The Impact of FDI on the Poor by Nita Rudra and Siddharth Joshi Discussion by James Raymond Vreeland Georgetown University Globalization and the Politics of Poverty and Inequality Conference January 4-6, 2011

Plan “Production of knowledge” GDP/capita as a measure of welfare FDI & the poor

1) The “production of knowledge” How a paper becomes a publication ( http://www.schooltube.com/video/fcde4d15a9276c9a09d3/ )

How does an idea get into your textbooks? Get an idea, write a paper Present the paper Share informally with colleagues Present at conferences (small & large) Revise, revise, revise Send to a journal – 3 anonymous reviewers Reject return to step III, send to a new journal Revise & Resubmit return to step III, resubmit Accept polish, return to step I Time to publication? – Lim paper: March 2010 – January 2013 Time to a book? – 1998-2003, 2006-2014 Time to a textbook?...

2) GDP/capita as a measure of welfare

GDP/capita as a measure of welfare Drawbacks Ignores income distribution Ignores other factors: Health Education Freedom Others? Advantages Easier to measure than distribution Highly correlated with many other factors we care about

How to measure GDP/capita Exchange rate (“real”) Purchasing Power Parity (PPP) Compare ranking: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

3) FDI and the poor https://gushare. georgetown

Contributions Paper shows how economic development can be bad for the poor FDI increases local competition for scarce resources FDI is bad for the poor - lowers access to clean water Especially if there is high income inequality Methods: Case study Panel study of India Country cross-section PLUS: Creative ways of measuring the dependent variable The IPE of ADD FDI   (p31)

http://www. offsetwarehouse. com/about-us/why-buy-eco-textiles http://www.offsetwarehouse.com/about-us/why-buy-eco-textiles.html https://www.flickr.com/photos/barefootcollege/190584743/ http://www.ipna-online.org/fundraising/rationale/ http://rehydrate.org/shows/acute-diarrhoeal-diseases.htm

My main question: Why is this a story of FOREIGN investment? Note: insignificant effect of economic growth suggests FDI is special Test for INVESTMENT in general?

Mechanism: inequality or institutions? At times in the paper: “institutional environment” But democracy is not significant Story seems to be: Governments respond to pressure groups REGARDLESS of institutional environment If the middle class is strong, water is protected With high income inequality, owners of capital prevail and water quality declines for the poor Democracy/dictatorship does not matter In terms of our class: Is it interests and/or institutions?

Are there further connections between FDI and income inequality? Does FDI go to places with more income inequality? Does FDI cause income inequality? What might be the implications of these questions for the Rudra & Joshi study?

Net impact of FDI on the poor? FDI may raise Income Tax base FDI lowers access to water So, what is the net impact on the poor?

Take aways: How an idea becomes a paper, becomes a publication, becomes “knowledge” How to measure social welfare – pros and cons of GDP/capita PPP How FDI can hurt the poor (uses up their water!) “Progress” can leave the poor behind… even making them worse-off

Thank you

Quick methods suggestion Fixed effects in a cross-section: y(i,t)= a(i) + b’x(i,t) + e(i,t) y(i,t-1)= a(i) + b’x(i,t-1) + e(i,t-1) Δy(i)= b’ Δx(i) + Δe(i)