Product quality and intra-industry trade

In this study, we argue that the conventional intra-industry trade (IIT) index does not address the quality issue directly and propose a methodology to make full use of unit-price gap information to deduce quality differences between simultaneously exported and imported products. By applying this measure to German trade data at the eight-digit level, we study the quality improvement of Chinese export goods in its IIT with Germany. We compare the case of China with those of Eastern European countries, which are also major trading partners of Germany. Our results show that the unit-value difference in IIT between Germany and Eastern European countries is clearly narrowing. However, China's export prices to Germany are much lower than Germany's export prices to China, and this gap has not narrowed over the last 23 years. This is at odds with the common perception that China's product quality has improved, as documented by Rodrik (2006) and Schott (2008). Our results support Xu (2010), which argued that incorporating the quality aspect of the exported goods weakens or even eliminates the evidence of the sophistication of Chinese export goods in Rodrik (2006).

Bank Borrowing and Financing of Medium-sized Firms in Indonesia

The improvement of financial intermediation functions is crucial for a robust banking system. When lending, banks have to cope with such problems as information asymmetry and adverse selection. In order to mitigate these problems, banks have to product information and improve their techniques of lending. During the 1998 financial crisis, Indonesia's banking system suffered severe damage and revealed that the country's banking intermediation functions did not work well. This paper examines the financial intermediation functions of banks in Indonesia and analyzes the importance of bank lending to firms. The focus is on medium-sized firms, and "relationship lending", one of the bank lending techniques, is used to examine financial intermediation in Indonesia. The results of logit regressions show that the relationship between a bank and a firm affects the probability of bank lending. The amount of borrowing and collateral are also affected by a firm's relationship with a bank. When viewed from the standpoint of relationship lending to medium-sized firms, Indonesian banks cannot be criticized for any malfunction of financial intermediation.

Chapter 5 Product Differentiation versus Geographical Differentiation: Evidence from the Pork Processing Industry in China

This chapter attempts to identify whether product differentiation or geographical differentiation is the main source of profit for firms in developing economies by employing a simple idea from the recently developed method of empirical industrial organization. Theoretically, location choice and product choice have been considered as analogues in differentiation, but in the real world, which of these strategies is chosen will result in an immense difference in firm behavior and in the development process of the industry. Development of the technique of empirical industrial organization enabled us to identify market outcomes with endogeneity. A typical case is the market outcome with differentiation, where price or product choice is endogenously determined. Our original survey contains data on market location, differences in product types, and price. The results show that product differentiation rather than geographical differentiation mitigates pressure on price competition, but 70 per cent secures geographical monopoly.

Input-output-based genuine value added and genuine productivity in China's industrial sectors (1995-2010)

The rapid growth of China's economy has brought about huge losses of natural capital in the form of natural resource depletion and damages from carbon emissions. This paper recalculates value added, capital formation, capital stock, and related multifactor productivity in China's industrial sectors by further developing the genuine savings method of the World Bank. The sector-level natural capital loss was calculated using China's official input–output table and their extensions for tracing final consumers. The capital output elasticity in the productivity estimation was adjusted based on these tables. The results show that although the loss of natural capital in China's industrial sectors in terms of value added has slowed, the impacts on their productivity during the past decades is still quite clear.

Inter-industry analysis and monetary policy evaluations in the Korean flow of funds accounts

This study mainly aims to provide an inter-industry analysis through the subdivision of various industries in flow of funds (FOF) accounts. Combined with the Financial Statement Analysis data from 2004 and 2005, the Korean FOF accounts are reconstructed to form "from-whom-to-whom" basis FOF tables, which are composed of 115 institutional sectors and correspond to tables and techniques of input–output (I–O) analysis. First, power of dispersion indices are obtained by applying the I–O analysis method. Most service and IT industries, construction, and light industries in manufacturing are included in the first quadrant group, whereas heavy and chemical industries are placed in the fourth quadrant since their power indices in the asset-oriented system are comparatively smaller than those of other institutional sectors. Second, investments and savings, which are induced by the central bank, are calculated for monetary policy evaluations. Industries are bifurcated into two groups to compare their features. The first group refers to industries whose power of dispersion in the asset-oriented system is greater than 1, whereas the second group indicates that their index is less than 1. We found that the net induced investments (NII)–total liabilities ratios of the first group show levels half those of the second group since the former's induced savings are obviously greater than the latter.