Trade and Development Working Papers
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Publication Metadata only Evolving from a rum state: Australia's alcohol consumption(Crawford School of Public Policy, The Australian National University, 2020-02) Anderson, KymEuropeans settlers in the Australian colonies had a reputation of being heavy drinkers. Rum dominated during the first few decades, followed by beer. It took until the 1970s before Australia's annual per capita consumption of wine exceeded 10 litres, and even then wine represented only one-fifth of national alcohol consumption. But over the next two decades per capita wine consumption nearly trebled and beer consumption shrunk - the opposite of what happened to global alcohol consumption shares. This paper draws on newly compiled datasets (a) to reveal that Australia was not much more alcoholic than Britain or southern Europe during the nineteenth century and (b) to help explain why it took so long for a consumer interest in wine to emerge in Australia.Publication Metadata only Identification of common and idiosyncratic shocks in real equity prices: Australia 1982 to 2002(Crawford School of Public Policy, The Australian National University, 2003-03) Dungey, Mardi; Fry-McKibbin, Renee A.A structural vector autoregressive (SVAR) model of real equity prices in Australia is specified to contain common shocks in international equity markets and domestic shocks in Australian financial and goods markets. Common shocks are identified through the long-run comovements of international equity markets, resulting in the model being characterized as having more shocks than variables. The empirical results show that the dot-com crisis of 2000 causes Australian real equity values to depreciate significantly below a precrisis baseline forecast, while contagion from the Asian financial crisis of 1997-1998 is found to have a much smaller negative impact.Publication Metadata only Invisible transfers in Indian federalism(Crawford School of Public Policy, The Australian National University, 1998-01) Rao, M.GovindaIn most federal countries, design of intergovernmental transfers do not take into account violation of horizontal equity due to invisible transfers. Such subterranean transfers can be significant and they occur due to inter-state tax exportation arising from the levy of resource based (as against residence based) taxes and subsidised loans given to the states by the central government and the public sector banking system. This study estimates the volume of invisible transfers due to subsidised lending to states in India and demonstrates that such transfers have significantly reduced the progressivity of explicit intergovernmental transfers.Publication Metadata only Paved with good intentions: Social dumping and raising labour standards in developing countries(Crawford School of Public Policy, The Australian National University, 1998-01) Corden, W. Max; Vousden, NeilThis paper uses a two-sector wage differential model to analyse the effects of an increase in labour costs in the export sector of a developing country. The increase is assumed to be a response to humanitarian or protectionist-motivated pressure from developed countries to reduce "?social dumping"?. Some labour would shift into the residual sector of the economy, hence lower wages there, and increase wage inequality. The average wage may rise or fall, depending on elasticity conditions. Monopsony in the labour market, mobility of multinationals in response to lower profits and terms of trade effects are allowed for.Publication Metadata only Trade orientation and productivity gains from international production: A study of overseas operations of US multinationals(Crawford School of Public Policy, The Australian National University, 1998-01) Athukorala, Prema-chandra; Chand, SatishThe effect of the trade policy regime of the host country on its productivity gains from international production is an issue of obvious policy relevance and analytical interest but one on which there has been a dearth of empirical research. This paper aims to fill this gap through an analysis of a cross-section of data on overseas production of US manufacturing multinationals in 44 countries over the period 1983-1992. The findings provide strong support for the proposition that, other things being equal, productivity gains from international production tend to be greater under a more open trade policy regime compared to a restrictive regime. There is also evidence of a significant negative effect of a stringent domestic tax regime on efficiency gains from international production.Publication Metadata only Towards a political economy explanation of rapid growth in Southeast Asia(Crawford School of Public Policy, The Australian National University, 1996-01) Hill, HalThis article offers an explanation for the rapid economic development of the four high growth economies of Southeast Asia (Indonesia, Malaysia, Singapore, and Thailand) over the past 30 years. It initially provides a brief review of the major determinants of interna tional differences in economic performance, drawing on both the economic growth and the "?East Asian miracle"? literature, and a confirmation that these determining factors have been operative to some extent in the four countries. The major section of the article addresses the political economy question of why, over the past 30 years, these countries have generally adopted the "?right"? development policies more than is the case almost anywhere else out side East Asia.Publication Open Access Globalization and national commodity cycles: The case of wine in Australia(Crawford School of Public Policy, The Australian National University, 2024-04) Anderson, KymGlobalization may have reduced but certainly has not eliminated differences in national commodity cycles. This article examines the case of Australia's wine industry. Over the past four decades, all annual indicators of that industry's international competitiveness have traced a steep inverted V. This paper draws on recently compiled data to first summarize such indicators and contrast them with those of other key wine-exporting countries. It then offers a series of partial explanations for the industry's sharp rise and then equally steep fall in its international competitiveness (and its several bumps along the way). The New Zealand and Californian wine industry's prolonged expansions in particular are contrasted with Australia's. Despite the current downturn in the industry's fortunes, and notwithstanding the likelihood of further boom-slump cycles in the decades ahead, the paper concludes that a return to profitability is possible if vignerons and wine exporters were to raise their current rates of investments in R&D, quality improvements and promotion, and if the AUD remains relatively weak.Publication Open Access Trade openness and the growth-poverty nexus: Reappraisal with a new openness indicator(Crawford School of Public Policy, The Australian National University, 2024-03) Wannaphong, DurongkaverojDeveloping countries have greatly benefited from globalization, coinciding with economic growth and structural transformation. Standard trade theory postulates that trade openness contributes to poverty alleviation directly by changing factor proportions of production and indirectly through the trickledown effect of growth. Existing multi-country studies using the trade-to-GDP ratio to measure openness often fail to find a direct effect of openness on poverty over and above the growth-poverty nexus. This paper is motivated by the concern that failure of these studies to detect the effectiveness of the factor proportion channel may be due to limitations of the commonly used measure of trade openness, the trade-to-GDP ratio. Using a newly constructed index of trade openness, which I dub "?the price convergence index' (PCI), I find significant direct effect of openness on poverty reduction. The results also suggest that the impact of growth on poverty is greater for countries with more open trade regimes.Publication Open Access The Global Trade Slowdown: Nominal or Real?(Crawford School of Public Policy, The Australian National University, 2024-03) Prema-chandra, AthukoralaThis paper revisits the contemporary debate on the deglobalization of merchandise trade using a new dataset that captures changes in the price structure of manufacturing trade associated with the decline in prices of information technology (IT) equipment. There is strong evidence that continued growth in world trade, both in absolute (value) terms and relative to GDP, has remained obscured by the frequent reliance on trade measured at current rather than constant prices. Continuing downward adjustment in the prices of manufactures trade within GVCs has significantly reshaped the price structure of global trade. When appropriately measured in real terms, there is strong evidence that world trade has regained its upward trend following the significant dip during the GFC owing to the dynamism of trade rooted in global production sharing.Publication Open Access Spillovers from agricultural processing(Crawford School of Public Policy, The Australian National University, 2024-03) Edwards, Ryan B.This paper uses the proliferation of palm oil factories across Indonesia's undeveloped hinterland to study industrial onset and estimate spillovers from agricultural processing. The main finding is signs of urbanization and structural change around factories: more non-agricultural employment, higher incomes, and more people, firms, and other economic and social organizations. These patterns are largely explained by economic linkages, infrastructure and other public goods, and economies of scale in production. By focusing on subsistence rural regions in a large developing economy, this paper adds a globally- significant new case to a growing literature emphasizing the importance of agglomeration externalities for understanding the birth of new towns, the spatial distribution of economic activity, and structural transformation.Publication Open Access International Production and Industrial Transformation: The Singapore Story(Crawford School of Public Policy, The Australian National University, 2024-03) Prema-chandra, Athukorala; Raveen, EkanayakeThe expansion of global manufacturing value chains (GMVCs) as a major mode of economic globalization opens up opportunities for latecomer countries to industrialize and carve out niches to specialize within the value chain, instead of producing a good from start to finish within their national boundaries. However, whether this provides a pathway for self-sustained industrialization remains a debatable issue. Sceptics argue that, since multinational enterprises (MNEs), which are the "?lead firms' of GMVCs, dominate upper-end activities of the value chain such as product design, research and development, global marketing, and after-sales care and services, a country located lower rungs of the value chain has little room for industrial upgrading. This paper aims to contribute to this debate through an in-depth case study of industrial transformation over the past six decades in Singapore, the first country to embark on an MNE-led export-oriented industrialization strategy based on the prophetic foresight of unfolding opportunities for global economic integration within GMVCs. The findings suggest that, while Singapore had some country-specific advantages, it was hard-headed national development policy that was instrumental in transforming the country from "?the third world to the first' within a generation. The key general lesson from the Singaporean experience is that industrialization success within GMVCs requires embedding FDI promotion in a comprehensive national development strategy that makes the country an attractive location for international production and continuously monitoring and recalibrating the development strategy in line with evolving patterns of international production.Publication Open Access The dynamics of labor share decline in manufacturing: Evidence from Indonesia(Crawford School of Public Policy, The Australian National University, 2024-03) Riandy, Laksono; Patunru, Arianto A.Labour share of income in developing economies has generally declined with increased engagement in international trade, raising concern about adverse distributional consequences of trade for workers. Using a panel dataset of Indonesian manufacturing firms from 1990 to 2015, we evaluate how trade affects the dynamics of labor share from a micro-level perspective. We find that trade liberalization contributes to declining labor share, mainly by shifting market share towards better-performing firms with already-low labor share. While this is in line with the superstar firm framework, such model fails to characterize the labor share dynamics in a developing economy like Indonesia where aggregate markups and concentration do not rise. Instead, this study supports a trade-based explanation for labor share decline.Publication Open Access Feeding the Aging World: The Role of Demographics in Shaping the Global Food Trade(Crawford School of Public Policy, The Australian National University, 2024-03) Wanissa, Suanin; Panit, WattanakoonThe global demographic shift to an ageing society poses challenges for the international food trade. People in different age groups have different dietary preferences, nutritional needs, and income levels, which influence consumer preference and purchasing power. This study examines the impact of global demographic shifts towards silver economies on international food imports using structural gravity analysis. The findings suggest that silver economies will shift consumer preferences to import healthier food, resulting in increased income elasticity of demand for these imports. The primary target markets for healthy food trade are developed countries, particularly Japan, the EU, and the US, where income elasticity is high and remains near or greater than one. Although consumers in developing countries may not prefer healthy foods, their income elasticity for healthy food imports will rise as the elderly population grows.Publication Open Access Effects of low emission zones on air quality, new vehicle registrations, and birthweights: Evidence from Japan(Crawford School of Public Policy, The Australian National University, 2024-02) Nishitateno, Shuhei; Burke, Paul J.In October 2003 four contiguous prefectures in Greater Tokyo introduced Low Emission Zones (LEZs) from which diesel trucks and buses without particulate filters have been banned from entering. This paper analyzes the effects of this large-scale intervention on air quality, new vehicle registrations, and birthweights. We use a matching approach to construct a control group comparable to the designated areas in terms of propensity scores based on municipality characteristics during the pre-intervention period and apply a difference-in-differences design. We find evidence that the intervention led to reductions in hourly particulate matter concentrations and the incidence of low birthweights in the Greater Tokyo LEZ relative to the control group. We also find that the LEZs led to increases in registrations of new trucks and buses. This is not the case for passenger cars, which were exempt from the regulations. Our paper provides the first evidence of a significant link between LEZs and reduced incidence of low birthweights. Keywords: Low emission zone, urban air pollution, birthweight JEL codes: Q53, R48, I18Publication Open Access Effectiveness of electric vehicle subsidies in China: A three-dimensional panel study(Crawford School of Public Policy, The Australian National University, 2024-01) Zhang, Tong; Burke, Paul J.; Wang, QiElectric vehicles (EVs) are likely to emerge as the main means of zero-emission road transport. China has used a variety of policy approaches to encourage EV adoption, including vehicle purchase subsidies. This study uses a three-dimensional dataset to estimate the effect of purchase subsidies for domestic EVs on adoption in 316 cities in China over January 2016-December 2019. An instrumental variable approach that utilizes the timing of the cancellation of local subsidies by the central government is pursued. The findings suggest that purchase subsidies for domestic EVs have led to a sizeable increase in uptake, but have discouraged uptake of imported EVs. Higher consumer awareness of the subsidies is associated with a larger proportional effect on uptake of domestically-produced vehicles. We estimate that increases in the per-vehicle subsidy rate have on average reduced carbon dioxide (CO2) emissions at a marginal subsidy cost of about 4,453 CNY (US$712) per tonne, which is high. However, other benefits, including long-run benefits from the emergence of a new clean technology sector, may be substantial. Keywords: electric vehicle subsidies||consumer awareness||imported vehicles||carbon dioxide emissions JEL codes: H23, H31, Q58Publication Open Access The sovereign debt crisis in Sri Lanka: Anatomy and policy options(Crawford School of Public Policy, The Australian National University, 2023-04) Athukorala, Prema-chandraDuring the COVID-19 pandemic, there has been a dramatic increase in national debt levels across the world, with reported cases of downgrading sovereign debt ratings and difficulty of fulfilling debt obligations ("?debt distress') heavily concentrated in low and middle-income countries. In this context, the unfolding sovereign debt crisis in Sri Lanka has attracted worldwide attention as the canary in the coalmine for what could become a global "?development' crisis. This paper examines the Sri Lankan crisis encompassing both the sources of vulnerability to the COVD-19 shock, and stabilization and structural adjustment reforms after the debt default, with emphasis on the systemic "?solvency' challenge of dealing with the massive debt overhang evolved over the previous two decades. The prime focus of the Extended Fund Facility Arrangement (EFFA) that Sri Lanka signed with the IMF in March 2023 is on economic stabilization through fiscal consolidation. This paper makes a strong case for combining economic stabilization with coherent structural adjustment policies to redress the long-standing anti-tradable bias in the incentive structure that underpinned vulnerability of the economy to external shocks.Publication Open Access Repurposing agricultural support policies for shared prosperity in rural Fiji(Crawford School of Public Policy, The Australian National University, 2023-04) Anderson, KymNotwithstanding the increasing place of tourism exports, the rural sector and its agricultural production remain important contributors to Fiji's economy. But their contribution is compromised by policies and institutions that distort the farm sector's resource use, with too many resources employed by sugar and livestock producers at the expense of other farmers and producers of non-farm products. Subsidies to the sugar industry could be used instead to boost investment in rural public goods such as infrastructure and agricultural research. That would benefit a much larger proportion of rural people, many of whom are below the poverty line. So too would a lowering of tariffs on imports of meat and milk products. And by thereby lowering food prices in urban areas, such re-purposing of support would benefit their poorest households most. It would also lower the prices of high-protein livestock products and nutrient-rich fruits and vegetables, which could well improve nutrition and health.Publication Open Access Exporting processed food: Sri Lanka's experience in the Asian context(Crawford School of Public Policy, The Australian National University, 2023-04) Athukorala, Prema-chandra; Weerahewa, Jeevik A.; Kandangama, Navaratne BandaraIn recent decades, there has been a palpable shift in the commodity composition of world agri-food trade away from the traditional primary (unprocessed) products mostly exported from developing countries. However, this structural change in trade patterns and its policy implications have so far received scant attention in policy making in most agricultural-resource rich developing countries. Policy makers are still wedded to the conventional division of primary products and manufactured goods that lumps together processed food with primary (unprocessed) agri-food products. This paper aims to draw attention to this policy oversight by examining the experience of Sri Lankan in processed food exports against the backdrop of the experiences of the other countries is the Asian region. The analysis uses a new dataset that systematically delineate processed food from the traditional primary good products, The analytical narrative of inter-country pattern of export performance shows that, unlike primary commodity dependence, exporting processed food is positively associated with the state of economic advancement of countries. The results of the econometric analysis suggests that export success of a country is determined by a combination of growth of world demand, the domestic agricultural resource endowment and the conduciveness of the policy regime for global economic integration.Publication Open Access Mortality from the influenza pandemic of 1918-19 in Indonesia(Crawford School of Public Policy, The Australian National University, 2023-03) van der Eng, PierreThis paper discusses existing estimates of the number of deaths due to the 1918 Spanish influenza pandemic in Indonesia, particularly in the core island of Java. Chandra (2013) estimated these deaths to be 4.26 to 4.37 million. The paper substantiates that these estimates are the result of a methodology that relies on an overestimated annual average population growth rate of 1.75% during 1880-1930. Using a more realistic growth rate of 1.1% per year reduces the estimate to a still considerable 1.47 million deaths in 1918. A rough estimate of excess mortality among the non-Indonesian population in Java and the whole population in the outer islands of Indonesia suggest a total of 2 million excess deaths related to the Spanish flu in 1918-19. The paper also briefly scrutinises the available vital statistics obtained from the village registers in Java. Correcting these as much as possible for under-recording confirms the impression that the estimates in Chandra (2013) are too high. The paper identifies opportunities for further historical demography research related to the 1918 flu pandemic in Indonesia.Publication Open Access Does official development assistance benefit the donor economy? New evidence from Japanese overseas infrastructure projects(Crawford School of Public Policy, The Australian National University, 2023-03) Nishitateno, ShuheiGiven the growing pressure on donors to curtail foreign aid budgets, analyzing the effectiveness of bilateral official development assistance (ODA) in realizing national interests has become more significant than ever. From the viewpoint of economic interests, prior research has revealed that ODA can help expand donor exports and outward foreign direct investments. This study provides evidence that ODA can also help firms from donor countries to win infrastructure projects in recipient countries. Employing unique contract data on Japanese overseas infrastructure projects, I estimate a fixed effects Poisson model with a panel dataset for 158 recipients for the period between 1970 and 2020. The results suggest that 17% of the total number of overseas infrastructure projects contracted to Japanese firms during 1970-2020 were attributable to Japanese ODA disbursement. I also explore the potential mechanism, finding that the Japanese ODA-infrastructure link is strengthened when Japanese loans and grants are simultaneously provided to a recipient country. This finding is consistent with the view that pre-investment studies conducted as part of technical cooperation could generate goodwill effects on Japanese firms during their bidding for Japanese yen loan projects.