the period between 2009 and 2017 in South Africa. Prepaid prices and quality-adjusted postpaid prices declined by over 40%. However, only approximately 30% of the decline in prepaid prices and 60% of the reduction in quality-adjusted postpaid prices can be explained by lower MTR costs. On-net and off-net prepaid prices converged as MTR costs dropped. Regulators concerned about high retail prices and differences between on-net and off-net prices should reduce MTRs.     

Fiscal discipline in EMU? Testing the effectiveness of the Excessive Deficit Procedure

The Excessive Deficit Procedure (EDP), central to the Stability and Growth Pact, has been criticized from opposite ends. Some blame the EDP for imposing too much fiscal austerity. Others question whether the EDP has any disciplining power at all. To test its actual effects, we construct a real-time database of EDP recommendations and estimate augmented real-time and ex-post fiscal reaction functions for a panel of EMU member states. Overall, we find that a 1% of GDP larger EDP recommendation leads to 0.8–0.9% of GDP of additional fiscal consolidation plans, and 0.6–0.7% of actual consolidation. This result does not extend to countries subject to financial support programs: we find that, while they did implement substantial consolidation measures, in these countries required and delivered consolidation efforts are less connected. Overall, our results suggest that EDP recommendations have substantially shaped fiscal policies in the euro area, especially in the years 2010–2014, when EDP recommendations were most frequent.     

Asymmetric effects of exchange rate changes on the Malaysia-China commodity trade

Previous research that considered the response of the trade balance between Malaysia and China to exchange rate changes used a linear model and did not find any significant long-run link. Suspecting that the results suffer from aggregation bias as well as ignoring nonlinear adjustment of the exchange rate, we consider the trade balance of 59 industries that trade between the two countries and use a nonlinear ARDL model to show that almost a third of the industries are affected by ringgit depreciation against the yuan, in an asymmetric manner. The largest industry, which accounts for more than 25% of the trade, is found to benefit from ringgit depreciation while not being hurt by appreciation. In total, 15 industries that account for 40% of the trade enjoy this property.