Measuring trade barriers (and their impact)

Revenue implications of tariff reform

Geographical pattern of trade

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Comments, Puzzles, Future Directions

Globalization and Inequality.  These were comments on a paper at at Brookings conference on Globalization, Poverty, and Inequality.  The original Power Point presentation is also attached (more figures, less words). 

Measuring Outward Orientation:  Can it be Done? Journal of Development Economics, v 49(2).  This paper does the very simple minded thing of showing that nearly all of the proposed measures of concepts that are at times treated as synonyms ("outward orientation", "openness"  "liberal trade") are mutually uncorrelated in cross sections of countries.  So either the different measures are measuring the same thing and at most one is "right" or they are all measuring different things.  See the comment below.

The Evolution of Import Restrictions in Africa in the 1980s. (with Bhanu Narasimhan).  This proposes a new way to measure import restrictions in order to avoid the problem that the restrictiveness of the typical licensing schemes for imports is unobservable without direct price comparisons (which are impossible) and crude measures like "fraction of imports which require a license" do not capture either the cross national differences or the changes in intensity over time.  We measure trade restrictions as the gap between actual and "notional" imports where notional imports are those predicted by a standard model of import demand.  This still strikes me as a much more useful approach and is the only approach that I have seen that gives a sense of the volatility of restrictions, induced by responses to foreign exchange availability. 

Tariff Rates, Tariff Revenue, and Tariff Reform:  Some New Facts. (with Geeta Sethi), World Bank Economic Review, v8 (1), 1994.  This article compares the statutory ad valorem tariff rates (official rates) with the ratio of tariff revenues to import values (collected rates) for Jamaica, Kenya, and Pakistan. It identifies four general features of the tariff codes, considers whether these features apply to all developing countries, and discusses four implications of these features for tariff reform. First, the collected rate for any given item in the tariff code is only weakly related to the official rate for that item. Second, the variation of collected rates around the official rate increases with the level of the official rate. Third, the collected rates, on average, increase much less than the official rates. Fourth, the relation between official rates and collected rates is nonlinear, because the slope is lower at higher levels of the official rate.

For awhile I used gravity models to answer various questions about trade flows.

European Trade Patterns After the Transition.  This paper was written just as the Eastern European countries were liberalizing.  Since a "partial equilibrium" approach could not predict the changes in trade patterns from a fully "general equilibrium" systemic (and seismic) shift we estimated a gravity model and used the estimated parameters from other countries to predict what EE would trade with the West of they were "normal" countries.

Intra-Sub Saharan African Trade:  Is it Too Little?  This paper estimates a gravity model on non-African countries and then applies the parameters to predict trade between SSA countries.  The results do not suggest that intra-SSA trade is "too small" relative to the predicted level. 

Import Demand in Developing Countries.  This paper grew out of my dissertation, which was estimating import demand functions (that is, imports as a function of income and relative prices) for a large number of countries, with specification tests that showed that nearly half of them were mis-specified mainly as they were dynamically unstable.  I concluded this was primarily because imports were often rationed and hence the "true" import determination function switched between being a demand function and a rationed "supply"--hence the paper above using this to measure restrictions by inference. 

These were a collection of papers in the early 1990s that were kind of "macro" as they were about real exchange rates.  All three of them were really concerned about the issue of sustained over-valuations, maxi-devaluations and the impact of these on trade and growth performance.  This was trying to understand the implications of the first generation of the "Southern Cone" experience of attempting to use crawling pegs to slow inflation (or simply of attempting to maintain a fixed exchange rate against inflation causing an over-valuation). 

Measuring Real Exchange Rate Instability in Developing Countries  This paper just made the simple point that exchange rate deviations were skewed and kurtotic.  Skewed because many small increases in RER (inflation differentials) were followed by a maxi-devaluation.  The more important point was the the "variance" in the RER that does not differentiate between these two sources of instability will not empirically capture the impact of RER "instability" as I conjecture the first--with persistent over-valuation--is much more pernicious that pure volatility. 

Volatility of the Real Exchange Rate and the Response to Adjustment.  This was an early attempt to answer the (increasingly pressing) question of the low export supply response to devaluations.  In this I looked at ARCH (auto-regressive conditional heteroskedasticity)-- meaning that in the immediate aftermath of a maxi-devaluation the RER was very hard to predict.  In some instances the devaluation was quickly inflated away with no persistent depreciation and hence exporters would not want to invest while in other episodes the RER would persist.  Inability to distinguish these because of high post-devaluation volatility make the export supply response weak--and of course could lead to a vicious circle. 

The RER and the Trade Surplus:  The Missing Correlation.  This paper just pointed out that the RER and the trade surplus were completely uncorrelated (or something fancier like a like of Granger Causality either direction).  I never did figure out what this meant or how it squared with policy talk about RER as the "forcing" policy variable to solve a trade imbalance or how it squared with dynamic general equilibrium models of their joint determination.  So I gave up on this. 

Review of Has Globalization Gone too Far?  by Dani Rodrik.

Rodrik.  Srinivasan.  Dollar. Frankel and Romer. (on the trade/growth debate).

Andrew Rose on trade flows (and much else).

The problem with measuring outward orientation or trade liberality (particularly on the import side) in developing countries is that a typical mode of import control in the 1970s and into the 1980s (although mostly eliminated by trade reforms by the 1990s) was the use of non-tariff barriers in the form of licensing requirements.  So many countries would divide goods up into three lists:  freely importable, banned, and importable with a license.  It then becomes impossible to know the severity of the price wedge created by the requirement of the li