China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

Science and female equality – reflections on the International Womens’s Day

March 6, 2024

The International Women’s Day (IWD) on March 8 has become a global phenomenon – widely acknowledged and celebrated. Theoretically, there is a broad understanding in most countries regarding the importance of female equality both politically, institutionally, economically, socially and psychologically. Practically, much more could be done for female equality – and should be done! Both in advanced and emerging countries.

Science has a lot to tell

In my view, science can give different explanations for the benefits of improving female equality. The following five conclusions from scientific research could be mentioned in the first place – most of them having an impact on economic growth and well-being (which is not the same):

¤  The impact of improved institutions on economic growth.
Research has shown for quite a number of years that improved institutions mean a lot to the quality and sustainability of economic growth. Nobel Prize winners such as R. Coase, D. North, E. Ostrom and O. Williamson are particularly famous in this respect. More lately, D. Acemoglu / J.Robinson, D. Rodrik and T. Persson have done extended work on the importance of institutions. Looking more closely on institutional research reveals clearly that better institutional conditions also mean improved conditions for economic growth – but also that extended female participation in these processes logically works as a driver of such desirable economic developments. Examples for progress may be better institutional conditions for female education, health, wages, and child care. 

¤  The impact of female human capital formation on economic growth.
Research has shown for quite some time (R. Lucas, R. Barro, P. Romer, G. Mankiw, etc.) that improvements of human capital formation (education) also outside the pure institutional sphere can contribute substantially to better economic growth. Consequently, when further focus on female capital formation happens, we have a widened source of economic growth.

¤  The impact of enlarged female labor supply. 
A substantial number of countries in the world have already – or will have – increasing demographic problems in the forthcoming decades (China, Japan, Russia, Germany, the Baltic countries, and a number of other European countries, see https://commission.europa.eu/system/files/2023-01/the_impact_of_demographic_change_in_a_changing_environment_2023.PDF).

 A major contribution to a future solution of the enormous burden of labor force shortage can most certainly emerge from an increasing female labor participation, both in volume and in quality terms. Such a development can also contribute to better international competitiveness.

¤  The impact of psychological satisfaction on productivity. 
Psychology often plays a neglected role in economic analysis, even, for example, in productivity studies for scientific work (J. Astegiano). Particularly important is the potential role of improved female labor productivity and what it means to economic growth (OECD, see https://www.oecd.org/chile/economic-empowerment-women-productive-inclusive-societies.htm).

¤  The impact of better economic conditions on the society. 
Since an extended and broadened female labor market participation leads to better medium- and long-term GDP growth, chances of a stable society with good ethics should increase as well (B. Friedman). 

Conclusion – science shows the importance of women in the economy
Putting together the brief reflections above should demonstrate that there is sufficient scientific analysis that underlines the positive impact on economic developments by increasing  and improving gender well-being and improved female participation on labor markets. These processes should be considered as win-win developments – on both macroeconomic and microeconomic levels. This conclusion can be applied to both more advanced and emerging countries.

Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

Avoid too much import of skilled human capital from poor countries!

February 6, 2024

Labor markets in less developed countries are frequently analyzed from  different angles. Researchers put their emphasis often on institutional and physical working conditions, gender issues, child labor, (minimum) wages and wage disparities, social protection of workers, income distribution,  energy and environment, workers’ health, ethics, labor market laws and rules (plus their enforcement and application), labor productivity, etc.

There exists also quite some literature about immigrant workers coming from the emerging world to Western countries. One special aspect, however, seems to be neglected by most analysts with nexus to migration issues: the increasing efforts by foreign (Western) politicians to attract skilled workers to their home countries.

The complicated issue of skilled worker immigration

We all know that the world has become tougher in recent years with extensive movements on global labor markets for various reasons – due to poverty, covid, dictatorship, persecution, and wars. All these developments are certainly disliked in advanced democratic countries – but many times politicians and voters want to see a visible downsizing of the unskilled labor force inflow from poor countries. Instead, they prefer a growing inflow of skilled workers from particularly Asia and Africa.

Whatever one may think about this less humanitarian positioning, there is at least some logic in it. First, Western institutions cannot cope with necessary immigration administration anymore. Second, politicians are often no longer capable to handle the protests from the extreme right. Third, the strong demographic changes with shrinking population in mostly mature countries – but also, for example, in China and Russia – has already led to serious shortages of skilled experts within the EU, particularly in Germany (“Fachkräftemangel”).

Regarding Europe, we can at least base a lot of labor knowledge on relatively reliable statistics. This is, however, mostly not the case when it comes to statistical developments on labor markets in emerging or really poor countries.

Not even China and India provide global analysts with sufficient labor market information. Sure, both countries have an enormous size which by definition makes the production of statistics very difficult. China, for example, measures therefore only urban unemployment. It has recently even stopped to announce the embarrassingly high youth unemployment. On the other hand one can read, for example, in newspapers and journals about the high unemployment of young Indian academics (https://www.linkedin.com/pulse/study-finds-42-gradsu-25-unemployed-upgradcampus-1c/).

Ethical shortcomings

Looking at labor market conditions in many economically lagging countries, I cannot find it very ethical that heads of governments and ministers from EU-countries  and other advanced countries increasingly travel around in Africa, Asia and Latin America just to attract specialized labor force to their own advanced countries (or to find more suppliers of commodities).

This active way of marketing should be considered as in-acceptable. Unnecessary “brain drain” from emerging countries would be the consequence, hindering progress there both in the society and the economy.

As regards countries and companies in our part of the world, sales to emerging countries could or would develop less favorably because of the negative “brain drain”-effects on GDP than in a world without such a kind of human capital loss.

For this reason, Western governments should rather give skills to emerging countries than take too much of their precious human capital accumulation.

Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

The Future Global Development: Hope and Concerns

December 6, 2023

Valedictory Address at the IIF International Research Conference & Award Summit (IIF-IRCAS), Delhi / India, December 2, 2023 by Prof. Hubert Fromlet, Linnaeus University/Sweden

Summary

After many years of fruitful relations with the Indian Institute of Finance (IIF), it is real honor and pleasure for me to have another speech for teachers and students at the very successful academic institution of the IIF. I am speaking also in honor of the late professor J.D. Agarwal, the founder of the IIF.

In many respects, the world has entered a period of disorder. We are confronted with wars, radicalism, political turmoil, protectionism, poverty, suffering refugees, egoism, political extremism and populism, lagging and economically weak and unstable countries – and all this simultaneously. But I also feel happy about India’s progress in the past few decades – and wish  this important catching-up country all the best for the future.

Below, I will sum up six factors of hope and ten factors of concerns (without ranking) that currently occupy my reflections a lot. Obviously, it is easier these days to put together the factors of concerns – but hope and (future) opportunities should not be neglected either. This latter conclusion is important for both financial markets and the corporate sector. We hereby touch briefly on behavioral finance and behavioral economics. Positive or encouraging psychological contributions may play an important role in bad times to develop turning points in the right direction; of course based on fairly realistic expectations.

Factors of concern

¤ The war in the Ukraine.
The Russian war in the Ukraine still goes on as a psychological (human) and financial burden, mainly for the U.S. and Europe.

¤ China’s economic and financial development.
China’s economy and the financial development remains a conundrum that creates uncertainty and concerns because of lagging transparency.

¤ China’s political development.
President Xi Jinping’s autocratic leadership style does not provide China with good predictability – neither when it comes to the economy nor to politics (e.g. vis à vis the U.S., Taiwan)

¤ The U.S. after the next presidential election.
The unpredictable Donald Trump as a possible new president scares me a lot.

¤ The political development of the EU.
The EU will have elections in its member countries in 2024 – with good chances for the extreme right as a big concern for EU unity.

¤ The economic development and reforms in the EU.
Further nationalism in the EU would impede reforms and growth.

¤ Insufficient reforms in emerging markets.
Most emerging countries still need a lot of reforms. An open question may be to what extent China’s growing political influence in many emerging countries impact on market reforms.

¤ Energy and water shortage in rich and less favored countries.
Global water shortage worries me a lot – but also uncertain and uneven global energy supply.

¤ Further increasing protectionism.
Here we have a risk of further reduced global trade expansion and economic growth. 

¤ Last but not least: turmoil on global financial markets.
Negative surprises on global financial markets may “always” be on the cards. As an obvious potential risk, I may particularly mention all the (hidden) financial imbalances in China but also potentially bursting financial bubbles elsewhere.

Factors of hope

¤ Politics – bad political leaders may be replaced sooner or later.
At least in working democracies, one may hope that bad political leaders some day will be replaced by more competent successors.

¤ Increasing global insight of climate improvement needs.
This is a factor where improvement is visible (but still too little).

¤ Global insight that education is a growth-driving need.
There is a growing insight around the world that the creation of new human capital is a main factor for stronger potential growth.

¤ Emerging markets receive growing political attention.
Here, we can currently watch an important development that does not look perfect but will gradually improve self-confidence of many emerging countries, particularly in the so-called South.

¤ Gender equality is improving globally (but still too slowly).
Progress happens in many countries. More still can be done. Nice to see that we in 2023 got another female Nobel Prize Winner with Claudia Goldin.

¤ AI means a lot of hope – but also unpredictable risks.
AI is currently expanding very quickly – creating a lot of new opportunities, particularly in medical research and diagnosis. However, AI risks should not be neglected one single day.

Altogether, 2024 will be an extremely important political year with lots of economic implications and consequences.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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