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11031. 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
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

11032. The Realities and Relevance of Japan's Great Recession: Neither Ran nor Rashomon

Author:
Adam S. Posen
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Japan's Great Recession was the result of a series of macroeconomic and financial policy mistakes. Thus, it was largely avoidable once the initial shock from the bubble bursting had passed. The aberration in Japan's recession was not the behaviour of growth, which is best seen as a series of recoveries aborted by policy errors. Rather, the surprise was the persistent steadiness of limited deflation, even after recovery took place. This is a more fundamental challenge to our basic macroeconomic understanding than is commonly recognized. The UK and US economies are at low risk of having recurrent recessions through macroeconomic policy mistakes—but deflation itself cannot be ruled out. The United Kingdom worryingly combines a couple of financial parallels to Japan with far less room for fiscal action to compensate for them than Japan had. Also, Japan did not face poor prospects for external demand and the need to reallocate productive resources across export sectors during its Great Recession. Many economies do now face this challenge simultaneously, which may limit the pace of, and their share in, the global recovery.
Topic:
Economics, Markets, Monetary Policy, and Financial Crisis
Political Geography:
United States, Japan, and United Kingdom

11033. Toward a Sunny Future? Global Integration in the Solar PV Industry

Author:
Jacob Funk Kirkegaard, Thilo Hanemann, Lutz Weischer, and Matt Miller
Publication Date:
05-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Policymakers seem to face a trade-off when designing national trade and investment policies related to clean energy sectors. They have pledged to address climate change and accelerate the large-scale deployment of renewable energy technologies, which would benefit from increased global integration, but they are also tempted to nurture and protect domestic clean technology markets to create green jobs at home and ensure domestic political support for more ambitious climate policies. This paper analyzes the global integration of the solar photovoltaic (PV) sector and looks in detail at the industry's recent growth patterns, industry cost structure, trade and investment patterns, government support policies and employment generation potential. In order to further stimulate both further growth of the solar industry and local job creation without constructing new trade and investment barriers, we recommend the following: Governments must provide sufficient and predictable long-term support to solar energy deployment. Such long-term frameworks bring investments forward and encourage cost cutting and innovation, so that government support can decrease over time. A price on carbon emissions would provide an additional long-term market signal and likely accelerate this process. Policymakers should focus not on solely the manufacturing jobs in the solar industry, but on the total number of jobs that could possibly be created including those in research, project development, installation, operations and maintenance. Global integration and broader solar PV technology deployment through lower costs can be encouraged by keeping global solar PV markets open. Protectionist policies risk slowing the development of global solar markets and provoking retaliatory actions in other sectors. Lowering existing trade barriers—by abolishing tariffs, reducing non-tariff barriers and harmonizing industry standards—would create a positive policy environment for further global integration.
Topic:
Climate Change, Globalization, International Cooperation, and International Trade and Finance

11034. 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
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

11035. The Margins of US Trade

Author:
J. Bradford Jensen, Andrew B. Bernard, Peter K. Schott, and Stephen J. Redding
Publication Date:
05-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Recent research in international trade emphasizes the importance of firms' extensive margins for understanding overall patterns of trade as well as how firms respond to specific events such as trade liberalization. In this paper, we use detailed US trade statistics to provide a broad overview of how the margins of trade contribute to variation in US imports and exports across trading partners, types of trade (i.e., arm's length versus related party) and both short and long time horizons. Among other results, we highlight the differential behavior of related-party and arm's-length trade in response to the 1997 Asian financial crisis.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

11036. Intra-Firm Trade and Product Contractibility

Author:
J. Bradford Jensen, Andrew B. Bernard, Peter K. Schott, and Stephen J. Redding
Publication Date:
05-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper examines the determinants of intra-firm trade in US imports using detailed country-product data. We create a new measure of product contractibility based on the degree of intermediation in international trade for the product. We find important roles for the interaction of country and product characteristics in determining intra-firm trade shares. Intra-firm trade is high for products with low levels of contractibility sourced from countries with weak governance, for skill-intensive products from skill-scarce countries, and for capital-intensive products from capital-abundant countries.
Topic:
Economics, Industrial Policy, International Trade and Finance, and Markets
Political Geography:
United States

11037. Economic Crime and Punishment in North Korea

Author:
Stephan Haggard and Marcus Noland
Publication Date:
03-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The penal system has played a central role in the North Korean government's response to the country's profound economic and social changes. As the informal market economy has expanded, so have the scope of economic crimes. Two refugee surveys—one conducted in China, one in South Korea—document that the regime disproportionately targets politically suspect groups, particularly those involved in market-oriented economic activities. Levels of violence and deprivation do not appear to differ substantially between the infamous political prison camps, penitentiaries for felons, and labor camps used to incarcerate individuals for a growing number of economic crimes. Such a system may also reflect ulterior motives. High levels of discretion with respect to arrest and sentencing and very high costs of detention, arrest, and incarceration encourage bribery; the more arbitrary and painful the experience with the penal system, the easier it is for officials to extort money for avoiding it. These characteristics not only promote regime maintenance through intimidation, but may facilitate predatory corruption as well.
Topic:
Crime, Economics, Markets, and Prisons/Penal Systems
Political Geography:
North Korea

11038. Bridging Thailand's Deep Divide

Publication Date:
07-2010
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
The protracted struggle between the royalist establishment and those allied with ousted Prime Minister Thaksin Shinawatra has left Thailand deeply polarised. It sparked the most violent political confrontations in recent times, killing people, injuring nearly 2,000 and inflicting deep wounds on the national psyche. The government of Abhisit Vejjajiva's unilateral offer of a “road map” to national reconciliation will lead nowhere without the participation of its opposition, including his deposed predecessor. A credible investigation of the violence, enduring legal reforms, and properly addressing societal inequities cannot succeed without the Thaksin-aligned Red Shirt movement. This cannot happen if its leaders are detained, marginalised, or on the run. Fresh elections that are peace­ful, fair and accepted by all sides will be the first test to see if the country is back on track or has lost its way. Thailand should lift the emergency decree imposed over large swathes of the country or risk further damaging its democracy, hindering much needed reconciliation, and sowing the seeds of future deadly conflict.
Topic:
Political Violence, Democratization, Armed Struggle, and Insurgency
Political Geography:
Southeast Asia

11039. Cameroun : les dangers d'un regime en pleine fracture

Publication Date:
06-2010
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
After 28 years of the Biya presidency, Cameroon faces potential instability in the run up to the presidential elections scheduled for late 2011. Constitutional and legal uncertainty; rivalries between the regime's leading figures; the government's attempts to control the electoral process; the rupture of the political contract between leaders and the population; widespread poverty and frustration; extensive corruption; and the frustration of a large part of the army all point to the possibility of a major crisis. To escape this Biya and his government must restore the independence of the body responsible for elections; institutionalise an impartial fight against corruption and ensure the military's political neutrality. They must also urgently establish the institutions envisaged by the 1996 constitution, so that a power vacuum and the potential for violence can be avoided in the event of a transition, including an unexpected one such as the death of the 77-year-old president in office. Cameroon's most influential partners, particularly France and the U.S., should actively support such measures to avoid unrest.
Topic:
Corruption, Democratization, Politics, and Political Power Sharing
Political Geography:
Africa

11040. Guatemala: Squeezed between Crime and Impunity

Publication Date:
06-2010
Content Type:
Working Paper
Institution:
International Crisis Group
Abstract:
The 1996 peace accords formally ended Guatemala's civil war but failure to address the conflict's root causes and dismantle clandestine security apparatuses has weakened its institutions and opened the door to skyrocketing violent crime. Guatemala is one of the world's most dangerous countries, with some 6,500 murders in 2009, more than the average yearly killings during the civil war and roughly twice Mexico's homicide rate. Under heavy pressure at home, Mexican drug traffickers have moved into Guatemala to compete for control of Andean cocaine transiting to the U.S. The UN-sanctioned International Commission against Impunity in Guatemala (CICIG) has brought hope by making some progress at getting a handle on high-level corruption. However, in June 2010 its Spanish director, Carlos Castresana, resigned saying the government had not kept its promise to support CICIG's work and reform the justice system. President Álvaro Colom needs to consolidate recent gains with institutional reform, anti-corruption measures, vetting mechanisms and a more inclusive political approach, including to indigenous peoples.
Topic:
Conflict Resolution, Security, Political Violence, and Crime
Political Geography:
Latin America