0000000001216203
AUTHOR
Philipp Harms
Demographic structure and the security of property rights: The role of development and democracy
Abstract It is often argued that countries with a high population share of children and young workers should attract large capital inflows from aging industrialized economies. However, many of these countries deter foreign investors by a high risk of creeping or outright expropriation. In this paper we explore whether the correlation between countries' demographic structure and the perceived security of property rights reflects a causal relationship. We show that, in low-income countries, the ratio of young to old workers has a positive effect on the perceived security of property rights if the political system is sufficiently democratic. By contrast, this relationship cannot be observed in…
Offshoring along the production chain
Recent contributions on offshoring often assume that firms can freely split their production process into separate steps which can be ranked according to the cost savings from producing abroad. We replace this assumption by the notion of a technologically determined sequence of production steps. In our model, cost savings from offshoring fluctuate along the production chain, and moving unfinished goods across borders causes transport costs. We show that, in such a setting, firms may refrain from offshoring even if relocating individual steps would be advantageous in terms of offshoring costs, or they may offshore (almost) the entire production chain to save transport costs. Small variations…
Good and useless FDI: The growth effects of greenfield investment and mergers and acquisitions
We explore the effect of foreign direct investment (FDI) on economic growth, distinguishing between mergers and acquisitions (M&As) and “greenfield” investment. A simple model underlines that, unlike greenfield investment, M&As partly represent a rent accruing to previous owners, and do not necessarily contribute to expanding the host country's capital stock. Greenfield FDI should therefore have a stronger impact on growth than M&A sales. This hypothesis is supported by our empirical results that are based on a panel of up to 127 industrialized, emerging, and developing countries over 1990 to 2010.
The Home Bias in Equities and Distribution Costs
We show that incorporating distribution costs into a general equilibrium model of international portfolio choice helps to explain the home bias in international equity investment. Our model is able to replicate observed investment positions for a wide range of parameter values, even if agents have an incentive to hedge labor income risk by purchasing foreign equity. This is because the existence of a retail sector affects both the correlation of domestic returns with the domestic price level and the correlation between financial and non-financial income.
Is money where the fun ends? Material interests and individuals’ preference for direct democracy
Abstract Are people’s attitudes towards referendums as a decision-making procedure predominantly driven by their material self-interest, or do individuals also value direct democracy as such, regardless of the material payoffs associated with anticipated policy outcomes? To answer this question, we use a survey data set that offers information on respondents’ support for referendums as a procedure to decide on tax policy, their income levels, socio-economic characteristics, and, most importantly, their expectation about the majority’s support for higher taxes. We find that the support of low-income individuals for referendums increases substantially if they expect a clear population majorit…
Offshoring and Sequential Production Chains: A General-Equilibrium Analysis
The Canadian journal of economics = Revue canadienne d'économique (2021). doi:10.1111/caje.12506
Bilateral De-Jure Exchange Rate Regimes and Foreign Direct Investment: A Gravity Analysis
Abstract This paper introduces a novel dataset on bilateral de-jure exchange rate regimes. The new dataset accounts for the fact that officially pegging to one currency is uninformative about the exchange rate regime prevailing vis-a-vis other currencies, and it allows characterizing bilateral exchange rate regimes based on countries’ ex-ante announcements rather than ex-post observations. We use this data to estimate the effect of expected exchange rate volatility on foreign direct investment (FDI). Starting from a simple model that suggests that announced exchange rate stability enhances bilateral FDI flows, we provide empirical evidence that lends support to this claim: countries that ar…
Trade shocks and the nationalist backlash in political attitudes: panel data evidence from Great Britain
This article leverages individual-level panel data on nationalist attitudes to contribute to the debate on the (economic) roots of popular opposition to globalization. We propose a ���nationalist backlash��� hypothesis: Individuals living in regions suffering from stronger import competition form more nationalist attitudes as part of a broad counter-reaction to globalization. Analyzing data from the British Household Panel Study (BHPS), we document not only a decrease in support for EU membership but also a general shift towards more nationalist attitudes among respondents from regions exposed to higher imports from low-wage countries���in particular, China. We thus uncover a direct individ…
Preferences for Referenda: Intrinsic or Instrumental? Evidence from a Survey Experiment
The call for more direct democracy, and referenda in particular, is often heard and met with support from large numbers of citizens in many countries. This article explores the motives for supporting referenda: Do citizens support them for intrinsic reasons, because referenda allow them to exercise their democratic rights more directly? Or are preferences for referenda predominantly based on the expectation that they will produce desired policy outcomes and thus instrumentally motivated? Our survey experiment explores such instrumental preferences by assessing how substantial policy preferences affect individuals’ choice of referenda over alternative decision-making procedures. We show tha…
Depression of the deprived or eroding enthusiasm of the elites: What has shifted the support for international trade?
Abstract We use the 2003 and 2013 waves of the International Survey Program (ISSP) in order to explore the change in people’s attitudes that may be behind the recent backlash against globalization. We show that the average support for international trade has decreased in many – albeit not all – countries, and we demonstrate that these changes are related to the depth and length of the global financial crisis of 2008/09 as well as the evolution of income inequality. Moreover, our results document a declining support of those individuals who are likely to benefit from international trade: the young, high-skilled and well-off. We show that this “eroding enthusiasm of the elites” is empirically…
Producer Services and the Current Account
Abstract In this paper, we present evidence that countries which experienced a larger expansion of services as a share of GDP in recent years exhibited lower current account balances. We argue that this relationship is compatible with the notion that producer services raise aggregate productivity by enhancing increasing returns to specialization, and we develop a model in which the deregulation of the services industry results in higher GDP growth, a reallocation of resources into the services industry, and a temporary current account deficit. We demonstrate that our theoretical argument is supported by the data, even if we control for a multitude of other factors that potentially affect th…
sj-pdf-1-psx-10.1177_0032321719879619 – Supplemental material for Preferences for Referenda: Intrinsic or Instrumental? Evidence from a Survey Experiment
Supplemental material, sj-pdf-1-psx-10.1177_0032321719879619 for Preferences for Referenda: Intrinsic or Instrumental? Evidence from a Survey Experiment by Claudia Landwehr and Philipp Harms in Political Studies
Like it or not? How the economic and institutional environment shapes individual attitudes towards multinational enterprises
The integration of goods and factor markets has affected the lives of individuals all over the world. While some agents have reaped enormous benefits from this process, others have lost in terms of income and welfare. It is usually argued that individuals are aware of the distributional effects of globalization, and that this knowledge shapes their preferences over various policy issues such as protection, financial market regulation etc. In this chapter, we use a large surveybased data set to explore whether this conjecture is correct when it comes to individuals’ attitudes towards multinational enterprises (MNEs).
The special issue on FDI and multinational corporations: An introduction
Abstract This paper offers an introduction to the special issue on FDI and multinational corporations: http://www.economics-ejournal.org/special-areas/special-issues/fdi-and-multinational-corporations. It summarizes the contents of the five papers included, and relates them to the recent literature on the subject.
sj-pdf-1-psx-10.1177_0032321719879619 – Supplemental material for Preferences for Referenda: Intrinsic or Instrumental? Evidence from a Survey Experiment
Supplemental material, sj-pdf-1-psx-10.1177_0032321719879619 for Preferences for Referenda: Intrinsic or Instrumental? Evidence from a Survey Experiment by Claudia Landwehr and Philipp Harms in Political Studies
Cultural Distance and International Trade in Services: A Disaggregate View
Abstract In this paper, we estimate the effect of “cultural distance” on bilateral trade in services. The measure of cultural distance we use is based on scores that reflect country averages of individuals’ attitudes towards inequality, self-orientation, competition, uncertainty, traditions, and indulgence. Controlling for standard ingredients of gravity equations, we show that an aggregate measure of cultural distance has a significantly negative effect on total bilateral services trade. Once we take a more disaggregate view, we find that the strength of this effect differs across various types of services and various aspects of cultural distance.