The analytic foundation of international economic modeling at the OECD

This article describes the OECD Secretariat's international linkage model, INTERLINK, built to assist various tasks, including the production of baseline international projections, the establishment and maintenance of international consistency of these projections, and the production of alternative projections and policy scenarios. It is thus concerned with the theory of the method of international forecasting and policy analysis, rather than the theory of forecasting itself. The article is divided into sections, which discuss the reasons for international economic modeling at OECD, the main tasks performed by the model, the technical requirements that it needs to satisfy, its present structure, and the experience with it.     

Sex selection and fertility in a dynamic model of conception and abortion

This paper investigates the effect of prenatal sex selection on fertility through a stochastic dynamic model with uncertainty in conception as well as in gender, where a woman makes decisions on conception and abortion with or without gender detection tests (i.e. sex-selective or sex-unselective abortion). The paper shows that, when the cost of gender detection test falls, the sex ratio at birth rises due to more selective abortions, but fertility can rise or fall with rising sex ratio. Fertility may rise (fall) if there are more (less) women giving up unselective abortions for selective abortions than women giving up childbirths without test for selective abortions. Similarly the paper shows that the sex ratio can rise or fall, when fertility decreases as the cost of children increases. I test these propositions as well as their implications against micro survey data on the pregnancy history of Korean women.Responsible editor: Junsen Zhang.     

HAS DEMOCRATIZATION REDUCED INFANT MORTALITY IN SUB‐SAHARAN AFRICA? EVIDENCE FROM MICRO DATA

Does democracy help babies survive in sub‐Saharan Africa? By using retrospective fertility surveys conducted in 28 African countries, I compare the survival of infants born to the same mother before and after democratization to disentangle the effect of democracy from that of changes in population characteristics, which is infeasible with country‐level statistics on infant mortality. I find that infant mortality falls by 1.2 percentage points, 12% of the sample mean, after democratization in the post‐Cold War period. Relevant aspects of democracy appear to be the combination of multiparty elections and leadership change.     

Foreign Direct Investment,Trade, and Skilled Labour Demand in Eastern Europe

In this paper, we study the effects of inward foreign direct investment (FDI) and trade on relative skilled labour demand in Poland, Hungary, and the Czech Republic. Our estimates show significant heterogeneity in the FDI effect across the three economies: the effect is always significantly positive for Hungary, weakly negative for Poland, and negligible for the Czech Republic. As to trade, we find much more homogeneity in coefficient estimates, which are generally negative for all countries, although significant only in the case of Hungary.     

测井联合地震反演在辉绿岩蚀变带识别中应用

黄骅拗陷地处渤海湾盆地,构造活动强度大且频繁,致使该区火成岩非常发育。其中辉绿岩在该地区多有分布,受辉绿岩烘烤形成的蚀变带储集层为寻找新的油气藏类型提供了方向。以大港油田R 区钻遇辉绿岩蚀变带己知井的测井资料为出发点,总结了其测井响应及波阻抗特征;结合地震反演所得出的波阻抗反演数据体和多属性反演自然伽马数据体,对辉绿岩蚀变带的分布和厚度进行了预测。所得出的辉绿岩厚度与己知井统计吻合良好,为该区域辉绿岩蚀变带储层的下一步勘探提供了重要的参考依据。     

DEEP FINANCIAL INTEGRATION AND VOLATILITY

We investigate the relationship between foreign direct ownership of firms and firm‐ and region‐level output volatility using a novel panel data set for European countries. We document a positive, highly robust, relationship between firm‐level foreign ownership and volatility of value added. This relationship holds cross‐sectionally and in panels with firm fixed effects where the relationship captures within‐firm variation over time. Considering domestic firms with assets in foreign countries, we document that it is international diversification, rather than the nationality of the owner, that explains this positive correlation. Our results can also be found at the aggregate level, where we show that region‐level volatility is correlated positively with foreign investment in the region. We show that this positive relation between aggregate volatility and foreign investment can be explained by the granularity of the firm size distribution and the fact that foreign ownership is concentrated among the largest firms.     

VERTICAL RELATIONS UNDER CREDIT CONSTRAINTS

We model the impact that credit constraints and market risk have on the vertical relationships between firms in the supply chain. Firms which might face credit constraints in future investments become endogenously risk averse when accumulating pledgable assets. In the short run, the optimal supply contract involves risk sharing, so inducing double marginalization. Credit constraints thus result in higher retail prices, and this is true whether the firm is debt or equity funded. Further, we offer a new theory of supplier finance arms as we show an intrinsic complementarity between supply and lending which reduces financing inefficiencies created by informational asymmetries. The model offers: a theory of countervailing power based on credit constraints; a transmission mechanism linking the cost of borrowing with retail prices; and a motive for outsourcing supply (or distribution) in the face of market risk.     

INSTITUTION‐INDUCED PRODUCTIVITY DIFFERENCES AND PATTERNS OF INTERNATIONAL CAPITAL FLOWS

This paper studies theoretically how the cross‐country differences in the institutional quality (IQ) of domestic credit markets shape the patterns of international capital flows when such IQ differences also cause productivity differences across countries. IQ affects productivity by changing productivity–agency‐cost trade‐offs across heterogeneous investment projects. Such institution‐induced productivity differences are shown to have effects on the investment and capital flows that are opposite of exogenous productivity differences. This implies that the overall effect of IQ could generate U‐shaped responses of the investment and capital flows. Among other things, this means that capital could flow from middle‐income countries to both low‐income and high‐income countries, and that, starting from a very low IQ, a country could experience both a growth and a current account surplus after a successful institutional reform. More generally, the results here provide some cautions when interpreting the empirical evidence on the role of productivity differences and institutional differences on capital flows. It also calls into question the validity of treating the degree of financial frictions as a proxy for the quality of financial institutions, as commonly done in the literature.     

十六大报告对马克思主义发展观的新拓展

党的十六大报告全面阐述了关于“发展”的理论思想 ,深刻地揭示了马克思主义发展观的科学内涵 :“三个代表”重要思想是马克思主义发展观“质”的规定 ;“第一要务”是马克思主义发展观的“量”的规定 ;“与时俱进”是马克思主义发展观“度”的把握。同时 ,在人的全面发展是马克思主义发展观的核心思想 ,马克思主义发展观在方针政策和方法论意义上对我国“全面建设小康社会”的指导等理论点上 ,都拓展了马克思主义的发展观。     

A MODEL OF ETHNIC CONFLICT

We present a model of conflict in which discriminatory government policy or social intolerance is responsive to various forms of ethnic activism, including violence. It is this perceived responsiveness—captured by the probability that the government gives in and accepts a proposed change in ethnic policy—that induces individuals to mobilize, often violently, to support their cause. Yet, mobilization is costly and militants have to be compensated accordingly. The model allows for both financial and human contributions to conflict and allows for a variety of individual attitudes (“radicalism”) towards the cause. The main results concern the effects of within‐group heterogeneity in radicalism and income, as well as the correlation between radicalism and income, in precipitating conflict.