rafmacalaba/datause-encoder-data huggingface dataset:
When instability increases the
            effectiveness of aid projects
The authors assess the effect of
            economic instability on the success of projects funded by
            the World Bank using the outcome of the projects, which is a
            notation of their overall success determined by the
            Bank's Independent Evaluation Group. It has been argued
            in macroeconomic studies that aid effectiveness is higher in
            vulnerable countries because it dampens the negative effects
            of shocks. The authors show that this finding is not
            inconsistent with the observation that the success of the
            projects is lower in an unstable environment. Instability,
            in particular the instability of exports, harms aid projects
            as it harms the rest of the economy, while the success of
            projects decreases when the total amount of aid received
            increases, due to absorptive capacity limitations. But this
            decrease is slower when instability is higher, showing a
            positive effect of aid through its stabilizing impact. The
            authors find the same results keeping only the projects
            funded by nonconcessionary loans, which suggests that the
            cushioning effect of aid extends not only to aid funded
            projects but to whole sets of projects. Corroborating
            macroeconomic findings, their results lead to the same
            conclusion that more aid should be allocated to more
            vulnerable countries, in spite of the lower success of the
            projects in an unstable environment: project evaluations
            cannot include the macrostabilizing effect of the aid
            delivered through projects.
Measuring the pro-poorness of income
            growth within an elasticity framework
Poverty reduction has become a
            fundamental objective of development, and therefore a metric
            for assessing the effectiveness of various interventions.
            Economic growth can be a powerful instrument of income
            poverty reduction. This creates a need for meaningful ways
            of assessing the poverty impact of growth. This paper
            follows the elasticity approach to propose a measure of
            pro-poorness defined as a weighted average of the deviation
            of a growth pattern from the benchmark case. The measure can
            help assess pro-poorness both in terms of aggregate poverty
            measures, which are members of the additively separable
            class, and at percentiles. It also lends itself to a
            decomposition procedure, whereby the overall pattern of
            income growth can be unbundled, and the contributions of
            income components to overall pro-poorness identified. An
            application to data for Indonesia in the 1990s reveals that
            the amount of poverty reduction achieved over that period
            remains far below what would have been achieved under
            distributional neutrality. This conclusion is robust to the
            choice of a poverty measure among members of the additively
            separable class, and can be tracked back to changes in
            expenditure components.
Evaluating the impact of
            Mexico's quality schools program : the pitfalls of
            using nonexperimental data
The authors evaluate whether increasing
            school resources and decentralizing management decisions at
            the school level improves learning in a developing country.
            Mexico's Quality Schools Program (PEC), following many
            other countries and U.S. states, offers US$15,000 grants for
            public schools to implement five-year improvement plans that
            the school's staff and community design. Using a
            three-year panel of 74,700 schools, the authors estimate the
            impact of the PEC on dropout, repetition, and failure using
            two common nonexperimental methods-regression analysis and
            propensity score matching. The methods provide similar but
            nonidentical results. The preferred estimator,
            difference-in-differences with matching, reveals that
            participation in the PEC decreases dropout by 0.24
            percentage points, failure by 0.24 percentage points, and
            repetition by 0.31 percentage points-an economically small
            but statistically significant impact. The PEC lacks
            measurable impact on outcomes in indigenous schools. The
            results suggest that a combination of increased resources
            and local management can produce small improvements in
            school outcomes, though perhaps not in the most troubled
            school systems.
Conscription and Crime
The initiation in criminal activities
            is, typically, a young phenomenon. The study of the
            determinants of entry into criminal activities should pay
            attention to major events affecting youth. In many
            countries, one of these important events is mandatory
            participation in military service. The objective of this
            study is to estimate the causal relationship between
            mandatory participation in military service and crime. The
            authors exploit the random assignment through a draft
            lottery of young men to conscription in Argentina to
            identify this causal effect. Their results suggest that
            participation in military service increased the likelihood
            of developing a criminal record in adulthood (in particular,
            for property and weapon-related crimes).
Preferential trade agreements and
            their role in world trade
The author investigates the effects of
            preferential trade agreements (PTAs) on bilateral trade
            flows using a comprehensive database of PTAs in force and a
            detailed matrix of world trade. He shows that total trade
            between PTA partners is a poor proxy for preferential trade
            (trade in tariff lines where preferences are likely to
            matter): while the former amounted to one-third of global
            trade in 2000-02, the latter was between one-sixth and
            one-tenth of world trade. His gravity model estimates
            indicate that using total rather than preferential trade to
            assess the impact of PTAs leads to a significant downward
            bias in the PTA coefficient. The author finds that product
            exclusions and long phase-in periods significantly limit
            preferential trade, and their removal could more than double
            trade in tariff lines above 3 percent of most-favored-nation
            (MFN) duties. He also shows that the effects of PTAs on
            trade vary by type of agreement and are increasing in the
            incomes of PTA partners.
Preferential trade agreements and
            their role in world trade
WPS4038

# Preferential Trade Agreements and Their Role in World Trade

## Denis Medvedev*

### Abstract

This paper investigates the effects of preferential trade agreements (PTAs) on bilateral trade flows using a comprehensive database of PTAs in force and a detailed matrix of world trade. We show that total trade between PTA partners is a poor proxy for preferential trade (trade in tariff lines where preferences are likely to matter): while the former amounted to one-third of global trade in 2000–02, the latter was between one-sixth and one-tenth of world trade. Our gravity model estimates indicate that using total rather than preferential trade to assess the impacts of PTAs leads to a significant downward bias in the PTA coefficient. We find that product exclusions and long phase-in periods significantly limit preferential trade, and their removal could more than double trade in tariff lines above 3 percent most favored nation (MFN) duties. We also show that the effects of PTAs on trade vary by type of agreement and are increasing in the incomes of PTA partners.

JEL classification: F13, F15, F53.

World Bank Policy Research Working Paper 4038, October 2006 _The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org._

> *Development Prospects Group, World Bank and Department of Economics, American University. I am deeply grateful to Robert Blecker, Paul Brenton, Jeffrey Lewis, Kara Reynolds, and Hans Timmer for valuable comments and suggestions.
A practitioner's guide to
            intergovernmental fiscal transfers
Intergovernmental fiscal transfers are a
            dominant feature of subnational finance in most countries.
            They are used to ensure that revenues roughly match the
            expenditure needs of various orders (levels) of subnational
            governments. They are also used to advance national,
            regional, and local area objectives, such as fairness and
            equity, and creating a common economic union. The structure
            of these transfers creates incentives for national,
            regional, and local governments that have a bearing on
            fiscal management, macroeconomic stability, distributional
            equity, allocative efficiency, and public services delivery.
            This paper reviews the conceptual, empirical, and practice
            literature to distill lessons of policy interest in
            designing the fiscal transfers to create the right
            incentives for prudent fiscal management and competitive and
            innovative service delivery. It provides practical guidance
            on the design of performance-oriented transfers that
            emphasize bottom-up, client-focused, and results-based
            government accountability. It cites examples of simple but
            innovative grant designs that can satisfy grantors'
            objectives while preserving local autonomy and creating an
            enabling environment for responsive, responsible, equitable,
            and accountable public governance. The paper further
            provides guidance on the design and practice of equalization
            transfers for regional fiscal equity as well as the
            institutional arrangements for implementation of such
            transfer mechanisms. It concludes with negative (practices
            to avoid) and positive (practices to emulate) lessons from
            international practices.
Estimating the returns to education
            : accounting for heterogeneity in ability
Typically estimates of the benefits of
            education investments show average private rates of return
            for the average individual. The average may not be useful
            for policy. An examination of the distribution of the
            returns across individuals is needed. The few studies that
            have examined these patterns focus on high-income countries,
            showing investments to be more profitable at the top of the
            income distribution. The implication is that investments may
            increase inequality. Extending the analysis to 16 East Asian
            and Latin American countries the authors observe mixed
            evidence in middle-income countries and decreasing returns
            in low-income countries. Such differences between countries
            could be due to more job mobility in industrial countries,
            scarcity of skills, or differential exposure to market forces.
Rules of origin for preferential
            trading arrangements : implications for the ASEAN Free Trade
            Area of EU and U.S. experience
With free trade areas (FTAs) under
            negotiation between Japan and the ASEAN Free Trade Area
            (AFTA) members and between the Republic of Korea and AFTA
            members, preferential market access will become more
            important in Asian regionalism. Protectionist pressures will
            likely increase through rules of origin, the natural outlet
            for these pressures. Based on the experience of the European
            Union and the United States with rules of origin, the
            authors argue that, should these FTAs follow in the
            footsteps of the EU and the U.S. and adopt similar rules of
            origin, trading partners in the region would incur
            unnecessary costs. Using EU trade under the Generalized
            System of Preferences with Africa, Caribbean, and Pacific
            partners, the authors estimate how the use of preferences
            would likely change if AFTA were to veer away from its
            current uniform rules of origin requiring a 40 percent local
            content rate. Depending on the sample used, a 10 percentage
            point reduction in the local value content requirement is
            estimated to increase the utilization rate of preferences by
            between 2.5 and 8.2 percentage points.
Mobilizing urban infrastructure
            finance within a responsible fiscal framework : South
            African case
Since South Africa held its first
            democratic elections in 1994, it has given significant
            attention to building an effective system of
            decentralization including provincial and local government.
            While provincial governments are responsible mainly for the
            implementation of social services such as health and
            education, the provision of much of the urban infrastructure
            is the responsibility of local government. Although many
            challenges remain, the country has made significant progress
            over the past decade in addressing urban service backlogs in
            poor areas. At the same time, it has greatly improved
            macroeconomic fundamentals. The system of financing local
            government seeks to place accountability firmly at the local
            level, with most revenues in the larger urban centers raised
            locally through a combination of local taxes and fees for
            services, while poorer regions are predominantly grant
            funded. The objective has been to encourage the financing of
            capital infrastructure through local borrowing based on
            sustainable, transparent local finances rather than national
            repayment guarantees, which are outlawed. There is some
            indirect subsidization of loans through the state-owned
            Development Bank of Southern Africa. But the emphasis is on
            achieving redistribution through transparent, formula-based
            grants paid directly from national to local governments.
            While further bedding down of the system is needed, the
            approach is proving largely successful. The paper concludes
            by recommending that the existing division between provinces
            as providers of social services and local governments as the
            key locus of responsibility for services related to the
            built environment should be strengthened, particularly
            through the devolution of more urban transport related
            functions. A number of key risks are also highlighted,
            including issues related to the reform of local business taxes.
Urban infrastructure finance from
            private operators : what have we learned from recent experience
The author examines the role of private
            participation in infrastructure (PPI) in mobilizing finance
            for key urban services, that is, urban roads, municipal
            solid waste management, and water and sanitation since the
            early 1990s when private participation came to be seen as a
            key element in infrastructure development. Her review
            indicates that for financing urban services, PPI has
            disappointed-playing a far less significant role  than was
            hoped for, and which might be expected given the attention
            it has received and continues to receive in strategies to
            mobilize financing for infrastructure. Looking beyond the
            number, the author examines transactions and finds that
            there are good reasons-practical, political, economic and
            institutional-for these disappointments. Recommending that
            cities in developing countries try harder is not likely to
            relieve all these constraints. Experience shows that there
            are a number of features that raise the risk profile of
            urban infrastructure for private investors, which has meant
            that the bulk of the transactions that have taken place have
            been exceptions rather than harbingers of a growing trend.
            Many of the measures that could reduce the risk profile are
            outside the control of many cities, others unlikely to
            change, and yet another group of steps to be taken that
            would improve prospects for urban service provision, whether
            in the hands of public or private operators. These findings
            suggest a more pragmatic and selective approach to the focus
            on PPI as a source of finance, and more focus on the array
            of some of the fundamental steps, among them strengthening
            the public finances of cities to improve both the capacity
            to deliver services and to reduce the risks that private
            investors must take when they invest in urban infrastructure.
Migrant networks and foreign direct investment
While there exists sizeable literature
            documenting the importance of ethnic networks for
            international trade, little attention has been devoted to
            studying the effects of networks on foreign direct
            investment (FDI). The existence of ethnic networks may
            positively affect FDI by promoting information flows across
            international borders and by serving as a contract
            enforcement mechanism. This paper investigates the link
            between the presence of migrants in the United States and
            U.S. FDI in the migrants' countries of origin, taking
            into account the potential endogeneity concerns. The results
            suggest that U.S. FDI abroad is positively correlated with
            the presence of migrants from the host country. The data
            further indicate that the relationship between FDI and
            migration is driven by the presence of migrants with a
            college education.
Unraveling the worldwide pollution
            haven effect
This paper contributes to the debate on
            the existence of pollution haven effects by systematically
            measuring the pollution content of trade (measured by the
            pollution content of imports, PCI) and decomposing it into
            three components-a "deep" component (unrelated to
            the environmental debate but including variables
            traditionally present in the gravity model) and two
            components (factor endowments and environmental policies)
            that occupy center stage in the debate on trade and the
            environment. The decomposition is carried out for 1986-88
            for an extensive data set covering 10 pollutants, 48
            countries, and 79 ISIC 4-digit sectors. Illustrative
            decompositions presented for three of the 10 pollutants in
            the data set indicate a significant pollution haven effect
            which increases the PCI of the North because of stricter
            environmental regulations in the North. At the same time,
            the factor endowment effect decreases the PCI of the North
            as the North is relatively well-endowed in capital and
            pollution-intensive activities are also capital-intensive.
            On a global scale, because the bulk of trade is
            intraregional with a high North-North share, these effects
            are small relative to the "deep" determinants of
            the worldwide pollution content of trade. In sum, although
            the impact has been stronger on vertical (North-South) trade
            flows, differences in factor endowments and environmental
            policies have only marginally affected the pollution content
            of world trade during the 1986-88 period.
Services inputs and firm
            productivity in Sub-Saharan Africa : evidence from
            firm-level data
The authors investigate the relationship
            between the productivity of African manufacturing firms and
            their access to services inputs. They use data from the
            World Bank Enterprise Survey for over 1,000 firms in 10
            Sub-Saharan African countries to calculate the total factor
            productivity of firms. The Enterprise Surveys also contain
            unique measures of firms' access to communications,
            electricity, and financial services. The availability of
            these measures at the firm level, both as subjective and
            objective indicators, allows the authors to exploit the
            variation in services performance at the subnational
            regional level. Furthermore, by using the regional variation
            in services performance, they are also able to address
            concerns about the possible endogeneity of the services
            variables. The results show a significant and positive
            relationship between firm productivity and service
            performance in all three services sectors analyzed. The
            authors thus provide support for the argument that
            improvements in services industries contribute to enhancing
            the performance of downstream economic activities, and thus
            are an essential element of a strategy for promoting growth
            and reducing poverty.
Trade reforms and welfare : an
            ex-post decomposition of income in Vietnam
This paper analyzes the impact of trade
            reforms on household welfare. In particular, it studies the
            importance of each of the links that together constitute the
            impact using data from the Vietnamese experience in the
            1990s. The implementation of trade reforms in the 1990s,
            most noteworthy of which was the liberalization of rice,
            resulted in substantial improvement in welfare as evidenced
            by the drastic decline in poverty. Using analytical and
            empirical methods, the author examines the role of each
            channel (direct versus indirect) in this improvement for
            different groups of households. Results indicate that the
            growth has been broad based and pro-poor. Poorer households
            experienced more growth for each and every group analyzed.
            And contrary to the standard literature, net buyer
            households had more growth compared with net sellers,
            emphasizing the importance of indirect links. Decomposition
            of the growth shows that for rural households, both the
            direct effect and the multiplier effect drive growth while
            the multiplier effect was key in urban areas. The importance
            of the secondary effects underscores the need for a broader
            model to estimate the impact of trade reforms fully.