Are Imports in Africa Responsive to Tariff Reductions?

In the 1980’s and 1990’s many African countries liberalised their trade policy, although since the mid 1990s there are countries that did not alter tariffs. This allows us to analyse the effects of trade liberalisation on the change in imports using Difference-in-Differences techniques that allow us to evaluate the impact on imports of trade liberalisation at the general and sector-specific level. During the period of study (1996-2004), Algeria (in 1997), Ethiopia (2001), Egypt (1998), Tanzania (2000) and Uganda (2000) all liberalised their tariffs. These countries act as a ‘treatment’ group. In comparison, Cameroon, Gabon and Madagascar all left their tariffs unchanged. These countries act as our ‘control’ group or counterfactual. We compare the effects on imports for liberalising countries relative to non-liberalising countries, controlling for the timing of liberalisation, trends in import capacity (country effects) and in sector imports across countries (product market effects). Overall, using three methods of measuring imports, there is little evidence that suggests imports increased for the treatment group countries relative to the control group countries. This is true at the general and sector-specific levels.Tariffs, Difference-in-Difference, liberalisation, Africa

Scalable approximate FRNN-OWA classification

Fuzzy Rough Nearest Neighbour classification with Ordered Weighted Averaging operators (FRNN-OWA) is an algorithm that classifies unseen instances according to their membership in the fuzzy upper and lower approximations of the decision classes. Previous research has shown that the use of OWA operators increases the robustness of this model. However, calculating membership in an approximation requires a nearest neighbour search. In practice, the query time complexity of exact nearest neighbour search algorithms in more than a handful of dimensions is near-linear, which limits the scalability of FRNN-OWA. Therefore, we propose approximate FRNN-OWA, a modified model that calculates upper and lower approximations of decision classes using the approximate nearest neighbours returned by Hierarchical Navigable Small Worlds (HNSW), a recent approximative nearest neighbour search algorithm with logarithmic query time complexity at constant near-100% accuracy. We demonstrate that approximate FRNN-OWA is sufficiently robust to match the classification accuracy of exact FRNN-OWA while scaling much more efficiently. We test four parameter configurations of HNSW, and evaluate their performance by measuring classification accuracy and construction and query times for samples of various sizes from three large datasets. We find that with two of the parameter configurations, approximate FRNN-OWA achieves near-identical accuracy to exact FRNN-OWA for most sample sizes within query times that are up to several orders of magnitude faster

Unraveling the Fortunates of the Fortunate: An Iterative Bayesian Model Averaging (IBMA) Approach

We investigate country heterogeneity in cross-country growth regressions. In contrast to the previous literature that focuses on low-income countries, this study also highlights growth determinants in high-income (OECD) countries. We introduce Iterative Bayesian Model Averaging (IBMA) to address not only potential parameter heterogeneity, but also the model uncertainty inherent in growth regressions. IBMA is essential to our estimation because the simultaneous consideration of model uncertainty and parameter heterogeneity in standard growth regressions increases the number of candidate regressors beyond the processing capacity of ordinary BMA algorithms. Our analysis generates three results that strongly support different dimensions of parameter heterogeneity. First, while a large number of regressors can be identified as growth determinants in Non-OECD countries, the same regressors are irrelevant for OECD countries. Second, Non-OECD countries and the global sample feature only a handful of common growth determinants. Third, and most devastatingly, the long list of variables included in popular cross-country datasets does not contain regressors that begin to satisfactorily characterize the basic growth determinants in OECD countries.growth regressions, growth determinants of OECD countries, parameter heterogeneity, model uncertainty, Iterative Bayesian Model Avering

Adjusting to Bilateral Trade Liberalisation under an EPA: Evidence for Mauritius

This paper estimates the impact and adjustment costs for Mauritius of eliminating tariffs on imports from the EU under an EPA, considering trade, revenue, welfare, production and employment effects, and considering the potential benefit of preserving preferential access to the EU market. Assuming ‘immediate’ complete elimination of all tariffs on imports from the EU, there is a small welfare loss (-0.17% of 2002 GDP) unless we include potential production gains (generating a welfare gain of 0.06% of GDP). Excluding up to 20% of imports as sensitive products, the overall welfare loss is -0.19% of GDP. However, potential adjustment costs are much greater than these low welfare effects suggest: tariff revenue will fall by 33-52% of 2002 levels, domestic (non-export) production will decline by almost a quarter and direct employment by 12% (about 11,000 jobs lost overall). Preferences under an EPA are unlikely to support any growth in the major export sectors (sugar and garments), so absorbing the adjustment costs will be difficult.EU-ACP, Economic Partnership Agreements, Mauritius

African Trade Policy in the 1990s: Political Economy or Technocratic Reforms?

The majority of African countries implemented import liberalisation in the 1990s. This paper explores factors that may explain the pattern of protection and of tariff reform. We consider political economy explanations, motivated specifically by the Grossman and Helpman (1994) model of protection in response to industry lobbies, and the possibility that reforms are technocratic. Using industry-level data for a sample of six African countries, we find limited evidence that political economy factors have influenced the pattern of tariffs or tariff reductions since the early 1990s. One result does appear frequently: relative sector size (measured by the number of employees or establishments) appears to be associated with the relative level of protection. We then explore various descriptive statistics for tariff changes in seven African countries. The analysis suggests that the pattern of tariff reductions was essentially technocratic in structure - across the board reduction in average tariffs and in the dispersion of rates, with larger proportional reductions for higher tariffs – consistent with policy reforms being guided by the World Bank. While political economy factors may have influenced the initial pattern of protection, the technocratic reforms since the early 1990s have diluted political economy influences on average and relative protection.Pattern of Protection, Tariff Reform, Political Economy, Africa

Are Inequality and Trade Liberalization Influences on Growth and Poverty?

Trade, Inequality, Growth, Poverty, Developing countries

Trade Facilitation in Developing Countries

Measures to actively facilitate trade are increasingly seen as essential to assist developing countries in expanding trade and benefiting from globalisation. Although often viewed as narrowly concerned with the ease and speed of Customs procedures, even greater trade cost reductions and trade and welfare benefits may be reaped from a broader view of trade facilitation (TF) that incorporates transportation, distribution and communication issues. A number of TF reforms are particularly beneficial: improving procedures, especially Customs clearance; introducing automation and use of information technology; reducing excessive documentation requirements; addressing lack of transparency in import and export requirements; addressing lack of modernisation of and cooperation between Customs and other government agencies. The review identifies the types of TF reforms that could address these problems and deliver a return in terms of increased revenue collection efficiency, reductions in trade costs and promotion of greater regional cooperation (at least in Customs and transport, especially as many TF measures are appropriate for inclusion in regional integration agreements).Trade Facilitation, Regional Integration