Economic integration in the lower Congo region : opening the Kinshasa-Brazzaville bottleneck

This working paper assesses cross-border economic integration in the Lower Congo region. It focuses on the Kinshasa-Brazzaville conurbation, which is projected to become Africa's largest urban area by 2025, and is already serving as the gateway to large hinterlands. Despite their size and proximity, formal economic exchanges between the two cities are extremely limited. The volume of recorded passenger travel between Kinshasa and Brazzaville corresponds to about one-fifth of the volume of traffic between East and West Berlin during the time of the Berlin Wall, and formal trade volumes are derisorily small. As a consequence, the authors find evidence of statistically significant differences in retail prices, indicating unexploited scope for cross-river arbitrage. Through a survey of firms, they find that local traders perceive substantial scope for increasing cross-border economic activity if cross-river trade costs were reduced. Trade in locally produced goods and by small firms would especially benefit from such reductions. Existing high trade costs mainly result from a lack of competition in cross-river transport services, which are dominated by a duopoly of state-controlled operators. High administrative border costs, exacerbated by the presence of multiple government agencies at the border, act as a further obstacle. Liberalization of cross-river transport and customs reform could yield large economic benefits for local producers and consumers.Transport Economics Policy&Planning,Economic Theory&Research,Emerging Markets,Trade Law,Free Trade

Clothing and export diversification : still a route to growth for low-income countries ?

Can the clothing sector be a driver of export diversification and growth for today's low-income countries as it was in the past for countries that have graduated into middle income? This paper assesses this issue taking into account key changes to the market for clothing: the emergence of India and especially China as exporting countries; the rise of global production chains; the removal of quotas from the global trading regime but the continued presence of high tariffs and substantial trade preferences; the increasing importance of large buyers in developed countries and their concerns regarding risk and reputation; and the increasing importance of time in defining sourcing decisions. To assess the importance of the factors shaping the global clothing market, the authors estimate a gravity model to explain jointly the propensity to export clothing and the magnitude of exports from developing countries to the E U and US markets. This analysis identifies the quality of governance as an important determinant of sourcing decisions and that there appears to be a general bias against sourcing apparel from African countries, which is only partially overcome by trade preferences.Economic Theory&Research,Free Trade,Trade Policy,Emerging Markets,Transport Economics Policy&Planning

The African Growth and Opportunity Act, exports, and development in Sub-Saharan Africa

The African Growth and Opportunity Act (AGOA) is the flagship of U.S. commercial and development policy with Sub-Saharan Africa. This paper looks at the impact of the trade preferences that are the central element of AGOA on African countries'exports to the U.S. and puts them in the perspective of the development of the region. The paper finds that, while stimulating export diversification in a few countries, AGOA has fallen short of the potential impetus that preferences could otherwise provide African exporters. The impact of AGOA would beenhanced if preferences were extended to all products. This means removing tariff barriers to a range of agricultural products and to textiles and a number of other manufactured goods. There also needs to be a fundamental change in approach to the rules of origin. Given the stage of development and economic size of Sub-Saharan Africa, nonrestrictive rules of origin are crucial. For all countries in Africa, those that have and those that have not benefited from preferences, there are enormous infrastructure weaknesses and often extremely poor policy environments that raise trade costs and push African producers further away from international markets. Effective trade preferences (those with nonrestrictive rules of origin) can provide a limited window of opportunity to exports while these key barriers to trade are addressed. But dealing with the barriers is the priority.Free Trade,Economic Theory&Research,Trade Policy,Agribusiness&Markets,Markets and Market Access

Technology Transfer Through Trade

This paper examines the role that trade plays in economic development through the channel of technology transfer, approximated by total factor productivity. Three strains of factors influence the process of technology transfer; direct effort that is taken to transfer technologies, the capacity to adopt technologies, and differences in the underlying conditions between donor- and receiving countries. In this context, trade in (capital) goods allows technology import and improved input decisions. Second, trade opens export markets, allowing learning-by-doing. Third and most importantly, trade increases the set of accessible technologies, increasing the scope for imitation. The theoretical insights are compared to the empirical literature that deals with trade and technology transfer. Not surprisingly, it turns out that openness and human capital have a positive influence on the transfer of technology. Yet methodological problems with the data weaken the practical significance of the results, especially as the precise and fundamental mechanism of spillovers and the factors that condition the degree of technology transfer are not profoundly illuminated. These underlying processes have to be better understood in order to be able to give valuable policy recommendations that will go beyond the general advice of increasing openness and human capital formation.Technology transfer, Trade, Economic growth, Total factor productivity

The Impact of education and mismatch on wages: Germany, 1984-2000

In analysing the impact of education on wage differentials and wage growth, we use next to personal characteristics (e. g. education and experience) also jobcharacteristics (e. g. skills required) to explain wages. We estimate wage equations on individual data for Germany, 1984 – 2000. When discussing observed andpreviously unobserved heterogeneity it turns out that personal characteristics like education and experience explain about half of the variation in wages. At least 20 per cent is explained by variation in job characteristics. When comparing the results with similar research for the Netherlands an the USA, the returns toexperience are the same in all countries, while the premiums on required skills and in particular education are much higher in the USA.labour economics ;

Economic partnership agreements and the export competitiveness of Africa

Trade can be a key driver of growth for African countries, as it has been for those countries, particularly in East Asia, that have experienced high and sustained rates of growth. Economic partnership agreements with the European Union could be instrumental in a competitiveness framework, but to do so they would have to be designed carefully in a way that supports integration into the global economy and is consistent with national development strategies. Interim agreements have focused on reciprocal tariff removal and less restrictive rules of origin. To be fully effective, economic partnership agreements will have to address constraints to regional integration, including both tariff and non-tariff barriers; improve trade facilitation; and define appropriate most favored nation services liberalization. At the same time, African countries will need to reduce external tariff peak barriers on a most favored nation basis to ensure that when preferences for the European Union are implemented after transitional periods, they do not lead to substantial losses from trade diversion. This entails an ambitious agenda of policy reform that must be backed up by development assistance in the form of"aid for trade."Economic Theory&Research,Free Trade,Emerging Markets,Trade Policy,Trade Law

Impure Public Goods and Technological Interdependencies

Impure public goods represent an important group of goods. Almost every public good exerts not only effects which are public to all but also effects which are private to the producer of this good. What is often omitted in the analysis of impure public goods is the fact that – regularly – these private effects can also be generated independently of the public good. In our analysis we focus on the effects alternative technologies – independently generating the private effects of the public good – may have on the provision of impure public goods. After the investigation in an analytical impure public good model, we numerically simulate the effects of alternative technologies in a parameterized model for climate policy in Germany