When looking at the potential effects of a trade policy, trade economists usually insist on the real income effects, often dismissing its unemployment effects as of second-order importance, whereas policymakers and the public at large tend to voice concerns about jobs gained or lost. This column presents a quantitative framework that weighs both concerns, which is especially important when real incomes and the unemployment rates move in the same direction following a trade reform.
Céline Carrère, Anja Grujovic, Frédéric Robert-Nicoud, 03 September 2015
Andrew Rose, 01 September 2015
A nation’s hard power is based on its ability to coerce, while its soft power depends on the attractiveness of its culture, political ideals, and policies. This column shows that a country’s soft power has measureable effects on its exports. Countries that are admired for their positive global influence export more, holding other things constant.
Kaoru Hosono, Daisuke Miyakawa, Miho Takizawa, 27 August 2015
‘Learning by exporting’ refers to productivity gains experienced by firms after they commence exporting. Such gains are argued to be due to access to new knowledge and resources. This column explores some of the preconditions for learning-by-exporting effects, using data on the overseas activities and affiliations of Japanese firms. Firms that enter markets in which they don’t have affiliates or subsidiaries are found to enjoy the most learning-by-exporting productivity gains. These findings have implications for the timing of new market entry.
Uri Dadush, 13 March 2015
Manufacturing is often seen as the key to sustainable export and productivity growth in developing countries. This column argues that, while manufacturing played a key role in some countries’ development, high growth can be sustained without relying primarily on manufacturing. A process of learning, productivity improvement, and investment that touches all sectors characterises the most successful economies. Policies that artificially favour manufacturing should instead give way to maximising learning from the frontier in all sectors of the economy.
Jason Furman, 20 February 2015
The US economy has strengthened considerably in recent years, presenting an opportunity to address the 40-year stagnation in incomes for the middle class. This column provides historical and international context for the key factors affecting middle-class incomes: productivity growth, labour force participation, and income inequality. It also outlines President Obama’s approach to economic policies – what he terms “middle-class economics” – which is designed to improve all three.
Theodore Moran, 30 January 2015
Joining international supply chains has helped some developing nations to industrialise while leaving others by the wayside. This column discusses research that extract lessons from four case studies. It suggests the key to success is combining pro-active investment promotion with customised infrastructure improvements and public-private vocational training that allow investors to fit production from a novel site seamlessly into the company’s international supplier network.
Otaviano Canuto, Cornelius Fleischhaker, Philip Schellekens, 11 January 2015
While Brazil has become one of the largest economies in the world, it remains among the most closed economies as measured by the share of exports and imports in GDP. This column argues that this cannot be explained simply by the size of Brazil’s economy. Rather it is due to a reliance on domestic value chain integration as opposed to participation in global production networks. Greater trade openness could produce efficiency gains and help Brazil address its productivity and competitiveness challenges.
Emine Boz, Matthieu Bussière, Clément Marsilli, 12 November 2014
The past three years have witnessed a slowdown in global trade. This column shows that the slowdown was particularly pronounced in advanced economies, especially the Eurozone. In a panel of 18 OECD economies, most of the slowdown can be explained by cyclical factors. However, structural factors – global value chains and especially protectionism – may have played a role too.
Amir Attaran, Roger Bate, Ginger Jin, Aparna Mathur, 09 October 2014
There is a perception amongst pharmaceutical experts that some Indian manufacturers and/or their distributors segment the global medicine market into portions that are served by different quality medicines. This column finds that drug quality is poorer among Indian-labelled drugs purchased inside African countries than among those purchased inside India or middle-income countries. Substandard drugs – non-registered in Africa and containing insufficient amounts of the active ingredient – are the biggest driver of this quality difference.
Jeffrey Frankel, 09 September 2014
Subsidies for food and energy are economically inefficient, but can often be politically popular. This column discusses the efforts by new leaders in Egypt, Indonesia, and India to cut unaffordable subsidies. Cutting subsidies now may even be the politically savvy choice if the alternative is shortages and an even more painful rise in the retail price in future. Ironically, it is India’s new Prime Minister Modi – elected with a large electoral mandate and much hype about market reforms – who is already shrinking from the challenge.
Marco Annunziata, 16 August 2014
Africa has generated a lot of enthusiasm lately. The cynical view of the continent as a hopeless basket case has been replaced by the lofty narrative of Africa Rising. This column argues that Africa’s progress is impressive, and there is more to the story than a commodity boom. But Africa is at a crossroads. The opportunities are huge, but the road ahead is long, and will require persistent and patient effort from policymakers as well as business.
Susan Ariel Aaronson, 14 July 2014
The internet promotes educational, technological, and scientific progress, but governments sometimes choose to control the flow of information for national security reasons, or to protect privacy or intellectual property. This column highlights the use of trade rules to regulate the flow of information, and describes how the EU, the US, and their negotiating partners have been unable to find common ground on these issues. Trade agreements have yet to set information free, and may in fact be making it less free.
Maria Bas, Vanessa Strauss-Kahn, 14 July 2014
The rise of trade in intermediate inputs is well documented, but its role in shaping domestic economies is not yet completely understood. This column presents evidence from French firms on the effects of importing intermediate inputs. Firms importing more varieties of intermediate inputs increased their productivity and exported more varieties. Foreign inputs from the most advanced economies have the strongest effect on firm productivity, but imported inputs from all countries help raise the number of export varieties.
Patricia Ellen, Jaana Remes, 12 July 2014
Brazil has grown rapidly and reduced poverty over the past decade, but it has grown more slowly than other emerging economies and its income per capita remains relatively low by global standards. This column points out that sectors of the Brazilian economy that have been opened up to international competition have outperformed those that remain heavily protected. Deeper integration into global markets and value chains could provide competitive pressures that would improve Brazil’s productivity and living standards.
Jayant Menon, 09 June 2014
With the rise of mega-regional trade agreements, the world trade system resembles a jigsaw puzzle. This column discusses the difficulties involved in consolidating free trade agreements at the regional level, and argues that piecing together the blocs around the world will be even more challenging. A potential way forward is to return to the most widely used modality of trade liberalisation – unilateral actions – but this time involving the multilateralisation of preferences rather than unreciprocated reductions in tariff rates.
Christopher Parsons, Pierre-Louis Vézina, 23 May 2014
Immigrants potentially foster international trade by reducing trade costs. This column uses the exodus of the Vietnamese boat people to the US as a natural experiment to provide evidence of such a pro-trade effect. An exogenous allocation of Vietnamese migrants across the US in 1975 was followed by a 20-year trade embargo. Following the lifting of sanctions in 1994, the share of US exports going to Vietnam was higher and more diversified in the states with larger Vietnamese populations.
Zhi Wang, Shang-Jin Wei, Kunfu Zhu, 16 April 2014
One common measure of trade linked international production networks is the so-called VAX ratio, i.e. the ratio of value-added exports to gross exports. This column argues that this measure is not well-behaved at the sector, bilateral, or bilateral sector level, and does not capture important features of international production sharing. A new gross trade accounting framework is proposed that can better track countries’ movements up and down global value chains.
Zhi Wang, Shang-Jin Wei, Kunfu Zhu, 07 April 2014
The growth of international trade in intermediate inputs means that standard trade statistics can give a misleading picture of the real patterns of production behind world trade. This column introduces an accounting framework that decomposes traditional trade flows into components that better reflect the underlying location of the value addition linked to exports.
Pascal Lamy, Ian Goldin, 28 March 2014
Excessive short-termism is always a problem for policy, but the Global Crisis has brought it sharply into focus. This column introduces a report that discusses how a shift to longer-term solutions is necessary and possible. A key message is that businesses as well as governments need to take a longer-term view. The report identifies ways to overcome the current impasse in key economic, climate, trade, security, and other negotiations.
Derek Kellenberg, Arik Levinson, 01 March 2014
Economic theory predicts that international environmental agreements will fail due to free-rider problems, and previous empirical work suggests that such agreements do not in fact reduce emissions. This column presents evidence that the Basel Convention and Ban on trade in hazardous waste has also been ineffective. The authors find no evidence that Annex-7 countries that ratified the Ban slowed their exports to non-Annex-7 countries as the agreement requires.