Differences In Factor Endowments Research Articles

Differences in Total Factor Productivity and the Pattern of International Trade

In this work, we develop a trade model that explains the pattern of trade between countries based on differences in total factor productivity (TFP) while also accounting for differences in relative factor endowments. The novelty stems from the introduction of production functions derived by combining the Ricardian and Heckscher–Ohlin–Samuelson (H-O-S) theories, with TFP differences serving as the basis of comparative advantage. To this end, a testable hypothesis is derived. For the empirical measurement of the TFP in each industry and country, a constant elasticity of substitution (CES)-type production function was employed, and the TFP was calculated as the Solow residual from the production function’s fixed term. To offer a better understanding, the model was tested for the bilateral trade between Germany and Russia, and Germany and the Czech Republic. It was found that TFP differences can be used as a basis for explaining comparative advantages and, consequently, the bilateral pattern of trade between two countries.

Energy security as a source of international competitiveness in new EU member states

Abstract Energy security and international competitiveness are two of the most fiercely discussed topics – especially in the light of the European Union (EU)’s dependence on Russia’s gas, oil, and coal. Both mentioned concepts are of special importance for the so-called EU new member states (EU NMS), which are undergoing the energy diversification process. The main goal of this paper is to analyze how energy security influences the international competitiveness of these countries. The study uses trade theories related to productivity differentials (Ricardian hypothesis) and differences in factor endowments (Heckscher–Ohlin hypothesis) as a basis for our econometric modeling. The results show that relative energy supply as well as physical and human capital relative endowments have a statistically significant impact on international competitiveness of the studied economies.

European Integration and International M&As: The Case of Poland

This paper studies determinants of international mergers and acquisitions (M&As) in Poland using the predictions of the knowledge capital model of multinational enterprise. The empirical implementation of the theory is based on the negative binomial model and the bilateral dataset covering 143 countries over the period 1995–2015. Our estimation results indicate that M&As in Poland are explained by both differences in relative factor endowments and in market size which confirms the importance of both market seeking and efficiency seeking motives. Moreover, the efficiency seeking motive is losing its importance over time while the market seeking motive becomes more important.

Environmental Regulation, Urban-Rural Income Gap and Agricultural Green Total Factor Productivity

Environmental regulation is the basis for achieving green agricultural development, and urban-rural integration is the key to optimizing the allocation of agricultural elements and achieving sustainable agricultural development. This paper aims to investigate the spatial spillover effect of environmental regulation on China’s agricultural green total factor productivity (AGTFP) and examine the mediating effect of the urban-rural income gap. Both the Super-SBM-DEA model and the Global Malmquist–Luenberger productivity index are used to account for the AGTFP of China’s 30 provinces, and the spatial Durbin model and the mediating effect model are used to analyze the impact of environmental regulation. We found that firstly, during the sample period, China’s AGTFP has increased with an average annual growth rate of 3.27%, which is mainly promoted by agricultural green technology progress (AGTC). Secondly, both the direct and spatial effects of environmental regulation on AGTFP show a significant “U”-shaped feature and have regional heterogeneity based on differences in economic development levels and factor endowments. Thirdly, there is an “inverted U”-shaped relationship between environmental regulation and the urban-rural income gap, and the urban-rural income gap negatively affects AGTFP. Based on the empirical results, we propose that the Chinese government should pay attention to green technology innovation, break the market segmentation, promote urban-rural integration, and then promote the AGTFP.

Agricultural factor endowment differences and relative poverty nexus: an analysis of macroeconomic and social determinants.

Poverty is a significant global ongoing issue that influences a substantial amount of people despite all efforts to eliminate or lessen it. Although poverty is an eminent problem because of its negative consequences, many people are unaware of the concept of poverty. Poverty not only degradesthe human capacity but also undermines economic growth in developing regions. This research aims at exploring the impact and heterogeneity of agricultural factor endowment investment on rural relative poverty. By using thedata obtained from China household tracking survey (CFPS-2018), probit model approach was applied to analyze the relationship between agricultural factor endowment investment and rural relative poverty. Finally, the intermediary effect of the selected model was validated through the robustness test. The study findings showed that the input of agricultural factor endowment can alleviate the relative poverty in rural areas of China. Our study findings also revealed that there is a significant heterogeneity in family size, endowment type of agricultural technology elements and the agricultural type. A positive association between the investment in agricultural technology and land factor endowment with relative poverty alleviation by increasing the total value of cash and deposits was revealed from the results. The overall findings of this study provide useful insights to facilitate government institutions to stabilize the agricultural labor force, accelerate the process of agricultural modernization and provide careful consideration to land property rights.

Convergence in road transport CO2 emissions in Europe

In Europe, the transport sector accounts for more than 27% of total CO2 emissions and, within this sector, road transport is by far the largest polluter. This fact has placed road transport emissions abatement firmly on the agenda of global alliances. In this paper, we examine the convergence in per capita road transport CO2 emissions in a sample of 22 European countries over the 1990–2014 period. We find evidence that European countries converge to one another but depending on certain structural factors (conditional convergence), and that the convergence speed has increased over time. Our results show that this conditional convergence process has led to undesirably high levels of emissions since a large part of the laggard (less polluting) countries have caught up with the leaders (more polluting) countries. We then estimate a conditional convergence dynamic panel data model to examine the structural factors affecting the convergence process and its influence on the convergence speed. Given that in our sample road transport CO2 emissions depend almost exclusively on (fossil) fuel consumption, we focus on the determinants channelled through the use of energy in the sector. By using alternative econometric approaches (pooled-OLS, fixed-effects and instrumental variables), our results show that the convergence process is conditioned by factors such as economic activity and fuel prices, and that some of these factors have a significant effect on the convergence speed. Our results imply that the European transport policy should reduce the differences in structural factor endowments among countries to enable the absolute convergence towards a lower level of emissions in a reasonable period of time.

Analysis on the Characteristics of the Demand for Development and Utilization of Sea Space Resources

The analysis of the demand characteristics and suitability of elements for the development and utilization of sea space resources is the key content of Marine zoning and planning. Taking Liaoning Province as the research area, this paper analysis the characteristics of the demand for offshore areas through the superposition analysis of the current situation of sea area use and Marine function zoning, and analysis the suitability of the elements of Marine function zoning through the superposition analysis of the Marine function area with the elements of water quality, water depth and coast type. The differences in factor endowment and demand characteristics between regions will provide references for the research on optimal allocation of sea space resources.

Growing Olive Oil Export and Intra-Industry Trade in Mediterranean Countries: Application of Gravity Model

While olive oil production is spreading to the non-traditional producer countries, including the US, Australia, and New Zealand, Mediterranean countries are still major producers and exporters. However, little is known about their olive oil exports simultaneously growing in tandem with their large volume of imports. This paper examines the factors that affect olive oil exports and imports in Mediterranean countries. Using balanced panel data of olive oil trade in Mediterranean countries from 1998 to 2016, we estimated the commodity-specific gravity model. Results suggest that an increase in the overall bilateral size of trading partners positively affects the flow of olive oil trade. The difference in factor endowments has a negative impact on exports, whereas its effect is positive on their imports. The members of the European Union (EU) are competitive in olive oil export, and the volume of its import is large among the EU countries whose per capita income and demand properties are similar. These results support Linder’s hypothesis rather than the predictions from the traditional Heckscher–Ohlin trade theory. The simultaneous export and import of olive oil in Mediterranean countries implies the relevance of a growing intra-industry trade rather than a country’s specialization following its comparative advantage.

Comments on Assessment of the Trade Integration Pattern Between the Russian Federation and East/Southeast Asian Economies Using the Panel Gravity Framework

Comments on Assessment of the Trade Integration Pattern Between the Russian Federation and East/Southeast Asian Economies Using the Panel Gravity Framework

A theory of economic unions

After decades of successful growth, economic unions have recently become the focus of heightened political controversy. To understand why, we develop a theoretical model of the effects on trade, income distribution and welfare of economic unions that differ in size and scope. Our model shows that political support for international unions can grow with their breadth and depth provided member countries are sufficiently similar. However, differences in economic size and factor endowments can trigger disagreement over the value of unions. Our model is consistent with some salient features of the process of European integration and statistical evidence from survey data.

Myopic Mergers across Borders with Incomplete Information in GOLE

Abstract In this paper, we present a tractable general equilibrium model capturing the incentives for myopic mergers in oligopolistic industries with incomplete information about rivals’ costs. We demonstrate that ex-ante gains from myopic mergers between firms with incomplete information about rival’s cost are larger when the difference between unknown components of their costs is wider. We also show that ex-ante gains from myopic mergers between firms across countries with large differences in factor endowments, ceteris paribus, would be greater than the ex-ante gains from mergers between countries with relatively similar factor endowments.

Local Government Competition, Environmental Regulation Intensity and Regional Innovation Performance: An Empirical Investigation of Chinese Provinces.

The aim of this paper is to examine the impact of local government competition and environmental regulation intensity on regional innovation performance and its regional heterogeneity. Based on the theoretical mechanism of the aforementioned variables, this study uses the Chinese provincial panel data from 2001 to 2016. We use the super-efficiency data envelopment analysis (SE-DEA) to evaluate regional innovation performance. To systematically examine the impact of local government competition and environmental regulation intensity on regional innovation performance, we build a panel date model using the feasible generalized least squares (FGLS) method. The results indicate that: the regional innovation performance can be significantly improved through technological spillover; local governments compete for foreign direct investment (FDI) to participate in regional innovative production. Moreover, improvements in environmental regulation intensity enhance regional innovation performance through the innovation compensation effect. Our results show that the local governments tend to choose lower environmental regulation intensity to compete for more FDI, which has an inhibitory effect on regional innovation performance. Furthermore, due to regional differences in factor endowments, economic reforms and economic development levels in Chinese provinces, there exists a significant regional consistency in the impact of local government competition and environmental regulation intensity on regional innovation performance. Therefore, institutional arrangements and incentive constraints must be adopted to enhance regional innovation performance as well as to guide and foster the mechanism of green innovation competition among local governments. At the same time, considering the regional heterogeneity of local government competition and environmental regulation intensity affecting regional innovation performance, policy makers should avoid the “one-size-fits-all” strategy of institutional arrangements.

Asymmetries in regional development: Does TFP or capital accumulation matter for spatial inequalities?

In the literature on regional inequalities, commonly adopted Neo-Classical theoretical framework (Y=AKα(hL)1−α) implies that disparities may arise for two reasons, either due to differences in factor endowments or TFP differentials. In the current study, we address the following rarely examined questions: i. Do regional income inequalities arise due to TFP or factor endowment disparities across regions? ii. What's their relative contribution to the level of and change in regional inequality? Our dataset covers the period 2004–2014 and 81 Turkish provinces. We use mathematical decompositions, Panel unit root, panel VAR and generalized impulse-response analyses. Results are summarized in two groups. First, the main contributor to income inequality is the disparity in regional factor endowments, whereas TFP differentials are relatively less influential. Second, the main source of decline in disparities seems to be the narrowing of TFP differences.

What attracts multinational enterprises from the new EU member states to Poland?

The main goal of this study is to examine empirically the determinants of multinational activity of firms from the new EU-12 member states in Poland during the period 1990–2014 using the negative binomial model. In particular, we test the predictions of competing theoretical models of the multinational enterprise to identify the investment motives for undertaking foreign direct investment in Poland. In addition to traditional country-pair characteristics such as absolute and relative market size and differences in relative factor endowments, in this study we account for cultural differences between the host and partner countries that may affect the cost of foreign investment. The assembled empirical evidence points to both market access and efficiency seeking as the main reasons for undertaking foreign direct investment in Poland by multinational enterprises based in the new EU-12 member states. However, cultural proximity does not seem to be an important factor in explaining the extent of multinational activity in Poland.

Are multinationals and governments from emerging economies configuring global value chains in new ways?

PurposeThe hallmark of today’s global value chains (GVCs), still dominated by multinationals from advanced economies, is a sophisticated international division of labor based on scale economies and prevailing factor endowment differences between countries. However, GVCs led by multinationals from large emerging economies may be configured on the basis of considerations that supplement factor cost efficiencies, namely, those of societal objectives as formulated by political actors in the home country. In this context, the purpose of this paper is to examine the implications of political and socio-economic factors on GVC configuration of multinational firms.Design/methodology/approachThis paper provides an in-depth case study of a leading Chinese car manufacturer, Zhejiang Geely Holding Group (ZGH) and its value-chain configuration, with a special focus on the acquisition of Volvo Car Corporation.FindingsThe authors show how ZGH’s configuration of its GVC, including that of acquired Volvo Car Corporation, takes place in symbiosis with political actors. The advantages and disadvantages of this symbiosis are highlighted.Research limitations/implicationsThe study focuses on GVC configuration of one company, ZGH, in one industry, the automotive industry, in one emerging economy. The external validity of the study may therefore be limited. Furthermore, the focus is on the geographical/locational configuration of GVCs and ignores the ownership aspects.Originality/valueThe paper provides novel empirical evidence to better understand GVC configuration of multinational firms from emerging economies.

MNE Activity in Poland: Horizontal, Vertical or Both?

ABSTRACT The purpose of this article is to validate empirically the theoretical predictions of the knowledge capital model of multinational enterprise and identify the reasons for undertaking international production in Poland. This model allows taking into account both horizontal and vertical reasons for foreign direct investment (FDI). The empirical implementation of the theoretical framework is based on the negative binomial model and the bilateral dataset covering 143 countries over the period 1995–2015 which yields a total of 3003 observations. In contrast to previous studies the actual data on differences in human capital per worker that come from the most recent edition of PennWorld Table 9.0 are employed as the measures of differences in relative factor endowments. The empirical evidence confirms the predictions of the knowledge capital model and points to the horizontal as well as vertical motives for undertaking FDI in Poland. In particular, our estimation results show that MNE activity in Poland is related to both differences in relative factor endowments and in market size which confirms the importance of both reasons for undertaking FDI in Poland. However, these reasons are different for different groups of parent countries.

Environmental regulations and redistribution of polluting industries in transitional China: Understanding regional and industrial differences

This paper examines the diverse patterns and driving forces of the changing distribution of pollution-intensive industries (PIIs) in the Yangtze River Delta (YRD), China from 1999 to 2015. The results find the co-existence of the Pollution Haven Hypothesis (PHH) and the Porter Hypothesis (PH) at an industrial level. PIIs, especially the labor-intensive PIIs, become geographically more dispersed to the peripheral YRD, while capital-, tax- and technology-intensive PIIs are still highly concentrated in the core YRD. Uneven environmental regulations (ERs), such as pollutant emission controls and government supervision, have directly reshaped the spatial patterns of PIIs. The modelling results also suggest that regional differences in factor endowment, ecosystem, and upgrading and innovation milieu play an important role in PIIs (re)distribution, and PIIs with diverse industrial characteristics respond differently to the changes in ERs and other place-specific attributes. Relatively loose ERs, low production cost, and high environmental bearing-capacity can promote the formation of “pollution havens” for labor-intensive or low-end PIIs. However, local assets such as innovation milieu may heighten the effects of the PH on capital-intensive or high-tech PIIs. This study provides China's evidences about the co-existence of the PHH and the PH, and can advance our understanding of the restructuring process and mechanism of PIIs at finer geographical scales.

Do big countries always win a tariff war? A reappraisal

AbstractIn their seminal paper, Kennan and Riezman () show that a “sufficiently” big country is better off under a tariff war compared to free trade. This prediction derived in a setting where market power stems from differences in factor endowments, is somehow puzzling, as the majority of free trade agreements notified to the GATT/WTO are initiated by large rather than small economies. To resolve this puzzle, I use a modified version of the Kennan and Riezman () model to show that the outcomes of a tariff war depend not only on countries’ endowment sizes, but also on consumption requirements. In particular, free trade benefits two asymmetric countries if the subsistence level of consumption in the large country is sufficiently higher than in the small country. In addition, free trade between symmetric countries may harm the country with a lower subsistence level of consumption. The theoretical framework presented in this paper supports the idea that even small countries enjoy some market power and thus helps understand why large economies seek free trade in natural resources with smaller commercial partners.

International Value-Added Linkages in Development Accounting

Development accounting evaluates how much of the variation in per-worker incomes across countries can be attributed to quantifiable factor endowments, and how much is due to unobserved TFP differences. We use a standard trade model to generalise the development accounting framework to a setting in which countries are open to trade, and consume both domestic and foreign value added. In addition to differences in factor endowments and TFPs, the generalised framework highlights differences in relative factor costs as source of real-income variation across countries. In turn, countries' relative factor costs are determined by their trade linkages, and the international distribution of factor endowments and expenditures. We use information on value-added trade from international input-output tables for 40 major economies in the period 1995-2011 to back out their relative factor costs in a model-consistent manner. Incorporating this information into the development accounting equation reduces the variation in unobserved TFPs required to explain the distribution of per-worker incomes among our sample countries by more than one half. Our findings suggest that the large international TFP differences found in traditional development-accounting exercises are in part due to their implicit assumption that countries are closed.

Persistence and Change in Culture and Institutions under Autarchy, Trade, and Factor Mobility

Differences among nations in culture (preferences including social norms) and institutions (contracts) may result in specialization and gains from trade even in the absence of exogenous differences in factor endowments or technologies. Goods differ in the kinds of contracts that are appropriate for their production, and so strategic complementarities between contracts and social norms may result in a multiplicity of cultural-institutional equilibria. The resulting country differences in culture and institutions provide the basis for comparative advantage. In our evolutionary model of endogenous preferences and institutions, transitions among persistent cultural-institutional configurations occur as a result of decentralized and uncoordinated contractual or behavioral innovations by employers or employees. We show that the gains from trade raise the cost of deviations from the prevailing culture and institutions. As a result, trade liberalization impedes decentralized transitions, even to Pareto-improving cultural-institutional configurations. International factor mobility has the opposite effect. (JEL D02, D86, F11, F21, J41, O43, Z13)