The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
This paper documents the foreign asset ownership and investment theory of the dynamic GTAP model (GTAP-Dyn). The new investment theory offers a disequilibrium approach to modeling endogenously international capital mobility. It permits a recursive solution procedure, a feature that allows easy implementation of dynamics into any static AGE model without imposing limitations on the model's size. The method involves treating time as a variable, not as an index. Having time as a variable allows the construction of dynamic GTAP with minimum modification to the existing structure of GTAP, by separating the theory of static GTAP from the length of run. JEL classifications: D58
The relationship between political violence and greenfield foreign direct investment is contingent on the type of violence, the characteristics of the investment-receiving sector, and the international scope of the investing firm. Analysis with a dynamic fixed effects model for a panel of 90 developing countries shows that nationwide political conflict is negatively associated with total and non-resource-related greenfield FDI, but not with resource-related greenfield FDI. The insensitivity of resource FDI to political conflict is explained by the high profitability of natural resource extraction and geographic constraints on location choice. In the non-resource sector, the least geographically diversified firms are most sensitive to conflict. Other types of political violence, including intermittent violence in the form of terrorist acts and assassinations, or persistent but low-impact events, such as political terror, have no effect on the location choice decisions of multinational enterprises. These findings inform the strategies of multinationals with a nuanced and much needed understanding of the effects of political violence and the risks it poses to their businesses. * We are grateful for the helpful comments from the editor, Mona Makhija, and three anonymous referees. Early versions of this paper were presented at the Center for the Study of African Economies (CSAE) Conference 2015 and the 2015 AIB Annual Meeting in Bangalore. We would also like to thank seminar participants at Ivey Business School, Copenhagen Business School, the University of Groningen and the Erasmus School of Economics for their useful suggestions.
This article presents estimates of the impact of China's accession to the World Trade Organization. China is estimated to be the biggest beneficiary (US$31 billion a year from trade reforms in preparation for accession and additional gains of $10 billion a year from reforms after accession), followed by its major trading partners that also undertake liberalization, including the economies in North America, Western Europe, and Taiwan (China). Accession will boost manufacturing sectors in China, especially textiles and apparel, which will benefit directly from the removal of export quotas. Developing economies competing with China in third markets may suffer small losses. Accession will have important distributional consequences for China, with the wages of skilled and unskilled nonfarm workers rising in real terms and relative to those of farm workers. Possible policy changes, including reductions in barriers to labor mobility and improvements in rural education, could more than offset these negative impacts and facilitate the development of China's economy. Trade policy reforms such as those flowing from accession to the World Trade Organization (WTO) lead directly to changes in policy instruments, such as tariffs, nontariff barriers, and coverage of trade rules. The main policy concerns, however, are with the impacts on such economic variables as prices; output, employment, and trade volumes; factor returns; and household incomes. This article estimates the impacts on these key economic variables of China's accession to the WTO as a guide to policy and as a basis for subsequent analysis at the household level. 1 It is part of a joint World Bank-Development Research Centre study reported in full in Bhattasali and others (2004).
China's forthcoming accession to the WTO involves reforms across a wide range of sectors in China, both in directly trade-related sectors and behind the border. The implications of these reforms are greatly influenced by the starting point-a partially reformed economy with relatively high import duties, but in which export sectors benefit from liberal duty exemptions on their inputs. The paper takes account of this special feature in assessing the implications of reform. We find that China and its major trading partners gain from accession, while some competing countries suffer smaller losses. The adjustments required are greatly reduced by the dramatic liberalization that China undertook in the 1990s.
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