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Interest Pressures and Carbon Taxation: Evidence from Vietnam
SSRN
Industrial policy and structural transformation: Insights from Ethiopian manufacturing
Motivation The question of industrial policy has gained prominence in the policy agenda over the last decade, despite its persistently ambiguous and incomplete definition. The lack of a firm definition is problematic because it prevents scholars and policy-makers from comparing and monitoring the impact of industrial policy across developing countries. This vague definition also fails to account for issues that are relevant to the impact and usefulness of industrial policy in the process of economic development. Research Question What is the effect of an inadequate definition and implementation of industrial policy for structural transformation in underdeveloped economies? Methods We undertake both a critical literature review of industrial policy and a policy review, and use insights from 86 structured interviews with manufacturing businesses and government officials in Ethiopia, to illustrate how industrial policy could be more effective. Findings The article finds that there is no clear and exhaustive understanding of what the definition of industrial policy entails. In part this is also a result of a limited and incoherent use of the concept of structural transformation in the definition and policy formulation of industrial policy. Conclusions Using a case study of Ethiopia, we show how an inadequate and incoherent definition and implementation of industrial policy can lead to limited upgrading, learning and innovation in an underdeveloped economy. Policy Implications For Ethiopia, and for other underdeveloped economies, the findings imply a reconfiguration of industrial policy, rather than more industrial policy.
BASE
SSRN
Quasi-Experimental Evidence on Carbon Pricing
In: Kasper Vrolijk, Misato Sato, Quasi-Experimental Evidence on Carbon Pricing, The World Bank Research Observer, 2023;, lkad001, https://doi.org/10.1093/wbro/lkad001
SSRN
Relational contracts in the Rwandan coffee chain
In: IDOS policy brief, 2023, 25
Businesses often engage in long-term relationships with firms and people they trust and know, in which they informally sell and exchange information and services (Baker, Gibbons, & Murphy, 2002). As postulated by Arrow (1972, p. 357), "virtually every commercial trans-action has within itself an element of trust". Within these relations, trust is defined as the belief that market actors adhere to informal contract arrangements. Particularly in lower-income countries, which are often described by distortions – such as inefficient institutions (e.g., contract enforcement), imperfect markets (e.g., access to credit), and market distortions created by firms (e.g., lobbying) (Atkin & Khandelwal, 2020) – such relational contracts are important for commercial interactions locally and internationally and are an important complement to formal contracts. In low-income economies, how are relational contracts used to foster economic activity? What policy measures can be used to aid trust-based relational contracts, or to address its inefficiencies? This Policy Brief presents the results from a study on the Rwandan coffee chain, which surveyed coffee mills, farmers and exporters on their performance and relational contracts. The main findings are that relational contracts are an important component at two levels of the chain: (a) between cooperatives, washing stations and mills, and its members, and (b) between mills and buyers. Mills, for example, offer informal provisions to its farmers to ensure timely delivery of high-quality beans. Exporters and mills invest in trust-based relationships with buyers by spending on getting market access and productivity-increasing activities (e.g., investing in new machinery) in anticipation of future buyer demand and prior to formal contracting. Buyers likewise invest in creating and maintaining relational contracts to local firms by providing informal technical and financial support. With the exception of certification programmes, few of the activities that both mills and buyers undertake are formally enforced through contracts but instead are done at the discretion of producers and buyers. Such informal relations are important and necessary because in low-income countries there can be market risks (e.g., limited access to inputs for farmers) that, if not addressed, affect the coffee supply and quality. The coffee sector in Rwanda is to a large extent com-parable to the coffee sector in other countries and other agricultural supply chains in low-income countries (like labour- and quality-intensive products, such as tea and cocoa). Therefore, this study may offer some valuable lessons to policy makers:1. Promote brokerage services to support trust-based relationships between local firms and international buyers. Brokerage services include programmes (either by governments of international organisations) that bring together and facilitate buyer-supplier linkages. These services have proven successful in creating long-term buyer-supplier relationships, while also facilitating financial and technical support for local firms and market access. There is a role for both international organisations and national governments to provide financing or facilitate such services.2. Use certification to formalise quality upgrading and market access. Certification programmes include credible, internationally recognised standards and evaluation protocols that are used across multiple commodities. Certification can help formalise some of the quality upgrading and market access activities that firms and farmers otherwise would receive informally through relational contracts. There are roles for national governments to promote and subsidise certification practices and for international organisations and certification providers to expand such services.
World Affairs Online
World Affairs Online
Economic effects of FDI: how important is rising market concentration?
In: IDOS policy brief, 2022,12
Many governments adopt policies and actively compete to attract foreign direct investment (FDI). Particularly for lower-income countries, attracting FDI – and with it the benefits of cooperating with multi-national enterprises (MNEs) – is a promising strategy for participating in global supply chains and increasing local firm productivity. However, empirical findings show contrasting effects and there is heated debate over FDI's advantages and drawbacks. The current trend to rising market concentration also begs the question: Have FDI effects changed in recent years? This Policy Brief aims to address these questions by studying FDI and what the apparent growth in market concentration implies. Although foreign investment theoretically raises productivity, creates employment and offers many other benefits, the empirical evidence is not unequivocal. Initial coarse country-level data found that receptivity to FDI raises the host country's economic growth. But later research used more detailed sector data and showed ambiguous effects (Görg & Greenaway, 2004). New microdata confirm that FDI effects are differential: Not all workers and households benefit equally. They also showcase the different ways in which MNEs and FDI benefit firms, workers and households in host countries. Recently, superstar firms, which capture large shares of industries and thereby increase market con-centration, have emerged. Linked to reduced national economic dynamism and evident in global markets, the rise of superstar firms could negatively impact on FDI effects. They differ from MNE competition effects and confer market power so that MNEs can determine prices and wages. This trend toward rising market concentration is observed across multiple sectors and has several possible causes, such as technological and legal factors. A literature survey reveals a lack of evidence about how rising concentration in global markets is affecting FDI gains. However, other evidence suggests that the positive spillovers to domestic firms may well be lower, with higher market concentration negatively affecting wages and employment. The following takeaways can be derived for policy-making: 1. Integrate competition policy: Competition effects should be considered when evaluating FDI and policies should be introduced to ensure competitive practises after FDI entry. 2. Improve monitoring: Collect data on competi-tive forces and how they change when MNEs enter host economies. 3. Absorb regressive effects: Introduce social benefits to counter the potential mixed effects of FDI and MNE market power.
World Affairs Online
Does COVID-19 change the long-term prospects of latecomer industrialisation?
In: Discussion paper 2021, 32
This study explores to what extent the COVID-19 crisis has been a turning point in the industrialisation process and the overall progress of countries towards sustainable development and what this implies for future inclusive and sustainable industrial development policies. The focus of the study is on latecomer economies.In the first part of this study, we show how the prospects for industrialisation are changing. The reasons are manifold, yet the following global megatrends have particularly strong effects: i) digitalisation and automation of production; ii) global economic power shifts, with enormous ramifications for trade flows and global value chains; and iii ) the greening of economies. These trends are interrelated in multiple ways and, in conjunction, shape the direction of structural change. They open up new avenues for inclusive and sustainable latecomer industrialisation – including digital technologies that reduce transaction costs for countries on the periphery that are willing to benefit from trade; the shift of labour-intensive investments from China to other latecomer economies; or the increasing demand for renewable energy and green hydrogen for which many latecomer countries offer excellent conditions. At the same time, digitalisation and increasing environmental standards raise entry barriers to markets, especially for country with weak innovation systems; likewise, automation tends to undermine latecomer countries' traditional advantages in labour-intensive industries. [...]