The Custom-House

"When tariff policy is laid out in this way, it looks literally insane."

Tim Taylor, the Conversible Economist, describes the impact of the 2009 tariff on tires from China:

When tariff policy is laid out in this way, it looks literally insane. No one would ever advocate a policy of imposing a tax worth $1.1 billion on all U.S. purchasers of tires, with $48 million to go to actual workers who produce tires, $250 million to go to U.S tire companies, and $800 million of the revenue from that tax to go to foreign tire producers.

Based on a recent Policy Brief by Gary Clyde Hufbauer and Sean Lowry of the Peterson Institute: US Tire Tariffs: Saving Few Jobs at High Cost.

 

 

Costa Rican Colonoscopies

Mark Perry at Carpe Diem: Colonoscopy: $9,000 in the U.S.; $350 in Costa Rica

Let's permit Medicaid and Medicare payments to authorized hospitals in India...

... and in Mexico, Thailand, and elsewhere abroad: Outsourcing Health Care To Countries That Appreciate Efficiency (Adam Ozimek channeling Tyler Cowen channeling Ragharum Rajan).

Rajan argues that this would stimulate competition and innovation in U.S. health care.  Ozimek cites a 2008 paper from the journal Health Care - the abstract reads:

Recent discussions in health reform circles have pinned great hopes on the
prospect of innovation as the solution to the high-cost, inadequate-quality U.S. health system.  But U.S. health care institutions—insurers, providers, and specialists—have ceded
leadership in innovation to Indian hospitals such as Care Hospital in Hyderabad and the
Fortis Hospitals around New Delhi, which have U.S.-trained doctors and can perform open
heart surgery for $6,000 (compared to $100,000 in the United States). The Indian success
is a window into America’s stalemate with inflating costs and stagnant innovation.

China's Interest in the Arctic

Linda Jakobson of the Stockholm International Peace Research Institute reports that potential Arctic sea routes to New York and Europe have attracted the attention of the Chinese: China prepares for an ice-free Arctic:

Because China’s economy is reliant on foreign trade, there are substantial commercial implications if shipping routes are shortened during the summer months each year. Nearly half of China’s gross domestic product (GDP) is thought to be dependent on shipping. The trip from Shanghai to Hamburg via the Northern Sea Route—which runs along the north coast of Russia from the Bering Strait in the east to Novaya Zemlya in the west—is 6400 kilometres shorter than the route via the Strait of Malacca and the Suez Canal... Moreover, due to piracy, the cost of insurance for ships travelling via the Gulf of Aden towards the Suez Canal increased more than tenfold between September 2008 and March 2009.

How did Paul Krugman get that way?

A great profile on Paul Krugman by Larissa Mac Farquhar in the March 1 New Yorker: The Deflationist. How Paul Krugman found politics.  Every part of this is interesting.  

Why economics?  And especially international economics?

Militarism and trade

Daron Acemoglu and Pierre Yared argue that militaristic states are less likely to engage in trade (NBER Working Paper 15694):

Despite the major advances in information technology that have shaped the recent wave of globalization, openness to trade is still a political choice, and trade policy can change with shifts in domestic political equilibria. This paper suggests that a particular threat and a limiting factor to globalization and its future developments may be militarist sentiments that appear to be on the rise among many nations around the globe today.

The evidence?

We proxy militarism by spending on the military and the size of the military, and document that over the past 20 years, countries experiencing greater increases in militarism according to these measures have had lower growth in trade. Focusing on bilateral trade flows, we also show that controlling flexibly for country trends, a pair of countries jointly experiencing greater increases in militarism has lower growth in bilateral trade.

Really Good News From China and Brazil

Clive Cookson reports that there's been a "64-fold increase in [Chinese] peer-reviewed scientific papers since 1981": China scientists lead world in research growth.  Projecting ahead:

Jonathan Adams, research evaluation director at Thomson Reuters, said China’s “awe-inspiring” growth had put it in second place to the US – and if it continues on its trajectory it will be the largest producer of scientific knowledge by 2020.

The Benefits of NAFTA

Lorenzo Caliendo and Fernando Parro provide Estimates of the Trade and Welfare Effects of NAFTA:

In this paper we build into a Ricardian model the role of trade in intermediate inputs, sectoral linkages and differing productivity levels across sectors. The model can be used for both ex-ante and ex-post trade policy evaluation. We also propose a new method to  estimate sectoral trade elasticities. Estimation requires only trade and tariff data and does not require the assumption of bilaterally symmetric trade costs. With the model and estimates of sectoral trade elasticities for the year 1993, we evaluate the trade and welfare effects of the North American Free Trade Agreement (NAFTA). We do so by incorporating into the model the change in tariffs from 1993 to 2005 to calculate the implied changes in exports and imports. We compare these calculated changes to their observed counterparts and …find that the model matches the observed outcomes well. We fi…nd that as a consequence of the tariff reductions, real wages increased in all NAFTA countries. Mexico had the largest gains, while Canada and the United States gained relatively more from trade liberalization against the rest of the world than from trade liberalization within NAFTA over the sample period.

A little more detail:

What were the welfare effects of NAFTA? Real wages increased in all NAFTA countries and Mexico had the largest gains. Almost 90% of the welfare gains and half of the increase in real wages for Mexico can be attributed to having access to cheaper intermediate goods. Canada and the United States gained relatively more than Mexico from liberalizing against the rest of the world.

Thanks to Jonathan Dingel (Job market papers in international trade) for the pointer.

Blog "Health Tourism"

Keith Pollard (of Intuition Communications, Ltd - "The company owns and operates a network of web sites that provide advice and information for patients in the UK and overseas who are seeking treatment and healthcare services.") provides policy oriented medical tourism discussion on his weblog Health Tourism.

Recent posts discuss Korea's potential as a destination, dental tourism in Budapest, and transparency and fraud in health tourism.  Infrequent posts since 2006.  Does look like a helpful resource.

The "local-market bias" in consumption of health care

Aaditya Mattoo and Randeep Rathindran explain How Health Insurance Inhibits Trade In Health Care (Health Affairs, 2006).   Many medical treatments can be obtained abroad for a lot less than they cost in the U.S.  "Medical tourism" could be a big money-saver for Americans.  But there are obstacles:

Most travel is for procedures not adequately covered by home-country health insurance; this suggests that a key impediment to trade is the nature of existing health insurance plans. We find that most plans do not cover treatment abroad; if they do, the consumer must bear the full costs of travel and obtains only a fraction of any cost savings. Since the costs of travel are usually greater than any out-of-pocket savings, the adequately insured have little incentive to travel, which results in a strong “local-market bias” in the consumption of health care.

There is a simple solution: The terms of insurance coverage should be neutral to the location of the provider, and reimbursement should be based on the costs of treatment inclusive of travel costs. This would be sufficient to ensure that the consumer has an incentive to travel if, and only if, there were any gains from trade. 

There are two other things to think about:

First, the scope for trade will be greatly increased if providers in destination countries improve the quality of care and are able to credibly signal these improvements by obtaining accreditation from source-country health regulators. Second, destination countries will need to use at least part of the revenues from increased inflows of foreign patients to ensure improved health care access for their own poorer citizens.