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Harvard CID stumbles into the sense of us in its policy engagements with governments


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We know diversification, extending production into more complex and higher value added goods and services, is they key to the process and development. And yet diversification implies doing things you currently don´t know how to do. Countries need to add new capabilities, which they cannot possibly have. We also know that it is easier to “move brains” to new locations, than to move knowhow into brains, i.e. moving experienced workers into a new location is faster than building experienced workers. Is this easier or even feasible to do? We find this is highly contingent on the “Sense of Us” as it regards policy areas like immigration and business travel. The "Sense of Us" is the collective illusion defining a place sense of who they are. Here we present three examples of three different policy engagements in Panama, Saudi Arabia and Chiapas (México), to show how did we stumble into the sense of us enthuse places, and how understanding it and be able to shape in a more inclusive way is cornerstone in the efforts to develop and grow out of poverty.

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Harvard CID stumbles into the sense of us in its policy engagements with governments

  1. 1. CID stumbles into the sense of us in our policy engagements Miguel Angel Santos @miguelsantos12
  2. 2. “US” VS. “THEM”
  3. 3. Panama: One of the top-ten fastest growing economies between 2005 - 2015 Gross domestic product per capita (constant US$ 2005)
  4. 4. Panama: Growth has been driven by a modern exportable service sector Export of services per capita (US$ million)
  5. 5. Panama: The modern service sector is skill -intensive
  6. 6. Ley de Sede de Empresas Multinacionales (Law 44) attracted more than 120 regional headquarters Special Economic Zones Ciudad del Saber Technology Park (2000) Panamá-Pacífico Industrial Park (2007)
  7. 7. Immigration regulations keep know-how locked into MNC and SEZ and prevent the diffusion of know -how and technology spillovers • 27 occupations legally restricted to immigrants • List of 50 countries considered national security concerns subject to (“Authorized visa”) • 10% cap of foreigners in the payroll (out of the SEZ and MNC) Restrictions to potential Immigrants Restrictions to Knowledge diffusion • Years spent on MNCs under Law 44 and SEZ do not count for residence purposes • Visas revoked the moment the expat ceases to work in the MNC • Expats dependents do not have work permit • Firms moving on from innovation to commercialization risk being expelled from City of Knowledge
  8. 8. H igh w age - premiums t o f oreigners across all indust ries/ prof essions indicat e t hat t alent is one of t he most binding const raint s t o grow th Wage-premium to foreign workers
  9. 9. R est rict ions t o high - skilled immigrant s and know ledge dif f usion are not helping t he Panamanian w orkers Immigrants flows and Panamanian wages 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Fuerza laboral panameños Panameños de baja calificación Panameños de alta calificación ChangeinwagesofPanamanianworkersassociated toanincreaseof10ppinthestockofimmigrants Total Panamanian labor force Low-skilled Panamanian workers High-skilled Panamanian workers
  10. 10. Panama w ant s t o be like H ong - K ong and Singapore, but seems unw illing t o support t he levels of immigrat ion of t hese count ries Stock of immigrants (% of the labor force)
  11. 11. “US” VS. “THEM”
  12. 12. Saudi Arabia: Foreigners account for 83% of private employment Composition of the Private Sector Saudis 17% Expats 83%
  13. 13. Contrary to Panama, foreigners earn much lower salaries than Saudis
  14. 14. Saudi Arabia´s minimum wage is too high for its level of complexity Saudi firms must compete in wages equivalent to those of Belgium, the Netherlands and France – economies with much higher economic complexity SAU
  15. 15. Are foreign workers substituting Saudis and “stealing their jobs”?
  16. 16. We find strong evidence that foreign workers are complement to Saudi workers – not substitutes 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 ChangeinSaudiwages(%) Effect of a 10 pp increase in the share of non-Saudi workers on Saudi wages (within a firm) -0.025 -0.02 -0.015 -0.01 -0.005 0 0.005 0.01 0.015 0.02 0.025 0.03 Changeinprobabilityoffirm-exit(%) Effect of a 10 pp increase in the share of non-Saudi workers on the prob. of a Saudi leaving the firm  Higher share of immigrants in the firm is associated with significant higher salaries for Saudis  No significant impact of immigration on the likelihood of Saudis losing their job
  17. 17. But there are many restrictions to foreign workers, which are based on the wrong assumption of substitutability Foreign workers: • Cannot own businesses • There is no permanent residence and no path to citizenship • Cannot own land • Cannot move across businesses without permission of the owner • Restrictions on bringing their family along Following oil price decline: • New taxes on foreign workers to raise government revenues Restrictions to the accumulation of knowledge
  18. 18. As a result , average job tenures for foreign w orkers is just 23 months 13.8 22.5 13.5 20.8 0 5 10 15 20 25 Saudis Immigrants Women Men Average job spells in Saudi Arabia labor market (months)
  19. 19. “US” VS. “THEM”
  20. 20. • 24% of the people in C hiapas belong to an indigenous gr oup, and oc c upy 50% of ter r itor y • Indigenous c ommunities ar e autonomous under Law of U s os y C os tumbr es i.e. land is c ommunal Tzotzil (20%) Tzeltal (44%) Ch´ol (10%) Tojolobal (10%) Mame, Mocho, Kakchiquel (8%) Zoque (8%) • Thes e tr ibes ar e quite dis tinc t fr om eac h other : differ ent or igins , differ ent dialec ts , differ ent gov er ning r ules
  21. 21. S trong ba r r ie rs to migra nts • Communal property is los t upon family migr ation • H efty fines impos ed on the family of migr ants
  22. 22. In spite of being poor, the chiapanecos are less prone to migrate 6.18 6.74 3.42 2.28 3.26 1.42 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 Total Urban Rural Migration rates (per 1,000 inhabitants) Rest of Mexico Chiapas
  23. 23. Those w ho manage t o migrat e, earn as much as any ot her Mexican migrant 0 20 40 60 80 100 120 140 Resto de Mexico Chiapas Total 100.0 67.2 15.1 51.6 115.1 118.8 * Monthly income, controlling for years of schooling, quality (ENLACE), experience, gender and indigenous. Monthly Income Migrant Premium Total monthly income Rest of Mexico Chiapas Monthly Income Migrant Premium Total monthly income
  24. 24. The absence of public transportation operates as a tax on salaries: Preventing indigenous communities to work urban while living rural 300 233 200 120 120 110 75 70 60 50 0 50 100 150 200 250 300 350 Director escuela Maestro de escuela (bilingüe) Trabajadores Prospera Electricista Albañil Ayudante fábrica Pox Otros trabajos (en San Cristóbal) Ayudante albañil Ayudas varias campos maíz/frijol Lavandería Cruzton: Daily salaries and cost of transportation (40 pesos round trip in shared cab) Salario diario Salario día (neto de transporte) 13% 17% 20% 33% 33% 36% 53% 57% 67% 80% Daily equivalent of monthly salaries (30 days) Wage per day Daily wage (urban) Daily wage (net of transportcosts)
  25. 25. Within indigenous communities, the “ us” doesn ´ t go beyond the f amily Social network of women in Cruztón, San Juan Chamula
  26. 26. The product space of Chiapas: Somehow a monkey has managed to survive alone
  27. 27. The product space of Chiapas: Somehow a monkey has managed to survive alone
  28. 28. Yazaki: The exception that confirms the rule
  29. 29. The pattern of expansion in Yazaki is highly informative: Move the jobs to where the people are 1,550 direct jobs
  30. 30. Some thoughts to conclude • Immigrants are like soccer referees • The sense of us is a feeling and –as such– is unlikely to be influenced by policy
  31. 31. We just see what we want to see…
  32. 32. Some thoughts to conclude • Immigrants are like soccer referees • The sense of us is a feeling and –as such– is unlikely to be influenced by policy • The way places define their sense of us has a significant impact on their growth potential and their capacity to bounce back from crises
  33. 33. THANKS!