Lecture 13 econ last one

Lecture 13 econ last one - Lecture 13: Globalization Today:...

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Lecture 13: Globalization
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Today: globalization Is globalization good or bad? Probably biggest macroeconomic debate Resurfacing at every WTO meeting Empirical evidence: “Trade, Growth and Poverty” Theoretical evidence: the theory of comparative advantage Going back to the data with cleaner evidence: The Canada-US Free Trade Agreement in 1989 Trade liberalization in India in 1991
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Trade, Growth, and Poverty Dollar, Kraay (2004), The Economic Journal Idea: identify a group of post 1980 globalizers and non-globalizers and compare their economic performance Use 2 criterias: Table 1: trade volumes Table 2: reductions in tariff
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Trade, Growth, and Poverty
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Trade, Growth, and Poverty
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Trade, Growth, and Poverty
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Trade, Growth, and Poverty
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Trade, Growth, and Poverty
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Trade, Growth, and Poverty
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Trade, Growth, and Poverty
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Trade, Growth, and Poverty Results hold in a regression framework Regress GDP per capita on trade volume Positive coefficient
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Problem with the analysis Comment from Rodrik: Dollar, Kraay use tricks! they exclude one country (Colombia) that should be in their list of “globalizers” according to all their stated criteria they include in their list 6 additional countries (out of 18) that do not fit the stated criteria Included because they joined WTO in the 1980s, but 42 countries have joined WTO in the 1980s
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Problem with the analysis
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Problem with the analysis Second problem: The authors use trade volume as the explanatory variable But policy makers do not directly control the level of trade The tools at the disposal of governments are tariff and non-tariff barriers, not import or export levels Results disappear when using tariff instead of trade volume as an explanatory variable
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Problem with the analysis Third problem: what about China and India? Isn’t that enough evidence? China: the increase in growth started in the late 1970s with the introduction of the household responsibility system in agriculture. Trade liberalization started during the second half of the 1980s and especially during the 1990s India: Trade liberalization in 1991
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Problem with the analysis
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Problem with the analysis Fourth problem: Simultaneity of trade openness and other reforms (better rule of law, better macro stability, better property rights, less transactions risk) How to disentangle trade openness from these other confounds? Very hard to solve We will see two examples at the end of the lecture that addresses this (Canada-US free trade agreement, and India trade liberalization)
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Post-1980 globalizers seem to have fared better But is it a correlation or a causality? Before going further with the data, what’s the theoretical impact of
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Lecture 13 econ last one - Lecture 13: Globalization Today:...

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