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The Growth of China and India: Three Challenges for Latin American Agriculture

The Growth of China and India: Three Challenges for Latin American Agriculture. D. Lederman Development Economics Research Group, The World Bank November 2007 IICA Technical Workshop, San José, Costa Rica. This Presentation. Advertisement: Forthcoming book Main channel: Commodity Prices

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The Growth of China and India: Three Challenges for Latin American Agriculture

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  1. The Growth of China and India: Three Challenges for Latin American Agriculture D. Lederman Development Economics Research Group, The World Bank November 2007 IICA Technical Workshop, San José, Costa Rica

  2. This Presentation • Advertisement: Forthcoming book • Main channel: Commodity Prices • Correlations between China and Commodity Prices • Co-movement between LAC production and China/India • Who benefits? The First Challenge • Supply capacity. The Second Challenge • Innovation and Diversification. The Third Challenge

  3. Forthcoming Book -- Outline • “The Challenge of China’s and India’s Growth for Latin America” (under review, forthcoming in 2008?) • Edited by D. Lederman, M. Olarreaga & G. Perry • In three parts • Introduction (Lederman, Perry, Olarreaga) • Negative impact of Chinese and Indian competition in some industries and some LAC regions (Hanson & Robertson, Freund & Ozden, Feenstra & Kee, and Freund) • The growth of China and India is not a zero-sum game for LAC (Calderón; Lederman, Olarreaga, and Soloaga; Suescún; Cravino, Lederman, and Olarreaga) • Factor adjustment and specialization patterns (Casacuberta & Gandelman; Castro, Olarreaga, & Saslavsky; Lederman, Olarreaga & Rubiano)

  4. Our Book: The Growth of China & India Is Not a Zero-Sum Game • Evidence from the gravity model of trade using aggregate non-fuel bilateral merchandise data for LAC, 2000/4 • Large demand for LAC exports, but low supply elasticities • Little evidence of substitution effects in 3rd markets • Evidence from the KCM model of MNCs using aggregate and sectoral FCS global data, 1990/2003 • Little evidence of substitution effects in 3rd markets • But shifting RCAs toward NRs and Knowledge-intensive industries

  5. World Bank Commodity Price Indexes (1990=100) Jan/Dec 05 Jan/Dec 06 Jan/Oct 07

  6. Price Trends: Selected Commodities

  7. China and Commodity Prices:Recursive Estimates of the Correlation between China’s I.P. and Prices

  8. India and Commodity Prices:Recursive Estimates of the Correlation between China’s I.P. and Prices

  9. China’s Appetite for Commodities

  10. Commodity Prices, China, and Other Global Factors

  11. Share of China and India in Latin American Trade, 1990 versus 2004 Total LAC non-fuel merchandise exports to China and India grew by 39% and 25% per annum respectively (in nominal USD$) during 2000-2005. Fast growth due to demand (prices) or supply (quantities/varieties)?

  12. Are LA regions competing in the Same Products as China and India? Source: Lederman, Olarreaga & Rubiano (forthcoming 2008, RWE).

  13. Regression Results – Diverging RCAs?

  14. Regression Results – Diverging RCAs?

  15. Who Benefits?:The First Challenge

  16. Who Benefits? Static Effects on Individuals (i.e., without changes in employment, quantity of sales, and quantities in consumption) Dynamic Effects on Individuals (i.e., with changes in employment, quantity of sales, and quantities in consumption caused by the change in prices of commodities)

  17. Who Benefits? Some Data on Mexico (for 10% rise in price of corn) Source: Porto (2006).

  18. Who Benefits? Data from Panama on Net Producers of Sensitive Agricultural Commodities

  19. Who Benefits? Data from Guatemalan

  20. An Aside on CAFTA (a decline in the price of maize, but increases in prices of fruits) and Guatemalan Indigenous Populations

  21. The Supply Response:The Second Challenge

  22. The Supply Response: The Gravity Model with Heterogeneity in Demand and Supply Elasticities What’s the proper estimator? We present OLS (log-linear), Poisson, & Neg Bin.

  23. Gravity Results: Large Ch & Ind Demand Elasticities, Low LAC Supply Elasticities

  24. Gravity Results: Large Ch & Ind Demand Elasticities, Low LAC Supply Elasticities

  25. USA MEX CHINA Substitution Effects in 3rd Markets? The Gravity Model with Heterogeneity in Ch/Ind Substitution, Aggregate Data, 2000/4 Note the Four Channels through which trade can affect LAC trade with 3rd Markets:

  26. Aggregate Trade: Little (robust) Evidence of Substitution Effects in 3rd Markets

  27. Foreign Capital: The Growth of China and India Is Not a Zero-Sum Game for LAC – Some Data Foreign Capital Stocks (FCS) as a Share of GDP in LAC Relative to China and India, 2003

  28. Foreign Capital: The Empirical Augmented KCM Allows for Horizontal and Vertical Motivations for FDI Note the data constraint  only one channel through which China can affect FCS in LAC from 3rd Markets: USA MEX CHINA What’s the proper estimator? We present OLS (log-linear), Poisson, & Neg Bin.

  29. Some Results: Little Evidence of Substitution Effects in the FCS Data

  30. Innovation and Diversification:The Third Challenge

  31. Export Diversification during the Growth of China and India

  32. Export Diversification during the Growth of China and India

  33. Export Diversification during the Growth of China and India

  34. Export Diversification during the Growth of China and India

  35. Export Diversification during the Growth of China and India

  36. For Future Research: Not a Zero-Sum Game in Innovation and Patenting? Some Data Patents Granted by the USPTO, 1960-2003

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