Person:
Freund, Caroline
Author Name Variants
Fields of Specialization
Degrees
External Links
Departments
Macroeconomics Trade & Investment
Externally Hosted Work
Contact Information
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.
Publication Search Results
1 - 10 of 13
-
Publication
What Constrains Africa’s Exports?
(World Bank, 2011-10-18)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. -
Publication
All in the Family : State Capture in Tunisia
(World Bank, Washington, DC, 2014-03)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. -
Publication
The Anatomy of China's Export Growth
(World Bank, Washington, DC, 2008-05)Decomposing China's real export growth, of over 500 percent since 1992, reveals a number of interesting findings. First, China's export structure changed dramatically, with growing export shares in electronics and machinery and a decline in agriculture and apparel. Second, despite the shift into these more sophisticated products, the skill content of China's manufacturing exports remained unchanged, once processing trade is excluded. Third, export growth was accompanied by increasing specialization and was mainly accounted for by high export growth of existing products (the intensive margin) rather than in new varieties (the extensive margin). Fourth, consistent with an increased world supply of existing varieties, China's export prices to the United States fell by an average of 1.5 percent per year between 1997 and 2005, while export prices of these products from the rest of the world to the United States increased by 0.4 percent annually over the same period. -
Publication
Export Surges : The Power of a Competitive Currency
(World Bank, Washington, DC, 2008-10)How can countries stimulate and sustain strong export growth? To answer this question, the authors examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least seven years. They find that export surges in developing countries tend to be preceded by a large real depreciation-which leaves the exchange rate significantly undervalued-and a reduction in exchange rate volatility. In contrast, in developed countries, the role of the exchange rate is less pronounced. The authors examine why the exchange rate is so important in developing countries and find that the depreciation leads to a significant reallocation of resources in the export sector. In particular, depreciation generates more entries into new export products and new markets, and the percentage of new entries that fail after one year declines. These new products and new markets are important, accounting for 25 percent of export growth during the surge in developing countries. The authors argue that maintaining a competitive currency leads firms to expand the product and market space for exports, inducing a large reorientation of the tradable sector. -
Publication
Deals and Delays : Firm-level Evidence on Corruption and Policy Implementation Times
(World Bank, Washington, DC, 2014-06)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. -
Publication
Which Firms Create the Most Jobs in Developing Countries? Evidence from Tunisia
(Elsevier, 2014-12)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. -
Publication
The Middle East and North Africa : A Year in Transition
(World Bank, Washington, DC, 2012-12)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. -
Publication
All in the Family : State Capture in Tunisia
(World Bank, Washington, DC, 2014-05)Understanding state-business relationships and how they have shaped the institutional architecture of countries in the Middle East and Northern Africa (MENA) is crucial for the identification of systemic vulnerabilities and reform priorities. In this paper, the authors examine the relationship between regulation and the business interests of President Ben Ali and his family, using unique firm-level data from Tunisia for 1994 to 2010, and document how Tunisia s investment policy was abused to serve the president s family s private interests. In spite of widespread recognition of its importance, empirical evidence on state capture has been limited by a lack of data. To redress this lacuna, the authors merge data on investment regulations with balance sheet and firm-level census data in which 220 firms owned by the Ben Ali family are identified. The data set assembled allows identifying the relationship between investment policies and the business interests of Tunisia's politicians. Tunisians today literally continue to pay the price of privileges extended to an elite group of entrepreneurs. Reform efforts have not yet resulted in an opening up of economic opportunities for all, which is unfortunate since this was one of the central demands of those who took the streets a little over three years ago. -
Publication
Champions Wanted: Promoting Exports in the Middle East and North Africa
(Washington, DC: World Bank, 2015-04-08)While other emerging regions were thriving, MENA's aggregate export performance over the past two decades has been consistently weak. Using detailed firm-level export data from Customs administrations, this report explains why. One central finding is that the size distribution of MENA's exporting firms is suggestive of a critical weakness at the top. With the exception of the top firm, MENA's elite exporters are smaller and weaker compared to their peers in other regions. The largest exporter is alone at the top-Zidane without a team. MENA countries have failed to nurture a group of export superstars which critically contribute to export success in other regions. Part of the reason behind weak export performance is the lack of a competitive real exchange rate. The deleterious effects of an uncompetitive currency can be traced all the way down to the firm, hurting expansion at the intensive and extensive margin and preventing the emergence of export take-offs. The lack of heavy weight exporters at the top of the distribution also reflects the region's failure to push for trade and business climate reforms energetically. Finally, MENA's prevalent cronyism and corruption under pre-Arab Spring regimes (at least) confirms that business-government ties led to distortionary allocation of favors and rent dissipation by beneficiary firms, with little evidence that those firms developed into national champions or helped lift the region's export performance. The possibility of state capture in itself should call for caution when advocating any form of government intervention. In contrast, some interventions, like export promotion programs show effects on small exporters. However, because these firms are marginal in trade, such programs cannot be game changers. More broadly, the success of MENA countries in promoting export growth and diversification as well as generating jobs depends heavily on their ability to create an environment where large firms can invest and expand exports and new, efficient firms can rise to the top. -
Publication
All in the Family: State Capture in Tunisia
(Elsevier, 2017-01)We examine the relationship between entry regulation and the business interests of former President Ben Ali’s family using firm-level data from Tunisia. Connected firms account for a disproportionate share of aggregate employment, output and profits, especially in sectors subject to authorization and restrictions on FDI. Quantile regressions show that profit and market share premia from being connected increase along the firm-size distribution, especially in highly regulated sectors. These patterns are partly explained by Ben Ali’s relatives sorting into the most profitable sectors. The market shares of connected firms are positively correlated with exit and concentration rates in highly regulated sectors. Although causality is difficult to establish, the results are consistent with the hypothesis that the Ben Ali clan abused entry regulation for private gain at the expense of reduced competition.