Published by De Gruyter

Volume 12 Issue 2

April 2012

Issue of Global Economy Journal

Contents
Journal Overview

Article

June 6, 2012

International Outsourcing and Wage Rigidity

Daniel Horgos

Abstract

In industrialized economies, International Outsourcing is often blamed for destroying jobs and thus, inducing unemployment. Since most contributions examining International Outsourcing assume flexible wages, they do not address these concerns directly. This paper adopts a rigid wage approach and investigates the differences occurring. As theoretical results and the empirical panel data estimations for Germany show, effects depend on industry aggregation, the industry's skill intensity, and the labor market institution. Only in industries characterized by wage rigidity, outsourcing significantly increases low skilled unemployment. Consequently, not International Outsourcing but inflexible labor market institutions instead should be blamed for destroying low skill jobs.

June 6, 2012

The Impact of Basel III on Emerging Economies

Monal A. Abdel-Baki

Abstract

This research constructs a two-stage model to gauge the impact of Basel III on GDP growth rates in 47 emerging market economies (EMEs). The first stage detects a strong relationship between compliance with Basel III capital, liquidity and leverage ratios on the one hand and credit performance on the other hand. The second stage uses multiple regression analysis to estimate the direct and the indirect transmission effects. The results reveal that implementing Basel III would hamper growth by more than 3 percentage points, and that the recovery period from the shock requires 3 years and 3 quarters. Advanced EMEs are the most adversely impacted in comparison to secondary and frontier emerging markets. The paper concludes by proposing a set of recommendations and reforms at various levels: the Basle Committee for Banking Supervision, domestic regulators, national and regional trade unions of banks, and individual banking institutions.

June 6, 2012

Product Quality, Trade, and Adjustment: The China-ASEAN Experience

A. KM Azhar, Rob J. Elliott, Junting Liu

Abstract

There is a fear among East Asian governments that China’s rapid export driven growth is significantly impairing the export performance of their own countries. The common belief among East Asian economies is that to remain competitive they must improve the quality of their exports relative to those of China. In this paper, we show how the emergence of China has affected the quality of its exports and imports to and from Malaysia, Singapore and Indonesia. Specifically, we combine a measure of marginal intra-industry trade (IIT) concerned with the adjustment implications of changes in matched trade, a measure of vertical and horizontal intra-industry trade concerned with the differences in product quality and a new dynamic measure of quality differentiated IIT. Our results suggest that Singapore and Malaysia have managed to maintain and even improve their position as the exporter of high quality varieties in bilateral trade with to China despite China’s rapid development and export orientated growth.

June 6, 2012

Trends of Trade Interdependence and Prolifiration of FTAs in Asia: 1980-2010

Shintaro Hamanaka

Abstract

In assessing the recent development of economic regionalism in Asia and elsewhere, it is important to carefully examine if the level of integration of intraregional trade is increasing or decreasing. However, it is not easy to answer this ostensibly simple question. There are two ways to assess the level of trade integration: de facto integration and de jure integration. With respect to de facto integration (actual level of interdependence in terms of trade flows), the answer depends on which Asian countries are being considered and which indicator is being used to measure trade interdependence. This paper compares the trade interdependence of different sets of Asian countries using various indices. With respect to de jure integration (the signing of free trade agreements [FTAs]), the number of signed FTAs in Asia is growing but the relation between trade interdependence and the signing of FTAs has not been sufficiently studied. The second half of this paper addresses whether de jure trade integration is ultimately brought about by high-level or low-level de facto trade integration. The analysis in this paper finds that a set of countries that have experienced de facto integration tend to sign a comprehensive agreement to solve issues associated with high levels of trade interdependence, while a set of countries whose level of economic interdependence is low or declining may require a goods-centered agreement to boost trade among members.

June 6, 2012

Stabilization Policy in an Economy with Two Exchange Rate Regimes

Sven W. Arndt

Abstract

This paper uses a flex-price open economy macro model to examine the effectiveness of U.S. monetary and fiscal policies when the dollar floats freely against the euro, but is fixed against the Chinese yuan. It is assumed that capital mobility is high between the U.S. and the Eurozone, but low between the U.S. and China. The model allows for short-run price flexibility and imperfect substitutability between domestic and foreign financial assets.The focus is on the implications for the efficacy of U.S. macro stabilization policies of China's fixed-rate strategy. While many countries have pegged their currencies to the dollar, China is large enough to have an impact. It is shown that its large size enables China to impede the effectiveness of U.S. macroeconomic policies. Indeed, while the U.S. is officially tagged as an independent floater, Chinese intervention is capable of interfering with dollar-euro flexibility and thereby creates outcomes that are more consistent with policy under fixed rates.

June 6, 2012

Choice or Mimetism in the Decision to Migrate? A European Illustration

Thierry Warin, Andrew Blakely

Abstract

This paper examines how herd behavior (mimetism) and network effects determine bilateral migration flows to thirteen EU-15 countries. Using an adapted gravity model controlling for economic activity, welfare progressivity, as well as geospatial and historic relationships, the results force us to question our explanations for migration flows. Herd behavior positively influences European migration flows, whereas network complementarities in the receiving country do not consistently predict, and may in some cases reduce, the likelihood of immigrant inflows. Moreover, economic activity, particularly labor market conditions, plays a lesser role in the migrants’ choice of destination than was previously thought. The introduction of herd behavior as a determinant of European Migration in our empirical analysis hopefully will change the paradigm for understanding migration.

What's New in Our World?

June 6, 2012

Learning by Exporting in Turkey: An Investigation for Existence and Channels

Daniela Maggioni

Abstract

Using a rich longitudinal database at the plant level, I shed new light on the causal nexus between exports and productivity for Turkey, a middle-income country. I find evidence for both self-selection into exporting and learning-by-exporting. My main focus is on post-entry effects. To test this hypothesis I follow recent empirical literature and I apply the Propensity Score Matching and a Difference-in-Difference estimator. I find a higher labour productivity and TFP growth for exporting firms in the entry year and some years following the entry. Exports seem to place firms on a superior productivity path. My main contribution is to show the strict linkage between export and import activity: export starters often start also importing. Learning by exporting effects hold when I control for the role of imports and I verify larger productivity gains for firms which start exporting and importing at the same time. Finally, in order to verify if post-entry effects are not only scale effects but work through competition channel and/or technology transfers, I look for a heterogeneity according to the sectoral productivity gap between the domestic market and foreign trade partners. I verify a different timing of efficiency improvements between comparative advantage and disadvantage sectors.

June 6, 2012

Have Migrants Bought a "Round Trip Ticket"? Determinants in Probability of Immigrants' Return in Spain

Rafael de Arce, Ramon Mahia

Abstract

Understanding the extent to which immigration is a predominantly permanent or transitory phenomenon is essential for host countries insofar as it affects the strategic design of their admission, reception, and integration policies. Beyond the determination of the volume of returns, it is crucial to also determine which covariates connect better with a greater or lesser propensity of return. An adequate approach to the dynamics of the return requires considering this decision conditioned by the time elapsed since the arrival of the immigrant. From this perspective, the variable of interest would not be the intention of return, but the elapsed time between the arrival of the immigrant and the moment that return is considered as an option, as well as what are the factors affecting a greater or lesser duration of the stay. In this context, the article explores the relative importance of various personal and migration characteristics in the intention of return of immigrants conditional at the time of residence through the application of a Cox model of duration.

About this journal

Global Economy Journal is no longer published by De Gruyter.

Please see link of current publisher for submissions, new content: https://www.worldscientific.com/worldscinet/gej