Factor Endowments Research Articles

Factor reallocation path for low-carbon transformation: A perspective of manufacturing industry ecosystem

The incomplete production factor market induces more factors flowing to industries with lower carbon productivity, highlighting the need for effective factor reallocation to promote low-carbon transformation. Current research is constrained by the dimension of factor endowments, with insufficient attention given to the problem of diminishing marginal benefit of factor input in factor reallocation. By combining the factor flow effect induced by productivity difference with the factor allocation equilibrium effect under diminishing marginal benefit, the factor reallocation path for low-carbon transformation is analyzed using random forest algorithm within a high-dimensional data environment from the perspective of manufacturing industry ecosystem. The results indicate that effective factor reallocation for low-carbon transformation depends on breaking the dual segmentation of factors between regions and industries to facilitate flow of factors from shrub layer industries to canopy layer industries. Adjusting key factor combinations to fall within the optimal equilibrium interval of S-shaped or anti S-shaped partial dependence curves maximizes the marginal benefits of low-carbon transformation. Industries must upgrade their factor endowment structure to accumulate essential carrying capacities that support advanced manufacturing, leveraging the low-carbon transformation dividends of advanced factors inflow and technology spillover. Otherwise, aligning with regional factor comparative advantage to cultivate differentiated characteristic manufacturing industries offers a promising alternative, capitalizing on the low-carbon efficiency premium derived from specialized division of labor.

Towards sustainable prosperity? Policy evaluation of Jiangsu advanced manufacturing clusters

The government of China, to hone manufacturing's competitive edge, has adopted a series of regional industrial policies to stimulate advanced manufacturing clusters as facilitators of agglomeration effects, utilisers of factor endowments, and implementers of innovation solutions, by playing the role of facilitating state. Focusing on advanced manufacturing cluster policies in East China's Jiangsu Province, the research employs a mixed data analysis methodology on a sample of 52 documents collected from the Jiangsu government and affiliated units. The policy orientations and priorities are examined under the triple analytical framework in terms of themes, instruments, and controls, applying textual mining and the PMC index model. The results reveal the alignment of policy themes with high-quality development strategy, the government preferences for the supply dimension in policy instruments, the emphasis on planning directive in policy controls, together with the relatively high internal consistency of the AMC policy toolkit by Jiangsu. Therefore, the research spotlights the importance of leveraging comparative strengths based upon the facilitating state institution, and of deploying internally coherent, scientific, and efficient initiatives that exploit more potential of advanced manufacturing clusters to foster sustainable prosperity from the perspective of New Structural Economics.

The Impact of Anti-Dumping Measures on the Export of Intermediate Goods in Chinese Manufacturing Industry - Based on the perspective of ownership of importing firms

Abstract This paper links the OECD-ICIOMNE database with the OECD analytical AMNE database. Based on the ownership of importing countries' enterprises, it dissects the scale of intermediate product exports in the Chinese manufacturing industry. Furthermore, it combines this analysis with the Temporary Trade Barriers Database to explore the heterogeneous effects of anti-dumping measures on the scale of intermediate product exports. The study finds that: (1) The scale of intermediate product exports from the Chinese manufacturing industry to domestically owned enterprises in importing countries is higher than that to the third-country multinational corporations within the importing country, with the lowest scale observed for exports to Chinese multinational corporations located within importing countries' borders. (2) Under the impact of anti-dumping measures, the negative effect on the scale of intermediate product exports to domestically owned enterprises in importing country is greater than that on exports to the third-country multinational corporations within the importing country. However, exports to Chinese multinational corporations within importing countries' borders don’t experience a significant impact. (3) The endowment of factors in Chinese manufacturing industries and the regions to which importing countries belong will lead to heterogeneous impacts on the relationship between anti-dumping measures and the scale of intermediate product exports. Keywords: Scale of Intermediate Product Export, Importing Country, Domestically Owned Enterprise, Chinese Multinational Corporation, Third-country Multinational Corporation.

Analysis of the Development History and Problems of Sino-Russia Trade in the Context of "One Belt, One Road"

China and Russia, as neighboring economic powers, have geopolitical advantages and stable political relations. The two countries have complementary advantages in production factor endowment and industrial structure, creating favorable conditions for bilateral trade. This paper examines the healthy development momentum in China-Russia relations in recent years. For 13 consecutive years, China has been Russia's largest trading partner. However, the trade between the two countries is limited to low-value-added products and other issues, failing to reflect their comparative advantages fully. This paper analyzes the history and problems of Sino-Russia trade in the context of the 'Belt and Road' initiative. The content is divided into three parts. First, it introduces the background and reasons for the study. Secondly, the development of Sino-Russia trade is analyzed by taking the "Belt and Road" initiative as the dividing line. Finally, it analyzes the problems existing in the process of Sino-Russia trade development and puts forward suggestions.

Is the impact of environmental regulations on the global value chains biased towards technological effects or refuge effects?

As an important factor endowment, environmental rules have a non-negligible impact on trade flows and patterns. Regarding the existing two completely different debates, this study uses simultaneous equations and the Spatial Durbin Model (SDM) to assess the interaction and spatial spillover effects of environmental rules and global value chains (GVCs), the aim is to determine whether the impact of environmental rules on GVCs is biased towards “technological effects” or “Refuge effect”. The research findings reveal: (1) When the environmental rules are strengthened by 1 %, the forward participation of GVCs in developed countries decreases by 0.2930 % and the backward participation of GVCs increases by 1.4327 %. This reveals that stricter environmental rules result in GVCs participation bias towards the “refuge effect” in developed countries. (2) When environmental rules are strengthened by 5 % and 1 %, respectively, the GVC forward and backward participation of developing countries decreases by 0.0477 % and 0.5113 %, respectively, which means that when the environmental rules become stricter, both the forward and backward participation of GVCs in developing countries are biased towards the “refuge effect”. (3) Concerning the spillover effects of environmental regulations on participation in GVCs, stricter environmental regulations in developed countries impede their own forward participation in GVCs but promote their backward participation, with insignificant indirect effects. Additionally, stringent environmental regulations in developing countries impede their own forward participation in GVCs and similarly do not contribute to the enhancement of forward participation in neighboring developing countries. Therefore, this study suggests that developed countries can transfer green technology to developing countries through technology transfer agreements to promote mutual development. Moreover, developing countries actively adjust their industrial structure, increase investment in technology R&D, and cooperate with other countries and regions, which will help countries learn from best practices and coordinate their responses to common environmental challenges.

The motivating and mobilizing effects of inequality on civil conflict: Focusing on trade-induced labor market shocks

This article has two aims: (1) to identify the causal effect of income inequality on civil conflict and (2) to find the mechanism in which disadvantaged individuals can mobilize collective violence. Applying the Heckscher-Ohlin and Stopler-Samuelson theorems, this study hypothesizes that workers in land-rich countries – those who face contracted demand in the labor market and consequently a larger income disparity – will have a lower opportunity cost to engage in conflict as trade expands. Exploiting exogenous spatial variation in inequality due to the country’s factor endowment, together with time variation in tariffs arising from the economic liberalization, the work of this research documents a statistically significant and economically meaningful causal effect of inequality on civil conflict. Secondly, to identify the mobilizing effect of inequality, I test whether higher disparity in income distribution within an ethnic group breeds more rebellions initiated by the group. Esteban and Ray’s model claims that an increase in income inequality within an ethnic group makes collective violence more likely, because the poor within the group provide conflict labor, and the rich within the group provide resources for violence. By merging international census data that cover 115 million individuals from 221 ethnic groups with the groups’ conflict records, the analysis empirically identifies that when holding total ethnic income constant, within-group inequality that is proxied by the unemployment rate is strongly correlated with the group’s propensity to initiate armed conflicts. Shedding new light on the prevailing scholarly discord that exclusively chooses either one of class and ethnic cleavages as sources of intrastate violence, the findings of this study imply that if trade-induced labor market shocks increase within-group inequality, it motivates workers to participate in rebellions by lowering their opportunity cost of fighting and mobilizes ethnic collective violence by allowing the ethnic leaders to recruit combatants at a lower cost.

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.

Trade Openness and Income Inequality: Evidence from India

Purpose: The aim of the study was to investigate the trade openness and income inequality: evidence from India
 Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries.
 Findings: Trade openness in India has complex effects on income inequality. While it can foster economic growth and reduce poverty by creating employment opportunities, it also has the potential to exacerbate income disparities. Trade openness may lead to job displacement and income losses for low-skilled workers, widening the gap between rich and poor. Additionally, globalization may favor certain sectors or skill groups over others, concentrating wealth among the elite.
 Unique Contribution to Theory, Practice and Policy: Stolper-samuelson theorem, factor endowment theory & new trade theory may be used to anchor future studies on the trade openness and income inequality: evidence from India. Encourage the diversification of India's export basket to include more value-added products and services. Invest in education and skill development programs to enhance the human capital of the workforce, thereby improving their competitiveness in the global market

Empowering women in sustainable agriculture

The agricultural and rural development policy seeks to facilitate the transition towards environmentally sustainable and climate-neutral agricultural practices, with a focus on human capital, knowledge, and innovation. Gender equality can play a significant role in promoting environmentally sustainable practices in the agricultural sector, particularly through the adoption and implementation of agri-environment-climate schemes (AECS) in the context of farm, agricultural, and rural development. We examine the presence of gender bias in the adoption intensity of AECS by utilising farm-level data from Slovenia. We find that women on Slovenian farms engage in the adoption of AECS and receive subsidies, despite the presence of a gender gap in various agricultural factor endowment variables that typically favour men. The results of this study provide evidence in favour of promoting greater involvement and empowerment of women in the fields of green technology applications and green entrepreneurship, particularly with AECS practices.

The failure of Algeria’s industrialization strategy, 1967–1989: a new structural economics perspective

Following the theoretical framework of New Structural Economics, this article attempts to explain why Algeria’s industrialization strategy failed over the period 1967–1989. Based on this approach, this paper shows that the overdevelopment of a big push industrialization strategy in Algeria since independence, which prioritized capital-intensive heavy industry, violates the comparative advantage principle identified by its factor endowments and gives rise to domestic market distortions and the misallocation of scarce resources. Simultaneously, to scaffold such a development mode, the Algerian government put forth an organic yet deeply distorted system. We conclude that the experience engendered serious weaknesses in Algeria’s industrial structure and planning, and it resulted in an unbalanced economic structure. Thus, Algeria’s industrialization strategy was disappointing in terms of economic outcomes and impact. This failure is often perceived as one of the main origins of the political, social and economic crisis faced by the country for more than a decade. Our findings suggest that the redesign of growth and industrialization strategies should better reflect Algeria’s endowments structure and level of development. Indeed, consistency of a broad-based and industry-based economy with its comparative advantage is one of the best ways to achieve high sustainable economic growth in Algeria.

Green bonds and sustainable development: theoretical model and empirical evidence from Europe

ABSTRACT As a novel financial instrument, green bonds require further research to understand their causal effects and theoretical mechanisms on sustainable development fully. This paper constructs a theoretical model that characterizes the issuance of green bonds as the extent to which social planners prioritize environmental benefits in bond markets. In this model, we define sustainable development as the geometric mean of environmental factor inputs and final production output. By maximizing consumer utility, this model elucidates the direct and non-linear relationship between green bonds and sustainable development. The paper empirically investigates this proposition using data from 19 European countries between 2018 and 2022. The results indicate that: (1) Green bonds significantly promote sustainable development. This financial instrument, designed to raise funds for environmental projects, can indeed promote sustainable development through clean and green resource allocation. (2) The promotional effect of green bonds on sustainable development increases significantly with improvements in innovation efficiency, industrialization rates, and savings rates. This finding elaborates on the conditions under which the positive impact of green bonds on sustainable development is enhanced. (3) Green bonds only promote sustainable development when a country’s factor endowment structure reaches a specific threshold. Beyond this threshold, as the factor endowment structure becomes very high, the country’s sustainable development gains sufficient momentum, diminishing the role of green bonds. This finding suggests that the positive impact of green bonds on sustainable development is contingent upon certain properties reflecting the economic basis.

Global Value Chain Participation, Employment Structure, and Urban–Rural Income Gap in the Context of Sustainable Development

Currently, the trend of globalization is evident, and global value chain participation has had a significant impact on the urban–rural income gap in China. This article takes sustainable development as the background and constructs a theoretical mechanism for the impact of global value chain participation on the urban–rural income gap and uses a two-way fixed effects model to empirically test data from 30 provinces in China from 2005 to 2014. Research finds that global value chain participation significantly widens the urban–rural income gap. Compared to the central and western regions, the participation of the eastern region in the global value chain has a more significant effect on widening the urban–rural income gap. Further research has found that employment structure plays a partial mediating role in the process of global value chain participation in widening the urban–rural income gap. The factor endowment structure and industrial structure upgrading can significantly strengthen the mechanism of global value chain participation in optimizing the employment structure. This article’s research findings have significant practical implications for reducing the income gap between urban and rural areas and fostering sustainable development in both.

Research on the Optimization Path of Agricultural Factor Endowment Structure under the Perspective of Rural Revitalization

The strategy of rural revitalization is to adhere to the priority development of agriculture and rural areas, further adjust the urban-rural relationship between agriculture and industry, and accelerate the development of agriculture and rural economy, while optimizing the structure of China's agricultural factor endowment is the key to achieve rapid agricultural development and rural revitalization. Through the perspective of new structural economics, this paper discusses the relationship between agricultural factor endowment structure and agricultural institutional arrangement, agricultural industrialization and upgrading of agricultural factor endowment structure, as well as changes in agricultural factor prices and changes in agricultural factor inputs, and specifically researches how to optimize the existing structure of agricultural factor endowment and puts forward relevant suggestions.

Can financial agglomeration curb carbon emissions reduction from agricultural sector in China? Analyzing the role of industrial structure and digital finance

As China enters the process of agricultural modernization, the problem of carbon emissions from agricultural sectors has become increasingly prominent, and the government and academia urgently need to take action. In this context, this study extends the literature through a new perspective of China's financial agglomeration construction that examines the actual role of financial agglomeration on agricultural carbon emissions reduction by using two-way fixed effect model and threshold effect model based on the panel data of 30 provinces in China from 2011 to 2019. Data statistics show that China has formed a multi-center development pattern with Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao as highly financial agglomeration under the influence of different locations, factor endowments and development foundations. Further empirical model estimates reveal the following main findings. Firstly, the effects of financial agglomeration on total agricultural carbon intensity (TACI), agricultural greenhouse gas carbon intensity (AGCI), agricultural energy carbon emission intensity (AECI), and agricultural input factors carbon intensity (ASCI) show an inverted U-shaped curve that from irritating to inhibiting. That is, financial agglomeration is conducive to slowing down agricultural carbon emissions. Secondly, financial agglomeration has a significant inhibitory effect on TACI, AGCI, AECI and ASCI in Beijing and Shanghai. Thirdly, when the industrial structure is more reasonable or the digital finance is more developed, the effect of financial agglomeration on reducing agricultural carbon emissions is stronger. Based on the current research results, promoting the construction of financial agglomeration is an effective way to promote agricultural carbon emissions reduction, and it is suggested that the government design effective systems and policies to slow down the carbon emissions in the agricultural sector.

Relative factor endowments, foreign direct investment and tax planning of multinational firms: an empirical investigation into cross-country data

ABSTRACT This paper studies the impact of relative endowments of skilled labour and physical capital on the location choices of multinational firms (MNEs). We demonstrate potential methodological issues and possible solutions related to the identification of vertical MNE activity when using aggregate country-level data. To support our analysis, we introduce data matching and various assumptions with respect to the degree of profit shifting activities of MNEs that we apply to study unilateral inward foreign direct investment (FDI) across Estonia, Latvia, and Lithuania. Our choice of data is motivated by various legislation gaps, taxation specificities, and growing equity stocks in sectors related to profit shifting in the aforementioned economies. Ultimately, we highlight the importance of international tax differences and the growing discrepancy between real and reported cross-country FDI data.

Does the digital economy improve comprehensive total factor productivity in China?

Total factor productivity is an important symbol of high-quality economic development. At present, the question of whether the digital economy can infuse fresh impetus into enhancing total factor productivity has emerged as a prominent concern in China. This paper constructs a new undesirable output to measure comprehensive total factor productivity (CTFP) with the slack-based measure (SBM) undesirable Malmquist-Luenberger index by using 2011-2020 Chinese provincial panel data. Then, this paper explores the impact of the digital economy (DIG) on CTFP with a fixed effects (FE) panel model and a mediating effect model. The results show that CTFP increases by an average of 3.9%, technical efficiency contributes -1.1%, and the contribution rate of technological progress is 5.0%. Technological progress is the main source of CTFP growth. The empirical findings show that the DIG has a positive and significant impact on CTFP. This paper conducts various robustness tests, and the results remain consistent with the previous conclusion. Moreover, mechanism tests suggest that the promoting effect of the DIG on CTFP can be attributed to three main effects: technological innovation, the factor endowment structure and the educational level. Furthermore, the results of heterogeneity analysis demonstrate that the promoting effect of the DIG on CTFP exists in China's eastern, central and western regions. The findings of this research can serve as a valuable reference for informing decision-making processes related to environmental governance and high-quality economic development in China.

Guided by the goal of “double carbon”, what is the carbon emission reduction effect of the promotion and application of green technology in China?

“Carbon peaking and carbon neutralization” is an important measure to promote China’s ecological and environmental protection and high-quality economic development, and the innovation and application of green technology are critical factors in achieving the “double carbon” goal. Based on the number of citations of green patents of listed enterprises in 30 provinces in China from 2011 to 2020, this paper uses GGDP to replace traditional GDP and calculate carbon emission intensity. Based on the relevant panel data at the provincial level, this paper constructs a spatial Durbin model to analyze the impact mechanism of whether the promotion and application of green technologies promote regional carbon emission reduction. The specific research results are as follows: (1) Through regression of the core explanatory variables with a one-stage lag, it is verified that the promotion and application of green technology has a significant positive promoting effect on regional carbon emission reduction, and there are significant spatial spillover effects and “learning by doing” effects. (2) In the part of heterogeneity test, the impact of green technology promotion and application on carbon emission reduction presents apparent regional heterogeneity and factor endowment heterogeneity. (3) The mediating effect test verifies the mediating effect of energy structure and industrial structure on the influence of green technology promotion and application on regional carbon emission reduction. (4) In the part moderating effect test, it is verified that marketization level and new infrastructure construction have a positive moderating effect in their influencing process, financial development, and government support will weaken the influence of green technology promotion and application on carbon emission reduction effect, and human capital level has a nonlinear regulating effect. The research conclusions of this paper provide necessary enlightenment for the coordination and unification of China’s economic transition to innovation-driven and green and low-carbon development.

The Endowment Effect: A Behavioural Economic Perspective on Land Use Policy, Environmental Protection and Taxation

This essay explores the implications of the endowment effect in various fields including housing markets, environmental policies, and taxation. This essay clarifies the definition and importance of the endowment effect and inspected related literature on the topic of the endowment effect and the fields of application. In the housing markets, this phenomenon is examined from the perspective of the Chinese rural villager displacement programme. In this situation, the endowment effect is influenced significantly by attachment rooted in emotion, ownership of the property, and the replaceability of houses. In environmental policies, the endowment effect is found to result in disparate assessments of favourable outcomes and adverse consequences in the environment. This introduces the concept of the endowment factor as a tool for policymakers. In the realm of taxation, the endowment effect is discussed in relation to tax salience, influencing public perceptions and responses to tax policy changes. Mitigation strategies for the endowment effect such as vocational training, fair compensation, the use of agents, and providing accessible information are also discussed.

Impact of the Sino-US Trade War on Factor Endowment in the China's GBA: A Theoretical Analysis from the Perspective of Factor Endowment Theory

Since the Sino-US trade war began in 2018, the two countries and other trading partners have been greatly affected. China's regional economic development has been affected by trade barriers, among which the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is more serious. On the premise that factor endowments determine trade has been proven, this study puts forward the potential impact mechanism of trade on regional factor endowments and takes GBA as an example for theoretical analysis based on factor endowment theory. The results show that due to the decrease in GBA export demand, the labor endowment will decline, the capital endowment will change oppositely to the labor due to the substitution effect and innovation pressure, and the land endowment will decline steadily. However, the movement of factors of production is limited by trade deflection and the restrictive policy. Future mathematical induction based on Heckscher-Ohlin model is needed to prove the results, and the corresponding empirical analysis will verify the relevance and implication.

Explaining the direction of emissions embodied in trade from hypotheses based on country rankings

We examine theories that take environmental aspects into account to explain exports and imports. They use a ranking of countries and the typical prediction in the case of bilateral trade is that the higher-ranked country (of the two) gains from extra trade whilst the lower-ranked country loses. Gains and losses are expressed in terms of the net emissions embodied in trade. The two best-known theories are the Pollution Haven Hypothesis (PHH) and the Factor Endowment Hypothesis (FEH). Using data for 40 countries (or regions), we have a set of 780 country-pairs. Only 32% of the predictions with PHH and 37% of the predictions with FEH turn out to be correct. Our next step is to start at the other end and ask which ranking of countries would have had the most correct predictions. It turns out that the success rate of the optimal ranking of countries is only 61%. The implication is that even the optimal ranking (or theory) performs poorly.