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This paper sets out the various stages in the construction and estimation of a supply block for medium-term projection models. It describes the theoretical basis for the specification chosen and the estimation results.

The basic block is a set of production factor demand functions. It is refined by modelling the scrapping behaviour of firms, introducing the effects stemming from movements in hours worked, and examining the role of profits. Other possible changes or improvements are outlined. The model is used to simulate the effects of movements in the relative prices of labour, capital and energy in recent years ...

This paper examines the main determinants of compositional changes in private consumption, output and employment in the post-OPEC 1 period compared with earlier developments. An attempt is made to separate cyclical forces from more permanent ones. This, it is hoped, may shed some light on the likely behaviour of employment in a setting of revived economic growth.

The first part of the paper presents a brief overview of past trends for major categories of private consumption (food, other goods, private services, and energy), private sector output (mining, agriculture, manufacturing, construction and private services), sectoral employment, productivity and foreign trade shares. The second part shows empirical results from sectoral output-, private consumption- and sectoral productivity functions. Assisted by these findings a third and final part evaluates the likely evolution of sectoral output and employment in a period of faster economic growth and, as well, its implications for ...

This paper describes work on the determination of primary commodity prices in world spot markets and in trade. Reduced-form equations for four product group price indices are estimated as functions of OECD activity, world prices, interest rates, exchange rates, oil prices, and other variables. The equations are tested for stability on their own and within the OECD INTERLINK system. The effect of exogenous shocks upon primary commodity prices is studied as well as the effect of commodity price changes upon OECD inflation and activity. The commodity price equations enter in the INTERLINK system through export unit value equations, the estimation of which is described in the paper ...

This paper investigates the application of the principle of comparative advantage to policy analysis and policy formulation. It is concerned with both the theory and the measurement of comparative advantage. Despite its central role in economics, the theory is found to be at an impasse, with its usefulness confined mainly to the illustration of economic principles which in practice are not borne out by the evidence.

The considerable methodological problems associated with the measurement of comparative advantage are highlighted in the paper. Attempts to derive indicators of comparative advantage, such as those associated with "revealed comparative advantage", "direct resource cost", "production cost" and "trade liberalisation" studies are reviewed. These methods are enlightening, but are unable to provide general perspectives which allow an analysis of dynamic comparative advantage. Comparative advantage, despite its centrality to economics, remains remote from policy ...

In 1957, when independence came, Ghana was one of the most advanced economies in sub-Saharan Africa. It seemed well placed to make rapid and substantial progress. In the event, economic performance was dismal, and by 1982 the economy was all but in ruins. External conditions and the weather can carry some of the blame for this. However, the fault lay mostly in internal policy, which, contrary to sound advice given by Arthur Lewis in 1953, discriminated against agriculture and increasingly inhibited market forces. Since 1983 economic reform and recovery have been under way. Here a realistic exchange rate has been central, and market forces have been resurgent. Apart from encouraging the cocoa farmer, policies have not noticeably included agriculture. Stateencouraged agricultural research and development and rural infrastructure could, however, be important, alongside soundly based industrial development ...

Two key developments affected Thai agriculture in the last decade: the precipitous decline (until 1988) in world prices for the major agricultural items exported by Thailand, and the decline in the amount of cultivable land available for each agricultural worker.

During this same period the Thai economy has experienced a slowdown in the rate of growth of real GDP and an increase in the extent of poverty, the first time this has happened since statistics on poverty became available in 1963. As these economy-wide developments and the adverse changes specific to agriculture coincided, it came to be widely believed that the one is the cause of the other. This paper sets out to examine the validity of this belief, using an applied general equilibrium model (the THAM-2).

The simulations indicate that the effect of the agriculture-associated changes on the Thai economy can be quite substantial. Liberalization of rice alone will increase real GDP by 2 to 3 per cent. Had the world ...

Subsidized capital flows have made a major contribution to the recovery of the Turkish economy from the acute balance of payments crisis of the late 1970s. The inflow of foreign capital on a substantial scale has facilitated rapid growth in imports of essential raw materials and investment goods which, in turn, has been instrumental in sustaining a comparatively high rate of economic growth.

A balanced account, however, needs to take into consideration the negative side effects associated with subsidized credits. Subsidized capital inflows have resulted in overborrowing and consequently in overexpansion of the public sector, particularly during the post-1984 phase. A structural disequilibrium has developed, in the sense that the majority of medium- and long-term capital inflows has been directed to the public sector, and within the public sector, primarily to infrastructure projects. The private sector has been able to borrow mainly on a short-term basis, to satisfy working ...

This paper summarises and analyses results of the OECD's Model Comparisons Project. The aim of the project is to better understand differences across six global models in the cost of reducing carbon dioxide emissions. In order to facilitate comparisons, key assumptions and reduction targets have been standardised. The paper provides evidence on; i) projected carbon dioxide emissions through the next century, and ii) the carbon taxes and output costs entailed in reducing these emissions ...

Managers of US multinational corporations generally respond with a "big yawn" to warnings that the world trading system might evolve into a set of protectionist regional blocs.

Their lack of fear is justified, since both their past strategies and their more recent, supposedly global strategies have resulted principally in regional systems of production facilities. The gains from manufacturing and trading among more widely dispersed facilities seem lower than the costs of managing such a complex system. As a result, US multinationals' trade in manufactures stays mostly within the region of production, and would be little affected by the emergence of powerful trading blocs.

The strategies of most US multinationals would be threatened only if regional blocs restricted foreign investment. This seems unlikely, given the history of regional trade groups, and restrictions on new investment would probably harm Japanese competitors more than US multinationals, which have already established ...

This paper forms part of an OECD project which addresses the issue of the costs of reducing CO2 emissions by comparing the results from six global models of a set of standardised reduction scenarios. The IEA model is an econometric energy model with a projection horizon to 2005. One of the major conclusions to emerge from the results presented in this paper is that even seemingly moderate CO2 emissions reduction targets would require very high carbon taxes. The reasons for this are, firstly, that the carbon taxes need to be very high to have any material impact on final prices, especially those of transportation fuels and electricity, and, secondly, that most of the decline in emissions would have to come from a reduction in energy demand because the scope for substitution is very limited over a period of 10-15 years. The model also suggests that the required carbon taxes for any target are likely to be much lower in North America than in the Other OECD region, because North ...

The last decade has exemplified a retrenchment of bank lending in developing countries. International banks strive to boost capital ratios, thereby raising equity, reducing their less profitable assets and rebalancing portfolios towards less risky claims. In that context of underfinanced adjustment and growth programmes in the LDCs, international financial institutions (IFIs) have attempted to mobilize additional financing from commercial banks through co-financing and guarantee operations. The World Bank has been at the forefront of such a role since 1983. The B-loan programme, however, has fallen short of reviving private lending in the LDCs. In 1989, the World Bank introduced an enhanced co-financing operation programme (ECO) geared toward creditworthy borrowers. Risk-sharing arrangements with private banks involve the guarantee of late maturities as well as direct participation in bank loans and partial guarantee of bond issues. Despite more flexible guidelines for the World ...

Starting from the theoretical argument underlying the “hump shape” hypothesis, the paper investigates the various dimensions of centralisation in the wage formation process. The diversity of effects discussed in the paper makes it harder to arrive at unambiguous policy conclusions. Careful analysis of the various features and economy-wide direct as well as indirect effect of the degree of centralisation in the wage formation process suggests that there exists various trade-offs, the most important of which appears to be that between real wage restraint and relative wage flexibility: centralisation favours the former but reduces the latter. This suggests that its effect on macroeconomic performance depends on the type of shocks affecting the economy ...

China is emerging as a leading Pacific economy in the 1990s. This paper examines the implications of China's entry into the world market for the OECD countries as well as for the regional economies of Asia and the Pacific. It argues that the shares of Asian countries in the OECD countries' market cannot increase without bound, as China and its neighbouring developing economies have basically similar export profiles, competing with each other for market shares for similar products.

China's coastal strategy has led to the emergence of a "greater China", encompassing China, Hong Kong and Taiwan. Growing trade and investment flows between China and Taiwan via Hong Kong since the mid-1980s can be understood as components of "catching-up" processes, described by some trade economists as the "flying-geese" pattern of trade development.

In short, China's entry into the world market is a "positive sum" game, as it provides new market opportunities for both OECD countries and Asian NIEs. In ...

This document provides a description of Colombian agriculture at a glance, to then enter into a more analytical view of how macroeconomic policies have interacted with sectoral policies to contribute in shaping the activity into what it is today. The institutional framework of the biotechnology activity in the country is later exposed to lay the elements for an understanding of its potentials, weaknesses, opportunities and threats. Then, the document goes into a detailed description, by prioritized crop cases, of how biotechnology interacts with other processes, sometimes as an integral part of a research program, complementing other disciplines, and other times as just being an isolated component that pursues knowledge for its own sake. The section on diffusion of biotechnology products forms a synthesis of what was previously reviewed, while the last section, on future developments, tackles an essential objective of the study which is to make proposals regarding institutional and ...

In the Baltic States, the process of independence started after the elections in spring 1990 and was completed by August 1991. Fifty-one years after being forced to join the Soviet Union, Estonia, Latvia and Lithuania each regained their independence and became once again part of the western community of nations. The USSR disappeared in late 1991 and from it sprung 12 new independent states.

The paper examines interrelations between corporate governance, competition and performance. Traditional theories emphasise the importance of managerial incentives and disciplining in corporate governance, and how institutional arrangements affect financing. The paper argues that ownership and control, rather than incentives, disciplining and corporate finance, are the distinguishing features of different financial systems. The insider systems of Continental Europe and Japan may be superior at implementing policies which involve relations with stakeholders. Outsider, Anglo-American, systems may be more responsive to change. Concentration of ownership may be required to establish relations between stakeholders, and this may impede product market competition ...

This paper examines the usefulness of consumer and business surveys in assessing the cyclical position of the economy and for forecasting output movements. To that effect, after a brief review of the nature of sentiment measures, the empirical relationship between confidence indicators and output components is explored. Graphical examination, correlation analysis and Granger causality tests are used to asses that relationship. The paper finds that sentiment measures obtained from business surveys provide valuable information for the assessment of the economic situation and forecasting. However, the relationship between sentiment indicators and output varies considerably across countries and sentiment measures. It is also found that consumer confidence indicators are much less useful than business confidence indicators for economic analysis due to their much looser relationship with output movements ...

The political agendas in the central and eastern European countries (CEECs) imply major democratic and economic reform programmes. Macro-economic stabilisation, privatisation, European integration, reform of the welfare systems, reform of tax systems, decentralisation to self-government are typical areas of reform. The number of new laws regulating reforms and changing old systems is considerable. In this context the need for an effective civil service becomes evident. A permanent and professional administration is the instrument, not only to develop policies and draft laws, but also to implement them and to manage the systems defined in the laws. Development of the administration as an instrument to carry through political and economic reforms and to manage the systems requires long-term investment and must be protected from short-term abuse and mismanagement. Skills and experience in each of the reform areas and providing professional continuity are thus essential objectives for the establishment of civil services in the CEECs.

Over the last decade, China has been the leading investor among developing countries and Hong Kong is the foremost destination of Chinese investment. However, China’s outward investment has been grossly understated in official statistics due to avoidance of China’s foreign exchange controls. This paper tries to appraise those investment flows both quantitatively and qualitatively.

It examines the many estimates of Chinese investment in Hong Kong, tracing their sources and bases of estimation. Most of these estimates are found to be crude guesses with very little empirical support. However, from the data on asset value and market capitalisation of listed Chinese companies in Hong Kong, and also from interviews with knowledgeable sources, it is possible to gauge the rough size of Chinese investment in Hong Kong. The paper also examines China’s economic presence in major sectors of the Hong Kong economy. It discusses the composition of Chinese investment by industry and by ownership ...

The use of the NAIRU-concept is not very widespread in Belgium. This may be partly due to an observed unemployment rate that is probably significantly higher than the NAIRU for most of the past two decades. Government policy to halve the administrative notion of unemployment by the beginning of the next century has therefore little regard for the NAIRU level. A second reason for the low popularity of the NAIRU resides in the fact that the measurement issues are seen as enormous. Confidence intervals for NAIRU estimates are notably high. From partial information on the last economic cycle in 1987-94, the deduction is nevertheless that the NAIRU would be in the 7-8 per cent range.

Instead of finding exact estimates for the NAIRU, the paper looks into the wage formation process in Belgium in the long and short run. Although total factor productivity is the main long-term influence of real wages, in the short term labour market pressure is clearly the main determining factor. It is ...