Matthias Busse

Substantial tariff reductions and increased usage of non‐tariff measures (NTMs) have been key dynamics of global trade policy in recent decades. We use highly disaggregated data on applied most favored nation tariffs, NTMs, and trade to investigate how International Monetary Fund (IMF) conditionality as a form of external pressure to reduce tariffs contributed to this dynamic in developing countries. Our results show that structural adjustment programs (SAPs) effectively lowered tariffs without increasing the usage of NTMs. A typical three‐year program containing tariff conditionality decreased tariff rates in the range of 2.0 to 3.8 percentage points in total. Furthermore, IMF programs reduced NTM initializations significantly. We also show that tariff conditionality was more effective in initiating tariff cuts for countries without previous greater globalization efforts than being a “catalyst” for ongoing liberalization efforts.

Black Economic Empowerment (BEE) is a policy that aims to empower black people and, thus, decrease racial inequality in South Africa. The program puts reformation pressure on firms and might strongly influence firm performance. This paper examines how BEE affects turnover, profits, and labor productivity of (large) firms listed in South Africa. We use an extensive dataset covering a major share of listed firms between 2004 and 2019. The analysis employs fixed-effects regressions and instrumental variable approaches to account for endogeneity. Overall, we find that BEE has a positive impact on firms' sales, a positive but not robust impact on labor productivity, and no impact on profits. After accounting for heterogeneity in BEE scorecards applied, the positive effect of BEE on turnover and labor productivity becomes less pronounced. We conclude that BEE had a slightly positive effect on firm performance in the best case but also did not harm firms in the worst case. Thus, this study disproves the critique that BEE harms businesses, at least on the sample of listed firms. However, we propose that the policy should be further adapted to reduce the cost of compliance and focus on areas that bring structural change in South African companies, like the skills development dimension.

Summary: Motivation: Despite its status as a low‐income country in an unfavourable location for economic conduct, and being overshadowed by the devastating genocide of 1994, Rwanda has been recognized for its efforts to improve its business environment via several reforms and regulations according to various indicators.Purpose: We contribute an analysis of the extent of improvements which Rwanda’s regulatory reforms have yielded in the business environment. We also identify four interconnected drivers of change which account for the government’s capability to implement successful reforms in the economy.Methods and approach: We adopt a quantitative and qualitative approach.Findings: We find that Rwanda’s regulatory reforms in the business environment are rather a mixture of true progress and window dressing. The drivers of change accounting for the progress in Rwanda’s economy are the pressure on the government to generate economic growth, the country’s leadership, the pre‐colonial institutional framework, and Rwanda’s aid effectiveness.Policy implications: The close interconnectedness of political and economic entities makes it inefficient to implement integral changes to Rwanda’s current system. The Rwandan government should rather credibly commit to its own policies and developmental approaches and continue its progress in private sector transformations without crowding out small‐ and medium‐sized enterprises.

In this paper, we analyze the role of structural transformation in view of the remarkable growth performance of Sub‐Saharan African countries since the late 1990s. Our analysis covers 41 African countries over the period 1980 to 2014 and accounts for structural transformation by employing the analytical frameworks of (1) growth decomposition and (2) growth regression. Even though the low‐productive agricultural sector continues to employ most of the African workforce, our results reveal that structural transformation has taken place and that it has contributed significantly to African growth in the period 1980‐2014.

The paper empirically assesses the impact of foreign aid on the change in economic freedom, which is closely related to the quality of regulations. We build on a relatively large panel of 77 developing countries and examine the period 2002–2012 using different econometric methods. In addition to standard country fixed‐effects regressions as well as estimations in first differences, we apply the system Generalised Method of Moments estimator. We, therefore, control for the potential endogeneity of foreign aid. We find that highly targeted aid can be a driver of change: Sectorspecific Aid for Business has a significantly positive impact on regulations across developing countries, but we do not find any effects for overall aid or aid directed at broad governance areas. The result that Aid for Business drives improvements in regulatory quality is robust using different model specifications and country samples. The strongest results are found for low‐income countries and for subsamples that exclude outliers. This outcome could partly explain the inconclusive evidence from the previous literature and it confirms our hypothesis that targeted, sector‐specific aid matters.

Summary: This paper investigates the impact of Chinese activities in sub‐Saharan African countries with respect to the growth performance of economies in that region. Using a Solow‐type growth model and panel data for the period 1991 to 2010, we find that African economies that export natural resources have benefited from positive terms‐of‐trade effects. In addition, there is evidence for displacement effects of African firms due to competition from China. On the other hand, Chinese foreign investment and aid in Africa does not appear to have a significant impact on African growth.

The paper empirically assesses the impact of foreign aid on the change in economic freedom, which is closely related to the quality of regulations. We build on

In the past few years economic research has empirically established the link between “good” regulation and development and there is a broad consensus over the fact that regulatory quality matters for economic growth. Up to now, however, there has not been much research on the determinants of regulation, since this link is difficult to establish empirically to data restrictions and methodological issues. In our panel data analysis with over 100 countries for the period from 1970 to 2005 we find some evidence that the private sector, especially foreign direct investment, plays a significant role in regulatory making.