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2371. China, Like the US, Faces Challenges in Achieving Inclusive Growth Through Manufacturing

Author:
Robert Z. Lawrence
Publication Date:
08-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
For more than three decades the goal of becoming “the factory of the world” has been at the core of China’s development strategy. This strategy, in combination with high rates of domestic investment and low rates of consumption, made Chinese production the most manufacturing intensive in the world. But as its wages have risen, China’s competitiveness in the most labor-intensive manufacturing industries has eroded. Its ability to assemble products remains a major source of its exports, but it has also tried to shift toward more sophisticated value-added production domestically. Chinese domestic spending has shifted away from investment toward more consumption as citizens’ incomes have grown. Like Americans, Chinese people are also spending more on services than on manufactured goods. All these changes are fundamentally altering the structure of China’s production, reducing the role of manufacturing, and increasing the skill levels of workers in manufacturing. This Policy Brief reviews the challenges posed by these developments for China’s long-term goal of achieving more inclusive growth. It presents evidence that commonly held perceptions that Chinese manufacturing employment growth is robust are wrong. In fact, such growth has peaked and China is now following the pattern of structural change that is typical of a more mature emerging economy, in which the share of employment in manufacturing declines as workers are increasingly employed in services.
Topic:
Economic growth, Manufacturing, and Trade
Political Geography:
China, Asia, North America, and United States of America

2372. Does Trade Reform Promote Economic Growth? A Review of Recent Evidence

Author:
Douglas A. Irwin
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the two decades since the critical survey of empirical work on this question by Francesco Rodriguez and Dani Rodrik in 2000, new research has tried to overcome the various methodological problems that have plagued previous attempts to provide a convincing answer. This paper examines three strands of recent work on this issue: cross-country regressions focusing on within-country growth, synthetic control methods on specific reform episodes, and empirical country studies looking at the channels through which lower trade barriers may increase productivity. A consistent finding is that trade reforms that significantly reduce import barriers have a positive impact on economic growth, on average, although the effect differs across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance.
Topic:
Reform, Economic growth, and Trade
Political Geography:
Global Focus

2373. The Rise of Global Innovation by US Multinationals Poses Risks and Opportunities

Author:
Lee G. Branstetter, Britta Glennon, and J. Bradford Jensen
Publication Date:
06-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
For decades, US multinational corporations (MNCs) conducted nearly all their research and development (R&D) within the United States. Their focus on R&D at home helped establish the United States as the unrivaled leader of innovation and technology advances in the world economy. Since the late 1990s, however, the amount of R&D conducted overseas by US MNCs has grown nearly fourfold and its geographic distribution has expanded from a few advanced industrial countries to many parts of the developing world, creating an innovation system that spans the globe. Like many aspects of globalization, including the offshoring of manufacturing over recent decades, the globalization of R&D raises concerns about US competitiveness and loss of technological leadership. At the same time, the spreading geographic location of innovation presents opportunities for US-based companies if the right policies are adopted to seize them. The research presented in this Policy Brief demonstrates that US innovators continue to remain involved in important ways in US MNCs' global R&D activities, and fears of a hollowing out of US capacity to innovate—based probably on previous fears about the hollowing out of US-based manufacturing—may be overstated. Indeed, the large and growing pool of highly educated scientists and engineers in the developing world could increase the rate of global productivity growth, to the advantage of US-based companies and the world in general. The authors conclude that a productive way to capitalize on the globalization of MNC R&D is not to oppose it but to combine emerging-market talent with MNC experience so that innovation can flourish to improve global living standards and fuel economic progress.
Topic:
Economics, Globalization, Multinational Corporations, Risk, and Innovation
Political Geography:
North America and United States of America

2374. Protectionism under Trump: The China Shock, Intolerance, and the "First White President"

Author:
Marcus Noland
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In 2016, the United States elected an avowedly protectionist president. This paper uses US county-level electoral data to examine this outcome. The hypothesis that support for protectionism was purely a response to globalization is rejected. Exposure to trade competition encouraged a shift to the Republican candidate, but this effect is mediated by race, diversity, education, and age. If the turn toward protectionism is due to economic dislocation, then public policy interventions could mitigate the impact and support the reestablishment of a political consensus for open trade. If, however, the drivers are identity or cultural values, then the scope for constructive policy intervention is unclear.
Topic:
Economics, Politics, Donald Trump, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

2375. The Impact of Income Inequality on Household Indebtedness in Euro Area Countries

Author:
Stefan Jestl
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper examines the impact of income inequality on consumption-related household indebtedness at the household level. Using the first wave of the Eurosystem Household Finance and Consumption Survey data, the analysis sheds light on heterogeneous effects across euro area countries. The results suggest a positive impact of income inequality on consumption-related household indebtedness in a small sample of countries. We further employ a multilevel regression model to also take country’s macroeconomic characteristics into account, such as credit market and welfare state design. In this setting, we find an overall positive impact of income inequality on consumption-related household indebtedness.
Topic:
Economics, Inequality, Economic Inequality, and Macroeconomics
Political Geography:
Europe

2376. Public and Private Pension Systems and Macroeconomic Volatility in OECD Countries

Author:
Mario Holzner, Stefan Jestl, and David Pichler
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper analyses the impact of public pension expenditures and pension funds’ assets as well as their benefits on economic volatility. To do so, we use panel data for 35 OECD countries for the period 1980-2018 and apply a set of state-of-the-art econometric estimators. Our results show weak evidence of a negative impact of public pension expenditures as well as weak evidence of a positive impact of pension funds’ benefits on volatility. Results were, however, found not to be very robust. In contrast, pension funds’ assets do not show any evidence of being associated with economic volatility. Unsystematic fiscal policy, banking crises and political (in)stability, however, are revealed to be somewhat more robust determinants of economic volatility.
Topic:
Economics, Public Sector, Econometrics, and Organisation for Economic Co-operation and Development
Political Geography:
Global Focus

2377. Implications of Foreign Direct Investment, Capital Formation and its Structure for Global Value Chains

Author:
Amat Adarov and Robert Stehrer
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
In the age of globalisation, international trade and foreign direct investment (FDI) have become integral elements of cross-country production sharing. In this paper we empirically assess the impact of FDI, as well as capital dynamics and structure, on the formation of global value chains (GVC) and trade in value added at country and sectoral levels based on a database constructed for a sample of European countries over the period 2000-2014. The analysis reveals that inward FDI is especially conducive to the formation of backward linkages while outward FDI facilitates forward GVC participation, especially in high-tech manufacturing sectors. A particularly robust influence of FDI and capital accumulation on GVC integration is identified in the textile and clothing industry. While capital accumulation in general intensifies GVC linkages for most sectors, ICT capital appears to be especially instrumental for backward integration of electrical and transportation equipment sectors.
Topic:
Globalization, International Trade and Finance, Foreign Direct Investment, Trade, and Global Value Chains
Political Geography:
United States, Japan, and Europe

2378. The Effect of Stressors and Resilience Factors on Mental Health of Recent Refugees in Austria

Author:
Judith Kohlenberger, Isabella Buber-Ennser, Michael Landesmann, Sebastian Leitner, and Bernhard Rengs
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
Given the exposure to stressors in their home countries, during their migration and in the phase after arrival, refugees are particularly vulnerable to mental health problems. At the same time, their access to adequate healthcare and other social infrastructure might be hampered by factors such as lack of knowledge as well as cultural and language barriers. In addition to other factors, this reduces their ability to take part in social activities as well as their integration into the labour market of the host societies. We examine the prevalence of mental disorders in the refugee population from Afghanistan, Iraq and Syria who arrived in Austria recently, drawing on data from a refugee survey conducted between December 2017 and April 2018 in Austria with a specific focus on Vienna, Salzburg, Graz, Linz and Innsbruck (FIMAS+INTEGRATION). We found a high share of refugees (32%) to have moderate or severe mental health problems. In particular, young refugees (15-34 years) show higher risk levels. When investigating the effects of stressors on the mental health situation, we found a positive association with e.g. experienced discrimination in Austria and the fear for partners and children left behind. In contrast, the results show a negative correlation for a couple of mitigating factors that foster resilience, i.e. proficiency in the German language, being employed (including volunteer work), having more supportive relationships and satisfaction with the housing situation.
Topic:
Refugee Issues, Refugees, and Refugee Crisis
Political Geography:
Africa

2379. Is There a Threat of a Repeated Deployment of Nuclear "Eurorockets" from the Cold War Period in Europe?

Author:
Miroslav Tuma
Publication Date:
01-2019
Content Type:
Policy Brief
Institution:
Institute of International Relations Prague
Abstract:
Will the U.S. unilateral withdrawal from the American-Soviet INF Treaty of 1987 become a possible reality? The Treaty prohibits ground-launched shorter and the middle-range missiles (500–5,500 kms) with nuclear or conventional warheads. The Treaty´s security significance and its main parameters, the legal framework of the withdrawal and the reasons of both parties for accusing each other of violating the Treaty, are discussed in the article as well. In its conclusion, the article, among other things, explains the context of the possible termination of the Treaty, and its consequences for the U.S.-Russia arms-control architecture. Motto: “ A nuclear war cannot be won and must never be fought.” (A joint statement of the American president Ronald Reagan and the Soviet highest representative Mikhail Gorbachev from their first meeting in Geneva in January 1985)
Topic:
International Relations, Nuclear Weapons, and Treaties and Agreements
Political Geography:
Russia, Europe, and United States of America

2380. Free Willy! Japan Resumes Commercial Whale Hunting

Author:
Veronika Bílková
Publication Date:
11-2019
Content Type:
Policy Brief
Institution:
Institute of International Relations Prague
Abstract:
In late 2018, Japan announced that it would withdraw from the International Convention on the Regulation of Whaling and leave the International Whaling Commission. It did so due to its disapproval of the ban on commercial whaling, which has been in force for the Parties of the Convention since 1986, and to its decision to resume whalle hunt since the summer of 2019. This reflection first gives an overview of the evolution and the structure of the international legal regime related to whaling and of the history of Japan’s relationship with this regime. It then shows that the Japan’s attempt to justify the resumption of commercial whaling by the principle of sustainable use of living marine resources cannot be successful for both practical and normative reasons.
Topic:
Environment, Treaties and Agreements, Law, Hunting, and Whaling
Political Geography:
Japan and Asia