Trade and Development Working Papers
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Publication Metadata only Costing global trade barriers, 1900 to 2050(Crawford School of Public Policy, The Australian National University, 2012-02) Anderson, KymBy how much did the cost of governmental barriers to trade change over the 20th century, and how might they change by the middle of the 21st century? This paper addresses that question by first reviewing evidence on the changing extent of global trade restrictions since 1900, particularly for agricultural and manufactured goods. It then assesses prospects for trade policy changes over the coming four decades by drawing on current political economy theory and evidence. The paper then provides crude estimates of the annual cost, in terms of economic welfare foregone in high-income and developing countries, of those trade-restricting policies.Publication Open Access The Japanese macroeconomic mystery(Crawford School of Public Policy, The Australian National University, 2016-01) Corden, W. Max; Jayasuriya, SisiraThis paper examines Japan's two decades of so-called 'stagnation' since the rapid the collapse of the bubble economy in the early 1990s brought the long period of rapid post-war economic growth to an abrupt halt. Successive governments have experimented with varying policy measures to restore growth without much success, though Keynesian fiscal measures have helped avoid high unemployment. A series of policy mistakes and demographic shifts that foreshadowed an aging and shrinking population led to a loss of confidence in the country's long term economic prospects and hampered recovery. A major cause of continuing stagnation has been a sharp decline in private corporate investment to the point where it became a net saver. Surprising for a country with no regulatory barriers to cross border capital mobility, the bulk of Japanese savings have gone into government bonds yielding progressively lower returns despite better foreign options. This extreme 'home bias' has enabled governments to run debt financed fiscal deficits for a long period but now public debt has exploded to well over twice GDP, threatening fiscal sustainability. Direct government measures to channel investments overseas through a Sovereign Wealth Fund can not only boost Japan's longer term income but also provide an immediate stimulus by depreciating its exchange rate. A fundamental lesson from the Japanese experience is that, to avoid a public debt sustainability problem, long term fiscal stimulus measures should make productive investments that enable subsequent debt repayments.Publication Open Access Cambodia's special economic zones(Crawford School of Public Policy, The Australian National University, 2015-03) Warr, Peter; Menon, JayantThis study examines the role of Special Economic Zones (SEZs) within the trade policy of Cambodia. It asks whether Cambodia's establishment of SEZs since late 2005 has been successful, based on the evidence to date, and analyzes the appropriate role and management of SEZs over the next decade or more. The study finds that the SEZs have attracted significant levels of foreign investment into Cambodia that would not have been present otherwise, creating around 68,000 jobs, with equal or better pay and better prospects than the alternatives that would otherwise have existed, raising the economic welfare of the workers concerned. A feature of the Cambodian experience is that the government has left the establishment and management of the zones to private sector developers, avoiding the large and sometimes wasteful public sector set-up costs associated with SEZ establishment in many other countries.Publication Open Access Two decades of declining poverty despite rising inequality in Laos(Crawford School of Public Policy, The Australian National University, 2015-03) Warr, Peter; Rasphone, Sitthiroth; Menon, JayantOver the last two decades the distribution of private household expenditures has become more unequal in Laos, with the Gini coefficient rising from 0.311 to 0.364, even though absolute poverty incidence has halved. The increase in inequality was statistically significant and reduced the average rate of poverty reduction per year by about 28 percent, meaning the actual rate compared with the counterfactual rate that would have occurred if the mean real expenditures had increased at their observed levels but inequality had not changed. When the data are decomposed into rural and urban areas of residence or by province, or by the ethnicity of the household head, the increase in inequality within groups dominates any changes between groups inequality has increased throughout the country. In contrast, access to publicly provided services has become more equal disparities in participation rates between richer and poorer groups have diminished.Publication Open Access Is plantation agriculture good for the poor? Evidence from Indonesia's palm oil expansion(Crawford School of Public Policy, The Australian National University, 2015-03) Edwards, RyanI study the poverty impacts of plantation-based agricultural growth, focusing on Indonesian palm oil. Using rich new administrative panel data, I exploit exogenous variation arising from Indonesia's unique institutions and the data's longitudinal features to identify causal effects. Increasing the palm oil share of land in a district by ten percentage points corresponds to a ten percent reduction in its poverty rate, and a narrowing of the poverty gap. Effects are similar across regions and at the province level. Oil palm expansion tends to be followed by a sustained boost to the value of agricultural output, manufacturing output, and district GDP.Publication Open Access Industrialisation, employment and poverty(Crawford School of Public Policy, The Australian National University, 2015-03) Athukorala, Prema-chandra; Sen, KunalIn this paper we revisit the debate on the role of industrialisation in employment generation and poverty reduction in developing countries through an interpretative survey of the literature, supplemented with relevant stylized facts. After more than four decades of development experience and research, there is a consensus that the early emphasis on 'force' import substitution through protection and state intervention has outlived its usefulness and growth prospects and poverty alleviation though employment generation are greatly enhanced by industrialization through greater integration into the international economy. The changes of policy reforms seem to hinge, however, on policy makers' ability to craft policies by carefully taking into account structural peculiarities and policy history of individual countries while drawing on both schools of thought and the accumulated evidence of economic successes and failures in other countries.Publication Open Access Victory in war and defeat in peace: politics and economics of post-conflict Sri Lanka(Crawford School of Public Policy, The Australian National University, 2015-03) Athukorala, Prema-chandra; Jayasuriya, SisiraThis paper examines causes and implications of Sri Lanka's political regime shift in February 2015, which has been widely hailed a victory for democracy, against the backdrop of the country's political and economic development in the post-independence era. The regime shift vividly demonstrates that voters, given the chance, turn against leaders they perceive to be corrupt, nepotistic or needlessly divisive, even if they deliver handsome growth figures there are limits to gaining political legitimacy in a multi-ethnic state simply by creating cleavages between majority and minority communities. For the first time, the minority communities in Sri Lanka appear to have felt themselves part of, and potentially an important influence on, the national political scene. It is, however, difficult at this stage to predict whether the regime change would usher in an era of ethnic harmony and robust economic growth. One hope is that war-weariness and discontents with the previous regime seem to have led to a greater willingness to accommodate diverse perspectives and demands within the political system.Publication Open Access Impacts of emerging Asia on African and Latin American trade: projections to 2030(Crawford School of Public Policy, The Australian National University, 2015-02) Anderson, Kym; Strutt, AnnaRapid growth in Asia's emerging economies has boosted export earnings of resource-rich economies over the past decade. Whether or not those high growth rates continue, how will structural changes in Asia alter the relative importance of their imports of primary products? This paper projects production and trade patterns of Africa and Latin America to 2030 under various growth and policy scenarios in Asia, using the GTAP model of the global economy. We compare a projection assuming relatively conservative economic growth in China and India with a projection in which those economies continue to grow rapidly (albeit slower than in the previous decade). We then compare our conservative growth baseline with two alternative scenarios: one assuming Africa and Latin America choose to invest more in public agricultural R&D to take advantage of Asian import growth the other assuming China and India dampen that import growth by restricting their imports of key foodgrains (following the historical pattern of economies such as Japan and Korea). The final section summarizes the results and draws out policy implications for Latin America and Africa.Publication Open Access Is there a Southeast Asian development model?(Crawford School of Public Policy, The Australian National University, 2013-04) Hill, HalThe 10 states of Southeast Asia have combined to form the developing world's most successful and durable regional grouping, the Association of Southeast Asian Nations, ASEAN. Economic integration among them is high and increasing. The ambitious ASEAN Economic Community is scheduled to take effect from December 2015, and should further accelerate this integration. But the socio-economic and institutional disparities among them are also very large. This paper therefore asks the question, does it make sense to contemplate a 'Southeast Asian development model'? Given this diversity, such a model obviously does not yet exist. But over time, these countries are converging with respect to their openness, their macroeconomic management and some aspects of their social policy. The poorer countries are generally growing faster than the richer ones, suggesting gradual convergence. There are also important spillover and demonstration effects evident from the region's leaders to its followers. Whether these developments will lead to the adoption of some sort of coherent regional development strategies remains to be seen.Publication Open Access Global production sharing, trade patterns and industralization in Southeast Asia(Crawford School of Public Policy, The Australian National University, 2013-04) Athukorala, Prema-chandra; Kohpaiboon, ArchanunThis paper examines the emerging trends and patterns of merchandise trade in Southeast Asia and their implications for growth and structural changes in domestic manufacturing, with emphasis on the on-going process of global production sharing. The analysis reveals that participation in global production networks (GPNs) has strengthened economic interdependence among the Southeast Asian countries, and between these countries and China and the other major economies in East Asia, but this has not lessoned the dependence of growth dynamism of these countries on the global economy. The operation of the regional cross-border production networks depends inexorably on trade in final goods with North America and the European Union. Reflecting differences in policy regimes and the overall business climate, the degree of integration within GPNs and the resultant impact on industrial upgrading varies notably among the countries in the region.Publication Open Access Emerging economies, productivity growth, and trade with resource-rich economies by 2030(Crawford School of Public Policy, The Australian National University, 2013-04) Anderson, Kym; Strutt, AnnaRapid economic growth in some emerging economies in recent decades has significantly increased their global economic importance. If this rapid growth continues and is strongest in resource-poor Asian economies, the growth in global demand for imports of primary products also will continue, to the on-going benefit of natural resource-rich countries. This paper explores how global production, consumption and trade patterns might change over the next two decades in the course of economic development and structural changes under various scenarios. We employ the GTAP model and Version 8.1 of the GTAP database with a base year of 2007, along with supplementary data from a range of sources, to support projections of the global economy to 2030. We first project a baseline assuming trade-related policies do not change in each region but that factor endowments and real GDP grow at exogenously-estimated rates. That baseline is compared with two alternative scenarios: one in which the growth rates of China and India are lower by one-quarter, and the other in which this slowdown in emerging economies leads to slower productivity growth in the primary sectors of all countries. Throughout the results, implications are drawn out for natural resource-abundant economies, including Australia and New Zealand.Publication Open Access Trade and investment patterns in Asia: implications for multilateralizing regionalism(Crawford School of Public Policy, The Australian National University, 2013-04) Athukorala, Prema-chandra; Kophaiboon, ArchanunThis paper documents and analyzes emerging patterns of trade and foreign direct investment in Asia with a view to informing the contemporary policy debate on multilateralizing regionalism. The key theme running through the paper is the pivotal role of global production sharing in transforming trade patterns. The findings make a strong case for a global, rather than a regional, approach to trade and investment policy making. Global production sharing has strengthened economic interdependence among the countries in the region, but the dynamism of the regional cross-border production networks depends inexorably on trade with the rest of the world, particularly with North America and the European Union.Publication Open Access Growth, growth accelerations and the poor: lessons from Indonesia(Crawford School of Public Policy, The Australian National University, 2013-03) Bhattacharyya, Sambit; Resosudarmo, Budy P.We study the impact of growth and growth accelerations on poverty and inequality in Indonesia using a new panel dataset covering 26 provinces over the period 1977-2010. This dataset allows us to distinguish between mining and non-mining sectors of the economy. We find that growth in non-mining significantly reduces poverty and inequality. In contrast, overall growth and growth in mining appears to have no effect on poverty and inequality. We also identify growth acceleration episodes defined by at least four consecutive years of positive growth in GDP per capita. Growth acceleration in non-mining reduces poverty and inequality whereas growth acceleration in mining increases poverty. We expect that the degree of forward and backward linkages of mining and non-mining sectors explain the asymmetric result. Our results are robust to state and year fixed effects, state specific trends, and instrumental variable estimation with rainfall and humidity as instruments.Publication Open Access Public Services and the poor in Laos(Crawford School of Public Policy, The Australian National University, 2013-03) Warr, Peter; Menon, Jayant; Rasphone, SitthirothBoth cross sectional and panel methods of analysis for Laos confirm that for public education and health services, the poorest quintile groups receive the smallest shares of total provision of these services. Nevertheless, poor groups' shares of an increase in the level of provision - their marginal shares - are generally higher than these average shares. For primary and lower secondary education and for primary health centers, expanding the overall level of provision delivers a pattern of marginal effects that is significantly more pro-poor than average shares indicate and the degree to which the poor benefit increases with the level of provision.Publication Open Access How India fits into global production sharing: experience, prospects and policy options(Crawford School of Public Policy, The Australian National University, 2013-03) Athukorala, Prema-chandraGlobal production sharing'?the break-up of the production process into geographically separated stages's an increasingly important facet of economic globalization that opens up opportunities for countries to specialize in different slices (tasks) of the production process depending on their relative cost advantage. This paper examines India's role in global production sharing from a comparative East Asian perspective in order to contribute to the contemporary policy debate in India on the link between export performance and 'jobless growth' in domestic manufacturing in India. The analysis reveals that India has so far failed fitting into global production networks in electronics and electrical goods, which have been the prime movers of export dynamism in China and the other high-performing East Asian countries. Further reforms to improve the overall investment climate is even more important for reaping gains from this new form of international exchange than for promoting the standard labour intensive exports. There is also a strong case, based on the experiences in East Asia and elsewhere, for combining further reforms with a proactive investment promotion campaign to attract multinational enterprises (MNEs) engaged in global production networks.vPublication Open Access Should developing countries undervalue their currencies?(Crawford School of Public Policy, The Australian National University, 2013-03) Schroder, MarcelThe Washington Consensus emphasizes the economic costs of real exchange rate distortions. However, a sizable recent empirical literature finds that undervalued real exchange rates help countries to achieve faster economic growth. This paper shows that recent findings are driven by inappropriate homogeneity assumptions on cross-country long-run real exchange rate behavior and/or growth regression misspecification. When these problems are redressed, the empirical results for a sample of 63 developing countries suggest that deviations of the real exchange rate in either direction from the value that is consistent with external and internal equilibrium reduces economic growth. Deviations from Balassa-Samuelson adjusted purchasing power parity on the other hand do not seem to matter for growth performance. The real exchange rate should thus be consistent with external and internal balance irrespective of implied purchasing power parity benchmarks.Publication Open Access Food price spikes, price insulation, and poverty(Crawford School of Public Policy, The Australian National University, 2013-03) Anderson, Kym; Ivanic, Maros; Martin, WillThis paper has two purposes. It first considers the impact on world food prices of the changes in restrictions on trade in staple foods during the 2008 world food price crisis. Those changes'?reductions in import protection or increases in export restraints'ere meant to partially insulate domestic markets from the spike in international prices. We find that this insulation added substantially to the spike in international prices for rice, wheat, maize and oilseeds. As a result, while domestic prices rose less than they would have without insulation in some developing countries, in many other countries they rose more than in the absence of such insulation. The paper's second purpose it to estimate the combined impact of such insulating behavior on poverty in various developing countries and globally. We find that the actual poverty-reducing impact of insulation is much less than its apparent impact, and that its net effect was to increase global poverty in 2008 by 8 million, although this increase was not significantly different from zero. Since there are domestic policy instruments such as conditional cash transfers that could now provide social protection for the poor far more efficiently and equitably than variations in border restrictions, we suggest it is time to seek a multilateral agreement to desist from changing restrictions on trade when international food prices spike.ePublication Open Access Global production sharing and trade patterns in East Asia(Crawford School of Public Policy, The Australian National University, 2013-03) Athukorala, Prema-chandraThis paper analyzes trade patterns in East Asia, with special reference to the implications of the development of global production sharing. It examines the nature and extent of global production sharing and the role of East Asian countries within global production networks. It also highlights the rise of China and it's positioning within these production networks, explores the implications of engagement in global production sharing for growth patterns, and analyzes the pattern of trade contraction across countries and types of goods during the global financial crisis (2008-2009).Publication Open Access The consequences of urban air pollution for child health: What does self reporting data in the Jakarta metropolitan area reveal?(Crawford School of Public Policy, The Australian National University, 2013-02) Amalia, Mia; Resosudarmo, Budy P.; Bennett, JeffSince the early 1990s, the air pollution level in the Jakarta Metropolitan Area (JMA) has arguably been one of the highest among mega cities in developing countries. This paper utilises the self-reporting data on illnesses available in the 2004 National Socio-Economic Household Survey (Survei Sosial Ekonomi Nasional, or SUSENAS) to test the hypothesis that air pollution impacts human health, particularly among children, in JMA. Test results confirm that air pollution, represented by the PM10 level in a sub-district, does significantly correlate with the level of human health problems, represented by the number of restricted activity days (RAD) in the previous month. The results also show that a given level of PM10 concentration is more hazardous for children.Publication Open Access Fertilizer subsidies and food self-sufficiency in Indonesia(Crawford School of Public Policy, The Australian National University, 2013-02) Warr, Peter; Yusuf, Arief AnshoryIndonesia is a net importer of almost all of its staple foods. National selfsufficiency in food, especially the main staple, rice, is a core objective of economic policy. Poverty reduction is also a core policy objective. Since the 1970s, Indonesia has used agricultural input subsidies, especially on fertilizer, to stimulate agricultural production, largely in pursuit of its selfsufficiency goals. Recently, it has also used output protection, especially in rice, for the same purpose. This paper utilizes a multi-sectoral, multihousehold general equilibrium model of the Indonesian economy to study the trade-offs between the goals of self-sufficiency and poverty reduction when two alternative means are used to achieve them: a fertilizer subsidy, on the one hand, and output protection, on the other. It does this by analyzing the aggregate and distributional effects of these two sets of policies and by comparing their effects with non-intervention. The analysis shows that, in terms of its effects on poverty, a fertilizer subsidy can be a more effective instrument for achieving the goal of rice self-sufficiency than final product import restrictions.