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In the first segment of the session,
we spent some time looking at administrative globaloney and
why it's a better idea to think of the world not as something that is globally
administered or even regionally administered, but as a world in which most
of the administrative action is still at the national or the subnational level.
What we're going to do in this segment is look at how
differences across these national administrative entities, countries,
how administered differences across them influence their international actions.
And perhaps the place to start is with this little table on
the CAGE distance framework that I've already put up in earlier sessions.
So, when we talk about administrative distance, we're talking about factors like
lack of colonial ties, lack of shared regional trading blocks,
lack of a common currency, political hostility, whether a country has a closed
economy, whether it's particularly home biased, whether institutions are weak,
whether the society is internally subject to conflict, etc.
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And so of these administrative variables, I took the ones that are in bold and
along with the other variables in bold on this particular side,
slide, ran multivariate regressions trying to
explain bilateral flows between each possible pair of countries.
To start with the trade results first, and here I'm focusing on
merchandise trade and I'm oh, only reporting the results for
some of the, some of the variables that were included in the regressions.
What we see actually having a colonial linkage in one's past, a colony-colonizer
tie, boost trade by more than 100% relative to the level that one would
expect of two otherwise similar countries that didn't share that colonial era tie.
So, that's a very large effect ha, being part of a common regional trade agreement.
The second bar in this particular chart ha does have a significant defective as well.
But the effect is relatively small, reminding us that there are varieties of
different trade agreements in terms of how effective they actually are at
achieving their stated goal of boosting trade integration.
And so, just as we saw for
common language, colonial linkage in particular is an administrative factor
that seems to affect not just trade flows, but flows all across the board.
So, on this slide, I've summarized how much 12 different categories
of cross-border interactions are boosted by situations in which the two countries
are being, being looked at actually had a colony-colonizer link in their past.
And we find that the impact of this is invariably positive,
generally statistically significant in all but two of cases.
And the median effect is actually a little bit greater than 100%, ranging from a low
of 62% for international tourist arrivals to a high of a 400% boost on
immigration intensities if two countries had this kind of colonial era tie.
So so just like common language helps explain a whole bunch
of cross-border actions administratively, having a colony-colonizer
linkage in the past helps explain a whole bunch of cross-border interaction.
And in fact, a common trade agreement also has
a positive significant effect in the case of about half the variables or
half the types of flows listed on this particular chart.
More broadly, there have been literally dozens, if not hundreds of studies,
actually looking at how other kinds of administrative variables also
affect international interactions, especially trade.
And some of the kinds of variables that have been found to
have had a significant positive effect if they connote similarity or
a significant negative effect, if they connote a difference,
turned out to significant across at least number of different studies.
So, having the same currency tends to boost international interactions,
differences in corruption levels tend to dampen international interactions, so
forth and so on.
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So, what one is left with is a sense that there are myriad administrative factors
that affect whether two countries are relatively close to each other or
relatively apart, far apart from each other.
And that myriad of policy factors starts to suggest, obviously, all kinds of policy
levers that could be pulled to a greater extent than, say, in the case of some of
the geographic elements of distance that we will look at in the next session.
Those are a little bit hard to manipulate in some respects through policy choices.
In contrast, these kinds of administrative factors really do fall under the influence
of governmental policies, and therefore are a place to start in terms of thinking
about how a country might go about boosting its international connectivity.
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Pankaj GhemawatProfessor of Strategic Management Anselmo Rubiralta Chair of Strategy and Globalization
