Intersectoral resource allocation and its impact on economic development in the Philippines

For sustained growth, a developing economy must provide productive employment opportunities in nonagricultural sectors. As the economy grows, employment shifts from the agricultural sector to industrial and service sectors. The move away from agriculture happens because of the decline in the income elasticity of food as incomes rise, the discovery of substitutes for agricultural products, and rapid technological changes in agriculture in response to shortages of land. The economic policies developing economies pursue are typically designed to accelerate this structural transformation by favoring the industrial sector. In the Philippines, however, the outcome of these policies was unique. Measures designed to discourage agriculture, rather than encourage the industrial sector, caused both the industrial sector and the agricultural sector to deteriorate. The authors criticize financial conglomerates for creating highly oligopolistic market structures that were responsible for the inefficient use of resources and unbalanced income distribution. Many of the conglomerates (dubbed"landed capitalists") channeled massive state resources into such traditional economic activities as sugar and coconut farming, limiting the country's industrial diversification.Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Fiscal&Monetary Policy,Agricultural Knowledge&Information Systems,Economic Theory&Research,Banks&Banking Reform,Agricultural Knowledge&Information Systems,Municipal Financial Management,Environmental Economics&Policies

The Declining Labor Income Shares Revisited: Intersectoral Production Linkage in Global Value Chains

The decrease in labor income share has gained worldwide publicity given that it may affect income inequality and other macroeconomic aggregates. This chapter focuses on global value chains (GVCs) as an important determinant of changes in the labor income share and indicates the mechanism responsible for the share decline under GVCs, which has not been documented in prior studies. The mechanism of developing countries is of particular research interest. In such countries, the services sector promotes capital deepening and increased involvement in GVCs because nonservices (especially manufacturing) tasks are offshored from developed to developing countries, creating demand for services as intermediate input to these tasks in the recipient developing countries. As a result, capital deepening is promoted in the services sector, and this results in lower labor income share. We conclude that the intersectoral production linkage between the services and nonservices sectors plays a major role in the downward trend of labor income share in developing countries

Are Japanese Firms Failing to Catch up in Localization? An Empirical Analysis Based on Affiliate-level Data of Japanese Firms and a Case Study of the Automobile Industry in China

This paper analyzes the degree and the current status of localization of Japanese affiliates in China. For this purpose, we (1) compare the localization (measured in terms of the number of expatriates, local sales, local procurement, and local management) of Japanese and U.S. affiliates in China and other major regions; (2) analyze the impact of localization on the profitability of Japanese affiliates in China and in other major regions; and (3) conduct a detailed investigation of inter-firm transactional relationships in China between automobile manufacturers and parts suppliers. We find that compared with U.S. affiliates, Japanese affiliates tend to be less localized. Using a comprehensive affiliate-level panel data set on Japanese multinationals and concentrating on China, we then examine the effect of localization quantitatively and find that Japanese affiliates with higher procurement ratios and/or local CEOs and procurement managers enjoyed high profits. Next, turning to the factors determining trading relationships between assemblers and suppliers of different nationalities in China, our analysis suggests that even when taking various control variables into account, such as suppliers' productivity level and the distance between assembler and supplier, the transactional relationships of Japanese suppliers are more limited than those of suppliers of other nationalities. Moreover, Japanese automobile assemblers do not choose suppliers based on their current labor productivity level and transactional relationships between assemblers and suppliers are more closed in the case of Japanese firms than in the case of firms of other nationalities. On the other hand, we find that auto parts suppliers dealing with Japanese assemblers see their productivity grow faster regardless of the supplier's nationality. The results indicate that Japanese assemblers may well be choosing business partners which they expect to realize sustainable productivity increases in the future rather than focusing on present productivity levels. This finding provides evidence of business practices based on a long-term perspective characteristic of Japanese enterprises.

Hyper Extremely Red Objects in the Subaru Deep Field: Evidence for Primordial Elliptical Galaxies in the Dusty Starburst Phase

We report observational analyses and theoretical interpretations of unusually red galaxies in the Subaru Deep Field (SDF). A careful analysis of the SDF data revealed a population with unusually red near-infrared (NIR) colors of J - K >~ 3-4, with higher confidence than the previous SDF result. Their surface number density drastically increases at K >~ 22 and becomes roughly the same with that of dusty starburst galaxies detected by submillimeter observations in recent years. These colors are even redder than the known population of the extremely red objects (EROs), and too red to explain by passively evolving elliptical galaxies which are the largest population of EROs. Hence these hyper extremely red objects (HEROs) should be considered as a distinct population from EROs. We discuss several possible interpretations of these enigmatic objects, and we show that these red NIR colors, K-band and sub-mm flux, and surface number density are quantitatively best explained by primordial elliptical galaxies reddened by dust, still in the starburst phase of their formation at z ~ 3.Comment: Accepted by ApJ Letter

US External debt sustainability revisited: Bayesian analysis of extended Markov switching unit root test

米国の対外債務の維持可能性について、拡張型のマルコフ・スイッチング（ＭＳ）単位根検定という手法を使い検討した。定常、非定常の異なる局面間の遷移確率を従来一般的な固定型から可変型に変え、さらに各時点の状態確率が、対外収支と理論的にも密接な関係を持つ実質為替レートの影響を受けるというモデルになっている。同国の対外債務ＧＤＰ比は歴史的にみてまだ比較的高い水準にあるが、維持可能性確率が予想外に高い水準にあることがわかった。 : The sustainability of US external debt, which has been an issue of global concern, is analyzed using a Markov switching (MS) unit root test applied to the flow of debt, i.e., the current account. The first to apply the MS unit root test to the issue of US external debt in order to examine local stationarity and global stationarity were Raybaudi et al. (2004). This paper introduces an extended MS unit root test where the transition probability is time-varying rather than fixed, as is usually the case, and the change of probability is explained by the real exchange rate, which theory suggests has a close relationship with the external balance. The extended MS unit root test calculated by the Markov Chain Monte Carlo (MCMC) method provides us with new insights on the issue of US external debt in recent years, suggesting that even though the debt/current account–GDP ratio remains relatively high, the probability of stationarity (sustainability) is unexpectedly high when recent US dollar depreciation is taken into account

The exact import price and its implications for the US external imbalance

This article calculates the Feenstra's (1994) 'exact price index' for each category of US-imported goods and aggregates them to analyse the US import demand equation for assessing the seriousness of the external imbalance. What distinguishes Feenstra's exact price index is that it incorporates new product varieties. The exact import price index thus calculated suggests that US conventional import prices are biased upwards. The consequent downward adjustment in import prices causes appreciation in the real exchange rate and lowers the excessive portion of imports (the difference between actual and theoretical amounts of imports obtained from the import demand equation). Since the early 2000s, however, the role that new product varieties play in lowering the excessive portion of imports has declined because the impact of new products on import prices has been outweighed by the impact of the spike in primary commodity prices, which has resulted in a substantial depreciation of the real exchange rate. It is possible that this depreciation combined with relatively large excessive imports has caused the subsequent US current account deficit to stop expansion from the late 2000s onwards.exact import price index, import demand equation, real exchange rate, US external imbalance,

Japan Center for Economic Research Measuring the Costs of an Asian Currency Unit

countries in India late May, it was agreed that they will conduct a study on a “regional currency unit. ” The initiative has been driven by their ever-growing mutual dependence through trade and investment and the consequent increase in importance of foreign exchange rate stability in the region. The first step towards such integration would actually involve efforts by each country in stabilizing its currency against a basket of yen, US dollar and euro. This would, in turn, collectively result in stable foreign exchange rates among their currencies. In Europe, a regional currency unit, ECU, was introduced before the single currency, euro. There are even wider economic disparities among Asian countries and a single currency is not an immediate option. It is, therefore, important to understand what influences coordination of foreign exchange policies vis-à-vis a currency basket, or a move towards a single-currency regime, Asian currency, would likely have on the regional economy. Merits and Costs of a Single Currency According to the theory of an Optimal Currency Area, or OCA, one of the greates

Do Japanese Firms Fail to Catch up in Localization? An Empirical Analysis Based on Affiliate-level Data of Japanese Firms and a Case Study of Automobile Industry in China

This paper analyzed the degree and the current status of localization of Japanese affiliates in China, dealing with the following three major issues- (1) comparison of localization (expatriates, local sales, local procurement, local management) of Japanese and US affiliates in China and in other major regions; (2) Analysis of the impact of localization on profitability of Japanese affiliates in China and in other major regions; and (3) Detailed investigation on inter-firm transaction relationships in China in the case of automobile manufacturers and the parts suppliers. Compared with the U.S. affiliates, Japanese affiliates tended to be less localized. The quantitative analysis based on the comprehensive affiliate-level panel data of Japanese multinational firms for the period from 1989 to 2002, confirmed that in China, Japanese affiliates with higher local procurement ratios, local CEOs, and local procurement managers, had higher profits. The analysis as of factors determining trading relationships between joint-venture assemblers and parts suppliers of different nationalities in China found that even when various variables, including the level of suppliers productivity and the distance between assemblers and suppliers are controlled for, Japanese suppliers transactional relationships are more limited than those of other suppliers. With respect to non-Japanese assemblers, high-productivity suppliers are engaged in significantly more transactional relationships. By contrast, the same was not found for Japanese assemblers. The results indicate that Japanese assemblers may well be choosing business partners which they expect to realize sustainable productivity increases in the future rather than focusing on present productivity levels. This finding provides evidence of business practices based on a long-term perspective characteristic of Japanese businesses.