Research Article
BibTex RIS Cite

EXAMINING THE PRODUCTIVITY BIAS HYPOTHESIS FOR NEXT 11 COUNTRIES

Year 2020, Volume: 20 Issue: 40, 165 - 173, 28.10.2020
https://doi.org/10.30976/susead.663138

Abstract

One of the reasons of deviation from Purchasing Power Parity is the Productivity Bias Hypothesis (PBH) that is also known as Balassa-Samuelson Hypothesis which is based on Balassa (1964) and Samuelson (1964). Productivity Bias Hypothesis implies that productivity causes a real appreciation in currency of a relatively more productive country. Mechanism can be briefly summarized as follows: Productivity increase in tradable sector increases wages in this sector and due to labor mobility across sectors wages in non-tradable sectors rise. Then, prices increase and finally exchange rates rise. Due to relatively high growth rates and productivity increases emerging countries can be good samples to investigate the hypothesis. The purpose of this study is to investigate the validity of Productivity Bias Hypothesis for Next 11 countries (Bangladesh Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, Phillipines, Turkey and Vietnam). Autoregressive Distributed Lag method (ARDL) of cointegration is used to analyze time series data. Empirical results suggest that the hypothesis is supported in Bangladesh, Indonesia, Turkey and Vietnam for the considered period of time. The policy implications are provided as well.

References

  • Anwar, S., & Ali, S. Z. (2015) . Productivity bias hypothesis: evidence from South Asia. Applied Economics Letters, 22 (17), 1389-1394. Doi: 10.1080/13504851.2015.1034832.
  • Asea, P. & Mendoza, E. (1994). The Balassa-Samuelson model: a general equilibrium appraisal. Review of International Economics, 2 (3), 244-267.
  • Bahmani-Oskooee, M. , Nasir, A.B.M. (2004). ARDL approach to test the productivity bias hypothesis. Review of Development Economics, 8 ( 3), 483-488.
  • Bahmani-Oskooee, M. & Nasir, A.B.M. (2005). Productivity bias hypothesis and the purchasing power parity: a review article. Journal of Economic Surveys, 19 (4), 671-696.
  • Bahmani-Oskooee, M.-O. & Niroomand, F. (1996). A reexamination of Balassa’s productivity bias hypothesis. Economic Development and Cultural Change, 45 (4), 195–204.
  • Balassa, B. (1964). The purchasing-power-parity doctrine: a reappraisal. Journal of Political Economy, 72 (6), 584-596.
  • Banerjee, A., Dolado, J.J. & Mestre, R. (1998). Error-correction mechanism tests for cointegration in a single equation framework. Journal of Time Series Analysis, 19 (3), 267-283.
  • Bergstrand, J.H.(1992). Real exchange rates, national price levels, and the peach dividend. American Economic Review, 82, 56–61.
  • Chowdhury, K. (2011). Modelling the Balassa-Samuelson Effect in Australia. Australasian Accounting Business and Finance Journal, 5 (1), 78-91.
  • Chowdhury, K. (2012). The real exchange rate and the Balassa–Samuelson hypothesis in SAARC countries: an appraisal. Journal of the Asia Pacific Economy, 17 (1), 52-73.
  • Clague, C. K. (1988). Purchasing power parities and exchange rates in Latin America. Economic Development and Cultural Change, 36, 529–541.
  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74, 427–431.
  • DeLoach, S.B. (2001). More evidence in favor of the Balassa-Samuelson hypothesis. Review of International Economics, 9 (2), 336-342.
  • Egert, B. (2002). Investigating the Balassa-Samuelson Hypothesis in Transition: Do We Understand What We See?. The Economics of Transition, 10, 273-309.
  • Eghbal, M. (2008). The Next 11 emerging economies. Euromonitor International. Retrieved from: http://blog.euromonitor.com/2008/02/the-next-11-emerging-economies.html
  • Halıcıoglu, F., Ketenci N. (2018). Testing the productivity bias hypothesis in Middle East countries. Journal of Economic Studies, 45 (5), .922-931.
  • Heston, A., Nuxoll, D. A. & Summers, R. (1994). The differential-productivity hypothesis and purchasing-power parities: some new evidence. Review of International Economics, 2 (3), 227–243.
  • Hsieh, D.A. (1982). The determination of the real exchange rate: the productivity approach. Journal of International Economics, 12, 355-362.
  • Irandoust, M. (2017). Symmetry, proportionality and productivity bias hypothesis: evidence from panel-VAR models, Economic Change and Restructuring, 50 (1), 79-93.
  • Kremers, J.M., Ericsson, N.R. & Dolado, J.J. (1992). The power of cointegration tests. Oxford Bulletin of Economic Statistics, Vol. 54 (2), 325-348.
  • Officer, L. H. (1976). The productivity bias in purchasing power parity: An econometric investigation. International Monetary Fund Staff Papers, 23, 545–579.
  • Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16 (3), 289–326.
  • Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75 (2), 335–346.
  • Rahman, M. & Ghosh, S. K. (2013). Productivity bias hypothesis: the case of South Asia. Economics Bulletin, 33 (3), 1771-1779
  • Rogoff, K. (1992). Traded goods consumption smoothing and the random walk behavior of the real exchange rate. Bank of Japan Monetary and Economic Studies, 10 (2), 1–29.
  • Rogoff, K. (June 1996). The Purchasing Power Parity Puzzle. Journal of Economic Literature, 34 (2), 647-668.
  • Samuelson, P. (1964). Theoretical notes on trade problems. Review of Economics and Statistics, 46, 145−154.
  • Wang, W., Xue, J., & Du, C. (2016). The Balassa-Samuelson hypothesis in the developed and developing countries revisited. Economics Letters, 146, 33-38.

VERİMLİLİK YANLILIĞI HİPOTEZİNİN GELECEK 11 ÜLKESİ İÇİN İNCELENMESİ

Year 2020, Volume: 20 Issue: 40, 165 - 173, 28.10.2020
https://doi.org/10.30976/susead.663138

Abstract

Satınalma gücü paritesinden sapmanın nedenlerinden biri Balassa (1964) ve Samuelson (1964) çalışmalarına dayanan ve Balassa-Samuelson hipotezi olarak da bilinen Verimlilik Yanlılığı hipotezidir. Verimlilik Yanlılığı Hipotezi’ne göre, nispeten daha verimli ülkenin para birimi değer kazanmaktadır. Mekanizma kısaca şu şekilde özetlenebilir:Ticarete konu olan sektörlerdeki verimlilik artışı bu sektörlerdeki ücretlerin artmasına neden olur. Sektörler arası işgücü geçişkenliği nedeniyle ticarete konu olmayan sektörlerde de ücretler artar ve bu durum fiyatların yükselmesine ve reel döviz kurunun artmasına yol açmaktadır. Nispeten yüksek büyüme ve verimlilik artışları nedeniyle gelişmekte olan ülkeler verimlilik yanlılığı hipotezini araştırmak için iyi örnekler olarak karşımıza çıkmaktadır. Bu çalışmanın amacı verimlilik yanlılığı hipotezinin geçerliliğini Gelecek 11 ülkesi (Bangladeş Mısır, Endonezya, İran, Güney Kore, Meksika, Nijerya, Pakistan, Filipinler, Türkiye ve Vietnam) için zaman serileri kullanarak incelemektir. Ampirik analiz otoregresif dağıtılmış gecikme methodu kullanılarak yapılmıştır. Elde edilen sonuçlara gore incelenen zaman diliminde, Verimlilik yanlılığı hipotezi Bangladeş, Endonezya, Türkiye ve Vietnam için desteklenmiştir. Politika önerilerine de yer verilmiştir.

References

  • Anwar, S., & Ali, S. Z. (2015) . Productivity bias hypothesis: evidence from South Asia. Applied Economics Letters, 22 (17), 1389-1394. Doi: 10.1080/13504851.2015.1034832.
  • Asea, P. & Mendoza, E. (1994). The Balassa-Samuelson model: a general equilibrium appraisal. Review of International Economics, 2 (3), 244-267.
  • Bahmani-Oskooee, M. , Nasir, A.B.M. (2004). ARDL approach to test the productivity bias hypothesis. Review of Development Economics, 8 ( 3), 483-488.
  • Bahmani-Oskooee, M. & Nasir, A.B.M. (2005). Productivity bias hypothesis and the purchasing power parity: a review article. Journal of Economic Surveys, 19 (4), 671-696.
  • Bahmani-Oskooee, M.-O. & Niroomand, F. (1996). A reexamination of Balassa’s productivity bias hypothesis. Economic Development and Cultural Change, 45 (4), 195–204.
  • Balassa, B. (1964). The purchasing-power-parity doctrine: a reappraisal. Journal of Political Economy, 72 (6), 584-596.
  • Banerjee, A., Dolado, J.J. & Mestre, R. (1998). Error-correction mechanism tests for cointegration in a single equation framework. Journal of Time Series Analysis, 19 (3), 267-283.
  • Bergstrand, J.H.(1992). Real exchange rates, national price levels, and the peach dividend. American Economic Review, 82, 56–61.
  • Chowdhury, K. (2011). Modelling the Balassa-Samuelson Effect in Australia. Australasian Accounting Business and Finance Journal, 5 (1), 78-91.
  • Chowdhury, K. (2012). The real exchange rate and the Balassa–Samuelson hypothesis in SAARC countries: an appraisal. Journal of the Asia Pacific Economy, 17 (1), 52-73.
  • Clague, C. K. (1988). Purchasing power parities and exchange rates in Latin America. Economic Development and Cultural Change, 36, 529–541.
  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74, 427–431.
  • DeLoach, S.B. (2001). More evidence in favor of the Balassa-Samuelson hypothesis. Review of International Economics, 9 (2), 336-342.
  • Egert, B. (2002). Investigating the Balassa-Samuelson Hypothesis in Transition: Do We Understand What We See?. The Economics of Transition, 10, 273-309.
  • Eghbal, M. (2008). The Next 11 emerging economies. Euromonitor International. Retrieved from: http://blog.euromonitor.com/2008/02/the-next-11-emerging-economies.html
  • Halıcıoglu, F., Ketenci N. (2018). Testing the productivity bias hypothesis in Middle East countries. Journal of Economic Studies, 45 (5), .922-931.
  • Heston, A., Nuxoll, D. A. & Summers, R. (1994). The differential-productivity hypothesis and purchasing-power parities: some new evidence. Review of International Economics, 2 (3), 227–243.
  • Hsieh, D.A. (1982). The determination of the real exchange rate: the productivity approach. Journal of International Economics, 12, 355-362.
  • Irandoust, M. (2017). Symmetry, proportionality and productivity bias hypothesis: evidence from panel-VAR models, Economic Change and Restructuring, 50 (1), 79-93.
  • Kremers, J.M., Ericsson, N.R. & Dolado, J.J. (1992). The power of cointegration tests. Oxford Bulletin of Economic Statistics, Vol. 54 (2), 325-348.
  • Officer, L. H. (1976). The productivity bias in purchasing power parity: An econometric investigation. International Monetary Fund Staff Papers, 23, 545–579.
  • Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16 (3), 289–326.
  • Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75 (2), 335–346.
  • Rahman, M. & Ghosh, S. K. (2013). Productivity bias hypothesis: the case of South Asia. Economics Bulletin, 33 (3), 1771-1779
  • Rogoff, K. (1992). Traded goods consumption smoothing and the random walk behavior of the real exchange rate. Bank of Japan Monetary and Economic Studies, 10 (2), 1–29.
  • Rogoff, K. (June 1996). The Purchasing Power Parity Puzzle. Journal of Economic Literature, 34 (2), 647-668.
  • Samuelson, P. (1964). Theoretical notes on trade problems. Review of Economics and Statistics, 46, 145−154.
  • Wang, W., Xue, J., & Du, C. (2016). The Balassa-Samuelson hypothesis in the developed and developing countries revisited. Economics Letters, 146, 33-38.
There are 28 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Articles
Authors

Gülfer Vural 0000-0002-7297-7545

Publication Date October 28, 2020
Submission Date December 22, 2019
Acceptance Date October 18, 2020
Published in Issue Year 2020 Volume: 20 Issue: 40

Cite

APA Vural, G. (2020). EXAMINING THE PRODUCTIVITY BIAS HYPOTHESIS FOR NEXT 11 COUNTRIES. Sosyal Ekonomik Araştırmalar Dergisi, 20(40), 165-173. https://doi.org/10.30976/susead.663138