Lawrence Edwards
Suggested topics for Masters/Honours Papers
I have outlined a number of research
interests and possible topics for Honours and Masters students
below. The suggested preliminary articles involving myself can
be downloaded from my home page.
Trade and the structure of employment and production in
South Africa during the 1990s
This paper will involve the extension of
two earlier papers of mine dealing with how trade has affected
structural change and employment in the economy. These earlier
papers looked at the effect of trade on production and
employment up to 1997. However, there has been significant
progress in trade liberalization subsequently and with new data
available it is possible to extend the paper to 2000. The paper
will use decomposition techniques applied to input-output
tables. This is an Honours/Masters level project
Preliminary readings:
Investigating the impact of trade liberalization on
employment, output, exports and imports
I have recently constructed tariff schedules for the South
African economy between 1988-2004. There is scope therefore a
simple study to investigate the impact of trade liberalization
on employment, output, exports and imports.
(1) Measuring the cost of protection: Calculate using simple
welfare triangles the consumer loss, transfer to producers,
government revenue and the deadweight loss arising from tariff
protection. What are the costs per job saved? Suitable for
Honours paper.
(2) Trade policy matters: Estimate the effect of trade policy on
exports and imports.
See paper: Edwards, L. and Lawrence, R.Z. South African Trade
Policy Matters: Trade Performance & Trade Policy, CID Working
Paper No. 135.
Trade facilitation and trade performance
What are the non-tariff costs of trading in South Africa? How large are these
relative to tariff barriers?
What impact does trade facilitation have on trade flows in Africa and the World?
What is the relative importance of infrastructure, customs environment,
regulatory environment etc. on trade flows?
- Wilson, J. Mann, C.L. Otsuki, T. 2005. Assessing the benefits of trade
facilitation: A global perspective. The World Economy, Vol. 28, 6: 841-871.
- Wilson, J., Mann, C. and Otsuki, T. 2003. Trade facilitation and
economic development. Policy research working paper, 2988.
- Simeon Djankov, Caroline Freund, Cong S. Pham, 2006. Trading on Time
There is scope for both honours and masters papers.
An honours paper could do a comparative analysis of trade facilitation across
countries. Data for such an analysis can be obtained from the World Bank Doing
Business 2007: How to reform-comparing regulation in 175 Economies (search on
web for data). We also have firm level data from the World Bank Investment
Climate surveys.
A masters paper could extend and replicate the Wilson et al. studies.
Infrastructure and trade performance
This topic explores the effect of infrastructure on trade performance. Some
useful articles are:
- Bougheas, S. et al. 1999. Infrastructure, transport costs and trade.
Journal of International Economics, 47: 169-189
- Shepard, B. and Wilson, J. 2006. Road Infrastructure in Europe and
Central Asia: Does network quality affect trade? World Bank Working paper
series WPS4104
- Escribano, A. and Guasch, L. 2005. Assessing the impact of the
investment climate on productivity using firm level data: Methodology and
the cases of Guatemala, Honduras and Nicaragua.
There are various empirical approaches that can be followed. Firstly, we have
long time series data on infrastructure from early 1900s. A time series
analysis of the relationship can be pursued. Secondly, we have firm level data
for a number of countries (the World Bank Investment Climate Surveys). There are
lots of opportunities to investigate the effect of infrastructure on trade
performance using this data.
Infrastructure and productivity
This topic explores the effect of infrastructure on productivity using firm
data. Some useful articles are:
- Escribano, A. and Guasch, L. 2005. Assessing the impact of the
investment climate on productivity using firm level data: Methodology and
the cases of Guatemala, Honduras and Nicaragua.
This topic is appropriate for masters mini-dissertation and technically
competent honours students.
Firm level analysis
The School of Economics (Data first research unit) has access to the World
Bank Investment Climate Surveys for a range of countries. This provides and
opportunity to do a number of projects using firm level data. These include
topics such as:
1) Efficiency and exporting in South Africa.
2) The size distribution of firms and export performance.
3) Labour costs, productivity and exporting.
4) Infrastructure, productivity and exporting
For information on South Africa, read:
Clarke, G. et al. 2006. South Africa: An assessment of the investment climate.
Paper presented at the DPRU conference, Johannesburg (18-20 Oct 2006). Search
the DPRU site for the article.
Trade and labour cost competitiveness:
Stephen Golub and I worked on a paper
analyzing the impact of labour cost competitiveness on South
Africa’s export performance at a sector level. We find that
labour cost competitiveness has an important effect of export
performance. Other variables such as foreign income, capacity
utilization are also found to impact upon export performance.
(1) I would like to extend this project to a multi-country
level. One problem with the above paper is that it does not
account for the impact of technological and institutional
features on export performance. Carlin et al. (2002) for
example, find that investment rates and institutional features
such as schooling, TFP growth and the structure of corporate
ownership have an important influence on export performance in
OECD countries. I would like to perform a similar study, but one
that includes a number of developing countries. One option is to
base the estimations on a large panel of data for aggregate
manufacturing in a range of developed and developing economies.
This project is suitable for Masters.
(2) Firm level analysis: We now have investment climate Survey
data available for a number of countries. I would like to extend
the above analysis using firm data.
Preliminary readings:
- Edwards, L. and
Golub, L. 2004. South Africa’s International Cost
Competitiveness and Productivity in Manufacturing. World
Development, 32, 8: 1323-1339.
- Edwards, L. and
Golub, L. 2002.
Wages, productivity and export performance in South Africa:
A dynamic panel analysis. Paper presented at the
Development Policy Research Unit conference, 22-24 October.
-
Carlin,
Wendy, Andrew Glyn and John Van Reenen. 2001. “Export market
performance of OECD countries: An empirical examination of
the role of cost competitiveness,” The Economic Journal,
111: 128-162.
Investigating the Balance of Payments impact of exchange
rate movements
With the significant depreciation of the
Rand in 2001 and the subsequent appreciation, policy makers have
become concerned about the impact of the exchange rate on the
balance of payments. I worked on a study for the National
Treasury looking at this particular problem. We found that a
depreciation does not lead to long term gains in the balance of
payments. There is however substantial scope to extend this
study using different approaches. All of these will require the
use of econometrics techniques: either panel data or time
series.
Some of these approaches are:
- Regressing the Trade Balance on a range of explanatory
variables, including the exchange rate
- Estimating the pass-through of exchange rate movements to
domestic, export, and import prices.
- Estimating export supply and import demand functions. I
am particularly interested in estimating how exchange rates
affect the import demand function.
Preliminary readings:
Estimation of Import demand functions
There is very little good work on
estimating import demand in South Africa. An understanding of
the import demand relationship is very useful for an assessment
of how exchange rates affect the balance of payments. They are
also useful in understanding how trade liberalization has
affected import demand, and via this production and employment.
The study can be conducted at an aggregate level (i.e. aggregate
manufacturing) or at a sector level. This study will require the
use of econometrics techniques, either panel data or time
series, and is suitable for Masters level students or Honours
students with a good grasp of econometrics.
Preliminary readings:
-
Golub,
Stephen S. and Janet Ceglowski. 2001. “South African real
exchange rates and manufacturing competitiveness,” South
African Journal of Economics, 70, 6: 1047 – 1075.
- Gumede, V. Journal of Studies in
Economics and Econometrics.
International trade and poverty
The impact of trade liberalization on
poverty is a hot topic internationally. DFID have recently
released a book dealing with trade liberalization and poverty (McCulloch,
Winters and Cirera, 2001). Numerous international studies
have also been completed on this topic. Research on South
Africa, however, is thin.
McCulloch, Winters and Cirera (2001)
propose an extensive framework to explain the various links
between trade liberalization and poverty. They argue that the
relationship between trade and poverty is complex and case
specific and requires a detailed understanding of the way and
channels through which such influences occur. In particular,
they identify three pathways through which trade liberalization
can have a direct effect on poverty:
Price transmission – trade liberalization affects
the prices of goods consumed and produced by the poor;
Enterprises – trade liberalization affects
households through its impact on profits, employment and wages;
and
Taxes and spending – trade liberalization affects
the government’s fiscal position.
There is the opportunity to investigate
each of these links in South Africa.
Price transmission: Investigate the
pass-through of tariffs and exchange rate movements to domestic
prices.
Enterprises: There are two interesting
dimensions to this aspect:
(a) Analyse employment at the household level. How exposed are
different households to employment within industries under
‘threat’ of liberalization? What is the linkage between
unemployed and the employed? The unemployed are often linked to
households in which there are employed workers. Therefore if
jobs are lost, even the unemployed may be affected. However, the
strength of this impact is dependent on what work these
individuals do and the composition of households and the
intra-household allocation of resources. Some tentative analysis
suggests that a high percentage of poor households have no link
to the income of formally employed workers. Further, the
employed workers are frequently in the services sector, which is
relatively isolated from the traded sector (and hence
liberalization). The impact of trade on these unemployed may
therefore be low. This needs to be explored further using
household survey data.
(b) Analyse consumption patterns of
different household income categories. Trade liberalization
reduces the price of imported goods. Depending on the
transmission mechanism this may lead to a reduction in prices
faced by the consumer. Households that spend a large percentage
of their income on protected products will gain relative to
other households. To analyse the consumption impact we therefore
need to look carefully at household consumption patterns using
the household expenditure surveys and then map these consumption
patterns to tariff protection.
Preliminary readings:
- McCulloch, Winters
and Cirera, 2001. Trade liberalisation and poverty: A
handbook. DFID
- Winters, A,
McCulloch, N & A. McKay. 2004. ‘Trade Liberalisation and
Poverty: The evidence so far’, Journal of Economic
Literature, vol 42 pp 72-115 March.
- Leibbrandt, M, Bhorat, H. and Woolard,
I. 2001. Household inequality and the labour market in South
Africa. Contemporary Economic Policy, 19, 1: 73-86.
The determinants of export performance
I have been extensively involved in a
number of projects for the World Bank and National Treasury
analyzing the determinants of South Africa’s export performance.
Most of this analysis has been conducted at the aggregate level,
either using aggregate manufacturing data or a panel of sector
level data. This research needs to be extended to the sector
level. Time series econometrics will be required.
Preliminary readings:
- Edwards, L. and Alves, P. 2006. South Africa's export
performance: Determinants of export supply. South African
Journal of Economics, 74, 3: 473-500. (see my web site)
- Edwards, L. and Golub, L. 2002.
Wages, productivity and export performance in South Africa:
A dynamic panel analysis. Paper presented at the
Development Policy Research Unit conference, 22-24 October.
-
South African export performance: Determinants of
supply: Some ideas
-
Golub,
Stephen S. and Janet Ceglowski. 2001. “South African real
exchange rates and manufacturing competitiveness,” South
African Journal of Economics, 70, 6: 1047 – 1075.
The market disciplining effects of trade policy
Economic theory suggests
that trade liberalisation has a pro-competitive effect on
industries (see Helpman and Krugman, 1999). Greater openness
increases competition and thus lowers the mark up of prices
above marginal costs. Most empirical analysis tests this
hypothesis by estimating the marginal impact of import
penetration and export orientation on mark-ups (Hakura, 1998;
Kee and Hoekman, 1999; Fedderke er al., 2003). In a recent paper
Tijl and I estimated the impact of tariff liberalisation between
1988 and 2002 on mark-ups in South Africa. There is significant
scope to extend this analysis. In particular, our analysis
estimated the average relationship between trade and mark-ups
for aggregate manufacturing using a panel of industry sectors.
There is scope to extend the analysis to the sector level.
Further, it is possible to investigate the impact of tariffs on
mark-ups over a longer period using aggregate manufacturing
data. All these studies can be repeated using a slightly
different measure of mark-ups. The use of this alternative
approach would enable us to test the robustness of the
relationships found in existing studies in SA. Johann Fedderke
has also worked in this area and is interested in encouraging
further research on this topic.
This topic is suitable
for both Masters and Honours students. Econometrics will be
used.
Preliminary readings:
- Edwards, L. and van
de Winkel, T. 2005.
The Market
Disciplining Effects of Trade Liberalisation and Regional
Import Penetration on Manufacturing in South Africa.
- Fedderke,
J., Kularatne, C. and Mariotti, M., 2003. “Mark-up
Pricing in South African Industry”, ERSA, University
of the Witwatersrand.
-
Hoekman, B., Kee, H.L. and Olarreaga, M.
2001. “Markups,
Entry Regulation and Trade: Does Country Size Matter?”
Background paper for the World Development Report 2001 –
Institutions for Markets, World Bank.
- Martins, J.O., Scarpetta, S. and Pilat,
D., 1996. “Mark-up
Ratios in Manufacturing Industries: Estimates for 14 OECD
Countries”, OECD Economics Department Working Papers,
No. 162, Paris.
Impact Analysis
Often policy makers require an assessment
of the economy-wide impact of various policy proposals. This is
difficult as one is in essence predicting into the future. A
common approach to dealing with this problem is to construct
some representation of the economy and then perform a number of
simulations using this framework. One such framework are Social
Accounting Matrix based models (or Input-Output models). A SAM
is a data framework that captures the flow of resources between
economic agents (households, producers, factors) in an economy.
Once behavioural relationships between these agents are
specified, one is able to shock the system and then estimate the
impact on production, employment, household income etc. There
are numerous SAMS available for South Africa and other
countries. If you are interested in assessing the economy-wide
impact of a policy change, this is an appropriate framework to
utilize.
These kind of analyses are suitable for
Honours long papers. Masters long paper will require the use of
more complex general equilibrium models.
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