Ideas for growth session 3: Trade

The goals of the IGC trade session were to (1) promote interaction among the members of the programme and the policy-makers that came from the IGC countries, (2) motivate members to stay engaged with IGC and submit research proposals on trade and development for funding, and (3) give members a chance to see and discuss cutting-edge research at the intersection of trade and development.

David Atkin (Yale) presented a paper on the “cost of globalization”. The opening up of a country to free trade is indeed very costly. The researchers estimation on the intra-national trade costs in developing countries suggests that the marginal cost of distance approximately double when only use source-destination pairs and that marginal costs of distance approximately double again when spatial variation in marks- up are taken into account. This paper is particularly timely because there is an increased understanding of trade among the practitioners. It is therefore entirely relevant, and especially for Africa.

Amit Kahndelwal (Columbia) presented his work on exports and firms performance. This is a path-breaking study because it implements for a first time a randomised controlled trial in a trade study. Much of the literature on microenterprises focuses on supply-side constraints preventing firms from growing. However, there is a large gap for work on demand constraints. Thus, this project analyses demand shock driven by a specific policy intervention: matching firms with new export opportunities. The field experiment is in Fowa, Egypt with the authors examining firms that manufacture handmade rugs using wooden looms. The advantages to choosing this case study are threefold: i) technology is common across firms and relatively simple to understand; ii) there is a large sample size; iii) the research can explore the link between exporting and poverty reduction. The study is still ongoing and it will produce the first results in the first months of 2013. The feedback from the audience was very positive.

The final presentation by Eric Veroogen (Columbia) on technology spillovers was particularly satisfying because it brought to the table one of the most relevant trade issue in developing countries: technology spillovers. The project looks at the production of soccer skilots balls in Pakistan in trying to understand the role of technology spillovers and their impact on productivity and firms’ performance. Al three papers had a respective discussant, precisely for the last paper.

The discussants – John Page (IGC Tanzania and Ethiopia), Paulo Bastos (World Bank), and Shujaat Ali (Government of Punjab, Pakistan) – challenged the researchers with very relevant policy questions which created an extremely interesting debate in the spirit of Growth Week.