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Business and Economics > Production and Operations Management

You are looking at 1 - 10 of 12 items for :

  • Type: Journal Issue x
  • Neoclassical Models of Trade x
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Cover IMF Working Papers
Industrial Policy in Europe: A Single Market Perspective
Andrew Hodge
,
Roberto Piazza
,
Fuad Hasanov
,
Xun Li
,
Maryam Vaziri
,
Atticus Weller
, and
Yu Ching Wong
European countries are increasingly turning to industrial policy to address the challenge of geopolitical fragmentation, enhance productivity, and accelerate the green transition. Well-targeted industrial policy has the potential to correct market failures and support production efficiency by exploiting scale effects and internalizing knowledge externalities. But even the most carefully designed unilateral industrial policies risk generating negative production externalities in other countries, and, under certain conditions, may not even be welfare-enhancing for the implementing country. The reason is that negative externalities of unilateral industrial policy can drive European and international production patterns away from underlying comparative advantages, create regional or global over-supply, and result in changes in terms of trade that reduce domestic welfare. This suggests significant benefits from coordination. Structural modeling and case studies show that a coordinated approach within the European Union and with international trading partners on a narrowly defined and carefully designed set of industrial policies could unlock untapped benefits. Closer European integration would facilitate the adjustment of firms and workers to coordinated and well-targeted industrial policies and amplify their benefits.
Keywords:
Industrial policy; European Single Market; State Aid; EU aerospace industry export; EU single market; fishery block exemption regulation; State aid expenditure; single market perspective; Comparative advantage; Demand elasticity; Competition; Terms of trade; Europe; Global
Cover IMF Working Papers
High Performance Export Portfolio: Design Growth-Enhancing Export Structure with Machine Learning
Ms. Natasha X Che
and
Xuege Zhang
This paper studies the relationship between export structure and growth performance. We design an export recommendation system using a collaborative filtering algorithm based on countries' revealed comparative advantages. The system is used to produce export portfolio recommendations covering over 190 economies and over 30 years. We find that economies with their export structure more aligned with the recommended export structure achieve better growth performance, in terms of both higher GDP growth rate and lower growth volatility. These findings demonstrate that export structure matters for obtaining high and stable growth. Our recommendation system can serve as a practical tool for policymakers seeking actionable insights on their countries’ export potential and diversification strategies that may be complex and hard to quantify.
Keywords:
export diversification; comparative advantage; machine learning; collaborative filtering; economic growth; international trade; export structure; export portfolio recommendation; export recommendation system; performance export portfolio; export potential; Exports; Comparative advantage; Export diversification; Human capital; Total factor productivity; Global; East Asia
Cover IMF Working Papers
In the Eye of the Storm Firms and Capital Destruction in India
Martino Pelli
,
Jeanne Tschopp
,
Natalia Bezmaternykh
, and
Kodjovi M. Eklou
This paper examines the response of firms to capital destruction, using a new measure of firm exposure to tropical storms as a negative exogenous shock on firms’ capital stock. Drawing on a panel of Indian manufacturing firms between 1995 and 2006, we establish that, depending on their strength, storms destroy up to 75.3% of the fixed assets of the median firm (in terms of its productivity and industry performance). We quantify the response of firm sales within and across industries and find effects akin to Schumpeterian creative destruction, where surviving firms build back better. Within an industry, the sales of less productive firms decrease disproportionately more, while across industries capital destruction leads to a shift in sales towards more performing industries. This build-back better effect is driven by firms active in multiple industries and, to a large extent, by shifts in the firm-level production mix within a firm’s active set of industries. Finally, while there is no evidence that firms adjust by investing in new industry lines, firms tend to abandon production in industries that exhibit lower comparative advantage.
Keywords:
WP; ISIC firm; single-establishment firm; tropical storm; firm-industry sales; industry line; intensity industry; industry-year FE; subscript f; ISIC industry; Comparative advantage; Total factor productivity; Capital productivity; Natural disasters; Productivity; Global; firms; capital; creative destruction; storms; Asia and Pacific
Cover IMF Working Papers
The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy
Reda Cherif
and
Fuad Hasanov
Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition for developing economies. Yet the success of the Asian Miracles with industrial policy stands as an uncomfortable story that many ignore or claim it cannot be replicated. Using a theory and empirical evidence, we argue that one can learn more from miracles than failures. We suggest three key principles behind their success: (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability.
Keywords:
WP; private sector; government failure; learning by doing; Industrial policy; technology; innovation; growth; diversification; market share; physical capital; export intensity; document state intervention; government intervention; construction company; Exports; Manufacturing; Comparative advantage; Productivity; Income; East Asia; Africa
Cover IMF Working Papers
Quantifying the Spillovers from China Rebalancing Using a Multi-Sector Ricardian Trade Model
Rui Mano
This paper assesses the spillovers from different facets of China rebalancing using a calibrated Ricardian trade model that includes 41 economies, each consisting of 34 sectors. We find that China’s move up the value chain in particular has the potential for significant spillovers – on the one hand, adversely affecting industrialized economies heavily involved in the Asia value chain, while at the same time generating positive spillovers to lower and middle income countries. The model’s strength lies in endogenously capturing production value chains and international trade of goods across sectors.
Keywords:
WP; value chain; Spillovers; China rebalancing; trade channel; sectoral trade; export growth pattern; exports contract; trade model; goods trade channel; production value chains; export share; Income; Exports; Productivity; Consumption; Asia and Pacific
Cover IMF Staff Country Reports
El Salvador: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper assesses the potential output in El Salvador. Based on various filters and the production function approach, El Salvador’s potential growth is estimated at about 2 percent for 1999–2015, and the output gap is now virtually closed. Potential growth after the global financial crisis has fallen as a result of lower capital accumulation and total factor productivity (TFP). TFP growth depends on technological progress, as well as the institutional, regulatory, and legal environment in which businesses operate. From a cyclical perspective, the economy is assessed to be operating at potential and labor market conditions also appear to be broadly neutral. Strengthening capital and TFP growth going forward is critical to achieve the authorities’ goal of raising potential growth to 3 percent over the medium term. Structural reforms should prioritize mobilizing domestic savings to invest and build a higher capital stock, enhancing research and development/technological diffusion and competition in product and labor markets, strengthening institutions to secure property rights and reduce red tape, improving infrastructure, facilitating access to financing, and fostering human capital to boost TFP growth. Going forward, it is critical to undertake structural reforms to strengthen capital and TFP to raise potential growth.
Keywords:
ISCR; CR; product; policy uncertainty variable; unemployment gap; export products; investment driver; OECD product market regulation Database; fund staff estimate; Total factor productivity; Exports; Output gap; Potential output; Comparative advantage; Global; Central America
Cover IMF Working Papers
The Global Welfare Impact of China: Trade Integration and Technological Change
Mr. Julian Di Giovanni
,
Mr. Jing Zhang
, and
Mr. Andrei A Levchenko
This paper evaluates the global welfare impact of China's trade integration and technological change in a quantitative Ricardian-Heckscher-Ohlin model implemented on 75 countries. We simulate two alternative productivity growth scenarios: a "balanced" one in which China's productivity grows at the same rate in each sector, and an "unbalanced" one in which China's comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson, 2004), the large majority of countries in the sample, including the developed ones, experience an order of magnitude larger welfare gains when China's productivity growth is biased towards its comparative disadvantage sectors. We demonstrate both analytically and quantitatively that this finding is driven by the inherently multilateral nature of world trade. As a separate but related exercise we quantify the worldwide welfare gains from China's trade integration.
Keywords:
WP; unbalanced growth; China; productivity growth; international trade; comparative advantage; growth scenario; export basket; trade cost; technology compare; productivity estimate; sectoral productivity; price level; export share; s distance; Productivity; Wages; Trade balance; Exports; Sustainable growth; Global; South Asia; East Asia; Middle East; North Africa
Cover IMF Working Papers
Evidence on Productivity, Comparative Advantage, and Networks in the Export Performance of Firms
Mr. Luca A Ricci
and
Mr. Federico Trionfetti
This paper tests the effect of comparative advantage, size, and networking on the firm probability of exporting. The closest theoretical framework is the one of Bernard, Redding, and Schott (2007), with firm heterogeneity across countries and industries. We use a recently assembled multi-country multi-industry firm level dataset, and construct original measures of comparative advantage. The results show that firms are more likely to export if they belong to the comparative advantage industry, if they enjoy a higher productivity, or if they benefit from foreign, domestic, or communication networks.
Keywords:
WP
Cover IMF Working Papers
Institutional Quality and International Trade
Mr. Andrei A Levchenko
The quality of institutions-meaning the quality of contract enforcement, property rights, shareholder protection, and the like-has received a great deal of attention in recent years. The purposes of this paper are twofold. First, it studies the consequences of trade when institutional differences are the source of comparative advantage among countries. Institutional differences are modeled within the Grossman-Hart-Moore framework of contract incompleteness. It is shown, among other things, that the less developed country may not gain from trade, and that factor prices may actually diverge as a result of trade. Second, the paper provides empirical evidence of "institutional content of trade:" institutional differences are shown to be important determinant of trade flows.
Keywords:
WP; base wage; physical capital; Trade patterns; institutions; incomplete contracts; capital intensity; trade equilibrium; trade opening; trade pattern; trade outcome; trade economist; trade value; trade volume; trade methodology; capital abundance; labor interest group; Capital productivity; Comparative advantage; Imports; Trade balance; Global
Cover IMF Working Papers
Financial Globalization, Portfolio Diversification, and the Pattern of International Trade
Miklós Koren
The paper provides a general-equilibrium model where incomplete international financial markets lead to insufficient industrial specialization and low international trade. As international portfolio diversification is limited and productivity is uncertain, investors wish to maintain a diversified industrial structure rather than specializing according to their comparative advantage. Financial globalization then induces more specialization and more trade. The present framework yields explicit closed-form solutions for the volume and the structure of trade. Empirical results support the implications of the theory. Trade in financially open countries is (i) higher, (ii) more dependent on productivity differences, and (iii) less sensitive to industry risks.
Keywords:
WP; utility function; max E; financial globalization; trade volume; trade structure; incomplete markets; portfolio choice; productivity shock; Ricardian trade model; goods trade; trade dependence ratio; trade structure estimation; productivity difference; Productivity; Comparative advantage; Consumption; Trade balance; International capital markets; Global