Mei Hsu

Time-Series Wage Differential in Taiwan: The Role of International Trade

Rising relative wages between skilled and unskilled workers in developed countries has been a popular subject of recent studies. This paper analyzes Taiwan, a semi-developed economy, where the relative wage reveals a declining trend since the mid-1980s. The authors study the role of international trade. A major point of departure is to distinguish the effects of net exports to OECD countries from those to non-OECD countries. The paper also differentiates the effects of net exports to China from those to non-OECD countries except China. It is found that net exports to the OECD countries raise the relative wage of skilled workers, whereas net exports to non-OECD countries and China diminish the relative wage. Moreover, the impacts of net exports to China are much larger than those to OECD and other non-OECD countries. The documented wage effects of international trade in this work diverge from what existing works have argued based on Heckscher-Ohlin theory. Copyright 2001 by Blackwell Publishing Ltd

Agricultural Productivity and Economic Growth: Role of Tax Revenues and Infrastructures

To encourage economic growth in a developing economy, higher agricultural productivity has been believed to enhance the manufacturing sectors development, which provides the transition into industrialization. Although this positive linkage between agricultural productivity and economic growth has been judged to be incorrect, based upon the comparative advantage argument in a model of small-open economies by Matsuyama (1992), this article revisits the linkage by extending Matsuyamas model by introducing the revenue-generating effect, which is missing in his model. As agriculture is an important source of taxation in an early stage of economic development, higher agricultural productivity generates more tax revenues and facilitates spending on infrastructure. By introducing government taxation and infrastructure expenditure, we show that under proper conditions, higher agricultural productivity creates a positive growth effect via the revenue generation that dominates the negative growth effect through the comparative advantage. Moreover, introducing infrastructure expenditure may shift the manufacturing sectors original comparative disadvantage into comparative advantage, thereby enabling a trapped economy to take off and eventually industrialize. From the early stages of economic development in Japan, Taiwan, and Korea, we can quantitatively assess an obvious net positive effect of agricultural productivity upon labor allocation and economic growth.

A One-Sector Growth Model with Consumption Standard: Indeterminate or Determinate?

In a representative agent, one-sector growth model in which the discounting is decreasing in the consumption standard measured as the current average consumption flow, Drugeon (1998) establishes local indeterminacy. This paper extends Drugeons setup in the discount rate. In our setup, the consumption standard is a habit stock that a weighted average of the whole history of average consumption flows in the past. Local indeterminacy emerges only when the speed of habit formation tends to infinity; otherwise, local indeterminacy cannot appear, no matter how large the habit affects the discount rate.

The Dynamic Relationship between Inflation and Output Growth in a Cash-Constrained Economy

This paper studies the dynamic relationship between inflation and output growth in neoclassical growth models with endogenous cash constraints. We show this dynamic relationship is negative if the degree of cash constraints on investment is smaller than the degree of cash constraints on consumption but is positive if otherwise.

Consumption Externality, Endogenous Impatience, and Macroeconomic Efficiency

Existing studies find that consumption externalities do not cause inefficiency in the long run unless choices of leisure are allowed for. This paper considers the role of endogenous impatience in a neoclassical growth model with consumption externalities. We find that consumption externalities create inefficiency by changing the demand for capital via endogenous impatience, thereby affecting equilibrium capital stock and output. We characterize the optimal tax structure for consumption and capital/output in order to correct the distortions caused by consumption externalities. The optimal tax/subsidy structure depends not only upon the marginal rate of substitution but also upon the effect on the degree of impatience. Moreover, it is optimal to tax or subsidize capital if the equalization of the shadow prices of capital between equilibrium and optimal is not required in the replication of equilibrium allocations to optimum. Finally, local indeterminacy is possible when there is sufficiently large decreasing impatience.