The seminar is part of the activities of FIW, the Centre of Competence in International Economics. Regular lecture series on current issues in international economics.

Location: wiiw Wiener Institut für Internationale Wirtschaftsvergleiche, Rahlgasse 3, 1060 Wien

Thursday, July 16^th, 4pm

wiiw Rahlgasse 3, 1060 Vienna, lecture hall (ground floor)

Katerina Lisenkova (with Mérette M. and Sanchez-Martinez M.)

National Institute of Economic and Social Research, UK

Abstract

This paper uses an OLG-CGE model for the UK to illustrate the long-term effect of migration on  the  economy.  We  use  the  current  Conservative  Party  migration  target  to  reduce  net migration “from hundreds of thousands to tens of thousands” as an illustration. Achieving this target would require reducing recent net migration numbers by a factor of about 2. We undertake  a  simulation  exercise  to  compare  a  baseline  scenario,  which  incorporates  the principal  2010-based  ONS  population  projections,  with  a  lower  migration  scenario,  which assumes  that  net  migration  is  reduced  by  around  50%.  The  results  show  that  such a significant reduction in net migration has strong negative effects on the economy. By 2060 the levels of both GDP and GDP per person fall by 11.0% and 2.7% respectively. Moreover, this policy  has  a  significant  impact  on  public  finances.  To  keep  the  government  budget balanced, the effective labour income tax rate has to be increased by 2.2 percentage points in the lower migration scenario.

Keywords: UK, migration, OLG, population ageing

JEL Codes: C68, E17, H53, J11, J21

Presentation

Discussion Paper

Tuesday, May 12^th, 4pm

wiiw Rahlgasse 3, 1060 Vienna, lecture hall (ground floor)

Dalia Marin (with Jan Schymik and Jan Tscheke)

LMU Munich

Abstract

What explains Germany’s superb export performance? Is Germany’s export behaviour very distinct compared to other European countries? In this paper, we explore the organizational responses to competition of 14,000 exporting firms in 7 European countries. We examine the export business model of the median exporter in each country as well as of the top 1 % of exporters in each country accounting for 20 % to 55 % of total exports. What do these firms do to become superstars? We find, first, that the export market share of the median exporter in each of the countries to the world are more than tripled (in some cases the export market share increases 10 fold) for firms which combine decentralized management with offshoring production to low wage countries. Exporters which abstain from any organizational adjustment do very badly. Decentralized management provides incentives for workers for product improvements allowing exporters to compete on quality. Offshoring production to low wage countries reduces costs allowing exporters to compete on prices. Second, we find that Germany is the leading quality exporter in Europe followed by Austria and Spain. Among the top 10 % percent of exporters there is no single firm with low quality in Germany and Austria which suggest that decentralized management has provided incentives for quality in these countries. Third, Germany’s exports are the least vulnerable to price increases, while exports in France and Italy respond strongly to price changes and thus reducing costs via offshoring  benefit these countries most.

Keywords: Exports, firm organization, offshoring, productivity, product quality.

JEL Codes: F14, D23, L22.

Presentation

Thursday, April 16^th, 4pm

wiiw Rahlgasse 3, 1060 Vienna, lecture hall (ground floor)

Timo Baas

University of Duisburg-Essen

Abstract

The Single European Labor Market is more and more seen as an instrument to face short-term challenges like diverging unemployment rates and asymmetric business cycles. Most labor economists, however, agree that the common labor market is far from completion even though migration increased strongly after EU-enlargement. It is, therefore, an open question to which extend this unfinished common market performs its function. In this paper, we analyze the impact of economic conditions on bilateral migration from Poland to Germany by estimating a two-country DSGE model using Bayesian methods. Our findings imply that migration, indeed, follows cyclical patterns and that it fosters economic stability. This, however, only holds true for the country of origin, as macroeconomic shocks of the destination country have a minor impact on migration.

Keywords: DSGE model, migration, open economy macroeconomics, Bayesian econometrics

JEL Codes: F22, F41, E32

Presentation

Thursday, April 9^th, 4pm

wiiw Rahlgasse 3, 1060 Vienna, lecture hall (ground floor)

Martin Falk (with Eva Hagsten)

WIFO

Abstract

Export participation of SMEs in Swedish computer services has increased rapidly over the last decade. Despite the increase, export participation rates of SMEs including micro enterprises remain rather low at 13 percent in 2010. Based on uniquely linked firm-level datasets with full coverage of micro enterprises and sole proprietors, this study investigates the determinants of export participation of Swedish SMEs in the computer service industry. Exports include both goods and services. Estimates based on the conditional logit model show a significantly positive relationship between initial labour productivity and the decision to export. An interesting and new finding is that the magnitude of the relationship between the probability to export and initial labour productivity is low once firm effects are controlled for. Surprisingly, the impact of labour productivity on exporting does not differ between micro enterprises and the remaining SMEs (10–249 employees). Furthermore, skill intensity is significantly related to the probability of exporting with low marginal effects. Overall, labour productivity and skill intensity only explain a small proportion of the export boom of Swedish software SMEs.

Keywords: Exports; productivity; computer service industry; human capital; conditional logit model

JEL Codes: F14

Presentation

MONDAY, March 30^th, 4pm

wiiw Rahlgasse 3, 1060 Vienna, lecture hall (ground floor)

Dario Guarascio

Sapienza University of Rome

Abstract

The paper investigates the links between export, R&D and new products. Technological efforts and international competitiveness are at the root of successful economic performance in advanced economies. Moreover, they are widely seen as key factors for the ability of European countries to return to growth after the 2008 crisis. We present a model for the structural relationships between R&D efforts, innovation success and export performance, carrying out an empirical test for 38 manufacturing and service sectors of six major European countries. The theoretical framework moves from the model developed by Bogliacino and Pianta (2013) and extends it to international competitiveness – captured by industries’ export market shares (Guarascio et al., 2014). We use a model of simultaneous equations exploring feedbacks and structural linkages between our key variables. First, the ability of industries’ R&D to lead to successful innovations is explored, combining supply push and demand pull drivers. Second, the determinants of export shares are identified, considering both the role of technological competitiveness, cost competitiveness as well as international fragmentation of production factors. Third, we investigate the feedbacks of export success and profits on further sectoral R&D efforts. Furthermore, some extensions of the approach proposed in Guarascio et al. (2014) are presented. Firstly, the contrast between patterns in Northern and Southern EU countries is examined, with separate tests, showing the dynamics of the ‘virtuous circle’ in each area. Then, the impact of business cycles, manufacturing/services distinction and technological clusters on the identified relations is assessed, following the approach of Lucchese and Pianta (2012).

Keywords: Export, R&D, Innovation, Three Stages Least Squares, Europe

JEL Codes: F12, F14, O31, O33, O52

Presentation

Thursday, March 19^th, 4pm

wiiw Rahlgasse 3, 1060 Vienna, lecture hall (ground floor)

Fulvio Castellacci (with Bodas Freitas I., Fontana R., Malerba F. and Vezzulli A.)

TIK Centre for Technology, Innovation and Culture, University of Oslo, Norwegian Institute of International Affairs

Abstract

Do the  additionality  effects  of  R&D  tax  credits  vary  across  sectors?  The paper presents a microeconometric analysis of this question for three countries: Norway, Italy and France. We use a  panel  of  firm-level  data  from  three  waves  of  the  Innovation Surveys  carried  out  in  these countries (referring to the years 2004, 2006 and 2008 respectively). The study estimates input and output additionality effects of R&D tax credits in each of these economies, and it investigates how  these  effects  differ  across sectors  characterized  by  different  R&D  orientation  and competition conditions. The results point out that firms in industries with high R&D orientation and in sectors with high market concentration are on average more responsive to fiscal incentives to R&D.

Keywords: R&D policy; R&D tax credits; input additionality; output additionality; Pavitt taxonomy; market concentration. 

JEL Codes: H25, H32, O32, O38

Presentation

Thursday, March 5^th, 4pm

wiiw Rahlgasse 3, 1060 Vienna, lectur hall (ground floor)

GoranVukšic

Institute of Public Finance, Croatia

Abstract

This study analyzes the competition for foreign direct investment (FDI) among countries at different stages of development. It is assumed that domestic companies in a more-developed country use more capital in production and that wages in a less-developed country are lower. Countries can compete for FDI by increasing the supply of public inputs in the economy, in addition to (or instead of) offering subsidies or tax reliefs to foreign investors. The results reveal that if governments of competing countries are not allowed to discriminate between domestic and foreign firms, there may be situations in which a less-developed economy will attract FDI depending on the labor cost differential and the responsiveness of foreign investors’ and domestic companies’ output to changes in the supply of public inputs. If tax discrimination between domestic and foreign firms is permitted, both countries will optimally raise the supply of public inputs, but the more-developed country will always win the foreign investment despite higher labor costs. Thus, governments of less-developed countries may have an incentive to work on an international agreement to disallow tax discrimination.

Keywords: foreign direct investment; economic development; taxation policy; subsidies; public goods

JEL Codes: F21, O24, H25, H41

Presentation

Paper

Thursday, February 26^th , 4pm

wiiw Rahlgasse 3, 1060 Vienna, lectur hall (ground floor)

Elisabeth Christen (mit Yvonne Wolfmayr und Michael Pfaffermayr)

WIFO

Abstract

Using a comprehensive and unique data set of Austrian service exporting firms provided by the Austrian central bank (OeNB) this paper empirically examines the determinants of service exports at the ?rm/destination country level. Based on a Heckman sample selection gravity model, the paper introduces a new approach to decompose expected firm-level services exports into changes at the intensive and the extensive margins of adjustment as a response to counterfactual changes in exogenous variables. Specifically, we consider several counterfactual scenarios including the (hypothetical) reduction of trade costs, changes in destination market size and enhanced ?rm productivity. Our results suggest that export market growth and a reduction in distance related trade costs exert the relative strongest impact on the entry into new markets. Policies aiming at promoting firm productivity also have the potential to broaden the exporter base and play an important role for trade deepening.

Keywords: Service trade, Firm-level evidence, Firm heterogeneity, Gravity model, Sample selection, Intensive and extensive margin of trade.

JEL Codes: C15, C21, D21, F14, L20, L80

Presentation