What does USAID stand for?

Lant Pritchett says that promoting development and providing assistance to developing countries are not the same thing:

An existential question the next leader of USAID has to face is whether USAID is about assistance—in whatever forms and for whatever goals political support can be mobilized and logistics can be arranged—or whether it really is an agency whose mission is to promote development…

Development, for better or worse, has always been defined as a deliberate acceleration of modernization, conceived as a synchronized (if not simultaneous), complex, four-fold transition of economy, polity, administration, and society…

Even addressing a series of important problems for well-being like vaccinations, schools for girls, HIV/AIDS prevention or malaria does not add up to a development agenda. If the next leader of USAID does not own that objective and mission—putting the big “D” in USAID and not just little “a” in aid—he or she is sealing USAID’s irrelevance.

Monitoring protectionism with Global Trade Alert

It’s World Trade Week in the UK. Unfortunately, I flew Heathrow to JFK yesterday, so I was unable to attend. At yesterday’s conference, Peter Mandelson introduced and Simon Evenett explained a new watchdog website devoted to monitoring protectionism – Global Trade Alert. Reuters reports:

British Business Secretary Peter Mandelson said the Global Trade Alert site would act as a watchdog to deter governments from protectionist measures that he warned would only make the recession “longer and more painful.”

“Everyone is watching everyone else and there is a lot to be said for peer pressure,” he said. “(The) trading system faces a huge crisis of demand and of credit, but the real long-term risk to its health lies in protectionism.”…

The website, http://www.globaltradealert.org, will be co-funded by the British government and run by the Centre for Economic Policy Research, a London-based thinktank. About 700 researchers working mainly in European universities will gather evidence.

It’ll be interesting to see how the UK government monitors itself. As for those 700 researchers, that’s the total number of economists affiliated with CEPR. I don’t think they’ve all been reassigned to Global Trade Alert. 🙂

International trade and labor income risk

In “International Trade and Labor Income Risk in the United States,”  Pravin Krishna and Mine Zeynep Senses tackle a topic that has received a lot of attention in the policy arena but, as far as I know, not been subject to extensive empirical assessment. They “find import penetration to have a statistically significant association with labor income risk in the United States, with economically significant welfare effects.”

They specify an income process with transitory and persistent shocks and then “combine industry-level, time-varying estimates of the persistent component of labor income risk with measures of industry exposure to international trade to estimate the relationship between labor income risk and trade.” Both workers who switch industries and workers in industries with increased import penetration experience higher labor income risk (defined as the variance of unpredictable changes in earnings).

Reverse Rybczynski

Opp, Sonnenschein, and Tombazos, forthcoming in the JIE:

We demonstrate that Rybczynski’s classic comparative statics can be reversed in a Heckscher-Ohlin world when preferences in each country favor the exported commodity. This taste bias has empirical support. An increase in the endowment of a factor of production can lead to an absolute curtailment in the production of the commodity using that factor intensively, and an absolute expansion of the commodity using relatively little of the same factor. This outcome – which we call “Reverse Rybczynski” – implies immiserizing factor growth. We present a simple analytical example that delivers this result with unique pre- and post-growth equilibria. In this example, production occurs within the cone of diversification, such that factor price equalization holds. We also provide general conditions that determine the sign of Rybczynski’s comparative statics.

Tidbits

Recently in the FT:

FDI flows to emerging economies nose-dived during the first quarter.

Michael Pettis says that the unsustainability of the US current account deficit implied the unsustainability of the Asian export-driven development model. Unfortunately, policymakers don’t seem to have a transition plan.

Gary Hufbauer and Jeff Schott argue that the United States is undermining the G20 pledge to avoid protectionism because state-level bureaucrats are only spending federal stimulus funds on goods and services provided by US suppliers, violating international procurement agreements.

“What Governments Maximize and Why: The View from Trade”

An entire paper estimating cross-country regressions with the estimated Grossman and Helpman (1994) weight on welfare as the dependent variable? I’m skeptical, even if the empirical results are plausible (governments are more concerned with welfare in the presence of more informed voters and more checks and balances, less so when media advertising and competitive elections prioritize special interest money).

  • The authors note that their estimates of the “government’s concern for general welfare” parameter are reasonable and thus differ significantly from five previous papers empirically estimating the Grossman-Helpman model. Why do they obtain different results?
  • The OECD countries in the sample largely make trade policy in multilateral negotiations, not a unilateral vacuum, so I am skeptical that the Grossman-Helpman (1994) model even applies.
  • If the authors hadn’t excluded economies without an elected legislature from the sample, how would they have handled Hong Kong’s estimated welfare concern of infinity? (Concern for welfare is inversely related to the tariff level, and Hong Kong’s tariffs are zero.)

"What Governments Maximize and Why: The View from Trade"

An entire paper estimating cross-country regressions with the estimated Grossman and Helpman (1994) weight on welfare as the dependent variable? I’m skeptical, even if the empirical results are plausible (governments are more concerned with welfare in the presence of more informed voters and more checks and balances, less so when media advertising and competitive elections prioritize special interest money).

  • The authors note that their estimates of the “government’s concern for general welfare” parameter are reasonable and thus differ significantly from five previous papers empirically estimating the Grossman-Helpman model. Why do they obtain different results?
  • The OECD countries in the sample largely make trade policy in multilateral negotiations, not a unilateral vacuum, so I am skeptical that the Grossman-Helpman (1994) model even applies.
  • If the authors hadn’t excluded economies without an elected legislature from the sample, how would they have handled Hong Kong’s estimated welfare concern of infinity? (Concern for welfare is inversely related to the tariff level, and Hong Kong’s tariffs are zero.)