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191. Rent(s) Asunder: Sectoral Rent Extraction Possibilities and Bribery by Multinational Corporations

Author:
Nathan Jensen, Edmund Malesky, and Dimitar Gueorguiev
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
We argue that openness to foreign investment can have differential effects on corruption, even within the same country and under the exact same domestic institutions over time. Our theoretical approach departs from standard political economy by attributing corruption motives to firms as well as officials. Rather than interpreting bribes solely as a coercive “tax” imposed on business activities, we allow for the possibility that firms may be complicit in using bribes to enter protected sectors. Thus, we expect variation in bribe propensity across sectors according to expected profitability which we proxy with investment restrictions. Specifically, we argue that foreign investment will not be associated with corruption in sectors with fewer restrictions and more competition, but will increase dramatically as firms seek to enter restricted and uncompetitive sectors that offer higher rents. We test this effect using a list experiment, a technique drawn from applied psychology, embedded in a nationally representative survey of 10,000 foreign and domestic businesses in Vietnam. Our findings show that the impact of domestic reforms and economic openness on corruption is conditional on polices that restrict competition by limiting entry into the sector.
Topic:
Corruption, Economics, and Foreign Direct Investment

192. Delivering on US Climate Finance Commitments

Author:
Trevor Houser and Jason Selfe
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
At the United Nations climate change conference in Copenhagen in 2009 and Cancun in 2010, the United States joined other developed countries in pledging to mobilize $100 billion in public and private sector funding to help developing countries reduce greenhouse gas emissions and adapt to a warmer world. With a challenging US fiscal outlook and the failure of cap-and-trade legislation in the US Congress, America's ability to meet this pledge is increasingly in doubt. This paper identifies, quantifies, and assesses the politics of a range of potential US sources of climate finance. It finds that raising new public funds for climate finance will be extremely challenging in the current fiscal environment and that many of the politically attractive alternatives are not realistically available absent a domestic cap-and-trade program or other regime for pricing carbon. Washington's best hope is to use limited public funds to leverage private sector investment through bilateral credit agencies and multilateral development banks.
Topic:
Climate Change, Development, Economics, Energy Policy, Politics, and Foreign Direct Investment
Political Geography:
United States, America, Washington, and United Nations

193. Applying Hubbert Curves and Linearization to Rock Phosphate

Author:
Cullen S. Hendrix
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Rock phosphate is a critical, nonrenewable resource for which there is no known substitute in agriculture. Cordell, Drangert, and White (2009) use Hubbert methodology (1956) to estimate the peak—the year after which production will monotonically decline—of world rock phosphate production at 2033–34. This note assesses the applicability of Hubbert's (1949) peak methodology to world rock phosphate production, based on (a) the ability of the model to produce accurate in-sample and out-of-sample forecasts and stable estimates of ultimately recoverable reserves, and (b) the degree to which the rock phosphate market approximates the theoretical conditions underpinning the Hubbert model. In both respects, the application of Hubbert methodology to rock phosphate is found to be problematic.
Topic:
Agriculture, Economics, International Trade and Finance, Markets, and Natural Resources

194. India's Growth in the 2000s: Four Facts

Author:
Arvind Subramanian and Utsav Kumar
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper marks the first attempt at examining the growth performance across Indian states for the 2000s, a period also marked by the global financial crisis. Four key findings are reported. First, consistent with the fact that the 2000s was the best ever decade for Indian macroeconomic performance, growth increased across almost all major states in 2001–09 compared to 1993–2001. Second, nevertheless, there is a continued phenomenon of divergence or rising inequality across states: On average the richer states in 2001 grew faster in 2001–09. Third, during the crisis years of 2008 and 2009, states with the highest growth in 2001–07 suffered the largest deceleration. Since states with the highest growth were also the most open, it seems that openness creates dynamism and vulnerability. Finally, although the demographic dividend—a young population boosting economic dynamism—was evident before 2000, there is little evidence that there was any dividend in the 2000s. Demography alone cannot be counted on for future economic growth.
Topic:
Demographics, Development, Economics, Industrial Policy, International Trade and Finance, and Social Stratification
Political Geography:
South Asia and India

195. Asia and Global Financial Governance

Author:
C. Randall Henning and Mohsin S. Khan
Publication Date:
10-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Currently, Asia's influence in global financial governance is not consistent with its weight in the world economy. This paper examines the role of Asia in the International Monetary Fund (IMF) and the Group of Twenty (G-20). It looks in particular at how the relationship between East Asian countries and the IMF has evolved since the Asian financial crisis of 1997–98 and outlines how Asian regional arrangements for crisis financing and economic surveillance could constructively interact with the IMF in the future. It also considers ways to enhance the effectiveness of Asian countries in the G-20 process.
Topic:
Development, Economics, Emerging Markets, Globalization, International Trade and Finance, and Monetary Policy
Political Geography:
Israel and Asia

196. A Generalized Fact and Model of Long-Run Economic Growth: Kaldor Fact as a Special Case

Author:
Daniel Danxia Xie
Publication Date:
02-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper provides new evidence on the long-run relationship between economic growth and labor's share in national income, based on a comprehensive panel data set for 123 countries from 1950 to 2004. Xie's primary finding is that labor's share follows a cubic relationship with real GDP per capita over the long process of development. At the beginning of the modern economic growth process, the share of labor in national income first decreases until an initial threshold is reached. After that, labor's share keeps increasing until the country's GDP per capita reaches a second threshold before falling again. Xie argues that these dynamics apply not only to the less developed countries in the postwar years, but also to the advanced countries like the United States and the United Kingdom during their early economic take-offs, starting in the late 18th and 19th century, respectively. Finally, he proposes a two-sector constant elasticity of substitution (CES)-type growth model and simulate the model to replicate and explain the possible mechanism behind such a nonlinear pattern of movements in labor's share.
Topic:
Economics, International Trade and Finance, Labor Issues, and Monetary Policy
Political Geography:
United States and United Kingdom

197. Too Big to Fail: The Transatlantic Debate

Author:
Morris Goldstein and Nicolas Véron
Publication Date:
01-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Although the United States and the European Union were both seriously impacted by the financial crisis of 2007, resulting policy debates and regulatory responses have differed considerably on the two sides of the Atlantic. In this paper the authors examine the debates on the problem posed by "too big to fail" financial institutions. They identify variations in historical experiences, financial system structures, and political institutions that help one understand the differences of approaches between the United States, EU member states, and the EU institutions in addressing this problem. The authors then turn to possible remedies and how they may be differentially implemented in America and Europe. They conclude on which policy developments are likely in the near future.
Topic:
Economics and Financial Crisis
Political Geography:
United States, America, and Europe

198. Current Account Imbalances Coming Back

Author:
Joseph Gagnon
Publication Date:
01-2011
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper finds statistically robust and economically important effects of fiscal policy, external financial policy, net foreign assets, and oil prices on current account balances. The statistical model builds upon and improves previous explanations of current account balances in the academic literature. A key advance is that the model captures the effect of external financial policies, including exchange rate policies, through data on net official financial flows. Based on current and expected future policies, current account imbalances in major G-20 economies are likely to widen much more in the next five years than projected by the International Monetary Fund (IMF). This paper concludes with a discussion of appropriate policies to prevent widening imbalances.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy

199. Estimation of De Facto Flexibility Parameter and Basket Weights in Evolving Exchange Rate Regimes

Author:
Jeffrey A. Frankel and Daniel Xie
Publication Date:
01-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
A new technique for estimating countries' de facto exchange rate regimes synthesizes two approaches. One approach estimates the implicit de facto basket weights in an ordinary least squares (OLS) regression of the local currency value rate against major currency values. Here the hypothesis is a basket peg with little flexibility. The second estimates the de facto degree of exchange rate flexibility by observing how exchange market pressure is allowed to show up. Here the hypothesis is an anchor to the dollar or some other single major currency, but with a possibly substantial degree of exchange rate flexibility around that anchor. It is important to have available a technique that can cover both dimensions: inferring anchor weights and the flexibility parameter. We test the synthesis technique on a variety of fixers, floaters, and basket peggers. We find that real world data demand a statistical technique that allows parameters and regimes to shift frequently. Accordingly we estimate de facto exchange rate regimes: endogenous estimation of parameter breakpoints, following Bai and Perron (1998).
Topic:
Economics, International Trade and Finance, and Markets

200. Renminbi Undervaluation, China's Surplus, and the US Trade Deficit

Author:
William R. Cline
Publication Date:
08-2010
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
On June 21, 2010, in the run-up to the G-20 meeting in Toronto, China announced that it would shift to a more flexible exchange rate policy. From mid-June to July 30 the yuan rose 0.8 percent against the dollar. In contrast, the currency had remained fixed (at about 6.83 yuan to the dollar) from September 2008 to early June 2010. Pressure not only from the United States and the European Union but also from Russia, Brazil, and India as well as the IMF seems likely to have played a role in China's decision, although concerns about domestic inflation may also have been a factor.
Topic:
Economics and Monetary Policy
Political Geography:
United States and China