External integration, structural transformation, and economic development: Evidence from Argentina 1870-1914
Pablo Fajgelbaum, Stephen Redding 12 July 2014
External integration is often viewed as an important driver of economic development, but most existing studies use aggregate data. This column present evidence from a natural experiment provided by Argentina’s integration into the world markets in the late 19th century. The findings suggest that proximity to trade centres is associated with employment density, high lands rates relative to wages, and structural transformation away from agriculture.
External economic integration is often argued to be an important driver of economic development, as it raises income through specialisation in comparative-advantage sectors, provides low-cost access to imported goods, and shapes the pattern of structural transformation from agricultural into non-agricultural activities. These relationships are typically examined at the aggregate level, implicitly treating each country as a point in space.
Development Economic history International trade
integration, comparative advantage, trade costs, Argentina, specialisation
Gross trade accounting: A transparent method to discover global value chain-related information behind official trade data: Part 2
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.
competitiveness, globalisation, trade, comparative advantage, global value chains, global supply chain, statistics
Offshoring and middle-income workers in the US
Lindsay Oldenski 16 October 2012
The state of the US middle class has been a key issue this election season as middle-income workers have experienced relative wage losses in the last decade. Skill-biased technology change has previously been identified as a major cause of this polarisation of wages in the US. But this column shows that there is also an empirical link between offshoring by US firms and the polarisation of the US labour market.
As the US presidential election approaches, both candidates have been focusing on the state of the middle class. In the first presidential debate, Mitt Romney claimed: "the people who are having the hard time right now are middle income Americans. Under the president's policies, middle income Americans have been buried". At the same time, Barack Obama has made the middle class the centrepiece of many of his campaign proposals, with his official website claiming that "President Obama is fighting to grow the economy from the middle class out, not the top down."
offshoring, comparative advantage, polarisation
Can China’s growth lower welfare in developed countries? A refutation of the Samuelson conjecture
Julian di Giovanni, Andrei Levchenko, Jing Zhang 02 April 2012
The late Nobel Laureate Paul Samuelson argued that if China’s productivity growth accelerates in areas where it does not currently have a comparative advantage – notably the service sector – developed countries may suffer. This column presents a multi-country, multi-sector model, and reaches the opposite conclusion: the world, including developed countries, is far better off when China’s growth favours its current comparative disadvantage sectors.
Global economy International trade
China, comparative advantage
Can services be the next growth escalator?
Ejaz Ghani, Arti Grover Goswami, Homi Kharas 12 December 2011
Policymakers in both developed and developing countries now see services as the source of jobs and growth. This column argues that modern services sophistication now surpasses that of the manufacturing sector and explores the reasons why.
The world is experiencing a third industrial revolution with services trade being at the forefront of this revolution. Services are characterised by growing tradeability, increasing technological sophistication, and lower transport costs. Modern services can now be unbundled and splintered in a value chain just like goods and they can be electronically transported internationally through satellite and telecom networks.
Development International trade Productivity and Innovation
comparative advantage, technological change, Services trade, Services sector, PRODY
Development and accumulation of new capabilities: The Index of Opportunities
Jesus Felipe, Utsav Kumar, Arnelyn Abdon 22 July 2010
This column introduces the Index of Opportunities – a ranking of countries by their capacity to undergo structural transformation and develop. It suggests countries at the bottom are in urgent need of implementing policies that lead to higher diversification and sophistication of exports.
Development is about structural transformation. This can be defined as the process by which countries change what they produce and how they do it. It involves a shift in the output and employment structures away move from low-productivity and low-wage activities into high-productivity and high-wage activities; and the upgrading and diversification of the production and export baskets. This process generates sustained growth and enables countries to increase their income per capita.
Development International trade
development, growth, international trade, comparative advantage, structural adjustment
Why large American gains from globalisation are plausible
Gary Clyde Hufbauer, Matthew Adler 24 July 2008
A popular headline figure quantifying the US payoff from globalisation at $1 trillion per year has been criticised by Dani Rodrik and other sceptics. Here is an explanation and defence of the Peterson Institute’s big number.
The Peterson Institute calculates that the US economy was approximately $1 trillion richer in 2003 due to past globalisation – the payoff both from technological innovation and from policy liberalisation – and could gain another $500 billion annually from future policy liberalisation (Bradford, Grieco, and Hufbauer 2005). Past gains amounted to about 9% of GDP in 2003, and potential future gains constitute another 4%.
Global economy International trade
globalisation, US economy, partial equilibrium, comparative advantage, monopolistic competition, economies of scale, productivity gains, safety net