1 The business environment in emerging economies Prof. Olivier Cadot Spring Semester, 2014

1

The business environment in emerging economies

Prof. Olivier CadotSpring Semester, 2014

2

SEMINAR OBJECTIVES

Get the big picture

o How is the world economy evolving? What is the role of emerging economies

o Basic differences between industrial and emerging economieso What do we know about economic development? Understand to

anticipate

Learn to analyze data

o Do and present descriptive statisticso Do and interpret basic regression analysiso Understand indices

Learn to present and discuss your ideas

o Select what you communicateo Give a «narrative» to your analysiso Provide constructive comments to others

3

SEMINAR EVALUATION

Hands-on data analysis exerciseo Get datao Organize it (cleaning, formatting)o Analyse it (descriptive statistics, econometric analysis)o Present your results

Group projecto Topic to be agreed with instructor/assistanto Original contribution (not just review of the literature)o Data analysis

Discussion of group projects

Optional: In-class case presentation and discussion

Exercises 30%

Group workPaper 50%Discussion 20%

Total 100%

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SEMINAR FORMAT AND SCHEDULE

Six introductory sessionsFebruary 20, 27; March 6, 13, 20, 27

Group work, phase I (topic determination & data gathering): AprilGroup meetings with professor/asssistant, round I: Week of April 15

Group work, phase II (analysis and preliminary draft): MayGroup meetings with professor/assistant, round II: Week of May 12Assignment of «discussant» roles

Presentations and discussion: May 15, 22, 29

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SUGGESTIVE LIST OF PAPER TOPICS

o Governance in extractive industries o Country competitiveness analysiso Measuring «logistics friendliness»o Export entrepreneurshipo Statistical analysis of competitiveness and other indiceso Public-private partnerships in public utilities, with a focus on water

privatizationo Free-trade agreementso Product standards, technical regulations, and competitiono NGO management & accountabilityo Project impact analysis

6

UNDERSTANDING GLOBALIZATION

7

TRADE GROWS FASTER THAN PRODUCTION

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

Low & middle income

High income

Openness ratioTrade growth vs. GDP growth

8

GLOBAL TRADE PATTERNS

250

375

1’395

628628

263263 427

242

105

5575

Source: Adapted from The Economist, A Survey of Logistics, 17 June 2006, p. 5.Million US dollars

9

SHIFTING PATTERNS, SHIFTING CENTER OF GRAVITY

Source: JM Grether and N Mathys (2006), “Is the World’s Economic Center of Gravity Already in Asia?”, mimeo, Univ. of Lausanne

2015

10

THE DECLINE OF THE RICH COUNTRIES

Share of high-income countries in trade in goods

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

Share of world GDP, constant dollars,OECDShare of world GDP, constant dollars,non-OECD

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Share of world GDP at PPP, OECD

Share of world GDP, at PPP, non-OECD

In current USD At PPP

11

THE RISE OF ASIAN PLAYERS

0

2

4

6

8

10

12

14

16

18

Trade in services (% ofGDP)

Service exports: India, 1975-2010

12

THE INTERNATIONALIZATION OF COMPANIES

-

1.00

2.00

3.00

4.00

5.00

6.00

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

Low & middle income

High income

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

Low & middle income

High income

Inward and outward FDI flows

Inward

Outward

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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

2 21 1

1i i i

i

F s s

H

1 1 1ij i j i jD s s s s

Intra-country fragmentation index

Inter-country distance index (Thoenig et al. 2009)

15

HAS CULTURAL DISTANCE SHRUNK?

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DETERMINANTS OF CULTURAL DISTANCE

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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

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

Low & middle income

0

10

20

30

40

50

60

70

80

90

100

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Low income

SSA

The developing world’s debt burden

20

SUMMING UP

Source: Sala i Martin 2002

Income distribution over time: World, 1970-80

21

SUMMING UP

Source: Sala i Martin 2002

Income distribution over time: World 1990-98

22

SUMMING UP

Poverty: tide turning?

Headcount of individuals living on less than $1 a day worldwide

Source: World Bank (2002),"Globalization, Growth and Poverty:Building an Inclusive World Economy"

million individual

s

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What is globalization?

o Rising openness to trade/reduced trade protection Goods Services

o Rising mobility of capital/internationalization of firms FDI Speculative flows

o Reduced global incidence of poverty Uneven across continents Halted by global financial crisis

SUMMING UP