Transcript What is inclusive growth?

Trade, Inclusive Growth,
and the Role of Policy
Aid for Trade Seminar
Hotel Jen Tanglin, Singapore | 21 April 2016
Emmanuel A. San Andres
APEC Policy Support Unit
Copyright © 2016 APEC Secretariat
Outline
• What is APEC?
• Economic growth and trade
• Inclusive growth: concept and
measurement
• Trade and inclusive growth
• The role of policy
What is APEC?
• Established in 1989.
• Forum for facilitating economic growth,
cooperation, trade and investment in the AsiaPacific region.
• Intergovernmental grouping that operates on the
basis of non-binding commitments, open dialogue,
and equal respect for the views of all participants.
• Composed of 21 Member Economies.
Copyright © 2013 APEC Secretariat
APEC Member Economies
APEC Official Observers
• Association of South East Asian Nations (ASEAN) Secretariat
• Pacific Economic Cooperation Council (PECC)
• Pacific Islands Forum (PIF)
Copyright © 2013 APEC Secretariat
APEC’s Significance
Source: StatsAPEC, Key Indicators Database.
Copyright © 2015 APEC Secretariat
APEC Policy Support Unit
• APEC Policy Support Unit (PSU) is the research and analysis arm
of APEC.
• Conducts independent research in line with APEC’s core priorities.
• Mission: To provide rigorous research & analysis needed to
improve the quality of APEC's deliberations and decisions.
• Provide APEC members and fora with professional & tailor-made
research, analysis, policy support & evidence-based policy suggestions.
• Five focus areas:
•
•
•
•
•
Trade & Investment Liberalization & Facilitation
Structural Reform
Connectivity including Supply Chain Connectivity & Global Supply Chains
Economic and Financial Analysis
Sustainable Economic Development
Copyright © 2013 APEC Secretariat
Trade and economic growth
•
Economies trade because it is mutually beneficial
• Classical trade theory: specialise in goods you can make
efficiently (comparatively) and trade for goods you cannot make
efficiently (comparatively)
• New trade theories: global value chains, horizontal integration,
economic geography and networks, etc.
•
Empirical data show synergies between trade and
economic growth
• More open economies grow faster than less open economies
• Economies that trade more get richer more quickly (e.g., East
Asian miracles)
Trade and economic growth
Period
1960-1988
1989-2013
1960-1988
1989-2013
•
Elasticity
Observations
(in %)
APEC Economies
0.428
376
0.565
453
Rest of the World
0.305
1,914
0.389
2,878
Overall R2
0.687
0.783
0.737
0.886
Elasticities: impact on GDP growth of 1% growth in trade
• Positive for all economies; more positive in APEC
• More synergistic in recent decades
•
But what about inclusive growth?
What is inclusive growth?
•
Two aspects: inclusiveness and growth
•
Growth is a necessary condition for inclusive growth
•
But inclusiveness implies an improved distribution
Economic
growth
• GDP per
capita
• Mean
household
income
Inclusive
growth
• [no
commonly
used
measures]
Inclusiveness
• Gini
coefficient
• Poverty
measures
• Poor’s
share of
income
Measuring inclusive growth
inclusive growth = growth in mean household income – increase in inequality
•
Inclusive growth is income growth adjusted for changes in
inequality
•
Both average income growth and reduction in inequality are
considered
•
An increase in inequality reduces the inclusiveness of income
growth
•
Note: mean HH income ≠ per capita income (but closely related)
Inclusive growth in APEC
Inclusive growth and per capita GDP growth, 1989-2012
Note: IG = inclusive growth; PCGDP = per capita GDP growth; ROW = rest of the world. Aggregate growth rates are
averages of economy-level growth rates weighted by population.
Source: PovcalNet data and APEC Policy Support Unit estimates.
Inclusive growth in APEC
Components of inclusive growth in APEC, 1989-2012
Note: Figures for inequality are presented in the negative: a negative growth rate means an increase in inequality
while a positive rate means more equality. Aggregate growth rates are averages of economy-level growth rates
weighted by population.
Source: PovcalNet data and APEC Policy Support Unit estimates.
Trade and inclusive growth
Inclusive
growth
GDP growth
Trade
growth
Trade and inclusive growth
• Increased income and
employment
• Investment and
consumption
multipliers
• Progressive public
policy: taxation and
service provision
GDP growth
Inclusive
growth
Trade
growth
Trade and inclusive growth
• Increased income and
employment
• Investment and
consumption
multipliers
• Progressive public
policy: taxation and
service provision
GDP growth
Inclusive
growth
• Exports sector
employs poor workers;
located in poorer areas
• Imports make goods
more affordable
• Access to educational
materials and
medicines; food
security
Trade
growth
Trade and inclusive growth
Bivariate analysis of inclusive growth and trade openness
Trade openness
Group 1 (least
open)
Group 2
Group 3
Group 4
Group 5 (most
open)
p-value
All
Inclusive growth
years
APEC
Inclusive growth
years
Rest of the world
Inclusive growth
years
41.8
53.1
46.3
52.0
16.7
54.6
43.2
60.5
50.0
52.5
47.0
51.1
57.3
0.004
53.9
0.000
57.9
0.096
• More open economies are significantly more likely to report
inclusive growth
• Bivariate correlation seems to be stronger in APEC
Trade and inclusive growth
Multivariate correlations with inclusive growth
Variable
Exports growth
Imports growth
Trade growth
Merchandise trade growth
GDP growth x exports growth
GDP growth x imports growth
GDP growth
Population growth
Inequality (Gini index)
(1)
Negative*
Negative
(2)
(3)
(4)
Negative*
Positive
Negative*
Positive
Positive
Negative
Negative*
Positive
Negative
Negative*
Positive
Negative
Negative*
Positive*
Negative
Positive
Negative
Negative*
Note: Trade indicator independent variables for the models are: (1) exports and imports growth separately; (2)
total trade growth (exports + imports); merchandise trade growth (goods exports + goods imports); and (4) exports
and imports growth separately and interacted with GDP growth.
Source: PovcalNet and WDI data and APEC Policy Support Unit estimates.
Trade and inclusive growth
•
Empirically, direct relationship between inclusive growth
and trade is mixed
• Could be positive or negative depending on specification and
econometric model used
• Statistically insignificant in many cases
•
Indications that the direct beneficiaries of trade growth
are the more well-off segments of society
• Bulk of APEC trade is in skill-intensive industries
• APEC top 3 exports: (1) integrated circuits and microassemblies;
(2) ICT electric appliances; (3) petroleum oils (not crude)
Trade and inclusive growth
•
However, indirect linkages point to positive effects
• Coefficient for the exports-GDP growth interaction variable is
positive and significant
• Although direct beneficiaries of exports growth are the well-off,
evidence to say the poor also benefit indirectly through the
overall economy
•
Interestingly, all coefficients for imports growth are not
significant
• No indication that the poor, in general, are hurt by imports
• Negative and positive impacts of trade seem to even out
• Protectionism not necessarily pro-poor
The role of policy
•
Inclusive growth is not automatic with trade
• Trade can play a positive role in inclusive growth
• But inclusiveness doesn’t just happen with trade; need to think about
inclusiveness in policy/programme development
• APEC: SME internationalisation, cooperation in services sector
•
Trade openness should be accompanied by structural
reforms that enhance inclusiveness
• Human capital investment and skills development
• Social protection (e.g., unemployment and health insurance)
• Labour market and financial sector policies that expand opportunities
• Access to finance and markets among the poor
Thank You
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