Resource Boom, Productivity Growth and Real Exchange Rate Dynamics - A dynamic general equilibrium analysis of South Africa.

We study the impact of a natural resource boom on structural change and real exchange rate dynamics, taking into account the indirect effect via relative sectoral productivity changes. Our contribution relative to the Dutch disease literature is threefold. First, the productivity specification is extended from simple learning by doing to include trade barriers and technology gap dynamics, consistent with the modern understanding of productivity growth. Second, we offer a dynamic general equilibrium model with imperfect substitution between domestic and foreign goods. Third, the model is applied to South Africa and analyzes the macroeconomic impact of the gold price increase in the 1970s. Political pressure for rapid domestic spending after a surge in resource rents tends to generate myopic government behavior with unsustainable high consumption spending. Such fiscal response to higher resource income is captured by the model specification. Numerical simulations show how the resource boom can help explain the structural change and real exchange rate path observed in South Africa. Due to productivity effects the initial real appreciation is followed by gradual depreciation of the real exchange rate.gold price boom;Dutch disease;trade barriers;fiscal response;deindustrialization

Multinational supermarket chains in developing countries: Does local agriculture benefit

There is no consensus in the empirical literature on how entry of multinational supermarket chains affects farmers in developing countries. We quantify the dynamic effects of supermarket expansion on agriculture within a structural framework that clarifies the adjustment mechanisms involved. The model specification takes the potential productivity linkage between supermarkets and local suppliers into account. While econometric analyses struggle with causality issues, we analyze the endogenous interaction between supermarkets’ choice of suppliers and agricultural productivity. Based on numerical simulations, two results emerge. First, we offer a possible understanding of the conflicting evidence in the empirical literature. Whether farmers benefit from supermarkets or get stuck in a low productivity trap depends on the extent of local constraints related to production capacity and market access. Second, supply chain development initiated by supermarkets can help farmers escape the low productivity trap. While supermarkets face a short run cost, they gradually gain from more productive local suppliers.

Productivity Growth in Backward Economies and the Role of Barriers to Technology Adoption

We offer a barrier model of growth with a broader understanding of the sources of productivity growth. Organizational change is suggested as an alternative to innovation and technology adoption. Domestic and international barriers (related to the level of human capital and the trade share) determine the timing and pace of technological catch-up, and as opposed to the catchingup hypothesis backward economies may get stuck in a poverty trap. Growth in lagging economies is not driven by adoption of foreign technology due to inappropriateness. The large technological distance forces the economy to rely more on own productivity improvements through organizational change. Trade liberalization in backward economies does not give the expected boost to productivity growth, because of low capability to take advantage of the frontier technology. Economies can escape the poverty trap by reducing trade barriers, but the benefits from an open economy is highest in middle-income economies, which have both the potential and capability to adopt foreign technology.Ramsey-model; sources of growth; trade barriers; poverty trap

Ramsey model of barriers to growth and skill-biased income distribution in South Africa

The paper integrates two mechanisms of economic growth, barriers to international spillovers and skill-biased effects on the income distribution. South Africa is an interesting case study because of dramatic changes in international barriers over time and policy focus to productivity and distribution. Barriers affect the balance between innovation and adoption in the productivity growth and thereby the skill-bias. The productivity dynamics and the distributional implications are investigated in an intertemporal Ramsey growth model. The model offers a calibrated tariff-equivalence measure of the sanction effect and allows for counterfactual analysis of no-sanctions. Increased openness is shown to reduce barriers to technology adoption leading to skill-biased economic growth and worsened income distribution. The result is consistent with the observation that economic growth under sanctions has been slow and with an increase in the relative wage of unskilled labor. The tradeoff between barriers and skill-bias, foreign spillover driven productivity growth and income distribution, obviously is a challenge for growth policy.

Learning and Foreign Technology Spillover in Thailand: Empirical Evidence on Productivity Dynamics

Thailand has experienced annual average growth of GDP of remarkable 6.6% during the period 1950 – 2000. We analyze total factor productivity (TFP) growth in a modified Nelson-Phelps framework where foreign trade and foreign direct investment influence the adoption of technology. The econometric analysis separating between sources of productivity for agriculture and industry covers the period 1975 – 96. International spillovers are significant and important, and both sectors have been able to take benefit of openness. The analysis addresses the endogeneity issues involved in the estimation of TFP sources and investigates the dynamics of productivity. The effects during the period studied must be interpreted as transition growth, and endogenous growth effects are rejected.

Learning by Exporting and Productivity-investment Interaction: An Intertemporal General Equilibrium Analysis of the Growth Process in Thailand

While the discussion of Thailand and East Asian growth has been a controversy between capital accumulation and productivity stories, we analyze the general equilibrium interaction between productivity and investment in an intertemporal model. The model builds in endogenous productivity spillover effects influencing profitability and investment and produces long run growth effects of economic policy. To understand the growth process in Thailand, learning by exporting is assumed to be the main vehicle of international spillover and brings further productivity effects to the domestic economy. The dynamic simulations show how high economic growth is prolonged by multisector productivity and investment dynamics and structural shift from agriculture to exportables. The importance of trade liberalization is shown in a counterfactual analysis where protection holds back growth by serving as a barrier to productivity spillover.intertemporal growth modeling; endogenous productivity growth; learning by exporting; trade and growth; Thailand

Assortative labor matching, city size, and the education level of workers

We investigate the heterogeneity of assortative labor matching with respect to geography, skills, and tasks. Our contribution is to separate plant quality by education level and occupation tasks using the AKM-model. We introduce a geology-related instrument to analyze the city effect and address limited mobility bias. Using rich administrative worker-plant dataset for Norway, we show that matching of the college educated have a strong city effect. The IV estimates indicate that a doubling of city size increases the correlation between worker and plant quality by 9 percentage points. A wage decomposition shows that matching accounts for 22% of the urban wage premium adjusted for sorting. In terms of occupations, better matching in cities is observed only for non-routine abstract tasks.publishedVersio

The gender wage gap and the early-career effect: the role of actual experience and education level

This paper studies how the gender wage gap develops with work experience throughout the career. The contribution is twofold. First, the analysis applies matched employer-employee register data with information on actual, rather than potential, experience. Second, the career effect of the gender wage gap is allowed to differ by workers’ education level. The male wage premium is small upon entry to the labor market, whereas it increases rapidly throughout the early career, before stabilizing. In contrast to the existing literature, the estimates reveal heterogeneity among high-educated workers, where the widening of the wage gap is much smaller for postgraduates than other college graduates

Assortative labor matching, city size, and the education level of workers

Recent research shows that thicker labor markets display better assortative matching. Our contribution addresses identification challenges and heterogeneity of effects, in particular with respect to education. Using a rich administrative worker-firm dataset for Norway, labor market size is shown to be of relevance for assortative matching mainly for the college educated. Among these, the pattern is most pronounced for workers of intermediate ages, with education related to business and administration, men, and service sector workers. Results are robust to instrumentation of population size using historical mines and sample adjustment to mitigate limited mobility bias.publishedVersio

National income taxation and the geographic distribution of population

We study how different national taxation schemes interact with geographic variation in productivity and consumption amenities in determining regional populations. A neoclassical migration equilibrium model is used to analyze the current nominal income tax system in Norway. The analysis is based on estimated regional income differences accounting for both observable and unobservable individual characteristics and the value of experience. Given regional differences in incomes and housing prices, quality of life and productivity are calibrated to model equilibrium. Compared to an undistorted equilibrium with lump-sum taxation, nominal income taxation creates a disincentive to locate in productive high-income regions. The deadweight loss due to locational inefficiencies is 0.18% of gross domestic product (GDP). We study real income taxation and equal real taxes as alternative tax systems. Both alternatives generate a geographic distribution of the population closer to the undistorted equilibrium, and hence with lower deadweight loss. In an extension of the analysis, we take into account payroll taxes. The existing regionally differentiated payroll taxes to the disadvantage of cities generate a deadweight loss of 0.22% of GDP in an economy with lump-sum income taxation. The two distortionary taxes interact and strengthen each other and the combined distortionary effect of income and payroll taxation in the Norwegian system is 0.46% of GDP