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1232. 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
- 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
1233. Commodity Price Shocks and the Australian Economy since Federation
- Author:
- Sambit Bhattacharyya and Jeffery G. Williamson
- Publication Date:
- 07-2009
- Content Type:
- Working Paper
- Institution:
- Weatherhead Center for International Affairs, Harvard University
- Abstract:
- Even though Australia has experienced frequent and large commodity export price shocks like the Third World, it seems to have dealt with the volatility better. Why? This paper explores Australian terms of trade volatility since 1901. It identifies two major price shock episodes before the recent mining-led boom and bust. It assesses their relative magnitude, their de-industrialization and distributional impact, and policy responses. In what way has Australia been different from other commodity exporters experiencing volatile prices?
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- Australia/Pacific
1234. The Estimated Trade Effects of the Euro: Why Are They Below Those From Historical Monetary Unions Among Smaller Countries?
- Author:
- Jeffrey Frankel
- Publication Date:
- 04-2009
- Content Type:
- Working Paper
- Institution:
- Weatherhead Center for International Affairs, Harvard University
- Abstract:
- Andy Rose (2000), followed by many others, has used the gravity model of bilateral trade on a large data set to estimate the trade effects of monetary unions among small countries. The finding has been large estimates: Trade among members seems to double or triple, that is, to increase by 100-200%. After the advent of EMU in 1999, Micco, Ordoñez and Stein and others used the gravity model on a much smaller data set to estimate the effects of the euro on trade among its members. The estimates tend to be statistically significant, but far smaller in magnitude: on the order of 10-20% during the first four years. What explains the discrepancy? This paper seeks to address two questions. First, do the effects on intra-euroland trade that were estimated in the euro's first four years hold up in the second four years? The answer is yes. Second, and more complicated, what is the reason for the big discrepancy vis-à-vis other currency unions? We investigate three prominent possible explanations for the gap between 15% and 200%. First, lags. The euro is still very young. Second, size. The European countries are much bigger on average than most of those who had formed currency unions in the past. Third, endogeneity of the decision to adopt an institutional currency link. Perhaps the high correlations estimated in earlier studies were spurious, an artifact of reverse causality. We test the hypotheses regarding lags and size directly; and we address the endogeneity problem by means of a natural experiment involving trade between the CFA countries of Africa and the euro countries of Europe. Contrary to expectations, we find little evidence that any of these factors explains a substantial share of the gap, let alone all of it.
- Topic:
- International Trade and Finance, Bilateral Relations, and Monetary Policy
- Political Geography:
- Europe
1235. Addressing the Leakage/Competitiveness Issue in Climate Change Policy Proposals
- Author:
- Jeffrey A. Frankel
- Publication Date:
- 04-2009
- Content Type:
- Working Paper
- Institution:
- Weatherhead Center for International Affairs, Harvard University
- Abstract:
- We will likely see increasing efforts to minimize leakage of carbon to non-participating countries and to address concerns on behalf of the competitiveness of carbon-intensive industry. Environmentalists on one side and free traders on the other side fear that border measures such as tariffs or permit-requirements against imports of carbon-intensive products will collide with the WTO. There need not necessarily be a conflict, if the measures are designed sensibly. There are precedents -- the shrimp-turtle case and the Montreal Protocol -- that could justify border measures to avoid undermining the Kyoto Protocol or its successors, if the measures are carefully designed. But if the design is dominated by politics, as is likely, import penalties are likely to run afoul of the WTO, to distort trade, and perhaps even to fail in the goal of preventing leakage.
- Topic:
- Climate Change, Environment, and International Trade and Finance
- Political Geography:
- China
1236. 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
1237. Beijing Bubble, Beijing Bust: Inequality, Trade, and Capital Inflow into China
- Author:
- James K. Galbraith, Sara Hsu, and Wenjie Zhang
- Publication Date:
- 09-2009
- Content Type:
- Journal Article
- Institution:
- German Institute of Global and Area Studies
- Abstract:
- This paper explores the relationships between inequality, trade, and capital flows into China since the early 1990s and particularly in the first years of the present decade. We show that the rise in economic inequality in China has more to do directly with the activities associated with China's financial and building boom, notably in Beijing, than with the massive growth in manufacturing employment and in Chinese exports since China joined the WTO in 2001. Nevertheless, it is likely that a flow of profits from the export boom did feed the speculative fires in the capital and elsewhere, and therefore it should be no surprise that the fall of one should be linked to the fall of the other, in a particularly painful reduction of economic inequality.
- Topic:
- International Trade and Finance
- Political Geography:
- China
1238. Message to the G20: Defeating protectionism begins at home
- Author:
- Mark P Thirlwell
- Publication Date:
- 09-2009
- Content Type:
- Policy Brief
- Institution:
- Lowy Institute for International Policy
- Abstract:
- What is the problem ? On 16 November 2008, G20 leaders made a commitment to resist protectionism. When they meet in Pittsburgh, on 24 September 2009, they will have an opportunity to review that commitment and to decide how best to act on it. The advice they have received to date focuses on international monitoring and short-term responses to the global economic crisis. These measures do little to deal with the underlying causes of protectionism.
- Topic:
- Economics, International Cooperation, International Organization, International Trade and Finance, and Treaties and Agreements
1239. External imbalances and the G20
- Author:
- Stephen Grenville
- Publication Date:
- 09-2009
- Content Type:
- Policy Brief
- Institution:
- Lowy Institute for International Policy
- Abstract:
- International external imbalances have been blamed for playing a central role in the Global Financial Crisis. China's large external surplus usually figures prominently in these explanations. While a more balanced account of the causes of the crisis would give only a modest role to external imbalances there seems little doubt that some adjustment of these imbalances over the next few years is both inevitable and desirable, not because external imbalances in themselves are inherently undesirable, but because some of the specific components of today's current balances are unsustainable. Markets could bring about these necessary adjustments over time. History, however, tells us that market-driven adjustments are often accompanied by exchange-rate overshooting and trade- threatening protectionist responses.
- Topic:
- Economics, International Trade and Finance, and Financial Crisis
- Political Geography:
- China
1240. Russian outward FDI and its policy context
- Author:
- Andrei Panibratov and Kalman Kalotay
- Publication Date:
- 10-2009
- Content Type:
- Working Paper
- Institution:
- Columbia Center on Sustainable Investment
- Abstract:
- Outward foreign direct investment (OFDI) from Russia often surprises outside observers by its landmark deals. One of them was the purchase in September 2009 of a 55% stake in General Motors' German affiliate Opel by a consortium of the Canadian car maker Magna and the Russian state-owned bank Sberbank. The latter is the largest creditor of the Russian car maker GAZ, and may represent its commercial interests in the contract. With this deal, Russia has bought into the industrial heartland of the world economy and could potentially access more advanced technology. This acquisition hints at the growth of Russian OFDI in general, which has prospered despite fears in many host countries that the investors are subject to Russian political interference, a fear that recently announced Russian policy intentions may allay.
- Topic:
- Economics, International Trade and Finance, Markets, and Foreign Direct Investment
- Political Geography:
- Russia, Europe, and Asia