Transport Modal Choice by Multinational Firms: Firm-level Evidence from Southeast Asia

The impacts of trade liberalization on poverty status of farm households in Africa often come through its effects on prices, government revenues, and employment, among other things. For the case of Ethiopia, the main channel through which trade liberalization affects farm households is changes in the prices of inputs and outputs. The aim of this study is to empirically examine the impacts of trade reform on poverty status in rural Ethiopia. The results show that, although households’ resource endowment had consistent and significant improvement impacts, trade liberalization had mixed effects on change in poverty status. As a result of trade liberalization, contrary to expectation, changes in the prices of cash crops (i.e. chat and coffee) had increased the probability of remaining poor and falling into poverty. On the other hand, changes in the relative prices of staple food crops (i.e. teff and wheat), together with access to credit and schools, had increased the probability of escaping poverty and remaining above the poverty line.     

Terms of Trade Shocks and Endogenous Search Unemployment: A Two‐Sector Model with Non‐Traded Goods

We develop a simple and tractable two‐sector search model featuring a non‐traded sector and endogenous search unemployment to examine the impact of terms of trade shocks on unemployment. We show that changes in terms of trade will not only lead to employment reallocation across sectors, as in the traditional trade models, but, more importantly, impact upon search unemployment within each sector. Specifically, we show that an improvement (deterioration) of terms of trade reduces (increases) unemployment rates in both traded and non‐traded sectors.     

POVERTY DYNAMICS DURING TRADE REFORM: EVIDENCE FROM RURAL VIETNAM

This paper implements and adapts the conceptual framework developed by Winters (2002) that identifies the transmission mechanisms between trade policy reform and household welfare outcomes. We make use of household panel data from Vietnam collected in two years, 1992–93 and 1997–98 that span the very earliest years of the reform period and its immediate after effects. Poverty dynamics are modeled using changes in consumption expenditure and poverty transition models. The trade effect is captured by a set of variables that are most likely to have an impact on rural poverty, namely prices of staples and employment in the export sector. We show that trade liberalization has a material and positive effect on rural household welfare and this trade effect is largely transmitted to the poor through the labor market channel.     

Disentangling the Poverty Effects of Sectoral Output,Prices, and Policies in India

This paper attempts to disentangle the poverty effects of key policy variables that directly affect the poor (namely the government‐led channel of development spending and financing) in both agricultural and non‐agricultural sectors after accounting for the effect of respective sectoral per capita income and prices, using data from India over five decades. The paper emphasizes the sectoral composition of income and prices as mechanisms influencing the level of poverty and establishes empirically that it is the rise in non‐agricultural per capita income that reduces rural poverty via the channel of internal migration, after having controlled for the variation in key components of fiscal spending and monetary/financial policy via the availability of credit. Uneven sectoral growth pattern explains why urban poverty becomes a spill‐over of persistent rural poverty when the agricultural sector shrinks. While checking for robustness, there is evidence that the rise in non‐agricultural income alone may not reduce rural poverty, when measured in terms of rural infant mortality rate as a non‐income indicator of well‐being.     

Poverty changes in Manaus: Legacy of a Brazilian free trade zone?

This study contributes to the literature on the social impacts of Special Economic Zones by analyzing poverty changes in the Brazilian state of Amazonas, where the Free Trade Zone of Manaus (FTZM) is located. Using census data, statistical micro‐decompositions and counterfactual simulations, we show that labor income was the major driver of poverty declines during the 2000 to 2010 decade in the municipality of Manaus (and all the more so for households with members working in the FTZM, who were less poor to start with). Comparison with ex‐ante “similar” municipalities, in regard to socioeconomic and demographic criteria, corroborates the relative success of Manaus in terms of poverty reduction as well as the essential role played by labor income. Wage regressions also show a significant FTZM premium effect for workers, though diminishing over time. In the rest of the state of Amazonas, nonlabor income remains the main factor for poverty reduction and the FTZM appears to have limited spillover effects, even at short distances. Our contrasting results illustrate both the benefits and limitations that trade and industrial policies face in underprivileged areas and suggest that a better targeting of social policies is needed to improve distributional outcomes and spillovers for the whole state.     

Home bias, distribution services and determinants of real exchange rates

This paper examines empirically how exogenous changes in the terms of trade affect the real exchange rate through the relative price of traded goods with Canada–US data. The relative price of traded goods is constructed using prices at the dock and retail prices. The first measure emphasizes the importance of home bias in consumption of traded goods. The second measure highlights the importance of distribution services required for consumption of traded goods. It is found that terms of trade shocks affect the relative price of traded goods using both measures. A possible interpretation of empirical findings is that home bias and distribution services are important for understanding the relative price of traded goods.     

International Market Access and Poverty in Argentina

This paper examines the impact of access to international agro‐manufacture markets on poverty in Argentina. Estimates from the literature suggest that expanded market access would cause the international price of Argentine exports of agro‐manufactures to increase by between 8.7% and 15.9%. I explore two poverty effects caused by these prices changes: on food expenditure and on wages. Using a household budget survey, I estimate the impact of higher food prices on the Argentine poverty line. Using a labor force survey, I estimate the responses of wages to changes in export prices. My main finding is that market access would cause poverty to decline in Argentina. From a national head count of 29.26%, the poverty rate would decline to between 28.28% and 28.80%. This means that between 161,000 and 343,000 Argentines would be moved out of poverty.     

PRICE DYNAMICS,FOREIGN EXCHANGE AND ANTICIPATED SHOCKS IN A TOURISM ECONOMY

Using a dynamic model of an open monetary economy, this paper examines the effects of tourism‐related anticipated shocks on goods prices and foreign exchange reserves. Foreign tourists consume mainly non‐traded goods in holiday destinations, converting them into exportable goods. This gives rise to a tourism terms‐of‐trade effect that affects the accumulation of foreign exchange. Announcements of anticipated events bring tourist visits forward, resulting in an initial under‐adjustment or an over‐adjustment in the prices of the non‐traded goods when the tourism terms‐of‐trade effect is positive or negative. This leads to an increase or a decrease in foreign reserves in the long run.     

A Note on Banking Reform and Poverty: Revisiting the Indian Social Banking Experiment

Recent empirical work demonstrates that state‐led bank expansion in rural India has contributed to a reduction in the number of poor people. In this note it is shown that the social banking policies have not simultaneously decreased the rural poverty gap. This suggests a potential trade‐off for policy makers, hinted at by earlier theoretical modeling: while opening new bank branches in “unbanked locations” might lift some people out of poverty, it may increase the depth of poverty of others. The result also illustrates the value added of combining complementary poverty measures to achieve a more complete picture of the impact of policies on livelihoods.     

Gross job flows in Ukraine

This paper documents and analyses gross job flows and their determinants in Ukraine using a dataset of more than 2200 Ukrainian firms operating in manufacturing and non‐manufacturing for the years 1998–2000. Job destruction dominates job creation in both 1999 and 2000. Another clear‐cut result of our analysis is the strong positive effect of new private firms on net employment growth. We also find an inverse relationship between job reallocation and size for both manufacturing and non‐manufacturing, while only in the latter sector is employment growth inversely related with size. The main focus of the paper is the effect of trade flows on employment adjustment in manufacturing. Our results show that both employment growth and job reallocation at the firm and two‐digit sector level are affected by strong exposure to import competition and product market competition in export markets. These effects are more pronounced when we consider trade flows to the world at large and to the EU than when the analysis is based on trade flows to the CIS. JEL Classifications: E24, F14, J63, P23.     

The impact of oil prices on trade

This paper introduces an oil price–distance interaction variable in a gravity equation to explain how global trade behaves as a result of oil price changes. The findings are that as oil prices increase, international trade becomes more localized in that countries begin trading relatively more with their neighbors. In contrast, when they decrease, trade becomes more dispersed in that the distance between countries becomes less relevant. These results are highly significant across specifications, and the magnitude is not to be ignored. According to the full specification an oil price halving will make trade more dispersed by relatively increasing trade by 40% for a distance of 10,000 miles and by 25% for a distance of 1,000 miles.     

Anthropometric failure and persistence of poverty in rural India

Recent studies have drawn attention to the high prevalence of stunting among children in rural India. In fact, these estimates point to more pervasive deprivation than conventional measures of poverty based on income or consumption expenditure shortfalls imply. Since stunting reflects cumulative nutritional and health deprivation, it is likely to persist despite higher incomes. With a view to shedding some new light on this issue, an analysis of the determinants of stunting is carried out, based on a recent all‐India survey of rural households. While income matters, other factors acting independently of it matter too. These include household size, whether household head is male, caste affiliation, mother’s age at marriage, mother’s age, age composition of children, male–female wage differences, hygiene and sanitation facilities, and prices of food items. So, while higher incomes will help mitigate stunting, careful attention must also be given to enhancing women’s autonomy through more remunerative employment opportunities for them, enabling households to improve hygiene and sanitation facilities, and facilitating more competitive local markets for food.     

Relative price shifts,economies of scale and poverty during economic transition1

Economic transition is associated with significant shifts in relative prices between private and public goods. If, as a result, public goods claim a larger share of total expenditures, economies of scale in consumption increase. We show how relative price changes might alter the welfare of different‐sized households in the short run and over time. We illustrate, for a selection of transition economies, that conventional poverty profiles are quite sensitive to assumptions made about economies of scale in consumption. In particular, the common view that large households with many children are poor relative to small households (such as those comprising the elderly) is shown to be highly non‐robust.     

Tariff pass-through and the distributional effects of trade liberalization

This paper estimates the distribution of welfare gains due to the trade reforms in India by simultaneously considering the effect on prices of tradable goods and wages. The cost of consumption for each household is affected by the domestic price changes, while wage incomes adjust to these price changes in equilibrium. Three rounds of the Indian Employment and Consumption Surveys are used for the analysis. The price transmission mechanisms are estimated for both rural and urban areas to understand the extent to which the trade reforms are able to affect the domestic prices. In order to assess the distributional effects, a series of nonparametric local linear regressions are estimated. The findings show that households at all per capita expenditure levels had experienced gains as a result of the trade liberalization, while the average effect was generally pro-poor and varied significantly across the per capita expenditure spectrum.     

Poverty Lines as Context Deflators: A Method to Account for Regional Diversity with Application to the Democratic Republic of Congo

This paper proposes a particular methodology to render budget data more comparable over highly diverse regions. More specifically, a set of regional poverty lines will be derived and employed as deflators to correct household expenditures for spatial differences in prices and needs. The quality of these deflators depends on the extent to which the underlying poverty lines adhere to the principles of consistency and specificity. Central to reconciling both principles in practice is our pursuit for austerity in setting poverty thresholds as well as the view that differences in social norms mainly reflect differences in social inclusion needs. The particularity of the proposed method compared to standard practice lies in the combination of: (i) the pronounced subdivision in socio‐economic strata; (ii) the use of a differential calorie threshold per sector; (iii) the introduction of protein intake; (iv) the derivation of a minimal house rent; and (v) the use of an austere non‐food/non‐housing allowance. The impact of this method is illustrated using a budget survey of the Democratic Republic of Congo.     

Entrepreneurship in post‐conflict transition1

We examine new self‐employment entry and its viability in Bosnia and Herzegovina, using a rich household survey for the years 2001–2004. We find that wealthier households are more likely to engage in viable self‐employment and create employment suggesting an important role for financing constraints. Specifically, although having an existing bank relationship is not significantly related to the entry decision, it is positively related to the survival for new entrepreneurs and their employment creation. We also find a non‐linear relationship between remittances and entry in that individuals not receiving remittances are more likely to enter self‐employment; but, if they do receive them, the likelihood of starting a business increases in the fraction of wealth received from domestic remittances. Finally, people working in the informal sector are more likely to become viable entrepreneurs, particularly those provided with loans from micro‐credit organizations. These findings support the perception of the informal sector as an incubator for formal self‐employment in the early years of transition.     

A comparative analysis of the impact of oil prices on oil-rich emerging economies in the Pacific Rim

This paper examines the relationship between raw materials prices and economic growth through two channels, the terms of trade (ToT) and energy efficiency (EF), in three emerging Pacific Rim economies, Russia, Indonesia and Malaysia. We demonstrate positive relationships between changes in output and oil prices and between changes in GDP and energy efficiency (EF). We examine the impact of oil prices on output growth through the ToT and EF channels. The effect of oil prices on ToT in Russia and Malaysia is positive but negative in Indonesia. Oil prices have a positive effect on EF in all three countries.     

Why Isn't the Doha Development Agenda more Poverty Friendly?

Critics of the Doha Development Agenda rightly point to the lack of aggressive reform in wealthy countries for its role in dampening developing country gains. The authors find that the absence of tariff cuts on staple food products in developing countries also critically limits poverty reduction in those countries. Based on their analysis of the impacts of multilateral trade policy reforms in a sample of 15 developing countries, they find there is some evidence of poverty increases amongst the poor who work in agriculture when they lose protection for their earnings. However, these effects are minimized when agricultural tariffs are cut in all developing countries, and when the impact of lower food prices on low income consumers is taken into account in their 15 country sample.     

International risk sharing and commodity prices

Abstract Cole and Obstfeld (1991) exposited a classic result where equilibrium movements in the terms of trade could make ex ante risk‐sharing arrangements unnecessary: a unity elasticity of substitution across goods and production specialization. This paper extends their model to N countries and M commodities (N > M). Here the terms of trade provides insurance against commodity‐specific shocks, not country‐specific shocks. Using commodity‐level production data at the national level and world commodity prices, we document significant terms of trade variability and positive responses of nation‐specific production to terms of trade improvements. The endogenous terms of trade insurance mechanism highlighted in CO is virtually non‐existent.     

The Hunger of Old Women in Rural Tanzania: Can Subjective Data Improve Poverty Measurement?

On average, women in Tanzania are slightly less likely than men to say that they are “always/often without enough food to eat”—but this masks a much higher rate of self‐reported food deprivation among elderly rural women. Official Tanzanian poverty statistics are, however, based on a methodology which presumes equal sharing per equivalent adult within the household. This paper combines subjective and objective micro‐data from Tanzania's 2007 Household Budget Survey and 2007 Views of the People Survey. By imputing individual consumption based on the relative probability of self‐reported food deprivation, it provides an example of the possible importance of one type of intra‐household inequality—i.e., the hunger of old women—for poverty measurement. Implications include the complexity of gendered intra‐household inequality and the importance of “technical” poverty measurement choices for public policy priorities, such as old age pensions.