Transcript ECONOMIC DEVELOPMENT & INTERNATIONAL POLITICS

The Impact of FDI on the Poor
by Nita Rudra and
Siddharth Joshi
Discussion by James Raymond Vreeland
Georgetown University
Globalization and the Politics of Poverty and Inequality
Conference
January 4-6, 2011
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Plan
1. “Production of knowledge”
2. GDP/capita as a measure of welfare
3. FDI & the poor
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1) The “production of knowledge”
How a paper becomes a publication
( http://www.schooltube.com/video/fcde4d15a9276c9a09d3/ )
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How does an idea get into your textbooks?
I.
II.
Get an idea, write a paper
Present the paper
1. Share informally with colleagues
2. Present at conferences (small & large)
III. Revise, revise, revise
IV. Send to a journal – 3 anonymous reviewers
1. Reject
•
return to step III, send to a new journal
2. Revise & Resubmit
•
return to step III, resubmit
3. Accept
•
polish, return to step I
•
Time to publication? – Lim paper: March 2010 – January 2013
•
Time to a book? – 1998-2003, 2006-2014
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Time to a textbook?...
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2) GDP/capita as a measure of welfare
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GDP/capita as a measure of welfare
• Drawbacks
– Ignores income distribution
– Ignores other factors:
• Health
• Education
• Freedom
• Others?
• Advantages
– Easier to measure than distribution
– Highly correlated with many other factors we care about
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How to measure GDP/capita
• Exchange rate (“real”)
• Purchasing Power Parity (PPP)
• Compare ranking:
– http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita
– http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
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3) FDI and the poor
https://gushare.georgetown.edu/mortaracenter/Nita%20Rudra1.mp3
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Contributions
• Paper shows how economic development can be bad for the poor
• FDI increases local competition for scarce resources
• FDI is bad for the poor - lowers access to clean water
– Especially if there is high income inequality
• Methods:
1. Case study
2. Panel study of India
3. Country cross-section
• PLUS:
– Creative ways of measuring the dependent variable
– The IPE of ADD
– FDI   (p31)
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http://www.offsetwarehouse.com/about-us/why-buy-eco-textiles.html
https://www.flickr.com/photos/barefootcollege/190584743/
http://www.ipna-online.org/fundraising/rationale/
http://rehydrate.org/shows/acute-diarrhoeal-diseases.htm
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My main question:
• Why is this a story of FOREIGN investment?
• Note: insignificant effect of economic growth
suggests FDI is special
• Test for INVESTMENT in general?
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Mechanism: inequality or institutions?
• At times in the paper:
– “institutional environment”
• But democracy is not significant
• Story seems to be:
– Governments respond to pressure groups REGARDLESS of
institutional environment
– If the middle class is strong, water is protected
– With high income inequality, owners of capital prevail and water
quality declines for the poor
– Democracy/dictatorship does not matter
• In terms of our class: Is it interests and/or institutions?
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Are there further connections between
FDI and income inequality?
• Does FDI go to places with more income inequality?
• Does FDI cause income inequality?
• What might be the implications of these questions for the
Rudra & Joshi study?
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Net impact of FDI on the poor?
• FDI may raise
– Income
– Tax base
• FDI lowers access to water
• So, what is the net impact on the poor?
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Take aways:
• How an idea becomes a paper, becomes a
publication, becomes “knowledge”
• How to measure social welfare – pros and cons
of GDP/capita
• PPP
• How FDI can hurt the poor (uses up their water!)
• “Progress” can leave the poor behind… even
making them worse-off
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Thank you
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Quick methods suggestion
• Fixed effects in a cross-section:
y(i,t)= a(i) + b’x(i,t) + e(i,t)
y(i,t-1)= a(i) + b’x(i,t-1) + e(i,t-1)
Δy(i)= b’ Δx(i) + Δe(i)
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