Deep Impact: China and the World Economy

Much of the debate about the impact of China on the international political economy arises from the many dimensions of the potential impact and the lack of historical precedent for such a large change. This paper provides some context for thinking about these issues by contrasting China’s recent expansion with the USA at the end of the last great wave of globalization, and reviewing recent quantitative modelling of China’s growth on other countries. It argues that China’s growth is good for the world economy with significant terms-of-trade gains being experienced in its trading partners, reductions in poverty and increases in living standards. Nevertheless it also suggests we should be cautious in predicting China’s future role in the world economy. It still commands only a fraction of the spending power of the USA and further growth will require China to embrace good institutions and continue the move to a more market-based economy.Economic Growth, India, Growth Accounting, Investment, Productivity

Deciphering The Hindu Growth Epic

India’s investment rate has increased fourfold since 1950 and is now nearly 40% of GDP. Many studies have suggested that this rising investment rate is the most significant component of India’s growth acceleration. I assess these hypotheses using the neoclassical growth model decomposition method. Unlike other methods based on this model, such as Hall and Jones (QJE 1999), the method used in this paper does not rely on the assumption of steady state. I find that the rise in investment rates since the 1970s explains only 30% of India’s growth over that period. I conclude that, notwithstanding the high investment rates, the main source of India’s growth acceleration is the modest upward trend in productivity growth since the 1970s.Economic Growth, India, Growth Accounting, Investment, Productivity

Reflections on Australia’s Skilled Migration Policy

This paper outlines some recent points of debate over the economic impact of skilled migration on Australia. It is argued that the national gains from an increase in skilled immigration are likely to be small but there are significant effects on income distribution. Recent general equilibrium modeling results are used to show that the skill based immigration programme is a blunt instrument for targeting particular skills needs and may have many potential unintended consequences including the “crowding-out” of higher education in Australia.Migration; Skilled immigration; Human capital; Education

Trade and Expropriation: A Factor Proportions Approach

An extended small open economy model is developed and used to examine the effect of trade on the illicit expropriation of incomes and the provision of legal services. We derive conditions under which trade liberalization will reduce expropriation activities. We also derive sufficient conditions for the gains from trade to be amplified or muted relative to the standard model. The signs of these effects depend on factor intensity rankings and factor abundance ratios. Thus the results show that trade liberalization will be beneficial to countries that export labor intensive goods by reducing the incentives for illicit expropriation and reducing the costs of providing legal services. The model also shows that trade liberalization can increase expropriation, particularly for countries that import labor intensive goods and have labor intensive crime problems.Expropriation; Factor Proportions; Gains from Trade; Legal Services

Developing preparedness for flexible delivery of training in enterprises

On a basis of research and literature review, Smith, in 2001, suggested a model for the development of preparedness of learners and their workplaces to support the flexible delivery of training in enterprises. Using the model as a framework, he then developed a detailed set of strategies that may be used in operating workplaces to develop learners and workplaces for effective flexible delivery. The research reported here was designed to test that strategy set in 12 different enterprises to assess the feasibility of their implementation in operating workplaces. The research shows that a majority of suggested strategies are feasible for implementation; some are feasible with qualification; and a minority were not seen as feasible.<br /

Implicit self-comparisons against others could bias quality of life assessments

Objectives: To explore how patient-reported health related quality of life (HRQL) and global health status are affected by use of differing personal reference frames. We hypothesised that implicit comparisons against self at an earlier time, against healthy peers or against ill patients would greatly affect patients’ response values. Study design and setting: Patients in a randomised trial for treatment of Paget’s disease completed annual HRQL questionnaires. Supplementary questions were appended, asking the patients whether they were aware of having made implicit comparisons. Results: The majority of patients reported considering themselves a year ago (31% at baseline), themselves before becoming ill (23%) or other healthy people (24%), with similar proportions during follow up. Mean HRQL scores varied substantially according to the declared frame of reference, with differences as big as 19% of the scale score, or a standardised mean effect size of 0.74 standard deviations. Conclusion: Reported reference frames were associated with effects of similar magnitude to the differences in HRQL that are regarded as clinically important. This may be of particular concern in trials that andomise patients to management in different settings, such as treatment at home / in hospital, or surgery / chemotherapy, and might bias or obscure HRQL differences

Can government policies increase national long-run growth rates?

We obtain time series estimates of the long run growth rates of 17 OECD countries, and test the hypothesis that these are the same across countries. We find that we cannot reject this hypothesis for the first and last three decades of the 20th century. We conclude that: (i) there are few, if any, feasible policies available that have a significant effect on long run growth rates, and; (ii) any policies that can raise national growth rates must be international in scope. The results therefore have bleak implications for the ability of countries to affect their long run growth rates.economic policy, technological change, convergence, economic growth

A New Taxonomy of Economic sectors With a View to Policy Implications

This paper is an attempt to tease out a taxonomy of economic sectors based on a systems approach to innovation and economic growth that may be useful for policy analysis. The taxonomy explored here revolves around novel products rather than ethereal knowledge-producing entities. This insight goes back to Allyn Young (1928) and Joseph Schumpeter (1934) who argued that the introduction of new goods was the engine of economic growth. More precisely, our taxonomy of sectors focuses on novel products which are efficiency-enhancing within and between sectors through the market mechanism. The scheme revolves around the relationship between 'Enabling' and 'Recipient' sectors (which gives the taxonomy its name: ER), and offers a lens for viewing and interpreting a substantive part of the mechanics of modern economic growth. The last part of the paper briefly discusses a few immediate policy implications, although it has the potential for greater use and value in this regard.innovation, economic growth, enabling linkages approach, knowledge-based economies, novel products, efficiency-enhancing innovations

The Dynamic Effects of Skilled Labour Targeting in Immigration Programs

We consider the impact of the recent trend in immigration policies towards selecting migrants on the basis of skills. The analysis uses an inter-temporal general equilibrium model with endogenous skill formation. The model is calibrated to a steady state benchmark that represents Australia in 2000-2001. We then consider the impact of the increase in skilled migrants of approximately 20 thousand per year, which corresponds to the increase in flows of migrant Professionals in Australia since 2000. We find that this generates substantial crowding out of the higher Education sector in Australia. Moreover we show that, when this shock is anticipated as a permanent policy change, there is very little net increase in the stock of skilled labour due to falling student enrollments of 12%. Paradoxically, in this case, the decline in students increases the number of unskilled workers in the economy such that the ratio skilled to unskilled workers in the economy actually falls and the skill premium increases.Immigration; Human Capital; Computable General Equilibrium Models