Europe has witnessed a considerable labour productivity slowdown in recent decades. Many potential explanations have been proposed to address this productivity ‘puzzle’. However, how the quality of local institutions influences labour productivity has been overlooked by the literature. This article addresses this gap by evaluating how institutional quality affects labour productivity growth and, particularly, its determinants at the regional level during the period 2003–2015. The results indicate that institutional quality influences regions’ labour productivity growth both directly—as improvements in institutional quality drive productivity growth—and indirectly—as the short- and long-run returns of human capital and innovation on labour productivity growth are affected by regional variations in institutional quality.
{"title":"Institutions and the Productivity Challenge for European Regions","authors":"A. Rodríguez‐Pose, R. Ganau","doi":"10.1093/JEG/LBAB003","DOIUrl":"https://doi.org/10.1093/JEG/LBAB003","url":null,"abstract":"\u0000 Europe has witnessed a considerable labour productivity slowdown in recent decades. Many potential explanations have been proposed to address this productivity ‘puzzle’. However, how the quality of local institutions influences labour productivity has been overlooked by the literature. This article addresses this gap by evaluating how institutional quality affects labour productivity growth and, particularly, its determinants at the regional level during the period 2003–2015. The results indicate that institutional quality influences regions’ labour productivity growth both directly—as improvements in institutional quality drive productivity growth—and indirectly—as the short- and long-run returns of human capital and innovation on labour productivity growth are affected by regional variations in institutional quality.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"94 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124217960","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper uses a dataset covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix, 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 40 to 85% of the impact of foreign fluctuations on French GDP is accounted for by the "foreign granular residual" - the term capturing the fact that larger firms are more affected by the foreign shocks. At the macro level, firm heterogeneity dampens the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model.
{"title":"Foreign Shocks as Granular Fluctuations","authors":"Julian di Giovanni, A. Levchenko, I. Mejean","doi":"10.2139/ssrn.3733123","DOIUrl":"https://doi.org/10.2139/ssrn.3733123","url":null,"abstract":"This paper uses a dataset covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix, 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 40 to 85% of the impact of foreign fluctuations on French GDP is accounted for by the \"foreign granular residual\" - the term capturing the fact that larger firms are more affected by the foreign shocks. At the macro level, firm heterogeneity dampens the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123588462","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We review the growing literature on the political effects of immigration. After a brief summary of the economics of immigration, we turn to the main focus of the paper: how immigrants influence electoral outcomes in receiving countries, and why. We start from the ``standard'' view that immigration triggers political backlash and raises support for nativist, anti-immigrant political parties. We present evidence from a variety of studies that the causes of natives' political discontent are unlikely to have (solely) economic roots, but are instead more tightly linked to cultural and social concerns. Next, we discuss works that paint a more nuanced picture of the effects of immigration, which, in some cases, can move natives' preferences in a more liberal direction. We also consider the factors that can explain a seemingly puzzling empirical regularity: the anti-immigration rhetoric has become a banner of right wing parties. We conclude by outlining what, to us, are promising avenues for future research.
{"title":"The Political Effects of Immigration: Culture or Economics?","authors":"A. Alesina, M. Tabellini","doi":"10.2139/ssrn.3846698","DOIUrl":"https://doi.org/10.2139/ssrn.3846698","url":null,"abstract":"We review the growing literature on the political effects of immigration. After a brief summary of the economics of immigration, we turn to the main focus of the paper: how immigrants influence electoral outcomes in receiving countries, and why. We start from the ``standard'' view that immigration triggers political backlash and raises support for nativist, anti-immigrant political parties. We present evidence from a variety of studies that the causes of natives' political discontent are unlikely to have (solely) economic roots, but are instead more tightly linked to cultural and social concerns. Next, we discuss works that paint a more nuanced picture of the effects of immigration, which, in some cases, can move natives' preferences in a more liberal direction. We also consider the factors that can explain a seemingly puzzling empirical regularity: the anti-immigration rhetoric has become a banner of right wing parties. We conclude by outlining what, to us, are promising avenues for future research.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"66 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114676524","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We explore the impact the internationalization of production is having on child labour at the sector level, using data for 26 low- and middle-income countries. We find that sectors with stronger participation in foreign markets exhibit less child labour. Similarly, sectors that participate in global value chains by providing inputs to exporting firms in third countries (forward linkages) have fewer cases of child labour. On the other hand, sectors in which a large share of exports have foreign imported inputs embedded in them (backward linkages) experience higher incidences of child labour. Unlike the existing empirical literature on trade and child labour at the aggregate (country) level, which does not control for income effects, our results, at the sector level, do control for them.
{"title":"Child Labour and Global Value Chains","authors":"Cristian Ugarte, M. Olarreaga, Gady Saiovici","doi":"10.1111/twec.13401","DOIUrl":"https://doi.org/10.1111/twec.13401","url":null,"abstract":"We explore the impact the internationalization of production is having on child labour at the sector level, using data for 26 low- and middle-income countries. We find that sectors with stronger participation in foreign markets exhibit less child labour. Similarly, sectors that participate in global value chains by providing inputs to exporting firms in third countries (forward linkages) have fewer cases of child labour. On the other hand, sectors in which a large share of exports have foreign imported inputs embedded in them (backward linkages) experience higher incidences of child labour. Unlike the existing empirical literature on trade and child labour at the aggregate (country) level, which does not control for income effects, our results, at the sector level, do control for them.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129949496","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The economic shocks experienced by the UK economy in the 1970s brought major changes in the spatial distribution of employment rates in the UK. This paper traces out the long run implications of these changes, suggesting that they were highly persistent and to a large extent shape current UK regional disparities. Most of the Local Authority Districts that experienced large negative shocks in the 1970s have high deprivation rates in 2015, and they constitute two-thirds of all districts with the highest deprivation rates. We conclude that neither economic adjustment processes nor policy measures have acted to reverse the effect of negative shocks incurred nearly half a century ago.
{"title":"The Persistent Consequences of Adverse Shocks: How the 1970s Shaped UK Regional Inequality","authors":"Patricia G. Rice, A. Venables","doi":"10.1093/OXREP/GRAA057","DOIUrl":"https://doi.org/10.1093/OXREP/GRAA057","url":null,"abstract":"The economic shocks experienced by the UK economy in the 1970s brought major changes in the spatial distribution of employment rates in the UK. This paper traces out the long run implications of these changes, suggesting that they were highly persistent and to a large extent shape current UK regional disparities. Most of the Local Authority Districts that experienced large negative shocks in the 1970s have high deprivation rates in 2015, and they constitute two-thirds of all districts with the highest deprivation rates. We conclude that neither economic adjustment processes nor policy measures have acted to reverse the effect of negative shocks incurred nearly half a century ago.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122835726","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J. Henderson, Dongling Su, Qinghua Zhang, Siqi Zheng
Despite China's economic achievements, factor market reforms have been slow. We analyze local political manipulation of land markets, along with capital market favoritism of certain cities, using a structural general equilibrium model. We estimate city-by-city local leaders' preferences over GDP enhancement versus residents' welfare. Equalizing capital prices across cities would increase worker welfare and returns to capital by 2.6% and 11%, respectively. Further, forcing local leader to focus just on enhancing welfare of residents would increase welfare by another 5.3%. Reforms would significantly reduce the population of favored cities like Tianjin and Beijing, while raising that of cities like Shenzhen.
{"title":"The Costs of Political Manipulation of Factor Markets in China","authors":"J. Henderson, Dongling Su, Qinghua Zhang, Siqi Zheng","doi":"10.2139/ssrn.3726863","DOIUrl":"https://doi.org/10.2139/ssrn.3726863","url":null,"abstract":"Despite China's economic achievements, factor market reforms have been slow. We analyze local political manipulation of land markets, along with capital market favoritism of certain cities, using a structural general equilibrium model. We estimate city-by-city local leaders' preferences over GDP enhancement versus residents' welfare. Equalizing capital prices across cities would increase worker welfare and returns to capital by 2.6% and 11%, respectively. Further, forcing local leader to focus just on enhancing welfare of residents would increase welfare by another 5.3%. Reforms would significantly reduce the population of favored cities like Tianjin and Beijing, while raising that of cities like Shenzhen.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132582321","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sergi Basco, Maxime Liégey, Martí Mestieri, Gabriel Smagghue
This paper develops and implements a novel test of the Stolper-Samuelson theorem. We use nationally-representative matched employer-employee panel data from 1997 through 2015 to study the effect of the rise in China's exports on French worker earnings. Our version of the Stolper-Samuelson theorem states that there is a negative correlation between occupation exposure to Chinese competition and change in worker earnings. First, we document substantial heterogeneity in trade adjustment across occupations. Then, consistent with the Stolper-Samuelson prediction, we show that workers initially employed in occupations more intensively used in hard-hit industries experience larger declines in earnings. We also show that workers tend to move out of hard-hit industries, but they tend to remain in their initial occupation
{"title":"The Heterogeneous Effects of Trade Across Occupations: A Test of the Stolper-Samuelson Theorem","authors":"Sergi Basco, Maxime Liégey, Martí Mestieri, Gabriel Smagghue","doi":"10.21033/wp-2020-24","DOIUrl":"https://doi.org/10.21033/wp-2020-24","url":null,"abstract":"This paper develops and implements a novel test of the Stolper-Samuelson theorem. We use nationally-representative matched employer-employee panel data from 1997 through 2015 to study the effect of the rise in China's exports on French worker earnings. Our version of the Stolper-Samuelson theorem states that there is a negative correlation between occupation exposure to Chinese competition and change in worker earnings. First, we document substantial heterogeneity in trade adjustment across occupations. Then, consistent with the Stolper-Samuelson prediction, we show that workers initially employed in occupations more intensively used in hard-hit industries experience larger declines in earnings. We also show that workers tend to move out of hard-hit industries, but they tend to remain in their initial occupation","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128115213","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Understanding why certain jobs are 'better' than others and what implications they have for a worker's career is clearly an important but still relatively unexplored question. We provide both a theoretical framework and a number of empirical results that help distinguishing 'good' from 'bad' jobs in terms of their impact on a worker's lifetime wage income profile through wage jumps occurring upon changing job ('static effects') or through increases in the wage growth rate ('dynamic effects'). We find that the distinction between internationally active firms and domestic firms is a meaningful empirical dividing line between employers providing 'good' and 'bad' jobs. First, in internationally active firms the experience-wage profile is much steeper than in domestic firms, especially for managers as opposed to blue-collar workers. Second, the higher lifetime wage income for managers in internationally active firms relies on the stronger accumulation of experience that these firms allow for and on the (almost) perfect portability of the accumulated dynamic wage gains to other firms. Static effects are instead much more important for blue-collar workers. Finally, the distinction between internationally active and domestic firms is relevant also at a more aggregate level to explain cross-sectional differences in wages among workers and spatial differences in average wages across regions within a country.
{"title":"Dream Jobs","authors":"Giordano Mion, Luca David Opromolla, G. Ottaviano","doi":"10.2139/ssrn.3653955","DOIUrl":"https://doi.org/10.2139/ssrn.3653955","url":null,"abstract":"Understanding why certain jobs are 'better' than others and what implications they have for a worker's career is clearly an important but still relatively unexplored question. We provide both a theoretical framework and a number of empirical results that help distinguishing 'good' from 'bad' jobs in terms of their impact on a worker's lifetime wage income profile through wage jumps occurring upon changing job ('static effects') or through increases in the wage growth rate ('dynamic effects'). We find that the distinction between internationally active firms and domestic firms is a meaningful empirical dividing line between employers providing 'good' and 'bad' jobs. First, in internationally active firms the experience-wage profile is much steeper than in domestic firms, especially for managers as opposed to blue-collar workers. Second, the higher lifetime wage income for managers in internationally active firms relies on the stronger accumulation of experience that these firms allow for and on the (almost) perfect portability of the accumulated dynamic wage gains to other firms. Static effects are instead much more important for blue-collar workers. Finally, the distinction between internationally active and domestic firms is relevant also at a more aggregate level to explain cross-sectional differences in wages among workers and spatial differences in average wages across regions within a country.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"60 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127913220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We compare trade liberalization under Cournot and Bertrand competition in reciprocal markets. In both cases, the critical level of trade costs below which the possibility of trade affects the domestic firm’s behavior is the same; trade liberalization increases trade volume monotonically; and welfare is U-shaped under reasonable conditions. However, welfare is typically greater under Bertrand competition; for higher trade costs the volume of trade is greater under Cournot competition, implying a “van-der-Rohe Region” in parameter space; and, for even higher trade costs, there exists a “Nimzowitsch Region”, where welfare is higher under Bertrand competition even though no trade takes place.
{"title":"When the Threat is Stronger than the Execution: Trade and Welfare Under Oligopoly","authors":"D. Leahy, J. Neary","doi":"10.1111/1756-2171.12380","DOIUrl":"https://doi.org/10.1111/1756-2171.12380","url":null,"abstract":"We compare trade liberalization under Cournot and Bertrand competition in reciprocal markets. In both cases, the critical level of trade costs below which the possibility of trade affects the domestic firm’s behavior is the same; trade liberalization increases trade volume monotonically; and welfare is U-shaped under reasonable conditions. However, welfare is typically greater under Bertrand competition; for higher trade costs the volume of trade is greater under Cournot competition, implying a “van-der-Rohe Region” in parameter space; and, for even higher trade costs, there exists a “Nimzowitsch Region”, where welfare is higher under Bertrand competition even though no trade takes place.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133308623","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper examines the impact of export promotion on aggregate unemployment. We findnd that increases in the share of Export Promotion Agencies' (EPAs) budgets on total exports lead to small decreases in aggregate unemployment. This effect is amplifi ed when export promotion efforts are concentrated in sectors in which the country has a comparative advantage. On the other hand, when EPAs aim at reducing aggregate unemployment by focusing their efforts in sectors with high levels of unemployment, then aggregate unemployment increases. These results suggest that even if EPAs' pri- orities were to shift towards reducing unemployment, this would be better addressed by focusing on sectors in which the country has a comparative advantage rather than sectors with high labor market frictions.
{"title":"Can Export Promotion Reduce Unemployment?","authors":"M. Olarreaga, Cristian Ugarte","doi":"10.2139/ssrn.3914009","DOIUrl":"https://doi.org/10.2139/ssrn.3914009","url":null,"abstract":"The paper examines the impact of export promotion on aggregate unemployment. We findnd that increases in the share of Export Promotion Agencies' (EPAs) budgets on total exports lead to small decreases in aggregate unemployment. This effect is amplifi ed when export promotion efforts are concentrated in sectors in which the country has a comparative advantage. On the other hand, when EPAs aim at reducing aggregate unemployment by focusing their efforts in sectors with high levels of unemployment, then aggregate unemployment increases. These results suggest that even if EPAs' pri- orities were to shift towards reducing unemployment, this would be better addressed by focusing on sectors in which the country has a comparative advantage rather than sectors with high labor market frictions.","PeriodicalId":170106,"journal":{"name":"CEPR: International Trade & Regional Economics (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122223067","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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