Economics [Working Papers]

Permanent URI for this collectionhttps://hdl.handle.net/10125/3158

Browse

Now showing 1 - 20 of 118

Trade and innovation in global networks--regional policy implications
(Honolulu, HI : East-West Center, 2014-05) Ernst, Dieter
This Think Piece explores how integration into international trade through global networks of production (GPNs) and innovation (GINs) might affect a region's innovation capacity. As regions across the globe are progressively integrated into those global networks--some certainly more than others--these regions are all faced with a fundamental challenge: How might progressive integration of its firms into GPNs and GINs affect learning, capability development and innovation? Will network integration unlock new sources of industrial innovation? Or will it act as a poisoned chalice that will sap and erode the region's accumulated capabilities? The paper presents illustrative examples of how "ubiquitous globalization" increases the diversity and complexity of GPNs and GINs, and briefly discusses the underlying systemic pressures and enabling forces. In order to capture the gains for innovation that a region might reap from global network integration, the paper suggests moving from a one-way analysis of the external impacts on a region's innovation capacity to an analysis of two-way interactions. The paper concludes with Policy Implications and highlights Unresolved Issues for Future Research, including the critically important issues of spillover employment effects and inequality.
The microeconomics of North-South Korean cross-border integration
(Honolulu, HI : East-West Center, 2012-06) Haggard, Stephan; Noland, Marcus
Economic integration between North and South Korea occurs through three modalities: traditional arm's-length trade and investment, processing on commission (POC) trade, and operations within the Kaesong Industrial Complex (KIC). In order, these three modalities are characterized by decreasing exposure of South Korean firms to North Korean policy and infrastructure. Through a survey of 200 South Korean firms operating in North Korea we find that these modalities of exchange matter greatly in terms of implied risk. For example, firms operating in the KIC are able to transact on significantly looser financial terms than those outside it. We find that direct and indirect South Korean public policy interventions influence these different modalities of exchange and thus impact entry, profitability, and sustainability of South Korean business activities in the North. In effect, the South Korean government has substituted relatively strong South Korean institutions for the relatively weak Northern ones in the KIC, thus socializing risk. As a result, the level and type of cross-border integration observed in the survey is very much a product of South Korean public policy.
Networks, trust, and trade : the microeconomics of China-North Korea integration
(Honolulu, HI : East-West Center, 2012-06) Haggard, Stephan; Noland, Marcus
A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although we cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
Global trends of multi-factor productivity
(Honolulu, HI : East-West Center, 2014-03) Lee, Jeong Yeon
Summary: Multi-factor productivity (MFP) compares the growth of gross domestic product with the growth of combined capital and labor inputs. The growth rate of MFP assumes theoretical significance because it represents the slope of the steady-state growth path, and hence is a major determinant of the long-term growth trend. This paper offers the balanced panel of the estimated growth rates of MFP for 24 OECD countries over 1986-2011. Based on the estimates of MFP growth, a number of notable trends in productivity growth are identified for the entire OECD area as well as three major economies--the United States, the Eurozone and Japan--within the OECD.
Is the information technology agreement facilitating latecomer manufacturing and innovation? : India's experience
(Honolulu, HI : East-West Center, 2013-11) Ernst, Dieter
A defining characteristic of today's international trading system is that plurilateral trade agreements like the Information Technology Agreement (ITA) are gaining in importance relative to the gridlocked Doha round of multilateral trade negotiations. These more selective trade agreements pose new and so far little understood challenges for the governance of the international trading system, especially with regard to the distribution of liberalization gains among participants which differ in their stage of development, their institutions, and their resources and capabilities. The paper examines India's experience with ITA. Initially, the main concern was to attract inward FDI and to facilitate the growth of its then still nascent IT services industry. For electronics manufacturing however, the analysis shows that gains from trade liberalization were overshadowed by substantial costs - with rising electronics imports inflating the country's current account deficit to unsustainable record highs, while eroding domestic electronic manufacturing and innovation. To improve reciprocity in the distribution of gains from ITA, the paper suggests that latecomers like India deserve, under certain conditions, special and differentiated treatment. In turn, these countries need to agree to reforms that reduce investment barriers in their domestic industries, such as restrictive regulations and discrimination against foreign direct investment.
Standards, innovation, and latecomer economic development : a conceptual framework
(Honolulu, HI : East-West Center, 2013-09) Ernst, Dieter
Little is known about the impact of standards on the economic development of countries which are latecomers to industrial manufacturing and innovation. Standardization is regarded primarily as a technical issue, and hence receives only limited high-level policy support. However, technical standards contribute at least as much as patents to economic growth. As a key mechanism for the diffusion of technological knowledge, technical standards contribute to productivity growth. Equally important are qualitative impacts for instance of environmental, health, food and work safety standards. A well-functioning standardization system and strategy can work as a catalyst for translating new ideas, inventions and discoveries into productivity-enhancing innovation. Standards thus are the missing link in a growth strategy which seeks to create quality jobs in higher-value added advanced manufacturing and services. The paper develops a conceptual framework to study how standards are created and used in Asian countries that seek to catch up with the productivity and income levels of the US, the EU and Japan. A stylized model of latecomer standardization tasks, capabilities and strategies is used to demonstrate that the costs of developing and implementing effective standards can be substantial. The paper examines the critical role that patents play for standardization and argues that "strategic patenting" to generate rents from de facto industry standards can stifle latecomer economic development. Policy implications conclude the paper.
Industrial upgrading through low-cost and fast innovation--Taiwan's experience
(Honolulu, HI : East-West Center, 2013-09) Ernst, Dieter
This paper examines the forces that drive Taiwan's new strategy of "Upgrading through Low-Cost and Fast Innovation." The first section highlights characteristics of Taiwan's traditional "Global Factory" innovation model and examines the role of innovation policy in that model. Section 2 reviews fundamental weaknesses that define the requirements of Taiwan's new innovation strategy. Section 3 explores Taiwan's new strategy of "low-cost and fast innovation through domestic and global innovation networks." Finally, section 4 examines the role of government and key policies and initiatives in the IT industry.
Europe's innovation union--beyond techno-nationalism?
(Honolulu, HI: East-West Center, 2012-08) Ernst, Dieter
This paper traces recent transformations in Europe's innovation policy--the move towards EU-wide policy coordination in the form of an "Innovation Union." A deep fiscal crisis and increasingly severe austerity policies are slowing down Europe's move towards greater openness and internationalization of its innovation system. The paper asks whether Europe has left behind for good "techno-nationalism," or whether government action in support of high-tech industries through various forms of protectionist policies is re-emerging, this time however on a region-wide scale. This question is of relevance to current policy debates about the role of innovation in the US as well as in Asia's emerging economies. The paper specifically explores what lessons the US and emerging Asia might draw from Europe's move towards an EU-wide Innovation Strategy.
Global technology sourcing in China's integrated circuit design industry : a conceptual framework and preliminary findings
(Honolulu, HI: East-West Center, 2012-08) Ernst, Dieter; Naughton, Barry
The paper examines the role of global technology sourcing, and its drivers and impacts in China's integrated circuit (IC) design industry. IC design is one of the priority targets of China's innovation policy, as codified especially in the "Strategic Emerging Industries" initiative. At the same time, however, China's IC design industry is deeply integrated into the vertically disintegrated global semiconductor industry, through markets, investment and technology. The paper highlights a fundamental challenge for China's innovation strategy: How can China reconcile its primary objective of strengthening indigenous innovation with the benefits that it could reap from its deep integration into international trade and into global networks of production and innovation? We show that the process of global technology sourcing is changing in important ways as it becomes possible to "source" technological services in an increasingly fine division of the value chain, even compared to what was possible a few years ago. The paper describes how globalization has transformed the distribution of scientific and technical knowledge; explores possible effects on technology sourcing; and examines the tension between these global changes and China's indigenous innovation policy. Focusing on IC design for wireless communications, the most dynamic part of China's country's IC design industry, we examine how changes in markets and technology create new strategic opportunities for Chinese IC design companies, and discuss tentative findings of case study research. Global technology sourcing describes a small but important segment of China's innovation system that is very different from the government-sponsored innovation of the strategic emerging industries and "indigenous innovation." This raises an important policy question: Can China combine the benefits of both innovation strategies?
Who should bear the cost of China's carbon emissions embodied in goods for exports?
(Honolulu : East-West Center, 2011-11) Zhang, ZhongXiang
China's capital-intensive, export-oriented, spectacular economic growth since launching its open-door policy and economic reforms in late 1978 not only has created jobs and has lifted millions of the Chinese people out of poverty, but also has given rise to unprecedented environmental pollution and CO2 emissions. While estimates of the embedded CO2 emissions in China's trade differ, both single country studies for China and global studies show a hefty chunk of China's CO2 emissions embedded in trade. This portion of CO2 emissions had helped to turn China into the world's largest carbon emitter, and is further widening its gap with the second largest emitter. This raises the issue of who should be responsible for this portion of emissions and bearing the carbon cost of exports. China certainly wants importers to cover some, if not all, of that costs. While China's stance is understandable, this paper has argued from a broad and balanced perspective that if this is pushed too far, it will not help to find solutions to this issue. On the contrary it can be to China's disadvantage for a number of reasons. However, aligning this responsibility with China does not necessarily suggest the sole reliance on domestic actions. In that context, the paper recommends specific actions that need to be taken internationally as well as domestically in order to effectively control the embedded CO2 emissions in China's trade.
An evaluation of overseas oil investment projects under uncertainty using a real options based simulation model
(Honolulu : East-West Center, 2011-11) Zhu, Lei; Zhang, ZhongXiang; Fan, Ying
This paper applies real options theory to establish an overseas oil investment evaluation model that is based on Monte Carlo simulation and is solved by the Least Squares Monte-Carlo method. To better reflect the reality of overseas oil investment, the model has incorporated not only the uncertainties of oil price and investment cost but also the uncertainties of exchange rate and investment environment. These unique features have enabled the model to be best equipped to evaluate the value of oil overseas investment projects of three oil field sizes (large, medium, small) and under different resource tax systems (royalty tax and production sharing contracts). In the empirical setting, China was selected as an investor country and Indonesia as an investee country as a case study. The results show that the investment risks and project values of small sized oil fields are more sensitive to changes in the uncertainty factors than the large and medium sized oil fields. Furthermore, among the uncertainty factors considered in the model, the investment risk of overseas oil investment may be underestimated if no consideration is given of the impacts of exchange rate and investment environment. Finally, as there is an important tradeoff between oil resource investee country and overseas oil investor, in medium and small sized oil investment negotiation the oil company should try to increase the cost oil limit in production sharing contract and avoid the term of a windfall profits tax to reduce the investment risk of overseas oil fields.
Trade in environmental goods, with focus on climate-friendly goods and technologies
(Honolulu : East-West Center, 2011-10) Zhang, ZhongXiang
Paragraph 31(iii) of the Doha Ministerial Declaration mandates to the liberalization of environmental goods and services. This mandate offers a good opportunity to put climate-friendly goods and services on a fast track to liberalization. Agreement on this paragraph should represent one immediate contribution that the WTO can make to fight against climate change. This paper presents the key issues surrounding the liberalization of trade in climate-friendly goods and technologies in WTO environmental goods negotiations. It begins with discussing what products to liberalize and how. Given that WTO Members are divided by this key issue, the paper explores options to move current negotiations on the liberalization of trade in environmental goods and technologies forward, both within and outside the WTO. Recognizing that there is no one-size-fits-all strategy for tariff liberalization for all countries and for all environmental goods, the paper suggests the need for a high degree of flexibility to accommodate different situations and stakes in the liberalization of trade in environmental goods. Given that there are simply not enough environmental markets or these markets are weak in many developing countries, the paper emphasizes that creating markets for environmental goods in developing countries is far more important than just improving market-access conditions for associated goods, and discusses how to best serve the interests and concerns of developing countries
The Trans-Pacific partnership and Asia-Pacific integration : a quantitative assessment
(Honolulu : East-West Center, 2011-10-24) Petri, Peter A.; Plummer, Michael G.; Zhai, Fan
Two emerging tracks of trade agreements in the Asia-Pacific—one based on the proposed Trans-Pacific Partnership (TPP) agreement and an Asian track—could consolidate the “noodle bowl” of current smaller agreements and provide pathways to a Free Trade Area of the Asia-Pacific (FTAAP). We examine the benefits and strategic incentives generated by these tracks over 2010-2025. The effects on the world economy would be small initially but by 2025 the annual welfare gains would rise to $104 billion on the TPP track, $303 billion on both tracks, and $862 billion with an FTAAP. The tracks will be competitive but their strategic implications are constructive: each would generate incentives for enlargement. Over time, strong economic incentives would emerge for the United States and China to consolidate the tracks into a region-wide agreement. Each track would bring a different template to such consolidation and can be viewed as defining a “disagreement point” in the Asia-Pacific bargaining game. The study is based on an analysis of 48 actual and proposed Asia-Pacific trade agreements and models impacts on variables including sectoral trade, output, employment and job shifts in 24 world regions.
America's voluntary standards system : a "best practice" for innovation policy?
(Honolulu : East-West Center, 2012-02) Ernst, Dieter
For its proponents, America's voluntary standards system is a "best practice" model for innovation policy. Foreign observers however are concerned about possible drawbacks of a standards system that is largely driven by the private sector. There are doubts, especially in Europe and China, whether the American system can balance public and private interests in times of extraordinary national and global challenges to innovation. To assess the merits of these conflicting perceptions, the paper reviews the historical roots of the American voluntary standards system, examines its current defining characteristics, and highlights its strengths and weaknesses. On the positive side, a tradition of decentralized local self-government, has given voice to diverse stakeholders in innovation, avoiding the pitfalls of top-down government-centered standards systems. However, a lack of effective coordination of multiple stakeholder strategies tends to constrain effective and open standardization processes, especially in the management of essential patents and in the timely provision of interoperability standards. To correct these drawbacks of the American standards system, the government has an important role to play as an enabler, coordinator, and, if necessary, an enforcer of the rules of the game in order to prevent abuse of market power by companies with large accumulated patent portfolios. The paper documents the ups and downs of the Federal Government’s role in standardization, and examines current efforts to establish robust public-private standards development partnerships, focusing on the Smart Grid Interoperability project coordinated by the National Institute of Standards and Technology (NIST). In short, countries that seek to improve their standards systems should study the strengths and weaknesses of the American system. However, persistent differences in economic institutions, levels of development and growth models are bound to limit convergence to a US-Style market-led voluntary standards system.
Rent(s) asunder : sectoral rent extraction possibilities and bribery by multinational corporations
(Honolulu : East-West Center, 2011-12) Gueorgiev, Dimitar; Malesky, Edmund; Jensen, Nathan
Openness to foreign investment can have differential effects on corruption, even within the same country and under the exact same domestic institutions over time. This theoretical approach departs from standard political economy by attributing corruption motives to firms as well as officials. Rather than interpreting bribes solely as a coercive "tax" imposed on business activities, allowance was made for the possibility that firms may be complicit in using bribes to enter protected sectors. Thus, the expectation of variation in bribe propensity across sectors according to expected profitability and investment restrictions. Specifically, foreign investment will not be associated with corruption in sectors with fewer restrictions and more competition, but will increase dramatically as firms seek to enter restricted and uncompetitive sectors that offer higher rents. This effect was tested using a list experiment, a technique drawn from applied psychology, embedded in a nationally representative survey of 10,000 foreign and domestic businesses in Vietnam. The findings show that the impact of domestic reforms and economic openness on corruption is conditional on policies that restrict competition by limiting entry into the sector.
Gender in transition : the case of North Korea
(Honolulu : East-West Center, 2011-11) Haggard, Stephan; Noland, Marcus
This paper uses a survey of 300 North Korean refugees to examine the experience of women in North Korea’s fitful economic transition. Like other socialist states, North Korea has maintained a de jure commitment to women's rights. However, we find that women have been disproportionately shed from state-affiliated employment and thrust into a market environment characterized by weak institutions and corruption. As a result, the state and its affiliated institutions are increasingly populated by males, and the market, particularly in its retail aspects, is dominated by women. Among the most recent cohort of refugees to leave North Korea, more than one-third of male respondents indicate that criminality and corruption is the best way to make money, and 95 percent of female traders report paying bribes to avoid the penal system. In short, the increasingly male-dominated state preys on the increasingly female-dominated market. These results paint a picture of a vulnerable group that has been disadvantaged in North Korea's transition. Energies are directed toward survival, mass civil disobedience is reactive, and as a group, this population appears to lack the tools or social capital to act collectively to improve their status.
Korea's growth performance : past and future
(Honolulu, HI : East-West Center, 2011-11) Noland, Marcus
South Korea is arguably the premier development success story of the last half century. For 47 years starting in 1963, the economy averaged 7 percent real growth annually, and experienced only two years of economic contraction: 1980 after the second oil shock and the assassination of President Park Chung-hee, and 1998 at the nadir of the Asian financial crisis. At the start of that period South Korea had a per capita income lower than that of Mozambique or Bolivia; today it is richer than Spain or New Zealand, and was the first Asian and first non-G7 country to host a summit of the G20, the unofficial steering committee of the world economy. The South Korean case is of interest for a variety of reasons. Rapid growth coincided with extensive state interventions in the economy, and considerable controversy exists as to how much this performance should be credited to the country's state-led development strategy and to what extent the lessons from that experience might be portable or applied elsewhere. The salience of this issue has grown as South Korea has become a more important provider of development assistance and advice. Now the country faces challenges in maintaining its superior economic performance in the face of an aging population domestically and a taxing external environment. Finally, the country confronts scenarios involving potential instability, collapse, and/or absorption of its neighbor, North Korea.
Resource management and transition in Central Asia, Azerbaijan, and Mongolia
(Honolulu, HI : East-West Center, 2011-06) Pomfret, Richard
This paper presents a comparative analysis of resource-rich Asian transition economies. For Uzbekistan and Turkmenistan the ability to earn revenue from cotton exports permitted avoidance of reform. Oil in Azerbaijan and Kazakhstan was associated with large-scale corruption, but with soaring revenues in the 2000s their institutions evolved and to some extent improved. Kyrgyzstan and Mongolia illustrate the challenge facing a small economy with a large potential mineral resource, with the former suffering from competition for rents among the elite and the latter from lost opportunities. Overall the countries illustrate that a resource curse is not inevitable among transition economies, but a series of hurdles need to be surmounted to benefit from resource abundance. Neither the similar initial institutions nor those created in the 1990s are immutable.
A brief history of standards and standardization organizations : a Chinese perspective
(Honolulu, HI : East-West Center, 2011-04) Wang, Ping
This paper reviews the history of standardization, from firm-level standardization at the early Industrial Revolution, to private standardization organizations and voluntary standards in the market economy, and national or international standardization organizations that emerged as a result of industrialization and international trade as well as their national or international standards. The paper examines the driving forces, principles and methodologies of standardization and addresses the position and role of technical standards and standardization organizations in the context of market economies. The author argues that standardization enables optimizing resource allocation in market economies and that standardization is the root cause of Adam Smith's "invisible hand". The paper proposes a strong relationship between innovative technologies and standards in the ICT industry and demonstrates that ICT standards are of strategic significance and have a great effect on the industry.
The Role of MNCs in China's standardization
(Honolulu, HI : East-West Center, 2011-02) Hou, JunJun
Multinational Corporations (MNCs) affect China's standardization through participation in standard setting, education for standardization and other ways to seek commercial profits. MNCs' participation accelerates the speed and strengthens the transparency and internationality of China's standardization, however, it weakens the sovereignty of China's standardization and makes it harder to reach agreement in standardization. In order to achieve a win-win situation, this paper attempts to propose that Chinese stakeholders should keep a more open mind to MNCs, and MNCs should keep more patience to Chinese standardization, moreover there should be more communication and collaboration between Chinese stakeholders and MNCs.

Browse

Recent Submissions