Comparative Advantage and Trade Performance: Policy Implications (Report on work in progress)

Transcription

1 Comparative Advantage and Trade Performance: Policy Implications (Report on work in progress) Przemyslaw Kowalski, Development Division OECD Trade and Agriculture Directorate OECD Global Forum on Trade on Globalisation, Comparative Advantage and Trade Policy, Chengdu, China, October 2010

2 Policy Relevance of Comparative Advantage To what extent is CA the mechanism underlying trade? What is and what is not a distortion? Targeted policies do influence relative costs, perhaps to the detriment of welfare But horizontal or public good policies also influence relative costs and welfare (e.g. Rodrik, 2009) If most sources of relative cost differentials can in reality be affected by policy, what is the usefulness of the CA concept? OECD Trade & Agriculture Directorate 2

3 Policy Relevance of Comparative Advantage (2) Pragmatic approach: welfare considerations aside, CA principle can help in modelling export composition and performance, and the role of policies How differences in policy design or policy performance across countries interact with specific needs of particular sectors of the economy, thereby creating relative cost advantage? theory Chor (2008), theory and financial systems Costinot (2009), labour markets Helpman (2010) and Cunat and Melitz (2009); quality of legal system (Nunn, 2007) OECD Trade & Agriculture Directorate 3

4 Policy Relevance of Comparative Advantage (3) Export performance and composition determined by interaction of: sector s dependence on policy (or endowment-intensity) Objectives: and policy in place (or endowments available) contribution of differences in endowments and policy designs to specialisation patterns country-specific policy gaps, filling of which would be most effective in terms of improving trade performance and, perhaps, composition OECD Trade & Agriculture Directorate 4

5 Policy coverage (so far) Area Exporter Indicator Sector dependence Endowments K/L ratio (estimated) Capital intensity (GTAP) Energy Human capital Total energy supply (WDI) Average years of study (Barro and Lee, 2010) Energy intensity (GTAP) Skilled labour intensity (GTAP) Macro stability Inflation (WDI) - Capital markets Domestic credit provision (WDI) Capital intensity (GTAP) OECD Trade & Agriculture Directorate 5

6 Possible policy coverage in the future Area Exporter Indicator Sector dependence Labour markets Competition policy Trade policy Macro stability Doing business EPL, cost of firing, cost of extra time OECD data on Competition Policy and Product Market Regulations Tariffs on intermediate products Exchange rate changes WB DB indicato rs labour intensity (GTAP) or demand volatility measure Mark-ups, concentration indices Intermediate inputs intensity(gtap) Exposure to foreign competition (export/output ratios) - OECD Trade & Agriculture Directorate 6

7 Methodology X k ijt = α + i + k jt + γ ln GDP it + ρ ln dist ij + θ lang ij + μ border ij + φ(colony ij ) +β 1 K L it KINT k + β 2 P 2it PD 2 k + + β N P Nit PD N k + ε ijt k X k ijt - exports of product k from country i to country j in year t i - exporter fixed effects k jt - importer-product-year fixed effect ln GDP it - exporter GDP in year t ln dist ij - distance between exporter and importer lang ij - common language border ij -common border colony ij -colonial relationship K KINT k - interaction between physical capital to labour ratio in export i in year t and capital L it intensity of sector k P Nit PD k N -interaction between n-th policy indicator for exporter i and indicator of dependence of sector k on policy n OECD Trade & Agriculture Directorate 7

8 Physical capital stocks OECD Trade & Agriculture Directorate 8

9 300,000 Capital to labour ratios selected countries 250, , , ,000 50,000 0 BRA CAN CHN DEU FRA GBR IND ITA JPN RUS USA ZAF OECD Trade & Agriculture Directorate 9

10 Total energy supply/gdp selected countries BRA CAN CHN DEU FRA GBR IND ITA JPN RUS USA ZAF OECD Trade & Agriculture Directorate 10

11 Average years of education BRA CAN CHN DEU FRA GBR IND ITA JPN RUS USA ZAF OECD Trade & Agriculture Directorate 11

12 Inflation selected countries BRA CAN CHN DEU FRA GBR IND ITA JPN RUS USA ZAF OECD Trade & Agriculture Directorate 12

13 Domestic credit provision selected countries BRA CAN CHN DEU FRA GBR IND ITA JPN RUS USA ZAF OECD Trade & Agriculture Directorate 13

14 Paddy rice Wheat Cereal grains nec Vegetables, fruit, nuts Oil seeds Sugar cane, sugar beet Plant-based fibers Crops nec Bovine cattle, sheep and goats, horses Animal products nec Raw milk Wool, silk-worm cocoons Forestry Fishing Coal Oil Gas Minerals nec Bovine meat products Meat products nec Vegetable oils and fats Dairy products Processed rice Sugar Food products nec Beverages and tobacco products Textiles Wearing apparel Leather products Wood products Paper products, publishing Petroleum, coal products Chemical, rubber, plastic products Mineral products nec Ferrous metals Metals nec Metal products Motor vehicles and parts Transport equipment nec Electronic equipment Machinery and equipment nec Manufactures nec Electricity Gas manufacture, distribution Water Construction Trade Transport nec Water transport Air transport Communication Financial services nec Insurance Business services nec Recreational and other services Public Administration, Defense, Dwellings Skilled-labour intensity 0.5 skilled-labour intensity OECD Trade & Agriculture Directorate 14

15 Paddy rice Wheat Cereal grains nec Vegetables, fruit, nuts Oil seeds Sugar cane, sugar beet Plant-based fibers Crops nec Bovine cattle, sheep and goats, horses Animal products nec Raw milk Wool, silk-worm cocoons Forestry Fishing Coal Oil Gas Minerals nec Bovine meat products Meat products nec Vegetable oils and fats Dairy products Processed rice Sugar Food products nec Beverages and tobacco products Textiles Wearing apparel Leather products Wood products Paper products, publishing Petroleum, coal products Chemical, rubber, plastic products Mineral products nec Ferrous metals Metals nec Metal products Motor vehicles and parts Transport equipment nec Electronic equipment Machinery and equipment nec Manufactures nec Electricity Gas manufacture, distribution Water Construction Trade Transport nec Water transport Air transport Communication Financial services nec Insurance Business services nec Recreational and other services Public Administration, Defense, Dwellings Unskilled-labour intensity 0.7 unskilled-labour intensity OECD Trade & Agriculture Directorate 15

16 Paddy rice Wheat Cereal grains nec Vegetables, fruit, nuts Oil seeds Sugar cane, sugar beet Plant-based fibers Crops nec Bovine cattle, sheep and goats, horses Animal products nec Raw milk Wool, silk-worm cocoons Forestry Fishing Coal Oil Gas Minerals nec Bovine meat products Meat products nec Vegetable oils and fats Dairy products Processed rice Sugar Food products nec Beverages and tobacco products Textiles Wearing apparel Leather products Wood products Paper products, publishing Petroleum, coal products Chemical, rubber, plastic products Mineral products nec Ferrous metals Metals nec Metal products Motor vehicles and parts Transport equipment nec Electronic equipment Machinery and equipment nec Manufactures nec Electricity Gas manufacture, distribution Water Construction Trade Transport nec Water transport Air transport Communication Financial services nec Insurance Business services nec Recreational and other services Public Administration, Defense, Dwellings Capital intensity 1 capital intensity OECD Trade & Agriculture Directorate 16

17 Paddy rice Wheat Cereal grains nec Vegetables, fruit, nuts Oil seeds Sugar cane, sugar beet Plant-based fibers Crops nec Bovine cattle, sheep and goats, horses Animal products nec Raw milk Wool, silk-worm cocoons Forestry Fishing Coal Oil Gas Minerals nec Bovine meat products Meat products nec Vegetable oils and fats Dairy products Processed rice Sugar Food products nec Beverages and tobacco products Textiles Wearing apparel Leather products Wood products Paper products, publishing Petroleum, coal products Chemical, rubber, plastic products Mineral products nec Ferrous metals Metals nec Metal products Motor vehicles and parts Transport equipment nec Electronic equipment Machinery and equipment nec Manufactures nec Electricity Gas manufacture, distribution Water Construction Trade Transport nec Water transport Air transport Communication Financial services nec Insurance Business services nec Recreational and other services Public Administration, Defense, Dwellings Energy intensity 0.8 energy intensity OECD Trade & Agriculture Directorate 17

18 Some preliminary results for Conditional fixed effects Poisson regression dependent variable value of exports (with zeros) exporter fixed effects yes importer-product-year fixed effects yes Number of obs. 213,592 variable coefficient robust s.e. z P> z 95% Conf. Interval log(exporter GDP) *** log (distance) *** contigiuity *** common official language *** colony log(k/l*capital intensity) *** log(total primary energy supply * energy intensity) ** log(av years of study * skill intensity) *** inflation rate *** log (domestic credit * capital intensity) *** significant at 1%, ** significant at 5% OECD Trade & Agriculture Directorate 18

19 Which factors are important for exports standardised coefficient relative to standardised coefficient on distance log(exporter GDP) log (distance) contigiuity common official language colony log(k/l*capital intensity) log(tpes * energy intensity) log(av years of study * skill intensity) inflation rate log (domestic credit * capital intensity) OECD Trade & Agriculture Directorate 19

20 Preliminary conclusions and further steps Signs of comparative advantage at work Endowments do play a role Policies at least as important Further steps More policy indicators Better measures of sector dependence Developing country-specific advice OECD Trade & Agriculture Directorate 20

21 Thank you!

22 Comparative Advantage and Trade Performance: Policy Implications (Report on work in progress) Przemyslaw Kowalski, Development Division OECD Trade and Agriculture Directorate OECD Global Forum on Trade on Globalisation, Comparative Advantage and Trade Policy, Chengdu, China, October 2010