Journal: / Topic: Economics - CIAO Search Results

5101. The New Turkish Economy and EU Accession Talks

Author:: Meral Varis
Publication Date:: 11-2005
Content Type:: Policy Brief
Institution:: The Washington Institute for Near East Policy
Abstract:: Now that negotiations toward full Turkish membership in the European Union (EU) have begun, what are the prospects for the Turkish economy? In particular, could Turkey attract significant global investment and take off economically as happened in Spain, Portugal, and Greece in the 1980s and Poland, Hungary, and the Czech Republic in the 1990s when those countries negotiated for EU accession?
Topic:: International Relations and Economics
Political Geography:: Europe, Turkey, Middle East, Greece, Poland, Hungary, Spain, and Portugal

5102. Accounting for Terror: Debunking the Paradigm of Inexpensive Terrorism

Author:: Joshua Prober
Publication Date:: 11-2005
Content Type:: Policy Brief
Institution:: The Washington Institute for Near East Policy
Abstract:: An increasingly accepted argument holds that terrorism has become a cheap enterprise. Louise Richardson, executive dean of the Radcliff Institute for Advanced Study at Harvard University, made just that case while testifying before the Senate Committee on Banking, Housing, and Urban Affairs in 2003. "The crucial point to bear in mind about terrorism, of course, is that it is cheap," Richardson said. She went on to argue that although the September 11 attacks cost $500,000, "It takes a great deal less to buy some fertilizer, rent a truck, and use them to bring down a building." If terrorism is cheap, as Richardson contends, then logic follows that financial counterterrorism measures are largely powerless to prevent terrorist attacks.
Topic:: International Relations, Economics, Education, and Terrorism

5103. Freezing U.S. Assets of Syrian Officials

Author:: Matthew Levitt and Jamie Chosak
Publication Date:: 07-2005
Content Type:: Policy Brief
Institution:: The Washington Institute for Near East Policy
Abstract:: On July 11, al-Seyassah, an independent Kuwaiti newspaper, reported that Syrian president Bashar al-Asad froze the assets of his country's minister of interior affairs, Ghazi Kanaan. If so, that is surely a reaction to Kanaan's June 30 designation—along with Chief of Syrian Military Intelligence for Lebanon Rustum Ghazali—by the U.S. Treasury Department as a Specially Designated National (SDN) under Executive Order (EO) 13338. The two were cited for directing “Syria's military and security presence in Lebanon and/or contributing to Syria's support for terrorism.”
Topic:: International Relations and Economics
Political Geography:: United States, Middle East, Kuwait, and Syria

5104. Sources and Effectiveness of Financial Development: What We Know and What We Need to Know

Author:: Panicos O. Demetriades and Svetlana Andrianova
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Drawing on recent literature, the paper argue s that institutions and political economy factors hold the key to understanding why some countries have succeeded in developing their financial systems while others have not. The paper also reviews new evidence which suggests that institutional quality may influence the effectiveness of financial development in delivering economic growth. These new findings highlight the possibility that poor countries may be stuck in a bad equilibrium, in which weak institutions inhibit growth both directly and indirectly, through under-developed, low- quality finance. In addition, the paper identifies a number of unanswered questions in the financial development literature, including the precise role of important institutions like law in finance, and the influence of geographical factors.
Topic:: Development, Economics, Political Economy, and Third World

5105. The Poverty Macroeconomic Policy Nexus: Some Short-run Analytics

Author:: George Mavrotas and S. Mansoob Murshed
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The present paper utilises a short-run theoretical macroeconomic model of a small open economy to look at the impact of macroeconomic policies and financial deepening upon poverty through sectoral changes. This is because an expansion in certain sectors may cause greater poverty reduction. The model involves a non-traded and a traded sector on the formal side of the economy. The former is more capital intensive and the latter more unskilled labour intensive. Increased employment in the traded sector is more pro-poor compared to a similar rise in the non-traded sector as the former draws workers out of poverty in the informal sector. The model in our paper analyses short-run effects of devaluation, a rise in the money supply induced by financial deepening, and taxation to discourage non-traded goods consumption. Financial deepening can induce greater output and reduce poverty. Other results are mixed and taxonomic. We also attempt to differentiate between the stylised experiences of East Asia and Latin America. East Asian economies have relied more heavily on labour-intensive manufactured exports, whereas Latin America has had a relatively greater share of capital intensive and natural resource based exports. In recent decades countries in these two regions have had differing experiences in poverty reduction, with poverty arguably declining more in East Asia.
Topic:: International Relations, Development, Economics, and Poverty
Political Geography:: East Asia and Latin America

5106. Does Financial Openness Promote Economic Integration? Some Evidence from Europe and the CIS

Author:: Fabrizio Carmignani and Abdur Chowdhury
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We study whether financial openness facilitates the economic integration of formerly centrally planned economies with the EU- 15. Two dimensions of economic integration are considered: cross-country convergence of per-capita incomes and bilateral trade in goods and services. We find that more financially open economies effectively catch-up faster and trade more with the EU-15. These integration-enhancing effects occur over and above any effect stemming from domestic financial deepening and other factors determining growth and trade.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: Europe

5107. The Effects of (within and with EU) Regional Integration: Impact on Real Effective Exchange Rate Volatility, Institutional Quality and Growth for MENA Countries

Author:: Iftekhar Hasan and Leonardo Becchetti
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We analyse two potential effects arising from regional (and with EU) integration—increased quality of institutions (including the quality of financial institutions) and, economic policies and reduced multilateral exchange rate volatility— in a conditional convergence growth framework for MENA countries. To this purpose we outline an ad hoc methodology which implements the traditional bilateral exchange rate measures to test effects of multilateral exchange rate volatility on growth of per capita GDP. Our estimates show that both factors (quality of institutions and reduction of multilateral volatility) significantly and positively affect growth and conditional convergence. We observe that MENA countries are not far from EU and OECD countries in terms of exchange rate volatility, but much below in terms of institutional quality. We finally simulate the potential effects of an improvement in institutional quality in MENA countries on their process of growth and conditional convergence. We conclude arguing that regional integration may be highly beneficial for such countries, mainly because of its effects on institutional quality.
Topic:: Development, Economics, and Regional Cooperation
Political Geography:: Europe

5108. Education, Financial Institutions, Inflation and Growth

Author:: Iftekhar Hasan, Leonardo Becchetti, and George Mavrotas
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Our paper investigates the unexplored impact of education on inflation and of this relationship on economic growth. By using a sample of 102 countries observed on non-overlapping five-year data spells over the period 1963-2001, we find that average schooling years of the working population have a significant negative impact on inflation rates after controlling for the effects of the stance of domestic monetary policy. We also show that the negative impact of inflation on growth in conditional convergence estimates is significantly increased when the former is instrumented by educational variables. Our findings outline a third potential role of human capital on conditional convergence. They show that education is not only a production factor or a variable which may reduce demographic pressures, but also an important antidote against inflationary pressures which, in turn, negatively affect economic growth and conditional convergence. We interpret our findings by identifying three potential rationales for the education-inflation nexus: (i) education raises consumers' awareness of their power in contrasting producers' inflationary pressures; (ii) more educated individuals have lower inflationary expectations when they are also wealthier and their consumption bundle is relatively less (more) intensive in inferior (superior) goods with higher (lower) inflation potential; (iii) more (less) educated and wealthier (less wealthy) individuals tend to be net creditors (debtors) in their maturity, thereby contributing to increase (reduce) the power of anti-inflationary lobbies.
Topic:: International Relations, Development, Economics, and Education

5109. Financial Sector Development, Savings Mobilization and Poverty Reduction in Ghana

Author:: Peter Quartey
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper primarily investigates the interrelationship between financial sector development and poverty reduction in Ghana. This is done using time-series data from the World Development Indicators from 1970-2001. The main findings are, first, that even though financial sector development does not Granger-cause savings mobilization in Ghana, it induces poverty reduction; and second, that savings do Granger-cause poverty reduction in Ghana. Also, the effect of financial sector development on poverty reduction is positive but insignificant. This is due to the fact that financial intermediaries in Ghana have not adequately channelled savings to the pro-poor sectors of the economy because of government deficit financing, high default rate, lack of collateral and lack of proper business proposals. Another interesting finding is that there is a long-run co integration relationship between financial sector development and poverty reduction.
Topic:: Development, Economics, and Poverty
Political Geography:: Africa and Ghana

5110. Financial Markets and R Investments: A Discrete-Time Model to Interpret Public Policies

Author:: Marco Mazzoli
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper introduces a discrete-time intertemporal investment model in which the flow of profits affects the risk premium on the cost of finance, and, as a consequence, the rate of discount of future profits. While public investments, according to a consolidated literature, constitute the main bulk of innovation policies, this model is used to comment and interpret the potential use of another, secondary, public policy, consisting of tax incentives for firms performing R expenditures and issuing securities in the stock market. Linking public policies for innovation to the stock market might help to reduce the problems of discretionality and the monitoring of public expenditure used to finance R and technical innovation.
Topic:: Security, Development, Economics, and Emerging Markets

5111. Does Financial Liberalization Influence Saving, Investment and Economic Growth? Evidence from 25 Emerging Market Economies, 1973-96

Author:: Robert Lensink and Niels Hermes
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper aims to investigate the relationship between financial liberalization on the one hand and saving, investment and economic growth on the other hand, using a new dataset for measuring financial liberalization for a sample of 25 developing economies over the period 1973-96. We find no evidence that financial liberalization affects domestic saving and total investment (although there are some signs to believe that liberalization may actually reduce rather than increase domestic saving), whereas it is positively associated with private investment, as well as with per capita GDP growth. We find a negative relationship between financial liberalization and public investment. These results suggest that financial liberalization leads to a substitution from public to private investment, which may contribute to higher economic growth.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance

5112. Financial Sector Development and Productivity Growth

Author:: George Mavrotas and Subal C. Kumbhakar
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Recent years have witnessed important structural changes around the world as a result of the globalization process, the creation of new economic blocks and the liberalization of financial sector in many countries. Responding to these changes many sectors of the industrialized countries have gone through major deregulatory changes to acclimate themselves to new environments. At the same time, many countries have undertaken institutional reforms to build a market-orientated financial system in the hope that transition towards market economy will improve productivity. In the face of uncertainty resulting from changes in regulatory structure and the development of financial institutions to foster market economy, many countries may not be able to achieve their maximum growth potential. In other words, productivity growth is likely to depend on the development of financial institutions and the stage of economic development That is, a less developed country is likely to benefit more (in terms of output growth rate) from the development of financial institutions than a developed economy with well-developed financial system. In this paper we document this by using data covering 65 countries, varying substantially in term s of level of development and geographic location, and spanning the period 1960-1999. Empirical results obtained from the estimation of two different empirical models regarding the measurement of total factor productivity growth seem to confirm a priori expectations about the overall positive influence of financial systems on productivity in line with previous work on this front. Our results remain robust with respect to alternative definitions of financial sector development we tried.
Topic:: Development, Economics, Globalization, and International Trade and Finance

5113. The Tax Reform Experience of Kenya

Author:: Stephen Njuguna Karingi and Bernadette Wanjal
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In evaluating tax reform in the developing countries, one first needs to determine what is the unique role of the tax system in each particular country. One of the key reasons for undertaking tax reforms in Kenya was to ad dress issues of in equality and to create a sustainable tax system that could generate adequate revenue to finance public expenditures. In this respect, the tax modernization programme introduced in the country was to achieve a tax system that was sustainable in the face of changing conditions domestically and internationally. Policy was shifted towards greater reliance on indirect taxes as opposed to direct taxes. Consumption taxes were seen to be more favourable to investments and hence growth. Trade taxes, instead of being used for protection or revenue-maximization purposes, were viewed more as instruments to foster export-led industrialization. Trade taxes were therefore used to create a competitive exports sector rather than protect the import-competing manufacturing sector, as had been done in the past.
Topic:: International Relations, Development, and Economics
Political Geography:: Kenya and Africa

5114. Tax Reforms in Ghana

Author:: Peter Quartey and Robert Darko Osei
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Ghana's tax reforms constitute the major policy instrument needed to accelerate growth and poverty reduction. Over the past two decades, the government has consistently spent more revenue than it is able to generate and the gap is often financed with foreign aid which has perpetuated the country's aid dependency. Two options can be explored to reduce the gap between government revenue and expenditure; generate more revenue or reduce government expenditure. Although the latter sounds reasonable, the government needs to spend more on key sectors like education, health and infrastructure if the country is to significantly reduce poverty. The critical issue has been how to generate the needed resources domestically, using tax instruments that are least harmful to the poor. This will obviously involve reforming the tax system to ensure efficiency by widening the tax net without necessarily increasing the tax rate. This paper provides an assessment of the changing structure of the tax system in Ghana over the last two decades and suggests ways to improve tax administration in the country.
Topic:: International Relations, Development, and Economics
Political Geography:: Africa and Ghana

5115. Taxes and Tax Reform in Ethiopia, 1990-2003

Author:: Alemayehu Geda and Abebe Shimeles
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In 1991 the Ethiopian Revolution Democratic Front (EPRDF) toppled the old 'socialist' regime that had ruled the country for seventeen years. In contrast to the previous policy regime of hard control, EPRDF initiated a wide range of reforms that covered not only the tax system but also the exchange rate, interest rates, trade, domestic production and distribution. This pa per attempts to explore the contribution of the tax reform, the change s in its structure and institutional reform in order to understand its role in raising revenue.
Topic:: Democratization, Economics, and Government
Political Geography:: Africa and Ethiopia

5116. Consistent Testing for Poverty Dominance

Author:: Bram Thuysbaert and Ricardas Zitikis
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: If uncertainty exists over the exact location of the poverty line or over which measure to use to compare poverty between distributions, one may want to check whether poverty dominance holds. We develop a consistent statistical test to test the null of poverty dominance against the alternative of nondominance. Dominance criteria corresponding to absolute and relative poverty measures are dealt with. The poverty line is allowed to depend on the income distribution. A bootstrap procedure is proposed to estimate critical values for the test. Our results cover both independent and paired samples.
Topic:: Demographics, Development, Economics, and Poverty

5117. The Microeconomics of Inequality, Poverty and Market Liberalizing Reforms

Author:: Rafael E. De Hoyos
Publication Date:: 11-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper illustrates how the use of microeconometric techniques can be used to uncover the micro dynamics behind macro shocks. Using Mexican micro data we find out that—controlling for everything else—between 1994 and 1998 returns to personal characteristics in the tradable sector increase d particularly those of skilled labourers. By the year 2000 the positive shock upon the tradeable sector vanishes with returns to personal characteristics converging to the levels observed in the non-tradable sector. We use our model's results to simulate a scenario where the Mexican economy experienced the negative shock of the peso crises in the absence of trade liberalization (NAFTA) and find out that under such a scenario the poverty headcount ratio would have increased more than 2 percentage points above the one observed in 1996. The simulated second- order effect of these changes shows that the skill mixed changed in a way that favoured relatively skilled men and relatively unskilled women. These changes in labour participation and occupation had an overall positive income effect though adverse in distributive terms.
Topic:: Demographics, Development, and Economics
Political Geography:: Central America

5118. Poverty Measurement and Theories of Beneficence

Author:: S. Subramanian
Publication Date:: 10-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This note points to certain similarities of orientation and outcome between Derek Parfit's quest for a theory of beneficence and Amartya Sen's quest for a suitable real-valued representation of poverty. It suggests th at both projects, in a certain sense, have been instructive failures. Using Sen's own work, the note also suggests a logically natural way of dealing with some of the problems in poverty measurement reviewed in it—but only to reject this way out on other compelling grounds.
Topic:: Demographics, Development, Economics, and Poverty

5119. The Fiscal Effects of Aid in Ghana

Author:: Robert Osei, Oliver Morrissey, and Tim Lloyd
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: An important feature of aid to developing countries is that it is given to the government. As a result, aid should be expected to affect fiscal behaviour, although theory and existing evidence is ambiguous regarding the nature of these effects. This paper applies techniques developed in the 'macroeconometrics' literature to estimate the dynamic linkages between aid and fiscal aggregates. Vector autoregressive methods are applied to 34 years of annual data in Ghana to model the effect of aid on fiscal behaviour. Results suggest that aid to Ghana has been associated with reduced domestic borrowing and increased tax effort, combining to increase public spending. This constructive use of aid to maintain fiscal balance is evident since the mid-1980s, following Ghana's structural adjustment programme. The pa per provides evidence that aid has been associated with improved fiscal performance in Ghana, implying that the aid has been used sensibly (at least in fiscal terms).
Topic:: Development, Economics, and Government
Political Geography:: Africa and Ghana

5120. Aid and Growth in Sub-Saharan Africa: Accounting for Transmission Mechanisms

Author:: Oliver Morrissey, Karuna Gomanee, and Sourafel Girma
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper is a contribution to the literature on aid and growth. Despite an extensive empirical literature in this area, existing studies have not addressed directly the mechanisms via which aid should affect growth. We identify investment as the most significant transmission mechanism, and also consider effects through financing imports and government consumption spending. With the use of residual generated regressors, we achieve a measure of the total effect of aid on growth, accounting for the effect via investment. Pooled panel results for a sample of 25 Sub-Saharan African countries over the period 1970 to 1997 point to a significant positive effect of foreign aid on growth, ceteris paribus. On average, each one percentage point increase in the aid/GNP ratio contributes one-quarter of one percentage point to the growth rate. Africa's poor growth record should not therefore be attributed to aid ineffectiveness.
Topic:: International Relations, Development, and Economics
Political Geography:: Africa

5121. Reckoning Inter-group Poverty Differentials in the Measurement of Aggregate Poverty

Author:: S. Subramanian
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In a heterogeneous population which can be partitioned into well-defined subgroups, it is plausible that the extent of measured aggregate poverty should depend upon the distribution of poverty across the subgroups. A judgment in favour of an equal inter-group distribution of poverty could arise in two ways. In the first approach, equality is upheld as an intrinsic social virtue, and the aggregate measure of poverty, in line with this view, is 'adjusted' to reflect the extent of inter-group disparity in the distribution of poverty that obtains. In the present paper, this approach is examined, with specific reference to the advancement of a diagrammatic aid to analysis called the group poverty profile. In the second approach, equality is upheld for instrumental reasons which arise from the observed fact that any individual's level of deprivation is a function not only of one's own income, but of the general level of prosperity of the group to which one is affiliated. Individual deprivation functions are specialized to a form which reflects this 'group-affiliation' externality, and the resulting poverty measure is studied with respect to its properties, and its implications for inter-group equity. The analysis is briefly extended to a review of the measurement of literacy, along externality-motivated lines suggested elsewhere by Basu and Foster. The paper concludes that social realism in the measurement of deprivation is often compromised by mainstream approaches to economic theorizing in which both heterogeniety and group-related externalities are generally de-emphasized.
Topic:: Demographics, Economics, Human Welfare, and Poverty

5122. Innovative Ways of Making Aid Effective in Ghana: Tied Aid versus Direct Budgetary Support

Author:: Peter Quartey
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: There has been significant amount of aid inflow s to developing countries including Ghana, but these have been very volatile. Aid flows have been associated with low domestic resource mobilization and have reduced Ghana to a country heavily dependent on aid. The amount of official development assistance (ODA) inflow s has fallen in recent years and has become unpredictable. It is general knowledge that aid has not yielded the desired benefit. In an attempt to improve aid effectiveness donors have used tie d aid not just to promote commercial interests but also to target aid to particular projects that have direct links with poverty. However, this has not yielded the maximum benefits required. Recently, the government of Ghana and its development partners agreed on an aid package dubbed the multi-donor budgetary support (MDBS), which would ensure continuous flow of aid to finance the government's poverty related expenditures.
Topic:: International Relations, Development, and Economics
Political Geography:: Africa and Ghana

5123. Why Do Poverty Rates Differ From Region to Region? The Case of Urban China

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper proposes a semi-parametric method for poverty decomposition, which combines the data-generating procedure of Shorrocks and Wan (2004) with the Shapley value framework of Shorrocks (1999). Compared with the popular method of Datt and Ravallion (1992), our method is more robust to misspecification errors, does not require the predetermination of functional forms, provides better fit to the underlying Lorenz curve and incorporates the residual term in a rigorous way. The method is applied to decomposing variations of urban poverty across the Chinese provinces into three components – contributions by the differences in average nominal income, inequality and poverty line. The results foreground average income as the key determinant of poverty incidence, but also attach importance to the influence of distribution. The regional pattern of the decomposition suggests provincial groupings based not entirely on geographical locations.
Topic:: Demographics, Economics, and Poverty
Political Geography:: China and Asia

5124. It Works; It Doesn't; It Can, But That Depends...: 50 Years of Controversy over the Macroeconomic Impact of Development Aid

Author:: Mark McGillivray, Simon Feeny, Robert Lensink, and Niels Hermes
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper surveys 50 years of empirical research on the macroeconomic impact of aid, looking mainly at studies examining the link between aid and growth. It argues that studies dating until the late 1990s produced either contradictory or inconclusive results. Aid either worked, or it didn't, according to this research. The paper then highlights a major shift in the literature that coincided with the release of the World Bank's Assessing Aid: What Works, What Doesn't and Why. Practically all research published since that report agrees with its general finding that aid works, to the extent that in its absence growth would be lower. One controversy may therefore have been settled. Yet, we show, the report has set-off an intense de bate over the context in which aid works. That debate centres on whether the effectiveness of these inflows depends on the policy regime of recipient countries. Some possible avenues through which the heat might be taken out of this debate are considered.
Topic:: International Relations, Debt, Development, and Economics

5125. Explaining Threshold Effects of Globalization on Poverty: An Institutional Perspective

Author:: Alice Sindzingre
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper focuses on the non-linearity of the transmission of the impact of globalization on poverty and the existence of threshold effects. Institutions constitute a critical factor for the creation of threshold effects in the impact of globalization on poverty. Institutions—their credibility, ability to be transformed by globalization, and the ways they give the poor access to the beneficial effects of globalization—determine whether the benefits of globalization are spread to the poor or are locked in by particular groups. They also determine whether or not the negative shocks associated with globalization are transmitted in an unfettered manner. The paper presents a theory of institutions that distinguishes several components, which evolve differently and explain the threshold effects that institutions generate upon the impact of globalization on the poor. The paper then shows that social institutions and norms have a critical role in the generation of these threshold effects. It finally examines the interactions between social institutions and state policies institutions, which may contribute to the formation of poverty traps.
Topic:: Development, Economics, Globalization, and Poverty

5126. Transforming Conflict with an Economic Dividend: The Sri Lankan Experience

Author:: Saman Kelegama
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Peace can generate an economic dividend, which can be further increased by appropriate economic reform. This dividend can in turn be used to raise popular support for conflict resolution measures along the road to achieving a final political settlement, a strategy that characterizes the recent period in Sri Lanka. However, despite an increase in economic growth following the cessation of hostilities between the Liberation Tigers of Tamil Eelam (LTTE) and the government, no substantial dividend materialized for either government supporters in the South or LTTE supporters in the war-torn Northeast. The causes of this failure include delays in disbursing aid which would have eased adjustment to economic reforms—resulting in cuts to public spending that affected Southern households—and weak institutions that impeded the effective use of aid in the Northeast. The Sri Lankan experience highlights some important lessons for both government and donors on making use of an economic lever for consolidating a peace process and conflict resolution. It also highlights some of the dangers in relying too much on economic levers to consolidate a peace process when levels of mistrust are very high.
Topic:: Conflict Resolution, Economics, and Peace Studies
Political Geography:: Asia and Sri Lanka

5127. Conflicts, Poverty and Human Development in Northern Uganda

Author:: Justine Nannyonjo
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The long-running conflict in northern Uganda has led to major violations of human rights against civilians, destruction of infrastructure, reduced access to social services, and paralysed economic activity. Creating peace and fostering reconciliation in the region have not been successful either, thereby hindering development and relief activities, which are further constrained by in sufficient funding, and lack of capacity at the district and community levels. The main challenges for reconstruction in northern Uganda are therefore to: (i) achieve peace and reconciliation (ii) provide basic social services to the affected areas (iii) strengthen government capacity to coordinate development and relief activities and (iv) harmonize interventions by the various stakeholders to achieve increased flexibility and transparency.
Topic:: Conflict Resolution, Economics, and Poverty
Political Geography:: Uganda and Africa

5128. Inequality, Corruption, and Competition in the Presence of Market Imperfections

Author:: Indranil Dutta and Ajit Mishra
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We analyze the relation between inequality, corruption and competition in a developing economy context where markets are imperfect. We consider an economy where different types of households (efficient and inefficient) choose to undertake production activities. For production, households borrow capital from the credit market. They also incur non-input costs which they could avoid by bribing inspectors. Due to information asymmetry and wealth inequality, the credit market fails to screen out the inefficient types. In addition to the imperfect screening, the inefficient type's entry is further facilitated by corruption. We analyze the market equilibrium and look at some of the implications. We show that a rise in inequality can lead to an increase in corruption along with greater competition.
Topic:: Development, Economics, Emerging Markets, and Human Welfare

5129. Distributional Conflict, the State, and Peacebuilding in Burundi

Author:: Léonce Ndikumana
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper examines the causes of conflict in Burundi and discusses strategies for building peace. The analysis of the complex relationships between distribution and group dynamics reveals that these relationships are reciprocal, implying that distribution and group dynamics are endogenous. The nature of endogenously generated group dynamics determines the type of preferences (altruistic or exclusionist), which in turn determines the type of allocative institutions and policies that prevail in the political and economic system. While unequal distribution of resources may be socially inefficient, it nonetheless can be rational from the perspective of the ruling elite, especially because inequality perpetuates dominance. However, as the unequal distribution of resources generates conflict, maintaining a system based on inequality is difficult because it requires ever increasing investments in repression. It is therefore clear that if the new Burundian leadership is serious about building peace, it must engineer institutions that uproot the legacy of discrimination and promote equal opportunity for social mobility for all members of ethnic groups and regions.
Topic:: Conflict Resolution, Economics, and Peace Studies
Political Geography:: Africa and Burundi

5130. Trade Openness and Vulnerability in Central and Eastern Europe

Author:: Pierluigi Montalbano, Alessandro Federici, Umberto Triulzi, and Carlo Pietrobelli
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper offers a substantive contribution to the debate on the role of international trade on the development of emerging countries. The aim is to detect empirically the phenomenon of vulnerability induced by trade openness. The methodology adopts a forward-looking approach and tries to fill a missing link in the theory between trade shocks, volatility, and the wellbeing of countries, distinguishing between 'normal' and 'extreme' volatility.
Topic:: Development, Economics, Globalization, and International Trade and Finance
Political Geography:: Eastern Europe

5131. Financial Sector Structure and Financial Crisis Burden: A Model Based on the Russian Default of 1998

Author:: George Mavrotas and Dmitri Vinogradov
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We consider an overlapping generations model with two production factors and two types of agents in the presence of financial intermediation and its application to the Russian default of August 1998. The paper focuses on the analysis of the consequences of a sudden negative repayments shock on financial intermediation capacity and consequently on the economy as a whole. The model exhibits a 'chain reaction' property, when a single macroeconomic shock can lead to the exhaustion of credit resources and to the subsequent collapse of the whole banking system. To maintain the capability of the system to recover, regulatory intervention is needed even in the presence of the state guarantees on agents' deposits in the banks (workout incentives). We compare the results for an intermediated economy with those derived under the assumption of a market economy, and draw some broad conclusions on the consequences of the crises, which are contingent on the financial sector structure.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:: Russia

5132. Channels and Policy Debate in the Globalization-Inequality-Poverty Nexus

Author:: Erik Thorbecke and Machiko Nissanke
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper offers a critical literature review of the debate surrounding the globalization-poverty nexus, focusing on channels and linkages through which globalization affects the poor. After introducing four different concepts used to measure trends in world income inequality, it examines first the 'growth' conduit through which globalization affects poverty. Treating inequality as the explicit filter between growth and poverty reduction, the causal chain of openness-growth-inequality-poverty is scrutinized, link by link. The paper then moves on to examine other channels in the globalization-poverty nexus that operate through changes in relative factor and good prices, factor movements, the nature of technological change and diffusion, the impact of globalization on volatility and vulnerability, the worldwide flow of information, global disinflation, and institutions, respectively. The paper concludes with a discussion of strategic policy issues within the context of the globalization debate.
Topic:: International Relations, Economics, Globalization, and Poverty

5133. Economic Agendas in Civil Wars: What We Know, What We Need to Know

Author:: Heiko Nitzschke and David M. Malone
Publication Date:: 07-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The political economy of civil wars has acquired unprecedented scholarly and policy attention. Among others, the International Peace Academy's programme on Economic Agendas in Civil Wars (EACW) has aimed to contribute to a better understanding of the complex dynamics of civil war economies and has identified areas for policy development critical for improved conflict prevention, conflict resolution, and postconflict peacebuilding. While much of the earlier debate on the economic dimensions has been polarized around the 'greed versus grievance' dichotomy, there is now a better understanding of how economic dynamics can influence the onset, character, and duration of armed conflicts. This paper discusses key research findings and their policy relevance, provides a preliminary assessment of policy efforts to address the economic dimensions of conflict and conflict transformation, and offers some issues for further research and policy action.
Topic:: Civil War, Development, Economics, and Political Economy

5134. The Volatility of Aid

Author:: George Mavrotas and David Fielding
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Issues related to the volatility of aid flows are now becoming crucial in view of their relevance to the achievement of the Millennium Development Goals. The paper examines aid volatility using data for 66 aid recipients over the period 1973-2002. We improve upon earlier work in this important area by disaggregating total aid inflows into sector and programme aid. In this way we avoid focussing on a single aggregate, unlike most previous studies on aid volatility. We also adopt a different methodology to capture aid volatility. The institutional quality of the aid recipient affects the stability of sector aid but not that of programme assistance. Moreover, more open economies, which tend to be smaller and richer, ceteris paribus, are associated with more volatile sector aid flows.
Topic:: International Relations, Economics, International Cooperation, and Poverty

5135. Post-Conflict Recovery: Does the Global Economy Work for Peace?

Author:: Tony Addison
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Countries as diverse as Afghanistan, Angola, and Sierra Leone are now attempting to recover from major wars, often amidst continuing insecurity. The challenge is to achieve a broad-based recovery that benefits the majority of people. The economic and social recovery of conflict-affected countries cannot be separated from their interaction with the rest of the world through flows of finance, goods, and people. Unfortunately, the global economy is not working well for peace. Trade reform, in particular, must take account of the need to create better, and non-violent, livelihoods for the world's poor: rich-country protectionism in agriculture hinders broad-based recovery and thereby harms the new international security agenda. Post-conflict economies also need more external finance to support early institutional development and reform, thereby increasing the effectiveness of longer-term aid inflows.
Topic:: Conflict Resolution, Economics, and Globalization
Political Geography:: Afghanistan, Middle East, Sierra Leone, and Angola

5136. Decent Work and the Informal Economy

Author:: Anne Trebilcock
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The ILO was founded for social justice, a mandate expressed today in terms of decent work as a global goal, for all who work, whether in formal or informal contexts. In June 2002, the delegates to the International Labour Conference from governments, workers' and employers' organizations adopted a resolution incorporating conclusions on decent work and the informal economy. The four components of decent work – opportunities for employment and income, respect for rights at work, social protection and stronger social dialogue – form the backbone of the ILO's approach to the informal economy. These elements can also be seen through a development lens, and necessarily feature a strong gender dimension. To make the action foreseen by the ILC conclusions more easily operational in a cross-disciplinary way, the issues they address can be cast in terms of macro policy, governance, enhancement of productivity, markets and employment, social protection/addressing vulnerabilities, and representation and voice. All play key roles in poverty reduction. Moreover, recognizing the importance of measuring progress towards decent work, developments in relation to indicators are briefly described. This paper includes annexes reproducing the ILC conclusions along with two relevant resolutions adopted by the International Conference of Labour Statisticians and a list of ILO websites that address various aspects of decent work and the informal economy.
Topic:: International Relations, Civil Society, Economics, and Government

5137. A Macro Policy for Poverty Eradication through Structural Change

Author:: Rehman Sobhan
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper argues that poverty originates in the structural injustices of a social order which incapacitates the poor from participating in the growth generating sectors of the economy and leaves them captives in the so called informal sector, characterized by low productivity and low earning capacity. In such a system the poor remain individualized and hence disempowered which compels them to interface with the market economy on highly inequitable terms which relegates them to the lowest tiers of the value addition chain. The need for a macro-policy designed to eliminate poverty is premised on the argument that poverty originates in the structural features of society which can only be addressed at the macro-level. Policy interventions, to redesign the structural sources of poverty, bring into consideration issues of social, political as well as economic reform.
Topic:: Foreign Policy, Development, Economics, and Poverty

5138. From Local to Global and Informal to Formal: Entering Mainstream Markets

Author:: Reema Nanavaty
Publication Date:: 02-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This is a brief sketch of the Self Employed Women's Association's (SEWA) three-decade-long journey from the local to global and informal to formal sector in search of finding work and income for now 720,000 women workers. Though SEWA remains a local and an informal economy workers' organization, its aim has always been to mainstream its issues, hopes, and achievements.
Topic:: International Relations, Economics, Emerging Markets, and International Trade and Finance

5139. Unlocking Public Entrepreneurship and Public Economies

Author:: Elinor Ostrom
Publication Date:: 01-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Unlocking human potential requires a rich network of institutional arrangements in both private and public spheres. Opening the private sphere to entrepreneurship and complex market organization is well understood as a key to increasing the level and quality of private goods available to consumers. Opening the public sphere to entrepreneurship and innovation at local, regional, and international levels is also a key to increasing the level and quality of public goods – e.g., peace, safety, and health – available to citizens. This paper reviews studies of urban service delivery that have repeatedly found communities of individuals who have self-organized to provide and co-produce surprisingly good local services. In addition to unlocking individual freedom, we need to unlock the public sector from rigid, top-down, hierarchical organization.
Topic:: International Relations, Economics, Emerging Markets, and International Trade and Finance

5140. Strategic Importance of Eurasia for Turkey's Export-Oriented Economy Policies

Author:: Mert Bilgin
Publication Date:: 09-2005
Content Type:: Journal Article
Institution:: Uluslararasi Iliskiler
Abstract:: It is almost impossible for Turkey to find a room in Eurasia based on its political meaning. However the more Eurasia is assigned an economic meaning, the more Turkey can benefit from its advantages. The necessity to ameliorate the terms of the energy agreements signed with Eurasian energy exporters and to increase exportations to these countries through strong brands fortified by the concept of TURQUALITY® are the two preconditions of this. By this positioning Turkey will better respond to the forthcoming pressures from; 1- High costs of energy and raw materials imported from Eurasian countries. 2- Full EU membership of East European countries, 3- Eurasian Customs Union, 4- Global price competition especially in the textile sector. Eurasia, which should be considered within this structure, does not indicate an alternative against Europe, but rather offers opportunities along which Turkey has the potency to position itself as a "Eurasian Tiger" if it manages to overcome these pressures.
Topic:: Economics
Political Geography:: Europe, Eurasia, and Turkey

5141. Emerging Trends in India's Foreign Trade Under the Globalised Regime

Author:: Irfan Ahmad
Publication Date:: 05-2005
Content Type:: Working Paper
Institution:: Columbia International Affairs Online
Abstract:: According to IMF, 'Globalisation may be defined as the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of capital inflow and also through the more rapid and wide spread diffusion of technology'. The world economy has been emerging as a global or transnational economy. A global economy is one which transcends the national borders unhindered by artificial restrictions like government restrictions on trade and factor movements. Globalisation is a process of development of the world into a single integrated economic unit. This process is a move towards a borderless regime of free trade based on competition. The globalisation has four parameters, that is, (i) Reduction of trade barriers so as to permit free flow of goods and services across national frontiers. (ii) Creation of an environment in which free flow of capital can take place. (iii) Creation of environment, permitting free flow of technology, and (iv) Creation of an environment in which free movement of labour can take place in different countries of the world.
Topic:: Economics, Globalization, and International Trade and Finance
Political Geography:: Asia

5142. The East Asian Experience: The Poverty of "Picking Winners"

Author:: Barry Desker and Deborah Elms
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:: Many leaders in Africa argue that East Asia's success in economic growth and development is due to special prowess in "picking winners." That is, the state is assume to have adequately identified future growth areas and effectively channeled investments into specific firms or industries. We argue, however, that this assessment is not accurate. Even where states have attempted to follow this path, they have frequently made a hash of it. The wrong sectors or firms have been identified. Public monies have been squandered or siphoned off for private enrichment. Instead, the successful East Asian states have focused their attention on consistently creating competitive market environments. They have invested in the hard and soft infrastructure (like road, ports and education) necessary for success in an increasingly globalized economy. It is these types of policies that currently hold out the greatest prospects for growth in Africa.
Topic:: Economics and Poverty
Political Geography:: Africa, Israel, and East Asia

5143. Africa and the Challenge of Globalization

Author:: Jeffrey Herbst
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:: This paper provides an overview of Africa's economic performance. Although the continent appeared headed for economic success in the early days of independence, based particularly on natural resource endowments, Africa's economic growth has stagnated while the rest of the world has experienced continuous, often spectacular, growth. The countries in Africa that have had the worst performance are those that contain the majority of the population. These states, in particular, suffer most from a crisis of governance and lack the policy and legal frameworks to grow quickly. The states in Africa can be divided into six categories and each grouping faces a different set of challenges from globalization: 1) high performers ready to globalize; 2) countries on an upward trajectory; 3) large, poorly performing countries; 4) poorly performing countries; 5) countries in collapse; and 6) oil producing countries. Only the states in the first two groupings are currently able to participate in the globalized economy.
Topic:: Development, Economics, and Globalization
Political Geography:: Africa

5144. Piracy in Southeast Asia New Trends, Issues and Responses

Author:: Catherine Zara Raymond
Publication Date:: 10-2005
Content Type:: Working Paper
Institution:: Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies
Abstract:: Piracy has plagued the region of Southeast Asia for many centuries and continues to do so to the present day. Despite increased efforts by the regional countries to reduce the problem, pirate attacks take place on an alarmingly regular basis in what are some of the world's most strategically important waterways. This paper will examine the phenomenon of piracy in Southeast Asia, in particular that which occurs in and around the waters of Indonesia and the Straits of Malacca. The trends which have emerged in recent years will be highlighted; specifically the types of attacks which take place, the different groups carrying out the attacks, the equipment they use and their targeting patterns. The study will then examine the causes of piracy, its impact and finally the responses of the region's states to the problem.
Topic:: Crime, Economics, and Regional Cooperation
Political Geography:: Southeast Asia

5145. Exploring the Emerging Social Movements in Africa at the Third African Social Forum

Author:: Marie Clark Brill
Publication Date:: 01-2005
Content Type:: Working Paper
Institution:: Africa Policy Information Center
Abstract:: The African Social Forum was born out of the larger World Social Forum, which provides an annual open meeting place where groups and movements of civil society come together to dialogue and network towards collaborative action. The Third African Social Forum (ASF) took place in Lusaka, Zambia in mid-December 2004. This report includes notes and analysis of the African Social Forum and provides reflection s on emerging social movements in Africa.
Topic:: Civil Society, Development, and Economics
Political Geography:: Africa, Lusaka, and Zambia

5146. Opening Opportunities, Building Ownership: Fulfilling the Promise of Microenterprise in the United States

Author:: Elaine L. Edgcomb and Joyce A. Klein
Publication Date:: 02-2005
Content Type:: Working Paper
Institution:: Aspen Institute
Abstract:: The notion that a person can turn a dream into a small business by applying healthy doses of ingenuity, elbow grease and grit has resonated with Americans from the earliest days of this nation. Indeed, there is something so intrinsically appealing about that scenario that more than 22 million Americans are small business owners today—including some 20 million who operate "micro"—or very small—enterprises.
Topic:: Development, Economics, Environment, and Industrial Policy
Political Geography:: United States and America

5147. Information Technology and the New Global Economy: Tensions, Opportunities, and the Role of Public Policy

Author:: David Bollier
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: Aspen Institute
Abstract:: Changes in technology have been transforming commerce, politics, and culture for centuries. Yet it is now becoming clear that the explosion of the Internet and assorted digital technologies is provoking epochal changes in the global economy. Finance capital now roams the world with unprecedented speed. Transportation and logistics have become radically more efficient. Work readily moves to wherever it can be most skillfully and cheaply performed. Innovation and productivity are forging ahead, sometimes at blinding speeds.
Topic:: Development, Economics, Globalization, Government, and Science and Technology

5148. Getting Serious about the Twin Deficits

Author:: Menzie D. Chinn
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: Council on Foreign Relations
Abstract:: Twenty years ago, the United States was the world's largest creditor nation, unsurpassed in its ownership of assets outside of its borders, even after deducting what foreigners owned inside its borders. Yet over the past two decades, America has been transformed into the world's largest debtor nation. At the end of 2004, its debts to the rest of the world exceeded its assets by about $2.5 trillion—21 percent of its gross domestic product (GDP). This proportion is unmatched by any other major developed economy.
Topic:: Foreign Policy, Development, and Economics
Political Geography:: United States and America

5149. The Current State of the Japanese Economy

Author:: Edward J. Lincoln
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Council on Foreign Relations
Abstract:: No abstract is available.
Topic:: Development, Economics, and Government
Political Geography:: Japan, Israel, and East Asia

5150. From Bound Duties to Actual Protection: Industrial Liberalisation in the Doha Round

Author:: Mohamed Hedi Bchir, Lionel Fontagné, and Sébastien Jean
Publication Date:: 11-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: In the background of the Doha Round of trade negotiations, this study proposes a CGE assessment of multilateral liberalisation of market access for non-agricultural products. The scenarios considered include the so-called 'Girard proposal' (with alternative choices for the coefficient involved), the removal of tariff peaks and complete liberalisation. This study is the first to take into account the difference between bound and applied tariffs, while considering all the enforced preferential trade arrangements and computing tariff cuts at the detailed product level (HS-6 classification). Although the liberalisation of market access for non-agricultural products is found to be welfare-enhancing at the world level, cross-country distributive effects prove significant. A soft liberalisation would not significantly reduce applied duties in developing countries, owing to their considerable binding overhang. By contrast, a deep liberalisation would entail fierce price competition among those developing countries that are largely specialised in similar sectors and in the same product quality range.
Topic:: Economics, International Trade and Finance, and Treaties and Agreements
Political Geography:: Eastern Europe

5151. Modelling the Effects of Trade Policy Scenarios on Multifunctionality in Greek Agriculture: A Social Accounting Matrix Approach

Author:: Dimitris Psaltopoulos and Eudokia Balamou
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper presents a Social Accounting Matrix (SAM) model for conducting an assessment on the potential impacts of trade agreements on several multifunctionality indicators in Greek agriculture. More specifically, two SAM models were constructed, one for Greece and one for local economy of Archanes (Crete), an agriculturally dependent NUTS IV area, which has demonstrated a noticeable record in terms of the implementation of Pillar 2 policies. Along these lines, five alternative scenarios were specified with regards to anticipated EU policy reactions under different future outcomes of the Doha round negotiations. In broad terms these scenarios range from a status quo (2003 CAP reform) hypothesis to full decoupling, taking also into account the possibility of further reductions in domestic (EU) support as well as developments on Pillar 2 funding. Results suggest that under the scenarios examined, the effects of policy reform upon multifunctionality indicators are rather mixed and surely not extremely worrying. Effects of the status quo scenarios seem to be optimistic in terms of projected economy-wide output and employment at both national and regional level. On the other hand, Scenario 1(bis) generates negative results in terms of farm output and employment (for Archanes), land-use abandonment projections are marginal at the national and rather moderate at the regional level, while environmental repercussions are negative at the national level. The regional analysis has also shown that the impacts of Scenarios 2, 2b and 3 are rather worrying in terms of all categories of projections, with the exception of “Total Output”. Taking account of the specification of Scenario 3, this finding generates rather justified reservations on the “ability” of Pillar 2 policies to ameliorate for economic activity contraction caused by a decrease in Pillar 1 support in Archanes economy.
Topic:: Agriculture, Economics, and International Trade and Finance
Political Geography:: Europe

5152. Impact of Public R Financing on Employment

Author:: Jyrki Ali-Yrkkö
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This study analyses how public R financing impacts the labour demand of companies. To our knowledge, no previous studies have distinguished the impact between a firm's global and domestic employment. Our company-level panel data covers a period from 1997 to 2002. The statistical method employed in the study takes into account the possibility that receiving public support may be an endogenous factor. Our results suggest that public R financing increases both group-level and domestic R employment. We also analysed the impact of public R funding on employment other than in the R area, and found that it is not affected by public funding. It is possible, however, that such funding has an impact in the longer term.
Topic:: International Relations, Civil Society, Economics, and International Trade and Finance

5153. Human Capital, R and Competition in Macroeconomic Analysis

Author:: Erik Canton, Bert Minne, Ate Nieuwenhuis, Bert Smid, and Mark van der Steeg
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Long-run per capita economic growth is driven by productivity growth. Major determinants of productivity are investments in education and research, and the intensity of competition on product markets. While these ideas have been incorporated into modern growth theories and tested in empirical analyses, they have not yet found their way to applied macroeconomic models used to forecast economic developments. In this paper, we discuss various options to include human capital, R and product market competition in a macroeconomic framework. We also study how policy can affect the decisions to build human capital or to perform research, and how competition policy impacts on macroeconomic outcomes. We finally sketch how these mechanisms can be implemented into the large models used at the Netherlands Bureau for Economic Policy Analysis (CPB).
Topic:: Development, Economics, Education, and Emerging Markets
Political Geography:: Netherlands

5154. Evaluating the Impact of Alternative Policy Scenarios on Multifunctionality: A Case Study of Finland

Author:: Heikki Lehtonen, Jussi Lankoski, and Jyrki Niemi
Publication Date:: 07-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper provides first results of the sector-model approach to analysing the effects of alternative policy scenarios on the multifunctional role of Finnish agriculture. In terms of environmental non-commodity outputs, this study focuses on nutrient runoffs, landscape diversity and biodiversity. As regards other non-commodity outputs, the paper considers rural socio-economic viability. The results suggest that, on the whole, reform of the common agricultural policy is not likely to result in any drastic decline of agricultural production in Finland. The amount of green fallow will increase considerably when agricultural support payments are decoupled from production, and as a result the remaining cultivated agricultural land will become biologically richer. The agricultural labour force is likely to decrease substantially irrespective of agricultural policy. The study concludes that the credibility of the production economics and biological relationships of the economic model determine the validity of the results of the many indicators examined. Further, the economic logic of microeconomic simulation models provides a consistent assessment of the many aspects of multifunctionality.
Topic:: Agriculture, Economics, and Environment
Political Geography:: Europe and Finland

5155. Economic Effects of Free Trade between the EU and Russia

Author:: Pekka Sulamaa and Mika Widgrén
Publication Date:: 05-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This study simulates the economic effects of eastern enlargement of the EU and an EU-Russian free trade area. The main emphasis of the paper is on the effect this would have on the Russian economy. The simulations were carried out with a GTAP computable general equilibrium model, using the most recent GTAP database 6.0 beta, which takes the former Europe agreements between the EU-15 and the eight new Central and Eastern European member states into account. The results confirm the earlier findings that a free trade agreement with the EU is beneficial for Russia in terms of total output but not necessarily in terms of economic welfare when measured by equivalent variation. The main reason behind this is the deterioration that would occur in Russia's terms of trade. Improved productivity in Russia would, however, make the free trade agreement with the EU advantageous.
Topic:: Economics and International Trade and Finance
Political Geography:: Russia, Europe, and Asia

5156. Is the European Economy a Patient and the Union its Doctor? On Jobs and Growth in Europe

Author:: Sjef Ederveen, Albert van der Hoorst, and Paul Tang
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: A stronger focus on jobs and growth is part of an effort to renew the Lisbon strategy. Yet the view that economic expansion contributes to maintaining Lisbon's other goals of social cohesion as well as the environment is somewhat optimistic. First, there are structural trade-offs among the central elements of the Lisbon strategy. Escaping these trade-offs temporarily is sometimes possible but requires policy changes. Second, higher productivity (growth) may not provide more structural room for governments to manoeuvre. It leads to higher tax receipts but also to higher public expenditures since public sector wages and social security benefits are linked to productivity. In contrast, more employment (jobs) is associated with a smaller public sector. But to engineer the increase in employment, changes in welfare state arrangements are needed. In other words, focussing solely on the sick child will probably harm the other children.
Topic:: Security, Development, Economics, and Human Welfare
Political Geography:: Europe and Lisbon

5157. Speed of Convergence and Relocation: New EU Member Countries Catching up with the Old

Author:: Kari E. O. Alho, Ville Kaitili, and Mike Widgrén
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Economic convergence of the EU's new member countries (NMCs) towards the incumbent EU countries (EU-15) is of paramount importance for both partners, not only in terms of real income but also in nominal terms. In this study we build a dynamic, computable general equilibrium model, starting from the Balassa-Samuelson two-sector framework, then modify and enlarge it (with, among other things, endogenous capital formation, consumption behaviour and labour mobility) to address several other issues such as uncertainty, welfare and sustainability in terms of foreign indebtedness. At the same time we make flows of foreign direct investment (FDI) endogenous in order to evaluate the impact convergence has on the EU-15 and the inter action between the two regions through FDI. We find that in a general equilibrium setting, fears of adverse effects resulting from a relocation of EU-15 manufacturing to the NMCs are not well founded.
Topic:: International Relations, Development, Economics, and Foreign Direct Investment
Political Geography:: Europe

5158. Financial Consequences of Widowhood in Europe: Cross-Country and Gender Differences

Author:: Namkee Ahn
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: We document in this paper the financial consequences of widowhood using both cross-section and panel data from the European Community Household Panel. The research reveals that there are large differences across countries. For example, widowed persons in Greece and Portugal have the lowest income – less than a half that of those widowed in Austria. Cross-country differences decrease somewhat if we consider household income net of housing costs, owing to the higher share of home ownership in low-income countries. Further, the income reduction upon widowhood is generally larger for widows than it is for widowers. The difference in income between the genders is largest in Denmark, Spain, Austria and Finland, where widower s enjoy an income that is more than 30% higher that of widows. The main culprit of the differences in income between widows and widowers lies in pension regulations. As today's elderly women an d those approaching old age spent their working years in an era where women worked at home, raised children and did not participate in the labour market, many depend mostly on survivorship pensions as their main source of income. Yet in most countries this kind of pension tends to be much lower than the applicable old-age pension, owing to the prevailing pension laws. Consequently, the financial situation of widows is unlikely to improve in the medium term unless pension regulations change.
Topic:: International Relations, Demographics, and Economics
Political Geography:: Europe, Finland, Greece, Denmark, and Spain

5159. A Gravity Model under Monopolistic Competition

Author:: Kari E. O. Alho
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper presents an alternative derivation of the gravity equation for foreign trade, which is explicitly based on monopolistic competition in the export markets and which is more general than previously seen in the literature. In contrast with the usual specification, our model allows for the realistic assumption of asymmetry in mutual trade flows. The model is estimated for trade in Europe, producing evidence that trade flows and barriers do indeed reveal strong asymmetry. We then carry out a simulation, based on the estimated model, of the general equilibrium effects (through trade) of the UK's possible entrance into the economic and monetary union.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: United Kingdom and Europe

5160. WTO Agricultural Negotiations: A Comparison of the Harbinson Proposal and the Swiss Formula

Author:: Martina Brockmeier, Marianne Kurzweil, Janine Pelikan, and Petra Salamon
Publication Date:: 02-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: The WTO agricultural negotiations of the Doha round are a key issue in the public debate. This paper analyses the effects of different options to improve market-access on the basis of a GTAP model, comparing the impact of the Harbinson proposal and the Swiss formula on trade balances. An extended version of the GTAP model is used to first project a base run that includes factors arising from Agenda 2000, EU enlargement, the EBA agreement and the EU's mid-term review. The policy simulation run additionally includes the WTO negotiations. Here, the model is differentiated between three experiments. While the first experiment simply implements the Harbinson proposal, the second one additionally takes into account an adoption of the EBA agreement by all industrialised countries. In the third experiment, the tariff cuts are based on the Swiss formula using a coefficient of 33 instead of the tiered approach of the Harbinson proposal.
Topic:: Economics and International Trade and Finance
Political Geography:: Europe

5161. Multilateral Market-Access Reforms of the Doha Round: A Preliminary Assessment of Implications for EU Agricultural Trade

Author:: Wusheng Yu and Hans G. Jensen
Publication Date:: 01-2005
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: The July package of the Doha Round of trade negotiations stipulates that a tiered-formula approach should be used to significantly reduce market access barriers across countries, implying that the EU would have to make larger cuts to its high external tariffs, in comparison with many other WTO members such as the US. This paper provides a preliminary assessment of the likely impact of the tiered-formula reform approach on EU agricultural sectors. Numerical simulations of a multilateral market-access reform scenario show that such cuts would lead to across-the-board decreases in intra-EU trade flows, as compared with a baseline projection. While intra-EU trade flows would decrease, the EU's trade with the rest of the world would increase. Yet such increases would not be symmetric – imports into the EU would increase more than exports, resulting in larger external trade deficits or smaller external trade surpluses in many EU agricultural products. Further, the resulting adjustments in member states' production and net trade positions are not equal: the new member states would generally lose part of their export shares in the EU market to external competitors, as highlighted in the cases of bovine meat and dairy products.
Topic:: Economics, Human Welfare, and International Trade and Finance
Political Geography:: United States and Europe

5162. The Food Aid Debate in Trade and Development

Author:: Andreas Schneider
Publication Date:: 12-2005
Content Type:: Policy Brief
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: It is generally agreed that making progress towards eradicating hunger worldwide is a moral obligation for the richer countries of the world. The instrument known as food aid is widely regarded as an important vehicle for providing assistance to needy countries. However, fresh debates in the present Doha round of WTO negotiations have brought a renewed interest in food aid issues. The Doha round is designed to put development at the centre of trade negotiations, and along with agriculture, to the fore among the contentious issues to be agreed.
Topic:: Agriculture, Development, Economics, and International Trade and Finance

5163. Who finances the Queen's CAP payments? The CAP as a dooH niboR Scheme

Author:: Richard E. Baldwin
Publication Date:: 12-2005
Content Type:: Policy Brief
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Thanks to the British Freedom of Information Act, the list of all CAP payments to English farms is public. It shows that the CAP is a dooH niboR scheme (that's Robin Hood spelled backwards). Table 1 records the CAP receipts for some of Britain's richest royalty. Why do royalty get paid? The CAP makes payments to farm owners, not to farmers, and about 40% of EU farmland is not farmed by its owner.
Topic:: Development and Economics
Political Geography:: United Kingdom and Europe

5164. Capital Adequacy vs. Liquidity Requirements in Banking Supervision in the EU

Author:: Karel Lannoo and Jean-Pierre Casey
Publication Date:: 10-2005
Content Type:: Policy Brief
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: The debate on banking supervision over the last decade has largely focused on capital requirements and solvency of financial institutions. The interaction between solvency and liquidity has been much less debated. Traditionally, it was assumed that once solvency was under control, liquidity should pose no problem. Banks with sufficient capital should be able to obtain extra liquidity from the central bank against adequate collateral if needed. Furthermore, the aim of the New Basel Accord to create a better alignment of regulatory capital with the risk to which banks are exposed, and the stronger focus on diversification, should eventually reduce mismatches between solvency and effective liquidity.
Topic:: Development, Economics, and Emerging Markets
Political Geography:: Europe

5165. Is the IMF business model still valid?

Author:: Ángel Ubide
Publication Date:: 09-2005
Content Type:: Policy Brief
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Since the Asian crisis, the IMF has undergone a deep process of soul searching, trying to extract lessons from the experience. External criticism has been abundant, and basically all three of the IMF's main areas of work – surveillance, crisis prevention and resolution, and poverty reduction – have been called into question. Several years later, there is a feeling that not much has been achieved, and key questions remain unanswered. As the world business cycle matures, and thus the likelihood of further crises slowly increases, it is critical for the stability of the world financial system to discuss what the IMF's business model should look like.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:: Asia

5166. The New Capital Requirements Directive: What pieces are still missing from the puzzle?

Author:: Rym Ayadi
Publication Date:: 09-2005
Content Type:: Policy Brief
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: After almost seven years of hard work to produce a new substantive piece of legislation updating the current banking regulation for European credit institutions and investment firms – the Capital Requirements Directive (CRD) – it looks like its timely adoption is still uncertain. The main problem is the dissatisfaction of Parliament with its limited role in comitology and in the Lamfalussy process, which has led it to suspend 'temporarily' the comitology provisions of the CRD, casting doubt over the future ability to amend the legislation. The European Constitution addresses Parliament's concern about ensuring democratic accountability in the comitology process in Art. 36. The pause for reflection on the Constitution prompted by the no-votes in the French and Dutch referenda has re-ignited the issue and is forcing EU institutions to seek a new inter-institutional agreement on this issue.
Topic:: Debt, Economics, and Government
Political Geography:: Europe

5167. Climate Change in the US Government Budget - Funding for Technology and Other Programmes, and Implications for EU-US Relations

Author:: Thomas L. Brewer
Publication Date:: 07-2005
Content Type:: Policy Brief
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: With increasing Congressional support for funding climate change technology programmes, as reflected in passage of the Hagel/Pryor amendment to the energy policy bill in June 2005, issues about the climate change budget are becoming more salient. In this Policy Brief, Congressional and Presidential actions on several recent budgets are examined for the four principal areas of the climate change budget: technology, science, international and tax credits. The emphasis is on energy technology in particular, because of its salience in current policy discussions and its relative size in financial terms. Highlights of the findings include the following: Congress imposed substantial (63.3%) increases over the administration's climate change technology proposals for 2004 and then small increases for FY2005. For 2006, the administration has proposed reductions compared with the Congressionally-enacted levels in the technology component – reductions in both nominal and inflation-adjusted terms (-4.1% and -5.6%, respectively). The administration has also proposed cuts for fiscal 2006 in the science and international programmes (-2.9 and -19.0% in real terms). These and other differences in Presidential and Congressional approaches to funding climate change programs provide further evidence that the Presidential-Congressional divide on climate policy is continuing to widen. There is an emerging bi-partisan Congressional coalition in favour of increased spending on a wide range of climate change programmes. This shift will affect EU-US relations on climate change issues for the remainder of the current administration until 2008, and beyond as well.
Topic:: Economics and Science and Technology
Political Geography:: United States and Europe

5168. The Real Budget Battle: Une crise peut en cacher une autre

Author:: Richard E. Baldwin
Publication Date:: 06-2005
Content Type:: Policy Brief
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: The failure to reach a budget deal at the June summit may prove a blessing in disguise. The spectacular failure of the European Council to agree the last-minute compromise on the 2007-2013 Financial Perspective generated massively negative media coverage. In the short run, it will create huge difficulties for the EU, but things might have been even worse had they agreed.
Topic:: Economics, International Organization, and Treaties and Agreements
Political Geography:: Europe

5169. Buying air warfare destroyers: a strategic decision

Author:: Hugh White
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: Lowy Institute for International Policy
Abstract:: The Air Warfare Destroyer [AWD] project is Australia's biggest proposed defence acquisition in decades. Cabinet has already chosen a company to build the ships. But before minsters go further and sign contracts, they should stop and ask two big questions which have not so far been properly considered. First, would AWDs do enough for Australia's defence to justify their cost, and what would we need to sacrifice to afford them? Second, are we buying them the right way? There are good reasons to think that the answer to both questions is no. The AWD's main purpose is to provide air defence for ADF amphibious operations in medium- to high-level conflicts. But such operations would not be a high priority for Australia. The forces we could deploy are small, and the risks they would face, even with AWDs, are daunting. And if it was necessary, amphibious operations could be better protected for air attack by proactive counter-air campaigns or fighter escorts. For coalition operations, AWDs would only add another option to a wide range of highly capable contributions we can already make, including submarines, maritime patrol aircraft, AEW and fighters. And AWDs would be marginal to any future development of ballistic missile defences for Australia. So AWDs would provide few important new military options. But their high price imposes big opportunity costs in the already-squeezed defence investment program. Unless Defence funding rises sharply, we can afford them only by cutting other major capabilities. The most likely trade-off is the JSF project; cutting that would have serious strategic costs. So ministers should not commit to buying the AWDs before they have reviewed the Defence Capability Plan as a whole to see the full implications for the ADF's overall capability. If ministers nonetheless decide to buy AWDs, they should look very carefully at how the project is being developed and managed. As they did with Navy's troubled Collins submarines and Seasprite helicopters, Defence is setting unique Australian requirements that will unnecessarily add to the cost and risk of the project. And they are experimenting with a new acquisition strategy that provides less competition and leaves more of the risk of the project in Defence's hands. A simpler and more competitive acquisition strategy would provide better value for money. The simplest and cheapest of all would be to buy overseas. There is no compelling strategic reason to buy AWDs, and even less to build them in Australia.
Topic:: Arms Control and Proliferation, Economics, and Government
Political Geography:: Australia and Australia/Pacific

5170. Living with Global Imbalances: A Contrarian View

Author:: Richard N. Cooper
Publication Date:: 11-2005
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Three propositions have become conventional wisdom in Washington and elsewhere. Americans save too little. As a consequence, the US current account deficit is unsustainably large. A necessary step to bring the global economy into sustainable balance is a significant appreciation of the Chinese currency, which in practice has been fixed to the dollar for over a decade.
Topic:: International Relations, Development, Economics, and Globalization

5171. After Argentina

Author:: Anna Gelpern
Publication Date:: 09-2005
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Argentina has finally restructured its foreign debt. Its credit rating is up, and its debt is back in the index. The new bonds are trading roughly in line with Brazil and Uruguay's, just above 400 basis points over treasuries for instruments of comparable duration. Argentina is raising new money from foreign investors. Earlier in the summer of 2005, it reopened a domestic dollar issue to accommodate excess foreign demand. Argentina and the International Monetary Fund (IMF) are on again. They might even sign a new disbursing program after the fall 2005 congressional elections. Like a bad dream, the 2001 default is fading into the night after three years of brisk growth and impressive fiscal management—even as the usual nabobs natter on about structural reform and unhappy bondholders.
Topic:: International Relations, Debt, and Economics
Political Geography:: South America

5172. A Currency Basket for East Asia, Not Just China

Author:: John Williamson
Publication Date:: 08-2005
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: China recently announced that it is adopting a basket of currencies as the peg for its exchange rate instead of the US dollar. This announcement raises questions of how such a system works, whether other East Asian countries would be advised to follow China in adopting a basket numeraire, and whether it would be advantageous to these countries if they were all to adopt the same basket. This brief answers these questions.
Topic:: Economics, International Cooperation, and International Trade and Finance
Political Geography:: United States, Israel, East Asia, and Asia

5173. Predicting Trade Expansion under FTAs and Multilateral Agreements

Author:: Dean A. DeRosa and John P. Gilbert
Publication Date:: 10-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper examines the historical record of eight recent free trade agreements (FTAs). It also investigates the predictive power of two popular quantitative world trade models—the single-equation gravity model and the multiequation computable general equilibrium (CGE) model—as applied to three major trade liberalization agreements adopted during the 1990s: Mercosur, NAFTA, and the Uruguay Round Agreement, using the Rose gravity model and the GTAP general equilibrium model. Both models are found accurate in some instances, but intervening influences in the wake of trade liberalization episodes confound the challenge of drawing a strong conclusion in favor of one modeling approach over the other. Between the "naïve" gravity model and "naïve" CGE model predictions, we find that the former tends to overpredict intrabloc trade expansion (especially over horizons of five years and less) while the latter tends to underpredict. CGE models remain favored for ex post analysis of welfare impacts and the direct and indirect linkages between policy reforms and the numerous other economic variables of concern to policymakers and the public at large.
Topic:: Development, Economics, International Trade and Finance, and Treaties and Agreements

5174. Prospects for Regional Free Trade in Asia

Author:: Gary Clyde Hufbauer and Yee Wong
Publication Date:: 10-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Frustrated with lackluster momentum in the WTO Doha Round and the Asia Pacific Economic Cooperation (APEC) forum, and mindful of free trade agreement (FTA) networks centered on the United States and Europe, Asian countries have joined the FTA game. By 2005, Asian countries (excluding China) had ratified 14 bilateral and regional FTAs and had negotiated but not implemented another seven. Asian nations are also actively negotiating some 23 bilateral and regional FTAs, many with non-Asian partners, including Australia, Canada, Chile, the European Union, India, and Qatar. China has been particularly active since 2000. It has completed three bilateral FTAs—Thailand in 2003 and Hong Kong and Macao in 2004—and is initiating another 17 bilateral and regional FTAs. However, a regional Asian economic bloc led by China seems distant, even though China accounts for about 30 percent of regional GDP. As in Europe and the Western Hemisphere, many Asian countries are pursuing FTAs with countries outside the region. On present evidence, the FTA process embraced with some enthusiasm in Asia, Europe, and the Western Hemisphere more closely resembles fingers reaching idiosycratically around the globe rather than politico-economic blocs centered respectively on Beijing, Brussels, and Washington.
Topic:: Economics, International Trade and Finance, and Regional Cooperation
Political Geography:: United States, China, Europe, Washington, Canada, India, Beijing, Asia, Australia, Qatar, Chile, Hong Kong, Brussels, and Macao

5175. The US Trade Deficit: A Disaggregated Perspective

Author:: Catherine L. Mann and Katharina Plück
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The paper prepares new estimates for the elasticity of US trade flows using bilateral, commodity-detailed trade data for 31 countries, using measures of expenditure and trade prices matched to commodity groups, and including a commodity-and-country specific proxy for global supply-cum-variety. Using the United Nations Commodity Trade Statistics Database (UN Comtrade) we construct bilateral trade flows for 31 countries in four categories of goods based on the Bureau of Economic Analysis's "end-use" classification system--autos, industrial supplies and materials-excluding energy, consumer goods, and capital goods. We find that using expenditure matched to commodity category yields more plausible values for the demand elasticities than does using GDP as the measure of demand that drives trade flows. Controlling for country and commodity fixed effects, we find that industrial and developing countries have demand elasticities that are statistically significant and that generally differ between development groups and across product categories. Relative prices for the industrial countries have plausible parameter values, are statistically significant and differ across product groups, but the relative prices for developing countries are poorly estimated. We find that variety is an important variable for the behavior of capital goods trade. Because the commodity composition of trade and of trading partners has changed dramatically, particularly for imports, we find that the demand elasticity for imports is not constant. Comparing the in-sample performance of the disaggregated model against a benchmark that uses aggregated data and GDP as the expenditure variable, our disaggregated model predicts exports better in-sample but does not predict imports as well as the benchmark model.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States

5176. Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods

Author:: J. Bradford Jensen, Peter K. Schott, and Andrew B. Bernard
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper provides an integrated view of globally engaged US firms by exploring a newly developed dataset that links US international trade transactions to longitudinal data on US enterprises. These data permit examination of a number of new dimensions of firm activity, including how many products firms trade, how many countries firms trade with, the characteristics of those countries, the concentration of trade across firms, whether firms transact at arm's length or with related parties, and whether firms import as well as export. Firms that trade goods play an important role in the United States, employing more than a third of the US workforce. We find that the most globally engaged US firms, i.e. those that both export to and import from related parties, dominate US trade flows and employment at trading firms. We also find that firms that begin trading between 1993 and 2000 experience especially rapid employment growth and are a major force in overall job creation.
Topic:: Economics, Globalization, and International Trade and Finance
Political Geography:: United States

5177. Tradable Services: Understanding the Scope and Impact of Services Offshoring

Author:: Lori G. Kletzer and J. Bradford Jensen
Publication Date:: 09-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: We develop a new empirical approach to identify tradable service activities. Contrary to conventional views of service activities as nontradable, we find a significant number of service industries and occupations that appear tradable and substantial employment in these tradable activities. Workers employed in tradable service activities differ from those employed in tradable manufacturing and nontradable services. Workers in tradable service activities have higher skill levels and are paid higher wages than manufacturing workers or workers in nontradable service activities. In general, we find little evidence that tradable service activities have lower employment growth than other service activities. However, evidence suggests lower employment growth at the lowest end of the skill distribution. There is also evidence of higher worker displacement rates in tradable services. Workers displaced from tradable service activities are different from displaced manufacturing workers: Displaced tradable service workers have higher skills and higher predisplacement earnings than displaced manufacturing workers.
Topic:: Economics, Human Welfare, Industrial Policy, and International Trade and Finance

5178. Egypt after the Multi-Fiber Arrangement: Global Apparel and Textile Supply Chains as a Route for Industrial Upgrading

Author:: Dan Magder and Dan Magder
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Exporting through international supply chains was a successful way for East Asian countries to develop their textile and apparel industries in the 1970s and 1980s, but it is a less clear route for countries like Egypt trying to compete today. The challenge is particularly acute given the strength of competitors like China, and even more so in the post-MFA era. Some analysts suggest that "lean retailing" increases the importance of geography in exporting in the world of rapidly changing apparel fashion, in a way that could beneﬁt a country like Egypt with its proximity to European end markets. Using a supply chain model, this paper suggests that shortening lead times can indeed have an impact on proﬁts, but that the effect is not tremendous, being in the range of a 0.3 percent to 0.9 percent increase in proﬁts for every week of improvement in lead times. The study also ﬁnds that the business environment in Egypt lags key comparator countries in several areas that help the ﬁrms compete in global apparel chains, although recent reforms by the Egyptian government are working to address several of these aspects. It concludes by exploring to what extent geography, trade preferences, and local production factors may help Egypt's textile and apparel industry carve out a role for itself in global supply chains, and provide an engine to drive industrial upgrading throughout the country.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: Europe, East Asia, North Africa, and Egypt

5179. What Might the Next Emerging-Market Financial Crisis Look Like?

Author:: Morris Goldstein and Anna Wong
Publication Date:: 07-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper addresses the following question: If a financial crisis affecting a group of emerging economies were to take place sometime over the next three years, where would the crisis likely originate, how could it be transmitted to other economies, and which economies would be most affected by particular transmission or contagion mechanisms? A set of indicators is presented to gauge the vulnerability of individual emerging economies to various shocks, including a slowdown in import demand in both China and the United States, a fall in primary commodity prices, increased costs and lower availability of external financing, alternative patterns of exchange rate changes, and pressures operating on monetary and fiscal policies in emerging economies.
Topic:: Economics, Emerging Markets, Globalization, and International Trade and Finance
Political Geography:: United States and China

5180. Explaining Middle Eastern Authoritarianism

Author:: Marcus Noland
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Arab political regimes are both unusually undemocratic and unusually stable. A series of nested statistical models are reported to parse competing explanations. The democratic deficit is comprehensible in terms of lack of modernization, British colonial history, neighborhood effects, reliance on taxes for government finance, and the Arab population share. Interpretation of the last variable is problematic: It could point to some antidemocratic aspect of Arab culture (though this appears not to be supported by survey evidence), or it could be a proxy for some unobservable such as investment in institutions of internal repression that may not be culturally determined and instead reflect elite preferences. Hypotheses that did not receive robust support include the presence of oil rents, the status of women, conflict with Israel or other neighbors, or Islam. The odds on liberalizing transitions occurring are low but rising. In this respect the distinction between the interpretation of the Arab ethnic share as an intrinsic cultural marker and as a proxy for some unobservable is important-if the former is correct, then one would expect the likelihood of regime change to rise only gradually over time, whereas if it is the latter, the probabilities may exhibit much greater temporal variability.
Topic:: Economics, Government, and Politics
Political Geography:: United Kingdom, Middle East, Israel, and Arabia

5181. South Korea's Experience with International Capital Flows

Author:: Marcus Noland
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: South Korea's experience is unparalleled in its combination of sustained prosperity, capital controls, and financial crisis. Over several decades South Korea experienced rapid sustained growth in the presence of capital controls. These controls and the delinking of domestic and international financial markets were an essential component of the country's state-led development strategy. As the country developed, opportunities for easy technological catch-up eroded, requiring more sophisticated corporate and financial sector decision making. But decades of financial repression had bequeathed a bureaucratized financial system and a formidable constellation of incumbent stakeholders opposed to transition to a more market-oriented development model. Liberalization undertaken in the 1990s was less a product of textbook economic analysis than of parochial politicking. The capital account liberalization program affected the timing, magnitude, and particulars of the 1997-98 crisis. Despite considerable reforms undertaken since the crisis, concerns remain about both South Korea's lending culture and its authorities' capacity to successfully regulate the more complex financial system. The main lesson of the South Korean case appears to be that while the state-led model may deliver impressive initial gains, transitioning out of this approach presents an exceedingly complex political-economy challenge.
Topic:: International Relations, Economics, and Emerging Markets
Political Geography:: Asia and South Korea

5182. Affinity and International Trade

Author:: Marcus Noland
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper examines the impact of American public attitudes toward foreign countries on the volume of trade. The issue is whether popular attitudes, as elicited in these surveys, convey any information about trust, risk, or transactions costs beyond what can be explained through standard economic models. The results of this paper suggest that they do, with a one standard deviation increase in warmth of feeling associated with a 20 to 31 percent larger trade volume when evaluated at the sample means. These public attitudes are in turn correlated with indices of cultural affinity and political ideology. A one standard deviation increase in the democracy score is associated with a 5 to 7 percent increase in trade. There might be additional secondary effects if democratization was associated with an increased likelihood of the removal of sanctions or the initiation of preferential trade relations.
Topic:: Foreign Policy, Economics, and International Trade and Finance
Political Geography:: United States

5183. Reform of the International Monetary Fund

Author:: C. Fred Bergsten
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: It is a pleasure to testify before the Committee again concerning your ongoing oversight of the International Monetary Fund. The topic remains of great importance, and our Institute for International Economics will in fact be holding a major conference on IMF reform on September 23 to address a number of specific proposals for strengthening and enforcing the rules of the monetary system, improving the governance of the Fund itself, reforming its lending programs, and reassessing the ways in which it might be financed in the future. All members of the Subcommittee and staff are cordially invited to participate in our event.
Topic:: International Relations, Debt, Economics, and International Political Economy

5184. What Iraq and Argentina Might Learn from Each Other

Author:: Anna Gelpern
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Financial collapse usually triggers a flurry of market, academic, and policy innovation. The Latin American debt crisis of the 1980s produced the Brady Bonds and led to the rise of today's emerging markets. In the late 1990s, crises in Pakistan, Ecuador, and Ukraine helped teach the markets how to restructure international sovereign bonds. Crises in Mexico, Russia, Brazil, Turkey, and throughout East Asia raised doubts about the international system's ability to manage vast and rapid capital flows, and prompted a big-picture reassessment under the rubric “international financial architecture.” This included most famously the sovereign bankruptcy proposals discussed elsewhere in this volume.
Topic:: Development and Economics
Political Geography:: Pakistan, Russia, Turkey, Ukraine, Middle East, East Asia, Brazil, South America, Latin America, and Mexico

5185. After 'Non' and 'Nee': Plans B, C, and D for the European Constitution

Author:: Daniel Gould
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The proposed European Constitution, which was just voted down in France and the Netherlands, is technically a treaty containing far-reaching amendments to the present set of treaties governing the European Union. Article 48 of the EU treaty text currently in force specifies that any such amendments first be unanimously approved by the governments of the member states within an Inter-Governmental Conference framework and then ratified by each country. The first, intergovernmental step of ratification was completed October 29, 2004.
Topic:: Economics and Government
Political Geography:: Europe, France, and Netherlands

5186. The Payoff from Globalization

Author:: Gary Clyde Hufbauer and Paul L. E. Grieco
Publication Date:: 05-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The battle over the Central American Free Trade Agreement (CAFTA) promises a reprise of familiar themes. While contemporary commentators may connect their arguments to NAFTA, in fact the "modern" debate over trade barriers can be traced back to British Corn Laws. Enacted to protect land barons, the Corn Laws were finally repealed in 1846 to make way for what Martin Wolf has called the "first age of globalization."
Topic:: International Relations, Economics, Globalization, and International Trade and Finance
Political Geography:: Central America

5187. Swiss National Bank Sales—Lessons and Experiences

Author:: Philipp M. Hildebrand
Publication Date:: 05-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: I am pleased to be in Washington today and would like to thank Fred Bergsten and his colleagues at the Institute for International Economics for providing me with this opportunity to talk about the recently completed gold sales of the Swiss National Bank (SNB).
Topic:: International Relations, Economics, and International Trade and Finance
Political Geography:: Europe and Washington

5188. Domestic and External Debt: The Doomed Quest for Equal Treatment

Author:: Brad Setser and Anna Gelpern
Publication Date:: 05-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: "Equality" has the ring of a basic value, an incontrovertible virtue. In international finance, equal treatment is enshrined in treaties and contracts. Of all the equal treatment aspirations in finance, none seems more essential to a lawyer than equal treatment of creditors holding identical legal instruments: if one is to suffer a default, surely so should the others; restructuring options available to one must be open to all without regard to the creditor's identity. Yet in the world of sovereign debt, local and foreign investors buying the same paper rarely achieve what anyone would recognize as equal treatment.
Topic:: Debt, Economics, Government, and International Trade and Finance

5189. North Korean Human Rights Act of 2004: Issues and Implementation

Author:: Stephan Haggard and Marcus Noland
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: It is an honor to be invited to testify before this committee. We would like to begin our testimony by restating a simple yet compelling point: The absence of human, civil, and political rights in North Korea and the humanitarian disaster that afflicts its population are inextricably linked.
Topic:: Economics, Government, and Human Rights
Political Geography:: Asia and North Korea

5190. The Euro and the World Economy

Author:: Fred Bergsten
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The dollar has been the dominant currency of the world economy for almost a century for a single overwhelming reason: It had no competition. No other economy came close to the size of the United States. Hence no currency could acquire the network externalities, economies of scale and scope, and public goods benefits necessary to rival the dollar at the global level. A similar situation for the United Kingdom explains sterling's dominance in the 19th century.
Topic:: Economics and International Trade and Finance
Political Geography:: United States, United Kingdom, and Europe

5191. The US Economic Outlook

Author:: Martin Neil Baily and Jacob Funk Kirkegaard
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Oil prices have risen and are expected to remain high. Slow job and wage growth result in slow income growth. Low interest rates kept housing and auto sales strong after 2000 – borrowing future growth. No new stimulus from monetary or fiscal policy. The Iraq war and the terrorism threat may be a drag on confidence. Because 9/11 did not have significant macroeconomic effects, the impact of the war and terrorism seems to be mostly on oil prices No new stimulus from monetary or fiscal policy.
Topic:: Debt, Economics, and International Trade and Finance
Political Geography:: United States and Iraq

5192. The Chinese Economy: Prospects and Key Policy Issues

Author:: Morris Goldstein
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: No abstract is available.
Topic:: Economics, Industrial Policy, and International Trade and Finance
Political Geography:: China and Asia

5193. Global Economic Prospects: Slower But Still Solid Growth in 2005; Worries About Growth and Inflation for 2006

Author:: Michael Mussa
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: After surging to the highest growth rate in a generation, world real GDP is set to slow from a rate of just over 5 percent for 2004 to about 4 percent for 2005 and a tad slower for 2006. The economic slowdowns in several important economies in the second half of last year, including much of continental Europe and Japan, already make it clear that year-over-year growth will slow for 2005. But the continued strong growth of domestic demand in other countries, most notably the United States and China, virtually assures that global growth this year will not fall below potential.
Topic:: Economics and International Trade and Finance
Political Geography:: United States, Japan, China, Europe, Israel, and East Asia

5194. Will Globalization Survive?

Author:: Martin Wolf
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Ours is not the first age of globalization. The decades before the First World War were remarkably similar to our own era. Under the aegis of the United Kingdom and stimulated by a host of technological advances, the world enjoyed an era of liberal trade, remarkably free movement of people, and almost entirely free movement of capital. The world also enjoyed an unprecedented rise in prosperity. According to the economic historian, Angus Maddison, real GDP per head rose at a rate of 1.3 percent a year in the world as a whole between 1870 and 1913. This is not far short of the improvement of the past three decades. As table 1 shows, only Asia and Africa, both victims of colonialism, failed to share in the rising prosperity.
Topic:: International Relations, Economics, Globalization, and War
Political Geography:: Africa, United Kingdom, and Asia

5195. What Bond Markets Can Learn from Argentina

Author:: Anna Gelpern
Publication Date:: 04-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Argentina has completed the largest and most complex sovereign bond restructuring in history. Before the debt exchange, it owed about $82 billion in principal and $20 billion in past due interest. Hundreds of thousands of creditors held 150 kinds of defaulted instruments issued in six currencies under the laws of eight jurisdictions. Creditors owed just over 76% of the total, or $62 billion, got $35 billion in new performing bonds. Other performing debt includes $40 billion in domestic and about $30 billion in multi-lateral obligations. Argentina left behind almost $25 billion in defaulted principal and interest.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: Argentina and South America

5196. China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity

Author:: Nicholas R. Lardy and Morris Goldstein
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: According to a popular argument put forward by three Deutsche Bank economists (Dooley, Folkerts-Landau, and Garber, here after DFG), one needn't worry about the sustainability of either the large US current account deficit or the undervalued exchange rates of a group of Asian economies (Dooley, Folkerts-Landau, and Garber 2003, 2004a, 2004b, 2004c; Folkerts-Landau 2004). In their view, the United States and the Asian economies have entered into an implicit contract—the so-called revived Bretton Woods system (hereafter BW2)—that can comfortably carry on for another decade or two, with significant net benefits to both parties.
Topic:: Economics and International Trade and Finance
Political Geography:: United States, China, and Asia

5197. Outsourcing and Offshoring: Pushing the European Model Over the Hill, Rather Than Off the Cliff!

Author:: Jacob Funk Kirkegaard
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Once again a specter is haunting Europe—not in the shape that Marx saw it but in the form of outsourcing and offshoring, which allegedly will empty Europe of the highly skilled high-paying jobs of the future. This working paper argues that the specter needs to be dispelled. Today, Europe faces challenges in the form of low productivity growth and low labor utilization/high unemployment. Outsourcing and offshoring, far from being a blight, are powerful tools to help solve the productivity growth problem and may also—provided the right structural reforms are implemented—assist in solving Europe's low employment problem.
Topic:: Economics, Government, and Third World
Political Geography:: Europe

5198. The Potential of International Policy Coordination

Author:: John Williamson
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: International economic policy coordination is an idea that is not nowadays at the top of the international agenda. The usual idea these days is that if each country pursues its own national interests, then the world will do as well as possible: There are no exploitable bargains of the type "it will pay [both][all] of us to change policies simultaneously even though if one of us made the change individually we would suffer" available. Even if there are no opportunities of that type (let us call them type A) available, there might still in principle be the chance of gaining by subscribing to a set of rules: Country X might expect to gain more over time from countries Y and Z respecting the rules than it would lose at other times from being obliged to modify its behavior according to the rules. Let us call these type B gains.
Topic:: International Relations and Economics
Political Geography:: United States and East Asia

5199. Reflections

Author:: Edwin M. Truman
Publication Date:: 03-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: My reflections on the new operating procedures that were adopted by the Federal Open Market Committee (FOMC) on October 6, 1979, derive from my responsibilities at the Federal Reserve Board at the time. Those responsibilities included preparation of the international component of the staff forecast, analysis of economic and financial developments in other countries, and assisting the Chairman and members of the Board (primarily Henry C. Wallich) with international responsibilities in connection with their attendance at international meetings. Therefore, mine was and is an international perspective. I was not involved in the design of the new operating procedures, although I was informed that the project was under way.
Topic:: Development, Economics, and Emerging Markets
Political Geography:: United States

5200. Managing Energy Insecurity

Author:: John Browne
Publication Date:: 02-2005
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: It is great to be in Washington again and a privilege to be invited to speak here for the first time. You asked me to talk about energy security, and I think the basic question is whether, to use the words of one of your recent papers, there is "a gathering storm" around energy supply, and what, if anything, should and could be done to avert that storm.
Topic:: Economics, Energy Policy, and Science and Technology
Political Geography:: United States and Washington

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COLUMBIA UNIVERSITY PRESS