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Item Open Access China's Engagement in Multilateral Institutions: Understanding the Trade Creation Impact of the ASEAN-China Free Trade Area(2010-05-06T13:01:56Z) Yuan, LangtianOver the past two decades, the rise of China has caused profound changes in the traditional underpinnings of international relations in Asia. China’s speedy economic development and military modernization led to heightened competition and conflicts with fellow East Asian countries in the late 1980s and early 1990s that caused many scholars and policy experts to become concerned with the nature of its rise to power. These concerns evolved into the great “engagement” versus “containment” debate in the 1990s regarding whether to engage or isolate the fledgling power during its ascension. Whether the international community is able to find a proper incentive that leads to the incorporation of China in the regional and international multilateral framework seemed to be the central question of the debate. Since the early 2000s, however, the Chinese government has implemented a series of liberal policy reforms regarding international relations which significantly improved its diplomatic relations with its neighbors and reassured the rest of the world of the benign nature of its rise to power. In particular, China’s increasing engagement in regional multilateral institutions surprised many western policy makers who have traditionally considered China’s hostile and suspicious attitude toward such institutions one of the major destabilizing factors in its rise to power. One prominent example of China’s increasing influence in regional multilateral institutions is its role behind the creation and implementation of the ASEAN-China Free Trade Area (ACFTA). Conceived in 2002, ACFTA seeks to promote regional economic cooperation through the gradual removal of trade barriers and unification of rules and economic practices in East Asia. With the 2010 deadline for the FTA’s implementation process fast approaching, the paper seeks determine the economic value of ACFTA through the application of the gravity model of trade. In particular, it hopes to answer the question whether ACFTA functions as an effective instrument promoting regional trade or merely serves to reinforce preexisting economic norms. Through the finding, the paper also hopes to offer some insights onto the question of whether China’s newfound enthusiasm in partaking in regional economic cooperation is paralleled by actual effective economic reforms. The empirical results from the gravity model are inconclusive on the trade creation aspect of ACFTA. However, analysis of other empirical data, including a closer inspection of specific ACFTA policies, do suggest that the FTA accomplished more than simply reinforcing preexisting economic norms. Moreover, the study of China’s leadership role behind the creation of ACFTA serve to reflect the new sophistication and confidence behind Beijing’s foreign policy and its altered attitude toward multilateral institutions. At the same time, it is important to note that China’s avid engagement in regional multilateral institutions and willingness to compromise in certain negotiations do not imply a full acceptance of regional cooperation and integration. There remains a great amount of uncertainty around the question of whether the recent patterns of economic cooperation are indicative of a permanent shift in the basic preferences of the Chinese government that can have long-term impact.Item Open Access Endogenous Growth, Trade, and the Environment(2011) Prasertsom, NujinThis dissertation presents two essays on endogenous growth and renewable resources.
The first essay explores the role of renewable resources in a tractable
model of endogenous growth driven by horizontal and vertical innovation in the closed economy.
The model is tractable in that it yields a complete, analytical characterization
of the path of utility and the associated welfare level. This property
is exploited to compare two cases of renewable resource management:
open access and full property rights. The first case involves a common
property problem in which agents ignore the long-term resource viability;
the second fully internalizes the dynamics of the resource stock.
Analysis shows that if the natural regeneration rate of the renewable
resource is too low, the tragedy of the commons occurs. If, instead,
the natural regeneration rate is sufficiently high, the steady-state
growth rate of the economy is identical across the two management
regimes. The reason is because there is no scale effect; that is,
the steady-state growth rate of the economy does not depend on the
labor or the resource endowment. However, the development path on
which the economy transits from the developing stage (no R\&D activity)
to the developed stage (positive R\&D activity) depends on the resource
management regime. In particular, a developing economy under full
property rights will cross its development threshold prior to one
under open access. This threshold depends on the size of the manufacturing
firms. When it becomes sufficiently large as a result of the decline
in the number of firms over time, there will be an incentive for the
remaining firms to conduct R\&D. Given the same number of manufacturing
firms, the firm size is larger under full property rights than under
open access due to higher nominal expenditure per capita. Therefore,
the development threshold will be reached sooner under full property
rights. In other words, the economy will start engaging in R\&D activities
sooner and more quickly accumulate knowledge, which is the source
of long-run growth. Moreover, switching from full property rights
to open access is welfare reducing due to two effects. The first is
through the price of the harvest good. Although the economy initially
enjoys a lower price of harvest good, the price gradually increases
as the resource becomes scarcer. Secondly, the competitive household
instantaneously loses the resource income and thus spends less on
manufacturing goods. This decreases the incentive for manufacturing
firms to conduct R\&D and results in a temporary deceleration of the
growth rate of TFP relative to the baseline case of full property
rights. The economy therefore experiences a cumulative loss of TFP
relative to the baseline, which is the novel feature of our model
of endogenous innovation. This mechanism has interesting and wide-ranging
implications for the role of resources in development and growth
The second essay extends the model of endogenous growth and renewable
resources into the open economy framework. The paper examines the effect of trade liberalization on resource-rich
countries, based on a two-country model in which the difference in
endowment of a renewable resource leads to asymmetric trade. In this
model, the resource-rich economy trades its harvest good and final
good for the final good from the resource-poor economy. Furthermore,
the renewable resource is considered to be under open access, where
there is no clear ownership over the resource, leading to overexploitation.
Long-term productivity, in this case, stems from endogenously-determined
knowledge accumulation. Under these circumstances, analysis shows
that the resource-rich country will lose from trade due to two effects.
The first effect is the instantaneous loss of income. Higher demand
for the harvest good, from the combined domestic and international
demand, diverts labor away from the production of technological goods
to the harvest sector, where rent is zero. The second effect is a
scarcity effect, which becomes more severe when trade results in a
greater demand for the harvest good. Overexploitation of the renewable
resource today leads to falling resource stock in the future, which
is then reflected in the higher price of harvest good, other things
being constant. Since the harvest good is an essential input to produce
the final good, given the same amount of the other inputs, the amount
of final good produced will also fall in the long run.
Item Open Access Essays in Firm Responses to Demand and Competition Shocks(2016) Medina Quispe, Pamela MilagrosThe aim of this dissertation is to examine, model and estimate firm responses to
demand shocks by focusing on specific industries where demand shocks are well
identified. Combining reduced-form evidence and structural analysis, this dissertation
extends the economic literature by focusing on within-firm responses of firms
to two important demand shocks that are identifiable in empirical settings. First,
I focus on how firms respond to a decrease in effective demand due to competition
shocks coming from globalization. By considering China's accession to the World
Trade Organization in 2001 and its impact on the apparel industry, the aim of these
chapters is to answer how firms react to the increase in Chinese import competition,
what is the mechanism behind these responses, and how important they are in explaining
the survival of the Peruvian apparel industry. Second, I study how suppliers'
survival probability relates to the sudden disruption of their main customer-supplier
relationships with downstream manufacturers, conditional on suppliers' own idiosyncratic
characteristics such as physical productivity.