Immigration Policy, Internal Migration and Natural Resource Shocks

A report by Michel Beine, ([michelbeine.be], University of Luxembourg), Robin Boadway, ([queensu.ca], Queen's University, Canada), and Serge Coulombe ([uottawa.ca], University of Ottawa, Canada) for the C.D. Howe institute [cdhowe.org] in Canada,

Moving Parts: Immigration Policy, Internal Migration and Natural Resource Shocks

Recent changes to Canadian immigration policy, including the Temporary Foreign Worker (TFW) Program, are positive overall, but they could have negative consequences that need addressing, according to a new C.D. Howe Institute report. In “Moving Parts: Immigration Policy, Internal Migration and Natural Resource Shocks,” authors Michel Beine, Robin W. Boadway and Serge Coulombe note that changes to the TFW Program have limited the kinds of workers companies can bring in, made the applications more rigorous, and set an employer-specific cap on the use of TFWs.

Report available here [cdhowe.org], and is partly based on earlier research by the two of the authors and yours truly on the effect of migration and resources in Canada, published recently in Economic Journal (here, [wiley.com])

New Research: Do Resource-Rich Countries Suffer from a Lack of Fiscal Discipline?

Michael Bleaney [University of Nottingham] and Håvard Halland [World Bank] write on

Do Resource-Rich Countries Suffer from a Lack of Fiscal Discipline?

Abstract:

Fiscal indicators for resource-rich and resource-poor lowand middle-income countries are compared using annual data from 1996 to 2012. Resource richness is defined by export composition: fuel greater than a 25 percent share and/or ores and metals greater than a 10 percent share. Fuel exporters have a significantly better general government fiscal balance than the rest of the sample, and higher revenues and expenditures, which are approximately evenly split between extra consumption expenditure and extra capital expenditure. Only about a quarter of their extra revenue goes into extra consumption expenditure, and this proportion has been lower since 2005. Fuel exporters’ expenditure reacts with a lag to oil price fluctuations. There are no significant differences between ores and metals exporters and resource-poor countries, or between new and old resource exporters, in aggregate expenditures and revenues. Ores and metals exporters spend more on investment and less on government consumption. Some individual country cases are briefly discussed. 

A paper from the World Bank's Governance Global Practice Group, Policy Research Working Paper 7552, available here [pdf, worldbank.org]

New Research: A Quantitative approach to assessing sovereign default risk in resource-rich emerging economies

Unurjargal Nyambuu [nyu.edu] (New York University)􏰀,􏰁 and Lucas Bernard [cuny.edu] (The City University of New York), write on

A quantitative approach to assessing sovereign default risk in resource-rich emerging economies
Abstract:

The problem of sovereign default is a tricky one for bankers, policy makers, politicians and investors alike. Purely financial models are likely to miss nuance and cultural idiosyncrasies. Nonetheless, risk metrics must play a role. Using a stochastic growth model in an open economy, we propose a Kealhofer, McQuown and Vasicek (KMV)-style approach for assessing sovereign default risk in resource-rich emerging economies. As is well known, financial effects, specifically external debt, can make a country vulnerable to economic shocks. Excessive external debt is, thus, a prime indicator for financial health in both resource-poor and resource-rich countries; yet, safe ratios are difficult to determine. Using a straightforward and easily implementable methodology, we show how optimal debt ratios may be used to define a ‘distance from default’ indicator variable. Further, we demonstrate that this is a plausible risk metric for a number of different developing countries, including representatives from Latin America, Africa and Asia.

Published in International Journal of Finance & Economics, available here [wiley.com].

New Research: Capital Mobility - resource Gains or Losses? How, When, and for Whom?

As the first post of the new year, some new research from
Hikaru Ogawa [nagoya-u.ac.jp] (Graduate School of Economics, Nagoya University)

Jun Oshiro [google.com] (Department of Law and Economics, Okinawa University) 

Andya Suhiro [google.com]  (Graduate School of Economics, Osaka University)

forthcoming in Journal of Public Economic Theory [wiley.com]

Capital Mobility—resource Gains or Losses? How, When, and for Whom?
Abstract:

This paper investigates which of the two types of countries—resource-rich or resource-poor—gains from capital market integration and capital tax competition. More specifically, we explore the effects of natural resources on the distribution of capital across countries, government reaction to capital flows, and the influence of capital flows and tax competition on regional welfare. We develop a framework involving vertical linkages through resource-based inputs as well as international fiscal linkages between the two types of countries. Our analysis shows that capital market integration causes capital flows from resource-poor to resource-rich countries and improves global production efficiency. However, such gains accrue only to resource-poor countries, and capital mobility might even negatively affect resource-rich countries. Furthermore, we show that resource-rich countries can exploit the gains when taxes on capital are available.