HKUST Institutional Repository
(5.016 recursos)
Repository of Hong Kong University of Science and Technology. Managed by the HKUST Library.
Mostrando recursos 1 - 20 de 27
1.
Insider control vs. government control : a study of China's state - Li, David D.
This paper examines the costs and benefits of government control of enterprises in transition, using a large survey of Chinese state enterprises. We find that tighter government control causes more unprofitable production and more surplus employment and thus tends to distort more severely enterprises' economic decisions. However, tighter government control also tends to reduce agency costs by forcing enterprise managers to cut wage and bonus when enterprise performance is poor. On net, government control seems to hinder enterprise efficiency. But control by lower level governments seems to be less efficiency-decreasing than by their higher level counterparts.
2.
Foreign direct investment and international trade in a continuum Ricardian trade model - Cheng, Leonard Kwok-Hon; Qiu, Larry Dongxiao; Tan, Guofu
We develop a continuum Ricardian trade model to capture both North-South trade and technology transfer via foreign direct investment (FDI) by multinational enterprises (MNEs). We show that there is a unique range of products produced in the South by MNEs. If the ability of Southern workers in absorbing Northern technology increases, (a) the range of MNE production increases, (b) Northern worker's welfare and Southern workers' welfare change in opposite directions, and (c) the world aggregate welfare increases under certain conditions. This model can also be used to explore issues such as North-South wage gaps, FDI policies and the product cycle.
3.
A General equilibrium analysis of software development : copyright protection and contract enforcement - Qiu, Larry Dongxiao
We develop a model to study the implications of a legal environment on the organization of software production. We show that contract enforcement affects the organizational mode (i.e., in-house versus outsourcing) of customized software development while copyright protection determines the introduction of package software. When copyright protection is weak, only customized software will be developed. When copyright protection is strong, both customized software and packaged software will be developed.
4.
Product differentiation, asymmetric information and international mergers - Qiu, Larry Dongxiao; Zhou, Wen
Information asymmetry creates value and incentives for firms from different countries to merge. To demonstrate this point, we develop a model of international trade under oligopolistic competition and asymmetric information, in which domestic firms are informed of the local market demands, but foreign firms are not. By emphasizing two features of a merger between a domestic firm and a foreign firm, we show that the two firms always want to share information, but output coordination is not always profitable, depending on the extent of product differentiation. We also examine how such a merger affects the non-merging firms' profits, consumer surplus,...
5.
Cost difference and endogenous lobbying position in intra-industry trade - Qiu, Larry Dongxiao
A two-country, two-firm model has been developed to study equilibrium lobbying positions in intra-industry trade under cost uncertainty. A firm chooses either a protect ionist position or a free-t rader position. The model predicts that taking the free-trader (protectionist) lobbying position is an effi cient (inefficient) firm's dominant strategy. In addit ion, for any lobbying position taken by a firm, its lobbying effort always decreases as its production cost increases. The findings help shed light on some empirical observations.
6.
Can technology transfer induce the south to sign international environmental agreements? - Qiu, Larry Dongxiao; Yu, Zhihao
We develop a North-South model of international trade and transboundary pollution to analyze the relationship between environmental technology transfer and the South's incentive to sign an international environmental agreement (IEA). First, we show that technology transfer could either increase or reduce the South's incentive to sign the IEA. Second, we show that the South's participation in the IEA would reduce the market incentive of technology transfer. Both results have very clear policy implications for (i) the sequence of technology transfer and the South's IEA membership and (ii) the legitimacy of South's subsidies for technology transfer.
7.
Lobbying, multisector trade and sustainability of free-trade agreements - Qiu, Larry Dongxiao
This paper is concerned with the sustainability of free-trade areas. I begin with an FTA that is formed as a political equilibrium and examine conditions under which the FTA is sustainable, i.e., governments do not leave it. The sustainability of the FTA is influenced by governments' valuation on political contributions, discount factors, the lobbying position of the specific-interest group in intra-industry trade sector, and the sectoral coverage of the FTA. I find that (i) under certain conditions, the lobby-opposed FTA could be more sustainable than the FTA formed without political pressure; (ii) the lobby-supported FTA is more sustainable than the...
8.
The Value of multilateral trade liberalization and the need for third-party sanction - Chen, Kong-Pin; Qin, Cheng-Zhong; Qiu, Larry Dongxiao
Trade policies such as tariffs are often featured by the prisoner's dilemma. One country's trade liberalization is vulnerable to the opportunism of another country. This problem is more serious in cases where a country behaving opportunistically can only be punished by the victims. In a trade model with three countries, we show that "circular concessions" are the only way to have any Pareto-improving trade liberalization. The circular nature of the concessions implies that if punishment can be carried out only by the victim of opportunistic behavior, multilateral trade liberalization cannot be sustained. Our results have implications for rule design in...
9.
Limiting government predation through anonymous banking: a theory with evidence from China - Bai, Chong-En; Li, David D.; Qian, Yingyi; Wong, Yijiang
China's economic performance of the past two decades presents a puzzle for the economics of transition and development: Enormous private business incentives were unleashed that have fueled rapid economic growth despite the fact that China has had very weak "conventional institutions" (such as the rule of law and separation of powers) to constrain the government from arbitrary intrusion into economic activities. We argue that one mechanism that has limited the government's ability for predation and harassment is commitment through information decentralization, where the key institution is "anonymous banking," that is, a combination of the use of cash for transactions and...
10.
A Theory of the reform of bureaucratic institutions - Basu, Susants; Li, David D.
By bureaucratic institutions or bureaucracy, we mean the rules and regulations that are implemented by government agencies. Burdensome bureaucratic institutions are leading obstacles to economic development and therefore the target of economic reform of many countries in today's world. In this paper, we provide a theoretical framework to analyze the reform of bureaucratic institutions. The analysis shows the key to the reform is to properly incentivize the incumbent generation of bureaucrats, whose cooperation is needed to reform the bureaucracy. However, a simple buy out strategy of reform may not always work. Under certain conditions, a delegation strategy that grants incumbent...
11.
Finishing China's economic reform : challenges and pitfalls - Li, David D.; Li, Ling
We argue that China's journey towards a market economy is far from being finished. Instead, in many areas, reforms have been delayed and economic problems accumulated. There are six major reforms that have to be accomplished in the near future in order for the economy to stay on the trajectory of growth. Meanwhile, the current reformers face more and bigger challenges than their predecessors, including ever more vocal losers of reform and increasing difficulties to arrange credible ways to compensate them. Facing these challenges, the reformers are prone to falling in two major pitfalls of reform. That is, overwhelmed by...
12.
Subsampling vector autoregressive test of causality - Choi, In
This paper studies subsampling the VAR causality test as a way of finding approximations to its finite sample distribution that are valid both for stationary and nonstationary VAR processes. Two types of subsamplings, a conventional one for time series and one using resampling again (called random subsampling in this paper), are considered. In computing the VAR causality test with subsamples (i.e., blocks of consecutive time series), both the test of the original form and the test with the subsample OLS coefficient estimate centered at the full-sample estimate are used. Subsampling using the latter is called centered subsampling in this paper....
13.
Testing linearity in cointegrating smooth transition regressions - Choi, In; Saikkonen, Pentti
This paper develops statistical tests that can be used to test linearity in ageneral cointegrating smooth transition regression model. These tests extend previous similar tests by considering I(1) regressors instead of stationary or mixing regressors. As is typical in cointegrating regressions, the regressors and errors of the model can also be serially and contemporaneously correlated. In order to allow for this feature, an endogeneity correction based on a leads-andlags approach is employed. Additionally, the model of this paper has more general transition mechanisms than in previous studies. The proposed tests are very simple to use because ordinary least squares techniques...
14.
Combination unit root tests for cross-sectionally correlated pannels - Choi, In
This paper develops unit root tests for cross-sectionally correlated panels. The cross-sectional correlation is modelled by error-component models. The test statistics we propose are formulated by combining p-values from the augmented Dickey-Fuller test applied to each time series whose nonstochastic trend components and cross-sectional correlations are eliminated by Elliott, Rothenberg and Stock's (1996, Econometrica) GLS-based detrending and the conventional cross-sectional demeaning for panel data. The combination tests have a standard normal limiting distribution. Simulation results show that these tests have reasonably good size and power properties. The combinations tests are applied to the real GDP data of 23 OECD nations....
15.
Inconsistency of bootstrap for nonstationary, vector autoregressive processes - Choi, In
Using a nonstationary, bivariate autoregressive process with normally distributed innovations, this paper shows that the bootstrap VAR causality test is inconsistent in general in the sense that its weak limit is different from that of the original causality test almost surely.
16.
The demographics of demand instruments for production function estimation - Cook, David E.
In this paper, I estimate a representative production function using instrumental variable methods. The instruments are demographic variables which reflect the age structure of the US population. These variables should affect sectoral demand and factor availability. I suggest that due to the low frequency and high predictability of demographic changes, the instruments are useful in illuminating the effects of exogenous changes in capital equipment. I find evidence that strongly favor constant returns to scale in U.S. manufacturing.
17.
Macroeconomic effects of international financial panics - Cook, David E.; Devereux, Michael B.
This paper explores the macroeconomic effects of capital market panics in a small open economy. The model is motivated by the sudden and dramatic capital outflows from East Asian economies in 1997-1998, which led to sharp exchange rate depreciations, followed by a collapse in the real economy, and a large reversal in the position of the current account. Our interpretation of this event follows the literature on `financial fragility', which points to the problems of the maturity mismatch between short term borrowing and long-term investment projects giving rise to the risk of capital market panics. We go beyond this literature,...
18.
Education and growth instrumental variables estimates - Cook, David E.
This paper estimates cross-country production functions with first differenced unbalanced panel data. Least squares estimates find significant social returns to education and experience, even after controlling for physical capital accumulation. The estimated returns to human capital are slightly smaller than private returns estimated from micro-level data. The estimated returns to physical capital accumulation are much larger than estimates based on factor shares. Physical and human capital are subject to measurement error and endogeneity. To address these problems, I estimate the production function with instrumental variables based on the age structure of the population. Instrumental variables estimates find statistically significant returns...
19.
Liability dollarization and the bank channel - Choi, Woon Gyu; Cook, David E.
Banks in developing economies often face a mismatch in the currency denomination of their liabilities (foreign currency denominated debt incurred from foreign lenders) and assets (domestic currency loans to domestic borrowers). We study the effect of this mismatch on business cycles and monetary policy in a sticky price, dynamic general equilibrium model of a dependent economy. We show that a fixed exchange rate rule that stabilizes the balance sheets of banks offers greater stability to a developing economy than would an inflation targeting interest rate rule. This result differs sharply from standard macroeconomic intuition which suggests that
inflation targeting ameliorates the...
20.
Capital flows, capital controls, and exchange rate policy - Cook, David E.; Devereux, Michael B.
Many emerging market economies use alternative forms of capital controls. Often the use of capital controls is related to the defense of the exchange rate. This paper examines the welfare case for capital controls, and the interaction between capital controls and the exchange rate. The main question is whether capital controls may be justified, in order to gain independence in monetary policy, while at the same time pegging the exchange rate. Our results suggest a very conditional yes to this question, but only when there are capital outflows. Surprisingly, there is also a similar case for capital controls in face...
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