Essays on trade, growth and applied econometrics

Abstract: This dissertation consists of five essays. Three of these study countries’ specialisation patterns combining the two classical paradigms of trade theory, namely the Ricardian (technology) and the Heckscher–Ohlin (factor endowments) framework. Of the remaining two essays, one studies convergence in per capita income among the Swedish counties and the other is methodological in that we investigate the issue of how seasonal unit roots and joint modelling may affect forecasts. In each of these essays, an empirical investigation is applied.Essay 1. Technical Progress, Capital Accumulation and Changing International Competitiveness.In this essay we studies how technology, measured by total factor productivity (TFP) and endowments, jointly determines countries’ specialisation patterns.The main findings are that endowments and technology jointly determine trade patterns. In analysing countries level of specialisation we find indications of scale effects at the firm level and that TFP turns out to be a poor determinant in explaining specialisation whereas endowments, and in particular natural resources are significant.When analysing changes in specialisation and trade patterns, TFP growth is found to be a significant explanatory variable. These contradictory results, i.e., that TFP is not significant when studying levels but is when studying changes, may to some extent be explained by potential time invariant measurement errors that are differenced out when analysing changes. There is also evidence for an increased specialisation of human capital intensive production in countries with a high growth rate in the national supply of skilled labour.Essay 2. Technology, Resource Endowments and International Competitiveness.In the second essay we takes the analysis one step further by going behind the black box of technology and relating this to its sources, where R&D is taken to be the new main object of the study. The analysis reveals that competitiveness is determined not only by R&D performance of the firm, but also that industry- and economy-wide stocks of knowledge are important, indicating the presence of local externalities in R&D. Further results point to scale effects in R&D at the firm level and that the impact of R&D is higher in high- and medium- than in low-tech industries.Essay 3. The Dynamics of European Industrial Structure.The third essay focus on changes in countries’ specialisation patterns. In the model building stage, we make the R&D process endogenous. Through domestic input-output linkages, we build in trade-transmitted technology transfers. Econometrically, we find indications of R&D at the firm level to be the main engine shaping technology and competitiveness. There is also evidence of scale effects in R&D at the firm level.Analysing capital accumulation, we find that countries with relatively high capital accumulation increase their specialisation in capital-intensive industries. We also find that capital abundant countries have the highest rate of capital accumulation. Together, this indicates an increased concentration of capital-intensive industries in capital abundant countries.Analysing human capital accumulation in an analogous manner, we find that countries with relatively high human capital accumulation increase their specialisation in human capital intensive industries. However, we find that countries with a relatively high human capital accumulation are those with initially small human capital stocks, indicating convergence in human capital abundance among the countries in the sample. How industries interact, and industrial interdependence, are analysed, and we find significant econometric evidence of interdependence between domestic industries with strong input-output linkages.Essay 4. Convergence, Prices and Geography: An empirical Study of the Swedish Counties 1911-1993.With Joakim Persson.In the fourth essay, we analyse convergence in per capita income among the Swedish counties during the period 1911-93. Some innovative features in this essay are that we explicitly introduce distance in the econometric analysis and construct regional price indices. In the econometric analysis, we find both absolute and conditional convergence in all ten year periods from 1911 to 1993 except in the 20s and 80s. We find no convergence whatsoever in the 20s and only conditional convergence in the 80s. Analysing counties’ interdependence, we find that counties are tied together such that growth in one county will have a significant impact on its neighbours. Further, we find that the regional cost of housing affects counties’ demographic composition and, through this mechanism, growth in per capita income.Essay 5. The Impact of Seasonal Unit Roots and Vector ARMA Modelling on Forecasting Monthly Tourism Flows.With Jonas Nordström.In the fifth and final essay we analyse how neglecting seasonal unit roots and vector ARMA modelling affect forecasts. We study the flow of monthly tourism flows into Sweden. The main conclusion is that the Box and Jenkins approach, taking a 12th difference to make the series stationary, is at least as good as the much more demanding route of analysing seasonal unit roots. In a second step, we investigate potential gains in using joint modelling techniques when making forecasts. We utilise other tourism series in order to improve the forecasts. The results are mixed. The results depend on what evaluation criteria we choose. In summary, find the Box and Jenkins approach to stand up well against more advanced techniques.Essay no 1 has been published as:Gustavsson, P., Hansson, P. and Lundberg, L., "Technical Progress, Capital Accumulation and Changing International Competitiveness" in Fagerberg, J. et al (eds.), Technology and International Trade, pp 20-37. Edward Elgar, 1997. Essay no 2 has been published as:Gustavsson, P., Hansson, P. and Lundberg, L.., "Technology, resource endowments and international competitiveness." in European Economic Review, Vol. 43, No. 8, 1999, pp 1501-1530.