The Determinants of Cross-Border Investment: A Value-Chain Analysis
This paper contributes to the literature on the determinants of FDI. We use a new data set covering greenfield and expansion projects to examine which factors infiuence the decision to invest abroad. Our empirical framework is an augmented gravity model that incorporates elements of factor proportions theory. At the aggregate level, we find that distance discourages FDI, size and sharing a language encourages it, and that FDI targets relatively capital scarce countries. When we classify investment projects according to their stage in the chain of production, we observe a lot of variation across stages. Nevertheless, economic size, distance, and capital abundance are still determining factors for most value-chain stages and preserve the sign of their effects. Moreover, even though the results confirm FDI targetting capital scarce countries, we find ev- idence of a minimum requirement on the host country's capital endowment in all the stages of production except extraction. Finally, ease of doing business is also important, especially so for the location of regional headquarters.
The Employment of Older Workers
This paper investigates the employment of individuals older than 55 years old using a dataset for Catalonia. We pin down the groups of individuals associated with lower employment rates: females, disabled and people with low qualifications. Part-time work rates for this age group are low, suggesting that employment could increase through more flexi-time at work. We also evaluate a reform in 2002 that changed pension incentives to early retirement and launched fiscal incentives for employers to retain individuals aged 60 or older. Results suggest that the reform increased the probabilities to remain employed for the affected group. We estimate that had not been for the re- form, the employment for the age group 60–64 in 2004 would have been at least 1.6 percentage points lower.
Outsourcing and your Collar's Color
In order to assess the effects of increased outsourcing on the relative de- mand for skilled and unskilled labor, it is crucial to understand whether out- sourcing is a complement or a substitute for each kind of labor. Using the traditionally employed log-log framework, Amiti and Wei (2006) find that out- sourcing of goods and labor are complements. Using the same methodology but differentiating between skilled and unskilled labor, one would conclude that outsourcing acts as a complement to unskilled labor but as a substitute for skilled labor. This paper proposes an improved methodology which uses estimated prices for outsourcing instead of other proxies (such as its intensity) and a complete factor cost-share system of equations to find the completely opposite result, that is, outsourcing is a substitute for unskilled labor and a complement for skilled labor. This result is consistent with the findings of the literature on outsourcing and the wage gap.
Government Spending and Consumption-Hours Preferences
In this paper we present two extensions that have been largely omitted in the recent literature on Bayesian estimation of DSGE models. First, we pay special attention to di?erent forms of complementarity between consump- tion and hours a?ecting the households preferences. Second, we allow for the presence of a fraction of non-Ricardian households —i.e. that have limited access to financial markets—. We show that exogenous changes in government transfers are crucial to distinguish between the two sources of comovements of consumption and hours in response to government spending shocks. The main conclusion from the estimated models is that private consumption increases af- ter a government spending shock, when either nonseparability, non-Ricardian behavior, or both, are introduced in the model. In addition, allowing for consumption-hours complementarity leads to a small, and stable over time, estimated fraction of non-Ricardian households.