Development Economics, HU zu Berlin - PowerPoint PPT Presentation

Loading...

PPT – Development Economics, HU zu Berlin PowerPoint presentation | free to view - id: 1ef3a6-ZDc1Z



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Development Economics, HU zu Berlin

Description:

Daniel Werner Alejandro Lara. Egor Nikitin Clemence Charveriat. Trade & Growth ... Daniel Werner | Alejandro Lara | Egor Nikitin | Clemence Charveriat. 19. Idea ... – PowerPoint PPT presentation

Number of Views:30
Avg rating:3.0/5.0
Slides: 36
Provided by: lesavre
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Development Economics, HU zu Berlin


1
Trade Growth
  • Development Economics, HU zu Berlin
  • Daniel Werner Alejandro Lara
  • Egor Nikitin Clemence Charveriat

2
Content
  • Growth Strategy
  • Economic principles for trade
  • Washington consensus
  • Import Substitution
  • Outward-oriented policies
  • Big Push
  • Spillover effects of industrialization
  • Openness and Growth
  • Measuring Growth
  • Empiric evidence

3
GROWTH STRATEGY Dani Rodrik 2003
Def Growth strategy Economic policies and
institution arrangements aimed at achieving
economic convergence with the living standards
prevailing in advanced countries.
4
Diverse growth in the last 40 years.
5
  • Fisrt order economic principles for trade…
  • Protection of property rights.
  • Market based competition.
  • Appropriate market based incentives.
  • Sound money.

  • …do not correspond to unique policies!!!!
  • Many different institution forms can succeed in
    applying these principles.

6
Ex. of the Washington consensus (J. Williamson
1990) 1 Fiscal discipline 2 Reorientation of
public expenditure 3 Tax reform 4 Interet rate
liberalization 5 Unified and competitive exchange
rates 6 Trade liberalization 7 Openness to DFI 8
Privatization 9 Deregulation 10 Secure property
rights
7
How can one ignite economic growth? Quite easy
all countries have experienced it. What ?
install the first order economic principles. How
? many different ways than the Washington
consensus! Authors view 1rst solution Remove
the government imposed barriers on trade
Government failures . 2nd solution The first
solution Subsidize the market so as to trigger
investment and entrepreneurship. Ex currency
devaluation.
8
How can one SUSTAIN economic growth? Institutio
n building strategy Why To construct a stable
and resistant environment for growth. How
Copying western way is not always the
solution. Ex Poland, Japan…
9
Content
  • Growth Strategy
  • Economic principles for trade
  • Washington consensus
  • Import Substitution
  • Outward-oriented policies
  • Big Push
  • Spillover effects of industrialization
  • Openness and Growth
  • Measuring Growth
  • Empiric evidence

10
Import Substitution R. E. Baldwin.
  • After the end of World War II developing
    countries adopted import-substitution policies
  • Reasons countries from whom they obtained
    independence had much higher per capita income
    levels and were much more industrialized, because
    former rulers had imposed economic policies that
    discouraged industrialization.
  • Import substitution restrict imports of
    manufactured goods for which there already was a
    domestic demand in order both to shift this
    demand toward domestic producers and permit the
    use of the countrys primary-product export
    earnings to import the capital goods needed for
    industrialization

11
  • The infant industry argument maintains that
    during the temporary period when domestic costs
    in an industry are above the products import
    price, a tariff is a socially desirable method of
    financing the investment in human resources
    needed to compete successfully with foreign
    producers. And in 1950s it was applied to the
    entire manufacturing sector.
  • Worked quite well initially. Increases in output
    of simple manufactured goods and imports of key
    intermediate inputs and capital goods. Production
    utilized the abundant unskilled labor.
  • Mistakes uncritical acceptance of the industry
    argument and failure to take macro effects when
    applied to all manufacturing

12
  • However, overvalued currencies (tight exchange
    controls) reduce earnings from primary-product
    exports and kept import prices relatively low of
    needed capital goods.
  • Secondary effects. Hardships imposed on export
    sector began to have adverse growth effects.
  • Lack of higher skill and technology requirements
    worsened profit of domestic producers
  • Expansionary activities by governments caused
    inflationary pressures and large government
    budget deficits and balance of payments deficits
    this caused tighter exchange rate and import
    controls. Net outcome was a slowing in growth
    rate.

13
Content
  • Growth Strategy
  • Economic principles for trade
  • Washington consensus
  • Import Substitution
  • Outward-oriented policies
  • Big Push
  • Spillover effects of industrialization
  • Openness and Growth
  • Measuring Growth
  • Empiric evidence

14
  • SHIFT TO OUTWARD-ORIENTED POLICIES
  • First group of developing countris were far
    eastern countries Taiwan, Singapore, South Korea
    and Hong Kong.
  • Many attempts to liberalize trade and payment
    regimes of other developing countries until the
    debt crisis of 1982 which convinced them.
  • They had borrowed heavily in the international
    markets to cope with trade-deficit problems
    caused by IS and growth rates were not as
    expected.
  • Countries such like Mexico, Argentina, Chile,
    Turkey, Ghana and Uganda began to adopt the
    outward looking policies.
  • Inability to borrow funds to mantain the IS was
    main reason to switch.

15
  • Studies started considereing not only changes in
    levels ofiimport protection and export
    subsidization but the array of macroeconomic
    policies monetary, fiscal, exchange rate to
    promote import substitution
  • Many countries that switched to the
    outward-looking polices often foreced to abandon
    them temporarily because of external events or
    domestic political pressures
  • Inward and outward policies involve as well FDI,
    exchange rates, money supply under control,
    constraint budget deficits and corruption and
    control monopolistic behavior.
  • Countries who stuck with an inward-looking
    approach over the years were Pakistan, Burma and
    Zimbabwe have had relatively lower growth rates

16
  • OPENNESS AND THE NEW GROWTH THEORY
  • Traditional comparative-statics frameword changes
    in trade policy lead only to one-time changes in
    levels of production. In real world one might
    expect to observe the shift to new equilibria
    over a number of periods.
  • In latter 80s and early 90s improvement in
    endogenous growth theroy buy Romer Lucas and
    Grossmand Helpman
  • RD process increases the stock of knowledge wich
    substitutes the human capital in the production
    of new intermediate inputs. The outcome is a
    constant rate of growth of factor productivity
    and output in the sectors producing the final
    goods
  • Effects of tariff on imported good. If the
    country is importing the good that uses human
    capital and exporting the good intensively using
    unskilled labor, the import duty will raise the
    relative domestic price of human capital
    intensive good and therefore the wages of skilled
    labor. This increase in the price of human
    capital will lower the RD and lower equilibrium
    growth

17
Content
  • Growth Strategy
  • Economic principles for trade
  • Washington consensus
  • Import Substitution
  • Outward-oriented policies
  • Big Push
  • Spillover effects of industrialization
  • Openness and Growth
  • Measuring Growth
  • Empiric evidence

18
Big Push Rosenstein-Rodan (Murphy, Kevin and
Shleifer)
  • Rosenstein-Rodan was initially concerned with
    the post war development of Eastern and South
    Eastern Europe
  • He argued that industrialisation was the only
    way to alleviate the 25 unemployment rate due to
    excess agrarian workers
  • However, he believed that such investment would
    not occur without coordination

Paul Rosenstein-Rodan 1902 - 1985
19
Idea of Big Push
  • small domestic markets (no free trade), costly
    trade ? firms may not generate enough sales to
    make adoption of an increasing returns technology
    profitable (industrialization trap )
  • simultaneous industrialization of many sectors
    can be self-sustaining and welfare improving
  • Why Growth in domestic demand ? growth of
    domestic output (Chenery, Robinson and Syrquin,
    1986)

20
Spillover effects of industrialization (Chenery,
Robinson and Syrquin, 1986)
  • where p(n) Profit of the firm
  • a markup,
  • F investment to industrialize
  • L labour.

Positive correlation between y and p
21
Spillover effects (contd.)
  • 1st Nash equilibrium all firms industrialize
  • 2nd Nash equilibrium none industrializes (LltF)

Industrialization
Output ?
Profit ?
Income ?
consumption
growth
Single industrialization
Output ?
Profit ?
No spillover
22
Content
  • Growth Strategy
  • Economic principles for trade
  • Washington consensus
  • Import Substitution
  • Outward-oriented policies
  • Big Push
  • Spillover effects of industrialization
  • Openness and Growth
  • Measuring Growth
  • Empiric evidence

23
Increased growth across regions (World Bank
Global Economic Prospects Report)
Real GDP growth, 2001-2005
24
Trade Facilitation circle
25
Trade Facilitation Theory (Berg Krueger, 2003)
  • Simplification of procedures through
  • Reduced transport costs
  • Improved ports facilities
  • Efficient and transparent customs procedures
  • Transparent and harmonized regulations (tarrifs
    and NTBs)
  • Improved communication/information technologies
  • ? static allocation of resources

26
Effects of efficient static allocation of
resources
  • an increased efficiency of investment
  • expansion of constant returns through access to
    larger markets
  • a higher real return to capital in unskilled
    labour abundant countries
  • higher rate of domestic saving and/or foreign
    capital inflow
  • rapid short-term growth in response to trade
    opening
  • further pro-growth economic policy reforms
    because of open trade regime
  • reduction in rent seeking activities inspired by
    trade restrictions
  • spur to innovation and entrepreneurial activity
    resulting from competition and access to larger
    markets
  • openness to ideas and innovations generated by
    openness to trade

27
Openness or changes in openness?
  • Increasing returns to scale or sufficient
    externalities can generate a situation of growth
    traps (Easterly, 2001)
  • NAFTA Mexico vs. U.S. textile market
  • Openness or changes in openness
  • China closed market vs. high growth
  • Closed market higher growth
  • Japan semiconductor world market

28
How to measure openness?
  • How to calculate a meaningful overall measure?
  • Commodity A ? higher tariff vs. lower welfare
    costs
  • Commodity B ? lower tariff vs. higher welfare
    costs
  • Same tariff ? different effects in different
    countries
  • no necessary relationship between official and
    collected tariffs (Pritchet and Sethi (1994)
    almost no relationship for three developing
    countries)
  • NTBs are hard to quantify (Anderson and Neary,
    1996)
  • average tariffs are not meaningful (Berg, 1997)
  • switching from one form of protectionism to
    another vs. decreasing/increasing protection
    (Dean, 1994)

29
Sachs and Warner index (1995)
  • Five tests of openness
  • an average tariff rate below 40
  • NTB covering less that 40 of trade
  • black market exchange rate premium below 20 on
    average during 70s 80s
  • absence of socialist economic system
  • absence of extractive state monopoly on major
    exports

30
Critics on Sachs Warner index
  • black market premium reflects chaotic
    macroeconomic policy
  • Various measures of trade policy are not
    correlated
  • productivity in traded-goods sector leads to a
    rise in relative prices of nontraded services
    (Alcala and Ciecone, 2001 real openness
    imports exports as a share of GDP in
    purchasing-power-parity dollars)

31
Content
  • Growth Strategy
  • Economic principles for trade
  • Washington consensus
  • Import Substitution
  • Outward-oriented policies
  • Big Push
  • Spillover effects of industrialization
  • Openness and Growth
  • Measuring Growth
  • Empiric evidence

32
Empirical Evidence (Edwards and Sebastian)
  • Methods
  • Multi-country studies
  • Cross-country growth regressions

33
A more detailed view on growth regressions
  • Econometrical background
  • Trade influences growth through
  • positive externalities on nonexports sectors (Fx)
  • a productivity differential in favour of exports
    (d)
  • ? equation (Feder, 1983)

34
A more detailed view on growth regressions
(contd.)
  • Results
  • Almost all studies find a positive relation
    between export performance and growth
  • but very general in nature, no insights in the
    mechanism

35
A more detailed view on growth regressions
(contd.)
  • Arising questions
  • Is a minimum level of development required in
    order to reap the benefits of trade?
  • Evidence is mixed, but indications that the state
    of development matters.
  • Do the world market conditions have an influence?
  • Strong indications that world market conditions
    matter on an individual country basis.
  • Does trade policy influence growth?
  • Outward oriented countries generally grow faster.
  • What about causality?
  • Often it is not clear, whether rising exports
    induce growth, or whether an improved growth
    performance lead to higher exports.
About PowerShow.com