Sector-level Analysis Research Articles

Trends of energy demand in the Middle East: A sectoral level analysis

Summary The Middle East region is a key player in the world energy market today. It holds approximately over 50% of the world's proven fossil fuel reserves. Yet, the region is significantly challenged by the large dependence on finite fossil fuel resources in its primary energy supply. The intricate relationship between climate change mitigation and the development of energy systems underlines great uncertainty over the future of energy development in the Middle East. Such uncertainty is greatly linked to growing energy demands and the region's capacity to transition to low-carbon energy systems. Over the past 20 years, the total primary energy demand in the Middle has almost tripled due to rapid population growth and economic development. Notably, most of the growing energy demand was concentrated in 5 countries, Iran, Saudi Arabia, Iraq, Kuwait, and the UAE. These 5 countries represented around 82% of the total primary energy demand in 2015, with Saudi Arabia and Iran alone accounted for 60%. The core question of this paper is what are the possible implications of growing energy demands in these countries and which sectors will entail significant increases in the projected energy requirements? The significance of the work presented here stems from analyzing 4 major countries that constitute the largest share in Middle East's total energy consumption and associated emissions. Examining these 4 countries together is important to highlight how future increase in these countries could largely affect the overall energy demand from the Middle East region in the next 20 years. Thus, the scope of the paper is looking at energy demand implications in 4 countries, Iran, Saudi Arabia, Kuwait, and the United Arab Emirates (UAE). Iraq is excluded from the analysis due to the large political uncertainty associated with Iraq's energy development. Here, a regression model is used to forecast energy demand from 5 economic sectors across the 4 countries using projected increase in population and gross domestic product (GDP) by 2030. Results indicate that most of the projected energy demand will be from Iran and Saudi Arabia. In addition, industry and transportation sectors will witness the largest increase among the 5 sectors examined in the paper. For instance, industry and transportation sector will collectively account for 52% and 67% of the projected energy demand in Iran and Saudi Arabia, respectively. Such results are important to highlight when ascertaining sectoral level implications of future energy demands and to determine potential areas where energy savings can be made.

What determines FDI inflow to MENA countries? Empirical study on Gulf countries: Sectoral level analysis

•This study investigates Natural resource-FDI curse hypothesis.•Natural resources have a negative impact on total FDI inflows in GCC countries.•Natural resources generate greater impact on resource FDI than non-resource FDI in GCC.•Corruption has positive effect on resource FDI in GCC.

Oil Prices, Stock Markets and Firm Performance: Evidence from Europe

This paper extends the understanding of the relationship between oil prices, stock markets and financial performance of oil and gas firms over the past decade. Firstly it studies the impact of oil price fluctuations on stock markets in Europe. Secondly, it examines the volatility spillovers between oil and European stock markets. As oil price changes do not equally affect all industries, the study conducts both market-level and sector-level analysis. Thirdly, it examines the impact of crude oil price changes on the financial performance measure of oil and gas firms, both listed and unlisted, from the Western European region. The findings show existence of the one-way directional relationship between oil and most of the European sector stock markets. Furthermore, the results indicate volatility spillovers between returns in oil price and stock markets. It was found that crude oil prices significantly and positively impact the performance of listed oil and gas firms in Western Europe. In the case with unlisted firms, the results suggest existence of other factors that have an impact on their performance. The geopolitical crisis (2014) negatively affected the financial performance of both listed and unlisted firms. On the other hand, financial performance of only listed oil and gas firms was negatively influenced by the global financial crisis (2008-2009).

Generation and distribution of the total factor productivity gains in US industries

ABSTRACTThis study estimates productivity gains and their distribution among inputs and outputs for 63 American industries over the period 1987–2012. Using the traditional surplus accounting method, the Total Factor Productivity (TFP) growth rates are divided into their price change components in order to determine the stakeholders who do or do not receive price advantages.An initial analysis showed that TFP of US industries increased at an average trend of 0.8% and established that remunerations to employees and firms’ profitability constituted 49% and 39%, respectively, of the accumulated economic surplus from the productivity gains. Suppliers of intermediate inputs retained 12.1% of the surplus. Finally, customers, equipment and structure providers were the losers in the distribution of economic surplus via, respectively, a significant growth of relative final demand prices and a substantial price decrease of these assets.A second step analysis underlined that industries with high TFP growth rates mainly benefited customers and firms via output price decreases and profitability improvements while industries with low or negative TFP changes hurt customers through significant output price increases. The sectoral level analysis also showed that employees’ remunerations depend only slightly on productivity gains produced within their industrial sectors.

Does foreign direct investment cause economic growth? A dynamic panel data analysis for SADC countries

Purpose – The purpose of this paper is to examine the causal relationship between inward foreign direct investment (FDI) and economic growth in Southern African Development Community (SADC) countries over the period 1980-2012. It also investigates whether the causal relationship between FDI inflows and economic growth is dependent on the level of income. Design/methodology/approach – In order to assess whether the causal relationship between FDI inflows and economic growth is dependent on the level of income, the study divided the SADC countries into two groups, namely, the middle-income countries and the low-income countries. The study used the recent panel-data analysis methods to examine this linkage. The Granger causality test for the middle-income countries was conducted within a vector-error correction mechanism framework; while that of the low-income countries was conducted within a vector autoregressions framework. Findings – The results for the middle-income countries’ panel show that there is a uni-directional causal flow from GDP to FDI, and not vice versa. However, for the low-income countries’ panel, there was no evidence of causality in either direction. The study concludes that the FDI-led growth hypothesis does not apply to SADC countries. Research limitations/implications – Methodology applied in this study is a bivariate framework which is likely to suffer from the omission of variable bias (Odhiambo, 2008, 2011). Second, the Granger causality analysis employed in this only investigates the direction of causality and whether each variable can be used to explain another, but does not directly test for the mechanisms through which FDI leads to economic growth and economic growth leads to FDI. Practical implications – Future studies may include a third variable such as domestic savings, exports, or financial development in a trivariate or multivariate panel causality model. A more complete analysis which seeks to explain the channels through which FDI impacts growth is suggested for future studies. Lastly, sector level analysis will help policy makers draft effective industrial policies, which can guide allocation of incentives. Social implications – The results of this study support the Growth-led FDI hypothesis, but not the FDI-led growth hypothesis. In other words, it is economic growth that drives FDI inflows into the SADC region and into Southern Africa, and not vice versa. This implies that the recent high economic growth rates that have been recorded in some of the SADC countries, especially the middle-income countries, have led to a massive inflow of FDI into this region. Originality/value – At the regional level, SADC as a regional bloc has been actively pursuing policies and strategies aimed at attracting FDI into the region. Despite the important role of FDI in economic development, and the increase in FDI inflows into SADC countries in particular, there is a significant dearth of literature on the causal relationship between FDI and economic growth. The study used the recent panel-data analysis methods to examine the causal relationship between FDI and economic growth in SADC countries.

Does German Development Aid boost German Exports and German Employment? A Sectoral Level Analysis

Abstract This paper uses an augmented gravity model of trade to investigate the link between German development aid and sectoral exports from Germany to aid recipient countries with data from 1978–2011. The findings indicate that in the long run each dollar of German aid is associated with an average increase of US$ 0.83 US of German goods exports. The sectors that benefit the most in terms of exports and employment are machinery, electrical equipment and transport equipment. According to our estimates using input-output analysis and a partial equilibrium framework, the aid-induced gains in sectoral exports are associated with the gross employment of approximately 216,000 people.

Absorptive capacity factors that mediate foreign direct investment spillovers: a sector-level analysis from emerging economies

Although foreign direct investment (FDI) is believed to promote economic growth and knowledge transfer, empirical evidence is mixed. Recent studies argue that the question is not of whether FDI spillover effects exist, but rather of whether the prerequisites for such effects exist. This builds on the notion of absorptive capacity; a country's ability to absorb the benefits FDI offers. This study examines the role of human capital as an absorptive capacity factor for Emerging and Middle Eastern Economies at the sector level. A sample of 30 countries is examined over the period 1990-2009 using panel data analysis. The study makes a contribution by focusing on sector data rather than aggregate FDI inflows to examine the individual sector's influence, allowing for inherent differences. The findings indicate that the results and implications vary according to sector.

Are Micro-Analyses of Employment Effects of Innovation Too Optimistic? A Sector-Level Analysis of the Austrian Economy between 2008 and 2012

Innovation – the development of new products and services as well as the application of new technologies – is widely assumed to be an important strategy for securing or improving competitiveness, growth and welfare. Usually, it is expected that rising competitiveness leads to positive effects on employment, particularly through product innovation. Comparing the innovation activity in the sectors of the Austrian economy which is covered by the European innovation survey CIS in the period 2008-2010 with the employment trends in the years of recovery from the crisis in 2009 until 2012 shows that the situation at sector level is more diverse. Regarding product innovation, the sector-level correlation analysis tends to confirm the often stated positive relation between product innovation and employment growth, but there is also a considerable number of opposite cases. Interestingly, there is almost no difference between general product innovations and products which are new to the market. Regarding the employment effects of process innovation, the group of sectors where there is a relation between process innovation and a reduction of employment and the group where such a relation cannot be found are of similar size. However, the results look very different when focusing on explicitly labour saving process innovations. Here the group of sectors with a negative relation between innovation intensity and employment growth is considerably bigger than in the case of process innovation in general.

Italian FDI and Exports at Sectoral Level: Substitutes or Complements?

In this contribution we investigate upon the impact of the stocks of Italian outward FDI (in terms of employees of Italian foreign affiliates in the host markets and of the number of Italian foreign affiliates) on trade (national exports and imports). We employ a sector gravity analysis of Italian trade and FDI with the main partners to estimate a conditional correlation between domestic exports and foreign investment. To such a purpose we carry out a sectoral level analysis by aggregating data at firm level that allows a detailed analysis of the Italian FDI (ICE-Reprint). The sectoral panel we build on the basis of this firm level dataset includes 68 Italian host markets and 16 sectors during the 2001–2003 period. Our results do not confirm a substitution relationship of firm performances in terms of exports with respect to productive takeovers and employment in affiliates abroad.

Persistence of Shocks in the US Natural Gas Market: A Sector-Level Analysis

This paper tests the integration property of US natural gas consumption at the sector level and finds a heterogenous behavior. Residential, commercial, and power consumption are stationary. However, even after allowing for endogenous structural breaks, tests fail to reject unit-root in the industrial consumption of natural gas. The results highlight the value of conducting sector-level analysis of unit-root behavior in energy consumption.

Economic analysis of atmospheric mercury emission control for coal-fired power plants in China

Coal combustion and mercury pollution are closely linked, and this relationship is particularly relevant in China, the world's largest coal consumer. This paper begins with a summary of recent China-specific studies on mercury removal by air pollution control technologies and then provides an economic analysis of mercury abatement from these emission control technologies at coal-fired power plants in China. This includes a cost-effectiveness analysis at the enterprise and sector level in China using 2010 as a baseline and projecting out to 2020 and 2030. Of the control technologies evaluated, the most cost-effective is a fabric filter installed upstream of the wet flue gas desulfurization system (FF+WFGD). Halogen injection (HI) is also a cost-effective mercury-specific control strategy, although it has not yet reached commercial maturity. The sector-level analysis shows that 193tons of mercury was removed in 2010 in China's coal-fired power sector, with annualized mercury emission control costs of 2.7 billion Chinese Yuan. Under a projected 2030 Emission Control (EC) scenario with stringent mercury limits compared to Business As Usual (BAU) scenario, the increase of selective catalytic reduction systems (SCR) and the use of HI could contribute to 39tons of mercury removal at a cost of 3.8 billion CNY. The economic analysis presented in this paper offers insights on air pollution control technologies and practices for enhancing atmospheric mercury control that can aid decision-making in policy design and private-sector investments.

Can cross-listing relax financial frictions in trade and equity holdings? A sector-level analysis

Previous studies have documented the positive mutual relationship between bilateral aggregate goods trade and asset holdings. This article examines whether financial frictions play an important role in this mutual relationship. Instrumental variable Poisson pseudo maximum likelihood (IV-PPML) estimation method is applied to a new panel of data on US imports and foreign equity holdings in 20 manufacturing sectors from 43 countries over the period 2001–2007. The results confirm the significantly positive relationship between goods trade and equity holdings, and show that financial frictions are an important factor causing this positive correlation. In addition, we find that equity cross-listings in the US stock markets provide external funds to relax financial frictions and promote goods trade. This impact varies with different measures of financial frictions in developing and developed countries.

Public–Private Pay Comparisons

As state and local governments attempt to manage fiscal stress created by the Great Recession, the level of compensation received by public sector workers has become an increasingly debated policy issue. A significant amount of research exists that addresses national public sector compensation trends, but relatively few state-level studies have been performed. This analysis provides a preliminary analysis of public and private sector compensation in Florida. Using data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau, sector-level comparisons are made between public and private sector workers within the state with regard to compensation, age and education. This sector-level comparison is then supplemented by an occupational analysis of career fields found in both sectors. The sector-level analysis suggests public sector workers in Florida are, on average, not only better compensated than those in the private sector in aggregate but are also considerably more educated and older. The occupational analysis suggests that public sector workers in Florida are in general less well-compensated than private sector workers employed in the same field, even when older and more highly educated on average.

Public administration and governance: a sector-level analysis of World Bank aid

This article turns the question about socioeconomic development away from its usual goal of economic growth and argues that governance is another appropriate measure of economic development. Instead of econometric analyses of country-level data, this article shows how aggregating project-level data to a sector-based approach is a new methodological tool for determining whether project and policy objectives translate into improved governance. Using the World Bank’s public administration, law and justice projects and panel-corrected time series, this article finds that the World Bank’s public administration, law and justice projects inconsistently improve governance. failures. Policy prescriptions removed from implementation considerations may limit public sector management project effectiveness. Points for practitioners (1) Foreign aid evaluation is assisted by sector-specific analyses. This is comple- mentary to traditional foreign aid evaluations’ focus on countries in general. (2) The World Bank’s Public Sector Management projects inconsistently improve a client country’s governance environment. (3) The World Bank’s ‘efficiency’ assumptions and partial understanding of public administration’s models may contribute to uneven project performances. (4) Certain public sector management projects neg- atively impact rule of law and the control of corruption. (5) Foreign aid researchers should re-engage their understanding of project outcomes and implementation

How Markets React to Earnings Announcements in the Absence of Analysts and Institutions: Evidence from the Saudi Market

How stock markets react to news is an established area of research. We examine the behaviour of the Saudi Stock market (SSM) in response to earnings announcements where there are no analysts’ forecasts, with the aim of examining the efficiency of the market. We conduct sector-level analysis to control for government and institutional ownership. The SSM seems to underreact to positive news for the first five days and then reactions tend to strengthen in the following weeks, indicating the presence of a post-earnings announcement drift, or PEAD. At the same time, the SSM overreacts to negative news in the first five days and then reverses its direction and reports an upward post-earnings announcement drift. The individually dominated market combined with the absence of analysts’ forecasts is the main explanation for this underreaction to positive news and overreaction to negative news.

The effects of unification: markets, policy, and cyclical convergence in Italy, 1861–1913

This paper uses time-series evidence on construction movements to examine the convergence of regional business cycles in the decades that followed Italy’s unification. The aggregate series point to cyclical convergence, but a sector-level analysis traces this result to the decline in differentiated “regional-policy” shocks. The regional market cycles diverged, as regions specialized in different sectors of production; market-cycle convergence is observed only within the “industrial triangle,” the regions of which also developed different specializations. This suggests that the balance between growing interdependence and growing differentiation is not general, as the current literature presumes, but specialization-specific.

Impact of Carbon Price Policies on U.S. Industry

This paper informs the discussion of carbon price policies by examining the potential for adverse impacts on domestic industries, with a focus on detailed sector-level analysis. The assumed policy scenario involves a unilateral economy-wide $10/ton CO2 charge without accompanying border tax adjustments or other complementary policies. Four modeling approaches are developed as a proxy for the different time horizons over which firms can pass through added costs, change input mix, adopt new technologies, and reallocate capital. Overall, we find that a readily identifiable set of industries experience particularly adverse impacts as measured by reduced output and that the relative burdens on different industries are remarkably consistent across the four time horizons. Output rebounds considerably over longer time horizons, and the adverse impacts on profits diminish even more rapidly in most cases. Over the short term employment losses mirror output declines, while gains in other industries fully offset the losses over the longer horizons. At the same time, leakage abroad is considerable in some sectors, particularly when reductions in exports are considered.

Economic and environmental performance of alternative policy measures to reduce nutrient surpluses in Finnish agriculture

This paper provides an economic sector level analysis of the effectiveness of different policy measures in decreasing nitrogen (N) and phosphorus (P) surpluses from agriculture in order to reduce nutrient runoff from agricultural fields to watercourses and to improve water quality of surface waters. Assuming no changes in the EU level policies after CAP reform 2003 we focus on national level policy measures such as full or partial de-coupling of national support from production, payments for reduced nutrient surpluses of N and P, and N fertiliser tax. None of the analysed policy measures is superior one with respect to environmental performance, since full decoupling of national support would be the most effective in reducing P surpluses while payment for reduced nutrient surplus performed best with respect to N surpluses. Economic performance (farmers’ compliance cost per %-reduction of N or P surplus) of full and partial de-coupling of national support is clearly better than that of specialised agri-environmental policy instruments, because both decoupling scenarios result in the increase of farmers’ income in comparison to base scenario, and thus compliance costs are in fact negative in these two cases. Our analysis confirms the fact that the overall policy package matters a lot for the effectiveness of agrienvironmental policy measures. Environmental performance of agri-environmental policy measures may be significantly reduced, if they are implemented jointly with production coupled income support policies. Thus, in order to increase the effectiveness of agri-environmental policy measures agricultural income support policies should be decoupled from production and this alone would bring substantial reduction in nutrient surpluses.;

The Effects of Unification: Markets, Policy and Cyclical Convergence in Italy, 1861-1913

This paper examines the convergence of regional business cycles in the decades that followed Italy's Unification. The aggregate construction series point to cyclical convergence, but a sectorlevel analysis traces this result to the decline in differentiated regional-policy shocks. The regional market cycles diverged, as the regions specialized in different sectors of production; market-cycle convergence is observed only within the industrial triangle, the regions of which also developed different specializations. This suggests that the balance between growing interdependence and growing differentiation is not general, as the current literature presumes, but specialization-specific.

Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis

Summary Booming foreign direct investment (FDI) in post-reform India is widely believed to promote economic growth. We assess this proposition by subjecting industry-specific FDI and output data to Granger causality tests within a panel cointegration framework. It turns out that the growth effects of FDI vary widely across sectors. FDI stocks and output are mutually reinforcing in the manufacturing sector, whereas any causal relationship is absent in the primary sector. Most strikingly, we find only transitory effects of FDI on output in the services sector. However, FDI in the services sector appears to have promoted growth in the manufacturing sector through cross-sector spillovers.