Andrew Charlton

Plant-Size Distribution and Cross-Country Income Differences

We investigate, using plant-level data for 79 developed and developing countries, whether differences in the allocation of resources across heterogeneous plants are a significant determinant of cross-country differences in income per worker. For this purpose, we use a standard version of the neoclassical growth model augmented to incorporate monopolistic competition among heterogeneous plants. For our preferred calibration, the model explains 58% of the log variance of income per worker. This figure should be compared to the 42% success rate of the usual model.

Growth and the Quality of Foreign Direct Investment: Is All FDI Equal

In this paper we distinguish different “qualities” of FDI to re-examine the relationship between FDI and growth. We use ‘quality’ to mean the effect of a unit of FDI on economic growth. However this is difficult to establish because it is a function of many different country and project characteristics which are often hard to measure Hence, we differentiate “quality FDI” in several different ways. First, we look at the possibility that the effects of FDI differ by sector. Second, we differentiate FDI based on objective qualitative industry characteristics including the average skill intensity and reliance on external capital. Third, we use a new dataset on industry-level targeting to analyze quality FDI based on the subjective preferences expressed by the receiving countries themselves. Finally, we use a two-stage least squares methodology to control for measurement error and endogeneity. Exploiting a new comprehensive industry level data set of 29 countries between 1985 and 2000, we find that the growth effects of FDI increase when we account for the quality of FDI.

Common Values for the Development Round

In the traditional theory of international trade, multilateral trade agreements should be easy because self-interested governments unilaterally commit to reduce their own protection and, as a bonus, they reap positive externalities from liberalization by other nations. In practice national governments do not behave as though they are maximizing the welfare of a representative citizen, but instead they respond to pressure from a diverse mix of constituencies and competing special interests. Governments attempt to manage domestic trade-offs within international negotiations, so progress is slow and protection persists. The practical operation of trade negotiations, emblemized by the infamous ‘green rooms’, is characterized by factionalism, horse-trading, and brinkmanship.

Multinational Ownership and Subsidiary Investment

This paper examines how foreign ownership affects the investment decisions of subsidiary firms using a new dataset of listed-parent − listed-subsidiary pairs. We find that improvements in the investment opportunities of parent firms have a negative effect on the investment of their subsidiaries, after controlling for the investment opportunities of the subsidiary, which can be independently observed. This provides evidence of internal capital markets in multinationals that reallocate funds towards units with better investment opportunities. We also find that the negative effect of the parent’s investment opportunities on subsidiary investment is greatest where the relationship is more arms-length, i.e. where parents have modest ownership stakes, are distant from their subsidiaries or when subsidiaries – as well as parents – operate in well developed financial markets.

Growth and the Quality of Foreign Direct Investment

Policymakers and academics often maintain that foreign direct investment (FDI) can help in the development efforts of host countries. In addition to supplying capital, FDI can be a source of valuable technology and know-how and foster linkages with local firms that can help to jumpstart an economy.1 While academics tend to treat FDI as a homogenous capital flow, policy makers, on the other hand, seem to believe that some FDI projects are better than others. National policies toward foreign direct investment (FDI) seek to attract some types of FDI and regulate other types in a pattern which seems to reflect a belief among policymakers that FDI projects differ greatly in terms of the national benefits to be derived from them. UNCTAD’ World Investment Report 2006 for instance describes “quality FDI” as “the kind that would significantly increase employment, enhance skills and boost the competitiveness of local enterprises.” Policymakers from Dublin to Beijing have implemented complex FDI regimes with a view to influencing the nature of the FDI projects attracted to their shores. Sean Dorgan, Chief Executive of Ireland’s Industrial Development Agency, for example, claims that “the value of inward investment must now be judged on its nature and quality rather than in quantitative measures or job numbers alone.” Chinese officials have openly stated that the new challenge for the country is to attract more “high quality foreign direct investment.”3

An Agenda for the Development Round of Trade Negotiations in the Aftermath of Cancun

Executive Summary 1. Introduction 2. The Need for a Development Round 2.1 Redressing Past Imbalances 2.2 Unfinished Business 2.3 New Area of Importance 3. Dohas Development So Far 4. Principles of a Development Round 4.1 Any Agreement Should Be Assessed in Terms of its Impact on Development 4.2 Any Agreement Should Be Fair 4.3 Any Agreement Should Be Fairly Arrived At 4.4 The Policy Space Should Be Interpreted Conservatively 4.5 Some Implications 5. Priorities for a Development Round 5.1 The Context 5.2 Market Access Priorities 5.3 Priorities in Non-market Access Issues 5.4 What Should Not Be on the Agenda 6. Special Issues 6.1 Special and Differential Treatment and the Development Box 6.2 Intellectual Property Issues 6.3 Competition Issues 6.4 Regional and Bilateral Trade Agreements and South-South Trade 7. Institutional Reforms 7.1 Procedures 7.2 Structures and Representation 8. A Practical Agenda Appendices 1. Empirical Review of Market Access Proposals 2. Regulatory Harmonisation: The Singapore Issues References

The Right to Trade: Rethinking the Aid for Trade Agenda

The link between aid and trade has been an important nexus in the global development framework since the World Trade Organization (WTO) launched its ‘Aid for Trade’ initiative at the 2005 Ministerial in Hong Kong.