Factor Intensity Rankings Research Articles

Pandemic Crisis, Contact Intensity and Gender Disparity in a Developing Economy*

The paper attempts to analyse the grotesque dimensions of gender disparity of lockdown as a policy response to the pandemic crisis. In doing so, we develop a multi‐sectoral distortion‐ridden general equilibrium model which applies to small open developing economies. Lockdown results in supply‐chain disruptions (SCDs), physical restrictions on labour gathering, adverse demand shock and an escalation of demand for the high‐skilled capital‐intensive product. Not only factor intensity ranking but also contact intensity of sectors has several dimensions. These dimensions include inter alia female labour force participation, the burden of unpaid domestic chores on women and gender wage disparity with unemployment as well.

Analysis of Effect of Agriculture Trade Liberalisation on Child Labour Supply, Factor Prices and Output Composition in a Small Open Perfectly Competitive Economy using a General Equilibrium Framework

Incidence of child labor is a disturbing feature of an emerging market economy. In the present paper, I would try to explore whether globalization policy namely agricultural trade liberalization has any negative impact on the incidence of child labor in a developing economy. For our work, I use a three-sector general equilibrium structure to highlight the linkage between different sectors and also focus on the fact that the effects of globalization are crucially dependent on the factor intensity ranking and factor specificity. Multiple cross effects that are present in a three-sector general equilibrium structure are the driving forces behind the results.

Formal-Informal Credit Market Interlinkage and Development Policies: A General Equilibrium Analysis

Globalization has brought about significant changes in the organization of production of emerging market economies. One such change is an emergence of an advanced, export-oriented rural agricultural sector. This advanced sector not only uses land and labor but also uses formal credit for financing its production. This growing importance of formal credit in the agricultural sector motivates us to explore the implications of formal-informal credit market interlinkage using a three sector General Equilibrium trade theoretic structure. In the present paper, we would like to explore the implications of financial deregulation, an increase in amount of formal credit and agricultural trade liberalization. The focus of our examination has been on factor rewards, output composition and national income of a transitional economy. Multiple cross effects, factor intensity ranking and factor specificity are crucial in determining the results.

Wages in a factor proportions model with energy input

This paper examines US wage adjustment in a structural vector autoregression of the factor proportions model with capital, labor, and energy inputs. Data cover the years 1949 to 2006. The wage adjusts to changes in input levels and output prices over six to eight years. Energy has a more robust wage impact than capital. The wage reacts weakly if at all to the falling price of manufactures and rising price of services during the sample period. Estimates relate directly to factor proportions theory suggesting robust substitution with labor in the middle of the factor intensity ranking.

Globalization, Child Labour and Development Policies: A Theoretical Analysis

Incidence of child labour is a disturbing feature of an emerging market economy. In the present article, we will try to explore whether globalization policies, namely, agricultural trade liberalization and methods aimed at attracting foreign direct investment (FDI), have had any negative impact on the incidence of child labour in a developing economy. We will also examine whether decrease in incidence of child labour would increase social welfare and welfare of the child labour-supplying family unambiguously. For our work, we use a three-sector general equilibrium structure. We intend to highlight that effects of globalization are crucially dependent on factor-intensity ranking and factor specificity. Multiple cross effects that are present in a three-sector general equilibrium structure are the driving forces behind the results.

Internal and external gains from international outsourcing

This article examines the implications of international outsourcing in the Heckscher–Ohlin model of general equilibrium by explicitly expounding the external effects to the outsourcing firms. With its focus paced on the labor-augmenting effect of outsourcing, it shows that (a) the standard result of welfare-enhancing outsourcing always holds in the absence of external effects, and (b) in the presence of external effects, however, (i) outsourcing may be welfare-reducing for the outsourcing country; (ii) the effects of outsourcing on sectoral outputs, employment and factor prices depend on factor-intensity ranking, and the signs and the relative magnitudes of the sectoral returns to scale.

Technological Progress with Segmented Labor Markets

It is argued here that with segmented labor markets, all types of technological progress in the fixed wage organized sector always hurts the unorganized or informal workers. However, such technical progress in the informal sector always helps the informal workers. This result is independent of the factor intensity ranking between the sectors.

Globalization, Labour Market Segmentation, Unemployment and Wage Inequality: A Theoretical Analysis

In this paper we build up a three-sector general equilibrium framework to examine impact of agricultural trade liberalization, tariff rate restructuring and inflow of Foreign Direct Investment on unemployment and wage inequality in an emerging market economy. The paper shows that agricultural trade liberalization and tariff rate restructuring reduces the skilled-unskilled wage gap whereas increase in inflow of foreign capital may lead to worsening of income distribution. Multiple cross effects, factor specificity and factor intensity ranking play important roles in determining changes in output composition, factor rewards and unemployment in the wake of economic reforms.

Skilled–unskilled wage inequality: A general equilibrium analysis

The paper develops a static three sector competitive general equilibrium model of a small open economy in which skilled labour is mobile between a traded good sector and a non-traded good sector and unskilled labour is specific to another traded good sector. The capital is perfectly mobile among all these three sectors. We examine the effects of change in different factor endowments and of globalization on skilled–unskilled wage inequality. We find that the effect of a change of a factor endowment on wage inequality depends on the factor intensity ranking between two skilled labours using sectors and on the relative strength of the marginal effects on demand for and supply of non-tradable good. We also find that a decrease in the price of the product produced by skilled (unskilled) labour using traded good sector lowers (raises) the skilled–unskilled wage inequality.

Skilled–unskilled wage inequality, nontraded good and endogenous supply of skilled labour: A theoretical analysis

The paper develops a static four sector competitive general equilibrium model of a small open economy in which skilled labour is endogenously produced by the education sector and is mobile between a traded good sector and a nontraded good sector. Capital is also perfectly mobile among the education sector, skilled labour using traded good sector and the nontraded good sector. However, land and unskilled labour are specific to another traded good sector. We analyse the effects of change in different factor endowments and reduction in tariff rate on skilled–unskilled wage inequality. We find that the effect of a change in different parameters on wage inequality depends on the factor intensity ranking between two skilled labour using sectors and on the relative strength of the marginal effects on demand for and supply of nontraded final good. We also analyse the effects of changes in different parameters on the supply of skilled labour.

Wages in a factor proportions time series model of the US

The theoretical effects of changes in prices and factor endowments on wages in general equilibrium models have been examined under various assumptions. The present paper is the first to estimate wage effects in the context of this theory. The data cover the US real wage, labor force, fixed capital assets, energy input, and prices of manufactures and services from 1949 to 2006. Estimated input elasticities of the wage are consistent with labor in the middle of the factor intensity ranking, and energy as very intensive in manufacturing. The estimation technique quantifies fundamental influences on the labor market.

La configuration des échanges dans un modèle à biens multiples : quelques paradoxes

In the framework of a two-good, two-factor model it is evident that the pattern of trade can be inferred from the change in commodity prices resulting from the opening of trade. Thus, if trade increases the relative price of a commodity, we expect that commodity to be exported, while the good whose relative price decreases will be imported. Under certain circumstances however, it may be possible to observe a country importing a commodity even though its free trade relative price is higher than under autarky. The purpose of this paper is to point out that a similar paradox can be established even if we rule out distributional effects of changes in commodity prices on the demand for goods attributable to different tastes. In particular, we focus our attention on a simple three-good, two-factor model with fixed production coefficients. It is well known that when the number of goods exceeds the numbers of factors, a basic indeterminacy exists in the relationship between output levels and relative commodity prices. Our interest lies in establishing that one application of this indeterminacy is that technological characteristics—in particular, the factor intensity ranking of commodities and a country's factor endowment—may result in the reversal of the expected pattern of trade.

Trade and Expropriation: A Factor Proportions Approach

An extended small open economy model is developed and used to examine the effect of trade on the illicit expropriation of incomes and the provision of legal services. We derive conditions under which trade liberalization will reduce expropriation activities. We also derive sufficient conditions for the gains from trade to be amplified or muted relative to the standard model. The signs of these effects depend on factor intensity rankings and factor abundance ratios. Thus the results show that trade liberalization will be beneficial to countries that export labor intensive goods by reducing the incentives for illicit expropriation and reducing the costs of providing legal services. The model also shows that trade liberalization can increase expropriation, particularly for countries that import labor intensive goods and have labor intensive crime problems.

Further Analysis of Illegal Migration and Immigration Policy under Risk Preference

The purpose of this paper is to analyze the effectiveness of border enforcement and internal enforcement policies under capital immobility and free capital mobility. Different from the previous studies where host firm is assumed to be risk-neutral, we introduce a framework in which host firm is allowed to exhibit different attitudes to risk and examine how the enforcement policies influence illegal migration. We show that the attitude toward risk of the host firm is important in determining the nature of equilibrium and many results with an assumption of risk neutrality continue to hold if the host firm exhibits a risk-averse attitude. We also show that under international capital mobility, the impacts of two enforcement policies on factor prices are different according to the factor intensity ranking between countries.JEL Classification: F21, F22

Equilibrium dynamics in discrete-time endogenous growth models with social constant returns

The existing literature establishes possibilities of local determinacy and dynamic indeterminacy in continuous-time two-sector models of endogenous growth with social constant returns. The necessary and sufficient condition for local determinacy is that the factor intensity rankings of the two sectors are consistent in the private/physical and social/value sense. The necessary and sufficient condition for dynamic indeterminacy is that the final (consumable) good sector is human (pure) capital intensive in the private sense but physical (consumable) capital intensive in the social sense. This paper re-examines the dynamic properties in a discrete-time endogenous growth framework and finds that conventional propositions obtained in continuous time need not be valid. It is shown that the established necessary and sufficient conditions on factor intensity rankings for local determinacy and dynamic indeterminacy are neither sufficient nor necessary, as the magnitudes of time preference and capital depreciation rates both play essential roles.

Adjustability in production and dynamic effects of domestic competition policy

This study explores the effect on trade balance of suppressing competition in the domestic non-tradable sector through the interaction between the short-run adjustment and the long-run adjustment in production process. Constructing a model that can capture a more short-run aspect than Yano (2001), this study demonstrates that the effect depends on the factor intensity ranking between the tradable sector and the non-tradable sector. In this model, a change in the price of the tradable good at time 0 plays an important role to explain this result.

Congestible public goods and local indeterminacy: A two-sector endogenous growth model

This paper shows that the congestible public goods can generate local indeterminacy in a two-sector, constant-return human capital enhanced growth model. While the productive public good exerts positive sector-specific externalities, the congestion effect generates negative aggregate externalities. The sector-specific externalities alone arising from productive public goods cannot establish local indeterminacy without the combination of negative externality in a model with social constant return technology. Congestible public good generates local indeterminacy if the degree of productive public good externality and the degree of congestion effect are large enough. The condition for indeterminacy is independent of the factor intensity rankings. The conditions are quantitatively assessed and the required parameter values for the degrees of public good externality and congestion are consistent with the estimated values in existing literature.

Pattern of trade and indeterminacy

This paper presents a three-sector small open endogenous growth model with physical and human capital and constant returns to scale. The model shows that the transitional path may be either saddle-path stable or indeterminate, depending on the pattern of specialization. This occurs for two reasons. First, in the presence of capital and labor income taxes, factor intensity rankings between the operating corporate sector and the education sector in value and physical senses can differ, which may cause too many stabilizing forces. Second, the change in the pattern of specialization discretely changes factor intensities in the operating corporate sector.

On the new export sector in developing countries

Many developing countries are establishing a new export sector by accepting foreign direct investment. Developing a three-sectors three-factors general equilibrium model with tariff, this paper considers the condition under which the acceptance of direct investment is desirable for the developing countries. We show that the factor intensity rankings among the sectors play a key role on the welfare effects and that direct investment increases the output of both the new export and the traditional export sector and promotes the export-led growth in developing countries.

Capital Mobility and Informal Wage in a Small Economy—Two Examples

We conduct two policy experiments in a general equilibrium framework with an informal sector. The first deals with a liberal trade policy and the second with a decline in the unionized wage rate. In both cases, informal workers gain if capital moves between the formal and the informal segments and lose if it does not. These results are independent of the factor intensity rankings of the sectors. Both of these results have important policy implications.