Reallocation gains in a specific factors model with firm heterogeneity

We study firm heterogeneity in a specific factors model to address the effect of factor mobility on reallocation gains from trade. A model is proposed with Melitz type firm heterogeneity with two sectors, two countries and two fixed factors and one factor mobile across sectors. Equilibrium in each sector can be concisely represented by a demand and supply equation and a FE and ZCP condition. Varying the substitution elasticity between the fixed and mobile factor we show that the welfare gains from trade liberalization are larger in countries with a lower substitution elasticity. Furthermore, it is shown that the immobile production factor in the comparative disadvantage sector can still gain from trade liberalization due to the reallocation effect.Firm heterogeneity, Specific Factors, Reallocation Gains from Trade

Reallocation Gains in a Specific Factors Model with Firm Heterogeneity

We study firm heterogeneity in a specific factors model to address the effect of factor mobility on reallocation gains from trade. A model is proposed with Melitz-type firm heterogeneity with two sectors, two countries and two fixed factors and one factor mobile across sectors. Equilibrium in each sector can be concisely represented by a demand and supply equation and an FE and ZCP condition. Varying the substitution elasticity between the fixed and mobile factor, we show that the welfare gains from trade liberalization are larger in countries with lower substitution elasticity. Furthermore, it is shown that the immobile production factor in the comparative disadvantage sector can still gain from trade liberalization due to the reallocation effect.firm heterogeneity, specific factors, reallocation gains from trade

Goodwin or Kalecki in Demand? Functional Income Distribution and Aggregate Demand in the Short Run

In a seminal paper on Marxian business cycle theory, Richard Goodwin (1967) presented a model which assumed that a higher wage share leads to lower investment and thus a general economic slowdown. In contrast, Michal Kalecki (1971) argued that a higher wage share would have an expansionary effect because the consumption propensity out of wage income is higher than that out of profit income. Based on a general model that allows for wage-led as well as profit-led demand regimes, this paper estimates the effects of a change in the wage share on aggregate private domestic demand with quarterly data for 12 OECD countries.functional income distribution, demand, Goodwin cycle, Kalecki, Post Keynesian economics, Marxian economics

Determinants of Inequality in Selected SEE Countries: Results from Shapley Value Decompositions

In this paper we provide a comparative analysis of inequality in household consumption per capita in four South-Eastern European countries, Albania, Bosnia & Herzegovina, Bulgaria, and Serbia. The analysis is based on a largely consistent dataset derived from the World Bank’s Living Standards Measurement Study (LSMS) providing data for at least two years for each of these countries and a comparable set of variables. We apply inequality decomposition methods based on regression analysis and variants of the Shapley value approach. We also present results from related methods like a decomposition of the explained variance using different approaches for comparisons. The results suggest that three groups of variables are particularly important for explaining patterns of inequality; these are socio-demographic variables, employment status and education. Regional aspects and nationality or ethnicity plays a less important role though there are some country differences.Inequality decomposition; Gini; Shapley value; Western Balkan countries

Subgroup and Shapely Value Decompositions of Multidimensional Inequality: An Application to South East European Countries

Inequality is a multidimensional phenomenon though it is often discussed along a single dimension like income. This is also the case for the various decomposition approaches of inequality indices. In this paper we study one- and multidimensional indices on inequality on data for three large South-East European countries, Bulgaria, Romania and Serbia. We include four dimensions in our measure of multidimensional inequality: income, health, education and housing. We apply various decomposition methods to these one- and multidimensional indices. In doing so, we apply standard decomposition techniques of the mean logarithmic deviation index (I0) and decompositions based on regression analysis in conjunction with the Shapley value approach.Multidimensional inequality, Inequality decomposition, Shapley value

Migrants and Economic Performance in the EU15: their allocations across countries, industries and job types and their (productivity) growth impacts at the sectoral and regional levels

Studies regarding the migrants’ impact upon performance variables and in particular upon productivity growth – which is the focus of this study - are few although there has been an increased interest in this area. This study addresses this issue in a cross-country and regional perspective with a focus on EU-27 countries at the industry level. In the first part of the study the focus is on employment patterns of migrants regarding their shares in employment, the composition in terms of places of origin, and an important aspect of the analysis is the study of their ‘skills’ (measured by educational attainment levels) and the utilisation of these skills relative to those of domestic workers. The second part of the study conducts a wide range of ‘descriptive econometric’ exercises analysing the relationship between migrants employment across industries and regions and output and productivity growth. We do obtain robust results with respect to the positive impact of the presence of high-skilled migrants especially in high-education-intensive industries and also more generally – but less robustly – on the relationship between productivity growth and the shares of migrants and of high-skilled migrants in overall employment. There is also an analysis of the impact of different policy settings with respect to labour market access of migrants and to anti-discrimination measures. The latter have a significant positive impact on migrants’ contribution to productivity growth. In the analysis of impacts of migrants on value added and labour productivity growth at the regional level we add migration variables to robust determinants of growth and find positive and significant relationships between migrants’ shares (and specifically of high-skilled migrants) and regional productivity growth. The limitations of the study with respect to data issues, causality and selection effects are discussed which give scope for further research.migration, productivity, employment structures

The effects of factor and sector biased technical change revisited

In the trade-technology-wage debate, the effects of the various forms of technical progress on relative factor prices have been addressed in a number of contributions over the past decade. However, the existing literature is far from conclusive. The various contributions have either relied on specific assumptions, such as Leontief technologies or Cobb-Douglas demand, that have been decisive for the respective conclusions, or they used a more general framework, arriving at ambiguous results in many cases. In this paper we analyse a general equilibrium framework with CES production and CES demand functions, which allows for any discrete number of sectors and countries integrated via trade flows. Technologies are country- and sector-specific and endowment structures differ across countries. The necessary and sufficient conditions under which the relative wage rates are rising or falling in the domestic and foreign economies are derived. This is done for various types of factor- and sector-biased technical change taking place in a particular sector in either the home or foreign country. The conditions - depending on the relative skill intensity of the innovating sector, the elasticities of substitution in demand and supply, the relative factor endowment and the prevailing (equilibrium) relative wage rate - allow for straightforward economic interpretations. This permits to solve the cases classified as ambiguous in the existing literature and provides clear-cut conditions which are important for modelling and empirical research. Furthermore, the results are interpreted with respect to recent empirical studies where special emphasis is given to the sector-biased versus factor-biased hypothesis

Austrian Exporters: A Firm-Level Analysis

exports, firm heterogeneity, export premium, Austrian manufacturing firms

Policies to attract Foreign Direct Investment: An industry-level analysis

This paper analyzes policies to attract Foreign Direct Investment (FDI) based on a sample comprising the US plus six EU countries (US-plus-EU-6) and four Central and Eastern European Countries (CEEC-4). The analysis draws on industry-level data for 1995-2003. A Dynamic Panel Data approach is used to isolate important country- and industry-level determinants of FDI inward stock. The estimated baseline model derived is used to assess the scope for FDI attraction policies. The scope for FDI is defined as the difference between the FDI inward stock received by a country-industry-pair, as implied by the baseline model ("estimated FDI"), and the inward FDI stock which could be realized if a certain "best practice" policy were carried out ("potential" FDI). The results show how different policy variables contribute to closing the gap between estimated and potential FDI. The countries in our sample fall into two groups: In the CEEC-4 an increase of R&D expenditures in GDP would result in a substantial increase in FDI, while in the US-plus-EU-6 an improvement of their unit labor cost position, e.g. via increases in labor productivity, and improvements in their tax position would attract additional FDI.Economic Policy, Foreign Direct Investment, European Union, Industry-level Study, Location Decision

Characteristics of exporting and non-exporting firms in Austria

In this study we provide detailed evidence on the importance and performance of exporters compared to non-exporters in Austrian manufacturing, based on firm level data. The results are in line with those found in other studies pointing towards the exceptional role of exporting firms with respect to various size and performance measures. We provide both descriptive as well as econometric evidence on these ‘export premia’ along these lines and further present a brief comparison with results found for other countries. Our findings however also suggest the existence of quite large differences across industries with respect to the export premia which deserves further attention.export premium, heterogenous firms, trade