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BDS Current Issue Volume XLI, June 2018, Number 2

Trade Expansion, International Competitiveness and the Pursuit of Export Diversification in Bangladesh

Author: Rakhal Sarker

While export diversification has been central to many policy dialogues in Bangladesh, little effort has been made to investigate international competitiveness of major export sectors using longitudinal data. This paper contributes to the export diversification literature by measuring and comparing international export competitiveness of five major export sectors in Bangladesh employing data from 1980 to 2013. The expansion of readymade garments export from Bangladesh has been phenomenal. Exports of fish and seafood also increased slowly. The exports of other three sectors, however, declined. While three of the five sectors considered in this study enjoyed international competitiveness, the export competitiveness of only two sectors increased over time. These results underscore export diversification challenges faced by Bangladesh and possible pathways.

Returns to Schooling in Bangladesh Revisited: An Instrumental Variable Quantile Regression Approach

Author: Mustafizur Rahman & Md. Al-Hasan

The paper focuses on estimation of returns to schooling in the Bangladesh context. Earlier studies which tried to quantify the returns were constrained by a number of factors including the limitations of the measurement techniques that were deployed. This paper revisits the issue and makes an attempt to build on earlier scholarly works through application of quantile regression and instrumental variable quantile regression methods. The paper finds that endogeneity problem leads to underestimation of the returns to schooling, and that the returns tend to vary along the wage distribution, which mean regression models fail to capture. The analysis shows that average returns to schooling for female is higher than that of male. The analysis also shows that returns to schooling tends to be higher as one moves along higher percentiles of wage distribution. This is found to be true both for male and female, as also for rural and urban labour markets.

Quality of Growth in Bangladesh: Some New Evidence

Author: Kazi Iqbal & Md.Nahid Ferdous Pabon

In this short note, we take a fresh look at some aspects of quality of growth in Bangladesh – the role of growth in reducing poverty, generating employment and containing inequality. Our analysis is primarily based on the measures of elasticities using both primary and secondary data. We find that the elasticity of poverty with respect to national income has been declining very fast over time, indicating the gradual ineffectiveness of growth in reducing poverty. While inequality in income and consumption has been increasing, the elasticity of Gini with respect to national income has been declining. It indicates that economic growth has now been associated with lesser inequality. We also shed light on the debate of “jobless growth” and cast doubt on this proposition as we find that the income-elasticity of employment has been increasing over time.

The Impacts of Fossil Fuel Subsidy Removal on Bangladesh Economy

Author: Sakib Amin, Laura Marsiliani & Thomas Renstrom

This paper investigates how the removal of fossil fuel subsidy affects the welfare of a small, oil-importing country like Bangladesh. In doing so, an energy augmented Dynamic Stochastic General Equilibrium (DSGE) model is developed. The model is calibrated and simulated for the Bangladesh economy under three scenarios, and the results reveal that a 10 per cent reduction in fossil fuel subsidy results in an overall increase in household welfare by 0.36 per cent.  However, complete removal of fossil fuel subsidy would increase welfare by 1.89 per cent. The results also show that the subsidy removal schemes improve the country’s fiscal burden. We highlight the fact that fossil fuel subsidy acts as a barrier to the development of renewable energy technologies in Bangladesh which can play a significant role in promoting the country's future energy security. So, the paper suggests that the government should use the revenue earned from the fuel subsidy removal to offer incentives to new electricity generators who would enter in the market planning to produce electricity with renewable technology. Following a revenue-neutral subsidy scheme, the government should also encourage the existing electricity generators to adopt renewable technologies in generating electricity.

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