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54191. Spatial Inequality for Manufacturing Wages in Five African Countries

Author:
Oliver Morrissey and Dirk Willem te Velde
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper uses data on individual earnings in manufacturing industry for five African countries in the early 1990s to test whether firms located in the capital city pay higher wages than firms located elsewhere, and whether such benefits accrue to all or only certain types of workers. Earnings equations are estimated that take into account worker characteristics (education and tenure) and relevant firm characteristics (notably size and whether foreign owned). Any location effect identified is therefore additional to appropriate control variables. There are two main findings. First, we find evidence of a 'pure capital city premium' equivalent to between 12 per cent and 28 per cent of nominal average earnings in the five countries. In some countries this location premium exceeds plausible consumer price differentials, between the capital and other urban areas. This does suggest that real (purchasing power) manufacturing wages are higher in the capital city (although this real premium is no more than ten per cent). Second, we find that skilled workers earn a higher wage premium in the capital city than those less skilled. However, this is not because of location effects on earnings per se, but rather because of other firm characteristics of firms located in the capital city, such as size and foreign ownership. This suggests that spatial inequality in itself does not directly contribute to skilled–less-skilled wage differentials.
Topic:
Economics and Industrial Policy
Political Geography:
Africa

54192. Regional Poverty and Income Inequality in Central and Eastern Europe: Evidence from the Luxembourgh Income Study

Author:
Michael Förster, David Jesuit, and Timothy Smeeding
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper reports levels of income inequality and poverty in four Central and Eastern European countries: the Czech Republic, Hungary, Poland and Russia. Unlike many previous researchers who examine transition economies, we aggregate the detailed individual-level income surveys made available through the efforts of the Luxembourg Income Study at the regional level of analysis. Although national-level investigations have contributed much to our understanding of the income distribution dynamics, these studies mask intracountry variance in levels of income inequality and thus may not capture the true distribution of household income and accurately reflect individual wellbeing. Accordingly, we compute summary measures of inequality and relative poverty rates, using both local and national relative poverty lines, for the most recent waves of data available. We offer comparisons between regional and national median incomes and assess levels of inter- and intraregional income inequality. In addition, we make comparisons to regions within Western European countries and find that, contrary to what is often asserted, interregional disparities in Central and Eastern Europe countries are not as large as those found in some Western European countries.
Topic:
Development and Poverty
Political Geography:
Russia, Europe, Eastern Europe, Poland, Hungary, Czech Republic, and Luxembourg

54193. Is the Brain Drain an Unmitigated Blessing?

Author:
Riccardo Faini
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Increasingly, immigration policies tend to favour the entry of skilled workers, raising substantial concerns among sending countries. The 'revisionist' approach to the analysis of the brain drain holds that such concerns are largely unwarranted. First, sustained migratory flows may be associated with an equally large flow of remittances. Second, migrants may return home after having acquired a set of productive skills. Finally, the ability to migrate abroad may boost the incentive to acquire skills by home residents.
Topic:
Development, Education, and Migration

54194. Some Welfare Implications of 'Who Goes First?' in WTO Negotiations

Author:
Basudeb Guha-Khasnobis
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We envisage a logical framework to explain why some trade negotiations are delayed because parties differ on who should 'go first'. In our model, there are substantive welfare implications depending on which party sets tariff rates (or subsidies) first in a strategic optimization exercise. When knowledge about cost levels are incomplete or missing, and hence must be guessed with a probability, the chances of conflict regarding who goes first are extremely high in the situation modeled in this paper. As an institution with some power to set the rules of negotiations, the WTO should be able to anticipate such conflicts in upcoming negotiations. It can then set the rule (in this case, dictate who should go first) depending on whose interest it wants to protect. There is a wide range of choices for the WTO in this regard: OECD consumer's surplus, OECD producers' loss, net exports of developing countries, firm profits, or even, world welfare as the sum of all these components.
Topic:
Development, International Organization, International Political Economy, and International Trade and Finance

54195. Who Gains from Tariff Escalation?

Author:
Basudeb Guha-Khasnobis
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
With the help of a simple model of production and trade, we examine the differential impact of tariff escalation on skilled and unskilled wages in an economy. Our findings provide a lobbying-based explanation of the prevalence of tariff escalation in developed countries. It also predicts the possible response of a developing country and shows how similar lobbying activity in that country can slow the pace of liberalization of service sector trade.
Topic:
Development, Economics, and International Trade and Finance

54196. International Trade, Location and Wage Inequality in China

Author:
Songhua Lin
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Models of economic geography predict that transportation costs directly affect demand for goods and the supply of intermediate inputs. One of the reasons that international trade is concentrated in the coastal provinces of China is that they have lower transportation costs in transporting goods to other countries than do provinces in the interior. This paper examines the relationship between the provincial wage rate and each province's access to international markets, and to suppliers of intermediate inputs. A gravity equation is first estimated to construct these 'market access' and 'supplier access' variables. In the second stage, the effect of market access and supplier access on the wage rate is estimated. It is found that about one quarter of the provincial wage differences in the coastal provinces and 15 per cent of the wage differences in the interior provinces can be explained by these economic geography variables.
Topic:
Industrial Policy and International Trade and Finance
Political Geography:
China, Israel, and East Asia

54197. Economic Polarization Through Trade: Trade Liberalization and Regional Growth in Mexico

Author:
Andrés Rodríguez-Pose and Javier Sánchez-Reaza
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper analyses the impact trade liberalization and economic integration have had on regional growth and regional disparities in Mexico over the last two decades. It is highlighted that the passage from an import substitution system to membership of the General Agreement on Tariffs and Trade (GATT) first, and to economic integration in the North American Free Trade Agreement (NAFTA) later, has been associated with greater concentration of economic activity and territorial polarization. The analysis also shows that these changes herald a period of transition between two growth models. Regional growth in the final stages of the import substitution period was mainly characterized by convergence and linked to the presence of oil and raw materials and proximity to Mexico City. Economic liberalization and regional integration in NAFTA has been related to regional divergence, a reduction of the importance of Mexico City as the main market and to the emergence of an economic system in which the endowment of skilled labour starts to play a more important role.
Topic:
Economics and International Trade and Finance
Political Geography:
North America and Mexico

54198. Controlling Asylum Migration to the Enlarged EU

Author:
Catherine Phuong
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We examine the ways in which candidate countries which are to join the EU in 2004 are responding to increasing asylum migration from the East and assess the impact of accession on their asylum and immigration laws and policies. It will be argued that recent changes in asylum and immigration laws in candidate countries have been largely affected by current EU efforts to devise a common immigration policy and a possible common asylum system. Instead of devising their own response to asylum migration, candidate countries are merely aligning their asylum policies with EU practice and expectations.
Topic:
Migration
Political Geography:
Europe

54199. Who Pays Indirect Taxes in Russia?

Author:
André Decoster and Inna Verbina
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The interplay of a differentiated indirect tax structure and the variation in expenditure patterns across households, leads to a possibly unequal distribution of indirect tax liabilities across the population. This paper uses the ninth round of the RLMS survey to assess the distributional consequences of the two major components of the indirect tax system: VAT and excise taxes. The global indirect system can be considered to be progressive overall, according to the Kakwani index. Decomposition into constituent terms shows that this is due not only to a progressive VAT structure, but also to progressive excise taxes. This surprising result is mainly explained by the progressivity of the excise tax on car fuel, but might also be sensitive to peculiarities in the data about alcohol consumption.
Topic:
Development, Economics, and Government
Political Geography:
Russia

54200. Opening the Convergence Black Box: Measurement Problems and Demographic Aspects

Author:
Carlos Azzoni, Naercio Menezes-Filho, and Tatiane Menezes
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In this paper we address the issues involved with the use of microeconomic data, that is, household surveys, to compare the patterns of income growth among different regions instead of the commonly used aggregate data. In particular, we investigate the issues of aggregation of household income to regional income and the problem of demography. As returns to experience generally differ across regions, differences in the patterns of income growth across regions in the same time interval will differ across age groups, which means that convergence or divergence of aggregate income among regions will depend on the age structure of their population. We apply these concepts to the case of the states of Brazil, for which we have repeated cross sections from a rich household survey. We find that patterns of income growth vary a great deal across birth cohorts, depending on the economic returns to experience.
Topic:
Demographics, Development, and Economics
Political Geography:
Brazil