Munisamy Gopinath

What Causes Spatial Variations in Economic Development in the United States

This article examines the causes of spatial disparities in economic development in the United States. A theoretical model is developed to analyze the location decisions of firms and households. An empirical model is estimated to quantify the contribution of alternative factors to spatial variations in wage, employment density, housing price, and land development density. Results suggest that remoteness is a primary cause of spatial disparities in economic development, while natural amenities are a major determinant of housing prices. Despite the dominant role of geography, public investments in infrastructure and human capital development could contribute to economic development in remote areas. Copyright 2008, Oxford University Press.

The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry

This paper investigates the determinants of foreign direct investment (FDI) and its relationship to trade in the U.S. food processing industry. A representative multinational corporation maximizes profits by choosing between production in the home country, which is exported, and production in a foreign country. This introduces the possibility that foreign affiliate sales can be a substitute and/or complement for exports. The empirical framework consists of a system of four equations with foreign affiliate sales, exports, affiliate employment, and FDI as endogenous variables. The results confirm a small substitution between foreign affiliate sales and exports. The empirical evidence supports the hypothesis that FDI is also protection-jumping.

Foreign direct investment and wages: a cross-country analysis

While globalization has led to overall economic growth in a number of countries, questions abound on its distributional effects, especially on rising wage inequality across nations. The main objective of this study is to investigate empirically the effects of foreign direct investment (FDI) on wages in a cross-country setting. We investigate the general equilibrium propositions that capital inflows (outflows) increase (lower) wages in host (home) countries due to the change in relative factor endowments. We also explore whether capital inflows have differential impacts on skilled and unskilled wages in developing economies. Time-series data on 26 countries, 15 developed and 11 developing, are used to fit the labour share equation derived from a translog GNP function with net FDI stock as one of its arguments. Results confirm that capital movement brings about a cross-country convergence of wages. However, there is some evidence that inward FDI flows increase the wage gap between skilled and unskilled workers in developing countries.

An empirical analysis of productivity growth and industrial concentration in us manufacturing

This manuscript focuses on the productivity-industrial concentration relationship in the US manufacturing industries, while accounting for external and internal sources of knowledge. It is found that there is a critical level of industrial concentration beyond which its relationship with productivity growth becomes negative. Results suggest that static welfare losses of increasing concentration in manufacturing industries can be offset by welfare gains from productivity growth.

Sources of Sectoral Growth in an Economy Wide Context: The Case of U.S. Agriculture

Growth in U.S. agriculture is linked to the non-farm economy through domestic terms of trade and factor market adjustments. With almost stable input growth, the relatively large contributions from growth in Total Factor Productivity (TFP) are passed on to intermediate and final consumers in the form of declining real prices for primary farm products. The resulting net growth in the real value of farm output (GDP) is relatively low (0.25% per annum). The decomposition of TFP suggests that public agricultural stock of knowledge and infrastructure are “robustly” associated with TFP growth, while spill-overs from private agricultural and economy wide research and development (R and D) are positive but, relatively small.

The Dynamics of Individuals' Fat Consumption

Consumers are increasingly aware of the link between their lifestyle choices and the risk of noncommunicable diseases. A dynamic approach incorporating this linkage in food demand is developed, where consumers maximize utility over time by choosing fat intake to control their cumulative fat level. The resulting dynamic indirect utility function and household data on meat, fish, and dairy consumption are used to estimate a censored demand system. Results show that consumers consciously adjust, but not instantaneously, their cumulative fat level. Highly educated households have a faster rate of adjustment of cumulative fat. When cumulative fat level increases, consumers shift to dairy or white meat from red meat products.

Financial constraints and output targets in Russian agricultural production.

Since the breakup of the Soviet Union, Russian agricultural production has experienced a significant decline. The rise in input prices relative to output prices and the lack of legal mechanisms to provide land as a collateral for loans suggest the existence of expenditure constraints. We test for expenditure constraints and prevalence of output-targeting as sources of inefficiency in addition to actual inefficiencies in 73 Russian farm regions (oblasts). Only six oblasts are overall efficient and the rest experienced profit losses from all three sources of inefficiency of up to 35.8 per cent. We find that 54 oblasts are subject to expenditure constraints, while output-targeting is still practised by 14 oblasts. Our results suggest that one-seventh of the overall inefficiency, and thus profit losses, is due to both financial constraints and output-targeting. Copyright

Knowledge Spillovers, Absorptive Capacity, and Skill Intensity of Chilean Manufacturing Plants

Knowledge spillovers are an important source of economic growth. In this study, we identify a mechanism through which knowledge spillovers occur among plants in the Chilean manufacturing industry. A plant-level production function is estimated with the absorptive-capacity hypothesis, that is, employment of skilled workers is a key channel through which knowledge is transmitted across plants. Results show that a plants productivity from spillovers increases with its skill intensity, which is measured by the share of skilled workers in total employment. We also find that plants in a region with a large knowledge stock increase their skill intensity to benefit more from spillovers. Our results suggest that an increase in regional knowledge stock is the most effective policy to improve a plants productivity. However, policies that encourage a plant to employ high skill-intensive production also enhance its productivity.

Heterogeneous Firms, Trade Liberalization and Agglomeration

In this study, we develop an economic model to examine agglomeration of heterogeneous firms following trade liberalization. In a closed economy, we show that high-productivity firms are more likely to agglomerate because they benefit more from agglomeration than their low-productivity counterparts. However, trade liberalization, especially with a high-productivity partner, favours partial agglomeration; that is, low-productivity firms relocate away from the region where high-productivity firms agglomerate. Consequently, the welfare gap between the domestic regions of an economy narrows following trade liberalization. The latter result suggests that trade liberalization promotes regional economic development.

Asia-Pacific Integration with China versus the United States: Examining Trade Patterns under Heterogeneous Agricultural Sectors

This article compares the effects on global agricultural trade patterns of Asia-Pacific regional economic integration led by the United States versus that by China. Our analysis employs a Eaton-Kortum type model in which agricultural producers have access to technology with heterogeneous productivity. Unlike the standard Eaton-Kortum model, product specific-productivity is linked to a country’s land and climate characteristics and trade costs are product-specific. We derive a structural relationship between the probability a country has comparative advantage in a given export market for an individual agricultural product and the bilateral costs of trading that product controlling for the product-specific unit costs of production from a general equilibrium framework. We specify the relationship as a random coefficients logit model to estimate a country-specific distribution of trade costs and productivity across agricultural products. We use these estimated distributions to explore the set of bilateral relationships from which Asia-Pacific integration is likely to generate the largest shifts in agricultural trade patterns.