Arjan Lejour

Capital mobility, wage bargaining, and social insurance policies in an economic union

In a two-country model with mobile capital we analyse decentralized social insurance policies. These policies are a compromise between the preferences of workers and capital owners. Due to wage bargaining, worker-based social insurance contributions are borne by capital owners. These contributions affect the profitability of investment, and consequently the direction and size of capital flows. Countries will take account of these effects in determining social insurance policy. Noncooperative decision making results in tax competition and an underprovision of social insurance. In addition, increasing economic integration, represented by increasing capital mobility, could imply a divergence of social insurance levels in the two countries.

Labour Mobility and Decision Making on Social Insurance in an Integrated Market

In a two-country model the consequences of labour mobility on social insurance levels are studied. There are two groups of workers, one with a high risk and the other one with a low risk of being nonemployed. In both countries the decision-making function on social insurance is some weighted average of the expected utilities of both groups. In case low-risk workers are much more mobile than high-risk workers, it can be concluded that labour mobility does not necessarily have a downward effect on social insurance. In that case coordination of decision making would not improve the levels of social insurance.

Market entry and economic diplomacy

This article analyses the role of economic diplomacy on the export market entry decisions of Dutch firms. We show that the presence of government support offices in middle-income countries and government trade missions stimulate Dutch firms to enter export markets in these countries. These conclusions follow from using detailed international trade data combined with firm and export market characteristics.

The Tradability of Services within Canada and the European Union

This paper analyses bilateral trade flows between the provinces of Canada and between the member states of the European Union using a gravity model. On average, distance is less a hindrance for services trade than for goods trade. Language and regulation differences hamper intra-EU trade significantly. Services trade, in contrast to goods trade, is also hampered by the level of regulation in the importing country. Services trade within Canada as a share of GDP is twice the intra-EU level, and estimates suggest that intra-EU services trade could more than double if the internal market functioned like the Canadian services market.

R&D Spillovers and Growth: Specialization Matters

We explore the relationship between openness and growth by taking a closer look at trade-related knowledge spillovers at the industry level. First, we estimate the relation between sectoral R&D expenditures, trade-related spillovers, and growth. Next, we incorporate these R&D linkages in a computable general-equilibrium model for the world economy. We simulate trade liberalization in the model with R&D spillovers and compare the effects on GDP in different regions with a non-R&D-based model simulation. We find that the GDP effects of trade liberalization are magnified considerably by R&D spillovers for some regions-notably Japan and Southeast Asia. In other regions, such as China, the additional GDP effects are modest. These findings can be traced back to changing specialization and import patterns. Copyright 2005 International Monetary Fund.

The Economic Effects of Croatia's Accession to the European Union

We explore the economic implications of Croatias possible accession to the European Union. We focus on two main changes associated with EU membership: accession to the internal European market and institutional reforms in Croatia triggered by EU membership. Consumption per capita in Croatia is estimated to rise by 2.6 percent as a result of accession to the internal market. In particular, the textile and wearing apparel sectors expand. If Croatia successfully reforms its domestic institutions in response to EU membership, income levels in Croatia could increase even more. Tentative estimates suggest that gross domestic product per capita in Croatia could rise by an additional 8 percent. Overall, the macroeconomic implications for the existing EU countries are negligible.

Trade costs, openness and productivity: market access at home and abroad

This paper discusses the channels between openness and productivity and trade hampering factors. The stylized facts from the heterogeneous firms literature suggests that firms face market entry costs for each new product they export and to each new export market. Transport costs, border costs and retail and wholesale distribution costs might add up to 170% of the export value, but formal import tariffs and duties are relatively unimportant. The results by the Observatory of European SMEs survey, which has firm-level data for the whole European Union confirm this result. Lack of knowledge on export markets and regulations in other countries are important trade barriers for European firms. From these outcomes it could be derived that EU trade policies should be directed to deep integration with other countries, preferably by implementing internal market policies for goods and services trade and foreign direct investment. These policies can deal with reducing regulations heterogeneity, non-tariff barriers and customs procedures. Providing public information on export markets (e.g. customers, contact, and distribution networks) could also be helpful, if well targeted.

EU Accession and the Catching Up of the Central and East European Countries

This chapter explores the consequences of the enlargement of the European Union (EU) with the Central and Eastern European Countries (CEECs). We examine the consequences of the CEECs’ entitlement for Structural Funds support and the impact of economic integration as such. We are interested in the question whether EU accession helps these countries to catch up to EU income levels. On average, income per capita in purchasing power terms is hardly a third of that in the EU. In the 1990s this gap has not been reduced. The question is whether the accession to the EU could be a help in closing this gap.

Identifying hubs and spokes in global supply chains using redirected trade in value added

ABSTRACT The increasing importance of global supply chains has prompted the use of analytical tools based on trade in value added – instead of traditional measures in gross value. We use this analytical framework to develop indicators that identify production hubs and supply spokes in global supply chains. Using these indicators and the Global Trade Analysis Project (GTAP) database, we quantify the relative importance of redirected value-added trade and the hub and spoke relationships at the aggregate level and for specific highly integrated industries.

GLOBALIZATION AND THE GLOBAL ENVIRONMENT: FOUR QUANTITATIVE SCENARIOS

This article presents a simulation of four quantitative scenarios using the applied general equilibrium model WorldScan . The scenarios are constructed to study the effects of globalization on transport and the environment. They contain different assumptions on the degree of globalization, technical progress, migration and energy policies. WorldScan focuses on long-term economic growth, trade and specialization patterns. It quantifies the economic content of the scenarios and the volume growth of energy and emissions between 1995 and 2050. The scenario outcomes show that emission growth quadruples with high economic growth without any energy-efficient technologies and environmental legislation. However, in an ecological scenario which combines energy-efficient technologies, environmental legislation and modest economic growth, global emissions hardly increase.