Upload
others
View
4
Download
0
Embed Size (px)
Citation preview
The benefits of international integration:
Is a global approach superior?
Three criteria to assess the benefits of integration:
1. Similarity of structural factors (HO, Ricardo)
2. Learning (Coe & Helpman 1995; Lumenga-Neso, Olarreaga, Schiff 2005; Keller 2004; Rivera-Batiz & Romer 1991)
3. Diversification of risks (Caselli et al. 2015)
LAC neighbors are structurally similar, invest Little in R&D, are less integrated in global markets.
Then, why pursue regional integration?
Then, why pursue regional economic
integration?
Because our neighborhood cannot be ignored
• Geography shapes trade in goods and services, migration decisions, and, to a lesser extent, capital flows
• It also affects knowledge diffusion (Keller 2002)
• And economic performance is geographically clustered (even after controlling for terms of trade fluctuations)
This implies that the benefits of global and
regional integration are intertwined
A country’s neighborhood affects its global competitiveness
• Example: Regionally traded goods and services, such as land transport and electricity
And global integration affects the potential benefits from regional economic ties (e.g., learning about our neighbors’ export markets)
How? An agenda for the renewal of integration in LAC…
0
5
10
15
20
25
30
35
40
45
50
Pacific Alliance CAFTA-DR Mercosur G-7 Selected Asianeconomies
In p
erce
nt
Applied MFN tariffs, 2014 Applied MFN tariffs, 1995
1. Renew MFN tariff liberalization to enhance efficiency
Evolution of applied MFN tariffs
LAC countries Other countries
0
5
10
15
20
25
30
35
40
45
Pacific Alliance CAFTA-DR Mercosur G-7 Selected Asianeconomies
In p
erce
nt
Applied MFN tariffs, 2014 Overhang
1. Renew MFN tariff liberalization to boost investment
Applied MFN tariffs and WTO binding commitments
LAC countries Other countries
0.000.050.100.150.200.250.300.350.400.450.50
Co
nti
guo
us
Oth
er S
ub
regi
on
al C
ou
ntr
ies
Oth
er R
egio
nal
Co
un
trie
s
Re
st o
f th
e W
orl
d
Co
nti
guo
us
Oth
er S
ub
regi
on
al C
ou
ntr
ies
Oth
er R
egio
nal
Co
un
trie
s
Re
st o
f th
e W
orl
d
Co
nti
guo
us
Oth
er S
ub
regi
on
al C
ou
ntr
ies
Oth
er R
egio
nal
Co
un
trie
s
Re
st o
f th
e W
orl
d
South America Central America + MEX Caribbean
Average Median
2. Deepen integration between LAC sub-regions
Trade similarity with regional and extra-regional partners (rank correlations)
0.000.050.100.150.200.250.300.350.400.450.50
Co
nti
guo
us
Oth
er S
ub
regi
on
al C
ou
ntr
ies
Oth
er R
egio
nal
Co
un
trie
s
Re
st o
f th
e W
orl
d
Co
nti
guo
us
Oth
er S
ub
regi
on
al C
ou
ntr
ies
Oth
er R
egio
nal
Co
un
trie
s
Re
st o
f th
e W
orl
d
Co
nti
guo
us
Oth
er S
ub
regi
on
al C
ou
ntr
ies
Oth
er R
egio
nal
Co
un
trie
s
Re
st o
f th
e W
orl
d
South America Central America + MEX Caribbean
Average Median
Trade similarity with regional and extra-regional
partners
2. Deepen integration between LAC sub-regions
3. Harmonize rules to enhance global competitiveness
Non-tariff barriers affect trade flows and efficiency
Two examples:
1. Rules of Origin (RoO)
Non-tariff barriers affect trade flows and efficiency
Two examples:
1. Rules of Origin (RoO)
2. Regulatory frameworks: Critical for RTGs• Example: transmission of electricity
3. Harmonize rules to enhance global competitiveness
SSAMENA
LACEUR
ECA
EAP
LAC
ECA
SSA MENA
EAPEUR
-1.6
-1.4
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
Rest of the world Regional partners
Not significant Significant
4. Reduce LAC’s trade costs
Elasticities of trade flows with respect to distance by region and partner type
Note: SSA=Sub-saharan Africa, MENA= Middle East and North Africa, EUR=Europe, ECA=Eastern Europe and Central Asia, EAP=East Asia and the Pacific
5. Deepen labor market integration
Three indicators of labor-market integration:
Short-term comovement of wages of similar workers (synthetic cohorts) across countries
Long-term wage differentials across countries
Speed of adjustment to equilibrium wage gaps
• All these compared with what is observed within countries (Mexico and the U.S.)
Short-term co-movement of wages: Across
LAC vs. Mexico and the U.S.
50%
27%
0.3
0.31
0.32
0.33
0.34
0.35
0.36
0.37
0.38
0.39
0.4
Latin America Mexico United States
Elasticity of wages in one country (region) with respect to changes in wages in other countries (regions)
Wage differentials and speed of adjustment:
Across LAC vs. Mexico and the U.S.
50%
27%-0.35
-0.3
-0.25
-0.2
-0.15
-0.1
-0.05
0
Latin America Mexico United States
Speed of adjustment toward equilibrium gaps
0%
10%
20%
30%
40%
50%
60%
LAC Mexico United States
Average wage gaps
5. Deepen labor market integration to enhance efficiency
Interpretation of the evidence: potential efficiency gains from deeper labor-market integration
But, two challenges ahead [graphs]
5. Deepen capital market integration to improve the
regional investment climate
Evidence suggests that geography exerts a weaker pull on capital flows
Nevertheless, concerted regional efforts can foster capital inflows into the region
Example: The Pacific Alliance’s MILA
If the regional investment climate improves, the region as a whole becomes more efficient
Link to the report: bit.ly/mejores-vecinos
Thanks!
Learning about your neighbors’ export markets
Determinants of entry and survival in new export markets [back]
0
0.001
0.002
0.003
0.004
0.005
0.006
0.007
0.008
0.009
0.01
0
0.01
0.02
0.03
0.04
0.05
Determinants of Entry Determinants of Survival
Esta
blis
hed
Par
tner
s' G
DP
per
cap
ita
Elas
tici
ty
Net
wo
rk E
ffec
t El
asti
city
Network Effect Established Partners' GDP per capita
Regional trade integration and diversification
of risks
Effects of changes on intra-LAC and global trade on export volatility [back]
Economic performance and geographic
distance
Structural breaks and distance Short-run economic cycles and distance [back]
-0.02
-0.015
-0.01
-0.005
0
All Contractions Recoveries Expansions
Dis
tan
ce E
last
icit
ies
Distance elasticity 5th-95th percentile
-0.03
-0.025
-0.02
-0.015
-0.01
-0.005
0
All phases High-growth phase Low-growth phase
Dis
tan
ce E
last
icit
ies
Distance elasticity 5th-95th percentile
Challenges to labor market integration in LAC:
Actual vs intended intra-regional emigration rates
Actual Intended
Challenges to labor market integration in LAC:
More immigration, more resistance
Immigration rates and anti-immigration views [back]
Brazil Chile
Dominican Republic
Guatemala
MexicoPeru
Trinidad and Tobago
Uruguay
Venezuela, RB
0.2
0.3
0.4
0.5
0.6
0 0.01 0.02 0.03 0.04 0.05
An
ti-i
mm
igra
tio
n v
iew
s
Immigration rate
Note: Immigration rates are calculated as the stock of immigrants over total population. Immigration views come from the World Value Surveys