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Business and Economics > Production and Operations Management

You are looking at 1 - 10 of 85 items for :

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Cover IMF Working Papers
Dynamic Development Accounting and Relative Income Traps
Patrick A. Imam
and
Jonathan R. W. Temple
Previous research suggests that economy-wide poverty traps are rarely observed in the data. In this paper, we explore a related hypothesis: low-income countries rarely improve their position relative to the US. Using finite state Markov chains, we show that upwards mobility is indeed limited. Since capital-output ratios are similar across countries, and human capital is also converging, the persistence of low relative income seems to originate in the persistence of low relative TFP. We study the dynamics of relative TFP and how they interact with absolute levels of human capital, casting new light on the future of convergence.
Keywords:
Economic growth; development accounting; low-income trap; poverty trap; income trap; state Markov chains; country sample; OECD member country; relative TFP; Total factor productivity; Human capital; Growth accounting; Income; Capital productivity; Global
Cover IMF Staff Country Reports
Hungary: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper presents monetary policy analysis with a quarterly projection model (QPM) in Hungary. The standard QPM is adapted to reflect some specific features of the Hungarian economy and post-Covid set of shocks. Inflation is modelled in greater sectoral detail, including the separation of core goods and services, to capture differences in their drivers and dynamics and to model spillovers of shocks from one sector to another. Following a period of large interest rate reductions, the projections from the QPM suggest that the next phase of monetary policy normalization should proceed cautiously and more gradually. Results from the model should be used alongside other forms of analysis and expert judgement in determining the optimal path of monetary policy. Data should be watched keenly to assess the realism of the model’s projections.
Keywords:
income convergence; E. impulse response; convergence in Hungary; beta convergence; monetary policy shock; Inflation; Corporate sector; Income; Income inequality; Global; Europe
Cover IMF Staff Country Reports
Luxembourg: 2024 Article IV Consultation-Press Release; and Staff Report; and Statement by the Executive Director for Luxembourg
International Monetary Fund. European Dept.
The 2024 Article IV Consultation discusses that Luxembourg’ economy contracted in 2023 despite buoyant consumption, mainly due to weak external demand and residential investment. Inflation is subsiding but underlying measures remain high. Credit growth turned negative as demand dropped and real estate prices declined. The newly elected government has approved a mix of temporary and permanent measures to support purchasing power and housing demand. Gradually easing financial conditions, continuing disinflation and expansionary fiscal policy is expected to help the economy rebound and the financial cycle bottom out. Inflation should decline in 2024, before temporarily increasing in 2025 once administrative price measures expire. The recovery is fragile amid heightened geopolitical tensions. Risks are tilted to the downside, stemming mainly from external demand/supply shocks and a disorderly correction of asset prices, including domestic real estate valuations. Sustained economic growth hinges on raising productivity, which has been stagnant since the Global Financial Crisis. Increasing investment in intangible assets, aligning workers’ skills with the current demands of the economy, reducing administrative burden, and making the wage indexation system more flexible will be key to harnessing productivity gains and bolstering competitiveness.
Keywords:
FATF report; Luxembourg economy; executive board assessment; headline inflation; labor productivity growth; Macroprudential policy; Productivity; Income; Financial Sector Assessment Program; Global
Cover IMF Working Papers
At the Threshold: The Increasing Relevance of the Middle-Income Trap
Patrick A. Imam
and
Jonathan R. W. Temple
We investigate the existence of a middle-income trap using finite state Markov chains, constant growth thresholds, and mean passage times. As well as studying output per head, we examine the dynamics of its proximate determinants: TFP, the capital-output ratio, and human capital. We find upwards mobility for the capital-output ratio and human capital, but not for relative TFP. The lack of upwards mobility in relative TFP, at least from an intermediate level, suggests that escaping the middle-income category can take many years, and such traps may become increasingly apparent in the years to come.
Keywords:
Economic growth; aggregate development; middle-income trap; passage time; No. 24/91; Jonathan R.W. Temple; middle-income country; growth slowdown; Total factor productivity; Capital productivity; Human capital; Income; Global
Cover IMF Working Papers
Unveiling the Hidden Impact of Urban Land Rents on Total Factor Productivity
Mr. Bas B. Bakker
This paper addresses the puzzling decline of Total Factor Productivity (TFP) levels in rapidly growing economies, such as Singapore, despite advancements in technology and high GDP per capita growth. The paper proposes that TFP growth is not negative; instead, standard growth decompositions have underestimated TFP growth by overestimating the contribution of capital, failing to account for the substantial part of capital income directed to urban land rents. This leads to an overestimation of changes in capital stock's contribution to growth and thereby an underestimation of TFP growth. A revised decomposition suggests that TFP growth in economies with high land rents and rapid capital stock growth, such as Singapore, has been considerably underestimated: TFP levels have not declined but increased rapidly.
Keywords:
Total Factor Productivity; Economic Growth; Capital Stock; Land Rents; Growth Decomposition; Urban Economics; Population Density; Diminishing Returns to Scale; Technological Progress; Singapore; TFP level; re-estimating TFP; land rent; decline of total factor productivity; Capital income; Stocks; Land prices; Asia and Pacific
Cover IMF Working Papers
Capital Account Liberalization and Wage Inequality: Evidence from Firm Level Data
Kodjovi M. Eklou
and
Shakeba Foster
Firms play an important role in shaping income inequality at the aggregated country level, given that wages represent a significant proportion of household income. We investigate the distributional consequences of capital account liberalization, relying on firm level data to explore the implications for betweenfirms earning inequality in ASEAN5 countries over the period 1995-2019. We find that between-firms wage dispersion alone, accounts for a nontrivial proportion of the variation in the market Gini. Our empirical findings show that capital account liberalization increases between-firms wage inequality, as wages grow faster at initially high-paying firms and slow-down at firms at the lower portion of the wage distribution. These results are robust to a battery of robustness checks. Further, the directions and categories of capital account liberalization matter as results are pronounced for inflow liberalization and equity capital flows. We also show that capital account liberalization induces an increase in Profit-to-Wage ratios. Furthermore, the impact depends on country characteristics (wage setting institutions, the level of financial development and the size of the informal sector) as well as industry characteristics (export orientation and external finance dependence).
Keywords:
Wage Inequality; Firm heterogeneity; Capital Account Liberalization; wage dispersion; inflow liberalization; Shakeba foster; baseline result; Income inequality; Wages; Total factor productivity; Wage adjustments
Cover IMF Working Papers
Home or Away? Profit Shifting with Territorial Taxation
Dominika Langenmayr
and
Ms. Li Liu
In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. This increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.
Keywords:
profit shifting; territorial tax system; multinational firms; shifted profit; UK multinational; UK subsidiary; difference-in-differences research design; Total factor productivity; Transnational corporations; Corporate income tax; Income; Wages; Global
Cover IMF Working Papers
Secular Drivers of the Natural Rate of Interest in the United States: A Quantitative Evaluation
Josef Platzer
and
Marcel Peruffo
We develop a heterogeneous agent, overlapping generations model with nonhomothetic preferences that nests several explanations for the decline in the natural rate of interest (r∗) suggested in the literature: demographic change, a slowdown in productivity growth, a rise in income inequality, and public policy. The model can account for a 2.2 percentage point (pp) decline in r∗ between 1975 and 2015, which is within the range of empirical estimates. Rising income inequality is an important driver (-0.70 pp), and together with demographic change (-0.71 pp) and the slowdown in productivity growth (-1.0 pp) explains most of the decline. Growing public debt is the major counteracting force (+0.31 pp). Permanent income inequality is of greater importance than inequality due to uninsurable income risk, and matching the degree of nonhomotheticity in consumption and savings behavior to empirical estimates is essential for this result. We predict that r∗ will reach a low of 0.38% by 2030, after which a slow reversal will begin. The natural rate will stabilize at 1% in the long run, a low level when compared with the postwar path of r∗ implied by the model. This remains true even if we take into account soaring public debt levels due to the COVID-19 pandemic. Policy can have considerable impact on the level of r∗ through the tax and transfer system.
Keywords:
Demographic Change; Inequality; Life-cycle; Natural Rate of Interest; Nonhomothetic Preferences; Secular Stagnation; transition path; baseline transition-path; labor income; uninsurable income risk; implied path; path of r; Nonhomothetic consumption preference; Income inequality; Income; Productivity; Consumption; Europe; Global
Cover IMF Staff Country Reports
People’s Republic of China: Selected Issues
International Monetary Fund. Asia and Pacific Dept
Selected Issues
Keywords:
SOE intensity; MACRO-FINANCIAL implication; Investment agreement; reform priority; B. China's reform experience; Pensions; Pension spending; Income inequality; Social assistance spending; Productivity; Global; Asia and Pacific
Cover IMF Staff Country Reports
Colombia: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
Selected Issues
Keywords:
ISCR; CR; income balance; production function approach; employment loss; labor input; opening output gap