Trade and Development Working Papers
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Publication Open Access Indonesia in global manufacturing value chains: Policy ambivalence and arrested growth(2025-10) Athukorala, Prema-chandra; Patunru, AriantoThis paper explores Indonesia's experience in leveraging opportunities presented by global manufacturing value chains (GMVCs), with a comparative focus on Southeast Asia. It is motivated by growing concerns in recent policy discussions regarding the country’s underutilized growth potential, which could be unlocked through more effective integration into GMVCs. Indonesia initially had promising prospects for export-oriented industrialization by engaging in GMVCs. However, its industrialization trajectory over the subsequent years has not lived up to expectations. Strong evidence indicates that Indonesia’s deep-rooted policy ambivalence has hindered its full participation in global production networks. The findings highlight the need for a proactive investment promotion strategy to attract multinational enterprises (MNEs) involved in GMVCs.Publication Open Access Philippines agricultural protection and insulation in international perspective(Arndt-Corden Department of Economics, Crawford School of Public Policy, ANU College of Law, Governance and Policy, 2025-10) Anderson, Kym; Briones, RoehlanoFor decades the Philippines has protected many of its farmers from import competition, taxed farm exports, and insulated domestic markets from fluctuations in international prices. Policy developments to the mid-1960s are summarized by Power (1971), and were updated to the mid-2000s by David, Intal and Balisacan (2009). This paper looks at what has changed in terms of agricultural assistance and food market insulation in the two decades since then, with emphasis on the extent to which those rates of assistance have fluctuated from year to year with international price movements as governments attempted to stabilize the nation’s domestic prices of farm products, most notably for rice. Philippine policies have been similar to those of other food-importing countries in adopting farm-support policies but have been unusual in being so protectionist so early in the country’s economic development. The paper explores the prospect of re-purposing support away from price-distorting measures – which are highly inequitable – toward more-direct forms of support for just the poorest rural households and boosting investment in rural public goods such as infrastructure and agricultural research. The latter would benefit a larger proportion of rural people as well as reduce food prices in urban areas.Publication Open Access Four Decades in the global apparel value chain: Evidence from Bangladesh(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-01) Mohammed, Abul BasharThe remarkable growth of the Bangladesh apparel industry within the global apparel value chain is an interesting case because the industry grew from virtually zero export capacity to become the second largest apparel exporter in the world. The country attained its unprecedented success against the speculations made by some industry experts that it would lose its market share after the abolition of the Multi-Fibre Arrangement (MFA) with effect from 2005. This paper aims to delineate the role of national policies and world demand and abolition of MFA through an econometric analysis using data from 1976-2018. The findings suggest that, contrary to the gloomy predictions, ample availability of labour and the pragmatic domestic policy posture helped Bangladesh to consolidate its position in the global apparel value chain in competitive market conditions during the post-MFA era. The policy challenge for the country is to achieve structural adjustments and industrial upgrading within the value chain as the surplus labour pool gradually depletes.Publication Open Access What causes structural change?(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-01) Warr, Peter; Yusuf, AriefStructural change refers to long-term, systematic changes in the sectoral composition of aggregate economic output. Ordinarily, it means the contraction of agriculture relative to industry and services. We analyse its economic causes, using a small, comparative-static, empirically-based computable general equilibrium model of the economy of Thailand, a country experiencing rapid structural change over recent decades. We test the explanatory power of five potential contributors to structural change, suggested by simple economic theory and relevant literature, using Thai data: (a) differential growth rates of aggregate supplies of physical capital, labour, and land (the Rybczynski effect); (b) differential growth rates of total factor productivity between sectors; (c) changes in relative international prices; (d) changes in sectoral rates of trade protection; and (e) income growth with differences in expenditure elasticities of demand between final consumer goods (Engel’s law). It is concluded that, in Thailand’s case, explanation (b) dominates the other four.Publication Open Access Economic growth and savings transition in Asia: Unity in diversity(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-01) Athukorala, Prema-chandra; Suanin, WanissaThis chapter examines the national saving behaviour in the process of economic growth through a comparative analysis of countries in developing Asia from a historical perspective. Developing Asia provides an ideal laboratory for the study, with considerable differences in the saving behaviour among countries and over time within individual countries, notwithstanding the ‘model saver’ image of the region that is based mainly on the experience of high-performing East Asian economies. The empirical analysis distinguishes between private and government saving rates, with specific emphasis on the former. The results of the empirical analysis are consistent with the view of a ‘virtuous circle’ between growth and saving, with growth initiating the saving transition. There is no evidence to suggest that a prior phase of promoting saving through specific policy initiatives is needed to initiate the process of growth and structural transformation. The private saving rate is also associated positively with export orientation of the economy, and net foreign capital inflows and negatively with the young dependency ratio of the population and domestic credit availability.Publication Open Access Anticipating unintended consequences of policy: Learnings from Indonesia's child labor reform(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-01) Elghafiky Bimardhika; Firman WitoelarWe study the causal effects of a labor law that governs child workers on labor market outcomes and the well-being of individuals. We exploit the timing of the national legislation to identify the causal effects of child labor reform using the Regression Discontinuity Design. We find that individuals who entered adulthood after the reform are less likely to have participated in the labor market during childhood. The reform also lowers the likelihood of poor health and improves the probability of working in paid jobs when children have reached adulthood. Our heterogeneity analysis highlights the importance of complementing regulation with enforcement and support programs to minimize unintended consequences that plagued many similar reforms.Publication Open Access Food one click away: The impact of online food delivery platforms on food security in Indonesia(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-03) Muchtar, Pyan; Resosudarmo, BudyThis paper examines the causal effects of online food delivery (OFD) platforms on household food security in the context of a developing country, Indonesia. We construct food security data from households consumption surveys from 2012 to 2022 and merged it with a novel dataset on OFD platform penetration across districts, compiled through a combination of internet scraping and machine learning. Utilizing a contemporary event-study estimator to analyze the impact, our findings indicate that the expansion of OFD services enhances food security at the district level, with a more pronounced effect in rural areas, among younger households, and male-led households. We also show that this impact is likely driven by increased competition in the food market.Publication Open Access Structural change and income inequality: Evidence from Thailand(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-06) Warr, Peter; Yusuf, Arief AnshoryStructural change is the contraction of agriculture as a share of both aggregate economic output and employment and the corresponding expansion of the combined shares of industry and services. First, we describe this process in the context of Thailand, a country experiencing significant structural change in recent decades. Second, we analyse its causes using a simple, comparative static computable general equilibrium model of the Thai economy, operated in long-run mode. We test the explanatory power of three hypotheses about the causes of structural change: differences in the growth rates of aggregate factor supplies (the Rybczynski effect; sectoral differences in total factor productivity growth; and the differences between commodities in expenditure elasticities of demand (Engel’s law). The first two hypotheses operate on the supplyside of the economy, implying changes in the shape of the production possibility frontier (PPF). The third, a demand-side effect, implies changes in output prices during growth that induce movements around the PPF. The results indicate that the first two explanators predict the observed structural change accurately, but that the third, Engel’s law, predicts poorly. Third, we use the above framework to study the impacts these drivers of structural change have on the functional distribution of incomes. The results show that the explanators of structural change do not predict the observed changes in factor income shares. We conclude that these two phenomena have different drivers and that stable empirical relationships between them should not be expected.Publication Open Access Under the water: flood impacts and economic dynamics in northern Peru(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-05) Alvarez, Jose Cobian; Resosudarmo, BudyThis paper assesses the effects of devastating flooding on household welfare in northern Peru. Remote sensing data are used to construct a novel damage index as a proxy for the local economic impact caused by the 2017 coastal El Niño floods. Using 5-year panel data from the Peruvian National Household Survey (ENAHO), we observe that affected households experience a decrease in income and expenditure compared to those in unaffected areas during the period 2015–2019. Additionally, poverty increases as a result of this natural hazard, especially among households in urban areas. Although there is a recovery in income and expenditure in the aftermath of the floods, households mitigate their consumption through donations of food and clothing. We suggest that, in a context where the occurrence of flooding affects the most vulnerable groups, the development of formal riskcoping strategies such as insurance is crucial for boosting their ability to reduce, mitigate, or adapt to future disaster risk.Publication Open Access Impacts of a US-led tariff war on international trade in wine, beer and spirits(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-05) Anderson, Kym; Wittwer, GlynThe announcements by President Trump in April 2025, of unilateral hikes of 10-50 percentage points on US import tariffs on all countries’ goods, are under threat of coming into force on 8 July 2025. This article estimates their likely effects on trade in alcoholic beverages, using a global model of national beverage markets. Various scenarios are compared. They suggest that if the tariff hike was restricted to just 20% on goods from the European Union, the value of global trade in each of the three beverages would shrink by one-tenth. But the US tariff hikes are to apply to all countries’ goods, which is estimated to shrink global exports by 13% for wine, 22% for spirits and 33% for beer. In that broader scenario, most countries’ wine exports would shrink, but exports of beer and spirits would expand for some countries thanks to the trade divergence generated by the varying tariff hikes. If the increasing uncertainty associated with these developments led to a cumulated 2% drop in consumer spending, virtually all wine-exporting countries would sell less wine to both the US and the rest of the world. That is, wine trade destruction would outweigh trade diversion.Publication Open Access The impact of the Belt and Road initiative on foreign direct investment from China, the United States, and major investor countries(Arndt-Corden Department of Economics, Crawford School of Public Policy, ANU College of Law, Governance and Policy, 2025-05) Todo, Yasuyuki; Nishitateno, Shuhei; Brown, SeanThis paper investigates the impact of the Belt and Road Initiative (BRI) on foreign direct investment (FDI) in BRI countries from China and other major source countries by applying staggered difference-in-differences (DID) event study estimator to a gravity model. In addition to country-pair fixed effects, we introduce source and host country-year fixed effects in estimating the model to control for changes in any host country attribute due to the BRI, such as infrastructure, and highlight the effect through changes in bilateral relationships. We find that FDI from China, Hong Kong SAR, the US, Switzerland, Japan, and France to BRI countries increased in the post-BRI period, whereas FDI from the United Kingdom (UK), the Netherlands, and Luxembourg decreased. After controlling for country-year fixed effects, there remains a post-BRI upward trend in FDI from the US, Switzerland, and France and a downward trend in FDI from the UK, the Netherlands, and Luxembourg. These findings suggest that FDI from non-China countries to BRI countries can be affected by their bilateral relationship with China. For example, the investors from the US may have invested more in BRI countries to strategically compete with China in those countries, whereas investors from France and Switzerland may have done so because of investment cooperation with China in Africa.Publication Open Access China's wine market: Recent shocks, long-term prospects(Arndt-Corden Department of Economics, Crawford School of Public Policy, The Australian National University, 2025-05) Kym AndersonChina was one of the world’s most important areas of growth in wine demand in the 2010s, accounting for 7% of the world’s wine consumption and 8% of its value of wine imports by 2017. But China’s per capita wine consumption peaked in the mid-2010s, and its wine imports have more than halved since then. As well, the sources of China’s imports of wine have fluctuated considerably over the past two decades, making this a risky market for wine exporters. Certainly the COVID-19 disruption played a role, but between 2019 and 2022 the fall in sales was considerably larger for wine (47%) than for spirits (17%) and beer (9%), such that wine’s share of alcohol consumption in China fell by two-fifths over those three years alone. The article examines reasons behind the dramatic gyrations in this globally important market and their impact on wine-exporting countries and speculates on future trends.ANU Archive Item Open Access Nudging alcohol moderation via excise tax reform: The case of beer in Australia(Crawford School of Public Policy, The Australian National University, 2025-11) Anderson, KymAustralia taxes alcohol consumption more than most other affluent economies. A switch to low-alcohol beer has been encouraged in Australia by it being subject to a lower rate of excise tax than regular beer, but no such incentive applies to packaged mid-strength beer. Would more or less alcohol be consumed if the tax rates for mid-strength beer were lowered, for example to those for low-strength beer? This study estimates changes in demand that could result from such a policy change. It finds that alcohol consumption from each of beer, wine and spirits could fall, but by little more than 1% in totalPublication Metadata only Evolving from a rum state: Australia's alcohol consumption(Crawford School of Public Policy, The Australian National University, 2020-02) Anderson, KymEuropeans settlers in the Australian colonies had a reputation of being heavy drinkers. Rum dominated during the first few decades, followed by beer. It took until the 1970s before Australia's annual per capita consumption of wine exceeded 10 litres, and even then wine represented only one-fifth of national alcohol consumption. But over the next two decades per capita wine consumption nearly trebled and beer consumption shrunk - the opposite of what happened to global alcohol consumption shares. This paper draws on newly compiled datasets (a) to reveal that Australia was not much more alcoholic than Britain or southern Europe during the nineteenth century and (b) to help explain why it took so long for a consumer interest in wine to emerge in Australia.Publication Metadata only Identification of common and idiosyncratic shocks in real equity prices: Australia 1982 to 2002(Crawford School of Public Policy, The Australian National University, 2003-03) Dungey, Mardi; Fry-McKibbin, Renee A.A structural vector autoregressive (SVAR) model of real equity prices in Australia is specified to contain common shocks in international equity markets and domestic shocks in Australian financial and goods markets. Common shocks are identified through the long-run comovements of international equity markets, resulting in the model being characterized as having more shocks than variables. The empirical results show that the dot-com crisis of 2000 causes Australian real equity values to depreciate significantly below a precrisis baseline forecast, while contagion from the Asian financial crisis of 1997-1998 is found to have a much smaller negative impact.Publication Metadata only Invisible transfers in Indian federalism(Crawford School of Public Policy, The Australian National University, 1998-01) Rao, M.GovindaIn most federal countries, design of intergovernmental transfers do not take into account violation of horizontal equity due to invisible transfers. Such subterranean transfers can be significant and they occur due to inter-state tax exportation arising from the levy of resource based (as against residence based) taxes and subsidised loans given to the states by the central government and the public sector banking system. This study estimates the volume of invisible transfers due to subsidised lending to states in India and demonstrates that such transfers have significantly reduced the progressivity of explicit intergovernmental transfers.Publication Metadata only Paved with good intentions: Social dumping and raising labour standards in developing countries(Crawford School of Public Policy, The Australian National University, 1998-01) Corden, W. Max; Vousden, NeilThis paper uses a two-sector wage differential model to analyse the effects of an increase in labour costs in the export sector of a developing country. The increase is assumed to be a response to humanitarian or protectionist-motivated pressure from developed countries to reduce "?social dumping"?. Some labour would shift into the residual sector of the economy, hence lower wages there, and increase wage inequality. The average wage may rise or fall, depending on elasticity conditions. Monopsony in the labour market, mobility of multinationals in response to lower profits and terms of trade effects are allowed for.Publication Metadata only Trade orientation and productivity gains from international production: A study of overseas operations of US multinationals(Crawford School of Public Policy, The Australian National University, 1998-01) Athukorala, Prema-chandra; Chand, SatishThe effect of the trade policy regime of the host country on its productivity gains from international production is an issue of obvious policy relevance and analytical interest but one on which there has been a dearth of empirical research. This paper aims to fill this gap through an analysis of a cross-section of data on overseas production of US manufacturing multinationals in 44 countries over the period 1983-1992. The findings provide strong support for the proposition that, other things being equal, productivity gains from international production tend to be greater under a more open trade policy regime compared to a restrictive regime. There is also evidence of a significant negative effect of a stringent domestic tax regime on efficiency gains from international production.Publication Metadata only Towards a political economy explanation of rapid growth in Southeast Asia(Crawford School of Public Policy, The Australian National University, 1996-01) Hill, HalThis article offers an explanation for the rapid economic development of the four high growth economies of Southeast Asia (Indonesia, Malaysia, Singapore, and Thailand) over the past 30 years. It initially provides a brief review of the major determinants of interna tional differences in economic performance, drawing on both the economic growth and the "?East Asian miracle"? literature, and a confirmation that these determining factors have been operative to some extent in the four countries. The major section of the article addresses the political economy question of why, over the past 30 years, these countries have generally adopted the "?right"? development policies more than is the case almost anywhere else out side East Asia.Publication Open Access Globalization and national commodity cycles: The case of wine in Australia(Crawford School of Public Policy, The Australian National University, 2024-04) Anderson, KymGlobalization may have reduced but certainly has not eliminated differences in national commodity cycles. This article examines the case of Australia's wine industry. Over the past four decades, all annual indicators of that industry's international competitiveness have traced a steep inverted V. This paper draws on recently compiled data to first summarize such indicators and contrast them with those of other key wine-exporting countries. It then offers a series of partial explanations for the industry's sharp rise and then equally steep fall in its international competitiveness (and its several bumps along the way). The New Zealand and Californian wine industry's prolonged expansions in particular are contrasted with Australia's. Despite the current downturn in the industry's fortunes, and notwithstanding the likelihood of further boom-slump cycles in the decades ahead, the paper concludes that a return to profitability is possible if vignerons and wine exporters were to raise their current rates of investments in R&D, quality improvements and promotion, and if the AUD remains relatively weak.