nep-res New Economics Papers
on Resource Economics
Issue of 2020‒04‒06
three papers chosen by
Maximo Rossi
Universidad de la República

  1. Induced Innovation: Evidence from China's Secondary Industry By Fleisher, Belton M.; McGuire, William H.; Wang, Xiaojun; Zhao, Min Qiang
  2. New Evidence on the Soft Budget Constraint: Chinese Envronmental Policy Effectiveness in Private versus SOEs By Mathilde Maurel; Thomas Pernet
  3. Environmental catastrophes and mitigation policies in a multiregion world By Besley, Timothy; Dixit, Avinash

  1. By: Fleisher, Belton M. (Ohio State University); McGuire, William H. (University of Washington Tacoma); Wang, Xiaojun (University of Hawaii at Manoa); Zhao, Min Qiang (Xiamen University)
    Abstract: We investigate the effect of rising labor costs on induced technological change in China's secondary industry. While previous studies have focused primarily on induced technology change in agriculture and in energy production/environmental protection, there has been little evidence relating to China's adjustments as rising labor costs affect its global competitiveness in the manufacturing sector. Building on insights developed in a rich literature, we propose a model linking changes in labor productivity to changes in labor costs, and the availability of physical capital. Importantly, we derive testable hypotheses to distinguish induced innovation from standard substitution of capital for labor under fixed technology. These hypotheses are tested using both firm- and provincial-level data. Our empirical results support the hypothesis that rising wages have induced labor-saving innovation in China, at least in the decade of the 1990s, but less so or not at all after the middle of the next decade.
    Keywords: induced innovation, labor productivity growth, China
    JEL: O30 D22 D24 D33
    Date: 2020–03
  2. By: Mathilde Maurel (CNRS - Centre d'Economie de la Sorbonne - Université Paris 1 panthéon-Sorbonne;; Thomas Pernet (Centre d'Economie de la Sorbonne;
    Abstract: This paper analyses the efficiency of a set of environmental measures introduced by the 11th FYP (Five Years Plan) in China 2006, using a rich and unique dataset borrowed from the Ministry of Environmental Protection (MEP) and from the State Environmental Protection Agency (SEPA). The objective is to provide new evidence of the Soft Budget Constraint (SBC), which is a key concept coinced by Janos Kornai. The main finding is that TCZ (Two Control Zone) cities are successful in bringing down the emission of SO2, and more importantly that this success is driven by the private sector. Sectors dominated by State-Owned Enterprises (SOEs) are less sensitive to the environmental target-based evaluation system, by a factor of 42%. We also find that one channel, through which this adjustment takes place, is Total Factor Productivity (TFP), but not in the case of SOEs. We interpret these results as pointing to the evidence of a still ongoing SBC surrounding Chinese SOEs
    Keywords: Environmental regulation; China; Kornai; Soft Budget Constraint
    JEL: Q53 Q56 P2 R11
    Date: 2020–02
  3. By: Besley, Timothy; Dixit, Avinash
    Abstract: In this paper we present a simple model for assessing the willingness to pay for reductions in the risk associated with catastrophic climate change. The model is extremely tractable and applies to a multiregion world but with global externalities and has five key features: (i) Neither the occurrence nor the costs of a catastrophic event in any one year are precisely predictable; (ii) the probability of a catastrophe occurring in any one year increases as the levels of greenhouse gases in the atmosphere increase; (iii) greenhouse gases are a worldwide public bad with emissions from any one country or region increasing the risks for all; (iv) there is two-sided irreversibility; if nothing is done and the problem proves serious, the climate, economic activity, and human life will suffer permanent damage, but if we spend large sums on countermeasures and the problem turns out to be minor or even nonexistent, we will have wasted resources unnecessarily; and (v) technological progress may yield partial or even complete solutions. The framework that we propose can give a sense of the quantitative significance of mitigation strategies. We illustrate these for a core set of parameter values.
    Keywords: catastrophic climate risk; climate change mitigation; global stock externality
    JEL: N0
    Date: 2019–03–19

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