China's WTO Commitments in Agriculture and Impacts of Potential OECD Agricultural Trade Liberalizations*

After accession to the WTO, China's agriculture is affected by the implementation of its WTO commitments and will be impacted by any multilateral liberalization (actions by the rich OECD economies in particular) resulting from the Doha negotiations. Using the actual commitment data, our computable general equilibrium simulation results show that China's WTO commitments will lead to increased agricultural imports and slightly declined outputs in China. The resulting efficiency gains will be negated by terms‐of‐trade losses, leading to quantitatively small welfare impacts. Furthermore, sectoral results depend critically on correctly representing the more complex policy measures, such as the tariff rate quotas. The negative output effects on Chinese agriculture can be alleviated/reversed if the rich OECD countries commit to reform their agriculture policies. The present paper concludes that trade liberalization should be carried out in both developing and developed countries. Reforming the latter will be particularly helpful in easing the problems facing those developing countries that are carrying out ambitious trade reforms.     

Business Cycle Synchronisation: Disentangling Trade and Financial Linkages

Drawing on a large cross-section of countries, this paper explores whether closer economic ties between countries foster business cycle synchronisation and disentangles the role of the various channels, including trade and financial linkages as well as the similarity in sectoral specialisation. Our results confirm that output comovement is higher for country pairs with closer trade linkages and similar patterns of sectoral specialisation. By contrast, it remains difficult to find a direct relationship between bilateral financial linkages and output correlation. However, our results suggest that financial integration spurs business cycle synchronisation indirectly by raising the similarity in sectoral specialisation. Notably, the main findings hold regardless of whether financial linkages are captured in terms of FDI or portfolio holdings.     

INDONESIAN TRADE LIBERALISATION: ESTIMATING THE GAINS

Indonesia has undergone comprehensive trade liberalisation by participating in multilateral and regional trade arrangements and by conducting unilateral liberalisation. This paper evaluates the different paths of liberalisation the country has followed, and measures their effects on the economy. It considers the impact of several liberalisation scenarios: unilateral liberalisation; regional liberalisation through APEC (Asia Pacific Economic Cooperation) and AFTA (the ASEAN Free Trade Area); and multilateral trade liberalisation through the Uruguay Round (UR). The results show that the full implementation of UR and APEC liberalisation would greatly benefit Indonesia, and that unilateral liberalisation, carried out in conjunction with the UR commitment, would lead to large welfare gains. On the other hand, the creation of AFTA is expected to add little to welfare in Indonesia or in the other ASEAN member countries.     

External Shocks and the HIPC Initiative: Impacts on Growth and Poverty in Africa

Abstract: The paper uses a simple macroeconomic model to estimate the impact of debt relief and terms of trade shocks on growth and poverty in African countries. For the 18 heavily indebted poor countries (HIPCs) that reached the enhanced HIPC decision point by end‐December 2000, the basic quantitative findings are that HIPC debt relief has boosted economic growth in these countries by an average of 2.9 percent per annum and that the computed result of this increase in growth is a reduction in poverty by an average of 2.2 percent per annum. However, the paper shows that recent deteriorations in the terms of trade have counter‐balanced these positive effects by lowering growth by an average of 2.0 percent per annum and by increasing poverty by an average of 1.3 percent per annum. Clearly, much of the positive impact emanating from the HIPC Initiative has been eroded due to recent deteriorations in the terms of trade. The paper also estimates the net effect on growth and poverty of the recently agreed 100 percent multilateral debt relief. This is predicted to boost economic growth by an average of 5 percent per annum and reduce poverty by about 5.3 percent per annum for the group of all African HIPCs. The paper concludes that 100 percent debt relief is crucial for Africa, but that more aid and policies need to be focused on a long‐term development strategy that fosters the necessary structural transformation.     

Military Expenditure and the Arms Trade in the Asian-Pacific Region

The trend towards further reductions in world military expenditure does not seem to be shared by most Asian-Pacific countries. Military expenditure in the region continues to expand, but the military burden (the proportion of military expenditure in GDP) and the military share (the share of military expenditure in central government expenditure) are declining in most Asian-Pacific countries. This is largely due to sustained high economic growth in the region. Thus far, the military burden has not had an adverse effect on the region's economic growth, but continued expansion of military expenditure is not sustainable in countries where the military share is high. Asian-Pacific countries are vigorously developing, modernizing and upgrading their indigenous arms production capabilities. This effort has been aided not only by the availability of financial resources but also by the changing nature of the international arms market that offers attractive package deals, including various licensing, co-production and offset manufacturing arrangements.     

Do International Remittances Affect Poverty in Africa?*

Abstract: International remittances flowing into developing countries are attracting increasing attention because of their rising volume and their impact on recipient countries. This paper uses a panel data set on poverty and international remittances for African countries to examine the impact of international remittances on poverty reduction in 33 African countries over the period 1990–2005. We find that international remittances—defined as the share of remittances in country GDP—reduce the level, depth, and severity of poverty in Africa. But the size of the poverty reduction depends on how poverty is being measured. After instrumenting for the possible endogeneity of international remittances, we find that a 10 percent increase in official international remittances as a share of GDP leads to a 2.9 percent decline in the poverty headcount or the share of people living in poverty. Also, the more sensitive poverty measures—the poverty gap (poverty depth) and squared poverty gap (poverty severity)—suggest that international remittances will have a similar impact on poverty reduction. The point estimates for the poverty gap and squared poverty gap suggest that a 10 percent increase in the share of international remittances will lead to a 2.9 percent and 2.8 percent decline, respectively, in the depth and severity of poverty in African countries. Regardless of the measure of poverty used as the dependent variable, income inequality (Gini index) has a positive and significant coefficient, indicating that greater inequality is associated with higher poverty in African countries, much in conformity with the literature. Similar results were obtained for trade openness. In the same vein, per capita income has a negative and significant effect on each measure of poverty used in the study. Our results also show that inflation rates positively and significantly affect poverty incidence, depth and severity in Africa. In all three poverty measures, the dummy variable for sub‐Saharan Africa is strongly positive, and strongly negative for North Africa. The policy implications of these results are discussed.     

Do R&D tax incentives work? Firm-level evidence from China

Tax incentives have been used worldwide to encourage firm R&D, but there is little evidence on their effectiveness as a policy tool in developing countries. We use a panel dataset of Chinese listed companies covering 2007 to 2013 to assess the effects of tax incentives on firm R&D expenditures and analyze how institutional conditions shape these effects. Our results show that tax incentives motivate R&D expenditures for our sample firms. A 10% reduction in R&D user costs leads firms to increase R&D expenditures by 3.97% in the short run. We also find considerable effect heterogeneity: Tax incentives significantly stimulate R&D in private firms but have little influence on state-owned enterprises' R&D expenditures. Moreover, the effects of tax incentives are more pronounced for private firms without political connections. Hence, reducing political intervention complements tax incentives' capacity to foster firm R&D in developing countries.     

Do Private Tutoring Expenditures Raise Academic Performance? Evidence from Middle School Students in South Korea

To shed light on the effectiveness of educational inputs for student outcomes, this paper examines the effect of private tutoring expenditures on the academic performance of middle school students in South Korea. To address endogeneity, the paper uses instrumental variables, first‐difference, propensity‐score matching and nonparametric bounding methods. We apply these methods to a panel dataset from South Korea, the Korea Education Longitudinal Study. The results show that the true effect of private tutoring remains, at most, modest. Instrumental variables (first‐difference) estimates suggest that a 10‐percent increase in expenditure raises a test score by 0.03 standard deviations or 1.1 percent (0.002 standard deviations or 0.08 percent). Matching estimates imply that the same amount of increase in expenditure leads to a 0.33 to 0.72 percent higher average test score. The tightest bounds of the effect of tutoring reveal that a 10‐percent increase in expenditure improves the test score by a low of 0 to a high of 2.01 percent, while statistical tests fail to rule out zero effects. The modest effects of private tutoring found in the present study are comparable to the effects of public school expenditures on test scores and earnings estimated in previous studies.     

Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation

We analyze the aid portfolio of various bilateral and multilateral donors, testing whether they have prioritized aid in line with the Millennium Development Goals (MDGs). Employing Tobit models that combine sectorally disaggregated aid data with various indicators reflecting the situation of recipient countries regarding the MDGs, we show that donors differ in the extent to which their sectoral aid allocation is conducive to achieving major MDGs. Some MDGs, notably the fight against HIV/AIDS, have shaped the allocation of aid. However, with respect to other MDGs such as primary education, there is a considerable gap between donor rhetoric and actual aid allocation. This invites the conclusion that the current focus on substantially increasing aid is unlikely to have the desired effects unless the targeting of aid is improved. JEL no. F35, O11, O19     

Measuring trade creation effects of free trade agreements: Evidence from wine trade in East Asia

East Asia has experienced an unprecedented expansion in its wine market over the past two decades. This paper examines the extent to which import tariff reductions through bilateral free trade agreements (FTAs) have contributed to an increase in wine imports to Japan, China, and South Korea. Our empirical method involves estimating an augmented version of the gravity equation by the Poisson pseudo-maximum likelihood (PPML) technique. Analyzing a panel dataset for 1990–2016 covering 27 exporters, we find that overall a 1 percentage point reduction in tariff among FTA member countries is associated with an increase in the wine import volumes by 0.042%, which is seven times higher than a similar reduction in tariff on an MFN basis. The strongest trade creation effects are founded for bottle wine. The results are robust to various specifications.     

Terrorism and its Determinants in the Sub‐Saharan Africa Region: Some New Insights

Terrorism is undesirable as it adversely affects the economic development of countries. This study explores the determinants of terrorism in 29 countries of sub‐Saharan Africa (SSA). The data is extracted from reliable sources spanning over 2005 to 2016. Econometric techniques relevant for panel data that control for unobserved heterogeneity (fixed effects) and endogeneity (generalized method of moment) are employed to estimate the specified models. The results indicated that low growth in per capita incomes along with political instability are the main driving forces responsible for terrorism. Similarly, military expenditures are influencing terrorism positively whereas corruption has impacted terrorism negatively in the SSA region. Further, the growth of both physical as well as human capital reduces terrorism. The paper suggests that the region should take appropriate steps for increasing income of the population, education and capital stock, along with ensuring political stability to eradicate terrorism from the region.     

Public capital formation and labor productivity growth in Mexico

This paper addresses the important question whether public investment spending on economic infrastructure enhances economic growth and labor productivity in Mexico. Following the lead of the endogenous growth literature, it presents a modified production function which explicitly includes the positive or negative externality effects generated by additions to the public capital stock. Using cointegration analysis, the paper proceeds to estimate a dynamic labor productivity function for the 1955–94 period that incorporates the impact of the growth rate in the stocks of both private and public capital (as opposed to the flows) and the economically active population (EAP) (rather than the rate of population growth). The results suggest that (lagged) increases in public investment spending on economic infrastructure—as opposed to overall public investment spending—have a positive and highly significant effect on the rate of labor productivity growth. In addition, the estimates suggest that increases in government consumption expenditures may have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. Finally, the findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures on economic and social infrastructure to meet targeted reductions in the fiscal deficit as a proportion of GDP.     

Role of Education in Cigarette Smoking: An Analysis of Malaysian Household Survey Data*

Heckman's sample selection model is used to examine the role of education on household purchase decisions and expenditures of tobacco products in Malaysia. Results of the marginal effects of education, segmented by ethnic and gender groups, suggest that education decreases the probability, conditional levels and unconditional levels of tobacco expenditures amongst Malaysian households. Specifically, an additional year of education of the household head, irrespective of ethnic or gender considerations, decreases smoking probability by 1.5 percent. However, the negative effect of education seems to be higher for Chinese (US$1.07) than Malay (US$0.26) households in terms of conditional expenditures. Furthermore, education significantly decreases conditional tobacco expenditures within male‐headed households.     

北约军事转型述评

冷战后推动北约军事转型的主要因素有结构性因素、观念性因素和功能性因素。北约军事转型主要包括安全观念更新、军事战略转变和军事体系改造三个方面,但北约军事转型仍存在一系列矛盾和难题,由于成员扩展、目标膨胀增大了转型难度,军事实践—跨区域军事行动是北约军事转型成败的"试金石"。积极、稳妥地同北约开展交流与合作符合中国的战略利益。     

China's outward foreign direct investment in the Belt and Road Initiative: What are the motives for Chinese firms to invest?

Because of the potentially large and important effects of the extremely ambitious Belt and Road Initiative (BRI) launched by China in late 2013, considerable attention has been given to the motives for, and repercussions of, the BRI-driven infrastructural projects. Yet, the non-infrastructural outward foreign direct investment (FDI) from China to BRI countries, which varies quite substantially across different sectors and different countries, has not yet received much attention. In contrast to some recent studies showing that the massive initiative has increased China's total FDI outflows to fellow BRI countries, in this paper, based on our sector-level difference-in-differences models, we find that effect to be statistically insignificant. Yet, at the same time, we provide empirical evidence on the sectoral pattern of China's outward FDI before and after 2014 indicating that China's FDI outflows to BRI countries have significantly increased in sectors characterized by overcapacity and contributing to pollution in China, thereby demonstrating that China's BRI-driven outward FDI has been very selective in terms of sectors. We confirm these findings with a variety of robustness checks and show that it is BRI countries with relatively low institutional quality that have been more likely to receive these types of FDI from China. We thus speculate that Chinese firms have been motivated to place FDI investments in BRI countries for the sake of alleviating China's own overcapacity and pollution problems. Our findings lead us to suggest that, although these sectoral patterns are consistent with the different stages of economic development in which China and its fellow BRI-identified countries find themselves, Chinese investors and host country governments should be more concerned with the potential for unwanted side-effects of the FDI investments so that the mutually beneficial effects of the BRI can be sustained into the indefinite future among all countries involved.     

Child labor, family income, and the Uruguay Round

Conclusion We are no longer limited to qualitative discussions of the merits of a social clause in the GATT against child labor. Future debates should be in quantitative terms. Child labor can contribute up to 25 percent of family income-contributions that the ILO regards as critical to their survival. Child laborers have few alternatives if they lose their jobs as a result of a social clause on labor standards. It is reasonably clear that child labor falls away quickly with economic development. However, multilateral trade agreements against child labor such as those proposed for inclusion in the WTO (and ILO) do not promote economic development. The contrary is more likely to be the case: they may reduce the range of alternatives available to children and their parents as producers, consumers, and breadwinners in developing countries.     

The trade effects of the U. S. generalized system of preferences

Conclusion Subsequent rounds of multilateral tariff reductions and changes in the GSP and other trade arrangements supersede the analysis presented here, but this study still provides some guidance to future analysis of tariff concessions. The review of the literature suggests a need for greater precision in methods and data. The new technique employed here would appear to be appropriate for future analyses of multilateral trade liberalization and of proliferating free trade areas. Our results indicate that extremely optimistic and pessimistic estimates of GSP trade effects should be regarded with skepticism. The GSP has probably had a modest positive impact on LDC exports to the United States.     

对等原则与最惠国待遇原则互逆共生

最惠国待遇原则是多边贸易体制的基石,WTO缔约方依据该原则而非歧视、无条件、自动地享有另一方给予第三方的优惠待遇,无须提供同等利益交换.美国近年来则积极推行对等原则,并以达成区域及双边协定、采取单边措施作为践行对等原则的突破口,要求各国享有优惠待遇必须付出同等对价,向WTO提出了巨大挑战.但是,对等原则与最惠国待遇原则之间的冲突是被过度放大的:对等原则不仅指美国片面强调的特定对等、完全对等、绝对对等,还包括与最惠国原则紧密共通的扩散对等.通过比较研究两项原则的真实含义、发展轨迹及实效优弊,中国可以全面认识二者互逆共生的实践关系,审慎接纳、有序践行特定对等,进而与各国一同坚守无条件最惠国待遇,巩固并扩大多边贸易体制来之不易的历史成果.     

Tax Revenue Effects of Sectoral Growth and Public Expenditure in Uganda

This paper contributes to a growing strand of literature on the determinants of tax revenue performance in developing countries, particularly in Sub‐Saharan Africa. More specifically we estimate the tax elasticities of sectoral output growth and public expenditure. The unique features of this paper are twofold: First, we develop a simple analytical model for tax revenue performance taking into account some structural features pervasive in most developing countries with large informal sectors. Second, we test the model predictions on Ugandan time series data using ARDL bounds testing techniques. Results indicate that dominance of the agricultural and informal sectors pose the largest impediments to tax revenue performance. In addition development expenditures, trade openness, and industrial sector growth are positively associated with tax revenue performance. We propose policies to support the development of value added linkages between agricultural and industrial sectors while emphasizing the need to unlock the potentially large contributions of the informal sector with a view of widening the tax base.     

MERCOSUR in gravity: an accounting approach to analyzing its trade effects

This paper aims at unveiling the roots of integration-induced trade effects for MERCOSUR. For this purpose, its methodology combines previous dummy-variables- and continuous variable approaches to identifying trade creation and trade diversion effects in a gravity model framework. Applying a straightforward accounting exercise to the integration-induced trade effects which are found for MERCOSUR en bloc, two results are central: Firstly, with sectoral exceptions, I generally identify pure trade creating effects on the import side but also find trade diversion with associate countries when refining extra-bloc country status. Secondly, while extra-bloc import growth seems to be driven predominantly by non-tariff determinants, trade creation in pooled commodity imports for the largest fraction stems from differences in the tariff treatment between trading partners.