A shift in the way the world treats immigration could give a boost to global growth, according to a World Bank report.
International mobility of people shouldn’t be seen as permanent migration or a one-way flow from less developed countries to advanced ones, Aaditya Mattoo of the World Bank and Arvind Subramanian from the Washington-based Peterson Institute for International Economics said in a July working paper.
“The current perspective on the flow of people is almost exclusively focused on permanent migration from poorer to richer countries and on immigration policies in industrial countries,” the authors wrote. “Two-way flows of people might provide the boost the world needs, creating the possibility for the first time of a grand bargain in which the poor world makes the following offer to the rich world: ‘Give us your old, infirm, and unemployed and in return take our young, poor, and even highly talented.’”
In the grand bargain they describe, skilled unemployed workers from industrialized economies could move to emerging markets for job opportunities while unskilled workers from poorer countries could work temporarily in advanced nations for lower wages. China needs teachers for 300 million of its people learning the English language, while Brazil needs 20,000 more engineers than the 40,000 it can produce every year, they said.
High-skilled professionals from lower-income nations, such as doctors and engineers, could move to richer countries to deliver services, while students from industrialized economies could benefit from cheaper educational opportunities in developing ones. For less-costly retirement and medical care, the sick and elderly from developed economies could turn to less advanced nations. A dollar goes three times farther in Thailand and twice as far in Costa Rica, Mattoo and Subramanian said.
While the World Trade Organization’s General Agreement on Trade in Services didn’t succeed in liberalizing temporary labor mobility, the openness may be more easily accomplished bilaterally or among a small group of countries, they said.
“The assault on globalization’s last holdout might finally be within reach,” the authors said. “John Lennon’s idealistic vision of ‘no countries...nothing to kill or die for...brotherhood of man’ will perhaps always elude humans but criss-crossing flows of people can take us one small step in that direction.”
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High oil prices are a “blessing in disguise” for the U.S. economy, because they’re helping the country achieve energy self-sufficiency, according to Bank of Canada economists Ron Alquist and Justin-Damien Guenette.
U.S. liquids production has increased almost 30 percent since 2005 because elevated oil prices have made hydraulic fracturing, or fracking, economically viable, the authors wrote in a working paper last month. While this increased production has led to a glut at North American facilities, that output “is unlikely to make a large contribution to the global supply,” and so won’t lead to lower world prices.
Other countries with large shale-gas fields -- such as Argentina, Poland and China -- won’t be able to match the U.S. fracking experience, according to the report. “The lack of technology and infrastructure outside of the United States that would enable the rapid development of unconventional oil resources, coupled with accelerating decline rates in the world’s conventional oil fields, are likely to keep oil prices at elevated levels over the medium term,” the authors wrote.
“While high oil prices may have adversely affected the recovery of the United States from the Great Recession, they have also made the extraction of its tight oil resources commercially viable,” Alquist and Guenette write. “By simultaneously encouraging growth in oil production and reduced oil consumption, elevated oil prices have put the long-standing goal of U.S. energy independence within reach.”
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It’s commonly thought that open economies, such as Australia’s, face more investment volatility when responding to sharp movements in commodity prices because it’s often unclear whether the shock is permanent or temporary. Daniel Rees of the Reserve Bank of Australia argues that isn’t necessarily true.
As part of his doctoral thesis at the Massachusetts Institute of Technology in Cambridge, Rees used Australian data to model how agents in a small open economy react to trade shocks.
When companies know a positive shock is temporary, their responses in output and employment are “substantially larger” than when information is incomplete. That’s because firms will accelerate production to take advantage of high export prices that they know won’t last, Rees said.
“While incomplete information about the persistence of terms of trade shocks increases the volatility of investment, it also encourages households to respond more cautiously to changes in the terms of trade,” he wrote in a research discussion paper published July 26 on the central bank’s website. “This makes consumption, the trade balance and output less volatile than they would be if agents had full information.”
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When officials in emerging-market economies design policies to alleviate chronic poverty, they should look at more than just how the poor live. They should study how the poor hope.
Policies aimed at raising aspirations will ease poverty more effectively than those that address external constraints alone, Sayantan Ghosal wrote in a policy paper published in July by Chatham House and the Centre for Competitive Advantage in the Global Economy at the University of Warwick in England. The goal is to escape so-called aspirations failure -- the condition of a person who doesn’t aspire to escape poverty even though he or she could.
“Pro-poor policies tend to focus on relaxing external constraints that may perpetuate poverty traps, such as lack of credit or insecure property rights, but internal constraints such as learned helplessness, pessimistic beliefs and an external locus of control are also important,” Ghosal wrote. “Changing beliefs is vital to break the failure of aspirations that can be found in poverty traps.”