Kar-yiu Wong

Education, Economic Growth, and Brain Drain

This paper examines how brain drain may affect the growth rate, education, and income distribution of an economy. It shows that if the engine of growth of the economy is human capital accumulation and intergenerational externality, brain drain hurts the growth rate of the economy. Brain drain also has important income distribution and welfare implications. This paper argues that in addition to the static effects that have been analyzed in the existing literature, brain drain affects adversely the intertemporal welfare of the non-migrants in the present and future generations. The government may use a more aggressive education policy to counter the detrimental effects of brain drain on the economys growth rate. One option is to invest more in education, raising the educator-student ratio, but this policy also has important income distribution implications, as it tends to benefit skilled workers at the expense of unskilled workers.

Are international trade and factor mobility substitutes

Abstract This paper analyzes whether factor flows and commodity trade are substitutes or complements, i.e. whether increasing the level of one impacts adversely or favorably on the volume of the. other. It derives, with the aid of a new general equilibrium framework of the world which allows possible differences in factor endowments, tastes and technologies across the two trading countries, the necessary and sufficient condition for substitutability and complementarity. The results are then further examined in two special cases. A survey of different concepts of substitutability and complementarity which have appeared in the literature is also given.

An exact measure of welfare change

This paper develops a measure of the change in welfare of a household or an economy due to exogenous shocks or policy changes. The measure can be applied in a wide range of economies of scale, imperfectly competitive markets, unemployment, and domestic distortionary taxes. The welfare change measure is decomposed into five terms, which identify the five sources of welfare impacts: tax revenue, international transfer and borrowing, terms of trade, consumption substitution, and production substitution. The measure is simple to interpret and easy to apply in practice. All statistical data and information required to compute these terms are generally available or can be estimated easily.

Specific and Ad Valorem Tariffs are not Equivalent in Trade Wars

This note argues that when two countries choose optimal tariffs in a trade war, specific tariffs are not equivalent to ad valorem tariffs even if all markets are competitive. In particular, it shows that if a countrys trading partener switches a specific tariff to an an valorem tariff that yields the same revenue at the initial trade point, the former country has an incentive to lower its tariffs.

Industrialization, Economic Growth, and International Trade

This paper analyzes the relationship between economic growth, industrialization, and international trade in a two-sector endogenous growth model. With learning-by-doing, the economy grows perpetually along a balanced growth path, with manufacturings relative price declining continuously. Under trade, its pattern of trade and growth will be affected by external growth. If it remains diversified under trade, its growth can keep in pace with the rest of the world. If the growth rate of the rest of the world is higher than a certain limit, the economy cannot catch up and will eventually produce agriculture only. Copyright 1999 by Blackwell Publishing Ltd.

Growth of Hong Kong Before and After its Reversion to China: The China Factor

The paper focuses on the Hong Kong economy and attempts to measure the contribution of Hong Kongs integration with mainland China to its GDP growth rate. Two linkages have received particular attention, namely, Hong Kongs foreign direct investment (FDI) in China and immigrants from China. While the former is assumed to stimulate capital investment in Hong Kong but at the same time to reduce human capital formation (owing to a shrinkage of its domestic manufacturing sector), the latter is assumed to further reduce Hong Kongs average human capital because immigrants tend to be less educated. By making some assumptions about the future trajectories of Hong Kong direct investment in China and Chinese immigrants into Hong Kong after its reversion to China, the paper offers some predictions about Hong Kongs future economic growth.

Gains from Trade with Overlapping Generations

SummaryThis paper examines the welfare effects of international trade in a context of overlapping generations. It shows that, for a single trading country, uncompensated free trade may be Pareto inferior to autarky. However, for each government there are compensation schemes which guarantee welfare improvements for all local individuals when free trade is allowed, or when for a small open economy the terms of trade improve or the number of tradable goods increases, or when a customs union is formed.

The West German gastarbeiter system of immigration

Abstract The paper analyzes the West German immigration system as operated until early 1970s. Defining the essential features of this system, the authors explain the cross-sectional industrywise utilization of foreign guestworkers during 1964/65 to 1971/72. They also extend the analysis to explaining the sourcewise (by country) composition of foreign workers during this period

Paradoxes associated with the administration of foreign aid

Abstract This paper shows that if because of administration costs or other wastes only a proportion of an aid reaches the recipient, then it is possible that the donor is enriched by its act of charity, the extent of the enrichment increasing with the extent of the leakage, and/or that the recipient is impoverished by aid, the extent of the impoverishment increasing with the extent of the leakage. These outcomes are possible even when trade is optimally restricted by donor or recipient.

On The Strategic Choice Between Capital And Labor Mobility

Abstract This paper analyzes the strategies of two governments when choosing between capital and labor mobility. For each type of factor mobility, the Nash equilibria under both income taxes and quotas on factor flows are derived. From each countrys point of view, an income tax dominates a quota. The paper also shows that in a strategic environment, Ramaswamis result that a country prefers the restricted inflow of a scarce factor to the restricted outflow of an abundant factor continues to hold for some initial factor endowments, but the opposite result may obtain for other factor endowments.