Aaditya Mattoo
Arvind Subramanian
Dominique van der Mensbrugghe

\ue010e Wo\ue00eld B\ue007n\ue008
Develo\ue009ment Re\ue00ae\ue007\ue00ec\ue00b G\ue00eou\ue009
T\ue00e\ue007de \ue007nd Integ\ue00e\ue007tion Te\ue007m
Novembe\ue00e 2009

Te Policy Research Working Paper Series disseminates the \ue000ndings o\ue001 work in progress to encourage the exchange o\ue001 ideas about development issues. An objective o\ue001 the series is to get the \ue000ndings out quickly, even i\ue001 the presentations are less than \ue001ully polished. Te papers carry the names o\ue001 the authors and should be cited accordingly. Te \ue000ndings, interpretations, and conclusions expressed in this paper are entirely those o\ue001 the authors. Tey do not necessarily represent the views o\ue001 the International Bank \ue001or Reconstruction and Development/World Bank and its afliated organizations, or those o\ue001 the Executive Directors o\ue001 the World Bank or the governments they represent.

\ue010e\ue00ee i\ue00a g\ue00eowing cl\ue007mo\ue00e in indu\ue00at\ue00ei\ue007l count\ue00eie\ue00a fo\ue00e
\ue007ddition\ue007l bo\ue00ede\ue00e t\ue007xe\ue00a on im\ue009o\ue00et\ue00a f\ue00eom count\ue00eie\ue00a wit\ue00b
lowe\ue00e c\ue007\ue00ebon \ue009\ue00eice\ue00a. \ue010e \ue007ut\ue00bo\ue00e\ue00a con\ue00c\ue00em t\ue00be \ue00cnding\ue00a
of ot\ue00be\ue00e \ue00ee\ue00ae\ue007\ue00ec\ue00b t\ue00b\ue007t unil\ue007te\ue00e\ue007l emi\ue00a\ue00aion\ue00a cut\ue00a b\ue00f
indu\ue00at\ue00ei\ue007l count\ue00eie\ue00a will \ue00b\ue007ve minim\ue007l c\ue007\ue00ebon le\ue007\ue008\ue007ge
e\ue00dect\ue00a. Howeve\ue00e, out\ue009ut \ue007nd ex\ue009o\ue00et\ue00a of ene\ue00eg\ue00f-inten\ue00aive
m\ue007nuf\ue007ctu\ue00ee\ue00a \ue007\ue00ee \ue009\ue00eojected to decline \ue009otenti\ue007ll\ue00f c\ue00ee\ue007ting
\ue009\ue00ee\ue00a\ue00au\ue00ee fo\ue00e t\ue00e\ue007de \ue007ction. A \ue008e\ue00f f\ue007cto\ue00e \ue007\ue00decting t\ue00be
im\ue009\ue007ct of \ue007n\ue00f bo\ue00ede\ue00e t\ue007xe\ue00a i\ue00a w\ue00bet\ue00be\ue00e t\ue00be\ue00f \ue007\ue00ee b\ue007\ue00aed on
t\ue00be c\ue007\ue00ebon content of im\ue009o\ue00et\ue00a o\ue00e t\ue00be c\ue007\ue00ebon content
in dome\ue00atic \ue009\ue00eoduction. \ue010ei\ue00e qu\ue007ntit\ue007tive e\ue00atim\ue007te\ue00a
\ue00augge\ue00at t\ue00b\ue007t t\ue00be fo\ue00eme\ue00e \ue007ction w\ue00ben \ue007\ue009\ue009lied to \ue007ll

\ue010i\ue00a \ue009\ue007\ue009e\ue00e\u2014\ue007 \ue009\ue00eoduct of t\ue00be T\ue00e\ue007de \ue007nd Integ\ue00e\ue007tion Te\ue007m, Develo\ue009ment Re\ue00ae\ue007\ue00ec\ue00b G\ue00eou\ue009\u2014i\ue00a \ue009\ue007\ue00et of \ue007 l\ue007\ue00ege\ue00e e\ue00do\ue00et in t\ue00be de\ue009\ue007\ue00etment to unde\ue00e\ue00at\ue007nd t\ue00be \ue009olic\ue00f im\ue009lic\ue007tion\ue00a of inte\ue00en\ue007tion\ue007l economic integ\ue00e\ue007tion. Polic\ue00f Re\ue00ae\ue007\ue00ec\ue00b Wo\ue00e\ue008ing P\ue007\ue009e\ue00e\ue00a \ue007\ue00ee \ue007l\ue00ao \ue009o\ue00ated on t\ue00be Web \ue007t \ue00btt\ue009://econ.wo\ue00eldb\ue007n\ue008.o\ue00eg. \ue010e \ue007ut\ue00bo\ue00e m\ue007\ue00f be cont\ue007cted \ue007t \ue007m\ue007ttoo@wo\ue00eldb\ue007n\ue008.o\ue00eg.

me\ue00ec\ue00b\ue007ndi\ue00ae im\ue009o\ue00et\ue00a would \ue007dd\ue00ee\ue00a\ue00a com\ue009etitivene\ue00a\ue00a
\ue007nd envi\ue00eonment\ue007l conce\ue00en\ue00a in \ue00big\ue00b income count\ue00eie\ue00a
but wit\ue00b \ue00ae\ue00eiou\ue00a con\ue00aequence\ue00a fo\ue00e t\ue00e\ue007ding \ue009\ue007\ue00etne\ue00e\ue00a. Fo\ue00e
ex\ue007m\ue009le, C\ue00bin\ue007\u2019\ue00a m\ue007nuf\ue007ctu\ue00eing ex\ue009o\ue00et\ue00a would decline
b\ue00f one-\ue00cft\ue00b \ue007nd t\ue00bo\ue00ae of \ue007ll low \ue007nd middle income
count\ue00eie\ue00a b\ue00f 8 \ue009e\ue00e cent; t\ue00be co\ue00e\ue00ee\ue00a\ue009onding decline\ue00a in \ue00ee\ue007l
income would be 3.7 \ue009e\ue00e cent \ue007nd 2.4 \ue009e\ue00e cent. Bo\ue00ede\ue00e
t\ue007x \ue007dju\ue00atment b\ue007\ue00aed on t\ue00be c\ue007\ue00ebon content in dome\ue00atic
\ue009\ue00eoduction, e\ue00a\ue009eci\ue007ll\ue00f if \ue007\ue009\ue009lied to bot\ue00b im\ue009o\ue00et\ue00a \ue007nd
ex\ue009o\ue00et\ue00a, would b\ue00eo\ue007dl\ue00f \ue007dd\ue00ee\ue00a\ue00a t\ue00be com\ue009etitivene\ue00a\ue00a
conce\ue00en\ue00a of \ue009\ue00eoduce\ue00e\ue00a in \ue00big\ue00b income count\ue00eie\ue00a \ue007nd le\ue00a\ue00a
\ue00ae\ue00eiou\ue00al\ue00f d\ue007m\ue007ge develo\ue009ing count\ue00e\ue00f t\ue00e\ue007de.

*World Bank, **Peterson Institute for International Economics, Center for Global Development, and Johns
Hopkins University. The views represent those of the authors and not of the institutions to which the
authors are affiliated. We would like to thank Nancy Birdsall, Bill Cline, Meera Fickling, Anne Harrison,
Gary Hufbauer, Jakob Kierkegaard, Jisun Kim, Mike Mussa, Caglar Ozden, Jairam Ramesh, Dani Rodrik,
John Williamson and, especially, Will Martin, Hans Timmer, and Michael Toman, as well as participants at
seminars at the Peterson Institute for International Economics and World Bank for helpful discussions.
Thanks also to Jolly La Rosa for excellent assistance with compiling the paper.