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1501. Criss-Crossing Globalization: Uphill Flows of Skill-Intensive Goods and Foreign Direct Investment

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
This paper documents an unusual and possibly significant phenomenon: the export of skills, embodied in goods, services or capital from poorer to richer countries. We first present a set of stylized facts. Using a measure which combines the sophistication of a country's exports with the average income level of destination countries, we show that the performance of a number of developing countries, notably China, Mexico and South Africa, matches that of much more advanced countries, such as Japan, Spain and USA. Creating a new combined dataset on FDI (covering greenfield investment as well as mergers and acquisitions) we show that flows of FDI to OECD countries from developing countries like Brazil, India, Malaysia and South Africa as a share of their GDP, are as large as flows from countries like Japan, Korea and the US. Then, taking the work of Hausmann et al (2007) as a point of departure, we suggest that it is not just the composition of exports but their destination that matters. In both cross-sectional and panel regressions, with a range of controls, we find that a measure of uphill flows of sophisticated goods is significantly associated with better growth performance. These results suggest the need for a deeper analysis of whether development benefits might derive not from deifying comparative advantage but from defying it.
Topic:
Development, Economics, International Trade and Finance, and Foreign Direct Investment
Political Geography:
United States, Japan, Malaysia, India, South Africa, Brazil, Spain, and Korea

1502. The Illusion of Equality: The Educational Consequences of Blinding Weak States, For Example

Author:
Lant Pritchett and Martina Viarengo
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
Does the government control of school systems facilitate equality in school quality? There is a trade-off. On the one hand, government direct control of schools, typically through a large scale hierarchical organization, could produce equalization across schools by providing uniformity in inputs, standards, and teacher qualifications that localized individually managed schools could not achieve. But there is a tendency for large scale formal bureaucracies to “see” less and less of localized reality and hence to manage on the basis of a few simple, objective, and easily administratively verified characteristics (e.g. resources per student, formal teacher qualifications). Whether centralized or localized control produces more equality depends therefore not only on what “could” happen in principle but what does happen in practice. When government implementation capacity is weak, centralized control could lead to only the illusion of equality: in which central control of education with weak internal or external accountability actually allows for much greater inequalities across schools than entirely “uncontrolled” local schools. Data from Pakistan, using results from the LEAPS study, and from two states of India show much larger variance in school quality (adjusted for student characteristics) among the government schools—because of very poor public schools which continue in operation. We use the PISA data to estimate school specific learning achievement (in mathematics, science, and reading) net of individual student and school average background characteristics and compare public and private schools for 34 countries. For these countries there is, on average, exactly the same inequality in adjusted learning achievement across the private schools as across the public schools. But while inequality is the same on average, in some countries, such as Denmark, there was much more equality within the public sector while in others, such as Mexico, there was much more inequality among the public schools. Among the 18 non-OECD participating PISA countries the standard deviation across schools in adjusted quality was, on average, 36 percent higher in government than in private schools. In cases with weak states the proximate cause of high inequality again was that the public sector distribution of performance had a long left tail—schools with extremely poor performance. Relying on blinded weak states for top-down control of educational systems can be lose-lose relative to localized systems relying on bottom-up control—producing worse average performance and higher inequality.
Topic:
Economics, Education, Government, Political Economy, and Social Stratification
Political Geography:
Pakistan and India

1503. Toward Effective Multilateralism: Why Bigger May Not Be Better

Author:
Thomas Wright
Publication Date:
07-2009
Content Type:
Journal Article
Journal:
The Washington Quarterly
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
The past eight years have been a period of retreat and revival for multilateralism. Retreat in the face of the most concerted unilateralist strategy undertaken by a U.S. administration in half a century, and revival because, during the Bush administration's second term, there was an emerging political consensus that multilateralism was a critical element of U.S. power. Revival, however, promised not simply restoring multilateral institutions in U.S. strategy, but reforming or even replacing those institutions themselves. The ongoing financial crisis_with the Group of 20 (G-20), including leaders from Argentina, China, India, and South Africa, among others, taking on a leading role_has merely been the latest sign that greater multilateral cooperation is both necessary and difficult.
Political Geography:
United States, China, India, South Africa, and Argentina

1504. The United States, India, and Global Governance: Can They Work Together?

Author:
Teresita C. Schaffer
Publication Date:
07-2009
Content Type:
Journal Article
Journal:
The Washington Quarterly
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
Two snapshots convey the flavor of India's pursuit of a larger role in global governing councils. The first dates from India's most recent accession for a two-year term to the United Nations Security Council in January 1991, just as the Union of Soviet Socialist Republics (USSR) was coming apart and the end of the Cold War was in sight. The first major issue to come before the council was the package of resolutions that would end the first Iraq war. Harried Indian diplomats, faced with draft resolutions being pressed on them with great insistence by their U.S. counterparts, spoke of their need to ''find the non-aligned consensus.'' Whatever decision India made was bound to alienate an international constituency it cared about. For Indian officials, this moment captured both the advantages and drawbacks of participating in the world's decisionmaking. The then—Indian ambassador to the United States, Abid Hussein, expressed considerable frustration in a private conversation with me at the time: ''Do you realize that we will have to do this for two years?''
Topic:
Cold War
Political Geography:
United States, India, and Soviet Union

1505. Ottoman De-Industrialization 1800-1913: Assessing the Shock, Its Impact and the Response

Author:
Jeffrey G. Williamson and Şevket Pamuk
Publication Date:
02-2009
Content Type:
Working Paper
Institution:
Weatherhead Center for International Affairs, Harvard University
Abstract:
India and Britain were much bigger players in the 18th century world market for textiles than was Egypt, the Levant and the core of the Ottoman Empire, but these eastern Mediterranean regions did export carpets, silks and other textiles to Europe and the East. By the middle of the 19th century, they had lost most of their export market and much of their domestic market to globalization forces and rapid productivity growth in European manufacturing. Other local industries also suffered decline, and these regions underwent de-industrialization as a consequence. How different was Ottoman experience from the rest of the poor periphery? Was de-industrialization more or less pronounced? Was the terms of trade shock bigger or smaller? How much of Ottoman de-industrialization was due to falling world trade barriers—ocean transport revolutions and European liberal trade policy, how much due to factory-based productivity advance in Europe, how much to declining Ottoman competitiveness in manufacturing, how much to Ottoman railroads penetrating the interior, and how much to Ottoman policy? The paper uses a price-dual approach to seek the answers. It documents trends in export and import prices, relative to each other and to non-tradables, as well as to the unskilled wage. The impact of globalization, European productivity advance, Ottoman wage costs and policy are assessed by using a simple neo-Ricardian three sector model, and by comparison with what was taking place in the rest of the poor periphery.
Topic:
Economics, Globalization, International Trade and Finance, and Markets
Political Geography:
Britain, Europe, Turkey, India, and Egypt

1506. Promoting Cross-LoC Trade in Kashmir

Author:
Moeed Yusuf
Publication Date:
09-2009
Content Type:
Working Paper
Institution:
United States Institute of Peace
Abstract:
Since 2005, Pakistan and India have pursued out-of-the-box thinking on Kashmir and have allowed nominal human interaction and economic exchanges across the Line of Control (LoC). One of the most promising recent developments has been the formation of the Federation of Jammu and Kashmir Chamber of Commerce and Industry (Joint Chamber), the first formal joint establishment across the Line of Control, which is poised to play a central role in future efforts at increasing economic collaboration. The Joint Chamber is still in its infancy and faces a number of critical challenges that are indicative of the potential stumbling blocks any effort at enhancing economic collaboration across the Line of Control is likely to face. Currently, a consensus is missing on the future direction of the Joint Chamber. Not only are the central governments in Islamabad and New Delhi skeptical about according this new body a pivotal position in cross–LoC trade, but even the business communities in the Indian and Pakistani parts of the state suffer from internal differences on the scope of the Chamber's activities. Perhaps most worrisome is the Kashmiri business community's reluctance to lobby proactively for expansion of ties beyond trade in goods. Investment, joint ventures, and transit trade through Pakistani Kashmir and Pakistan hold the real potential if economic interdependence is to ameliorate the long-standing political tensions over Kashmir. The Joint Chamber members need to agree on a clear vision for the Chamber, preferably including concerns not only relevant to goods trade but also to trade in services, investment, joint ventures, and transit trade. To cover this broad horizon the Chamber would have to increase its capacity by involving entities such as trade associations and the civil society at large. Before tangible gains can be made, the Joint Chamber needs a number of scoping exercises to determine the true potential for economic collaboration on all fronts. The current dearth of information is a major shortcoming in determining the specific areas that could expand the hitherto nascent cross–LoC interaction. The Joint Chamber is already engaged in advocating for an increase in the nominal goods trade initiated across the LoC in October 2008. Protocols for physical travel and communication between traders, marketing and banking facilities, and an expansion of the scope of engagement are obvious next steps for this process. The key to the Joint Chamber's success is to strike a delicate balance between nudging the governments to open up and remaining pragmatic about the necessarily incremental nature of the gains.
Topic:
Conflict Resolution, Political Violence, Islam, and Bilateral Relations
Political Geography:
Pakistan, South Asia, and India

1507. Unconventional partners: Australia-India cooperation in reducing nuclear dangers

Author:
Rory Medcalf and Amandeep Gill
Publication Date:
10-2009
Content Type:
Policy Brief
Institution:
Lowy Institute for International Policy
Abstract:
To reduce the grave dangers posed by the continued existence and spread of nuclear weapons, and the risk that they will one day again be used, unconventional diplomacy is needed. Part of the problem is the way in which global agreements or pragmatic interim solutions are often obstructed by longstanding divisions among nations: nuclear weapon states and non-nuclear weapon states; Nuclear Non-Proliferation Treaty (NPT) members and nonmembers; Western states and the non-aligned. New partnerships and platforms for dialogue could cut across these stale categories, at least on some issues, and expand the space for agreement and new thinking. Australia and India could take the lead in crafting one such new partnership.
Topic:
Arms Control and Proliferation, Nuclear Weapons, Peace Studies, Treaties and Agreements, and Weapons of Mass Destruction
Political Geography:
South Asia, India, and Australia/Pacific

1508. Can India catch up with China?

Publication Date:
09-2009
Content Type:
Working Paper
Institution:
Oxford Economics
Abstract:
Although it is only since 2000 that the growing economic power of the Chinese 'dragon' has emerged fully into the media spotlight, its GDP has in fact been growing at an average rate of close to 10% pa for the last 30 years. On a PPP basis, China is already the second largest economy in the world. The Indian 'elephant', on the other hand, has grown at a more sedate pace, but following a burst in the 2000s it now has the fourth largest GDP in the world on a PPP basis and has been close to emulating Chinese growth rates. With the global economy perhaps now starting to recover slowly from the deep recession, it is possible that India is better placed than China to benefit from what may prove to be a fairly slow period of growth in the developed economies in the years ahead, with the latter's huge exports of manufactured goods struggling to recapture the momentum of the last ten years. For China, net trade will probably be a significant drag on growth in the year ahead, while the stimulus from state-led investment may begin to peter out. In order to maintain earlier rapid growth, the Chinese economy will need to rely much more heavily on domestic demand than before, especially if global over-capacity appears in certain key industries. Despite the apparent resilience of the economy to the global recession, there are a number of question marks over whether this shift can be made quickly. India's fundamentals have become more favourable given the rise in its service sector and climbing FDI inflows (albeit both of these remain well below Chinese levels), and its lower reliance on trade will also mean that it is less exposed to what may be a lengthy period of sluggish world demand. But it also faces problems, including an inefficient agricultural sector, a still-burdensome bureaucracy and a cautious stance towards privatisation. Its fiscal position is also much weaker than China, which may be a long-term threat to greater foreign investment. India also has the benefit of being a democracy – although to date this has probably hampered rather than helped growth performance, it should facilitate faster growth in the longer term. China's authoritarian regime has enabled policies to be implemented more quickly and with little regard to public popularity, but this may be storing up socio-political problems for the longer term, especially if growth were to slow sharply. Demographic factors should also favour India, but again over the long term rather than the next decade. China's decision to start to reverse its one-child policy indicates mounting concern about its ageing population and labour shortages in the future. India on the other hand may be able to turn population growth trends to its advantage, as long as it can improve the skills base. In conclusion, although India's growth trend is forecast to pick-up to 7-8% over the next decade, this is not likely to be enough to overtake China's pace of expansion. But India's recent surge in growth was achieved with few reforms – if it can manage to implement further liberalisation measures, attract increasing FDI inflows and turn its more favourable demographics to its advantage, then the 'elephant' may begin to catch up with the 'dragon' after 2020, although by that time the gap will be even wider than it is now.
Topic:
Development, Economics, and Foreign Direct Investment
Political Geography:
China, South Asia, and India

1509. The United States and India 3.0: Cave! Hic Dragones

Author:
Ashley J. Tellis
Publication Date:
10-2009
Content Type:
Policy Brief
Institution:
Carnegie Endowment for International Peace
Abstract:
The United States and India share the fundamental objective of preserving an Asia that is peaceful, prosperous, and free. Without security, India's meteoric rise cannot continue. While New Delhi can manage Pakistan, its longtime regional adversary, it will have more difficulty confronting the challenges posed by a rising China. As a result, India will continue to depend on the United States to preserve order in Asia until it can protect its own interests there.
Topic:
Ethnic Conflict, Terrorism, Power Politics, and Bilateral Relations
Political Geography:
Pakistan, United States, China, India, and Asia

1510. Tourism in the Developing World

Author:
Raymond Gilpin and Martha Honey
Publication Date:
10-2009
Content Type:
Working Paper
Institution:
United States Institute of Peace
Abstract:
Although often underestimated, the tourism industry can help promote peace and stability in developing countries by providing jobs, generating income, diversifying the economy, protecting the environment, and promoting cross-cultural awareness. Tourism is the fourth-largest industry in the global economy.
Topic:
Climate Change, Development, Globalization, and Third World
Political Geography:
India and Nigeria