Economic Deregulation and Trade Liberalization in Kenya,Tanzania and Uganda: Growth and Poverty

With economic growth as a principal target, Kenya, Tanzania and Uganda have implemented deregulation and trade liberalization policies. By tracing the trends in major economic aggregates, the progress of these economies is reviewed. While acknowledging the conceptual arguments supporting the measures adopted, constraints in both the international economy and domestically have resulted in disappointing outcomes. International trade rules and practices, particularly in the agricultural sector, have worked against all three countries. Moreover, their domestic economies lack crucial resources. The results suggest that it may be a long time before the deregulation policies lead to a reduction in poverty.     

A contest model of liberalizing government procurements

This paper models liberalization of government procurements as admitting entry of foreign firms in a contest among potential rent seekers. It contributes to the literature on how institutions influence socially desirable outcomes. Liberalizing procurements reduces wasteful domestic lobbying but also increases the likelihood that a foreign firm will capture the rent. A main result is that the domestic welfare change is not monotonic in the foreign firms' abilities. Furthermore, we show that domestic liberalization policies can be inefficient from the global point of view because foreign lobbying costs can outweight productive efficiency.     

Trade liberalization, foreign ownership, and the environment in a small open economy

This paper examines the effects of trade liberalization on firm ownership and the environment for a small open economy. It is found that trade liberalization via tariff reductions can result in a dramatic switch in firm ownership from domestic to foreign, coupled with a lower pollution tax.     

Do liberal trade policies promote trade openness?

Although trade liberalization and trade openness are assumed to be strongly associated with each other and often used interchangeably, the empirical evidence has not been forthcoming. This article is an attempt to fill this gap. By investigating the link between trade openness and trade restrictions, it argues that while a negative link between various types of trade restrictions and trade openness is evident, the relationship is weak, statistically not always significant and there is no clear evidence that the removal of trade restrictions (trade‐liberalization) invariably leads to improved trade openness.     

Trade liberalization and capacity utilization: New evidence from the Turkish rubber industry

This study empirically tests the hypothesis that trade liberalization increases capacity utilization. It calculates capacity utilization for the Turkish rubber industry by using a production theory framework. More specifically, plant-level capacity utilization levels are calculated using a Generalized Leontief cost function system. Capacity utilization levels were low but improved when the trade regime shifted from a restrictive to a more liberalized one. The size and location of plants were two significant factors which created capacity utilization differences within the industry. However, capacity utilization levels appeared to improve primarily because of trade liberalization.Also, a scholar-in-residence, Department of Economics, Duke University. My particular thanks go to Patrick Conway, Marjorie McElroy, Edward Tower, participants of the International Economics Workshops at Duke University, and the anonymous referee for helpful suggestions. Any errors are mine.     

Unequal skill premiums and trade liberalization: Is education the missing link?

We examine the impact of increased trade on wage inequality in developing countries; whether higher human capital stocks moderate this effect. We find countries with a higher level of initial human capital experience less increased wage inequality following increased trade.     

Environmental improvement with trade liberalization

Past studies predict that trade liberalization agreements (and NAFTA in particular) harm the environment. These studies have focused on adjustments in production and have assumed that environmental policy is exogenously given. We show why trade liberalization and improved environmental quality are mutually compatible — when environmental policy is recognized as politically endogenous. We also present empirical evidence to support the basic assumptions underlying the consistency of more liberal trade policy and an improved environment.     

Financial liberalization and short-run housing price dynamics

We develop a continuous time, rational expectations, multi-cohort model of an exchange economy with housing, the purchase of which is subject to a down payment (DP) constraint. The timing of the house purchase decision is a crucial endogenous variable, and four determinants of it are identified – the housing services effect, the interest discounting effect, the consumption smoothing effect, and the rate of price increase effect. Cohort effects, and supply constraints, play crucial roles at the aggregative level. We explore in detail the effects of a discrete financial liberalization, and show that if the liberalization is not announced sufficiently far in advance, housing prices will initially overshoot the new stationary equilibrium, and vice versa. Particular attention is paid to the possibility that for a subset of cohorts along the transition path the DP constraint will not bind. An interesting ‘Prisoners’ Dilemma’ is also identified, and policy implications discussedJEL Classification Numbers: E3, R21Valuable comments and suggestions from Phillip Brock, Ho Kong-Weng, Liu Haoming, David McKenzie, David Miles, Jacques Olivier, Phang Sock-Yong, J. Thampapillai, Ping Wang, Wong Wing-Keung, and Zeng Jinli are gratefully acknowledged. I am also immensely indebted to an anonymous referee, whose incisive, deep and patient comments, on successive drafts, helped greatly to sharpen and improve the paper, as well as to the Editor and the Co-Editor, Professor Mordecai Kurz, for their invaluable advice and encouragement. An earlier version was presented at a Conference in Honour of Ronald McKinnon, held at Stanford University in June 2002     

Trade liberalization,the exchange rate and job flows in Brazil

Brazil underwent a large trade liberalization process in the 1990s. Over the period, manufacturing employment decreased significantly, generating public debate on the need to revert liberalization. This paper aims to identify the actual effect of trade liberalization on employment, separating it from exchange rate movements using a gross job flow approach. Our novel dataset covers all sectors and formally registered enterprises, and we use new sector specific exchange rate data. Our estimates suggest that greater openness reduce jobs through increased job destruction, with no effect on job creation, but the exchange rate matters also. Depreciations expand the number of jobs in manufacturing by increasing creation, with no effect on destruction.     

Trade liberalization and technical efficiency in the Indonesian chemicals industry

This article examines the impact of trade reform on technical efficiency on the Indonesian chemicals industry using firm-level panel data. The effects of trade reform on technical efficiency are analysed using a stochastic frontier approach. Two variables represent trade reform in this model: effective rate of protection (ERP) and import ratio (IMP). The findings of the present study suggest that both trade reform variables have significant effects on technical efficiency. The coefficient of ERP has a positive sign and is statistically significant, which means that an increase in ERP increases the inefficiency (or decreases the technical efficiency) of firms in the chemicals industry. The coefficient of IMP is negative and statistically significant, which represents the negative impact of IMP on technical inefficiency (or positive on technical efficiency). Thus, trade reform, a reduction in ERP or an increase in IMP, has an unambiguously positive effect on technical efficiency in the Indonesian chemicals industry.     

金融自由化、经济转轨与农民相对贫困的恶化

金融自由化通过如下机制影响农民相对收入水平:经济增长、金融服务、金融发展和金融危机。转轨经济的特殊性使上述4个渠道都使农民相对收入增长受到不利影响。经济增长的再分配效应是不确定的。在转轨过程中,国有经济和国有银行从农村地区大规模撤退,减少了农民的金融机会和金融服务。在金融发展过程中,农民分享经济增长和金融发展外部性的难度提高。金融危机的再分配效应更是不利于农民。综合效应是,伴随金融自由化的推进,农民金融机会集合变窄,城乡收入差距快速扩大。     

On the growth and welfare effects of monopolistic distortions

The most fundamental proposition about growth and competition is that there is a tradeoff between static welfare and long-term growth. This paper reconsiders this basic proposition in an expanding variety endogenous growth model with competitive markets for “old” innovative products and for a traditional good. We shed light on some implications of monopolistic distortions which tend to be ignored by standard models. First, no growth may be better than some growth, since modest positive growth potentially requires sizeable static welfare losses. Second, the economy may converge to a steady state with zero growth, even though a locally saddle-point stable steady state with positive growth exists if the initial share of “cheap” competitive markets is sufficiently high, as this implies a relatively low demand for “expensive” innovative goods. Third, such a “no-growth trap” may happen in a world economy made up of several countries engaged in free trade with each other. The policy implications are that growth-enhancing policies may be misguided and that quick deregulation as well as quick trade liberalization can lead to stagnation in the long term.      

Impact of improved water services in informal neighbourhoods in Ouagadougou

This article examines the impact of a project to improve water services in underserved neighbourhoods in Ouagadougou on household water access conditions. We used the propensity-score matching method to analyse data from a survey carried out in 2011, and found that the improvement project cut the cost of water neighbourhood-wide by 94 CFA francs per cubic meter, reduced the portion of this expense by 1% of the average household budget, and cut the daily time to collect water by 10–13 min. The results that we obtained through the propensity-score matching method differ from those obtained by simply comparing the averages of the neighbourhoods participating in the project to those that did not participate. This indicates that the propensity-score matching method of impact evaluation is valuable in supplying decision makers with nonbiased estimates of the link between ease of access to water and poverty reduction.     

Trade and Global Income Inequality with Frictional Labor Markets: A Lesson from the Canada–US Free Trade Agreement

This paper develops a two-country trade model with frictional labor market structures to investigate the link between increased openness to trade and cross-country income inequality. Calibrated to US–Canadian data, the model simulation results show that the Canada–US Free Trade Agreement benefited Canada, the country with relatively higher capital intensity, more due to its capacity to flexibly expand in response to an increase in product demand. The results from counterfactual experiments indicate that increased capital intensity in the US is expected to increase gains from trade in both countries while making the distribution of gains less unequal.     

What are the distributional implications of halving poverty in South Africa when growth alone is not enough?

The country risk indicator, as measured by the JP Morgan's EMBI or grades of rating agencies such as Standard & Poor's (S&P's) or Moody's, does not seem to truly reflect the fundamentals of an economy. Countries that pursue sound economic policies are frequently placed on the same level as countries with a populist orientation or with a recent history of default or debt restructuring. Such circumstance generates a feeling of unease with regard to these ratings. The objective of this article is to investigate whether these indicators truly reflect market fundamentals or whether some sort of prejudice, or intolerance towards certain countries, can be identified. We use the Oaxaca–Blinder decomposition to analyse the differences in country risk, measured as by EMBI+, for a group of emerging markets. This decomposition allows us to separate the ‘justified’ (differences in fundamentals) from the ‘unjustified’ differences (same fundamental differently evaluated).     

Poverty dynamics in rural China revisited: do assets matter?

This paper uses an asset-based approach to examine poverty dynamics in rural China over the period 1989–2006. The analysis documents a significant structural component in the poverty dynamics of households. The lack of profitable agricultural asset accumulation plays an unneglectable role in causing households to be trapped in persistent poverty. The escape from poverty is increasingly dominated by stochastic upward mobility rather than by structural movement in terms of asset accumulation. This could threaten the prospect of poverty reduction in rural China. It is argued that future reform and policy-making should pay more attention to building households’ asset base.