This chapter surveys recent developments in agglomeration theory within a unifying framework. We highlight how locational fundamentals, agglomeration economies, the spatial sorting of heterogeneous agents, and selection effects affect the size, productivity, composition, and inequality of cities, as well as their size distribution in the urban system.
Contrary to expectations, evidence of a death of distance has eluded numerous estimations in the popular gravity model of trade: estimates of the coefficient of distance are markedly higher in studies with recent data. This column shows that this is only so for the poorer countries who are trading with geographically closer partners. This regionalization of trade for low-income countries could reflect the dramatic decrease in a host of costs independent of distance (MFN tariffs, border-related costs, administrative costs, communication costs or increasing containerization), all of which would enhance the relative importance of transport costs that depend on distance.
This paper focuses on developing countries exports to the OECD and obtains several important results on export dynamic, linking exports experience and exports survival. It also provides insights on the role of preferential trade agreements (PTAs) in facilitating export experience and thus survival. Using product level data at the SITC 5 digit level for the 1962-2009 period, we show that prior exports experience obtained in non-OCDE markets increases survival in OECD markets. The effect of experience depreciates however rapidly with time: gaining experience for more than two years is worthless. Moreover, a break in export experience prior to entering the OECD reduces the benefit on survival. Geographic export dynamic reveals that experience is acquired in neighbor, easy to access markets before reaching more distant, richer partners and ultimately serving the OECD. PTAs among developing countries thus help exporters finding partners where to learn about their export potential. Finally, exporters may acquire experience directly within the OECD market through a process of trial and error. By facilitating this process, PTAs between developing countries and the OECD help boosting survival in the long run.
How export patterns vary across time and countries has become a subject of intense descriptive analysis in recent years. The originality of our work is to compute usual diversification indices using a very large and disaggregated dataset on exports. Export data is from UNCTAD’s COMTRADE database at the HS6 level (4’991 lines).
Un nombre croissant d’études explore les différentes dimensions de la proximité linguistique favorisant les échanges commerciaux. Néanmoins, peu d’analyses se sont concentrées sur des aires linguistiques en particulier et aucune sur le cas de la langue française. Quelle est aujourd’hui l’importance de la langue française dans le commerce international ? Dans quelle mesure l’existence d’un espace francophone favorise l’ouverture aux échanges internationaux et, par conséquent, engendre de la richesse et de l’emploi pour ses pays membres ? Ces questions font l’objet d’une étude menée par la FERDI à la demande du MAE. L’enjeu est donc de distinguer, une fois l’espace francophone (EF) défini, l’importance de la proximité linguistique par rapport aux autres dimensions de la proximité (géographique, historique, économique) influençant les flux de commerce internationaux.
L’objectif général de cette étude s’inscrit dans une analyse des rapports entre langue et économie pour les espaces linguistiques non francophones, à savoir les espaces anglophone, hispanophone, arabe et lusophone. Cette étude s’articulera autour de deux volets : 1 / apprécier la part que représente chacun de ces espaces dans la richesse mondiale et dans les échanges internationaux ; 2 / établir la part des échanges internationaux, de la richesse (produit intérieur brut par tête) et des emplois, générée par l’existence de chacun de ces espaces pour ses pays membres. Cette étude fait suite au rapport intitulé « Le poids économique de la langue française dans le monde » (2013) et offrira un point de comparaison en étendant ses estimations, fondées sur des critères et des indicateurs similaires, aux autres principaux espaces linguistiques.
This paper complements the cross-country approach by examining the correlates of GDP per capita growth acceleration around “significant” public expenditure episodes by reorganizing the data around turning points, or “events”. Here we define (i) a growth event as an increase in average per capita growth of at least 2 percentage points (pp) sustained for 5 years, (ii) fiscal event as an increase in the primary fiscal expenditure annual growth rate of approximately 1 pp sustained for 5 years and not accompanied by an aggravation of the fiscal deficit beyond 2% of GDP. These definitions of events are applied to database of 140 countries (118 developing countries) over 1972-2005, providing a summary but encompassing description of “what is in the data”. For this sample, the probability of occurrence of a fiscal event is about 10%, and, for a large range of parameter values for the selection of a “significant” event, the probability of a growth event once a fiscal event had occurred is in the 22%- 28% range. The probability of occurrence of a fiscal event is higher for the bottom half of the income distribution of countries, but the probability that this fiscal event is followed by a growth event is higher for the third quartile, corresponding to middle income countries (which are largely in Latin America). The probability of a fiscal event not followed by a growth event is significantly higher for the Middle East and Africa region. The description of the changes in expenditures components during fiscal events shows that, for developing countries, there are notable differences underlying fiscal events followed by growth events: they occur under situations of (i) significant lesser deficit, (ii) fewer resources devoted to non-interest General Public Services and (iii) shift in discretionary expenditures towards Transport & Communication. After controlling for the growth-inducing effects of positive terms-of-trade shocks and of trade liberalization reform, probit estimates indicate that a growth event is more likely to occur in a developing country when surrounded by a fiscal event. Moreover, the probability of occurrence of a growth event in the years following a fiscal event is greater the lower is the associated fiscal deficit, confirming that success of a growth-oriented fiscal expenditure reform hinges on a stabilized macroeconomic environment (through limited primary fiscal deficit).
We embed a model of the labor market with sector-specific search-and-matching frictions into a Ricardian model with a continuum of goods to show that trade liberalization causes higher unemployment in countries with comparative advantage in sectors with strong labor market frictions and leads to lower unemployment in countries with comparative advantage in sectors with weak labor market frictions. We test this prediction in a panel dataset of 97 countries during the period 1995-2009 and find that the data supports the theoretical prediction. Our results also help reconciliate the apparently contradicting evidence in the empirical literature on the impact of trade on unemployment.
Once again the Doha Round negotiators are struggling to reach an agreement, this time by mid-December 2011 on a “plan B” package that would give increased market access to the Least Developed Countries (LDCs) under simplified rules of origin (RoO). We argue that in spite of some simplifying reforms by the EU and the US, administrative costs associated with establishing origin will continue to be sizeable, approximately equal to the effective market access left under “plan B”. Given the reluctance in the past for OECD countries to simplify their RoO, the note concludes that the meeting the December package is unlikely.
Trade liberalization is often believed to benefit urbanized regions more than rural regions. We explore the effects of trade liberalization on employment and wage growth of different sized towns within a country. A multi-region model of intranational adjustment predicts that small towns have more elastic labor-force responses to trade liberalization. We examine this predictions in finegrained regional data for Austria. The fall of the Iron Curtain in 1990 represented a large exogenous trade shock to the Austrian economy, providing us with a quasi-experimental setting for the exploration of trade-induced spatial effects. We find improved access to foreign markets to boost both employment and nominal wages, but large towns tended to have larger wage responses and smaller employment responses than small towns. In terms of aggregate income responses, the two effects cancel out: we find no statistically significant differences in the effects of trade liberalization on the wage bills of small and large towns.