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Services, Inequality, and the Dutch Disease

LTD Editors's picture

A new World Bank policy research working paper by Bill Battaile, Richard Chisik, and Harun Onder shows how Dutch disease effects may arise solely from a shift in demand following a natural resource discovery. The natural resource wealth increases the demand for non-tradable luxury services due to non-homothetic preferences. Labor that could be used to develop other non-resource tradable sectors is pulled into these service sectors. As a result, manufactures and other tradable goods are more likely to be imported, and learning and productivity improvements accrue to the foreign exporters.

Service with a smile: A new growth engine for poor countries

Ejaz Ghani's picture

This post was originally published in Voxeu.org.

Services have long been the main source of growth in rich countries. We argue that services are now the main source of growth in poor countries as well. We present evidence that services may provide the easiest and fastest route out of poverty for many poor countries.

For more than 200 years, it was argued that economic development and growth was associated with growth of the labour-intensive manufacturing sector (Baumol 1967, Kaldor 1966, UNIDO 2009). Services were considered as menial, low-skilled, and low-innovation (McCredie and Bubner 2010). But today, services can be among the most dynamic sectors in an economy. The policy question is whether this is true even in poor countries.

March Madness or Spring Awakening?

John Wilson's picture

APEC and New Beginnings in Trade

The first Senior Officials’ Meeting (SOM I) of Asia-Pacific Economics Cooperation (APEC) concluded earlier this month in Washington D.C. The APEC 2011 agenda now swings into full action. The member economies in the region are looking for ways to reaffirm APEC’s reputation for innovative economic integration initiatives – and the means by which to stave off new hiccups in the region’s economic recovery.  In particular, the new APEC Supply Chain Connectivity Initiative (SCI) holds real promise as a dynamic successor to APEC’s successful Trade Facilitation Action Plans, which resulted in significant trade cost reductions across the region. 
 

As a testament to the dynamism and ambition behind the trade-related policy goals of APEC – the United States, as APEC 2011 Chair, and the World Bank are working with APEC to build a platform to expand trade through research, data, and capacity building – with direct participation of private sector firms. Fedex is with us in this new venture. Is this March madness – yet another attempt to forge alliances where goals are shared but sustaining momentum proves tough?  Or is it a spring awakening that data, research, and direct partnerships with firms to build in this area provides the real anchor for taking action to assist developing countries tackle trade costs at their source?  I suggest it is the latter.