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This paper analyses how trade affects women's job opportunities and earnings through five case studies: Mauritius, Mexico, Peru, the Philippines and Sri Lanka. It is found that women's share of the labour force has increased over time and the wage gap between men and women has narrowed. It is also found that there is a positive and statistically significant relation between exports and women's share of employment while there is a statistically significant and negative correlation between women's share in employment and imports. The correlation between women's share of employment and trade stems from variation between sectors rather than within sectors over time, indicating that export-competing industries tend to employ women while import-competing industries tend to employ men. Trade liberalization is likely to create jobs for women and over time increase their relative wages.

This paper analyses to which extent domestic institutions affect trade flows. We use two complementary approaches, one focusing on the size of total trade flows and one focusing on bilateral trade patterns (gravity equation). Besides, we control for two other domestic policy variables: trade policy and domestic infrastructure. We find that the quality of institutions has a positive and significant impact on a country's level of openness. Domestic tariffs have no statistically significant impact on their own, but do affect total trade flows when combined with good institutions. Domestic institutions also have a positive and significant impact on bilateral trade flows, but the parameter of our institution variables is reduced by almost a half and may turn insignificant when the quality of domestic infrastructure is included in the regression.

This paper explores the role that quality of infrastructure has on a country's trade performance, estimating a gravity model that incorporates bilateral tariffs and a number of indicators for the quality of infrastructure. The paper looks at the impact of the quality of infrastructure (road, airport, port and telecommunication, and the time required for customs clearance) on total bilateral trade and on trade in the automotive, clothing and textile sectors. In order to obtain unbiased estimators, multilateral resistances for tariffs and remoteness are introduced in the gravity equation. Moreover, the robustness of the results is tested by estimating a fixed-effect model, where bilateral indexes of the quality of infrastructure are included. The results can be summarised in four main findings: (i) bilateral tariffs, generally neglected in gravity regression of bilateral flows, have a significant negative impact on trade; (ii) quality of infrastructure is an important determinant of trade performance; (iii) port efficiency appears to have the largest impact on trade among all indicators of infrastructure; (iv) timeliness and access to telecommunication are relatively more important for export competitiveness in the clothing and automotive sector respectively.

This paper discusses how information and communication technology (ICT) affects the quality and reach of consumer services. These services need to be provided locally, but consist of several components, some of which can be digitised and transmitted over long distances. A general equilibrium model is developed and numerical simulations in a stylised two-factor, two-region, centre-periphery setting are presented. Trade in intermediate services improves the quality of consumer services enormously in the periphery, but may reduce the quality at the centre. Trade in intermediate services also has a dramatic impact on skilled workers' wages in the periphery, both relative to unskilled workers in their own region and relative to skilled workers at the centre and leads to a more equal distribution of income both between the centre and the periphery and within the periphery.

The report analyzes local industrial development related to the upstream petroleum sector in six selected oil-exporting countries. It focuses on local content in the supply and services industry, and how policies to enhance local content may contribute to economic growth. The report also addresses indirect effects on industrial development at large where such effects can be identified, for example through government investment of the oil revenue in national industries. The selected case studies are Brazil, Indonesia, Malaysia, Mexico, Nigeria and Norway. The objective of the study is to draw lessons for Nigeria from the other countries' experience and Nigeria's own past experience.

This paper explores the impact of vertical specialization on world trade within the framework of the O-ring theory of production. Within such a framework there is little scope for substituting quantity for quality or for gaining market shares by undercutting established suppliers purely on cost. Furthermore, quality requirements will increase as lead firms in the supply chain invest in technology that reduces inventory and speeds up the production process. It is shown that potential suppliers in low-cost countries will only have an incentive to upgrade quality if adequately efficient infrastructure, logistics and customs procedures are in place. Changing trade patterns between USA and Mexico and China suggests that proximity and low trade barriers are important determinants of the extent and nature of vertical specialization. Thus, a larger share of Mexico's trade with USA is driven by vertical specialization than China's trade with USA. Nevertheless, China has caught up with Mexico as far as share in US total imports is concerned, and the market share gap has narrowed even in electronics, the sector in which vertical specialization is most prominent. It appears that vertical specialization adds to total world trade rather than replacing traditional trade flows.

This paper explores the impact of vertical specialization on world trade within the framework of the O-ring theory of production. Within such a framework there is little scope for substituting quantity for quality or for gaining market shares by undercutting established suppliers purely on cost. Furthermore, quality requirements will increase as lead firms in the supply chain invest in technology that reduces inventory and speeds up the production process. It is shown that potential suppliers in low-cost countries will only have an incentive to upgrade quality if adequately efficient infrastructure, logistics and customs procedures are in place. Changing trade patterns between USA and Mexico and China suggests that proximity and low trade barriers are important determinants of the extent and nature of vertical specialization. Thus, a larger share of Mexico's trade with USA is driven by vertical specialization than China's trade with USA. Nevertheless, China has caught up with Mexico as far as share in US total imports is concerned, and the market share gap has narrowed even in electronics, the sector in which vertical specialization is most prominent. It appears that vertical specialization adds to total world trade rather than replacing traditional trade flows.

This paper presents a case study of a naval architecture firm in Western Norway, which trades its services electronically. The paper goes on to analyze the market entry and location decision of such entrepreneurs by means of a theoretical model that builds on insights from Williamson’s theory of market structure and relation-specific investment. I introduce a governance cost function that depends on the distance between the two contractual parties and find that there exists a wage level above which no potential entrepreneur would set up a designer firm, and a critical distance between the designer firm and the customer, beyond which no designer firm would be established. Investment in ICT extends this distance, but it is unlikely to eliminate it. The critical distance and the critical wage level depend on the cost of fabricating the designed e.g. vessel.

This paper discusses how information and communication technology (ICT) affects the richness and reach of services such as education, health and entertainment. These services consist of several components, some of which can be digitized and transmitted over geographical distances. Digitization and transmission require an investment in ICT. A general equilibrium model is developed and numerical simulations in a stylized two-factor, two-region, center-periphery setting are presented. Diffusion of information technology, modeled as a reduction in the cost of digitizing and transmitting information over geographical distances, has a dramatic impact on skilled workers' wages in the periphery, both relative to unskilled workers in their own region and relative to skilled workers at the center. Trade in intermediate services improves the welfare of low-income groups in the periphery and leads to a more equal distribution of income both between the center and the periphery and within the periphery.

This paper analyzes the impact of WTO accession on China’s international trade patterns. It starts with an analysis of historical trade patterns and the driving forces behind them. It is argued that China’s trade has been dominated by foreign firms located in special economic zones, particularly in the electronics sector and other technologically advanced sectors. The paper continues with a discussion of China’s WTO accession protocol and the changes in trade policy that it implies. It is argued that China’s WTO accession can largely be seen as a unilateral reduction in tariffs and non-tariff trade barriers on the part of China, with one important exception; the textile and clothing industry. China will face substantially lower trade barriers in the European and North American markets in these two sectors and China will be able to double its world market share in the apparels industry, both at the expense of other developing countries and highly protected firms in the US and EU. Other developments are a widening Chinese trade surplus towards North America, and a widening trade deficit towards Asia. However, China’s overall world export market share will not change much. These quantitative estimates are derived by running the GTAP world general equilibrium model.

The diffusion of information and communication technology has reduced cost of information substantially in recent years. Even in the poorest countries in the world, the share of the population with access to telecommunications and the Internet has increased at double-digit growth rates during the last few years. Privatisation, deregulation and liberalisation of trade and investment in the service sectors have further contributed to this development. The paper analyses the impact of better access to information services on development. For this purpose a two-country model of trade in differentiated intermediate services, which captures some of the most significant properties of information services is developed, and the effects of better access to information services under various assumptions on technology, preferences and relative size of the two countries are explored. Our results suggest that there are significant welfare gains from liberalisation of trade and investment in information services, and that small, poor or labour-intensive countries gain the most in all our scenarios. Small developing countries will benefit a lot from better access to information services, while developing countries in which consumers have relatively low preference for information-intensive goods are less likely to obtain large benefits. It is further shown that improvements of infrastructure and increases in human capital in one country improve welfare in both countries. Thus, investments in rich countries to some extent spill over to poorer countries, which get access to a broader variety of services. We finally derive the welfare optimum and the taxes that reproduce the social optimum as a competitive equilibrium.

This paper discusses one aspect of the by now somewhat discredited "new economy", namely the impact of information and communication technology on the growth in volume and diversity of producer services. It provides an analysis of data on developments within transport, communication, finance and business services in South Africa and discusses on the background of recent theoretical work the impact of these developments on the economy as a whole. It is argued that so far the very rapid development in the producer services sectors has had little impact on the rest of the economy. It is further argued that outsourcing of producer services combined with access to a broad variety of such services are important factors for reaping the full benefits of the observed developments in the producer services sectors. The paper also provides a discussion of under which conditions extensive outsourcing will take place.

This paper deals with two questions: First, what are the determinants of FDI? Second, what is the role of FDI in economic development? In order to provide some answers to these questions, we draw upon the existing theoretical and empirical literature as well as insights derived from five country studies that we have conducted. Important location advantages include a stable social, political and economic environment, liberal trade policies, and geographical proximity to large and growing economies. On the host country effects of FDI, we conclude that while FDI is not necessary to achieve economic development, the entry of foreign firms may play an important role in adding technology and competition to the host economies. However, Wwhen foreign firms compete with local firms in markets with imperfect competition, local firms will lose market shares and there will be an element of profit shifting to the favour of the foreign entrant. This problem is likely to be more important if foreign entry takes place in markets shielded from the competitive pressures of international trade.

South Africa is not an emerging market in the sense that modern industries are established in the country for the first time. Rather, South Africa is in transition from a mature, mineral-led and inward-looking economy to an outward-looking economy. A major problem in the transition process is that the country is relatively abundant in unskilled labor, but has difficulties in establishing competitive labor-intensive industries. Thus, the industrial sector is relatively capital-intensive and there is a gap between the productivity level and corresponding wage rate in existing industries and the productivity level of the presently unemployed. The paper describes and analyses the role of foreign direct investment (FDI) in South Africa's industrial development. Inward FDI played an important role for early developments in the financial and manufacturing sectors, but during the past two decades outward investment has outpaced inward investment. Both inward and outward investments (except outward investment in the SADC region) have largely been in the form of mergers and acquisitions. This may lead to integration of South African companies in international supply networks, but it does not create jobs in the short run. The major factors limiting FDI inflows are probably shortage of skills, inflexible labor markets, a relatively small and slowly growing domestic and regional market and a highly concentrated ownership structure in the South African economy. The post-election euphoria has not been sufficient to provide the "big push" towards sustained growth. The Asian crisis was an untimely setback although South Africa weathered the storm largely due to its sound financial sector. Even in the absence of this setback, however, the gap between domestic savings and the investment rate necessary to generate growth at around 5-6 percent or more is too wide to be filled by FDI.

The study discusses information and communication technology (ICT) and regional development. It first presents a case study of a small multinational company (Vik-Sandvik) producing naval architecture and ship design in an international market. The company's headquarter is in Fitjar, a rural community with about 3000 inhabitants, and it has affiliates in Iceland, Poland and China. The case study illustrates the business opportunities that new ICT bring to rural areas. However, the Vik-Sandvik case appears to be exceptional. In order to analyze the impact of ICT on rural development, a two-region model is adopted to a stylized urban-rural setting and numerical simulations are presented. Diffusion of information technology is modeled as a reduction in the cost of transmitting digitized producer services over geographical distances. The simulations suggest that the skills premium in rural areas drops sharply as the cost of transmitting information falls. The income distribution within rural areas becomes more equal, but since skilled workers in rural areas also fall behind skilled workers in urban areas, the likely outcome is that skilled and professional people will move to the cities. When the cost of transmitting information falls below a critical level, the impact on the skills premium and the wage gap between urban and rural areas is reversed. A possible interpretation of the results is that the ICT development so far has contributed to urbanization, but broadband networks and third generation mobile technology may revitalize rural areas.

This paper introduces endogenous adoption costs for productive assets in a Ramsey type growth model with international capital flows. There are two classes of productive assets: owner-specific and location-specific. Adoption costs are an increasing function of the level of technology embodied in the investor's owner-specific assets and a declining function of the host country's location-specific assets. In this setting the observed pattern of international capital flows is consistent with diminishing returns to capital. Further, our model predicts the sectoral allocation of investment and output observed in the South.

This case study analyses the market for oil-related producer services for the Gullfaks oil field in the Norwegian part of the North Sea. We find that the market is highly concentrated, the Norwegian market share is extensive, and foreign companies service the Norwegian market mainly from their Norwegian subsidiaries. Relational contracts between the oil company and the service suppliers are most common during the operation/production phase and in the non-maritime services sector. We find a negative correlation between Norwegian market share and the extent of relational contracts in the market. Turning to sources of technology, we find that producer services have played a crucial role in the transfer of technology from multinational oil and offshore industries to the Norwegian petroleum sector. The channels of technology diffusion appear to have been agreements of technical assistance, mergers and acquisitions, joint ventures, foreign direct investments and employment of foreign professional staff on a contractual basis. It is, however, more difficult to identify technology diffusion from the Gullfaks field to the economy at large.

This paper analyzes and explains foreign direct investment (FDI) in Mozambique. The country was one of the fastest growing countries in the world during the second half of the 1990s, and FDI has followed growth with a lag. FDI is dominated by South African and Portuguese companies, it is concentrated in the Maputo corridor, and one major project, an aluminium smelter plant, accounts for more than 60 per cent of total accumulated FDI. The driving forces for FDI appear to be access to natural resources, particularly cheap energy, a reasonably well developed infrastructure and regional economic integration. The most important direct impact of FDI in Mozambique is export earnings, easing the foreign exchange constraint on investments. Since the foreign investments are concentrated in mature, capital-intensive industries, job creation is limited and depends on the development of backward linkages to the local economy.

The petroleum sector is a service-intensive industry. The quality, price and availability of services are therefore important for the productivity level in the petroleum sector. This paper analyses data on the Norwegian petroleum sector’s purchases of services and estimates the contribution of service input to productivity. It is found that specialisation in the service sector, measured by the number of service suppliers in the market, contributes significantly to the level of productivity of capital equipment. Specialisation in services also contributes directly to productivity in oil and gas, but the results are significant only at a 10 per cent level. We argue that an open market for oil-related services is likely to improve productivity in the Norwegian petroleum sector.

The petroleum sector is a service-intensive industry. The quality, price and availability of services are therefore important for the productivity level in the petroleum sector. This paper analyzes how intermediate inputs contribute to productivity in the Norwegian petroleum sector and discusses how technical progress and changes in the international trade regime affect productivity and vertical relations between oil companies and their suppliers. It is shown that in a small market, tailor-made inputs and dose vertical relations between the oil companies and their suppliers are the preferred and most cost-effective technology. As the market expands, the relative cost of tailor-made inputs increases, and at one critical point becomes less cost-effective than standardized inputs. A policy implication of the analysis is that the NORSOK policy of enhancing standardization needs to be complemented with a more open market in order to achieve its objectives. The analysis is particularly relevant for oil-related producer services, since this is the market for intermediate inputs that is the least open.

This is the first report on Angola under the Country Advisor Agreement between the Norwegian Agency for Development Co-operation (NORAD), the Chr. Michelsen Institute (CMI) and the Nordic Consulting Group (NCG). The report consists of two parts. Part I comprises an assessment and a synthesis of basic information regarding economic, political and social developments in the country. It devotes particular attention to the current politico-military situation in which UNITA seems to be suffering decisive military defeat, and the options for using Angolas vast oil income for economic and social development in a situation where relative peace appear promising. Part II gives an overview over the system of tertiary education and existing social science capacity in Angola. It is argued that the lack of updated and relevant information about socio-economic conditions in the country will be a major constraint in the planning and implementation of development policies and programmes.

Botswana has experienced one of the highest growth rates in the world over the past three decades. Growth can, however, be attributed to a long-lived diamond sector boom and the injection of mineral revenue into the economy through government expenditure and government production of goods and services. Botswana has at present one of the highest government expenditure/GDP rates in the world. Still the country has one of the most unequal distributions of income in the world, and the largest discrepancies between economic and social development. This report analyzes the performance of the Botswana public sector, its role in the economy as a provider of public and private goods, its role in income distribution and its activities’ impact on economic growth. It is argued that the government needs to reduce its share in total expenditure by 10-15 percentage points in order to facilitate a transition from mineral and government-led growth to sustained economic growth based on a diversified private sector. Further, it is argued that a more equal distribution of income is imperative for sustained growth.

Denne rapporten ser på hvordan norske petroleumsinvesteringer kan bidra til industriutvikling og en jevnere inntektsfordeling i mottakerlandet. Videre ser vi på i hvilken grad norske petroleumsinvesteringer kan være en positiv faktor når det gjelder sosial utvikling, menneskerettigheter, helse, miljø og sikkerhet. Studien konsentrerer seg om norske investeringer i Angola. Offshore petroleumsvirksomhet er kapitalintensiv og teknologisk krevende. Derfor blir den lett en enklave i land der det ikke finnes en godt utviklet industribase og kvalifisert arbeidskraft. Petroleumsinntektene utgjør en svært høy andel av eksportinntektene og offentlig sektors inntekter samtidig som sektoren skaper relativt få lokale arbeidsplasser. Petroleumsinntektene blir dermed i utgangspunktet konsentrert på få hender. Petroleumssektoren har derfor lett for å føre til høy inntektsvekst i utbyggingsperioden, men lite utvikling. Dette kan motvirkes ved at det blir ført en bevisst utjevningspolitikk og ved at makroøkonomiske virkemidler blir tatt i bruk som hindrer overoppheting i økonomien og som skaper rom for utvikling i privat sektor i fastlandsøkonomien. Dette er vanskelig generelt, og få oljeeksporterende utviklingsland har lykkes med det. I Angola er det knapt mulig under de rådende forhold med borgerkrig og fravær av fungerende institusjoner. Rapporten understreker at oljeselskapene kan bidra med kunnskapsoverføring til lokalt ansatte og det lokale statsoljeselskapet. Dessuten kan og bør de bidra til at Angolas ressurser blir utvunnet på en mest mulig effektiv og miljøvennlig måte. Landets sosiale og økonomiske utvikling er imidlertid lokale myndigheters ansvar. Norske myndigheter kan eventuelt bidra med teknisk og økonomisk bistand, men det blir understreket at det bør være en klar rollefordeling mellom myndighetene og oljeselskapene.

This report first describes the currency, financial and economic crises in Asia and analyses how the crises evolved. The second part analyses how the three types of crises affect selected Norwegian development partners in Africa and Asia. It is suggested that the currency crisis had very little impact in the poorest developing partners that are not integrated into the world financial system. The currency crisis did, however, spread to South Africa. As a result the easing of monetary policy that was under way was reversed. The economic crisis on the other hand, has had a more significant impact, both in terms of export demand facing the countries in question and the prices they obtain on their exports. These losses are, however, at least partly counterbalanced by cheaper oil imports.

This paper analyzes the impact of liberalization of trade in producer services, focusing on financial services, telecommunications and transport. The likely effects on developing countries is that they will become net importers of the liberalized services, but they will also become more industrialized and increase their exports of labor-intensive goods and services, if given market access under the most appropriate modes of trade. Potential gains from this pattern of trade are large, since imports of efficient producer services will improve productivity in all sectors of the economy and depends on the developing countries' capacity to en sure sufficient competition in the liberalized sectors, and the quality of infrastructure in the country in question. The paper continues with a discussion of the experience from liberalization in the financial and telecommunication sectors of South Africa, Namibia and Tanzania. South Africa has apparently gained the most from liberalization, as its markets are sufficiently large and reasonably well regulated to attract foreign investors. Namibia has seen very little foreign investment after liberalization, while Tanzania has attracted investors that have established themselves in the most profitable niches of the markets. James Hodge, DPRU, University of Cape Town Hildegunn Kyvik Nordås, Chr. Michelsen Institute

This report assesses a set of criteria for providing development aid in the form of general budget support and sector support. The criteria are suggested by the Norwegian Ministry of Foreign Affairs and relate to good governance, structural reforms, the budget process, accounting, auditing and reporting. The criteria are assessed on the background of a discussion of how general budget and sector support work from a macroeconomic view. In addition an analysis of the workings of such support in combination with the most common conditions on which it is given is provided. It is recommended that budget or sector support should be given when the recipient government has adequate administrative capacity. Macroeconomic policy measures should be left to the recipient government in cooperation with the IMF in order to ensure internal consistency. Budget and sector support should be given under the condition of accountability and transparency. If these conditions are not fulfilled, debt relief may be considered as an alternative to sector or budget support.

This report outlines the structure of a macroeconomic model for the Tanzanian economy. It consists of a core IS-LM/ Mundell-Fleming model, an SS-DD framework for estimating the consumer price inflation and other price indices, and finally a sectoral supply block. The latter is at an early stage of development, due to inadequate data. The report starts with a discussion of some key features of the Tanzanian economy, emphasizing structural weaknesses and recent gains in terms of stabilizing the economy. It continues with the presentation of the model. The workings of the model are demonstrated by a set of scenarios where various policy measures in the face of an exogenous shock are explored. Finally the report presents a study of the agricultural sector.

This paper introduces endogenous adoption costs for productive assets in a Ramsey type growth model with international capital flows. There are two c1asses of productive assets: owner-specific and location-specific. Adoption costs are an increasing function of the level of technology embodied in the investor's owner-specific assets and a dec1ining function of the host country's location-specific assets. In this setting the return to capital is low in capital-poor countries. Consequently, they receive small amounts of foreign investments. Further, even though capital flows from North are spread evenly across industries in the South, the relative importance of high-technology industries is small in terms of output.

This essay offers a selective review of central issues related to economic growth. The interrelationship between technological progress, capital accumulation, specialisation and industrial structure is emphasised. It is conc1uded that, first, there is little evidence that industrial structure plays an independent role for growth. Second, economists have been more successful in explaining the consequences of technological progress than the determinants of technological progress. However, even the consequences are not well understood, and there is still a long way to go before general and well-documented policy implications can be drawn

This paper focuses on the interaction between world community and capital markets within the framework of an extended neoclassical growth mode!. The model incorporates raw materials as an essential input and captures the observed, but hitherto unexplained impact of terms of trade on economic growth. It is shown that in a world of declining real prices of industrial raw materials, the steady state growth rate is an increasing function of the input ratio raw materials/unskilled labour. When international capital flows are constrained, the speed of convergence is determined by the same variables.

This paper develops a dynamic two-country, two-sector model of international trade with asymmetric technological spillovers, static increasing returns to scale in one sector and dynamic increasing returns to scale in the other sector. It is found that the country with comparative advantage in the static sector is subject to slow structural changes, but the gains from exploiting economies of scale may outweigh the disadvantage of being locked into a static industrial structure.

This paper argues that intraindustry trade with developed countries is an important source of technology transfer, and creates incentives to climb up the learning curve. South Africa has an industrial structure that could be suited to such trade, but high costs and weak social capacity to assimilate technology are an impediment to productivity growth. Therefore, reintegration into the world economy is likely to reinforce dependence on resource-intensive industries. In the short run this need not adversely affect economic growth, but unless the quality and quantity of education are improved, the prospects for rebuilding the technological capacity and catch up with OECD countries are bleak.