Market Distortions Research Articles

Factor market distortion, ICT capital, and green development

Factor market distortion, ICT capital, and green development

Pemikiran Tokoh-Tokoh Ekonomi Islam Mengenai Konsep Penetapan Harga Pasar

This journal discusses the thoughts of Islamic economic figures regarding the concept of market price determination. The figures discussed include Ibn Taymiyyah, Al-Mawardi, Abu Yusuf, Al-Ghazali, and Ibnu Khaldun. The methodology used is literature study. The results show that according to these figures, prices should be determined by market mechanisms and the interaction between demand and supply. However, under certain conditions, for example market distortion, the government is allowed to intervene in price fixing to protect public interests. In conclusion, Islamic economic figures agree that basically prices must be determined by competitive market mechanisms, but government intervention is permitted under certain conditions to protect community interests and restore market balance.

Predicting Chinese Banking Policy incidence using a VAR model

In this exploratory research, we examine the effect of economic and noneconomic indicators on the creation of Chinese Banking and Insurance Regulatory Commission policies using a VAR model. We find that CBIRC policies are predicted by State Council construction policies and policies set by the State Administration of Foreign Exchange. This indicates that the CBIRC is inward-looking, observing what other regulators are doing rather than responding to changes in the real and financial economy. This may be a product of market distortions due to China’s unique blend of state-oriented and market-based institutions.

Rural Development Policy, Agricultural Producer Services and Wage Disparities in the Context of Developing Economies

In developing countries, due to the predominance of marginal and small farmers leads to agriculture practices on small and fragmented plots of land where access and usage to modern farm equipment and implements is hampered. Agricultural producer service sector that acts as an intermediate sector facilitates this process. We build three-sector general equilibrium models to delineate this process: parts of manufacturing goods are utilized by the service sector, the outputs of which are intermediate inputs that could substitute labor in agriculture. We explore the impact of labour market distortion mitigation and input subsidies on rural development policies on pay disparity using this framework. Growing subsidies result in widening wage inequality. Reduction of labor market distortion will raise wage rate of skilled labor, and its impact on wage rate of unskilled labor is ambiguous, depending on elasticity between skilled and unskilled labor. In order for the agricultural development policy to fall short of its broad objectives and may impact on agricultural output.

Green Transformation of Hainan's Manufacturing Industry Addressing Market Distortions in the Energy Sector

This paper examines the market distortions in the energy sector of Hainan Province, China, and their impact on the green transformation of its manufacturing industry. We analyze the existing market distortions in energy factors, including improper allocation of energy resources, distorted energy prices, energy subsidy policies, inadequate energy efficiency management, and imperfect regulations and supervision mechanisms. We also discuss the specific impact of these market distortions on innovation efficiency, natural resource endowment, energy price distortion, energy subsidy policies, energy efficiency management, environmental protection, ecosystem impact, talent training, technological innovation, international competitiveness, and social and economic benefits. Finally, we provide policy recommendations to address these challenges and promote the green transformation of Hainan's manufacturing industry.

Labor Market Distortions, Rural-Urban Inequality, and the Opening of People's Republic of China's Economy

Labor Market Distortions, Rural-Urban Inequality, and the Opening of People's Republic of China's Economy

The impact of urban digital platforms on entrepreneurial activity: Evidence from China

The development of urban digital platforms has changed its entrepreneurial environment and affected regional innovation vitality. We calculated the development index of digital platforms of 294 prefecture-level cities in China between 2013 and 2020 using the principal component analysis method. We used the microdata of enterprise registration information to describe the urban entrepreneurial activity. Digital platforms have promoted urban entrepreneurial activity significantly. Moreover, alleviating labour market distortions, optimizing the urban financial environment, and improving technological innovation are virtual channels for digital platforms to increase urban entrepreneurial activity. Furthermore, digital platforms play a more significant role in promoting urban entrepreneurial activity in the eastern region and cities with better industrial structures. This impact has a nonlinear increasing “marginal effect” in which the faster the development of digital platforms, the more significant the promoting effect on urban entrepreneurial activity.

Sustainable growth rate, corporate value of US firms within capital and labor market distortions: The moderating effect of institutional quality

Research background: Understanding how distortions in capital and labor markets affect corporate value and sustainable growth is crucial in today's economy. These distortions can disrupt resource allocation and economic sustainability. Additionally, the role of institutional quality in shaping these dynamics requires thorough exploration. Purpose of the article: We quantify the effect of capital and labor market distortions on corporate value and sustainable growth rate (SGR) and how this association is moderated by institutional quality. Methods: Stemming from the sample criteria, we calibrated a final sample of 1971 United States-listed manufacturing firms for 2012–2022. This research offers insights into market inefficiencies and institutional effects. Progressing towards objectives, we use advanced techniques like feasible generalized least squares and generalized methods of moments. These methods help us rigorously analyze complex relationships among study variables. Findings & value added: Three key findings emerge: first, capital and labor market distortions have a negative and significant influence on corporate value and sustainable growth. Our primary finding implies that increasing distortions significantly reduce sustainable growth's value and potential. Second, we find institutional quality has a positive significant effect on corporate value and sustainable growth. Third, institutional quality positively moderates the association between capital and labor market distortions, corporate value, and sustainable growth. Findings suggest that institutional quality, as a potential mechanism, improves the efficiency of resource allocation and optimizes the sustainable economic system to lessen the negative effect of factor market distortions on corporate value and SGR. Besides, we conduct robustness checks to validate our findings. Finally, we offer policymakers and stakeholders actionable insights.

Direct Public Support of R&D and Innovation in Czech Firms: Unintended Consequences and Possible Peltzman Effect

This paper investigates the complex relationship between direct public support for innovation projects, being continuous innovator, and turnover growth, with a particular emphasis on the possibility of a Peltzman effect. The quantitative analysis investigates whether companies incentivized by direct subsidies prefer safer projects over riskier, groundbreaking innovations, using the 2014 Czech innovation dataset and an extensive literature review. The findings show a link between firms that receive public funding and those that engage in continuous or occasional innovation activities. However, the impact on turnover growth is not positive, implying that, on average, public subsidies do not significantly contribute to turnover growth. Concerns are raised in the study about potential market distortions, inefficient resource allocation, and the dynamics of collaboration among large firms in publicly funded projects. While acknowledging the models' exploratory nature, the study emphasizes the importance of ongoing scrutiny and refinement of innovation policies to ensure their effectiveness in promoting genuine innovation while mitigating unintended consequences.

The impact of resident demand on industrial carbon emissions and the transmission path: Evidence from Zhejiang Province

The industrial sector is the main source of carbon emissions in most developing countries. Little research has been conducted on demand-side factors and how the demand side affects industrial emissions through the supply side. Therefore, this article selects 2004–2019 panel data on Zhejiang Province, and a multiple linear regression model and a multiple mediating effects model are adopted to explore the impact mechanism and relationship between demand and industrial emissions. We find the following: (i) There is a significant positive influence of demand on emissions, and (ii) demand has an indirect inhibitory effect on industrial emissions through factor market distortion and an indirect promoting effect through technological innovation and energy consumption. (iii) There are two chain intermediary paths led by factor market distortion that have a negative impact on industrial emissions and a chain path led by technological innovation that has a positive impact.

Development of financial performance of food retailers as an attribute behind the increase of food insecurity in selected Central and Eastern European Countries

Food insecurity is not a new phenomenon even in leading European economies, but this complex problem area is facing new global challenges. This article traces the research gap in addressing food insecurity by focusing on the role of food retail chains in the former “Eastern Bloc” in light of unprecedented food price inflation and the resulting scale of demand for the services of food banks. Through empirical analysis of secondary financial corporate data, a low level of their profitability in the period of 2011–2019 was revealed, which preceded the synchronicity of two unexpected global economic downturns. Specifically, Return on Sales for food retailers located in the Czech Republic and Hungary was generally below 2%, offset by higher Total Asset Turnover figures, consistent with the need to extend the volume of goods for sale. Development in profitability in selected newer EU member states is just as significantly similar to the situation in Ukraine. The mutual interaction of factors of economic size and the country of residence of business was analyzed regarding a possible influence on their financial performance. This study concluded that the presence of unresolved market distortions can both lead to increased food insecurity and, paradoxically, contribute to increased food waste. AcknowledgmentThe authors are thankful to the Internal Grant Agency of Mendel University in Brno for financial support to carry out this research as the partial output of the project No. IGA-PEF-TP-23-015 “Zajišťování výživových potřeb obyvatelstva vzhledem k aktuálním výzvám v oblasti regenerativních přístupů při vykonávání hospodářských činností podniků agropotravinářského komplexu se zaměřením na roli tuzemských potravinových bank”.

Impact of digital finance on enterprise green innovation: From the perspective of information asymmetry, consumer demand and factor market distortions.

The study endeavors to empirically assess the influence of digital finance on promoting enterprise green innovation, while simultaneously probing its underlying mechanisms, by leveraging panel data from a sample of 2071 China A-share listed firms over an extensive time frame spanning from 2011 to 2021. The findings demonstrate that digital finance plays a crucial role in promoting enterprise green innovation, and that both the coverage breadth and usage depth of digital finance have a significant effect on enterprise green innovation, but the digitization level of digital finance also has a non-significant effect on enterprise green innovation, and the conclusions hold even after multiple robustness tests and consideration of endogeneity issues. Furthermore, heterogeneity analysis reveals that digital finance is only has a significant promoting effect on green innovation of SMEs, and high-tech enterprises. After conducting the mechanism analysis, it has been noted that digital finance serves as a facilitator in promoting green innovation in enterprises by reducing information asymmetry, stimulating consumer demand, and attenuating the distortion of regional factor markets. Intellectual property protection and environmental governance will strengthen the positive impact of digital finance on enterprises' green innovation. The research results provide policy implications for the green development of digital finance enabling enterprises.

RECENT DEVELOPMENTS IN STATE AID LAW CONCERNING FREE TRADE ZONES

This article examines a recent ruling alongside EU legislative advancements concerning the application of EU State aid regulations to free trade zones. The correct application of state aid rules to free trade zones is crucial for several reasons, encompassing legal, economic, and political dimensions. State aid rules help to maintain a level playing field for all market participants. By ensuring that state aid is applied correctly in free trade zones, unfair advantages or disadvantages are minimized, promoting fair competition among businesses. The correct applicability of state aid rules aligns with international trade agreements and standards. It ensures that a region or country is in compliance with broader economic and trade practices which could affect international relations and trade partnerships. Further, State aid rules aim to prevent market distortions that could arise from improper subsidies or aid. By applying these rules correctly in free trade zones, economic efficiency can be better achieved, and resources can be allocated more optimally. Lastly, predictability and legal certainty are essential for investor confidence. When state aid rules are correctly applied, investors have a clearer understanding of the legal and economic environment, which may lead to increased investment and economic growth.One of the most recent case-law of the European Court of Justice (“ECJ”) is the ruling of September 21, 2022, in the case T-95/21 concerning the Madeira Free Zone State aid scheme. The ECJ affirmed that the Europeans Commission’s (hereinafter: Commission) conclusion, which stated that the implementation of the Madeira Free Zone State aid scheme (Regime III) did not adhere to the approved conditions, was accurate. The scheme was not implemented according to State aid law, and therefore it must be recovered. The primary objective of the scheme was to enhance the economic development of Madeira through tax incentives. Consequently, the General Court dismissed Portugal’s appeal against the Commission’s decision (KPMG et al., 2022). The authority however, which was involved in granting the State aid, was not only Portugal but also Região Autónoma da Madeira (Autonomous Region of Madeira, Portugal, hereinafter “RAM”) and therefore, it decided to appeal the Commission’s decision, as individual applicant. Same as Portugual, RAM which seeks annulment of Articles 1 and 4 to 6 of Commission Decision (EU) 2022/1414 of 4 December 2020 on the aid scheme SA.21259 (2018/C) (ex 2018/NN) implemented by Portugal in favour of the free zone of Madeira (Zona Franca da Madeira - ZFM) - Scheme III (OJ 2022, L 217, p. 49). Therefore, on June 12, 2023, the General Court was required to render a judgment on the same subject matter as its decision on September 21, 2022 (Case T-131/21 Região Autónoma da Madeira v Commission, 2023). The only distinction is that the current applicant is different from the previous case.

Collaborative governance on industrial pollution and carbon emissions through synchronous development of factor markets: Impact and mechanism

Industrial sectors are pivotal areas for achieving the collaborative goal of pollution and carbon abatement, with technology playing a crucial role. Despite previous studies discussing the adverse environmental impacts of factor market distortion, there remains a research gap in examining the role of the technology market and the coordination among factor markets. This study introduces the concept of synchronous development between the capital and technology markets, drawing on the method of marriage-education matching in sociology. Furthermore, it employs the theoretical framework of new structural economics to investigate the impact and mechanisms of synchronous development between the capital and technology markets on the synergistic reduction of industrial pollution and carbon emissions, based on Chinese provincial-level panel data from 2000 to 2019 and auxiliary listed-company panel data. The results indicate that (1) the synchronous development between capital and technology markets facilitates collaborative governance in pollution mitigation and carbon abatement. (2) Industrial and technological structures serve as channel mechanisms, with the latter including technological innovation and productivity improvement of micro-enterprises as well as the optimization of energy consumption structure at the macro level. (3) Technology and labor quality endowments enhance the synergistic abatement effect, albeit by setting certain thresholds for actualization. (4) There is a reciprocal reinforcement and restrictive relationship between the synchronization and development of factor markets. This study applies the new structural economic theory to collaborative governance on pollution and carbon emissions, extending the research on the environmental and climate impacts of factor markets.

Impact of social insurance law on total factor productivity: evidence from Chinese micro and small businesses

ABSTRACTOur study investigates the impact of China’s 2011 Social Insurance (SI) Law on the Total Factor Productivity (TFP) of micro and small businesses (MSBs). Using the difference-in-differences (DiD) model, we found that the SI Law’s implementation resulted in a significant decline in TFP levels within MSBs owing to increased social security contributions. Mechanism analysis indicates that the incremental costs cannot be shifted onto employees through wage adjustments or workforce reduction and curb firms’ capital investments, subsequently affecting capital intensity and overall business productivity. Furthermore, heterogeneity analysis underscores that the SI Law’s effects on TFP are most pronounced in MSBs within the manufacturing sector, characterized by financial constraints, or situated in provinces with high enforcement intensity and greater factor market distortions. Further analysis reveals that the SI Law reduces labour productivity levels among MSBs, with the majority of the impact directly stemming directly from the SI Law, while the remaining effect is mediated through capital-labour intensity and TFP, respectively. Our study contributes to the existing literature by offering new insights from MSBs in an emerging market context, and the findings offer significant policy implications.

Competitiveness analysis of fresh tomatoes in Indonesia: Turning comparative advantage into competitive advantage.

Tomato commodity ranks fifth regarding vegetable export volume and value in Indonesia. The main issues with tomato production in Indonesia are seemingly its lack of variations, quantity, quality, and supply continuity. This study aimed to analyze the comparative and the competitive advantages of tomato farming, evaluate the government policy on inputs, outputs, and input-output sectors, and formulate strategic for transforming the comparative advantage into a competitive advantage. Policy Analysis Matrix (PAM) and sensitivity analysis were employed as the method with the 75 farmers as the respondents and their Focus Group Discussion (FGD) involving farmer groups, agricultural extension workers, traders, and the Agricultural Service Offices in the respective regencies. The results showed that tomato farming has both its comparative and competitive advantages. Its comparative advantage was higher than its competitive advantage in both dry and wet seasons. In general, tomato farming's comparative and competitive advantages outside Java were higher than those in Java. Meanwhile, the divergence effects of tomato agribusiness were more beneficial to consumers than producers. It indicates that improving domestic tomato production was more profitable for Indonesia than importing this commodity in terms of domestic resource use. The sensitivity analysis shows that tomato farming was relatively stable regarding productivity and price changes. The suggested strategic policies to apply are transforming tomato farming's comparative advantage into competitive advantage through productivity enhancement, improvement of distribution efficiency, less market distortion, and government incentives.

The effect of COVID-19 containment measures on fresh food market vendors in Uganda

PurposeThe coronavirus disease (COVID-19) pandemic continues to impact economic systems, with devastating consequences on livelihoods. Anecdotal evidence has predicted the adverse effects of COVID-19 on the livelihood of food system actors. Uganda experienced two lockdowns in March 2020 and June 2021 with varying government containment measures. During the first lockdown, fresh food market vending was deemed essential to meet urban food demand, and was consequently exempted from a total shutdown despite the ban on public and private transport. Thus, this study sought to examine the effect of COVID-19 containment measures on fresh food market vending businesses in Uganda.Design/methodology/approachUsing primary data collected from fresh food market vendors, this study applied a pooled time-series estimation to examine the effect of the first lockdown COVID-19 containment measures on fresh food vendors' welfare.FindingsThe study revealed that COVID-19 had a significant negative impact on the income of fresh food vendors, with female vendors being the most affected. COVID-19 containment measures reduced the diversity of buyers, individual customers and the number of commodities traded in causing a greater impact on vendors' income.Research limitations/implicationsThe unavailability of data for vendors who did not return to the market at the time of data collection limits the scope of the study. Additionally, the absence of data for the second lockdown limited the analysis to only March 2020 lockdown period.Originality/valueThe empirical analysis highlights how vulnerabilities of different gender categories could be exacerbated by crises. The study provides empirical evidence of various market distortions caused by the COVID-19 pandemic and the disproportionate impact on women and men market vendors which calls for the need to integrate women's perspectives in future planning for market systems as well as advocating for gender-sensitive recovery responses.

Avoiding the China shock: How Chinese state-backed internationalization drives changes in European economic governance

The state-backed internationalization of Chinese companies has led to conflicts in the EU over potential market distortions and security concerns. The EU has responded to this challenge with increasing state intervention and defensive measures in trade and investment regulation, competition policy, and industrial policy. Drawing on comparative capitalisms research and Neo-Gramscian perspectives on European integration, we analyze how European economic governance has changed under the pressure of Chinese competition. Based on 31 semi-structured expert interviews and a document analysis, this exploratory study examines the EU’s response in these policy fields. We observe a gradual, albeit contested change of European Economic Governance in two phases since 2017, primarily driven by a new “China-threat-coalition” in Germany. We argue that there is no overall paradigm shift in the neoliberal mode of European integration, but there are nonetheless significant changes as new “filter functions” have emerged that tend to “bypass” EU economic governance and filter out “market-distorting” state-capitalist influences.

Does Factor Market Distortion Inhibit Enterprise Innovation? Empirical Evidence from Chinese Industrial Enterprises

Does Factor Market Distortion Inhibit Enterprise Innovation? Empirical Evidence from Chinese Industrial Enterprises

Impact of targeted subsidies on access to resilient sanitation for climate-vulnerable households in rural Cambodia

Abstract Access to safe sanitation is a basic requirement for human well-being and is critical for protecting public health and preventing environmental contamination at the community level. The increasing global risk of climate-related disasters exacerbates the likelihood of traditional sanitation solutions failing and exposing communities to harmful pathogens. This risk is ubiquitous in Cambodia's flood-prone Tonle Sap Lake region, which has some of the lowest rates of sanitation coverage in the country. This study sought to design and test a targeted mechanism in the region to deliver sanitation subsidies to households in a vulnerable position due to climate and socioeconomic characteristics. Subsidy eligibility was evaluated using the poverty probability index for Cambodia, with thresholds set according to households' individual and community-level climate vulnerability. In a randomized controlled trial, offering subsidies increased the likelihood of successful sales conversions for climate-resilient latrine products among targeted households by 32 percentage points, indicating effectiveness for increasing market-based sanitation uptake. The research did not find evidence of widespread or sustained market distortion due to the subsidy program.