Technology Trade in Economic Development

Recent evidence on the respective contributions of institutions and trade to income levels across countries has demonstrated that – once endogeneity is considered – institutional quality clearly dominates the effect of trade. We argue that overall trade is not the most appropriate measure for technology diffusion as a source of productivity growth and propose to focus on imports of research and development (R&D) intensive goods instead. Overall, we confirm previous findings that institutions matter most and that overall trade is not positively associated with per-capita income levels. Yet this does not hold for technology trade, as there is a positive and significant linkage between technology imports and income levels. This outcome is robust to various model specifications, including an instrumental variable approach.Growth, Technology Diffusion, Trade, R&D Spillovers.

Spatial clustering and nonlinearities in the location of multinational firms

We propose a semiparametric geoadditive negative binomial model of industrial location which allows to simultaneously address some important methodological issues, such as spatial clustering and nonlinearities, which have been only partly addressed in previous studies. We apply this model to analyze location determinants of inward greenfield investments occurred over the 2003-2007 period in 249 European regions. The inclusion of a geoadditive component (a smooth spatial trend surface) allows to control for omitted variables which induce spatial clustering, and suggests that such unobserved factors may be related to regional policies towards foreign investors Allowing for nonlinearities reveals, in line with theoretical predictions, that the positive effect of agglomeration economies fades as the density of economic activities reaches some limit value.industrial location, negative binomial models, geoadditive models, european union.

General Equilibrium Long-Run Determinants for Spanish FDI: A Spatial Panel Data Approach

While general equilibrium theories of trade stress the role of third-country effects, little work has been done in the empirical foreign direct investment (FDI) literature to test such spatial linkages. This paper aims to provide further insights into long-run determinants of Spanish FDI by considering not only bilateral but also spatially weighted third-country determinants. The few studies carried out so far have focused on FDI flows in a limited number of countries. However, Spanish FDI outflows have risen dramatically since 1995 and today account for a substantial part of global FDI. Therefore, we estimate recently developed Spatial Panel Data models by Maximum Likelihood (ML) procedures for Spanish outflows (1993-2004) to top-50 host countries. After controlling for unobservable effects, we find that spatial interdependence matters and provide evidence consistent with New Economic Geography (NEG) theories of agglomeration, mainly due to complex (vertical) FDI motivations. Spatial Error Models estimations also provide illuminating results regarding the transmission mechanism of shocks.Foreign Direct Investment; Spatial Econometrics; Panel Data.

Network Dependency in Migration Flows – A Space-time Analysis for Germany since Re-unification

The contribution of this paper is to analyse the role of network interdependencies in a dynamic panel data model for German internal migration fl ows since re-unification. So far, a capacious account of spatial patterns in German migration data is still missing in the empirical literature. In the context of this paper, network dependencies are associated with correlations of migration flows strictly attributable to proximate flows in geographic space. Using the neoclassical migration model, we start from its aspatial specification and show by means of residual testing that network dependency eff ects are highly present. We then construct spatial weighting matrices for our system of interregional flow data and apply spatial regression techniques to properly handle the underlying space-time interrelations. Besides spatial extensions to the Blundell-Bond (1998) system GMM estimator in form of the commonly known spatial lag and unconstrained spatial Durbin model, we also apply system GMM to spatially filtered variables. Finally, combining both approaches to a mixed spatial filteringregression specification shows a remarkably good performance in terms of capturing spatial dependence in our migration equation and at the same time qualify the model to pass essential IV diagnostic tests. The basic message for future research is that space-time dynamics is highly relevant for modelling German internal migration flows.Internal migration, dynamic panel data; Spatial Durbin Model; GMM

Competitive implications of cross-border banking

This paper reviews the recent literature on cross-border banking, with a focus on policy implications. Cross-border banking has increased sharply in recent decades, particularly in the form of entry, and has affected the development of financial systems, access to financial services, and stability. Reviewing the empirical literature, the author finds much, although not uniform, evidence that cross-border banking supports the development of an efficient and stable financial system that offers a wide access to quality financial services at low cost. But as better financial systems have more cross-border banking, the relationship between cross-border banking and competitiveness has to be carefully judged. While developing countries have some special conditions, provided a minimum degree of oversight is in place, they experience effects similar to industrial countries. There are some questions, though, on the effects of cross-border banking on lending based on softer information and on stability. Relevant experiences from capital markets show that the degree of cross-border financial activities can affect local market sustainability and there can be path dependency when opening up to cross-border competition. Reviewing the fast changing landscape of financial services provision, the author argues that cross-border banking highlights the increased importance of competition policy in financial services provision. This competition policy cannot be traditional, institutional based, but will need to resemble that used in other network industries. Furthermore, with globalization accelerating, competition policy will need to be global, supported by greater cross-border institutional collaboration and using the General Agreement on Trade in Services (GATS) process and the disciplines of the World Trade Organization. GATS can be of special value to developing countries as it provides a binding, pro-competition framework that has proven more difficult to establish otherwise.Banks&Banking Reform,Economic Theory&Research,Financial Intermediation,Knowledge Economy,Education for the Knowledge Economy

Business cycle patterns in European regions

The aim of this paper is threefold. First, we analyze the comovements of business cycles in European regions. Second, we date these business cycles and identify clusters of regions with similar business cycle behavior, using Finite Mixture Markov models. Third, we develop a new index to measure within-country homogeneity. We find that comovement among regions is, on average, quite low, although it increased during the convergence process prior to the euro cash and after the onset of the Great Recession. We identify five different groups of European regions. We also find heterogeneity in the size of border effects

Tell-tale tails: A data driven approach to estimate unique market information shares

The trading of securities on multiple markets raises the question of each market's share in the discovery of the informationally efficient price. We exploit salient distributional features of multivariate financial price processes to uniquely determine these contributions. Thereby we resolve the main drawback of the widely used Hasbrouck (1995) methodology which merely delivers upper and lower bounds of a market's information share. When these bounds diverge, as is the case in many applications, informational leadership becomes blurred. We show how fat tails and tail dependence of price changes, which emerge as a result of differences in market design and liquidity, can be exploited to estimate unique information shares. The empirical application of the new methodology emphasizes the leading role of the credit derivatives market compared to the corporate bond market in pricing credit risk during the pre-crisis period. --price discovery,information share,fat tails,tail dependence,liquidity,credit risk

OECD agricultural subsidies and poverty rates in lower income countries

We investigate the implications of the OECD support for agriculture on the headcount poverty rates of developing countries. Following the strategy proposed by McMillan, Peterson Zwane, and Ashraf (2005, 2007), we estimate the cross-country empirical framework building a new OECD policy index and applying different panel data techniques. In addition to the standard parametric model estimators, we also use the finite mixture models to detect heterogeneous effects of the OECD policy index within our sample. We find statistically significant evidence that OECD agricultural policies worsened the poverty rates in some developing countries. Most of the main food exporters appear in fact to be negatively affected by the OECD support for agriculture while the impact detected on food importers is not significant or near to zero

Technology trade in economic development

Recent evidence on the respective contributions of institutions and trade to income levels across countries has demonstrated that - once endogeneity is considered - institutional quality clearly dominates the effect of trade. We argue that overall trade is not the most appropriate measure for technology diffusion as a source of productivity growth and propose to focus on imports of research and development (R&D) intensive goods instead. Overall, we confirm previous findings that institutions matter most and that overall trade is not positively associated with per-capita income levels. Yet this does not hold for technology trade, as there is a positive and significant linkage between technology imports and income levels. This outcome is robust to various model specifications, including an instrumental variable approach. --Growth,Technology Diffusion,Trade,R&D Spillovers

Prospects For Enhanced Exchange Rate Cooperation in East Asia: Some Preliminary Findings from Generalized PPP Theory

The Asian financial crisis increased economic disparities in the East Asian region, thus making monetary integration more difficult, but rekindled political interest in Asian monetary and exchange rate cooperation. This paper applies the theory of Generalized Purchasing Power Parity (G-PPP), which looks at the behavior of long-run real exchange rates, to assess the potential for an optimum currency area (OCA) among a subset of East Asian countries based on five of the more advanced members of the Association of Southeast Asian Nations (ASEAN5). Our findings suggest little support for an OCA for ASEAN5 as a bloc prior to the Asian financial crisis and mixed results in the post-crisis period. In particular, asymmetries in the way countries adjust to shocks and low or insignificant speeds of adjustment were found. Thus, although the application of single OCA criteria is notoriously demanding and our tests apply to only one of the many criteria for the successful formation of an OCA, we cannot find persuasive evidence that ASEAN5 as a group constitute a potential currency area with either the USA or Japan, even when the ‘noisy’ period of the Asian financial crisis is omitted.Optimum currency area, exchange rates, East Asia, ASEAN