Capital-intensive Countries Research Articles

Testing Hecksher Ohlin Theory : Evidence From Singapore In 1991-2016

This research aims to test Hecksher Ohlin's theory with a capital-intensive country in Asia, namely Singapore with the research period 1991-2016. The time period was chosen to avoid a significant shock, namely the covid 19 that occurred in 2020. However, taking into account the effect of the Asian financial crisis in 1997, the 1991 - 2016 time period was chosen. The data used and obtained are from the World Bank. We examine the variables of labor, investment, consumer price index and export. This study uses VECM Modelling. According to Hecksher Ohlin's theory, a capital-intensive country like Singapore will export its goods and services which has a positive and significant relation with investment. The research's findings support the Hecksher-Ohlin Theory. However, employment is also positively related to investment in Singapore. This is very rational even though Singapore uses a capital-intensive system but still requires manpower. Likewise, the CPI is also significantly positive regarding investment in Singapore, proving that Singapore's production is not only for export orientation but also to meet domestic consumption.

“Made in China” matters: Integration of the global labor market and the global labor share decline

We show that the integration of Chinese labor into the global labor market has played a key role in the global labor share decline since the late 1970s. Several key institutional changes, including the “reform and opening-up” that began in the late 1970s and China's entry into the WTO in 2001, accelerated this process. We build a two-country dual economic model to explain how labor shares decline in labor-intensive and capital-intensive countries simultaneously. Our empirical results show that the integration of Chinese labor significantly affects the global labor share, mainly through the channel of international trade and especially processing trade business.

Spain trade in view of some migratory and economic considerations

The importance of trade and migration flows has become crucial in a time of long and global crisis. This paper analyzes how migration and other significant and novel economic considerations explain international trade. The methodology consists a panel data’ analysis of trade processes measured by export from Spain and import to Spain in 90 countries from 1998 to 2015 regarding immigration and other economic variables. The results show that immigration facilitates international trade of sending and receiving countries. Likewise, the results provide an indirect evidence that labor productivity is relevant for international trade and it also supports the existence a “Say’s Law of Immigration. In addition, the paper shows how labor-intensive countries favor the exports from Spain, and by contrast, capital-intensive countries facilitate the imports from Spain. Finally, the results add empirical evidence about how the lack of technology infrastructure act as a non-tariff trade barrier, meanwhile the membership to EU reduce trade costs, encouraging exports and imports for any country.DOI: http://dx.doi.org/10.5755/j01.ee.29.1.19387

Past and future of the labor force in emerging Asian economies

In this paper we investigate the determinants of past changes in the labor force of 12 emerging Asian countries, and attempt to make projections of the labor force in those countries for the period 2010–2030. Results from our regression analysis of the labor force indicate that the wage earnings elasticity of labor supply is negative, albeit insignificant, for men and significantly positive for women, and it has a significantly positive association with educational level and a negative one with age. We also find that per capita income shows a negative relationship with the labor force in general for younger age groups and older age groups, and more capital-intensive countries have smaller female labor force. Using extrapolation, the paper predicts that the labor force will increase in all 12 countries during the first two decades of the period 2010–2030, but will eventually decline in China, Hong Kong, Singapore, South Korea, and Taiwan. The paper also makes projections of the unemployment rate and the average working hours in those countries.

Some empirics of the bivariate relationship between average subjective well-being and the sustainable wealth of nations

The World Bank's Millennium Capital Assessment (MCA) has provided per capita estimates of total wealth and its major subcategories for a large number of countries. In this article, these macro-level estimates are used to explore bivariate cross-country ‘wealth–happiness’ relationships, focussing on issues of appropriate functional form, parameter stability and outliers. For comparative purposes, ‘income–happiness’ relationships are also explored. Total wealth turns out to be strongly related to Gross National Income (GNI) per capita, due to the importance of produced and intangible capital, but not to natural capital. In contrast, when the most natural capital intensive countries are excluded as outliers, a strong relationship emerges between Subjective Well-Being (SWB) and natural capital, especially amongst high income countries. In these countries, natural capital seems to be an important wealth correlate of SWB, despite accounting for only a very small proportion of total wealth.

A Theory of Outsourcing and Wage Decline

This paper develops a theory of outsourcing in which the circumstances under which factors of production can grab rents play the leading role. One factor has monopoly power (call this labor) while a second factor does not (call this capital). There are two kinds of production tasks: labor-intensive and capital-intensive. We show that if frictions limiting outsourcing are not too large, in equilibrium labor-intensive tasks are separated from capital-intensive tasks into distinct firms. When a capital-intensive country is opened to free trade, outsourcing increases and labor rents decline. A decrease in outsourcing frictions lowers labor rents. (JEL J31, L22, L24)

On the Dynamics of the Hecksher-Ohlin Theory

Over the last decades, large labor intensive countries, like China, have played a growing role in world trade. Using the factor proportions theory, this paper investigates the dynamic effects of economic growth consequent to international trade between countries with different factor proportions. I present a complete characterization of the equilibrium dynamics with initial factor endowments outside the cone of diversification where factor prices are not equalized and either one or both of the countries specialize. I find that while a small country can grow without the retarding force of a terms-of-trade deterioration, a large, capital-intensive country can experience terms-of-trade deteriorations, as a consequence of trading with a large, labor-intensive partner. These terms-of-trade effects have consequences over growth and the pattern of specialization in production. For instance, the capital stock of the poor country can overshoot its long-run steady state. However, at the steady state, the labor intensive country will always remain poorer compared to the capital intensive country. The model can also help to explain why countries experience non-monotonic changes in their pattern of specialization as they grow, why countries do not converge to the same steady state level of income, and why non-factor price equalizations might be the most likely outcome after all.

Past and Future of the Labor Force in Emerging Asian Economies

This paper investigates the determinants of past changes in the labor force of 12 emerging Asian countries, and attempts to make projections of the labor force in those countries for the period 2010-2030. Results from the regression analysis indicate that the labor force has grown faster than the population, has an inverted U-shape relationship with per capita gross domestic product, and is smaller in more capital-intensive countries. Using extrapolation, the paper predicts that the labor force will increase in all 12 economies during the first 2 decades of the period 2010-2030, but will eventually decline in the People’s Republic of China; Hong Kong, China; the Republic of Korea; Singapore; and Taipei, China. The paper also makes projections of the unemployment rate and the average working hours in those economies.

Effect of mergers on firm profits with trade liberalization: the role of technology

The objective of this study is to analyse the effects of trade liberalization on the firm-level profit-enhancing effects of mergers and its dependence on whether the technology is labour intensive or capital-intensive, under an oligopolistic competition framework. Mergers, as considered in this article, cause an increase in the firm-level profits. The extent to which they enhance the profits is inversely proportional to the number of firms in the country. With a freer trade, the profit effect of mergers depends on the extent to which the fall in profit due to fall in price outweighs the gain in profit due to increased output. A firm in the capital-intensive country can gain more from a merger than one in the labour-intensive country, if the aggregate output is at sufficiently large scale.

Effects of trade liberalization on firm profits and social welfare: the role of technology

The objective of this study is to analyse the effects of trade liberalization on profits of a capital-intensive exporting country and a labour-intensive one with different cost functions and the welfare of the importing country under an oligopolistic competition framework. The results show that output is increasing in the degree of trade liberalization and price falls with it. However, the effects of freer trade on profits of the exporting countries are ambiguous and depend on the net gains in profit from free trade. Given the same level of output for both countries, a suffciently high output would bring more profits to the capital-intensive country than to the labour-intensive country. Welfare of the importing country, at least within this framework, is increasing in the degree of trade liberalization, provided that the initial level of restrictions in trade are not too high.

Interactions Between Technology, Profits, Welfare and Profit Effects of Mergers with Trade Restrictions

The objective of this study is to analyse the effects of trade liberalisation on profits of a capital-intensive exporting country and a labour-intensive one with different cost functions and the welfare of the importing country, as well as the effects of trade liberalisation on the firm-level profit-enhancing effects of mergers, under an oligopolistic competition framework. The results show that output is increasing in the degree of trade liberalisation and price falls with it. However, the effects of freer trade on profits of the exporting countries are ambiguous and depend on the net gains in profit from free trade. Given same level of output for both countries, a sufficiently high output would bring more profits to the capital-intensive country than to the labour-intensive country. Welfare of the importing country, at least within this framework, is increasing in the degree of trade liberalisation, provided that the initial level of restrictions in trade are not too high. Mergers, as considered in this paper, cause an increase in the firm-level profits. The extent to which they enhance the profits is inversely proportional to the number of firms in the country. With a freer trade, the profit effect of mergers depends on the extent to which the fall in profit due to fall in price outweighs the gain in profit due to increased output. A firm in the capital-intensive country can gain more from a merger than one in the labour-intensive country, if the aggregate output is at sufficiently large scale.

Transport practice and policy in Mauritius

Like many developing nations over the last twenty years or so, the small, isolated, densely populated, developing Indian Ocean island of Mauritius has undergone––and continues to undergo––a revolution in the way its society lives and works. From a transport perspective, the case of Mauritius is interesting because it exhibits many of the transport problems faced in other countries, such as worsening congestion, air pollution and traffic accidents, but its transport planners have rather less time, experience and resources to develop a solution before the situation becomes critical, due to the faster pace of population, economic growth, and the lack of space. Further, while Mauritius is clearly a developing country, the future policy options currently being considered by the Government are perhaps better suited to a western developed nation than to a less capital intensive country. This paper outlines the development of transport policy on the island to date, and suggests that Mauritius might look to models closer to home to see how to address its problems instead of looking to the West for its inspiration.

Income distribution, factor endowments, and trade openness

This paper studies the empirical links among factor endowments, trade and personal income distribution. By using panel data, we show that land and capital intensive countries have a less equal income distribution while skill intensive countries have a more equal income distribution. We also show that the effects of trade openness on inequality depend on factor endowments in a way consistent with several recent case studies but not with the simple Hecksher–Ohlin framework. Our results are robust to the division of the sample according to level of income, the inclusion of different regressors, the use of different measures of trade openness and of relative factor abundance, and tests for possible problems of endogeneity.