Jonathan Haskel

Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms

Are there productivity spillovers from FDI to domestic firms, and, if so, how much should host countries be willing to pay to attract FDI? To examine these questions we use a plant-level panel covering U.K. manufacturing from 1973 through 1992. Across a wide range of specifications, we estimate a significantly positive correlation between a domestic plants TFP and the foreign-affiliate share of activity in that plantis industry. This is consistent with positive FDI spillovers. We do not generally find significant effects on plant TFP of the foreign-affiliate share of activity in that plants region. Typical estimates suggest that a 10 percentage-point increase in foreign presence in a U.K. industry raises the TFP of that industrys domestic plants by about 0.5 percent. We also use these estimates to calculate the per-job value of these spillovers. These calculated values appear to be less than per-job incentives governments have granted in recent high-profile cases, in some cases several times less.

The Law of One Price - A Case Study

We use retail transaction prices for a multinational retailer to examine the extent and permanence of violations of the law of one price (LOOP). For identical products, we find typical deviations of twenty to fifty percent, though there is muted evidence for convergence over time. Such differences might be due to differences in local costs. If so, relative prices of similar products (round versus square mirrors) should be equal across countries. In fact, relative prices vary significantly across very similar goods within a product group; indeed, the ordering of common currency prices often differs for similar products. The finding suggests that differences in local distribution costs, local taxes, and probably tariffs do not explain the price pattern, leaving strategic pricing or other factors resulting in varying markups as alternative explanations for the observed divergences.

Trade, Technology and UK Wage Inequality

The U.K. skill premium fell from the 1950s to the late 1970s and then rose very sharply. This paper examines the contributions to these relative wage movements of international trade and technical change. We first measure trade as changes in product prices and technical change as TFP growth. Then we relate price and TFP changes to a set of underlying factors. Among a number of results, we find that changes in prices, not TFP, were the major force behind the rise in inequality in the 1980s. We also find that although increased trade pressure has raised technical change, its effect on wage inequality was not quantitatively significant.

Computers and the Demand for Skilled Labour: Industry- and Establishment-Level Panel Evidence for the UK

The authors use two U.K. panel data sets to investigate skill-upgrading in the United Kingdom and how it has been affected by computerization. Census data reveals that most aggregate skill-upgrading is explained by within-establishment rises in skill composition. Such upgrading is significantly related to computerization, a relation that is robust to different worker and computer types, endogeneity, human capital upgrading, and other technology measures.

What Happened To The Knowledge Economy? Ict, Intangible Investment, And Britain'S Productivity Record Revisited

Despite the apparent importance of the “knowledge economy,” U.K. macroeconomic performance appears unaffected: investment rates are flat, and productivity has slowed. We investigate whether measurement issues might account for this puzzle. The standard National Accounts treatment of most spending on “knowledge” or “intangible” assets is as intermediate consumption. Thus they do not count as either GDP or investment. We ask how treating such spending as investment affects some key macro variables, namely, market sector gross value added (MGVA), business investment, capital and labor shares, growth in labor and total factor productivity (TFP), and capital deepening. We find: (a) MGVA was understated by about 6 percent in 1970 and 13 percent in 2004; (b) instead of the business investment/MGVA ratio falling since 1970 it has been rising; (c) instead of the labor share being flat since 1970 it has been falling; (d) growth in labor productivity and capital deepening has been understated and growth in TFP overstated; and (e) TFP growth has not slowed since 1990 but has been accelerating.

Does the Sector Bias of Skill-Biased Technical Change Explain Changing Skill Premia? *

Abstract This paper shows the sector bias of skill-biased technical change (SBTC) can help explain changing skill premia within countries in recent decades. Our model demonstrates that in many cases it is the sector bias of SBTC that determines SBTCs effect on relative factor prices, not its factor bias. Rising (falling) skill premia are caused by SBTC that is concentrated in skill-intensive (unskill-intensive) sectors. Our empirical findings for ten OECD countries over the 1970s and 1980s are consistent with sector bias being important. In countries when skill premia were rising (falling), SBTC was generally concentrated in skill-intensive (unskill-intensive) sectors.

DOES NATIONALITY OF OWNERSHIP MATTER FOR LABOR DEMANDS

Do multinational firms exhibit different patterns of labor demand from purely domestic firms? Many standard models of trade and multinational companies suggest one such difference may be labor-demand elasticities. For several reasons, multinationals may have more-elastic labor demands than do purely domestic firms. In this paper we discuss the theory issues involved. We then present industry-level evidence that, for U.K. and U.S. manufacturing, labor demand for less-skilled labor has become more elastic in recent decades-a period in which for both countries multinational activity has expanded. (JEL: F2, L1) Copyright (c) 2003 The European Economic Association.

Privatization, Liberalization, Wages and Employment: Theory and Evidence for the UK

Most agency-based privatization models are of the owner/manager relation and ignore the labor market. Yet in the 1980s there were profound changes in public sector and privatized firms to wages and employment. The authors develop a bargaining model of the manager/workforce relation that explains employment and wages when firms are privatized, government objectives become more commercial, and markets are liberalized. Using data on fourteen U.K. companies, 1972-88, that were publicly owned in 1972, the authors find: (1) employment fell following the change to more commercial objectives; and (2) wages were only slightly affected by this, but fell if the firm lost market power. Copyright 1993 by The London School of Economics and Political Science.

Privatisation and X-Inefficiency: A Bargaining Approach

The usual analysis of privatization and X-inefficiency uses agency theory to model managerial effort. We model worker effort as determined by a bargain between firms and workers. Workers dislike effort because it lowers utility. Firms prefer high effort because it raises productivity. Public-sector firms are assumed to be social welfare maximizers and compared to private-sector firms, therefore, they bargain lower effort levels since they have the interests of consumers and workers at heart. Our model predicts that under certain conditions privatization should raise effort and so lower X-inefficiency, and that wages may increase or decrease.

Returns to Education: Evidence from U.K. Twins

We use a new sample of UK female identical twins to estimate private economic returns to education. We report findings in three areas. First, we use identical twins, to control for family effects and genetic ability bias, and the education reported by the other twin to control for schooling measurement error. Our estimates suggest a return to schooling for UK females of about 7.7%. Second, we investigate within-twin pair ability differences by examining within-twin pair and between-family correlations of education with observable correlates of ability (including birthweight, ability tests and reading scores). Our findings suggest lower ability bias in within-twin pair regressions than pooled regressions. Third, using data on twins smoking we show smoking reflects family background and using it as an instrument exacerbates ability bias.(This abstract was borrowed from another version of this item.)