The business environment in emerging economies
Prof. Olivier Cadot
Spring Semester, 2014
1
SEMINAR OBJECTIVES
Get the big picture
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How is the world economy evolving? What is the role of emerging economies
Basic differences between industrial and emerging economies
What do we know about economic development? Understand to anticipate
Learn to analyze data
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Do and present descriptive statistics
Do and interpret basic regression analysis
Understand indices
Learn to present and discuss your ideas
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Select what you communicate
Give a «narrative» to your analysis
Provide constructive comments to others
2
SEMINAR EVALUATION
Hands-on data analysis exercise
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Get data
Organize it (cleaning, formatting)
Analyse it (descriptive statistics, econometric analysis)
Present your results
Group project
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Topic to be agreed with instructor/assistant
Original contribution (not just review of the literature)
Data analysis
Discussion of group projects
Optional: In-class case presentation and discussion
Exercises
30%
Group work
Paper
Discussion
50%
20%
Total
100%
3
SEMINAR FORMAT AND SCHEDULE
Six introductory sessions
February 20, 27; March 6, 13, 20, 27
Group work, phase I (topic determination & data gathering): April
Group meetings with professor/asssistant, round I: Week of April 15
Group work, phase II (analysis and preliminary draft): May
Group meetings with professor/assistant, round II: Week of May 12
Assignment of «discussant» roles
Presentations and discussion: May 15, 22, 29
4
SUGGESTIVE LIST OF PAPER TOPICS
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Governance in extractive industries
Country competitiveness analysis
Measuring «logistics friendliness»
Export entrepreneurship
Statistical analysis of competitiveness and other indices
Public-private partnerships in public utilities, with a focus on water
privatization
Free-trade agreements
Product standards, technical regulations, and competition
NGO management & accountability
Project impact analysis
5
UNDERSTANDING GLOBALIZATION
6
TRADE GROWS FASTER THAN PRODUCTION
Openness ratio
70.00
60.00
50.00
40.00
Low & middle income
30.00
High income
20.00
10.00
-
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
Trade growth vs. GDP growth
7
GLOBAL TRADE PATTERNS
628
263
375
55
105
250
628
242
75
427
263
1’395
Source: Adapted from The Economist, A Survey of Logistics, 17 June 2006, p. 5.
Million US dollars
8
SHIFTING PATTERNS, SHIFTING CENTER OF GRAVITY
2015
Source: JM Grether and N Mathys (2006), “Is the World’s Economic Center of Gravity Already
in Asia?”, mimeo, Univ. of Lausanne
9
THE DECLINE OF THE RICH COUNTRIES
Share of high-income countries in trade in goods
In current USD
90.00
At PPP
70.00
80.00
60.00
70.00
50.00
40.00
Share of world GDP, constant dollars,
OECD
Share of world GDP, constant dollars,
non-OECD
50.00
40.00
30.00
30.00
20.00
20.00
10.00
10.00
Share of world GDP at PPP, OECD
Share of world GDP, at PPP, non-OECD
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
-
-
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
60.00
10
THE RISE OF ASIAN PLAYERS
Service exports: India, 1975-2010
18
16
14
12
10
8
Trade in services (% of
GDP)
6
4
2
0
11
THE INTERNATIONALIZATION OF COMPANIES
Inward and outward FDI flows
Inward
6.00
Outward
5.00
4.00
7.00
3.00
Low & middle income
High income
2.00
6.00
5.00
4.00
1.00
Low & middle income
3.00
High income
2.00
1.00
2010
2007
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
-
1971
2009
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
-
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DIFFERENCES IN VALUES (I): HOFSTEDE (1980)
Power acceptance
Individualism
“Masculinity” (competitiveness)
Risk aversion
Source : http://www.clearlycultural.com/geert-hofstede-cultural-dimensions/uncertainty-avoidance-index/
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DIFFERENCES IN VALUES (II): A CULTURAL DISTANCE INDEX
Intra-country fragmentation index
Fi  1   si   1  si 
2
2
 1  Hi
Inter-country distance index (Thoenig et al. 2009)
Dij  1  si s j  1  si  1  s j 
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HAS CULTURAL DISTANCE SHRUNK?
15
DETERMINANTS OF CULTURAL DISTANCE
16
THE TRANSPORTATION REVOLUTION
Share of U.S. trade shipped by air, 1965-2010
Source: Feyrer (2009)
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GLOBALIZATION: STYLIZED FACTS
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GLOBALIZATION: STYLIZED FACTS
The developing world’s debt burden
45.00
40.00
35.00
30.00
25.00
20.00
Low & middle income
15.00
10.00
100
5.00
90
80
70
60
50
Low income
40
SSA
30
20
10
0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
-
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SUMMING UP
Income distribution over
time: World, 1970-80
Source: Sala i Martin 2002
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SUMMING UP
Income distribution over time:
World 1990-98
Source: Sala i Martin 2002
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SUMMING UP
Poverty: tide turning?
Headcount of individuals living on less than $1 a day worldwide
million
individuals
Source: World Bank (2002),"Globalization, Growth and Poverty:
Building an Inclusive World Economy"
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SUMMING UP
What is globalization?
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Rising openness to trade/reduced trade protection
 Goods
 Services
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Rising mobility of capital/internationalization of firms
 FDI
 Speculative flows
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Reduced global incidence of poverty
 Uneven across continents
 Halted by global financial crisis
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