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201. Do Developed and Developing Countries Compete Head to Head in High Tech?

Author:
Robert Z. Lawrence and Lawrence Edwards
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Concerns that growth in developing countries could worsen the US terms of trade and that increased US trade with developing countries will increase US wage inequality both implicitly reflect the assumption that goods produced in the United States and developing countries are close substitutes and that specialization is incomplete. In this paper we show on the contrary that there are distinctive patterns of international specialization and that developed and developing countries export fundamentally different products, especially those classified as high tech. Judged by export shares, the United States and developing countries specialize in quite different product categories that, for the most part, do not overlap. Moreover, even when exports are classified in the same category, there are large and systematic differences in unit values that suggest the products made by developed and developing countries are not very close substitutes—developed country products are far more sophisticated.
Topic:
Development, Emerging Markets, International Trade and Finance, Markets, Science and Technology, and Labor Issues
Political Geography:
United States

202. Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach

Author:
Olivier Jeanne and Anton Korinek
Publication Date:
05-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper analyzes prudential controls on capital flows to emerging markets from the perspective of a Pigouvian tax that addresses externalities associated with the deleveraging cycle. It presents a model in which restricting capital inflows during boom times reduces the potential outflows during busts. This mitigates the feedback effects of deleveraging episodes, when tightening financial constraints on borrowers and collapsing prices for collateral assets have mutually reinforcing effects. In our model, capital controls reduce macroeconomic volatility and increase standard measures of consumer welfare.
Topic:
Economics, Emerging Markets, International Trade and Finance, Foreign Direct Investment, and Financial Crisis

203. Dealing with Volatile Capital Flows

Author:
Olivier Jeanne
Publication Date:
07-2010
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The set of tools and mechanisms with which emerging-market countries insure themselves against volatile capital flows is in a state of flux. Most emerging-market countries had accumulated an unprecedented level of international reserves before the global financial crisis that started in 2008. The crisis itself led to a large increase in International Monetary Fund (IMF) resources and the introduction of a new lending facility, the Flexible Credit Line (FCL). Meanwhile, some progress was made toward transforming the Chiang Mai Initiative into an Asian Monetary Fund, and the Greek debt crisis even prompted calls for the creation of a European Monetary Fund.
Topic:
Development, Economics, Emerging Markets, Markets, and Foreign Direct Investment

204. The evolving post-crisis world

Author:
Stephen Grenville
Publication Date:
04-2010
Content Type:
Working Paper
Institution:
Lowy Institute for International Policy
Abstract:
The worst of the global financial crisis (GFC) is over, but it has left scars, principally in the form of fiscallydriven debt increases, balance sheets that still need repair and high unemployment in the principal crisis countries. There is also unfinished business from the precrisis period, in the form of external imbalances. More positively, the crisis offers lessons about economic policymaking that may improve the way things are done. Of course the main lessons are for the developed countries that were at the centre of the crisis. But the countries of the region had to cope with the backwash, and in doing so lessons were learned. In addition, the lessons in the crisis countries, learned in an environment of extreme stress, may have relevance for the emerging market economies of this region.
Topic:
Development, Emerging Markets, and Financial Crisis
Political Geography:
China, India, and Asia

205. Sectoral Productivity Trend: Convergence Islands in Oceans of Divergence

Author:
Fulvio Castellacci, Gaaitzen J. de Vries, and Bart Los
Publication Date:
07-2010
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
In their influential study on productivity growth at the sector-level, Bernard and Jones (1996, BJ) observed convergence of aggregate labor productivity levels in 14 highly developed countries in 1970-1987. They also found evidence that this could be attributed to convergence in services productivity rather than in manufacturing. The main question this paper addresses is whether this result can be generalized to a broader set of countries. Several strands of growth theory suggest that thresholds with regard to a variety of issues can lead to multiple growth regimes, which are likely to lead to very heterogeneous patterns of convergence and divergence. To analyze this, we use econometric techniques that explicitly allow for identification of parameter heterogeneity (quantile regressions and quantile smoothing splines), both with regard to initial conditions and to performance conditional on these initial productivity levels. BJ's data are extended in several dimensions. The recently developed sectoral dataset we use spans the period 1970-2004 and covers 49 countries, including many developing countries. Overall, our findings suggest that convergence as found by BJ only applies to limited groups of country-sectors ('convergence islands'), whereas the biggest parts of our sample spaces can be considered as 'oceans of divergence'.
Topic:
Development, Economics, and Emerging Markets

206. Closing the Technology Gap?

Author:
Fulvio Castellacci
Publication Date:
08-2010
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
This paper focuses on the dimensions shaping the dynamics of technology. We present a model where the knowledge stock of a country grows over time as a function of three main factors: its innovation intensity, its technological infrastructures and its human capital. The latter two variables contribute to determine the absorptive capacity of a country as well as its innovative ability. Based on this theoretical framework, we carry out an empirical analysis that investigates the dynamics of technology in a large sample of developed and developing economies in the last two-decade period, and studies its relationships with the growth of income per capita in a dynamic panel model setting. The results indicate that the cross-country distributions of technological infrastructures and human capital have experienced a process of convergence, whereas the innovative intensity is characterized by increasing polarization between rich and poor economies. Thus, while the conditions for catching up have generally improved, the increasing innovation gap represents a major factor behind the observed differences in income per capita.
Topic:
Development, Economics, Emerging Markets, Science and Technology, and Infrastructure

207. The G-20 and International Financial Institution Governance

Author:
Edwin M. Truman
Publication Date:
09-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper addresses the agenda for the Group of Twenty (G-20) leaders' meeting in Seoul, Korea in November 2010. This is an opportunity and challenge for Asian leaders in particular. Their test will be, first, to demonstrate that they can responsibly advance economic recovery. They must also deliver on institutional reform, in particular of the International Monetary Fund (IMF). I advocate a substantial expansion of the IMF's role as lender of last resort that is integrated with the surveillance role of the IMF in the form of comprehensive prequalification for IMF assistance and policy advice and a substantial increase in the IMF's financial resources. I also propose an approach to meaningful reform of the distribution of IMF quotas along with limiting European seats on the IMF executive board.
Topic:
Economics, Emerging Markets, Global Recession, Financial Crisis, and Governance
Political Geography:
China, Israel, Asia, and Korea

208. Managing the Challenge of Russian Energy Policies

Author:
Keith C. Smith
Publication Date:
12-2010
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
Following the breakup of the Soviet Union and the Warsaw Pact, the leaders of Russia, including then-President Boris Yeltsin, searched for new methods of continuing to exert influence over the former Soviet-controlled region. The Kremlin at first used an energy blockade to the Baltic States in 1990 in an attempt to prevent their breakaway from the Soviet Union. After that failed, it then focused on the growing opposition in the former republics of the Soviet Union and in East Central Europe to its foreign and economic policies, and in particular on demands that Russian military forces withdraw from the newly independent states. The Kremlin leadership quickly recognized that short of military action, its major foreign policy tool was the denial or threat of denial of access to Russia's vast oil and gas resources. The economies of East European and Central Asian countries, and especially their rail and pipeline infrastructures, had been hardwired by Soviet leaders to assure total dependency on Moscow for their raw materials, including oil, gas, coal, and nuclear fuel.
Topic:
Cold War, Economics, Emerging Markets, Energy Policy, and Oil
Political Geography:
Russia, Europe, Central Asia, and Soviet Union

209. Russia's modernization reloaded: Political constraints on economic development

Author:
Katri Pynnöniemi
Publication Date:
11-2010
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
Rumour has it that prior to his first visit to Beijing in spring 2008, President Medvedev instructed officials at the Ministry of Trade and Development to take a picture of Moscow that would aptly convey Russia's drive for modernization and innovation to his Chinese hosts. In carrying out his orders, employees from the ministry spent two months looking for a suitable place to photograph, but it is not known whether they were successful in their quest or not. Perhaps the story is only apocryphal, and no such order was ever given. Nevertheless, the anecdote has sown the seeds of doubt in the minds of the country's current leadership that there is actually not that much to see when it comes to the campaign for the 'technological modernization' of Russia.
Topic:
Development, Emerging Markets, Markets, Political Economy, and Science and Technology
Political Geography:
Russia, China, and Moscow

210. Energy Innovation Policy in Major Emerging Countries

Author:
Ruud Kempener
Publication Date:
12-2010
Content Type:
Policy Brief
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
Over the past decade, the six BRIMCS countries— Brazil, Russia, India, Mexico, China, and South Africa—have become important global players in political and economic domains. In 2007, they were collectively responsible for a third of the world's energy consumption, driven by China's growing energy use. Despite their increasing significance in the world's energy sector, very little systematic analysis of their energy investments, innovation institutions, and energy innovation policies has taken place. The International Energy Agency (IEA) is one of the few agencies that have been collecting data on ERD investments, but none of the BRIMCS countries are members.
Topic:
Emerging Markets, Energy Policy, Oil, and Natural Resources
Political Geography:
Russia, China, India, South Africa, Brazil, and Mexico