Reallocation Effects Research Articles

Defeminization, Structural Transformation and Technological Upgrading in Manufacturing

ABSTRACTThis article examines gendered employment implications of structural transformation and technological upgrading in manufacturing. It focuses on 14 countries that relied heavily on exports of labour‐intensive and assembly industries that have long provided strategic entry points onto global markets. The study uses accounting decomposition methods to identify the drivers of changes in female shares of manufacturing employment as well as econometric analysis to assess the gendered impacts of technological upgrading. This study is the first to apply either of these methods at a detailed industry level as well as the first to estimate long‐run relationships between women's representation in manufacturing employment and technological upgrading. The main findings are that within‐industry effects on female shares of employment are generally more important than employment reallocation effects and that there is more often a negative than positive relationship between technological upgrading and female shares of employment at the country and industry levels. These negative effects of technological upgrading are found in four of the five strategic export‐oriented industries — food, beverages and tobacco products; textiles; apparel, leather products and footwear; and motor vehicles. The article discusses the policy implications of these findings and of the defeminization of manufacturing employment more generally.

The effects of land markets on resource allocation and agricultural productivity

We assess the effects of land markets on misallocation and productivity both empirically and quantitatively. Exploiting variation from a land certification reform across time and space in Ethiopia, we find that certification facilitates rentals and improves agricultural productivity. We calibrate a quantitative macroeconomic model with heterogeneous household farms facing institutional costs to land markets using the micro panel data. The effect of a counterfactual reallocation from no rentals to efficient rentals increases zone-level agricultural productivity by 43 percent on average. While our estimated institutional costs are strongly associated with land certification across zones, there are nontrivial residual frictions to rental market activity, implying that land certification only partially captures the overall effects of rentals. A full certification reform accounts for about one-fourth of the overall productivity gains from land rentals. This result highlights the importance of comprehensive reforms alleviating frictions to land transactions beyond the granting of certificates.

The Assessment of Direct Agricultural Investment and Cash Transfer on Households in Malaysia: An Evidence of Compensation Mechanisms for Fuel Subsidy Removal

The objective of this study was to examine the impacts of introducing compensation mechanisms of direct agricultural investment and cash transfer for fuel subsidy removal, with particular focus on the income and consumption of all household segments in Malaysia. A computable general equilibrium (CGE) model was built on the basics of the standardized LöfgrenCGE model to conduct this study. The subsidy removal, without integrating any compensation mechanism, imposed additional burdens of living cost on households as fuel was one of the important elements of the consumption basket especially during the period of transition, thus indicating a need for this study. The ultimate results revealed that the introduction of direct cash transfer was more desirable for both the low-and the medium-income segments to live with high prices where their existing consumption level would be maintained. Comparatively, the direct agricultural investment by increasing the use of intermediate inputs in the production did not seem to be enough to help the rural low-income segment within the period, mainly because of reducing the factor income (factor reallocation effect), and exaggerating consumption expenditure subsequently. Thus, direct cash transfer was considered a direct and faster way to help the needy in the short term. However, the direct agricultural investment remained the best approach to gain long-lasting impacts; not only in helping the rural poor, who mostly dealt in agricultural activities, but also in motivating overall economic activities

Growth, innovation, credit constraints, and stock price bubbles

We study the potential for rational bubbles in the innovation sector to affect long term economic growth. We show that stock market prices of research and development (R&D) firms can include a bubble component when credit constraints are present. Bubbles are self-sustained in equilibrium by a “liquidity” premium that originates when credit constraints are relaxed. Bubbles expand the borrowing and production capacities of R&D firms, stimulate innovation, and increase the growth rate. Small firms benefit more from bubbles than big firms. Bubbles are magnified by tighter credit constraints and scarce investment opportunities. Thus, financially underdeveloped countries benefit more from bubbles. Finally, we show that bubbles can create permanent reallocation effects that benefit the innovation sector over other sectors.

Environmental Regulation, Resource Misallocation and Industrial Total Factor Productivity: A Spatial Empirical Study Based on China’s Provincial Panel Data

A vast theoretical and empirical literature has been devoted to exploring the relationship between environmental regulation and total factor productivity (TFP), but no consensus has been reached and the reason may be attributed to the fact that the resource reallocation effect of environmental regulation is ignored. In this paper, we introduce resource misallocation in the process of discussing the impact of environmental regulation on TFP, taking China’s provincial industrial panel data from 1997 to 2017 as a sample, and the spatial econometric method is employed to investigate whether environmental regulation has a resource reallocation effect and affects TFP. The results indicate that there is a U-shaped relationship between environmental regulation and industrial TFP and a negative spatial spillover effect of environmental regulation on industrial TFP at the provincial level in China. Both capital misallocation and labor misallocation will lead to the loss of industrial TFP. Capital misallocation has a negative spatial spillover effect on industrial TFP, while labor misallocation is just the opposite. Environmental regulation can produce a positive resource reallocation effect, which in turn promotes the industrial TFP in the range of 28% to 33%, while capital misallocation and labor misallocation are only partial mediator.

Fiscal Consolidation and Public Wages

AbstractA New Keynesian model with government production, public compensation, and unemployment is fit to U.S. data to study the effects of public wage reductions. Estimation implies reductions in public wages and government goods purchases have similar effects on total output, and the fiscal balance, yet the former can raise private output slightly, while the latter does not. Exogenous public wage reductions decrease private wages. Model counterfactuals show that sufficiently rigid nominal private wages can reverse the private wage response, as the rigidity dampens the labor reallocation effect from the public to private sector that exerts downward pressure on private wages.

Integrated soil fertility management and household welfare in Ethiopia

Integrated Soil Fertility Management (ISFM) is a set of locally adapted soil fertility technologies and improved agronomic practices promoted to enhance soil fertility, crop productivity and incomes of smallholder farmers. While the suite of practices is site-specific, the use of improved seeds, organic and inorganic fertilizers constitute core ISFM technologies. ISFM is mostly related to higher input and labor demand, but there is little evidence whether these investments pay off at the household level. Using data from maize, wheat and teff growing farmers in two agroecological zones in Ethiopia, we assess whether the adoption of core ISFM technologies is associated with changes in household welfare, measured by total household income, food security and education. In addition, we look into resource allocation decisions within the household as potential drivers of welfare outcomes. We use the inverse probability weighting regression adjustment method. Results show that adopting ISFM core components for maize, wheat or teff is associated with higher labor demand as well as income obtained from these crops in both agroecological zones. Yet, only in one agroecological region, it also goes along with enhanced household income, food security and school enrollment. By contrast, in the other region, we find that technology adoption for at least one of the three crops is related to a reduced likelihood of engaging in other economic activities, pointing towards labor reallocation effects. We conclude that welfare outcomes of agricultural innovations can be heterogeneous depending on farmers’ income diversification strategies.

Price regulation and supplier margins in the Hungarian electricity markets

It is highly debated whether residential electricity markets were mature enough for market liberalization. While most countries are unambiguously committed to the trend of liberalization, the Hungarian government decided to re-regulate the residential electricity prices after the liberalization reforms were completed. This situation provides a unique opportunity to study the price effects of a subsequent regulation process. The present paper examines the interaction between the universal service provider (USP) and free-market trader margins on the Hungarian electricity market. We distinguish three main regulatory periods: the transitional system between 2004 and 2008, the fully liberalized system between 2008 and 2010, and the post-liberalized regime from 2010 to date. A vector autoregression model is applied to assess the relationship between the different margins. The results show that in the transition period, margins were independent, while in the deregulated period, mutual dependence was evidenced between them, and in the third one, only traders' margins affected the margins of the universal service providers. This suggests that the public intervention, which was intended to focus on universal service and residential consumers, surprisingly did not have an indirect horizontal profit reallocation effect between USPs and traders. The findings can support countries that plan to modify the regulatory framework of the electricity market.

The Distributional Impact of the Sharing Economy on the Housing Market

What is the impact of the sharing economy, pioneered by companies such as Airbnb, on the housing market? In this paper, I estimate the welfare and distributional impact of Airbnb on the residents of New York City. I develop a model of an integrated housing market, in which a landlord can offer a housing unit for rent either on the traditional long-term rental market or on the newly available short-term rental market. By estimating a structural model of residential choice and linking it to detailed Airbnb usage data, I estimate the effect of such reallocation on the equilibrium rents across different housing types and demographic groups. In addition, to evaluate the gains from direct home-sharing, I estimate a supply system featuring heterogeneous costs. Overall, renters in New York City suffer a loss of $178mm per annum, as the losses from the rent channel dominate the gains from the host channel. I find that the increased rent burden falls most heavily on high-income, educated, and white renters because they prefer housing and location amenities that are most desirable to tourists. Moreover, there is a divergence between the median and the tail, where a few enterprising low-income households obtain substantial gains from home-sharing. Thus, this paper delivers a nuanced characterization of the winners and losers of the sharing economy and provides a framework for understanding the consequences of regulating such technological innovations.

The Welfare Effects of Time Reallocation: Evidence from Daylight Saving Time

Daylight Saving Time (DST) is currently implemented by more than seventy countries, yet we do not have a clear knowledge of how it affects individuals’ welfare. Using a regression discontinuity design combined with a differences-in-differences approach, we find that the Spring DST causes a significant decline in life satisfaction. By inducing a reallocation of time, the transition into DST deteriorates sleep and increases time stress, which in turn affects physical and emotional health. After performing a simple cost-benefit analysis, we find evidence suggestive that ending DST would exert a positive effect on welfare, namely the wellbeing costs associated with DST exceed its benefits.

Welfare Effects of Time Reallocation: Would Ending Daylight Saving Time Affect Wellbeing?

Daylight Saving Time (DST) is currently implemented by more than seventy countries, yet we do not have a clear knowledge of how it affects individuals' welfare. Using a regression discontinuity design combined with a differences-in-differences approach, we find that the Spring DST causes a significant decline in life satisfaction. By inducing a reallocation of time, the transition into DST deteriorates sleep and increases time stress, which in turn affects physical and emotional health. After performing a simple cost-benefit analysis, we find evidence suggestive that ending DST would exert a positive effect on welfare, namely the wellbeing costs associated with DST exceed its benefits.

Decomposing the Rise in Markups

An increase in the aggregate markup can be due to both firm-level markups increasing and economic activity reallocating toward high-markup firms. I show that standard decomposition methods estimate a non-zero reallocation effect even when the allocation does not change and that this bias is potentially large. In opposite to the existing literature, I find that reallocation does not seem to be the major driver of the rise in markups among Compustat firms.

Impacts of the Clean Air Act on the Power Sector from 1938-1994: Anticipation and Adaptation

The passage of landmark government regulation is often the culmination of evolving social pressure and incremental policy change. During this process, firms may preemptively adjust behavior in anticipation of impending regulation, making it difficult to quantify the overall economic impact of the legislation. This study leverages newly digitized data on the operation of virtually every fossil-fuel power plant in the United States from 1938-1994 to examine the impacts of the 1970 Clean Air Act (CAA) on the power sector. This unique long panel provides an extended pre-regulation benchmark, allowing us to account for both anticipatory behavior by electric utilities in the years leading up to the Act's passage and reallocative effects of the CAA across plant vintages. We find that the CAA led to large and persistent decreases in output and productivity, but only for plants that opened before 1963. This timing aligns with the passage of the original 1963 CAA, which provided the federal government with limited authority to “control” air pollution, but signaled impending federal regulation. We provide historical evidence of anticipatory responses by utilities in the design and siting of plants that opened after 1963. We also find that the aggregate productivity losses of the CAA borne by the power sector were substantially mitigated by the reallocation of output from older less efficient power plants to newer plants. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Impacts of the Clean Air Act on the Power Sector from 1938-1994: Anticipation and Adaptation

The passage of landmark government regulation is often the culmination of evolving social pressure and incremental policy change. During this process, firms may preemptively adjust behavior in anticipation of impending regulation, making it difficult to quantify the overall economic impact of the legislation. This study leverages newly digitized data on the operation of virtually every fossil-fuel power plant in the United States from 1938-1994 to examine the economic impacts of the 1970 Clean Air Act (CAA) on the power sector. This unique long panel provides us an extended pre-regulation benchmark, allowing us to account for both anticipatory behavior by electric utilities in the years leading up to the Act's passage and reallocative effects of the CAA across plant vintages. We find that the CAA led to large and persistent decreases in output and productivity, but only for plants that opened before 1963. The timing aligns with the passage of the original 1963 CAA, which provided the federal government with the authority to control air pollution, sending a strong signal to firms of impending federal regulation. We provide historical evidence of anticipatory responses by utilities in the design and siting of plants that opened after 1963. We also find that the aggregate productivity losses of the CAA borne by the power sector were substantially mitigated by the reallocation of output from older less efficient power plants to newer plants.

Business Dynamism, Sectoral Reallocation and Productivity in a Pandemic

Asymmetric effects across sectors are the distinctive features of the Covid-19 shock. Business Formation Statistics in the United States show a reallocation of entry and exit opportunities across sectors in the initial phase of the pandemic. To explain these facts, we propose an Epidemiological-Industry Dynamic model with heterogeneous firms and endogenous firms dynamics. Our analysis suggests that the cleansing effect on business dynamism of the Covid-19 crisis, which typically characterizes recessions, is sector-specific. The framework can rationalize the dynamics of aggregate productivity during the crisis. Monetary policy and sticky wages are central ingredients to capture reallocation effects. Social distancing, by smoothing out cleansing in the social sector, slows down the reallocation process and prolongs the recession, but saves lives.

Oil import portfolio risk and spillover volatility

The concept of energy security has been recently extended to encompass not only the concept of physical supply availability or concerns about the lack of, but also new aspects related to price stability and affordability. Energy security is viewed, in a financial perspective, as a concept of economic convenience of energy supplies, available from a portfolio of partner countries.This paper analyzes the oil imports structure of four major Asian energy importers: China, Japan, Korea and Taiwan. We measure the total and bilateral volatility spillovers of the portfolio risk associated with the composition of the main oil suppliers, using forecast-error variance decompositions derived from a vector autoregressive model. Results show that the composition of oil import composition determines varying risk levels for given oil import growth rates and average import prices and before and after the Financial Crisis of 2008. We simulate two shocks: Covid-19 Scenario and Increased imports from KSA, showing that risk increases within a 3–15% range. As expected, spillover effects are increasing and exhibit a consistent reallocation effects, confirming that a deep shock can modify the quality composition of the variance and not only its level.

Assessing Regional Inequality based on Revenues of the Federal Budget using the Pareto Principle

The use of fiscal instruments for regulating territorial development has both positive and negative macroeconomic effects related to the withdrawal of revenue from more economically developed regions. Therefore, using the Pareto principle, this paper assesses the negative effects of budgetary reallocation. This study considers inter-budgetary reallocation as an annually recurring four-stage process of regional budgets reproduction. The article analyses the firs t stag e o f th e process , namely , the creation of resource allocation base. A hypothesis has been tested to examine whether the centralisation of tax revenues in the federal budget and, consequently, an increase in inter-budgetary reallocation does not reduce, but exacerbates inequality in regions due to their revenue depletion and limited self-development. The study assessed the contribution of federal districts and individual constituent entities of the Russian Federation to the federal budget, withdrawal of regional revenues, and the concentration of territorial revenues to the federal budget. Based on the ranking of regional contributions to federal revenues, I built a Pareto diagram, checking the 80/20 rule for grouped and non-grouped data. Calculations and comparison of the data for 2017 and 2010 confirm numerous negative effects. For example, there is an increase in the withdrawal of regional revenues and a significant concentration of federal revenues for a limited number of regions. Additionally, negative effects include the existence of a direct relationship between regional revenues and the rate of their withdrawal, as well as the predominance of the equalising component over the stimulating one in regional socio-economic development. These effects lead to revenue depletion in the territories and increased centralisation of budgetary resources, contradicting the principles of fiscal federalism. Authorities can use the research results, conclusions and suggestions for managerial decision-making to improve intergovernmental relations in the Russian Federation.

Bio-energy and CO2 emission reductions: an integrated land-use and energy sector perspective

Biomass feedstocks can be used to substitute fossil fuels and effectively remove carbon from the atmosphere to offset residual CO2 emissions from fossil fuel combustion and other sectors. Both features make biomass valuable for climate change mitigation; therefore, CO2 emission mitigation leads to complex and dynamic interactions between the energy and the land-use sector via emission pricing policies and bioenergy markets. Projected bioenergy deployment depends on climate target stringency as well as assumptions about context variables such as technology development, energy and land markets as well as policies. This study investigates the intra- and intersectorial effects on physical quantities and prices by coupling models of the energy (REMIND) and land-use sector (MAgPIE) using an iterative soft-link approach. The model framework is used to investigate variations of a broad set of context variables, including the harmonized variations on bioenergy technologies of the 33rd model comparison study of the Stanford Energy Modeling Forum (EMF-33) on climate change mitigation and large scale bioenergy deployment. Results indicate that CO2 emission mitigation triggers strong decline of fossil fuel use and rapid growth of bioenergy deployment around midcentury (~ 150 EJ/year) reaching saturation towards end-of-century. Varying context variables leads to diverse changes on mid-century bioenergy markets and carbon pricing. For example, reducing the ability to exploit the carbon value of bioenergy increases bioenergy use to substitute fossil fuels, whereas limitations on bioenergy supply shift bioenergy use to conversion alternatives featuring higher carbon capture rates. Radical variations, like fully excluding all technologies that combine bioenergy use with carbon removal, lead to substantial intersectorial effects by increasing bioenergy demand and increased economic pressure on both sectors. More gradual variations like selective exclusion of advanced bioliquid technologies in the energy sector or changes in diets mostly lead to substantial intrasectorial reallocation effects. The results deepen our understanding of the land-energy nexus, and we discuss the importance of carefully choosing variations in sensitivity analyses to provide a balanced assessment.

Las asimetrías de la enfermedad holandesa. Revisando el modelo petrolero noruego, 1970-2015

En este artículo, se discute sobre la existencia de enfermedad holandesa (EH) en la economía noruega, lo que implica analizar tanto sus manifestaciones como sus vínculos con las políticas. A partir de una visión sistematizada de la configuración y evolución de la industria petrolera en el período 1970-2018, se muestra el impacto ejercido por este sector sobre el resto de la economía y se valora la dependencia que la economía noruega tiene de esta industria. En particular, no se observan manifestaciones claras del efecto reasignación de recursos de la EH, aunque sí cierto efecto gasto. Además, y a pesar de los índices de dependencia petrolera más bajos que los de otros grandes productores, el conjunto de la economía noruega muestra una alta vinculación al sector y la balanza comercial ha registrado déficits crecientes en la partida de las manufacturas de mayor contenido tecnológico. A partir de estos resultados, se diagnostica la medida, tenue, en que la EH se manifiesta en Noruega, lo que puede permitir hacer aportaciones en términos de política de desarrollo para economías ricas en hidrocarburos.

ANALYSIS OF STRUCTURAL TRANSFORMATION OF LABOR FROM AGRICULTURE TO NON-AGRICULTURE IN ASIA

Through the dataset from APO (Asian Productivity Organization) comprising 22 countries in Asia from 1980 to 2015, this study is to investigate the growth pattern, decomposition, and determinants of structural transformation in Asia. A decomposition method measuring within-effect, between-static-effect, and between-dynamic-effect was adopted to explain the structural change within sectors of agriculture, industry, and services. The results show that the agriculture sector of all countries in Asia declines slowly. The agriculture sector is no longer the largest contributor to GDP in all Asian countries even though it still has the largest labor in Asian developing countries. Workers moving from the agriculture sector to the services sector as the productivity of the service sector is higher than agriculture. The structural changes positively contribute to productivity growth in Asia as a result of the positive static reallocation effects and negative dynamic reallocation effects. Overall, the structural changes contribute to a large part of labor productivity growth. The important determinants of structural transformation are the employment share in agriculture and trade. Final, the policy implication was proposed for structural changes.