Freund, Caroline

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Freund, Caroline

Macroeconomics Trade & Investment

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Macroeconomics Trade & Investment

Last updated January 31, 2023

Biography

Caroline Freund is Director of Trade, Regional Integration and Investment Climate. Previously she was a Senior Fellow at the Peterson Institute for International Economics. She has also worked as Chief Economist for the Middle East and North Africa at the World Bank, after working for nearly a decade in the international trade unit of the research department. Freund began her career in the international finance division of the Federal Reserve Board and spent a year visiting the research department of the IMF. She has published extensively in academic journals and is the author of Rich People Poor Countries: The Rise of Emerging Market Tycoons and their Mega Firms. She is a US national and received a PhD in economics from Columbia University.

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Now showing 1 - 10 of 26

What Constrains Africa’s Exports?

(World Bank, 2011-10-18) Freund, Caroline ; Rocha, Nadia

Africa's share of global exports has dropped by 50 percent over the last three decades. To stem this decline, aid for trade to the region has increased rapidly in recent years. Assistance can target improvements in three important components of trade facilitation: transit times, documentation, and ports and customs. Of these, transit delays have the most economically and statistically significant effect on exports. Specifically, a one day reduction in inland travel times leads to a 7 percent increase in exports, after controlling for the standard determinants of trade and potential endogeneity. Put another way, a one day reduction in inland travel times translates into a 2 percentage point decrease in all importing-country tariffs. By contrast, longer delays in the other areas have a far smaller impact on trade. Large transit delays are relatively more harmful because they are associated with high (within-country) variation, making delivery targets difficult to meet. Finally, the results imply that transit times are primarily about institutional features—such as border delays, road quality, fleet class and competition and security—and not geography.
All in the Family : State Capture in Tunisia

(World Bank, Washington, DC, 2014-03) Rijkers, Bob ; Freund, Caroline ; Nucifora, Antonio

This paper examines the relationship between regulation and the business interests of President Ben Ali and his family, using firm-level data from Tunisia for 1994-2010. Data on investment regulations are merged with balance sheet and firm-level census data in which 220 firms owned by the Ben Ali family are identified. These connected firms outperform their competitors in terms of employment, output, market share, profits, and growth and sectors in which they are active are disproportionately subject to authorization requirements and restriction on foreign direct investment. Consistent with theories of capture, performance differences between connected firms and their peers are significantly larger in highly regulated sectors. In addition, the introduction of new foreign direct investment restrictions and authorization requirements in narrowly defined five-digit sectors is correlated with the presence of connected firms and with their startup, suggesting that regulation is endogenous to state capture. The evidence implies that Tunisia's industrial policy was used as a vehicle for rent creation for the president and his family.
Exporter Dynamics Database

( 2012-10) Cebeci, Tolga ; Fernandes, Ana M. ; Freund, Caroline ; Pierola, Martha Denisse

This paper introduces the Exporter Dynamics Database. The database includes exporter characteristics and measures of exporter growth based on firm-level customs information from 38 developing and seven developed countries, primarily for the period between 2003 and 2010. The measures are available at different levels of aggregation, including: a) country-year, b) country-year-product, and c) country-year-destination. Several new stylized facts about exporter behavior across countries emerge from the database. (i) Larger or more developed economies have more exporters, larger and more diversified exporters, and lower entry and exit rates than smaller or developing economies. (ii) In the short run, expansions along the intensive margin (exporter size) contribute more to export growth than expansions along the extensive margin (number of exporters). (iii) Exit rates are highly correlated with entry rates and both are negatively correlated with survival rates, average exporter size, and diversification. (iv) The number of exporters and the entry and exit rates in a country-product group are partially driven by country and product-group effects; however, the average size of exporters in a country-product group is not. Although the first three facts can be explained by models incorporating firm heterogeneity and uncertainty, the fourth fact is more difficult to explain with existing models. Several findings are confirmed in this database, including the importance of large multi-product firms. This database can be a valuable tool to improve the understanding of the micro-foundations of export growth, by providing new insights about exporter characteristics and dynamics.
Export Superstars

(World Bank, Washington, DC, 2012-10) Freund, Caroline ; Pierola, Martha Denisse

This paper shows that the top 1 percent of exporters critically shape trade patterns, using firm-level data from 32 countries. In particular, variation in average firm size (the intensive margin) explains over two thirds of the variation in the sector distribution of exports across countries, the remaining share is explained by variation in the number of firms (the extensive margin). Variation in average firm size across sectors is largely driven by variation in the sectoral distribution of exports from the top 1 percent of firms in a country -- export superstars. In contrast, the sectoral distribution of exports from the remaining 99 percent of firms is more similar across countries, and the distribution of the total number of firms across sectors is very similar across countries. This paper also finds that current export superstars typically entered the export market relatively large, reached the top 1 percent after less than three years of exporting, and account for more than half of a country's total exports, export growth and diversification. The results underscore the role of individual firms in determining both trade volumes and trade patterns.
Infrastructure and Employment Creation in the Middle East and North Africa

(World Bank, Washington, DC, 2012-01) Freund, Caroline ; Ianchovichina, Elena

The report estimates Middle East and North Africa's (MENA's) infrastructure investment and maintenance needs through 2020 at 106 billion dollars per year or 6.9 percent of the annual regional gross domestic product (GDP). Developing oil exporting countries (OEC) will need to commit almost 11 percent of their GDP annually ($48 billion) on improving and maintaining their national infrastructure endowments, while the oil importing countries (OIC) and the Gulf Cooperation Council (GCC) oil exporters need approximately 6 and 5 percent of their GDP, respectively. Infrastructure investment has the potential to create jobs quickly, while providing a foundation for future growth. This is especially important in the oil importing countries, where the infrastructure gap is the greatest and employment needs are growing. However, it is also likely to be most difficult in these countries because of strained finances. Going forward, government decisions on what types of spending to expand and what to contract to achieve balanced budgets will have important implications for jobs. Prudent infrastructure development will be critical for short and long-term growth and job creation.
Deals and Delays : Firm-level Evidence on Corruption and Policy Implementation Times

(World Bank, Washington, DC, 2014-06) Freund, Caroline ; Hallward-Driemeier, Mary ; Rijkers, Bob

This paper examines whether demands for bribes for particular government services are associated with expedited or delayed policy implementation. The "grease the wheels" hypothesis, which contends that bribes act as speed money, implies three testable predictions. First, on average, bribe requests should be negatively correlated with wait times. Second, this relationship should vary across firms, with those with the highest opportunity cost of waiting being more likely to pay and face shorter delays. Third, the role of grease should vary across countries, with benefits larger where regulatory burdens are greatest. The data are inconsistent with all three predictions. According to the preferred specifications, ceteris paribus, firms confronted with demands for bribes take approximately 1.5 times longer to get a construction permit, operating license, or electrical connection than firms that did not have to pay bribes and, respectively, 1.2 and 1.4 times longer to clear customs when exporting and importing. The results are robust to controlling for firm fixed effects and at odds with the notion that corruption enhances efficiency.
Episodes of Unemployment Reduction in Rich, Middle-Income, and Transition Economies

(World Bank, Washington, DC, 2014-05) Freund, Caroline ; Rijkers, Bob

This paper studies the incidence and determinants of episodes of drastic unemployment reduction, defined as swift, substantial, and sustained declines in unemployment. Forty-three episodes are identified over a period of nearly three decades in 94 rich, middle-income, and transition countries. Unemployment reductions often coincide with an acceleration of growth and an improvement in macroeconomic conditions. Episodes are much more prevalent in countries with higher levels of unemployment and, given unemployment, are more likely in countries with better regulation. An efficient legal system that enforces contracts expeditiously is particularly important for reducing unemployment. The results imply that while employment is largely related to the business cycle, better regulation reduces the likelihood of high unemployment and facilitates a more rapid recovery in the event unemployment builds up.
What Constrains Africa's Exports?

(World Bank, Washington, DC, 2010-01) Freund, Caroline ; Rocha, Nadia

This paper examines the effects of transit, documentation, and ports and customs delays on Africa s exports. The authors find that transit delays have the most economically and statically significant effect on exports. A one-day reduction in inland travel times leads to a 7 percent increase in exports. Put another way, a one-day reduction in inland travel times translates to a 1.5 percentage point decrease in all importing-country tariffs. By contrast, longer delays in the other areas have a far smaller impact on trade. The analysis controls for the possibility that greater trade leads to shorter delays in three ways. First, it examines the effect of trade times on exports of new products. Second, it evaluates the effect of delays in a transit country on the exports of landlocked countries. Third, it examines whether delays affect time-sensitive goods relatively more. The authors show that large transit delays are relatively more harmful because of high within-country variation.
Which Firms Create the Most Jobs in Developing Countries? Evidence from Tunisia

(Elsevier, 2014-12) Rijkers, Bob ; Arouri, Hassen ; Freund, Caroline ; Nucifora, Antonio

This paper examines private sector job creation in Tunisia over the period 1996–2010 using a unique database containing information on all registered private enterprises, including self-employment. In spite of stable GDP growth, overall net job creation was disappointing and firm dynamics were sluggish. The firm size distribution has remained skewed towards small firms, because of stagnation of incumbents and entrants starting small, typically as one-person firms (i.e. self-employment). Churning is limited, especially amongst large firms, and very few firms manage to grow. Post-entry, small firms are the worst performers in terms of job creation, even if they survive. Moreover, the association between productivity, profitability and job creation is feeble, pointing towards weaknesses in the re-allocative process. Weak net job creation thus appears to be due to insufficient firm dynamism rather than excessive job destruction.
The Middle East and North Africa : A Year in Transition

(World Bank, Washington, DC, 2012-12) Freund, Caroline ; Ianchovichina, Elena ; Wood, Christina ; Mottaghi, Lili

This note is based on report entitled Looking Ahead after a Year in Transition that was issued by the Chief Economist s office of the Middle East and North Africa region of the World Bank. Egypt, Libya, Tunisia, and Yemen are given special attention because each of them experienced a revolution and a major political change in 2011 and is undergoing a process of political transition toward democracy. In each of the four focus countries, the transition authorities have been charged with implementing agreed time-bound actions leading to democratic elections for new constitutions, presidents and /or parliamentary bodies. Tunisia s new elections are expected to be held no later than June 30, 2013. Egypt lacks a full constitution and parliament, and the transition framework remains uncertain, having been reshaped multiple times by a series of constitutional declarations, laws, decrees, legal challenges and court rulings. Libya barring major disruptions appears to be on track to adopt its new constitution in 2013. In Yemen the new government led by President Hadi is overseeing a two year transition period that is to end with elections.