Essays on Labor and Development Economics.

This work comprises four essays in two related areas: labor and development economics. On the labor side, two essays study (i) the effects of sizeable policy reforms over labor informality and (ii) the relation between productivity and wages in a context of substantial informality and high turnover rates. On the development side, two essays provide a comparison between developed and developing countries in the following aspects: (iii) the degree of complementarity of production factors and their capacity to translate R&D investments into economic growth and (iv) the effects of fiscal redistribution over income inequality. Within the context of Latin America - the most income-unequal and labor-informal region in the world - this work intends to augment the understanding of the behavior, dynamics, interactions and contributions of productive factors (labor and innovative capital) and the effects that policies aimed at formalizing labor, innovating capital or redistributing factors retributions may have. The study applies recent measurement techniques and exploits rich novel datasets which combined with reformulated models help us to propose alternative appealing explanations. Lessons learnt from these four essays suggest that (i) job dynamics play a fundamental role in the success (or failure) of policies aimed at promoting labor formality. Against the conventional wisdom, we contend that reductions in hiring rather than increases in separation rates are the main determinants of informality increases following protectionist policies. (ii) Job dynamics also play a differentiating role in the determination of wage-productivity elasticities and income risk (with new hires reacting more than incumbents). (iii) Yet, returns of labor and physical capital are constant across countries and periods regardless the stage of development whereas they exhibit an inverted U shape for technological capital (this is, highest returns observed for mid developed cases). (iv) Comparable private returns of productive factors are mirrored in comparable market income inequality measures observed across some developed and developing regions. However, while in Europe fiscal redistribution helps to achieve better distributed disposable income, in Latin America fiscal redistribution has meager or even countervailing effects.

Ein dynamisches Multi-Akteurs-Modell zur integrierten Bewertung des Klimawandels

The interactions between climate and the socio-economic system are investigated with a Multi-Actor Dynamic Integrated Assessment Model (MADIAM) obtained by coupling a nonlinear impulse response model of the climate sub-system (NICCS) to a multi-actor dynamic economic model (MADEM). The main goal is to initiate a model development that is able to treat the dynamics of the coupled climate socio-economic system, including endogenous technological change, in a non-equilibrium situation, thereby overcoming some of the limitations of standard economic modelling approaches. The core of MADEM describes an economy driven by the opposing forces of business, striving to increase profits by investments in human and physical capital, and the erosion of profits through business competition, enhanced by labour wage pressure. The principal driver of economic growth is the increase in labour productivity (human capital) generated by endogenous technological change. In the presence of climate change, these basic interactions are modified by government taxes on CO2 emissions, which are recycled into the economy as various subsidies, by climate-related changes in consumer preferences, and by modified business investment decisions in response to these actions. The combined effect of the climate-response strategies of the different actors determines the form of the induced technological change that ultimately governs the evolution of the coupled climate-socioeconomic system. To clarify the individual roles of the actors, the model is set up in a systems-analytical way, with prescribed control algorithms for the different actors, rather than in the traditional single-actor cost/benefit optimization mode. The results of the scenario simulations are the following. Business investments in energy and carbon efficiency, induced by government CO2 taxes, yield a significant contribution to emissions reduction. Direct government mitigation actions through carbon taxes are more effective with regard to both emission reductions and economic growth if a significant fraction of carbon taxes are recycled into investments in net carbon efficiency, i.e. into induced technological change. The influence of consumer preferences, often neglected in integrated assessment analyses, is also shown to be very effective in guiding business investments, thereby positively affecting both climate and economic growth. The simulations of combined parallel control strategies, in which at least two actors simultaneously change their control variables in the same (climate friendly) direction, show that the actors are clearly motivated to cooperate. In relation to the different welfare goals 8 Abstract of the actors and in comparison to the impacts of the individual control decisions, there are always combined strategies, which offer a more effective and reasonable choice than achieved with individual control decisions. The chosen examples are intended as illustrations rather than to provide quantitative predictions. While all actors are found to exert a significant influence on technological change and the mitigation of global greenhouse warming, their impact on long-term economic growth in all cases is small. The delay in GDP growth incurred over a one-hundred-year period is typically of the order of only one or two years. This result is independent of the details of the (necessarily uncertain) calibration of our model

Essays on endogenous technical change in climate policy analysis

This thesis consists of four papers studying endogenous technical change (TC) in climate policy analysis. The first paper provides a conceptual framework of analyzing the mechanism through which TC can be induced by climate mitigation policies. The second paper develops a computable general equilibrium (CGE) numerical model to quantitatively analyze the effect of endogenous TC on the timing and cost of carbon abatements. The third paper develops a multi-region modelling framework to examine the mechanism of international technology diffusion and its effect on domestic carbon savings. The fourth paper analyzes the mechanism of international technology coordination resulting from reciprocal cross-nation knowledge spillovers and its effect on global climate governance. The first paper, "Revisiting the mechanism of endogenous technical change for climate policy analysis", aims to reconcile the diverging specifications of endogenous TC in existing climate policy modeling literature. Drawing on the theory of R&D-induced TC, I provide a generalized framework to analyze the mechanism through which TC can be induced by climate mitigation policies. The second paper, "Can technological innovation help China take on its climate responsibility? A computable general equilibrium analysis", examines the effectiveness of China's indigenous R&D and technological innovation to cut its carbon emissions. The mechanism of endogenous TC is incorporated into a CGE numerical model. R&D investment and knowledge creation is modeled as the endogenous behavior of profit-seeking private producers. The accumulated stocks of productive knowledge are applied in a production process to induce the rate and bias of production TC. The third paper, "Can China harness globalization to reap domestic carbon savings? Modelling international technology diffusion in a multi-region framework", aims to examine the effect of globalization, particularly international technology diffusion, on reducing China's domestic carbon emissions. The single-country CGE model is extended into a multi-region framework, where both indigenous R&D and foreign technology diffusion are explicitly considered as two sources of endogenous TC for domestic carbon savings. The model systematically describes foreign technology diffusion through three diffusion channels of trade, foreign direct investment (FDI) and disembodied knowledge spillovers, with an elaborate treatment of local knowledge absorptive capacity. The fourth paper, "International knowledge spillover and technology externality: Why multilateral R&D coordination matter for global climate governance", investigates the mechanism of international technology cooperation and its effect on lowering global climate mitigation cost, with an aim of exploring the potentials of complementing international emission-based agreements with technology cooperation in the post-2012 climate regime. For that purpose, this paper firstly presents an analytical framework that describes how the mechanism of international R&D coordination can work for climate change mitigation. This mechanism is then quantitatively examined in a multi-region global numerical model that explicitly considers multilateral knowledge spillovers and resulting technology externality for global climate governance

Determinants of Domestic Investment in the Libyan Manufacturing Sector and its Impact

The main objectives of this thesis are to examine and estimate the determinants of domestic investment (public and private) in the Libyan manufacturing sector, and to investigate the impact of domestic investment on the Libyan economy. It adds to the growing literature on the issue of economic growth and econometrics by drawing attention to several issues hitherto little considered in the existing literature. In particular, the thesis blends various aspects of economic growth with models of investment to explain and define the main factors which affect domestic investment, and how domestic investment drives economic growth in the Libyan economy. It is important to recognise that economic growth has become an important aim for all countries in the world; especially less developed countries, which require greater economic efforts to be able to deal with the current international economic climate and the challenges of globalisation: domestic investment is an exemplary element to stimulate economic growth to achieve this target. The main objective of the Libyan government has been the industrialization of Libya, principally through import substitution. Various import restrictions in the form of licensing, quotas and tariffs have provided several sub-sectors of manufacturing with a high level of protection from foreign competition. The government benefits from high levels of financial return in terms of oil revenues, and the consequent easy availability of imported raw materials and capital goods. Despite government support for investment designed to encourage import substitution and export-oriented production, Libya has continued to experience low levels of investment in the domestic manufacturing sector. The stimulus to undertake this study was a desire to explore the most important determinants of fixed investment in Libya's manufacturing sector. This study aims to identify determinants of domestic investment in both the public and private manufacturing sectors in the Libyan economy during the period 1962-2008. Furthermore, this study aimed to identify the impact of domestic investment as a determinant of growth in the Libyan economy during the period 1962-2008. Cobb- Douglas Function was used to analyze the relationship between real per-capita GDP and its most important determinants. Properties of time series of the model variables have been analyzed by using several tests for determining the integration level of each time series separately.B y using the Johansen-Juselius cointegration method, the results showed that private investment is strongly and adversely affected in the longer term by changes that take place in domestic public investment in the manufacturing sector, which shows the competition factor between the private and public sectors. The results of these tests revealed an equilibrium relationship between domestic investment in the private manufacturing sector and its determinants in the long and short-run. Also, the results showed the significance of the impact of annual appropriations for the manufacturing sector and imports of machinery & capital goods on domestic investment in the public manufacturing sector, the results of these tests revealed an equilibrium relationship between domestic investment in the public manufacturing sector and its determinants in the long and short-run. Moreover, the results showed the significance of the impact of investment on per-capita GDP; the results of tests revealed an equilibrium relationship between per-capita GDP and its determinants in the long and short-run. The study concludes that the elasticity of per capita GDP to changes in domestic investment is greater than the elasticity of the labour force, which appeared inelastic in the short and long-term. According to the information available, the study and approach adopted have never been undertaken before for Libya, and therefore might contribute toward advancing knowledge and enhancing investment policy, and its implementation by government and private manufacturing enterprises in Libya and other developing countries

Foreign capital inflows and growth of real estate markets in selected African countries

A Dissertation Submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in Fulfilment of the Requirements for the Degree of Doctor of Philosophy in Finance. 28th September 2015National real estate markets are globally recognized as essential segments of an economy and major contributors to national aggregate outputs. However, Africa’s national real estate markets are largely underdeveloped mainly because capital is in short supply. In this study, we examine the effects of foreign direct investment (FDI), foreign portfolio investments (FPI) and remittances on Africa’s real estate markets. We also sought to establish the financial market channels of capital inflows that are especially important for the real estate markets. In 1980s and 1990s, the widespread influence of the Bretton Woods institutions’ policy prescriptions saw many African countries implement far-reaching financial liberalization reforms. These reforms were meant to address low domestic savings and investments by opening the capital accounts of nations as to enable inflow of foreign capital. In this study, we test the externalities of these inflows. Specifically, we examine the effects of foreign capital inflows on African real estate markets by estimating a structural investment model using a pooled feasible generalized least square and general method of moment estimators in a panel set-up. We use data from Botswana, Kenya, Morocco, Namibia and South Africa for this test. Second, we examine causality relationships between real estate investments and foreign capital inflows using vector autoregressive (VAR) models and the Bai-Perron threshold test. Third, using the optimal general method of moment estimators and interactive term approach, we model the most important channel for foreign capital inflows’ externalities on the real estate markets. The panel results show that FDI and remittance do not have favourable associations with residential and non-residential real estate investments during their initial period of inflow, but in later periods, they correlate positively and significantly with real estate investments. The relation between FPI and the real estate investments is inconclusive. The VAR test suggests that the effects of foreign capital inflows on both residential and non-residential real estate investments vary across countries and markets. In some cases, the effects are time-varying and size-dependent, but in the majority of the cases, the effects are contingent on the size of the inflows. In respect of the most important channel(s) reflective of effects of cross-border flows on real estate markets, the results appear largely country-dependent: the credit market channel appears to stand out in reflecting most favourable externalities from cross-border flows. Further, evidence on the direct channel effect also varied from country to country. The indirect channel of the equity market is only important in South Africa, especially, when remittances are funnelled via the equity market channel. Based on the forgoing, it appears clear that in order to fast-track growth in national real estate markets, we should recommend that African countries put policies in place to motivate direct foreign capital inflows, encourage channelling of foreign capital inflows, particularly remittances and FDIs through the financial markets, with emphasis on credit markets.MT201

Beyond behavioral economics: who is the economic man

There are two reasons to go beyond Behavioral Economics. The first reason is that humans, as presented by this school, do not explain many critical economic problems. Behavioral Economics is not an alternative paradigm to traditional economics. It is only one of the New Schools of thought, that has risen due to the failure of the contemporary Neoclassical School to show that markets have a unique maximum welfare full employment equilibrium. Therefore, in order to delimit Behavioral Economics ́ contributions we need to look at the whole paradigm in economics, which today includes: the contemporary neoclassical paradigm plus all the New Schools of thought. The second reason is that humans, as described by Behavioral Economics, are not a good representation of mans ́ evolutionary characteristics. For Behavioral Economics, humans are emotional beings which often do not know what is best for them, and need the help of the government to make the choices which are truly convenient; and they display altruistic and social cooperative behavior, even in monetary transactions. But evolutionarily we are neither design to be emotional or rational, nor to be selfish or altruistic and socially cooperative. We are design to be flexible for survival purposes, and to display a wide range of behaviors

Beyond behavioral economics: who is the economic man

There are two reasons to go beyond Behavioral Economics. The first reason is that humans, as presented by this school, do not explain many critical economic problems. Behavioral Economics is not an alternative paradigm to traditional economics. It is only one of the New Schools of thought, that has risen due to the failure of the contemporary Neoclassical School to show that markets have a unique maximum welfare full employment equilibrium. Therefore, in order to delimit Behavioral Economics ́ contributions we need to look at the whole paradigm in economics, which today includes: the contemporary neoclassical paradigm plus all the New Schools of thought. The second reason is that humans, as described by Behavioral Economics, are not a good representation of mans ́ evolutionary characteristics. For Behavioral Economics, humans are emotional beings which often do not know what is best for them, and need the help of the government to make the choices which are truly convenient; and they display altruistic and social cooperative behavior, even in monetary transactions. But evolutionarily we are neither design to be emotional or rational, nor to be selfish or altruistic and socially cooperative. We are design to be flexible for survival purposes, and to display a wide range of behaviors