Essays in economic growth, political economy and institutions

This dissertation analyzes the effects of political and economic institutions on economic development and growth.^ The first essay develops an overlapping-generations political economy model to analyze the incentives of various social groups to finance human capital accumulation through public education expenditures. The contribution of this study to the literature is that it helps explain the observed differences in the economic growth performance of natural resource-abundant countries. The results suggest that the preferred tax rates of the manufacturers on one hand and the political coalition of manufacturers and landowners, on the other hand, are equal to the socially optimal tax rate. However, we show that owners of natural resources prefer an excessively high tax rate, which suppresses aggregate output to a suboptimal level.^ The second essay examines the relationship between the political influence of different social classes and public education spending in panel data estimation. The novel contribution of this paper to the literature is that I proxy the political power and influence of the natural resource owners, manufacturers, and landowners with macroeconomic indicators. The motivation behind this modeling choice is to substantiate the definition of the political power of social classes with economic fundamentals. I use different governance indicators in the estimations to find out how different institutions mediate the overall impact of the political influence of various social classes on public education spending. The results suggest that political stability and absence of violence and rule of law are the important governance indicators.^ The third essay develops a counter argument to Acemoglu et al. (2010) where the thesis is that French institutions and economic reforms fostered economic progress in those German regions invaded by the Napoleonic armies. By providing historical data on urbanization rates used as proxies for economic growth, I demonstrate that similar different rates of economic growth were observed in the regions of France in the post-Napoleonic period as well. The existence of different economic growth rates makes it hard to argue that the differences in economic performance in the German regions that were invaded by the French and those that were spared a similar fate follow from regional differences in economic institutions.^

Intra-regional Tourism and Challenges Facing Hong Kong's Hotel Industry

Asia is experiencing a rapid growth in intra-Asian tourism, and is finding that the spending priorities of these new visitor markets is quite different from traditional markets. Not only have Hong Kong's markets changed, but the economic operational environment is becoming increasingly difficult as a result of the change in sovereignty in 1997, increasing land prices, and new regulations. The current structure of the hotel industry is out of balance with the demands of these new markets. Hong Kong now needs to consider some intervention in the hotel industry to further encourage the development of properties in this mid-market.

Essays on intergenerational and regional aspects of water management

This dissertation consists of three essays on different aspects of water management. The first essay focuses on the sustainability of freshwater use by introducing the notion that altruistic parents do bequeath economic assets for their offspring. Constructing a two-period, over-lapping generational model, an optimal ratio of consumption and pollution for old and young generations in each period is determined. Optimal levels of water consumption and pollution change according to different parameters, such as, altruistic degree, natural recharge rate, and population growth. The second essay concerns water sharing between countries in the case of trans-boundary river basins. The paper recognizes that side payments fail to forge water-sharing agreement among the international community and that downstream countries have weak bargaining power. An interconnected game approach is developed by linking the water allocation issue with other non-water issues such as trade or border security problems, creating symmetry between countries in bargaining power. An interconnected game forces two countries to at least partially cooperate under some circumstances. The third essay introduces the concept of virtual water (VW) into a traditional international trade model in order to estimate water savings for a water scarce country. A two country, two products and two factors trade model is developed, which includes not only consumers and producer's surplus, but also environmental externality of water use. The model shows that VW trade saves water and increases global and local welfare. This study should help policy makers to design appropriate subsidy or tax policy to promote water savings especially in water scarce countries.^

Editor's choice Regional trade agreements and export competitiveness: the uncertain path of Nicaragua’s apparel exports under CAFTA

The Central American Free Trade Agreement (CAFTA) has been a mixed blessing for economic development. While exports to the US economy have increased, dependency may hinder economic growth if countries do not diversify or upgrade before temporary provisions expire. This article evaluates the impact of the temporary Tariff Preference Levels (TPLs) granted to Nicaragua under CAFTA and the consequences of TPL expiration. Using trade statistics, country- and firm-level data from Nicaragua’s National Free Zones Commission (CNZF) and data from field research, we estimate Nicaragua’s apparel sector will contract as much as 30–40% after TPLs expire. Our analysis underscores how rules of origin and firm nationality affect where and how companies do business, and in so doing, often constrain sustainable export growth.

Three Essays on Taxation, Growth and Consumption

The purpose of this dissertation is to examine three distributional issues in macroeconomics. First I explore the effects fiscal federalism on economic growth across regions in China. Using the comprehensive official data set of China for 31 regions from 1952 until 1999, I investigate a number of indicators used by the literature to measure federalism and find robust support for only one such measure: the ratio of local total revenue to local tax revenue. Using a difference-in-difference approach and exploiting the two-year gap in the implementation of a tax reform across different regions of China, I also identify a positive relationship between fiscal federalism and regional economic growth. The second paper hypothesizes that an inequitable distribution of income negatively affects the rule of law in resource-rich economies and provides robust evidence in support of this hypothesis. By investigating a data set that contains 193 countries and using econometric methodologies such as the fixed effects estimator and the generalized method of moments estimator, I find that resource-abundance improves the quality of institutions, as long as income and wealth disparity remains below a certain threshold. When inequality moves beyond this threshold, the positive effects of the resource-abundance level on institutions diminish quickly and turn negative eventually. This paper, thus, provides robust evidence about the endogeneity of institutions and the role income and wealth inequality plays in the determination of long-run growth rates. The third paper sets up a dynamic general equilibrium model with heterogeneous agents to investigate the causal channels which run from a concern for international status to long-run economic growth. The simulation results show that the initial distribution of income and wealth play an important role in whether agents gain or lose from globalization.

Essays on Intergenerational and Regional Aspects of Water Management

This dissertation consists of three essays on different aspects of water management. The first essay focuses on the sustainability of freshwater use by introducing the notion that altruistic parents do bequeath economic assets for their offspring. Constructing a two-period, over-lapping generational model, an optimal ratio of consumption and pollution for old and young generations in each period is determined. Optimal levels of water consumption and pollution change according to different parameters, such as, altruistic degree, natural recharge rate, and population growth. The second essay concerns water sharing between countries in the case of trans-boundary river basins. The paper recognizes that side payments fail to forge water-sharing agreement among the international community and that downstream countries have weak bargaining power. An interconnected game approach is developed by linking the water allocation issue with other non-water issues such as trade or border security problems, creating symmetry between countries in bargaining power. An interconnected game forces two countries to at least partially cooperate under some circumstances. The third essay introduces the concept of virtual water (VW) into a traditional international trade model in order to estimate water savings for a water scarce country. A two country, two products and two factors trade model is developed, which includes not only consumers and producer’s surplus, but also environmental externality of water use. The model shows that VW trade saves water and increases global and local welfare. This study should help policy makers to design appropriate subsidy or tax policy to promote water savings especially in water scarce countries.

Variability of marine climate on the North Icelandic Shelf in a 1357-year proxy archive based on growth increments in the bivalve Arctica islandica

A multicentennial and absolutely-dated shell-based chronology for the marine environment of the North Icelandic Shelf has been constructed using annual growth increments in the shell of the long-lived bivalve clam Arctica islandica. The region from which the shells were collected is close to the North Atlantic Polar Front and is highly sensitive to the varying influences of Atlantic and Arctic water masses. A strong common environmental signal is apparent in the increment widths, and although the correlations between the growth increment indices and regional sea surface temperatures are significant at the 95% confidence level, they are low (r ~ 0.2), indicating that a more complex combination of environmental forcings is driving growth. Remarkable longevities of individual animals are apparent in the increment-width series used in the chronology, with several animals having lifetimes in excess of 300 years and one, at 507 years, being the longest-lived non-colonial animal so far reported whose age at death can be accurately determined. The sample depth is at least three shells after AD 1175, and the time series has been extended back to AD 649 with a sample depth of one or two by the addition of two further series, thus providing a 1357-year archive of dated shell material. The statistical and spectral characteristics of the chronology are investigated by using two different methods of removing the age-related trend in shell growth. Comparison with other proxy archives from the same region reveals several similarities in variability on multidecadal timescales, particularly during the period surrounding the transition from the Medieval Climate Anomaly to the Little Ice Age.

Performance and prospects of smaller UK regional airports

This paper investigates the traffic and financial performance of smaller UK regional airports between 2001 and 2014. Fourteen airports that typically serve less than 5 million passengers per annum were selected for the analysis. A period of strong growth in passenger demand was experienced from 2001 to 2007, driven largely by low cost carriers. The period from 2007 to 2014 was characterised by declining demand, resulting in significant losses for many of the airports. Airline strategies, such as the use of an increased unit fleet size and average sector length, may further limit future prospects for smaller UK regional airports in favour of larger ones with greater local demand. The relationship between traffic throughput and the generation of aeronautical revenues seems to vary at airports. There is generally a strong and significant relationship between traffic throughput and the generation of commercial revenues and total operating costs at airports serving 3–5 million passengers, but the situation for airports serving fewer than 3 million is less certain.

Inter-industry differences in local banks' effect on new firm formation : A regional study of entrepreneurship in Sweden

Formation of new firms is important, since new firms create jobs and economic growth. When entrepreneurs lack the financial resources which are needed to start a firm, they often turn to banks to borrow money. Previous research has shown that relationships between banks and new business borrowers most often are local and that the dependence on banks differs across industries. In light of this, the purpose of this paper is to investigate if local access to banks has a stronger relationship with the rate of new firm formation in some industries than in others. Based on cross-sectional data on all Swedish municipalities in 2009, a series of OLS regressions are estimated to test if variables used to describe the bank market in a municipality are related with the new firm formation rate, both in total and in different industry categories. The results show that the number of bank branches per capita is positively related with the total new firm formation rate. In regards to the inter-industry differences, the findings indicate that local access to banks is more important for new firm formation in some industries than in others. 

Down scaling to regional assessment of greenhouse gas emissions to enable consistency in accounting for emissions reduction projects and national inventory accounts for northern beef production in Australia

This paper explores the effect of using regional data for livestock attributes on estimation of greenhouse gas (GHG) emissions for the northern beef industry in Australia, compared with using state/territory-wide values, as currently used in Australia’s national GHG inventory report. Regional GHG emissions associated with beef production are reported for 21 defined agricultural statistical regions within state/territory jurisdictions. A management scenario for reduced emissions that could qualify as an Emissions Reduction Fund (ERF) project was used to illustrate the effect of regional level model parameters on estimated abatement levels. Using regional parameters, instead of state level parameters, for liveweight (LW), LW gain and proportion of cows lactating and an expanded number of livestock classes, gives a 5.2% reduction in estimated emissions (range +12% to –34% across regions). Estimated GHG emissions intensity (emissions per kilogram of LW sold) varied across the regions by up to 2.5-fold, ranging from 10.5 kg CO2-e kg–1 LW sold for Darling Downs, Queensland, through to 25.8 kg CO2-e kg–1 LW sold for the Pindan and North Kimberley, Western Australia. This range was driven by differences in production efficiency, reproduction rate, growth rate and survival. This suggests that some regions in northern Australia are likely to have substantial opportunities for GHG abatement and higher livestock income. However, this must be coupled with the availability of management activities that can be implemented to improve production efficiency; wet season phosphorus (P) supplementation being one such practice. An ERF case study comparison showed that P supplementation of a typical-sized herd produced an estimated reduction of 622 t CO2-e year–1, or 7%, compared with a non-P supplemented herd. However, the different model parameters used by the National Inventory Report and ERF project means that there was an anomaly between the herd emissions for project cattle excised from the national accounts (13 479 t CO2-e year–1) and the baseline herd emissions estimated for the ERF project (8 896 t CO2-e year–1) before P supplementation was implemented. Regionalising livestock model parameters in both ERF projects and the national accounts offers the attraction of being able to more easily and accurately reflect emissions savings from this type of emissions reduction project in Australia’s national GHG accounts.

FlorNExT®, a cloud computing application to estimate growth and yield of maritime pine (Pinus pinaster Ait.) stands in Northeastern Portugal

Aim of the study: To introduce and describe FlorNExT®, a free cloud computing application to estimate growth and yield of maritime pine (Pinus pinaster Ait.) even-aged stands in the Northeast of Portugal (NE Portugal). Area of study: NE Portugal. Material and methods: FlorNExT® implements a dynamic growth and yield modelling framework which integrates transition functions for dominant height (site index curves) and basal area, as well as output functions for tree and stand volume, biomass, and carbon content. Main results: FlorNExT® is freely available from any device with an Internet connection at: http://flornext.esa.ipb.pt/. Research highlights: This application has been designed to make it possible for any stakeholder to easily estimate standing volume, biomass, and carbon content in maritime pine stands from stand data, as well as to estimate growth and yield based on four stand variables: age, density, dominant height, and basal area. FlorNExT® allows planning thinning treatments. FlorNExT® is a fundamental tool to support forest mobilization at local and regional scales in NE Portugal. Material and methods: FlorNExT® implements a dynamic growth and yield modelling framework which integrates transition functions for dominant height (site index curves) and basal area, as well as output functions for tree and stand volume, biomass, and carbon content. Main results: FlorNExT® is freely available from any device with an Internet connection at: http://flornext.esa.ipb.pt/. Research highlights: This application has been designed to make it possible for any stakeholder to easily estimate standing volume, biomass, and carbon content in maritime pine stands from stand data, as well as to estimate growth and yield based on four stand variables: age, density, dominant height, and basal area. FlorNExT® allows planning thinning treatments. FlorNExT® is a fundamental tool to support forest mobilization at local and regional scales in NE Portugal.

RISKS TO FOOD AVAILABILITY AND ACCESS FROM CLIMATE POLICIES: AN INTEGRATED ASSESSMENT OF REGIONAL FOOD AVAILABILITY AND ACCESS WITH ALTERNATIVE CLIMATE MITIGATION STRATEGIES TO 2050

Although mitigating GHG emissions is necessary to reduce the overall negative climate change impacts on crop yields and agricultural production, certain mitigation measures may generate unintended consequences to food availability and access due to land use competition and economic burden of mitigation. Prior studies have examined the co-impacts on food availability and global producer prices caused by alternative climate policies. More recent studies have looked at the reduction in total caloric intake driven by both changing income and changing food prices under one specific climate policy. However, due to inelastic calorie demand, consumers’ well-being are likely further reduced by increased food expenditures. Built upon existing literature, my dissertation explores how alternative climate policy designs might adversely affect both caloric intake and staple food budget share to 2050, by using the Global Change Assessment Model (GCAM) and a post-estimated metric of food availability and access (FAA). My dissertation first develop a set of new metrics and methods to explore new perspectives of food availability and access under new conditions. The FAA metric consists of two components, the fraction of GDP per capita spent on five categories of staple food and total caloric intake relative to a reference level. By testing the metric against alternate expectations of the future, it shows consistent results with previous studies that economic growth dominates the improvement of FAA. As we increase our ambition to achieve stringent climate targets, two policy conditions tend to have large impacts on FAA driven by competing land use and increasing food prices. Strict conservation policies leave the competition between bioenergy and agriculture production on existing commercial land, while pricing terrestrial carbon encourages large-scale afforestation. To avoid unintended outcomes to food availability and access for the poor, pricing land emissions in frontier forests has the advantage of selecting more productive land for agricultural activities compared to the full conservation approach, but the land carbon price should not be linked to the price of energy system emissions. These results are highly relevant to effective policy-making to reduce land use change emissions, such as the Reduced Emissions from Deforestation and Forest Degradation (REDD).

Legal Framework for Cross-Regional Networks: The Case of Services and Migration

Paper prepared by Marion Panizzon and Charlotte Sieber-Gasser for the International Conference on the Political Economy of Liberalising Trade in Services, Hebrew University of Jerusalem, 14-15 June 2010 Recent literature has shed light on the economic potential of cross-border networks. These networks, consisting of expatriates and their acquaintances from abroad and at home, provide the basis for the creation of cross-border value added chains and therewith the means for turning brain drain into brain circulation. Both aspects are potentially valuable for economic growth in the developing world. Unilateral co-development policies operating through co-funding of expatriate business ventures, but also bilateral agreements liberalising circular migration for a limited set of per-sons testify to the increasing awareness of governments about the potential, which expatriate networks hold for economic growth in developing countries. Whereas such punctual efforts are valuable, viewed from a long term perspective, these top-down, government mandated Diaspora stimulation programs, will not replace, this paper argues, the market-driven liberalisation of infrastructure and other services in developing countries. Nor will they carry, in the case of circular labour migration, the political momentum to liberalise labour market admission for those non-nationals, who will eventually emerge as the future transnational entrepreneurs. It will take a combination of mode 4 and infrastructure services openings-cum regulation for countries at both sides of the spectrum to provide the basis and precondition for transnational business and entrepreneurial networks to emerge and translate into cross-border, value added production chains. Two key issues are of particular relevance in this context: (i) the services sector, especially in infrastructure, tends to suffer from inefficiencies, particularly in developing countries, and (ii) labour migration, a highly complex issue, still faces disproportionately rigid barriers despite well-documented global welfare gains. Both are hindrances for emerging markets to fully take advantage of the potential of these cross-border networks. Adapting the legal framework for enhancing the regulatory and institutional frameworks for services trade, especially in infrastructure services sectors (ISS) and labour migration could provide the incentives necessary for brain circulation and strengthen cross-border value added chains by lowering transaction costs. This paper analyses the shortfalls of the global legal framework – the shallow status quo of GATS commitments in ISS and mode 4 particular – in relation to stimulating brain circulation and the creation of cross-border value added chains in emerging markets. It highlights the necessity of adapting the legal framework, both on the global and the regional level, to stimulate broader and wider market access in the four key ISS sectors (telecommunications, transport, professional and financial services) in developing countries, as domestic supply capacity, global competitiveness and economic diversification in ISS sectors are necessary for mobilising expatriate re-turns, both physical and virtual. The paper argues that industrialised, labour receiving countries need to offer mode 4 market access to wider categories of persons, especially to students, graduate trainees and young professionals from abroad. Further-more, free trade in semi-finished products and mode 4 market access are crucial for the creation of cross-border value added chains across the developing world. Finally, the paper discusses on the basis of a case study on Jordan why the key features of trade agreements, which promote circular migration and the creation of cross-border value added chains, consist of trade liberalisation in services and liberal migration policies.

Regional diversity and economic performance

This thesis consists of an introductory chapter and four individual papers. In each paper the relationship between some form of spatial diversity and economic performance is analyzed. Diversity is treated as a potential source of externality effects, mainly in the form of knowledge spillovers. The first paper studies the impact of a broad range of spatial externalities on the productivity of manufacturing plants. While finding positive effects of specialization and competition, there is no support for positive spillovers of either related or unrelated industry diversity. The second paper argues that relatedness should be framed at the level of individuals and consequently should be measured in terms of, for example, education and occupation rather than industry belonging. The results show that educational- and occupational related diversity matter for regional productivity growth, while related industry diversity is positively related to employment growth. The third paper analyzes the importance of neighborhood related diversity, in terms of both industries and education, and internal human capital for firms’ propensity to innovate. The findings support that education and skills are strongly related to firm innovation. Additionally, firms in metropolitan regions are more innovative in neighborhoods with more related diversity in industries, while firms in rural regions seem to benefit more from related diversity in education. In the fourth paper, the location factor of interest is segregation, which may be regarded as inverse diversity. The results show that neighborhood segregation has a negative effect on individual employment. However, it is not the spatial separation of individuals with different backgrounds that causes lower employment but rather the distress of segregated neighborhoods.

Impaired Compensatory Beta-cell Function And Growth In Response To High-fat Diet In Ldl Receptor Knockout Mice.

In this study, we investigated the effect of low density lipoprotein receptor (LDLr) deficiency on gap junctional connexin 36 (Cx36) islet content and on the functional and growth response of pancreatic beta-cells in C57BL/6 mice fed a high-fat (HF) diet. After 60 days on regular or HF diet, the metabolic state and morphometric islet parameters of wild-type (WT) and LDLr-/- mice were assessed. HF diet-fed WT animals became obese and hypercholesterolaemic as well as hyperglycaemic, hyperinsulinaemic, glucose intolerant and insulin resistant, characterizing them as prediabetic. Also they showed a significant decrease in beta-cell secretory response to glucose. Overall, LDLr-/- mice displayed greater susceptibility to HF diet as judged by their marked cholesterolaemia, intolerance to glucose and pronounced decrease in glucose-stimulated insulin secretion. HF diet induced similarly in WT and LDLr-/- mice, a significant decrease in Cx36 beta-cell content as revealed by immunoblotting. Prediabetic WT mice displayed marked increase in beta-cell mass mainly due to beta-cell hypertrophy/replication. Nevertheless, HF diet-fed LDLr-/- mice showed no significant changes in beta-cell mass, but lower islet-duct association (neogenesis) and higher beta-cell apoptosis index were seen as compared to controls. The higher metabolic susceptibility to HF diet of LDLr-/- mice may be explained by a deficiency in insulin secretory response to glucose associated with lack of compensatory beta-cell expansion.