Final Goods Research Articles

Welfare‐Reducing Integration Under Emission Taxes and Endogenous Competition Mode

ABSTRACTThis study examines asymmetric supply chain competition between integrated and non‐integrated supply chains under emission taxes when firms choose competition mode in the final goods market endogenously. We find that higher emission taxes may lead the non‐integrated downstream firm to adopt aggressive pricing to induce its upstream firm to lower prices, leveling competition with an integrated one. When the non‐integrated chain integrates, however, quantity contracts become dominant strategies, which might distort welfare under lower emission taxes if both environmental damage and product substitutability are sufficiently high. Our finding indicates the welfare‐reducing effects of government interventions post‐integration when emission tax policy and endogenous competition mode are relevant.

Circular vs One-Way Production Processes: Two Different Views on Production and Income Distribution

ABSTRACT This paper examines two distinct representations of production processes: circular production, where commodities function as both inputs and outputs, and one-way production, which starts with factors of production and ends with finished goods. These frameworks offer different views on profits. In circular systems, profits arise from surplus production, while in one-way systems, they appear to emerge from price differences between final goods and inputs. Using Sraffa’s price equations, we analyse the properties of both systems. We demonstrate that while one-way systems seem to allow for profit increases by raising prices, this is an illusion as it ultimately reduces real wages, the true source of profits. Additionally, we show that one-way systems become circular when real wages are fixed. Finally, the paper discusses how this distinction is important in understanding the shift from Walras’ general equilibrium theory to neo-Walrasian formulations. This study highlights the importance of circularity in the functioning of capitalist economies and its implications for the theory of distribution.

A Study of Virtual Water Trade among G20 Countries from a Value-Added Trade Perspective

Abstract: From a value-added trade perspective, this study utilizes the world input–output tables and the water footprint data of each industry in each country in the Eora database to explore the virtual water resources of 19 countries (the G20 countries excluding the European Union) in 2016. We calculated nine value chain decompositions and the pattern of virtual water flows and then explored the implied virtual water use due to the trade of intermediate goods and final goods, and we also analyzed the unequal trade of virtual water and added value among countries. The results indicate the following. Firstly, in most countries, the largest portion of virtual water is attributed to exports of intermediate inputs that are produced in the source country and fully utilized by the direct import countries, followed by the foreign value-added component of intermediate goods, while the smallest share of virtual water is returned to the country. Secondly, in value-added trade, excluding the rest of the world (ROW), China, France, Italy, Japan, Mexico, South Korea, South Africa, Saudi Arabia, and Germany are net importers in the virtual water trade between G20 countries, and the USA is the largest net exporter of virtual water. Thirdly, intermediate product trade is the dominant form of implied virtual water trade among countries, which leads to a net flow ratio of implied virtual water of about 80% to 90%. Lastly, the Virtual Water Inequality Index shows that thirteen country combinations, including Brazil and Argentina, exhibit significant inequality, and most countries are in a relatively equal state. In addition, the virtual water and added value of the relatively economically developed regions benefit more from the virtual water trade. Therefore, it is crucial for countries to reduce their consumption of virtual water when trading intermediate products to develop high-value-added and low-water-consumption industries and to choose appropriate virtual water trade targets.

Prediction of inlet gas volume fraction of rotary vane pump under variable operational conditions with 1DCNN-TL model utilizing vibration signals

The Rotary vane pump (RVP) exhibits promising potential in the lubricating oil system of aircraft engines. The entrainment of air into the lubricating oil flowing through the pump affects the suction and discharge flow rates of the RVP. Therefore, understanding the inlet gas volume fraction (IGVF) of the RVP is crucial to assess its capability to deliver sufficient lubricating oil for ensuring the safe operation of aircraft engines. This study presents a one-dimensional convolutional neural networks (1DCNN)-based transfer learning (TL) (1DCNN-TL) prediction model to predict IGVF for the RVP using experimental data from gas-liquid two-phase flow in the RVP. The model is pre-trained using the vibration signals under a specific differential pressure between the pump inlet and outlet to enable predictions of the IGVF under varying differential pressures. The 1DCNN serves as pre-trained model for analyzing the outcomes of different transfer tasks. The effect of different frozen layer numbers on training time and prediction accuracy of the neural network is explored. Subsequently, the influence of varied source domain data on prediction accuracy is investigated, revealing that for optimal TL results, stable condition data at 200 kPa should be preferred as the source domain. Then the 1DCNN-TL prediction model of IGVF of RVP under variable operational conditions is determined. The results indicate varying iteration convergence rates of the pre-trained model under a differential pressure of 200 kPa across different transfer tasks, with a final goodness of fit exceeding 0.958 after fine-tuning the model. The model demonstrates the high prediction accuracy and applicability, which can contribute to improving the reliability and safety of aircraft engines.

Officials’ hometown connections and interprovincial trade in China: based on the perspective of hometown favoritism

ABSTRACT This study examines the impact of officials’ hometown connections on interprovincial trade in China, emphasising local officials’ favouritism towards their hometowns. Utilising the detailed curriculum vitae of provincial leaders along with railway trade data for province pairs, the paper finds that provincial governors significantly enhance bilateral trade with their hometowns by 14.0%. Further analysis reveals that governors augment final goods imports by 19.4% and raw resources exports by 17% with their hometowns, while exhibiting a less significant influence on final goods exports and raw resources imports. These findings suggest that local leaders may allocate portions of monopoly markets and raw resources to favour their hometowns. Moreover, differences in industrial structures appear to amplify the impact of hometown connections, while officials’ promotion pressures may mitigate this effect. This study contributes new insights into the spillover effects of hometown connections, thus combining the existing literature on hometown favouritism and local protectionism.

The Role of Commercial Vehicles in the Secondary Sector of Indian Economy

The secondary sector, which includes industries like manufacturing, construction, and processing, is crucial for economic growth. Commercial vehicles play a key role in supporting this sector by providing efficient transport for raw materials, semi-finished products, and final goods. This paper investigates the contribution of commercial vehicles to the secondary sector, focusing on how they improve efficiency, reduce costs, and expand market reach. Additionally, the study looks into the challenges faced by commercial vehicle operators, such as fuel prices, maintenance, and regulatory hurdles. The analysis highlights the essential role commercial vehicles play in boosting productivity and fostering industrial growth, which is vital for the overall economy.

The application of chromatographic methods in optimization and the enhancement of the oxidative liquefaction process to wind turbine blade recycling

AbstractThe concept of the circular economy aims to maximise the longevity of raw materials, materials, and final goods while simultaneously minimising waste generation. In order to accomplish this objective, researchers are currently exploring emission-free recycling methods and advancing a novel oxidative liquefaction methodology. This process is employed to efficiently degrade the polymer matrix which we can find among other things in wind turbine blades while also conducting chromatographic investigations of the resulting degraded resins. The conducted experiments included a temperature range spanning from 250 °C to 350 °C. The residence lengths varied from 30 to 90 min, while the pressures ranged from 20 to 40 bars. Additionally, the waste-to-liquid ratios were within the range of 5–25%, and the oxidant concentrations were between 15 and 45% by weight. The study’s results will help improve the design of the experiments by focusing on getting the highest concentrations of oxygenated chemical compounds, such as volatile fatty acids, aromatic hydrocarbons, and aromatic carboxylic acids. These compounds are the main chemicals obtained during resin degradation, and identifying the optimal conditions for their production will facilitate the implementation of this process on a larger scale. Graphic abstract

US international trade policy: Scenarios of protectionism and trade wars

US international trade policy under both the Trump and Biden administrations has been increasingly protectionist. This paper considers two policy scenarios under active discussion: (1) an across-the-board increase in all US tariffs by 10 percentage points, and (2) a severe escalation of the US trade war with China. The scenarios are analyzed using a multi-country computable general equilibrium (CGE) simulation model of the global economy. Trade wars or policy regimes of widespread protection will increase tariffs in many sectors simultaneously and include both final goods and intermediate inputs. The impacts are complex, with a web of direct and indirect forces coming into play across domestic and international markets. The global CGE model captures these mechanisms, including both short and long-run effects, with and without retaliation by partner countries. In a world economy where the US accounts for only 10 % of global trade and potentially rival trade bloc have emerged in Europe and E&SE Asia, the US is no longer hegemonic in global markets. We find that across-the-board tariffs do not protect manufacturing jobs because the cost of imported intermediate goods increases, raising costs in manufacturing production. The US trade war with China leads to a dramatic fall in bilateral trade. Other countries expand their trade to China and the US with the exception of closely linked partners (e.g. Canada and Mexico and all countries in E&SE Asia). We find that the world economy can adjust to US trade wars, diverting trade around the US.

Engel curves on outsourcing and foreign environmental taxes: A valued‐added approach

AbstractThis paper estimates Engel curves on the foreign content (outsourcing) and the foreign environmental taxes embedded in the consumption of final goods and services in the United States (U.S.). We estimate Engel curves using U.S. household income and consumption information from 1996 to 2011 and find that they are concave and shift down over time. Importantly, our results suggest a coherent picture where the foreign content and the foreign environmental taxes in U.S. household consumption bundles decreased on average over time primarily because of a composition effect where the significant income increase has led to a shift in consumption towards goods and services with lower foreign content and lower foreign environmental taxes. Both effects represent a movement along their respective Engel curves. Consequently, other effects besides income changes play a minor role in the evolution of consumer decisions and their relationship with foreign content and environmental taxes.

Expression of Concern: "Green tax as a path to greener economy: A game theory approach on energy and final goods in Iran" [Renew Sustain Energy Rev, 156 (2022) 111968]

Expression of Concern: "Green tax as a path to greener economy: A game theory approach on energy and final goods in Iran" [Renew Sustain Energy Rev, 156 (2022) 111968]

Impact of Trade Liberalisation and MSME Classification on Productivity of Indian Manufacturing Firms

This article examines the effects of tariff and non-tariff reductions on firm-level productivity of large as well as Micro, Small and Medium Enterprises (MSMEs) in India’s manufacturing sector for the 1999–2009 period. We calculate input and final goods tariffs, effective rates of protection and non-tariff barriers (NTBs) for broad product groups using information from India’s Exim Policy of 1997–2003 and 2004–2009 to examine this impact. We use a balanced as well as unbalanced firm-level panel data set, while accounting for firm, industry, state and time-specific factors. By using fixed effect models and Heckman’s two-step estimation procedure, we find that trade liberalisation is associated with improved firm-level productivity for large firms but not in the case of MSMEs. We posit that this might be due to the relative disadvantages that Indian MSMEs face which prevent them from benefiting from trade liberalisation. We also find that productivity gains arising from the sourcing of imported inputs have been greater than those arising from increased product competition and that NTB liberalisation has had a greater impact compared to tariff liberalisation on firm-level productivity. Changes in MSME legislation and the classification of firms are also found to have a bearing on firm performance. Our study contributes to the literature by confirming the need to focus specifically on constraints faced by MSMEs if they are to benefit from trade liberalisation. It highlights the importance of liberalising trade in intermediates as well as the role of MSME classification in enabling productivity gains. JEL Codes: L6, D24, L1, F13

Complementary inputs, outsourcing and vertical integration: Price versus quantity competition

AbstractWe compare the effects of price and quantity competition in an industry with complementary inputs, outsourcing and a vertically integrated firm where vertical integration occurs between a final goods producer and a subset of input suppliers. The profit of the integrated firm and the industry profit are higher under Bertrand competition, the profit of the non‐integrated firm is higher under Bertrand competition for high product differentiation, and consumer surplus and welfare are higher under Bertrand competition for low product differentiation. Further, no market foreclosure can be the preferred choice of the vertically integrated firm for any degree of product differentiation.

Import of digital products and production fragmentation

Empowering traditional manufacturing through the digital economy can not only enhance the competitiveness of Chinese manufacturing enterprises, but also enhance the degree of specialization of enterprises by optimizing the industrial structure, thus enhancing the embeddedness of Chinese enterprises in the global value chain. Based on this background, on the one hand, this paper extracts and integrates digital product information from China Customs data. On the other hand, this paper constructs the number of production processes of enterprises as a proxy variable for production fragmentation. Finally, by matching these two databases, we get the production segmentation data of Chinese enterprises' digital product import from 2000 to 2014. We found that improving the penetration degree of digital technology by importing digital products can effectively promote the production fragmentation. In order to further clarify the mechanism, we divided the digital products into final and intermediate kinds and found that firms importing digital final goods have a larger marginal impact on their production fragmentation.

Export-Platform FDI: Cannibalization or Complementarity?

We develop a model of export-platform foreign direct investment (FDI) in which final goods are produced only with labor and there are no fixed costs of exporting. We derive a simple condition that determines whether an MNE's plants are substitutes or complements. This condition is shaped by the relative size of (i) the cross-firm elasticity of demand the MNE faces for its goods and (ii) the within-firm elasticity of labor substitution across the MNE's plants. In two extensions of the model, we show that this complementarity is enhanced by firm-level (rather than plant-level) fixed costs of exporting and of sourcing inputs.

Import Constraints

During the recovery from the COVID-19 pandemic, international shipping and logistics capacity was strained, limiting the quantity of imports. We investigate the impact of an import constraint on inflation, following an increase in domestic demand. Whether the binding import constraint raises inflation depends on how it affects trade intermediation costs. If the binding constraint raises trade costs, then import price inflation also increases. In this case, however, foreign producer price inflation falls and import quantities rise more for inputs than final goods. Both these model results appear counterfactual, which suggests that import constraints may not explain observed import price inflation.

Oligopoly and oligopsony in international trade

AbstractWe study the effects of international trade on the oligopsony power of firms in input markets. We build a theoretical model of international trade in which firms are oligopolists in the market for final goods and oligopsonists in the market for inputs. Consistent with evidence from the literature, firms' markups over unit costs rise with the level of oligopsony power and of oligopoly power. While trade liberalization decreases market power in one market, it has the opposite effect in the other. In particular, international competition between oligopolists in final goods markets causes oligopsony power to increase and oligopoly power to decline. In a simulation, we show that the increase in oligopsony power can more than offset the reduction in oligopoly power, resulting in a net increase in markups over unit costs.

Connecting stakeholder priorities and desired environmental attributes for wetland restoration using ecosystem services and a heat map analysis for communications.

Framing ecological restoration and monitoring goals from a human benefits perspective (i.e., ecosystem services) can help inform restoration planners, surrounding communities, and relevant stakeholders about the direct benefits they may obtain from a specific restoration project. We used a case study of tidal wetland restoration in the Tillamook River watershed in Oregon, USA, to demonstrate how to identify and integrate community stakeholders/beneficiaries and the environmental attributes they use to inform the design of and enhance environmental benefits from ecological restoration. Using the U.S. Environmental Protection Agency's Final Ecosystem Goods and Services (FEGS) Scoping Tool, we quantify the types of ecosystem services of greatest common value to stakeholders/beneficiaries that lead to desired benefits that contribute to their well-being in the context of planned uses that can be incorporated into the restoration project. This case study identified priority stakeholders, beneficiaries, and environmental attributes of interest to inform restoration goal selection. This novel decision context application of the FEGS Scoping Tool also included an effort focused on how to communicate the connections between stakeholders, and the environmental attributes of greatest interest to them using heat maps.

The role of local currency pricing in the international transmission effects of a government spending shock in an economy with vertical production linkage and foreign direct investment

By constructing a two-country model with asymmetry in price-setting behavior between home and foreign intermediate goods firms, vertical production and trade, and endogenous entry of three types of final goods firms, this paper examines the effects of a home government spending shock. In particular, it focuses on the role of asymmetry in price-setting behavior between home and foreign intermediate goods firms. A home government spending shock is shown to result in the entry of multinational firms from both countries, an increase in the aggregate outputs of both countries, a deterioration in home welfare, and an improvement in foreign welfare. In addition, with an increase in the ratio of home and/or foreign intermediate goods firms setting their export prices in the local currency, the effects of this shock on the entry of home multinational firms, the increase in aggregate foreign output, the deterioration in home welfare and the improvement in foreign welfare are shown to be weakened, while the effects of this shock on the entry of foreign multinational firms and the increase in aggregate home output are intensified.

Pakistan: Withholdingisation of the Economic System—A Source of Revenue, Civil Strife, or Dutch Disease+?

The paper takes an incisive shot at the systemic inadequacies that have tiptoed into the economic order of the state over time via the apparently innocuous mechanism of withholding taxes. Withholding tax—a legitimate instrument of preponing the state revenues on clearly identifiable chunks of incomes—has historically been resorted to by most states, and to that extent it should be normal with Pakistan, too. However, what has happened in Pakistan is that the tool of withholding taxation has been used as a source of revenues way too large in scale, size, scope and intensity. In addition to the pulling forward of tax collection on clearly demarcated chunks of incomes, a large number of transactions have also been roped into its nexus and then charged to tax by presumptivising gross receipts as income—a withholdingisation of the sorts not only of the tax system but of the entire economic system as a weighty portion of ubiquitous withholding taxes gets stuck into the pricing structure of the final goods and services produced in the economy rendering them price-incompetitive in the international market. This overwhelming withholdingisation of the economic system, it is argued, has been brought about by a numb state continually operating under, using a Freudian framework, the “pleasure principle” instead of the “reality principle” with political governments complacently choosing to continue harvesting quick bucks into the exchequer, pushing the extractive system into a total disarray, the society into burgeoning civil strife, and the economy to the Dutch Disease effect.

Licensing option to reduce rent extraction by the input supplier

AbstractIt is well known that if the final goods producers adopt new technologies, the input suppliers with market power can extract more rent from the final goods producers by increasing the input prices. Higher rent extraction by the input supplier neither allows the licenser of the new technology to earn large profit nor helps welfare to increase much. In a model with an outside innovator (the licenser), a final good producer (the licensee) and an input supplier, we offer a new perspective to the literature by considering a licensing option, which is often observed in the business world, but ignored in the literature. We show that the licensing option offered by the outside innovator can prevent rent extraction by the input supplier. The innovator's profit and social welfare are higher under licensing option compared to a standard licensing contract with no option.