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The difficulty of pursuing a conventional market-oriented development strategy in the Palestinian territories led in the early part of the 2000s to a second-best reliance on public sector employment and wage bill expansion to boost aggregate demand. The main objective of this Programmatic Public Expenditure Review (PER) is to inform policy and institution-building efforts of the Palestinian Authority (PA) and its donor partners about improving the sustainability of public expenditures and the efficacy and efficiency in the provision of essential public services.In particular, this PER aims to provide an assessment of public revenue and expenditure policies offering specific policy and institutional measures to reduce the size of the Palestinian territories fiscal deficit and make it more sustainable.The fiscal situation of the Palestinian Authority is not sustainable.The difficult fiscal situation facing the Palestinian Authority today results from a unique confluence of challenges.As this report will argue, there is considerable further scope for reforms that would raise additional tax revenues, and reduce expenditures without compromising the quality of public services or negatively impacting public welfare.However, the PER notes that there are limits to what can be achieved by PA fiscal policy alone.The PER is organized as follows: Chapter one provides an overview of recent macroeconomic and fiscal developments; it also contains a brief assessment of priority fiscal policy issues facing the PA, and serves as an introduction to the in-depth analysis of the issues that follow in subsequent chapters. Chapter two analyzes the factors driving the size of the PA’s wage bill, and shows how these can be tackled. Chapter three reviews expenditures in the public health sector. Chapter four analyzes the Palestinian public pension system, and looks into how its sustainability can be assured. Chapter five assesses the quality of intergovernmental fiscal transfers, including net lending transfers. Chapter six reviews the way in which public investment projects are planned and implemented, and identifies steps to improve investment quality. Further details on health and pensions are provided in the annexes.

The high level of exports and their product and market concentration exposes the Democratic Republic of Congo to the economic fluctuations of the country's trade partners. This paper uses the United Nations Conference on Trade and Development trade data set to analyze the Democratic Republic of Congo's export patterns for the period 1960-2014. The data confirm that the country's exports remain highly concentrated. The product concentration on minerals is high and reaches exceptional levels. The geographic concentration is also high, while there is a shift in destinations. Hence, EU27, traditionally the main market destination for the Democratic Republic of Congo, lost its importance to China for most of the past decade. This trend continued to increase in the past few years from 2010 to 2013. The clear prevalence of commodity products within the Democratic Republic of Congo's exports and the higher exposure to the Chinese economic cycle are sources of vulnerability. The empirical analysis indicates that the country's exports appear to be significantly sensitive to foreign demand fluctuations. This exposure increases the volatility of the country's macroeconomic framework to exogenous shocks, with negative consequences on growth in gross domestic product and on external balances. The analysis concludes that increasing the Democratic Republic of Congo's resilience requires product and market diversification of exports. This diversification requires improvements in the investment climate and business environment, with emphasis on skills and infrastructure.

After sharply declining in the first half of 2015, world trade began to grow, albeit at a slow pace. Preliminary data indicate that merchandise import growth was 1.7 percent in 2015, down from 3 percent in 2014. Recent trade developments should be seen in the context of a deceleration in trade growth since the early 2000s, and particularly since the global financial crisis. These developments reflected a combination of old and new cyclical factors as well as enduring structural determinants, such as the maturation of global value chains and the slower pace of trade liberalization. In particular, trade developments in Latin America and Eastern Europe and Central Asia mostly reflected lower imports of recession hit commodity exporters such as Brazil and Russia. Latin America contributed 6 percent to the downward pull in global imports in 2015. Except for Japan, imports and exports of advanced economies did not show signs of a significant downturn, but were sluggish. Lower commodity prices have reduced real incomes in commodity producers and led to a contraction in their imports from all regions, including China. At the same time, the gradual shift from investment to consumption in China, and the more significant contraction in its industrial production seen in early 2015, have reduced its imports from other regions, including commodity producers.

This background paper provides information on the study of the Group of 20 (G-20) and challenges faced by low-income developing countries (LIDCs). The study analyzes LIDCs development challenges and how G-20 economic policies can be coordinated so they can contribute to creating an enabling environment for their development. The focus of the paper is the role that trade and investment policies of G-20 countries play in this context. The paper is composed of three parts 1) the characteristics of LIDCs integration in the world economy, 2) the evolution of G-20 policies that affect LIDCs integration, and 3) the potential for changes in the G-20 trade and investment policy landscape to benefit LIDCs.

This paper analyzes the impacts of selected trade facilitation measures on international trade flows. A gravity model is used to estimate four equations: a pooled cross-section model; a fixed-effects model; a random effects model; and a Poisson maximum likelihood estimator. The contribution of the paper is twofold. First, the analysis uses a recent data set, a panel that includes trade data from 2011 and 2012 for 72 countries. Second, to measure the impacts of trade facilitation measures, the analysis includes dummy variables for the presence of an authorized economic operator program, the existence of a single-window program in the countries in the sample, and the existence of a mutual recognition arrangement between pairs of countries in the sample. The results show that the presence of an authorized economic operator program and the existence of a single-window program will improve countries’ trade performance. By contrast, the existence of a mutual recognition arrangement will not necessarily improve countries’ trade performance. These results suggest that, in general, trade facilitation measures as a whole will help countries improve their trade performance.

The main message of this report is that if Kazakhstan wants to take advantage of global integration and diversification opportunities, the government needs to improve its trade policy framework, its management, and its regulations. It is also finalizing accession to the World Trade Organization (WTO) while its trade strategy includes a number of free trade agreements to be negotiated. It is an active member of the Central Asia Region Economic Cooperation (CAREC). This report is composed of three policy notes that discuss how to improve the trade policy framework, management, and regulations: note one is on the trade policy framework and recommends joining the WTO on a tariff schedule that is more liberal than Russia’s; note two postulates that to benefit more fully from the WTO membership and future regional or bilateral agreements, the institutional framework for trade policy management will need a clearer strategic vision, better coordination within the government and with private sector, and enhanced human capacity; and note three suggests that for the private sector to benefit from global integration and diversification, the government should ease the burden of regulations that affect trade (non-tariff measures (NTMs)).

In the last decade Morocco undertook substantial, if gradual, trade liberalization by reducing tariffs, reforming trade regulations and signing free and preferential trade agreements with several regions and countries, including the United States, Turkey, the European Union and Arab countries. This paper analyzes the impact of input tariff reduction on Moroccan exporting firms through the channel of intermediate goods. Gaining access to more varied and cheaper inputs can make exporting firms more competitive, and as a result they export more. To evaluate how this policy may impact firms export performance, the paper analyzes the impact of input tariff reduction on different margins of trade with emphasis on export markets and product diversification. The identification of the effect of input tariffs on exports relies on a difference-in-difference estimator using heterogeneous access to import tariff exemption as a measure of different levels of exposure to input tariff reduction at the firm level. Overall, the analysis finds that firms that are relatively more exposed to input tariff perform better in those sectors with the largest input tariff reduction, with better access to markets, higher probability to survive when exporting new products in those sectors and higher export value growth.

This report analyzes export competitiveness in the Dominican Republic drawing from the Trade Competitiveness Diagnostic methodology (Farole and Reis, 2012). Dominican exports fare well in terms of performance, sophistication, and survival in Special Economic Zones. Three main challenges are identified: 1) quality issues and rejection of agro exports in the US border; 2) the role of Special Economic Zones in the new decade and the lack of backward linkages; and 3) excessive concentration in terms of markets that is not addressed by a fragmented institutional setup.

What affects a country's decision of whether to formally engage in a trade dispute directly related to its exporting interests? This article empirically examines determinants of affected country participation decisions in formal trade litigation arising under the World Trade Organization (WTO) between 1995 and 2000. It investigates determinants of nonparticipation and examines whether the incentives generated by the system's rules and procedures discourage active engagement in dispute settlement by developing country members in particular. Though the size of exports at stake is found to be an important economic determinant affecting the decision to participate in challenges to a WTO-inconsistent policy, the evidence also shows that measures of a country's retaliatory and legal capacity as well as its international political economy relationships matter. These results are consistent with the hypothesis of an implicit 'institutional bias' generated by the system's rules and incentives that particularly affects developing economy participation in dispute settlement.

The rural sector, defined here as the economic sector that falls under the scope of the Ministry of Agriculture and Water (MAH), the Ministry of Animal Resources (MRA), and the Ministry of the Environment and Sustainable Development (MEDD), is one of the pillars of the Burkina Faso economy. Although its contribution to GDP has decreased in recent times from 35 percent in 1999 to 30 percent in 2011 due to the development of the other sectors of the economy, agricultural activity still employs approximately 86 percent of Burkina Faso s labor force and is the main source of income for poorer populations. Consequently, the rural sector is among the primary beneficiaries of public expenditures by the Burkina Faso government and constitutes one of the pillars of the Strategy for Accelerated Growth and Sustainable Development (SCADD) adopted in 2010. The goals of this agriculture public expenditure review in Burkina Faso are as follows: draw lessons from the past in terms of budget execution in the agricultural sector in order to promote the design and implementation of public expenditure programs that are more efficient and more equitable and have a greater impact; initiate the implementation of the databases and methodology required to conduct similar reviews regularly and thus contribute to the institutionalization of the process; and contribute to establishing the conditions for increased support for the sector while encouraging the harmonization and alignment of support with respect for national strategies.

Tanzania continues to stand out as a model of sound economic performance in the African continent, with a growth rate of over six per cent in 2011 and 2012, surpassing other regional economies and demonstrating impressive resilience to the global economic crisis. This is the second issue of the Tanzania economic update series. The series aim to engage a broad audience in a discussion of the state of the economy in general, as well as in specific debates of topical importance in Tanzania. The current issue seeks to get the discussion going on how to achieve the structural transformation of the rural economy so that rural households can also benefit from the country's remarkable growth performance.

This report is structured as follows. Chapter one analyzes the performance of Kazakhstan s trade. Chapter two presents an overview of recent developments in Kazakhstan regional and international trade integration. Chapter three examines in detail key issues related to market access, focusing on non-tariff measures and trade facilitation and logistics. Chapter four examines the services sector and offers a roadmap for actions to enhance its competitiveness. Chapter five addresses building institutional capacity for the trade and competitiveness agenda. The report s recommendations are summarized in the following table. In order of the four main messages of the report, they cover balancing regional and international integration efforts, measures to improve access to inputs and export markets by reducing non-tariff barriers and through trade facilitation measures, raising the quality and efficiency of the services sector, and strengthening institutional capacity to implement an effective trade policy and competitiveness agenda.

The issue of measuring product variety has received relatively little attention due to its inherent difficulty. In the language of index numbers, an expansion in the range of inputs or outputs is a 'new goods' problem: a good that is newly available will have an observed price and quantity, but no corresponding price or quantity the year before. The availability of this new good will yield a welfare gain to consumers, as well as a productivity gain to firms buying the new input. In this paper we show how product variety can be measured in the case of a CES aggregator function. This paper is organized as: after reviewing the literature on the 'new goods' problem in section two, then discuss how to measure export variety in section three. In sections four and five discuss the empirical applications to export variety growth in Mexico and China. Regression results relating trade liberalization to industry export variety are presented in section six, and conclusions are given in section seven.

The Doha round of multilateral trade negotiations stalled in 2008 owing in no small degree to a lack of agreement on the terms of substantially reducing trade-distorting support for agricultural products and to what extent this will be beneficial to developing countries. Nicaragua presents an interesting case in point, being one of the poorest economies in Latin America with still a relatively large agricultural sector and high degrees of rural poverty. In 2005, the country signed a free trade agreement with the United States. This chapter provides a quantitative analysis addressing that question. It does so using a computable general equilibrium (CGE) model for Nicaragua coupled with a micro-simulation methodology. The first section provides background information on trade reform policies and macroeconomic trends in Nicaragua, with special reference to the agricultural sector and rural poverty. The section that follows describes the main features of the CGE model and the micro-simulation methodology used to assess the impact on poverty and inequality. The author then lay out the model scenarios considered, which include liberalizations of agricultural and all merchandise goods trade by the rest of the world and by Nicaragua itself. That is followed by a summary analysis of results. This analysis includes tests for the sensitivity of the results with respect to assumptions regarding the responsiveness of trade to price liberalization, as identified through the relevant trade elasticities. The final section provides conclusions and possible policy implications.

Now that import-substitution policies have failed and been discredited, there has been a shift in favor of interventions on behalf of export interests. The author argues that close scrutiny reveals these arguments to be as flawed as the old arguments for import substitution. Among other things, the author concludes that: 1) Under perfect competition, a country trying to retaliate against a trading partners export subsidies by instituting its own export subsidies, will only hurt itself. 2) The argument that export subsidies may be useful for neutralizing import tariffs, is spurious. In most practical situations, this is not possible. Removal of tariffs is a far superior policy. 3) In principle, a case can be made for protecting infant export industries in the presence of externalities. But the empirical relevance of externalities remains as illusory for export industries as it was for import-substituting industries. 4) Adverse selection and moral hazard can lead to the thinning of the market for credit insurance, but that is not a case for government intervention. 5) India's experience shows export subsidies to have little impact on exports. Brazil and Mexico's experience shows export subsidies to be a costly instrument of export diversification. 6) Those who argue that pro-export interventions were important in East Asia have not provided convincing evidence of a casual relationship between the interventions and growth.