Saturday, February 18, 2012

Links of Interest (2012-02-18)

Industrial policy works for smaller firms (If governments must provide investment subsidies to domestic firms, there is a much larger bang for their buck if they target small businesses rather than larger ones.)

Demand composition and the trade collapse of 2008–09 (The Great Trade Collapse was mainly caused by the crash in global demand.)

Non-tariff measures and supply chain (NTBs may add many trade costs along the supply chain and, in a world where production is fragmented across countries, they are associated with development traps.)

The figure below shows traded goods prices along the supply chain. Different policies apply to each part of the supply chain. Market distortions in international shipping specifically affect the difference between the free-on-board and cost-insurance-and-freight prices; import customs procedures then affect the landed duty-paid price; and restrictions on the size or hours of retail operations affect the difference between the wholesale and retail price.

The impact of natural disasters on developing countries' trade flows (Due to natural disasters such as earthquakes, floods, and volcanic eruptions exports of disaster-hit small developing countries decline by 22 percent and the observed impact tends to last for about three years. Exports of larger developing countries, on the other hand, are not significantly affected.)

What explains high unemployment? The aggregate demand channel (The decline in aggregate demand driven by household balance sheet shocks accounts for almost 4 million of the lost jobs from 2007 to 2009, or 65% of the lost jobs.)

Preferential trade agreements and the world trade system

    • Despite the proliferation of PTAs in recent years, the actual amount of liberalization that has been achieved through PTAs is actually quite limited.
    • At least a few studies point to significant trade diversion in the context of particular PTAs and thus serve as a cautionary note against casual dismissals of trade diversion as a merely theoretical concern. Equally, adverse effects on the terms-of-trade of non-member countries have also been found in the literature.
    • While the literature has found mixed results on the question of whether tariff preferences help or hurt multilateral liberalization, the picture is different with the more elastic tools of trade policy, such as antidumping duties (ADs); the use of ADs against non-members appears to have dramatically increased while the use of ADs against partner countries within PTAs has fallen.
    • Despite the rapid expansion of preferences in trade, intra-PTA trade shares are relatively small for most PTAs; multilateral remain relevant to most member countries of the WTO.

Conditional versus unconditional cash transfers in Burkina Faso

Compared with control group households, conditional cash transfers significantly increased the number of preventative health care visits during the previous year, while unconditional cash transfers did not have such an impact. For the conditional cash transfers, money given to mothers or fathers showed beneficial impacts of similar magnitude in increasing routine visits.

China's Growing Role in Africa: Myths and Facts

China’s emergence as a major player in Africa’s trade, investment, and aid has led many to question the nature of its involvement. Critics say that China is only interested in resources, its exports to Africa threaten local industries, and it is displacing Africa’s traditional partners, like the United States. True, China is a large user of commodities and has a vital interest in developing Africa’s natural resources, but it is not just on a resource hunt. Moreover, the adverse impacts on Africa of China’s increased exports, both in internal and external markets, appear to be limited to specific industries such as garments. And despite their differences in priorities and approaches, China and the United States can complement each other in some areas. Africa has much to gain if it uses its leverage wisely.

Beyond Keynesianism : Global infrastructure investments in times of crisis

As the world recovers only slowly from the 2008 financial crisis and Europe is facing a looming debt crisis, concerns have increased that the "new normal" -- a period of high unemployment, low returns on investment, high risks, and low growth -- may become protracted in advanced economies. If growth remains weak, unemployment rates and debt levels will be slow to recede. Consequently, the global recovery may continue to be fragile for years to come. What the world needs now is a growth-lifting strategy. This strategy could take the form of a global infrastructure initiative. Since debt levels are high, governments in the United States and Europe could increase demand and support growth through investments in bottleneck-releasing infrastructure projects that are self-financing. An infrastructure initiative should, however, go beyond the borders of advanced countries and include developing countries. Economic and social returns to infrastructure investments tend to be high in developing countries, which have become increasingly important drivers of global growth. At the same time, infrastructure investments require capital goods, most of which are produced in high-income countries. Scaling up infrastructure investment in developing countries could therefore help generate a virtuous cycle in support of a global recovery.