The Complementarity Between Trade In Goods And Capital Flows: An Empirical Study Of G7 Countries

This paper attempts to empirically examine whether trade in goods and assets are complementary. This is tested by assessing whether  countries that are more open in terms of trade policy are also more open in terms of capital flows; that is, whether the degree of capital mobility is positively related to openness. For this purpose, we examine the dynamics of saving-investment relationship in a group of seven most industrialized countries over the 1982-2003 period using a random coefficients error correction model

On The Relation Between Regulation And Economic Growth

This paper examines the relation between regulation and economic performance in the context of 23 developed economies. We apply a generalisation of the growth accounting model popularized by Solow to data over the 2002-2008 period. In the model, we assume that regulatory quality impacts on growth via its impact on total factor productivity growth. We look at three measures of regulatory quality, all of which are based on the set of governance indicators developed by the World Bank. The model is estimated using a fixed effects as well as a random effects estimation strategy. Our findings do lend support for the view that the better the quality of regulation, the higher rate of economic growth, but find no support for the view that the strength of the positive growth impact is stronger for countries that rank relatively lower on the regulatory quality scale

On The Growth Process Of Firms: Does Size Matter?

The purpose of this empirical study is to investigate whether the growth process of firms is best explained essentially by a random process as envisaged by Gibrat’s law, or by identifiable systematic influences such as growth persistence and firm size. A dynamic random coefficients model is applied to data on 260 Canadian firms classified into four groups according to firm size.  Gibrat’s law of proportionate effect is not supported by the empirical results. Specifically, the findings indicate that smaller firms grow faster than larger ones in all cases.  However, they also show that the effect of the disadvantage of size on growth is somewhat different for each group

The Current Account And The Intertemporal Budget Constraint: Evidence From G-7 Countries

A random coefficients, error-correction model of saving-investment behaviour, which is consistent with intertemporal open-economy models, is estimated for G-7 countries to infer about the current account, capital mobility and the relevance of intertemporal budget constraints in such model. The error-correction mechanism is especially suited here since it is able to integrate short run dynamics with long run behaviour, while the random coefficients approach is a natural specification for accommodating inter-country differences. If saving-investment correlations measure capital mobility, a positive correlation would mean that a country’s growth prospects would be constrained by its saving, government deficits would crowd out private investment and, at a broader level, good investment opportunities might have to be foregone unless the required resources were obtained through a sacrifice in current consumption. On the other hand, those correlations could also be seen as validating the use of intertemporal budget constraints in open-economy models.

Is the lower return to immigrants’ foreign schooling a post arrival problem in Canada?

Published VersionUsing the 2006 Canadian Census, this paper investigates the lower return to immigrants’ foreign education credentials after adjusting for their occupational matching in hosting labor markets. We develop two continuous indices that quantify the matching quality of the native-born in both horizontal (fields of study) and vertical (educational degrees) dimensions. This allows us to separate the effects of immigrants’ occupational attainment and their foreign schooling quality on wage earnings by measuring immigrants’ occupational match relative to that of native-born. Our findings indicate that the lack of portability in immigrants’ foreign credentials may not be addressed effectively by post arrival policies as the results show that a significant and persistent poor matching quality for internationally educated immigrants cannot substantiate the lower return to their foreign education credentials

On the impact of trade openness on growth: further evidence from OECD countries

This study attempts to examine empirically the implications of the degree of openness for total and individual factor productivity growth in a group of 19 OECD countries over the last three decades. The study combines both time series and cross-sectional data. The model employed is a generalization of the commonly used, growth-accounting model based on the concept of an aggregate production function in which the rate of economic growth is a function of capital and labour accumulation and total factor productivity. It is explicitly assumed that total factor productivity depends, in turn, upon the rate of export expansion. The model is then estimated using the random coefficients approach. While results generally indicate that the relative importance of trade openness on economic growth varies significantly across countries, they also indicate that the role of capital and labour accumulation in fostering economic growth varies with the degree of openness, cross-sectionally as well as across time.

An Empirical Investigation of the Impact of Imperfect Information on Wages in Canada

Most studies of wage differentials explain such differentials in terms of factors like gender, race, and human capital. But systematic gaps in earnings can arise even among homogenous individuals as a result of asymmetric employer and worker information gaps, thereby reflecting labour market inefficiency. This paper estimates these gaps in terms of wage differentials across various population groups in Canada. We examine 21 populations groups, which include a number of immigrant groups as well. Information gaps are likely to be important in the context of immigrants, especially those new to Canadian labour markets. Our special interest is not only to compare information gaps of immigrant and other population groups, but also to assess whether (and how) immigrant information gaps depend upon the length of residence in Canada. The econometric model we employ is the two-tier stochastic earnings frontier, which is estimated using data from the 2001, 1996 and 1991 censuses