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731. China invests (somewhat) more in the world

Author:
Derek M. Scissors
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
New data published in the American Enterprise Institute-Heritage Foundation China Global Investment Tracker show that China continues to invest heavily around the world. Outward investment excluding bonds stood at $85 billion in 2013 and is likely to reach $100 billion annually by 2015. Energy, metals, and real estate are the prime targets. The United States in particular received a record of more than $14 billion in Chinese investment in 2013. Although China has shown a pattern of focusing on one region for a time then moving on to the next, the United States could prove to be a viable long-term investment location. The economic benefits of this investment flow are notable, but US policymakers (and those in other countries) should consider national security, the treatment of state-owned enterprises, and reciprocity when deciding to encourage or limit future Chinese investment.
Topic:
Security, Foreign Policy, Development, Economics, Emerging Markets, International Trade and Finance, Foreign Direct Investment, and Sovereign Wealth Funds
Political Geography:
United States, China, and Asia

732. Scarcity without Leviathan: The Violent Effects of Cocaine Supply Shortages in the Mexican Drug War

Author:
Juan Camilo Castillo, Daniel Mejia, and Pascual Restrepo
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Using the case of the cocaine trade in Mexico as a relevant and salient example, this paper shows that scarcity leads to violence in markets without third party enforcement. We construct a model in which supply shortages increase total revenue when demand is inelastic. If property rights over revenues are not well defined because of the lack of reliable third party enforcement, the incentives to prey on others and avoid predation by exercising violence increase with scarcity, thus increasing violence. We test our model and the proposed channel using data for the cocaine trade in Mexico. We found that exogenous supply shocks originated in changes in the amount of cocaine seized in Colombia (Mexico's main cocaine supplier) create scarcity and increase drug-related violence in Mexico.
Topic:
Crime, Economics, War on Drugs, Narcotics Trafficking, and Law Enforcement
Political Geography:
Colombia, Latin America, and Mexico

733. Development as Diffusion: Manufacturing Productivity and Sub-Saharan Africa's Missing Middle

Author:
Vijaya Ramachandran, Alan Gelb, and Christian J. Meyer
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We consider economic development of Sub-Saharan Africa from the perspective of slow convergence of productivity, both across sectors and across firms within sectors. Why have "productivity enclaves", islands of high productivity in a sea of smaller low-productivity firms, not diffused more rapidly? We summarize and analyze three sets of factors: First, the poor business climate, which constrains the allocation of production factors between sectors and firms. Second, the complex political economy of business-government relations in Africa's small economies. Third, the distribution of firm capabilities. The roots of these factors lie in Africa's geography and its distinctive history, including the legacy of its colonial period on state formation and market structure.
Topic:
Development, Economics, Industrial Policy, and Markets
Political Geography:
Africa

734. From Maize to Haze: Agricultural Shocks and the Growth of the Mexican Drug Sector

Author:
Oeindrila Dube, Omar Garcia-Ponce, and Kevin Thom
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We examine how commodity price shocks experienced by rural producers affect the drug trade in Mexico. Our analysis exploits exogenous movements in the Mexican maize price stemming from weather conditions in U.S. maize-growing regions, as well as export flows of other major maize producers. Using data on over 2,200 municipios spanning 1990-2010, we show that lower prices differentially increased the cultivation of both marijuana and opium poppies in municipios more climatically suited to growing maize. This increase was accompanied by differentially lower rural wages, suggesting that households planted more drug crops in response to the decreased income generating potential of maize farming.
Topic:
Agriculture, Economics, Poverty, War on Drugs, and Narcotics Trafficking
Political Geography:
Latin America and Mexico

735. Migration as a Strategy for Household Finance: A Research Agenda on Remittances, Payments, and Development

Author:
Michael Clemens and Timothy N. Ogden
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
It is time to fundamentally reframe the research agenda on remittances, payments, and development. We describe many of the research questions that now dominate the literature and why they lead us to uninformative answers. We propose reasons why these questions dominate, the most important of which is that researchers tend to view remittances as states do (as windfall income) rather than as families do (as returns on investment). Migration is, among other things, a strategy for financial management in poor households: location is an asset, migration an investment. This shift of perspective leads to much more fruitful research questions that have been relatively neglected. We suggest 12 such questions.
Topic:
Economics, Migration, Political Economy, Poverty, Labor Issues, and Immigration

736. Foreign investments in Uganda's oil sector: linkages and issues for the local economy

Author:
Anne Mette Kjær
Publication Date:
03-2014
Content Type:
Working Paper
Institution:
Danish Institute for International Studies
Abstract:
The Ugandan economy resembles many other economies in sub-Saharan Africa in that it has a large subsistence sector, relies on a few primary commodities for export and depends on aid to finance its public services. Oil and minerals have so far not been important to the economy. However, this might change as an estimated 3.5 billion barrel oil reservoir has been discovered in Uganda's Western and Northwestern Albertine Graben. Minerals have also been found and are being sold off as concessions. If oil revenues start to be mobilized as currently planned (2016-17), significant changes in not only government finance but also in the governments' relationships with donors and in state–society relations are likely to occur. The consequences for local communities and the environment are also likely to be significant.
Topic:
Development, Economics, Oil, Natural Resources, Foreign Aid, Fragile/Failed State, and Foreign Direct Investment
Political Geography:
Uganda and Africa

737. Rethinking the National Export Initiative

Author:
Caroline Freund
Publication Date:
02-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
As the United States struggled with unemployment and other effects of the Great Recession in January 2010, President Barack Obama set the goal of doubling exports within five years and creating 2 million new export-related jobs. Four years later, however, exports are less than halfway toward that goal and the rate of export growth is slowing. More worrisome, the administration's strategy failed to boost average export growth from historical levels, despite the robust recovery in international trade after the collapse of 2009. The National Export Initiative (NEI) has come up short.
Topic:
Economics, Industrial Policy, International Trade and Finance, Markets, and Maritime Commerce
Political Geography:
United States

738. A Proposed Code to Discipline Local Content Requirements

Author:
Gary Clyde Hufbauer, Jeffrey J. Schott, and Cathleen Cimino
Publication Date:
02-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Proponents of liberalized trade and finance were relieved when the global economic crisis in 2008 produced a broad range of pledges from countries around the world to avoid new barriers to trade and investment (see Evenett 2013). These promises, designed to avert a replay of the Great Depression of the 1930s, were largely honored when it came to classic forms of protection (tariffs and quotas). But the spirit of that pledge was violated as countries shifted from traditional forms of protection to behind-the-border nontariff barriers (NTBs), including local content requirements (LCRs)—policies mandating that local suppliers of goods, services, and even entire projects be favored by governments and private firms, even when foreign firms offer lower costs, better quality, and faster delivery.
Topic:
Debt, Economics, International Trade and Finance, Markets, Financial Crisis, and Reform

739. Is the European Central Bank Failing Its Price Stability Mandate?

Author:
Ángel Ubide
Publication Date:
02-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Inflation in the euro area is too low, just 0.9 percent year-on-year in December 2013, and inflation expectations, measured from inflation derivative contracts, have shifted lower, indicating that markets expect some small probability of deflation in 2014 and average inflation over the next five years in the 1.25 to 1.5 percent range. The European Central Bank (ECB), however, seems to be content with this outlook. Its current projections show a very slow economic recovery and inflation at just 1.3 percent in two years' time. Yet the ECB describes the risks to inflation as balanced. This puzzling assessment might be due to the fact that the ECB's definition of price stability is less precise than that employed by other central banks, and some ECB members may interpret the definition as setting a ceiling, rather than a target, for inflation at close to but below 2 percent. But if one considers the ECB's self-assessment of success since its creation—achieving 2 percent inflation on average—its current inflation forecast of 1.3 percent would fall short of achieving its price stability mandate.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
Europe

740. Monetary Policy with Abundant Liquidity: A New Operating Framework for the Federal Reserve

Author:
Joseph E. Gagnon and Brian Sack
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The dramatic increase in the Federal Reserve's balance sheet since 2009 has attracted the attention of economists, pundits, and ordinary citizens. The amount of assets held by the Fed recently crossed $4 trillion and will likely continue to rise to a peak of about $4.5 trillion. This run-up in asset holdings has resulted from the Fed's large-scale asset purchase programs, which were intended to support economic growth. However, a side-effect of these asset purchases is the creation of unprecedented amounts of liquidity in the financial system.
Topic:
Economics, International Trade and Finance, Markets, and Monetary Policy
Political Geography:
United States