The impacts of trade policy reforms on the Sri Lankan economy

This dissertation presents an analysis of the impacts of trade policy reforms in Sri Lanka. A Computable General Equilibrium (CGE) model is constructed with detailed description of the domestic production structure and foreign trade. The model is then used to investigate the effects of trade policy reforms on resource allocation and welfare.^ Prior to 1977, Sri Lanka maintained stringent control over its imports through rigid quantitative restrictions. A new economic policy reform package was introduced in 1977, and it shifted Sri Lanka's development strategy toward an export oriented policy regime. The shift of policy focus from a restrictive trade regime toward a more open trade regime is expected to have a significant impact on the volume of external trade, domestic production structure, allocation of resources, and social welfare.^ Simulations are carried out to assess the effects of three major policy reforms: (1) a devaluation of the Sri Lanka rupee, (2) a partial or a complete elimination of export duties, and (3) a devaluation-cum-removal of export duties.^ Simulation results indicate that the macroeconomic impact of a devaluation-cum-removal of export duties can be substantial. They also suggest that the resource-pull effects of a devaluation and a devaluation-cum-export duty removal policy are significant. However, the model shows that a devaluation combined with an export duty reduction is likely to be a superior strategy. ^

Tennessee trabajadores: Global wage arbitrage comes home to roost

In the 1980s, the American meat industry began restructuring both its domestic production methods and the distribution of its processing facilities. Many meat and poultry processing facilities have since been relocated into small rural communities. The red meat industry was once highly-paid and unionized, but now work in both meat and poultry processing is a dangerous, low-paid manufacturing job, heavily reliant on immigrant workers who must turn to local social services to supplement their wages and benefits. In an attempt to discover the manner in which the social relations of a specific locale may be enmeshed with global production, this research explored perceptions of social power and alliances after a rural community became host to a foreign workforce employed by the local poultry processing plant. On-site semi-structured interviews were conducted with sixteen local residents, and a content analysis of the community newspaper was undertaken. ^ The research found that as new production relations were inserted into the community, the society continued to reproduce and social relations remained relatively unchanged. The community's cultural standards and social infrastructure dictate that residents are respectful of authority, extend Christian charity to those less fortunate, and are generally accepting of a community known for low wages, low taxation, and low standards of education. Hegemonic ideologies seem to dictate the goals and beneficiaries of social power, and residents are unable to name any power vectors even in the face of sustained community support of, for example, the company that introduced the immigrant labor into the community. While there are indications of displeasure with the influx of immigrants appearing in the newspaper and the interviews, there are tangible examples that the community was proactive in welcoming the immigrants into their community. Thus, given that the last time elements of the community united around an issue was in the mid-1970s and no other issue has evoked any type of tangible struggle since then, there is no indication that any social alliances will be formed in reaction to changes in the community wrought by the globalization of its economy. ^

The effect of domestic credit in the economic *development process

A commonly held view is that creation of excessive domestic credit may lead to inflation problems, however, many economists uphold the possibility that, generous domestic credit under appropriate conditions will result in increases of output. This hypothesis is examined for Japan and Colombia for the period 1950-1993.^ Domestic credit theories are reviewed since the times of Thornton and Smith, until the recent times of Lewis, McKinnon, Stiglitz and of Japanese economists like K. Emi, Tachi R. and others. It is found that in Japan of the Post-War period, efficient financial markets and the decisive role of the government in orienting investment decisions seem to have influenced positively the effectiveness of domestic credit as an output-stimulating variable. On the contrary, in Colombia the absence of the above features seems to explain why domestic credit is not very effective as an output-stimulating variable.^ Multiple regression analyses show that domestic credit is a strong explanatory variable for output increases in Japan and a weak one for Colombia's case in the studied period. For Japan the correlation depicts a positive relationship between the two variables with a decreasing rate very similar to a typical production function. Moreover, the positive decreasing rate is confirmed if net domestic credit is used in the correlations. For Colombia a positive relationship is also found when accumulated domestic credit is used, but, if net domestic credit is the source of correlations, the positive decreasing rate is not obtained.^ Granger causality tests determined causality from domestic credit to output for Japan and no-causality for Colombia at the 1% significance level; the differences are explained by: (1) The low development level of the financial system in Colombia. (2) The nonexistence of consistent domestic credit policy to foster economic development. (3) The lack of an authoritative orientation in the allocation of financial resources and the nonexistence of long range industrialization programs in Colombia that could channel productively credit resources. For the system of equations relating domestic credit and exports, the Granger causality tests determined no-causality between domestic credit and exports for both Japan and Colombia also at the 1% significance level. ^