Human capital, mechanisms of technological diffusion and the role of technological shocks in the speed of diffusion: Evidence from a panel of Mediterranean countries

Our main goal is to ascertain the importance of human capital as a facilitator of technological diffusion in a sample of seven Mediterranean countries (Algeria, Cyprus, Israel, Egypt, Syria, Tunisia, and Turkey) for the period 1960-2000. First, we estimate the technological progress growth rate and the technological gap between each country in our sample and the technological leader (the USA), following the methodology of Benhabib and Spiegel (2002). We then address the issue of the importance of technology diffusion for the TFP growth rate through the Nelson and Phelps (1966) hypothesis - the potential speed of technology diffusion is inversely related to the degree of technological backwardness of the follower country and its ability to absorb new technologies will depend positively on its human capital level. The non-linear specification of the TFP growth rate proposed by Benhabib and Spiegel (2002) is estimated to control for the type of technological diffusion: logistic or exponential. The empirical analysis is applied to two samples: a smaller one consisting of the above-mentioned countries, and a larger one that includes some European countries. First, we studied the unit root characteristic of the TFP growth rate series using unit root panel tests. The results obtained allowed the use of traditional econometric methods for both equations. For the first equation estimations were performed using the NLLS estimation procedure, as it is a non-linear equation. The second equation, was estimated using OLS with robust errors, the fixed effects model and the random effects model, as it is a linear equation. The empirical importance of human capital in fostering technological diffusion is also addressed through the FDI channel, by which technology is transferred from the leader to the followers. The host economy needs a sufficient level of human capital in order to apply the technology of the leader, i.e., the stock of human capital of the follower country limits its absorptive capability. We also analyse the role of human capital as a facilitator of the diffusion of a particular type of technology, ICT, where there is a role for different educational levels. In both cases we take Lee (2000) as the basic framework for our estimations. Finally, the last part of the paper discusses the importance of technological shocks to the process of technological diffusion. The speed of technological diffusion, and consequently the evolution of cross-country differences in GDP growth rates and levels, depend, to a large extent, on exogenous shocks. We propose to model technological shocks for each of the seven countries in our sample in a simple VAR model with four variables: their TFP growth rate, the logarithm of GDP per capita, the logarithm of investment per capita, and the logarithm of the stock of human capital.Economic growth, Education, Human capital, Panel data, VAR models

Education and growth: an industry-level analysis of the Portuguese manufacturing

TThis paper investigates the education–growth link at the more disaggregate industry level in the Portuguese manufacturing sector with a focus on different levels of education. The insights from new growth theory and a modified and augmented version of the Benhabib and Spiegel (1994) specification are the basis for the empirical analysis of the role of education in innovation and imitation activities highlighting a role for specific schooling levels across industries according to their technological characteristics and its interaction with international trade. We use data for the period 1986–1997, fourteen Portuguese manufacturing industries and panel data econometric techniques. Our most robust finding concerns the relevance of technology spillovers embodied in imports for productivity growth, as long as manufacturing industries employ workers with skills provided by secondary education. The Portuguese manufacturing industry cannot rely on automatic technological catch up for productivity growth so active trade and education policies are crucial to recover from the present bottom position in the rank of OECD productivity levels.education, innovation, technology diffusion, productivity growth, panel data

Channels of transmission of inequality to growth: A survey of the theory and evidence from a Portuguese perspective

We review the theoretical and empirical literature on the relationship between inequality and economic growth from the perspective of the Portuguese economy in order to identify the correct (predicted) sign for the relationship in this particular country and the underlying mechanisms that explain it. Different mechanisms relating inequality and economic growth can be at stake explaining why different countries can experience different outcomes in the same period of time or why the same country experiences different outcomes in different periods of time. It is thus fundamental to correctly identify the channels of transmission of inequality to growth in the Portuguese economy. Ideally, all the mechanisms selected should be tested, but prior judgments should also lead us to produce a ranking of the mechanisms according to its relevance for the economy under analysis. This correct identification and ranking leads to more accurate policy recommendations as far as redistributive policies for the Portuguese economy are concerned.Inequality; Growth; Portugal.

The Fundamentals of the Portuguese Crisis

This paper analyses the fundamentals of the Portuguese crisis. The financial crisis of 2007 worsened and triggered the current Portuguese crisis. We argue that the main problem the economy is facing is its output stagnation due to a kind of Dutch disease that has created high and increasing levels of indebtedness, low and decreasing levels of saving and has reduced Portuguese competitiveness. Moreover, the existence of a dualist labour market and a new wave of emigration produce inefficiency, increasing unemployment of younger workers and the supply of human capital abroad funded by the Portuguese taxpayers. Governance problems such as poor public budget governance and lack of transparency and accountability are also at stake. These governance problems must be solved to allow the economy to return to its long-run growth path.ntion paid to it than hitherto.Growth, Debt, Saving, Dutch disease, Unemployment, Budget policy

Exchange Rate Target Zones: A Survey of the Literature

This work selectively reviews the literature on exchange rate target zones and their theoretical and empirical methodologies and examines whether they can be used to clarify to what extent this type of exchange rate regime could contribute to greater exchange rate stability. We discuss the main contributions of the first and second generations of exchange rate target zone models. In an attempt to reconcile the poor empirical performance of the Krugman (1991) model with the reality of exchange rate target zone regimes, this line of research integrates target zones with alternative underlying economic models, such as imperfect credibility, intra-marginal interventions and sticky price models. It was thus possible to understand the correlations observed between the exchange rate, its fundamentals determinants and the interest rate differential, and to explain the fact that the statistical distribution of the exchange rate is hump-shaped rather than U-shaped. This implies that the initial emphasis of target zone models on nonlinearities, “honeymoon effect”, “smooth pasting” and marginal interventions has vanished. Exchange rate target zones are better described as similar to managed floating regimes with intra-marginal interventions, with some marginal interventions when the exchange rate reaches the edges of the floating band.Exchange rate target zones, imperfect credibility, intra-marginal interventions realignments and sticky prices.

Exchange Rate Mean Reversion within a Target Zone: Evidence from a Country on the Periphery of the ERM

The aim of this study is to assess to what extent the Portuguese participation in the European Monetary System (EMS) has been characterized by mean reverting behaviour, as predicted by the exchange rate target zone model developed by Krugman (1991). For this purpose, a new class of mean reversion tests is introduced. The empirical analysis of mean reversion in the Portuguese exchange rate shows that most of the traditional unit root and stationarity tests point to the nonstationarity of the exchange rate within the band. However, using a set of variance-ratio tests, it was possible to detect the presence of a martingale difference sequence. This suggests that the Portuguese foreign exchange market has functioned efficiently, allowing us to conclude that the adoption of an exchange rate target zone regime has contributed decisively to the creation of the macroeconomic stability conditions necessary for the participation of Portugal in the euro area.difference sequence, mean reversion, stationarity, target zones and unit roots

The Fundamentals of the Portuguese Crisis

This paper analyses the fundamentals of the Portuguese crisis. The financial crisis of 2007 worsened and triggered the current Portuguese crisis. We argue that the main problem that the economy is facing is its output stagnation due to a kind of Dutch disease that has created high and increasing levels of indebtedness, low and decreasing levels of saving and has reduced Portuguese competitiveness. Moreover, the existence of a dualist labour market and a new vague of emigration reproduces inefficiency increasing unemployment of younger workers and the supply of human capital abroad funded by the Portuguese taxpayers. Governance problems such as bad public budget governance, lack of transparency and accountability are also at stake and have to be solved to allow the economy to return to its long-run growth path.Growth, Debt, Saving, Dutch disease, Unemployment, Budget policy.

Exchange Rate and Interest Rate Distribution and Volatility under the Portuguese Target Zone

The aim of this study is to analyse the exchange rate and interest rate distribution and volatility under the participation of the Portuguese economy in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) based on some of the main predictions of the target zone literature. Portugal adopted this exchange rate target zone from April 6 1992 until December 31 1998. During this period, the exchange rate distribution reveals that the majority of the observations lie close to the central parity, thus rejecting one of the key predictions of the Paul Krugman (1991) model. The analysis of the data also shows that exchange rate volatility tended to increase as the exchange rate approached the edges of the band, contrary to the predictions of the basic model. Interest rate differential volatility, on the other hand, seemed to behave in line with theoretical predictions. This suggests an increase in the credibility of monetary policy, allowing us to conclude that the adoption of a target zone has contributed decisively to the creation of the macroeconomic stability conditions necessary for the participation in the European Monetary Union (EMU). The Portuguese integration process should therefore be considered as an example to be followed by other small open economies in transition to the euro area.Exchange rate stability, EMS, Volatility and target zones

Exchange Rate and Interest Rate Volatility in a Target Zone: The Portuguese Case

This work examines the participation of the Portuguese economy in the ERM of the EMS based on some of the main predictions of the target zone literature. The exchange rate distribution reveals that the majority of the observations lie close to the central parity, thus rejecting one of the key predictions of the Krugman (1991) model. Using a M-GARCH model however we confirm that there is a trade-off between exchange rate volatility and interest rates differential volatility. These results express the increased credibility of the Portuguese monetary policy, due manly to the modernisation of the banking and financial system and to the progress made in terms of the disinflation process under an exchange rate target zone policy. In accordance to these results we can say that the participation of the Portuguese escudo in an exchange rate target zone was crucial to create the conditions of stability, credibility and confidence necessary for the adoption of a single currency.Credibility, Exchange rate stability, M-GARCH, ERM, EMS, Volatility and target zones

The Rise of the Portuguese Contemporary Art Market in the 21st Century

UIDB/00417/2020 UIDP/00417/2020The aim of this article is to characterise the rise of the Portuguese contemporary art market since the beginning of the 21st century, within the broader context of the global contemporary art market. Against a theoretical backdrop of the globalisation of markets for contemporary art and the concept of the periphery, I will analyse Lisbon’s art scene as a local phenomenon that is looking for an international recognition. In doing so, I am focusing on two working hypotheses. The first relates to the efforts made by the gallery sector to raise the international profile of its artists, giving them sought-after widespread recognition, which encompasses a historical perspective on the situation and a prominent role for the younger generation of gallerists. The second intends to observe the role played by private collectors and their contributions towards boosting the art scene, assembling their contemporary art collections and making them available to the public. I conclude that this has led to an upsurge in the contemporary art market in connection with the growing number of validating structures, museums, and art centres, due mainly to the fact that the shortcomings of the public sector are being made up for by private initiatives.publishersversionpublishe