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961. Macroeconomic Impact of Capital Flight in Sub-Saharan Africa

Author:
John Weeks
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
This paper assesses the impact of capital flight on growth in thirty-one sub-Saharan African countries. It first considers the “macro fundamentals” hypothesis that capital flight would be lower in a country whose government adhered to “sound” macroeconomic policies. Analytical considerations fail to support this hypothesis. Second, it develops a growth estimating equation derived from the Harrod-Domar framework. The growth estimations support the conclusion that capital flight had a major impact on growth over the last three decades, 1980–2010. The negative impact was greatest for the petroleum-exporting countries and those affected by internal conflict, but it was also substantial for the other countries, with a few exceptions.
Topic:
Economics, Markets, Global Markets, Economic growth, Economic Policy, Macroeconomics, and Capital Flight
Political Geography:
Africa, Sudan, Nigeria, Angola, Chad, Cameroon, Global Focus, Gabon, and Republic of Congo

962. Natural Resources and Capital Flight: A Role for Policy?

Author:
Lemma W. Senbet, Gregoire Rota-Graziosi, and Rabah Arezki
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
This paper investigates the relationship between natural resources and capital flight in the form of tax avoidance from multinational corporations. In particular, it focuses on the spillover effects in terms of tax revenue mobilization and stock market development from the thin capitalization rule, a policy instrument aimed at limiting firm tax avoidance through setting limits on a firm’s foreign indebtedness. We exploit the plausibly exogenous within-country variations of data on oil discoveries for a panel of 117 countries during the period 1970–2012. We find evidence that oil discoveries significantly enhance both tax revenue mobilization and stock market development, but only when a thin capitalization rule is in place. We argue that these findings can be explained through the limiting role of a thin capitalization rule in multinational companies’ use of financial transactions among their affiliates or tax havens to transfer part of the profit. The thin capitalization rule may thus not only help limit the erosion of the domestic tax base but may also entice multinational corporations to resort to using and developing the domestic financial system.
Topic:
Development, Economics, International Trade and Finance, Financial Markets, Economic growth, Capital Flows, and Capital Flight
Political Geography:
Africa

963. Has India Peaked?

Author:
John R. Schmidt
Publication Date:
09-2014
Content Type:
Journal Article
Journal:
The Washington Quarterly
Institution:
Center for Strategic and International Studies
Abstract:
Has India peaked? This may seem like a strange question given the strong economic growth the country has experienced since it liberalized its economy in 1991. Together with China, India is widely regarded as the greatest global economic success story of the past quarter century, with growth rates typically ranging between 5 and 10 percent. 1 Although its growth rate has declined recently to less than 5 percent due in part to the global economic downturn, the landslide victory of the strongly pro - business BJP (for Bharatiya Janata Party, or Indian People's Party) in the spring 2014 elections has convinced many that it will begin trending up again in the near future.
Topic:
Economics
Political Geography:
China and India

964. The Civil Transition in Afghanistan: The Metrics of Crisis?

Author:
Anthony H. Cordesman
Publication Date:
12-2014
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
Creating an effective transition for the ANSF is only one of the major challenges that Afghanistan, the US, and Afghanistan's other allies face during 2014-2015 and beyond. The five other key challenges include: Going from an uncertain election to effective leadership and political cohesion and unity. Creating an effective and popular structure governance, with suitable reforms, from the local to central government, reducing corruption to acceptable levels, and making suitable progress in planning, budgeting, and budget execution. Coping with the coming major cuts in outside aid and military spending in Afghanistan, adapting to a largely self-financed economy, developing renewal world economic development plans, carrying out the reforms pledged at the Tokyo Conference, and reducing the many barriers to doing business. Establishing relations with Pakistan and other neighbors that will limit outside pressures and threats, and insurgent sanctuaries on Afghanistan's border. Persuading the US, other donors, NGCO, and nations will to provide advisors to furnish the needed aid effort through at least 2018, and probably well beyond.
Topic:
Corruption, Economics, Governance, and Reform
Political Geography:
Afghanistan and Asia

965. Is the European Model Relevant for ASEAN?

Author:
Eleonora Poli
Publication Date:
11-2014
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Before the 1997 economic crisis in Asia, the institutional evolution of the Association of Southeast Asian Nations (ASEAN) was very different from the European model. The economic downturn in the late 1990s and the global shift toward a neo-liberal economic era urged ASEAN countries to rethink their regional integration strategy and to mimic some of the institutional models in Europe. In light of this, this paper analyses the rationale behind the evolution of ASEAN since the late 1990, evaluating how and why the organization on a surface replicated aspects of the EU model without engaging in meaningful supranational institutionalization.
Topic:
Economics, Regional Cooperation, and Governance
Political Geography:
Europe and Asia

966. European Banking Union: An Immediate Tool for Euro Crisis Management and a Long-Term Project for the Single Market

Author:
Giulia Rosa Maria Cavallo
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
After the adoption of a single monetary policy which commits the European Central Bank to maintaining the euro's purchasing power and price stability in the Eurozone, the European Union is facing a new, but equally fundamental challenge: the implementation in a relatively short time of the so-called "Banking Union". Its purpose is twofold: (1) breaking the link between banking and sovereign risk, with the ultimate goal of achieving full protection of EU savers in the event of a crisis; and (2) ensuring uniformity of credit conditions - which are still too fragmented - within the European banking market, to ensure greater EU integration of the financial system. Starting from the Communication in which the European Commission stressed the need for a banking union, this paper intends to explore the complex process towards its establishment by looking at the EU institutional mechanisms and the legal aspects. In particular, the analysis will be based on two building blocks: (1) the Single Supervisory Mechanism, with a single supervisor at the heart of the banking union; and (2) the Single Resolution Mechanism as a new integrated resolution framework and a resolution fund to address the failure of banking institutions. The paper then assesses the next steps for a fully fledged banking union, necessary in order for this new instrument to lay the foundations for a genuine Economic and Monetary Union, thereby fostering financial and economic stability in the euro area and in the EU as a whole.
Topic:
Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
Europe

967. Global Power Transition, Sanctions and Iran's Export Orientation

Author:
Mohammad Reza Abedini Moghanaki and Mohsen Shariatinia
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
Iranian Review of Foreign Affairs
Institution:
Center for Strategic Research (CSR)
Abstract:
While during the last few decades developed countries were the main buyers of Iranian export items, in the last couple of years, the developing countries have become the primary destination of Iranian exports. It can be argued that a strategic shift has occurred in the Iranian export orientation. Exploration of the reasons for such a reorientation is of importance. The aim of this research is study of the impacts of international trends on the Iranian export orientation with the emphasis placed on non-oil exports. The primary question of this study is: what factors have contributed to the change in Iran's export orientation? The hypothesis posed in response to the question is that: the trend of power transition in the international political economy and intensification of the West's sanctions against Iran constitute key factors in the change. Analyzing Iran's export data, the authors have reasoned that a turn has occurred in the orientation of Iranian export. They have discussed the rise of emerging powers in the international political economy as well as the escalating tension between Iran and the West (manifested in international sanctions) as the two main factors that have contributed to this reorientation. In their point of view, the change in Iran's export orientation is probably permanent which will leave an important imprint on the geopolitical and geo-economic status of Iran.
Topic:
Economics and Politics
Political Geography:
Iran

968. Value Subtraction in Public Sector Production: Accounting Versus Economic Cost of Primary Schooling in India

Author:
Lant Pritchett and Yamini Aiyar
Publication Date:
12-2014
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
We combine newly created data on per student government expenditure on children in government elementary schools across India, data on per student expenditure by households on students attending private elementary schools, and the ASER measure of learning achievement of students in rural areas. The combination of these three sources allows us to compare both the “accounting cost” difference of public and private schools and also the “economic cost”—what it would take public schools, at their existing efficacy in producing learning, to achieve the learning results of the private sector. We estimate that the “accounting cost” per student in a government school in the median state in 2011/12 was Rs. 14,615 while the median child in private school cost Rs. 5,961. Hence in the typical Indian state, educating a student in government school costs more than twice as much than in private school, a gap of Rs. 7,906. Just these accounting cost gaps aggregated state by state suggests an annual excess of public over private cost of children enrolled in government schools of Rs. 50,000 crores (one crore=10 million) or .6 percent of GDP. But even that staggering estimate does not account for the observed learning differentials between public and private. We produce a measure of inefficiency that combines both the excess accounting cost and a money metric estimate of the cost of the inefficacy of lower learning achievement. This measure is the cost at which government schools would be predicted to reach the learning levels of the private sector. Combining the calculations of accounting cost differentials plus the cost of reaching the higher levels of learning observed in the private sector state by state (as both accounting cost differences and learning differences vary widely across states) implies that the excess cost of achieving the existing private learning levels at public sector costs is Rs. 232,000 crores (2.78% of GDP, or nearly US$50 billion). It might seem counterintuitive that the total loss to inefficiency is larger than the actual budget, but that is because the actual budget produces such low levels of learning at such high cost that when the loss from both higher expenditures and lower outputs are measured it exceeds expenditures.
Topic:
Economics, Education, Privatization, and Reform
Political Geography:
India and Asia

969. Legalization Programs and the Integration of Unauthorized Immigrants: A Comparison of S. 744 and IRCA

Author:
María E Enchautegui
Publication Date:
01-2014
Content Type:
Journal Article
Journal:
Journal on Migration and Human Security
Institution:
Center for Migration Studies of New York
Abstract:
Experiences under the Immigration Reform and Control Act of 1986 (IRCA) may prove to be a poor guide for understanding how smoothly today's unauthorized immigrants will integrate into the economy under reform proposals such as the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744). While IRCA provided a relatively quick path to legal permanent resident status, S. 744 proposes a decade long process with much attendant uncertainty. This and other provisions in S. 744 may adversely affect immigrants' integration and economic mobility.
Topic:
Economics and Immigration
Political Geography:
United States

970. Breaking the Standoff: Post-2020 climate finance in the Paris agreement

Author:
Tim Gore, Simon Bradshaw, Annaka Carvalho, Kiri Hanks, and Jan Kowalzig
Publication Date:
12-2014
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
Negotiations are currently under way to develop a new international climate change agreement that will cover all countries and curb global warming to below the internationally agreed limit of 2 degrees. The new agreement will be adopted at the United Nations Climate Change Conference – Conference of the Parties 21, or COP21 – to be held in Paris in November/December 2015, and will be implemented from 2020.
Topic:
Climate Change, Development, Economics, and Environment