Do smartphones cause car accidents? Evidence from Blackberry cuts

The National reports:

Last week email and internet functions were unavailable to Blackberry users in the Middle East, Africa and Europe after a crucial link in the BlackBerry network failed. In Dubai, traffic accidents fell 20% from average rates on the days BlackBerry users were unable to use its messaging service. In Abu Dhabi, the number of accidents fell 40% and there were no fatal accidents. On average there is a traffic accident every three minutes in Dubai, while in Abu Dhabi there is a fatal accident every two days.

ht: TC

Book Review: Aftershock by Philippe Legrain

Back in 2005, when globalisation and its detractors were still beating at full swing, a friend of mine told me the best book about globalisation wasn't Krugman's or Bhagwati's, but Open World, by Philippe Legrain. I never took the time to read it. Two years later, Legrain published Immigrants, making the case for the free flow of people. Being already convinced, I skipped it again. So when I came upon his latest book, Aftershock, I thought it was due time to give Legrain a try. And I'm glad I finally did.

Aftershock, first published in May 2010, is a great book about "reshaping the world economy after the crisis". It starts off with a few chapters on the crisis, how it happened, how it affected people around the world, how the financial system should be fixed, and how emerging markets are our best hope for a stable recovery. Instead of praising the BRICs, he praises the BEEs, i.e. the Big Emerging Economies, which include China, India, and Brazil, but not Russia. He then warns about the dangers of protectionism, especially against China, and argues that a free flow or people and ideas is of utmost importance for the a prosperous and peaceful world.

He does all this recycling ideas from his previous, Immigrants and Open World, and combining VoxEU-inspired analyses with anecdotes collected from interviews done all around the world. His writing style, probably his greatest strength, is a mix of Tim Harford, the Undercover Economist, and Jagdish Bhagwati, the ardent defender of free trade. He's also reminiscent of Superfreakonomics, especially in his chapter on climate change where he describes the technologies that will allow us to stop polluting.

He is almost as radical as a Chicago boy when arguing about free markets, but most convincing in his conclusion when making the case for an open world from a moral, rather then economic, point of view. This is best captured by a quote from Kishore Mahbubani: "the real value of free-market economics is not just in the improvements in economic productivity. It is about how it uplifts the human spirit and liberates the minds of hundreds of millions of people". Hopefully, if politicians stop being retarded, our future will be an Open World.

The persistence of tax-evasion culture

Social norms such as corruption, trust or violence are persistent. If you put an Italian in Switzerland, he will be an hour late at meetings even after living there a few years. Old habits are hard to change. We've learned from previous studies that diplomats from corrupt countries don't pay their parking fines even when in New York, that soccer players from violent countries commit more fouls in the European leagues, and that second-generation migrants still have inhirited trust from their countries of origin.

Now comes a new study on the persistence of culture. Researchers from Indiana University teamed up with the US Treasury to examine cases of corporate tax evasion. They used data on more than 270,000 IRS corporate tax audits from 1996 to 2007 and measured a firm’s tax evasion using the amount of positive adjustment to the firm’s tax liability following audit. They found that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the US. The authors also show that when the US government beefed up efforts to tackle evasion, these firms were less likely to adhere. As they sum up in their abstract, cultural norms can be a challenge for legal enforcement.

Bowing to Chinese pressure

Taiwan goes by many names. Sometimes it is "Taiwan, Province of China" (at the IMF), sometimes it is "Taipei,China" (without any space, at the WTO), or "Chinese Taipei" (at the WHO and the World Baseball Classic). The reason behind this cacophony is Chinese pressure. China thinks Taiwan belongs to China, hence it disapproves every attempt by Taiwan to join international events and ends up forcing everyone to use a modified country name.

Bowing to Chinese pressure is now the norm. The World Bank provides no data for Taiwan, even though the IMF does. Costa Rica and Malawi are the last two countries to have cut formal ties with Taiwan. South Africa failed to issue a visa to the Dalai Lama who was supposed to attend Desmond Tutu's birthday. The reason is China thinks the Dalai Lama is dangerous. We have now reached the level where two Nobel Peace laureates who are beacons of humanity cannot get together because of Chinese pressure.

There are two reasons for the bowing. The first is fear of armed conflict. If the US doesn't speak up it's because it fears China will invade Taiwan and what would follow would make the Iraq war look like a mere skirmish. Obama did sell weapons to Taiwan though. This will surely come with economic consequences. Which brings me to the second reason for bowing: economic ties. Breaking ties with China is like saying no to growth. But, as a trade union leader in South Africa puts it best: “Even though China is our biggest trading partner, we should not exchange our morality for dollars or yuan,” (source NY Times).

The tragedy of "you're of dick"

Which country has the best reputation?

Canada. Of course. This is what reveals a new report by the Reputation Institute, a consultancy. They asked over 42,000 people from G8 countries whether they think a "Country" has a good reputation, whether they have a good feeling about "Country" , whether they admire, respect or trust "Country" etc... The ranking is found below. The report argues that a 10% increase in Country Reputation leads to 11% increase in Tourism Receipts, and 2% increase in Foreign Direct Investment. Now whether reputation boosts FDI or the other way around is the question. They also estimate a self-image gap and found that Belgium, Italy and Greece rated their own country way lower than how others perceived their nation. That's telling...

Book Review: "23 things they don't teach you about capitalism", by Ha-Joon Chang.

Argentina recently imposed import-license requirements for mobile-phones. Its motive is to replace imports with local production, and hence create jobs. The trade policy, coupled with tax incentives, led Research in Motion, the makers of BlackBerrys, to begin assembling phones in Tierra del Fuego. Similarly, Brazil is trying to replace imports by local manufacturing using tax breaks. As a result, Foxconn is setting up a Brazilian plant to assemble iPads.

Both these examples, taken from this week’s Economist, would make Ha-Joon Chang smile. Not only is he a great believer in the role of manufacturing in prosperity (see here how he crushed Bhagwati in an onlinedebate), he also believes such industrial policy is exactly the right tool to promote development. His latest book, “23 things they don’t tell you about capitalism”, makes the point once again, repeating his favorite stories from previous books (see my previous review here).

The author is quite talented at convincing people that capitalism is often a bad idea. His approach consists in making extremes out of free-market ideas, and giving a few examples to prove they’re not true. Arguing by examples does not usually convince economists, who prefer regressions. But the latter should pay attention rather than dismiss it so easily.

He is most interesting when arguing that education does not matter much for growth. A university education does not make you more productive. What matters more is the capacity of organization of leaders, whether in business or government. He’s also fun when he gives example of how economists don’t do good policy. The rest is mostly summarized as “free-market policies don’t always work, but quite to the contrary”.

All in all, this is another great book by Ha-Joon Chang, but nothing new. As for Brazil and Argentina, let’s see what happens to their industries in the years to come.

The Chinese in Zambia

BBC NEWS:

"Lusaka has recently become the first African city to offer Chinese currency banking services. The city's Bank of China branch now handles counter deposits and withdrawals in yuan.
In the last 10 years... Sino-Zambian trade has really taken off, growing from just $100 million in 2000 to $2.8 billion last year... Beyond mining and manufacturing, there is also growing Chinese presence within Zambia's retail sector, from imported textiles and electronics, to chickens farmed locally and sold in city markets. The country is also home to two of China's six African Special Economic Zones."

Zambia is having elections today...

to blog or not to blog?

DAVID MCKENZIE and BERK ÖZLER, form the World Bank's relatively new blog "Development Impact" are blogging a series of analyzes about the impact of blogging. The first one about the impact on citations, the second one impact on recognition and effective policies.... so far, their methodology is not too credible, and similar to many impact evaluations they have criticized, full of endogeneity and selection bias... I hope they will improve in the next reports of the series.