ABSTRACT Business cycles and macroeconomic fluctuations are influenced by various factors. This paper analyzes the impact of the U.S.‐China Tension Index (UCT) on macroeconomic fluctuations in 32 countries using time series models from January 1999 to February 2024. The VAR model reveals that UCT shocks generate financial volatility and fluctuations in financial markets, which in turn transmit the shock to industrial production, leading to a decline in output. The GVAR model further supports this analysis by showing spillover effects from UCT shocks across economies. The results reveal capital flight, rising oil prices, and financial fluctuations. The estimates suggest that the impact of UCT is more pronounced on industrial production than on stock markets. Robustness checks using subsamples and alternative shock identification confirm these results. Tensions between the two major economies may trigger turbulence in financial markets, with effects propagating to production.
ABSTRACT Education is a fundamental driver of human capital accumulation, playing a critical role in shaping labor market outcomes, earnings, and economic inequality. While previous work decomposed wealth inequality into fair and unfair components, the novelty of this study lies in extending this framework to educational inequality, which is inherently ordinal in NFHS data. Evidence indicates that people care less about inequality in general and more about whether it stems from fair or unfair factors. We propose a parallel methodology to measure and scale fair and unfair inequalities in educational outcomes. We examine the evolution of these inequalities among unmarried women across India and its states. Using NFHS‐4 (2015–16) and NFHS‐5 (2019–21), we construct a pseudo‐panel dataset to assess unfair inequality through equality of opportunity. Our empirical analysis has three parts. First, we quantify fair and unfair educational inequality across 26 Indian states between the two survey rounds. Second, we examine the robustness of our findings using alternative ordinal measures of educational attainment, with results consistently indicating an increase in unfair educational inequality at both national and state levels. Third, we employ Shapley decomposition to identify the relative contribution of individual circumstance factors. Our findings highlight the need for policies that address circumstantial disadvantages faced by unmarried women to promote more equitable educational opportunities.
ABSTRACT Platform participants often join multiple competing platforms, a phenomenon known as multihoming. At the same time, many platforms invest in value‐added services (VAS) to enhance their value and strengthen their competitiveness. We propose a two‐sided (users and creators) platform competition model in which the user side has two segments (one values VAS and the other network effects), and we consider four different partial multihoming scenarios, endogenous platform VAS, and endogenous third‐party provisioned VAS (e.g., a third‐party payment, or delivery system for a marketplace). Our model setup complements the existing platform economics literature on multihoming and yields four main results. First, any increase in the proportion of users who value VAS can impact platform prices in either direction, depending on which side multihomes. Second, VAS asymmetries can strengthen feedback loops and strategic interdependence between the sides, as they act as bait to attract users who, in turn, attract other participants. Third, platforms have less incentive to invest in VAS on the multihoming side, as they prefer to weaken the aforementioned feedback loops. Fourth, third‐party‐provisioned VAS generates a new type of feedback loop that makes demands more elastic; that is a platform business‐model vulnerability that must be managed carefully. Overall, our study captures how network effects, VAS, user‐side heterogeneity, and third‐party services interact to shape platform pricing and investment strategies, as well as competition outcomes.
ABSTRACT As supply chains have expanded and grown more complex, manufacturers increasingly face two simultaneous demands: strategic interaction with downstream retailers and growing social responsibility for the supply chain as a whole. Based on an observable‐delay (endogenous‐timing) game, we study how these demands interact in dual‐channel supply chains – where manufacturers sell through both traditional retail and direct (often online) channels – focusing on a socially concerned manufacturer that internalizes consumer surplus alongside its own profit. We demonstrate that the mode of competition between channels – price versus quantity – critically shapes how social concern affects strategic timing within the supply chain. Under quantity competition, the manufacturer's emphasis on consumer surplus materially influences equilibrium timing; under price competition, it does not. In particular, when social concern is low, the manufacturer does not necessarily move first by setting the direct‐channel quantity before the retailer. Moreover, under quantity competition, heightened social concern may paradoxically shrink the equilibrium set, eliminating the timing sequence that yields the highest consumer surplus.
This paper revisits the "too much finance" hypothesis by reassessing the relationship between financial depth and economic growth using an expanded dataset (1960-2019) and a systematic estimation strategy that avoids reliance on any single, potentially arbitrary sample window. We estimate both cross-sectional and panel models for all feasible starting periods and focus on transparent specifications. We find a robust inverted-U relationship between private credit and growth: financial depth is growth-enhancing at low and moderate levels but exhibits diminishing returns and eventually becomes negative at high levels. The turning point generally lies between 70 and 120 percent of GDP, almost always below the 90th percentile of the global distribution of credit to the private sector.
ABSTRACT This paper provides a critical review of the Too Much Finance literature, both in its academic contribution and as response to the earlier finance and growth literature. We describe the academic origins and development of the finance and growth literature and discuss pitfalls with the commonly used indicators of financial development. We explore how the finance and growth research findings can be translated into policy recommendations including with respect to the trade‐off between growth and stability. Finally, we argue that the question of “can there be too much finance” contains actually three questions: can there be too much credit, can there be too large a financial sector, and can there be too much financial development.
ABSTRACT The African Growth and Opportunity Act programme (AGOA) is a non‐reciprocal trade preference offered by the United States to Sub‐Saharan African countries. It was set to expire on 30 September 2025, but was re‐authorized on February 03, 2026, by President Trump through December 31, 2026, with retroactive effect to September 30, 2025. The present article examines the effect of the AGOA suspension on poverty in suspended countries. The analysis covers an unbalanced sample of 43 SSA countries, of which 15 SSA countries suspended at least once from the benefits of the AGOA (the treatment group), and 28 SSA countries that are eligible for the benefits of the programme but were never suspended from those benefits (control group). Empirical findings indicate that the AGOA suspension has raised poverty in suspended countries, with countries that export non‐resource products being the most adversely affected. The analysis has additionally revealed that the poverty situation of suspended countries has worsened relatively to countries that never benefited from the programme. This finding shows that the poverty situation of suspended countries has deteriorated after the AGOA suspension relatively to what their situation would have been if they did not benefit from the programme. Finally, the analysis shows that for SSA countries eligible for the AGOA (both beneficiary countries that were never suspended from the benefits of the programme, and those that were suspended at least once from the programme), the AGOA programme leads to the decline in poverty rates in both resource‐rich and non‐resource rich SSA beneficiary countries, but to a greater extent in the former than in the latter. The analysis sheds light on the poverty rise consequences of the AGOA suspension, and points to the adverse consequences of the uncertainty surrounding non‐reciprocal trade preferences for beneficiary countries.
This paper examines how cross-ownership and strategic delegation interact with trade policy under policy commitment and non-commitment regimes. We develop a Cournot export-rivalry framework in which governments choose export subsidies or import tariffs, while firms strategically determine managerial incentive schemes. A higher degree of cross-ownership generates opposing collusive and incentive effects, leading to non-monotonic outcomes in output, profits, and welfare. Under export subsidies, strategic delegation intensifies competition and exacerbates the prisoner's dilemma. However, under non-commitment, firms strategically distort incentive schemes to influence policy intervention, generating time-consistency problems and non-monotonic welfare effects. We further show that increasing cross-ownership gradually mitigates policy distortions and, under a quadratic cost structure, may reverse the optimal policy from an export subsidy to an export tax. Overall, the results highlight that ownership structure, managerial incentives, and policy commitment jointly determine optimal trade policy and welfare outcomes.
This paper examines how dynamic economic conditions shape internal migration flows across U.S. states in the post-Great Recession period. Using a dyadic panel of bilateral state-to-state migration flows from 2000 to 2018, we estimate gravity-style models with dyad and year fixed effects, focusing on within-pair variation in income growth and labor market conditions. This framework isolates how time-varying economic shocks at origins and destinations influence migration responses, net of persistent spatial relationships. We find that origin economic dynamics are the most robust predictors of migration. Higher income growth at the origin is associated with increased bilateral flows, while higher origin unemployment reduces mobility. Destination income growth plays a more limited role overall but becomes a stronger and more precisely estimated pull factor in the post-2010 period, indicating changes in migration responsiveness following the Great Recession. By contrast, environmental conditions and institutional quality exhibit weaker and less consistent effects once dynamic economic factors are accounted for. These results highlight the role of internal migration as a mechanism of regional adjustment to asymmetric economic shocks. More broadly, the findings underscore the importance of modeling migration as a dynamic, dyadic process driven by localized economic change rather than static regional characteristics.
This paper contributes to the literature on the relationship between financial development and GDP per capita growth, by considering both the total financial assets and the interconnectedness across the different financial sectors, as well as employing a more detailed sectoral classification. It focuses on a set of European advanced economies in the 1995-2023 period and finds that higher levels of total financial assets of banks and non-banks are negatively associated with GDP per capita growth. The same is also true of measures of interconnectedness within the aggregate financial sector, which display a negative association in baseline specifications but are more sensitive to identification choices. These results reinforce the view that financial deepening beyond a certain point may hinder growth in advanced economies.
There are two problems with the view that cheaper capital caused a decline in the labor share: first, aggregate capital and labor are gross complements; second, the price of capital is roughly constant, worldwide. Taking seriously the composition of capital resolves both challenges. Though information and communications (ICT) capital is a small fraction of capital, it is highly substitutable with labor, and its user cost declined sharply. Distinguishing ICT and non-ICT capital is empirically plausible and suggests that automation accounts for more than 1/4 of the global decline in the labor share, even if aggregate capital and labor are complements.
Productivity serves as the core driving force for corporate development, but with the period of the global supply chain reconfiguration, the remarkable increase in supply chain uncertainty has posed severe challenges to the improvement of corporate productivity. We examine the impact of supply chain stability on corporate productivity under uncertainty using a sample of Chinese A-share listed companies from 2009 to 2023. This study indicates that supply chain stability can play a safeguarding role in promoting corporate total factor productivity. The underlying mechanisms are that supply chain stability promotes corporate total factor productivity through improvements in resource accessibility, operational performance, and governance effectiveness. Further heterogeneity analysis reveals that the positive effect is more pronounced in firms with high supply chain risk, weak supply chain power, and low social capital. This study provides new perspectives and knowledge for maintaining supply chain stability and promoting corporate total factor productivity.
This study revisits the Keynes-Kuznets puzzle by examining not only whether the consumption-income ratio is mean-reverting, but also the speed of adjustment. The Seemingly Unrelated Regression Augmented Dickey-Fuller (SURADF) panel unit root framework, combined with half-life estimates, is employed to analyze the dynamic properties of the average propensity to consume for 110 countries from 1960 to 2019. The empirical results based on the half-life indicate that the consumption-income ratio is mean-reverting and converges in the long run, consistent with Kuznets' observations; however, adjustment speeds differ significantly across countries. By incorporating half-life measures, we uncover substantial cross-country heterogeneity, suggesting that the empirical relevance of competing consumption theories depends on the adjustment horizon. This perspective helps reconcile the Keynes-Kuznets puzzle by distinguishing long-run equilibrium behavior from short-run dynamics. Differences in adjustment speeds may reflect the underlying structural and cyclical forces, analogous to Schumpeter's classification of economic cycles. Methodologically, the findings underscore the value of half-life measures beyond standard unit root tests. From a policy standpoint, these results further suggest that heterogeneity in adjustment speeds should be considered when designing consumption stabilization policies, particularly in economies facing the middle-income trap, while also facilitating catch-up growth in low-income countries.
This study considers mutual outsourcing firms in a vertically related market and examines their strategic adoption of environmental corporate social responsibility (ECSR) activities. We demonstrate that ECSR adoption reduces mutual outsourcing firms' profits, resulting in a prisoner's dilemma situation, but enhances welfare regardless of competition modes. We also find that Cournot competition generates higher levels of ECSR and welfare than Bertrand competition, whereas Cournot competition (under low substitutability) or asymmetric competition (under high substitutability) emerges as an equilibrium in the endogenous choice of competition modes. Finally, we provide policy discussions on input pricing strategies, showing that a discriminatory wholesale price reduces welfare when products are less substitutable, whereas its effects on ECSR and profits depend on the competition mode; in contrast, a mutual outsourcing price regulation consistently decreases mutual outsourcing firms' ECSR and profits but may improve welfare when products are highly substitutable under Bertrand competition.
This paper examines how network externalities shape the strategic interaction of trade policies between home and foreign countries. Incorporating reciprocal trade policy into an import-competing model under Cournot and Bertrand competition, we show that the endogenous choice of trade policies depends critically on the strength of network effects. Under Cournot competition, weak network externalities yield an Intervention-Non-intervention outcome, where the home country imposes tariffs while the foreign country opts for free trade. However, when network externalities are sufficiently strong, two equilibria arise: Intervention-Non-intervention or Non-intervention-Intervention, implying that the home country may prefer free trade. Under Bertrand competition, strong network externalities lead the foreign country to subsidize exports rather than impose an export tax. Moreover, depending on the degree of network effects, three distinct equilibria emerge. These findings suggest that when network externalities are strong, the trade policy preferences of the two trading countries converge, making an equilibrium in which the home country adopts free trade and the foreign country pursues export subsidies Pareto optimal.
We revisit an existing framework of endogenous institution formation for public good provision, incorporating heterogeneous players to address the question, "Who joins an institution that sanctions only its members to provide a public good?" We analyze two models with different sources of heterogeneity. Considering players with heterogeneous wealth levels and valuations of the public good, our first model suggests multiple equilibria at which institution formation is successful. Formation requires each member's valuation to exceed a threshold linked to her contribution ratio. Correlations between valuations and wealth levels influence the equilibrium set's size. Our second model examines sequential decision-making, uncovering a first-mover advantage in which non-members free-ride on the institution as a second-order public good.
The relationship between workforce gender diversity and firm productivity is a long-standing issue in economic literature. The institutional and social factors make India as a unique case for examining this issue. But despite having an abundant labor force, evidence from India is rare. Drawing upon a firm level panel data, spanning from 2017 to 2022, this study provides new evidence on relationship between workforce gender diversity and firm productivity in India where the former has a significant positive association with the latter. In particular, this relationship demonstrates a non-linear pattern and is more prevalent in the service sector. Several robustness checks validate these findings. Our further analysis addresses the issue of non-disclosure of female workers' information; and its estimation results support our main findings.
Drastic innovation, which eliminates rivals via cost advantages, is typically considered unprofitable to license. This paper revisit drastic innovation licensing in a vertical market with backward ownership. Contrary to conventional wisdom, we show that sufficient partial backward ownership makes licensing of drastic innovation profitable: fixed-fee licensing is preferred when the licensor holds upstream equity, while royalty licensing is optimal when the licensee does.
This paper explores the choice of origin versus destination tax principles in an open economy with strategic environmental corporate social responsibility (ECSR). Conceptualizing ECSR as collective reputation, we analyze how pollution scope and consumer awareness shape the optimal regime. Under localized pollution, the origin principle generally dominates due to rent-shifting efficiency, although a non-monotonic sandwich result emerges at intermediate trade costs. Under global pollution, we challenge the conventional view that the destination principle is universally superior for preventing a race to the bottom. We identify a novel reputation rescue mechanism: in the high-ECSR regime, the origin principle reclaims superiority because its production subsidies are essential to sustain collective reputation and preserve market viability. These findings offer a rationale for the policy divergence between the EU's CBAM and the US IRA.
To assess the direct, spillover and total effect of three types of government expenditure on economic growth, we analyzed 30 member states of AU and 27 member states of EU over the period of 2002-2023. The study reveals that education and health expenditure have positive direct effects and military expenditure has a negative direct effect on GDP per capita in the AU, while education and health expenditures have negative direct effects and military expenditure has positive direct effect in the EU. Education expenditure has positive spillover effects through the channels of human capital and technology in AU, while it has positive spillover effects through the channels of physical capital and technology. Health expenditure has positive spillover effects through the channels of human capital and technology in AU and EU. While military expenditure has a positive spillover effect through the channel of technology in AU, it has a positive spillover effect on GDP per capita through the channel of physical capital in EU. The total effect of education expenditure is larger in the EU, while health and military expenditure have vague effects in the AU.
