Person: Freund, Caroline
Macroeconomics Trade & Investment
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Last updated: November 1, 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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Publication All in the Family : State Capture in Tunisia(World Bank, Washington, DC, 2014-03) Nucifora, Antonio; Rijkers, Bob; Freund, CarolineThis 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 All in the Family : State Capture in Tunisia(World Bank, Washington, DC, 2014-05) Nucifora, Antonio; Rijkers, Bob; Freund, CarolineUnderstanding 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 Which Firms Create the Most Jobs in Developing Countries? Evidence from Tunisia(World Bank Group, Washington, DC, 2014-10) Arouri, Hassen; Rijkers, Bob; Nucifora, Antonio; Freund, CarolineThis 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 growth of gross domestic product, overall net job creation was disappointing and firm dynamics were sluggish. The firm size distribution has remained skewed toward small firms, because of stagnation of incumbents and entrants starting small, typically as one-person firms (self-employment). Churning is limited, especially among large firms, and few firms manage to grow. Post-entry, small firms are the worst performers for 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 Which Firms Create the Most Jobs in Developing Countries? Evidence from Tunisia(Elsevier, 2014-12) Rijkers, Bob; Freund, CarolineThis 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 All in the Family: State Capture in Tunisia(Elsevier, 2017-01) Rijkers, Bob; Freund, CarolineWe 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.Publication The Middle East and North Africa : A Year in Transition(World Bank, Washington, DC, 2012-12) Wood, Christina; Freund, Caroline; Ianchovichina, Elena; Mottaghi, LiliThis 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.