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1 C OMPETITIVENESS ANALYSIS Objectives o Analyzing potential for export growth/diversification o Ground the analysis in some sort of economic principles.

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Presentation on theme: "1 C OMPETITIVENESS ANALYSIS Objectives o Analyzing potential for export growth/diversification o Ground the analysis in some sort of economic principles."— Presentation transcript:

1 1 C OMPETITIVENESS ANALYSIS Objectives o Analyzing potential for export growth/diversification o Ground the analysis in some sort of economic principles o Provide relevant advice to the government  Practical leads for action  Grounded in factual analysis  Robust

2 2 T HE PRINCIPLES : RICARDO Productivities Endowments (here, labor forces) WineDrape Portugal845 UK1220 Postulats 2 countries (Portugal, GB) Two sectors (wine,drape) One production factor (labor), CRS No transport cost No government intervention (tariffs etc.) perfect competition (price = unit cost)

3 3 P ORTUGAL ’ S OPPORTUNITY SET Wine Drape PPF (production. Possibility frontier) Autarky consumption point Indifference curve

4 4 GB’ S OPPORTUNITY SET Wine Drape PPF Autarky consumption point Indifference curve

5 5 I NTEGRATED WORLD EQUILIBRIUM UNDER FREE TRADE ProductionConsumption WineDrapeWineDrape Portugal40020 UK04020 Total40

6 6 T HE RYBCZYNSKI THEOREM Initial PPF Steel Effect of FDI Effect of immigration Textile

7 7 T HE HECKSCHER -O HLIN THEOREM “ trade triangle ” Steel Textile Indifference curve Relative price on word market ( textile cheaper ) Consumption point after SA Relative autarky price Production point after structural adjustment PPF

8 8 C OUNTRY ENDOWMENTS : N EW MEASUREMENT o Human capital measured by workforce’s average educational attainment o Physical capital stock measured by investment updated by PIM o Arable land per worker o Subsoil natural resources stock measured in 1994 and 2000

9 9 H UMAN CAPITAL ENDOWMENT : M OROCCO VS. W ORLD Insufficient investment in education shows up through international comparison o Morocco has been investing o But the world has been moving faster

10 10 Distribution of capital around the world becoming increasingly bi-modal: o Many countries with very little capital (less than $50’000 per worker) o A few with 4 times that ($200’000 per worker or more) P HYSICAL CAPITAL ENDOWMENT : M OROCCO VS. W ORLD

11 11 W HY DO INDUSTRIAL POLICY ? Justifying industrial policy requires a market failure o Synergies o Imperfect information, …

12 12 «R EVEALED » COMPARATIVE ADVANTAGE Balassa’s revealed-comparative advantage index Numerator: share of product (or sector) k in country i ’s exports Denominator: share of that product/sector in world exports Problem: Doesn’t pick up latent comparative advantage

13 13 A N ALTERNATIVE MEASURE OF COMPARATIVE ADVANTAGE Revealed capital intensity of a product: o Take all countries exporting that product o Calculate a pseudo-RCA measure for each o Take a weighted average of capital endowments using this RCA measure as weight Revealed most intensive in human capital

14 14 Revealed least intensive in human capital P UTTING THE MEASURE AT WORK

15 15 New products Deaths Baseline export portfolio: Export portfolio A NALYSING EXPORT PORTFOLIOS : C OSTA R ICA

16 16 Theil index shown on vertical axis: measure of export concentration Income level shown on horizontal axis (GDP per capita) Countries first diversify, then re-concentrate E XPORT DIVERSIFICATION : A GENERAL LAW

17 17 Intensive margin: higher volumes of existing products & destinations Export growth Extensive margin New products New destinations Sustainability margin: Survival of new products/destinations Largest contributors to export growth (across countries and time) Intensive margin New-destination margin S OURCES OF EXPORT GROWTH

18 18 Most export growth is at the intensive margin Next come new destinations New products almost negligible! S OURCES OF EXPORT GROWTH : C ROSS - COUNTRY EVIDENCE

19 19 A N ALTERNATIVE DECOMPOSITION OF INTENSIVE AND EXTENSIVE MARGINS

20 20 Your market share in your export portfolio Weight of your export portfolio in world trade Big fish in a small pond Small fish in a big pond

21 21 A N EXTENSION TO GEOGRAPHICAL MARKETS

22 22 Your market share in your destination portfolio Weight of your destination portfolio in world trade Big fish in a small pond Small fish in a big pond

23 23 R OLAND B ERGER ’ S ANALYSIS FOR THE M OROCCAN GOV ( I )

24 24 bla A N EXAMPLE : TEXTILE INDUSTRY ANALYSIS

25 25 bla M ARKET ANALYSIS

26 26 bla R ECOMMENDATIONS IN TERMS OF EXPORT PROMOTION ( I )

27 27 bla R ECOMMENDATIONS IN TERMS OF EXPORT PROMOTION ( I I)

28 28 Program covers o Mixture of matching grants and technical assistance to  Develop an export activity/grow out of single-buyer relationships  Get into new markets  Export new products o 455 firms had completed Famex programs at end-2009 Activities co-financed by FAMEX o Prospection: acquisition of information on foreign markets, purchase of data, or missions abroad to visit foreign exhibitions o Promotion: production of marketing information (design, production and publication of ads in various media), firm representation in fairs and exhibitions, and mailings o Product development: production of samples, package design o Firm development: organizational issues like setting up a marketing watch, an export cell, or an export-oriented business plan o Foreign subsidiary creation: legal, consulting, rental and salary costs for the first year of establishment. T UNISIA ’ S EXPORT PROMOTION

29 29 Matching-DID estimator (see Heckman et al. 1998, Blundell & Costa Dias 2009): τ is treatment year and w ij are the weights used in the matching (kernel, NN). o Compares the change in outcomes for FAMEX firms relative to the change in outcomes for matched control firms before and after FAMEX o Controls for differences in pre-treatment attributes through matching Problem: Tunisian firms received FAMEX assistance in different years, so τ = τ ( i ), and calendar time matters for performance E STIMATING « TREATMENT EFFECTS » ( I )

30 30 One possible fix: restrict matching for treatment firm treated in τ ( i ) to controls observed in τ ( i ): Alternative: revert to a regression framework using propensity score as weights (Hirano, Imbens and Ridder 2003). That is, estimate a simple DID equation with unit weights for treated firms and for controls. E STIMATING « TREATMENT EFFECTS » ( II )

31 31 Cumulative effects: o Disappear after 2 years for export value o Remain significant up to 5 years for # of products and destinations E XPORTERS SPREADING THEMSELVES TOO THIN ? B ASELINE IMPACT EFFECT Note: All regs include firm controls and year effects

32 32 R ESULTS VS. EXPECTATIONS Initial expectations… …vs. what happened

33 33 I MPACT EFFECT, BY OBJECTIVE Effects on primary stated objective (along diagonal) do not appear either larger or more precisely estimated; most precisely estimated effects are always on # of destinations Dummies, add up to treatment

34 34 I MPACT EFFECT, BY ACTIVITY Effects of prospection (getting to know) and promotion (getting known) seem most significant (suggesting informational market failure?) Amounts Total (program) amounts disbursed by activity: See last slide Selection correction based on PSM, i.e. corrects only for selection into the program; not into particular activity amounts

35 35 E XTERNALITIES Impressive absence of results—like Bernard & Jensen Bad proxy? Or no externalities? If anything, negative (also like B&J): poaching of managers/workers using taxpayer’s money?

36 36 Estimated treatment benefit o Average annual export growth for control firms, : 8.35% o Estimated annual export growth for treated firms in treatment year: 8.35%*1.667= 13.9% o Average exports per firm in 2004: TND 2’308K Estimated treated-firm exports in treatment year: TND 2’308K *1.139 = TND 2’629K Estimated treated-firm exports in treatment year: TND 2’308K *1.083 = TND 2’501K Difference attributable to treatment: TND K Treatment cost Average grant amount disbursed per Famex beneficiary: TND 21.7 K Total cost (matching grant + firm own expense) : TND 2*21.7K = TND 43.4 K Return based on impact effect o On grant: TND 128.5k additional exports for 21.7k TND ( 6 for 1 ) o On total investment: TND 128.5k for 43.4k TND ( 3 for 1 ) Is exports the right metric? Value added? Profits? A ROUGH COST - BENEFIT ANALYSIS

37 37 bla A NALYSIS AND UNDERSTANDING «B IG HITS »

38 38 … Your job S UMMING UP


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