18 research outputs found
Outsourcing: Opportunities and challenges for India and the USA
The global outsourcing of services has become increasingly important in the debate over globalization. In India, the most high profile services exporter, GDP per capita increased rapidly between 2001 and 2006 in a climate of increasing services trade, with the export-oriented services sector responsible for greater shares of GDP growth. Despite its contributions to aggregate economic growth, there is no empirical examination of how these gains are distributed across the economy. At the same time, there are many fears in the USA that greater services imports will have detrimental effects on US wages and employment by displacing occupations whose activities are currently not tradable, but could become tradable in the future. While economic theory is useful in conceptualizing the problem of outsourcing, purely analytical approaches have not been able to address the questions being posed by policy makers. Therefore empirical methods are necessary. A global general equilibrium model was used to examine how the historical changes in India’s services trade affected factor incomes across different industries. The analysis concludes that factors of production in the urban-based services sector benefited from the services trade growth. At the same time outsourcing has hurt the incomes of the owners of capital in the rural and suburban based agriculture and manufacturing sectors, indicative of a widening of income inequality. Shifting the analysis to the USA, a panel data econometric analysis of US manufacturing industries between 1998 and 2004 found that historically, services imports have only had a small influence on the demand for skilled workers. Moving past historical changes, a USA focused specific-factors general equilibrium model was used to analyze how wages of different occupational groups will be affected if outsourcing increases enough to displace the maximum possible share of US employment. The US economy as a whole would grow, although most occupations that could be classified as tradable would suffer from wage declines. Legal workers would be an exception, and experience wage increases instead. Several nontradable occupational groups would benefit through wage gains, although a handful of labor types, including construction and transportation workers are projected to suffer from the growth of outsourcing
Information Communication Technology and Economic Development: Learning from the Indian Experience - Edited by Thatchenkery Tojo and R. Stough Roger
Outsourcing and US Manufacturing Employment
In an increasingly protectionist trade environment, there is public concern in the USA that services outsourcing is contributing to declining employment. Addressing this concern, this paper analyzes the impact of outsourcing on the relative demand for skilled worker in US manufacturing industries between 1998 and 2004. Greater outsourcing of communications and business services slightly reduces skilled labor demand and the outsourcing of other services increases labor demand, although nonproduction labor demand is generally inelastic to changes in outsourcing intensity. Part of the reason for this is the fact that tradable services are only small shares of the industries’ total inputs
The Impact of Liberalizing Labor Mobility in the Pacific Region
Due to the lack of political consensus at the previous General Agreement on Trade on Services (GATS), negotiations on the temporary movement of natural persons (Mode 4) have stagnated. The growth in the economic literature surrounding this issue has also been lackluster; despite the large welfare gains that have been demonstrated to result from relatively small multilateral liberalizations on such transitory movements. This paper implements a CGE model of bilateral migration flows to quantify the benefits of liberalising GATS Mode 4 in the Pacific region. The results indicate that an increase in the labor forces of Australia and New Zealand from elsewhere within the Pacific region would raise welfare in both Australia and New Zealand. However the results show that while the Pacific Islands economies could gain substantially from the movement of unskilled workers, the loss of scarce skilled workers could lead to significant declines in the welfare of those remaining. Agreements regarding the movement of unskilled labor could therefore potentially constitute significant development policies which warrant further attention from policy makers
Agriculture and Water Policy: Toward Sustainable Inclusive Growth
This paper reviews Pakistan's agriculture performance and analyzes its agriculture and water policies. It discusses the nature of rural poverty and emphasizes the reasons why agricultural growth is a critical component to any pro-poor growth strategy for Pakistan. It supports these arguments by summarizing key results from recent empirical analysis where the relative benefits of agricultural versus non-agricultural led growth are examined. The results also provide an illustration of farm and non-farm linkages. It summarizes recent performance of the agriculture sector, and discusses key characteristics of its sluggish productivity growth. Three key issues related to increasing productivity are discussed: namely technology, water use and water management, and policy reforms related to markets and trade that can strengthen the enabling environment and contribute to the promotion of diversification towards high value agriculture
A Comparison of RAS and Entropy Methods in Updating IO Tables
Since the first half of the 20th century, the input-output (IO) table has been the backbone of much empirical work used to support policy analysis and develop economy-wide models. The need for accurate, up-to-date IO tables is thus essential for establishing the validity of the empirical work that follows from them. However, the construction of an IO table for any given country is an expensive and time-consuming endeavor. Current and accurate IO tables for many countries are thus often difficult to obtain on a regular basis. Once an initial IO table has been constructed, a common workaround is to collect partial information for subsequent periods, such as final demands for commodities within the economy, and then employ a Bayesian parameter estimation technique to determine values for a new IO matrix using the previous period IO table as a prior. Two such techniques to achieve this are RAS and Minimum Cross Entropy (CE).
The literature has largely ignored the question of the relative merits of these two methods. This paper uses the actual IO tables for South Korea from two distinct time periods to compare the accuracy of the RAS and CE methods. The 1995 IO table for Korea is updated to 2000 using column and row totals from the true 2000 IO table using both RAS and CE methods. The estimated IO tables are then compared to the actual 2000 IO table in order to make some observations on the relative accuracy of the methods.
The sums of squared deviations of the estimates tables from the true tables are used as the main instrument to measure deviations of the updated matrices from the true year 2000 IO matrix. It is found that the CE approach is more accurate than the RAS approach, based on the lower summed squared deviations of the elements of the CE estimated 2000 matrix from the elements of the true 2000.
The maximum absolute differences between the true and estimated tables were also calculated. It was found that the maximum absolute difference between CE-estimated table and the true posterior table was smaller than the difference between the RAS-estimated table and the true posterior
A Comparison of RAS and Entropy Methods in Updating IO Tables
Since the first half of the 20th century, the input-output (IO) table has been the backbone of much empirical work used to support policy analysis and develop economy-wide models. The need for accurate, up-to-date IO tables is thus essential for establishing the validity of the empirical work that follows from them. However, the construction of an IO table for any given country is an expensive and time-consuming endeavor. Current and accurate IO tables for many countries are thus often difficult to obtain on a regular basis. Once an initial IO table has been constructed, a common workaround is to collect partial information for subsequent periods, such as final demands for commodities within the economy, and then employ a Bayesian parameter estimation technique to determine values for a new IO matrix using the previous period IO table as a prior. Two such techniques to achieve this are RAS and Minimum Cross Entropy (CE). The literature has largely ignored the question of the relative merits of these two methods. This paper uses the actual IO tables for South Korea from two distinct time periods to compare the accuracy of the RAS and CE methods. The 1995 IO table for Korea is updated to 2000 using column and row totals from the true 2000 IO table using both RAS and CE methods. The estimated IO tables are then compared to the actual 2000 IO table in order to make some observations on the relative accuracy of the methods. The sums of squared deviations of the estimates tables from the true tables are used as the main instrument to measure deviations of the updated matrices from the true year 2000 IO matrix. It is found that the CE approach is more accurate than the RAS approach, based on the lower summed squared deviations of the elements of the CE estimated 2000 matrix from the elements of the true 2000. The maximum absolute differences between the true and estimated tables were also calculated. It was found that the maximum absolute difference between CE-estimated table and the true posterior table was smaller than the difference between the RAS-estimated table and the true posterior.Research Methods/ Statistical Methods,
Measuring the Impact of the Movement of Labor Using a Model of Bilateral Migration Flows
The economics literature increasingly recognizes the importance of migration and its ties with many other aspects of development and policy. Examples include the role of international remittances (Harrison et al, 2003) or those immigrant-links underpinning the migration-trade nexus (Gould, 1994). More recently Walmsley and Winters (2005) utilised a Global Migration model (GMig) to demonstrate that lifting restrictions on the movement of natural persons would significantly increase global welfare with the majority of benefits accruing to developing countries. Although an important result, the lack of bilateral labor migration data forced Walmsley and Winters (2005) to make approximations in important areas and naturally precluded their tracking bilateral migration agreements. In a new technical paper, Walmsley, Winters, and Ahmed incorporate bilateral labor flows into the GMig model developed by Walmsley and Winters (2005) to examine the impact of liberalizing the temporary movement of natural persons. Quotas on both skilled and unskilled temporary labor in the developed economies are increased by 3% of their labor forces. This additional labor is supplied by the developing economies. The results confirm that restrictions on the movement of natural persons impose significant costs on nearly all countries, and that those on unskilled labor are more burdensome than those on skilled labor. Developed economies increasing their skilled and unskilled labor forces by 3% raise the real incomes of their permanent residents. Most of those gains arise from the lifting of quotas on unskilled labor. On average the permanent residents of developing countries also gain in terms of real incomes from sending unskilled and skilled labor, albeit the gains are lower for skilled labor. While results differ across developing economies, most gain as a result of the higher remittances sent home.
Calibration of a Land Cover Supply Function Using Transition Probabilities
An important question that arises frequently in the economic analysis of environmental and energy policies is, how does the supply of land across various uses change in response to policies? The GTAP Modeling framework of Hertel (1997) addresses this question by determining the supply of land across different uses through a Constant Elasticity of Transformation (CET) supply function. In the standard GTAP Model, the only type of land explicitly modeled is agricultural land, and this is distributed across uses with a one-level, CET function. However, in the GTAP-AEZ framework, data are available on a wider range of activities, including forestry (Sohngen et al., forthcoming). Given the recent availability of data on land cover (Ramankutty et al., 2007) and harvested cropland (Monfreda et al., forthcoming) the land supply decision is more naturally divided into the allocation of land cover across forestry, grazing and crops, followed by the allocation of harvested area across cropping activities. In this Research Memorandum, we focus on the former problem, namely the allocation of land cover between these three competing commercial uses. Naturally, the quality of the land cover responses produced by GTAP-based simulations is contingent on the value of the CET parameter. And the value of this parameter is likely to depend on the length of run for the analysis in question. This research memorandum describes the empirically based calibration strategy used to determine the value for the CET parameter, based on recent research in the United States. The following section reviews the theory of the CET parameter and how it is relevant for modeling land supply. Sections 3 and 4 describe the calibration methodology and data, while the final section discusses the calibration results.
The Impact of Liberalizing Labor Mobility in the Pacific Region
Due to the lack of political consensus at the previous General Agreement on Trade on Services (GATS), negotiations on the temporary movement of natural persons (Mode 4) have stagnated. The growth in the economic literature surrounding this issue has also been lackluster; despite the large welfare gains that have been demonstrated to result from relatively small multilateral liberalizations on such transitory movements. This paper implements a CGE model of bilateral migration flows to quantify the benefits of liberalising GATS Mode 4 in the Pacific region. The results indicate that an increase in the labor forces of Australia and New Zealand from elsewhere within the Pacific region would raise welfare in both Australia and New Zealand. However the results show that while the Pacific Islands economies could gain substantially from the movement of unskilled workers, the loss of scarce skilled workers could lead to significant declines in the welfare of those remaining. Agreements regarding the movement of unskilled labor could therefore potentially constitute significant development policies which warrant further attention from policy makers.