Content Type: Working Paper / Topic: International Trade and Finance

1401. A Free Trade Area of the Americas: Implications of Success or Failure for the Members of the OAS

Author:: Stephen Keat
Publication Date:: 08-2002
Content Type:: Working Paper
Institution:: The North-South Center, University of Miami
Abstract:: Ongoing negotiations involving all the nations in the Americas except for Cuba are aimed at agreeing on a Free Trade Area of the Americas (FTAA or ALCA in Spanish) “from Alaska to Tierra del Fuego” by 2005. In addition to potentially revolutionizing the economies of some of the members of the Organization of American States (OAS), an FTAA will have major political, social, and even military ramifications for the Inter-American System. Failure to agree, however, will not just leave the member states with the present status quo. It would have negative impacts in the above-cited areas.
Topic:: International Organization and International Trade and Finance
Political Geography:: America

1402. Economic Convergence through Savings, Trade and Technology Flows—Lessons from Recent Research

Author:: Per Botolf Maurseth
Publication Date:: 10-2002
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: This paper reviews the theoretical and empirical literature on income disparity between countries and convergence in economic growth. New theoretical models modify and often reverse the prediction of convergence in the traditional neo-classical model of economic growth. A particular feature of the recent literature as compared to traditional studies of economic growth is that it acknowledges interdependence between countries. International capital flows, trade in goods and (maybe most important) international technology flows influence individual countries growth performance. The empirical literature on the dynamics of the international distribution of income per capita reveals massive unconditional divergence in income levels. For sub-samples of countries on the other hand, the data support the conditional convergence hypothesis: when other factors are accounted for, there is a tendency for income per capita to converge. For the OECD countries, as well as for some other countries, knowledge flows, either embodied in traded goods or disembodied seem to be important for whether poorer countries are able to catch up with richer ones.
Topic:: International Relations, Economics, International Trade and Finance, and Science and Technology

1403. International R Spillovers and the Effect of Absorptive Capacity

Author:: Leo A. Grünfeld
Publication Date:: 08-2002
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: We study the productivity effects of R spillovers through imports, foreign direct investment and domestic intermediates, using a highly disaggregated data set for Norwegian business sectors. As opposed to the large body of similar studies, we explicitly analyse the importance of absorptive capacity effects, claiming that the positive contribution from R spillovers is an increasing function of the R activities of the economic units that receive the spillovers. We find strong support for the existence of R spillovers through imports and domestic intermediates, but no sign of such spillovers through foreign ownership. Surprisingly, we identify absorptive capacity effects relating to spillovers from imports, but no such effects with respect to domestic intermediates. One possible explanation is that the cost of learning from international R sources is larger than from domestic R sources, implying that own R investments can counteract the negative effect of geographical and cultural distance on R spillovers.
Topic:: International Relations, Economics, Industrial Policy, and International Trade and Finance
Political Geography:: Norway

1404. Multinationals Searching for R Spillovers

Author:: Leo A. Grünfeld
Publication Date:: 08-2002
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: This paper surveys the literature on R and technology spillovers as a motive for FDI. During the last years, a growing body of theoretical studies has generated formal arguments supporting the economic rationale for such behaviour. Yet, theoretical contributions are clustered within a few schools and a wider approach is necessary in order to understand the mechanisms that relate R spillovers to FDI. The empirical literature is more numerous, but provides ambiguous conclusions with respect to the strength of this motive. Micro studies provide less supportive results as compared to studies based on more aggregate data. Studies based on patent information are generally supportive to the existence of this motive.
Topic:: International Relations, Economics, International Trade and Finance, and Science and Technology

1405. International R Spillovers and the Absorptive Capacity of Multinationals

Author:: Leo A. Grünfeld
Publication Date:: 08-2002
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: This paper studies R spillovers as a motive for firms to go multinational. The establishment of a foreign subsidiary may increase a firm's ability to learn from foreign R activity since R spillovers between firms are moderated by geographical distance. As opposed to earlier studies on this subject, we also model the concept of absorptive capacity where spillovers are endogenised as a function of the firms'own R investments. We employ a three-stage Cournot duopoly model to identify under what conditions a firm chooses to service a foreign market through exports or localised production (going multinational). With exogenous R investments, the absorptive capacity effect contributes to increase the gains from going multinational when the firm is a technology leader in terms of R If R investments are endogenous, only medium-sized absorptive capacity effects will result in firms going multinational. Also, higher spillover rates do not necessarily drive down R and profits for the multinational firm. This stands in contrast to models that ignore the aspect of absorptive capacity.
Topic:: International Relations, Economics, International Trade and Finance, and Science and Technology

1406. The Epidemiology of Microeconomic Expectations

Author:: Christopher D. Carroll
Publication Date:: 12-2001
Content Type:: Working Paper
Institution:: The Brookings Institution
Abstract:: Since the foundational work of Keynes (1936), macroeconomists have emphasized the importance of agents' expectations in determining macroeconomic outcomes. Yet in recent decades macroeconomists have devoted almost no effort to modeling actual empirical expectations data, instead assuming all agents' expectations are 'rational.' This paper takes up the challenge of modeling empirical household expectations data, and shows that a simple, standard model from epidemiology does a remarkably good job of explaining the deviations of household inflation and unemployment expectations from the 'rational expectations' benchmark. Furthermore, a microfoundations or 'agent-based' version of the model may be able to explain, in a way that still permits aggregation, stark rejections of the pure rational expectations framework like Souleles's (2002) finding that members of different demographic groups have sharply different predictions for macroeconomic aggregates like the inflation rate.
Topic:: Economics and International Trade and Finance
Political Geography:: United States and Latin America

1407. Evolution of Japan's Policy Toward Economic Integration

Author:: Naoko Munakata
Publication Date:: 12-2001
Content Type:: Working Paper
Institution:: The Brookings Institution
Abstract:: On October 22, 2000, Japanese Prime Minister Yoshiro Mori and Singapore Prime Minister Goh Chok Tong agreed to formal negotiations for the Japan-Singapore Economic Agreement for a New Age Partnership (JSEPA) in January 2001, in light of the September 2000 report from the Japan-Singapore Free Trade Agreement (JSFTA) Joint Study Group. It was the first time Japan entered into negotiations concerning regional economic integration. With a strong emphasis on the need to address the new challenges globalization and technological progress pose; the Joint Study Group explored a possible .New Age FTA. between the two countries, which Prime Minister Goh proposed in December 1999. Thus, for Japan the JSEPA marked a major turning point in promoting regional economic integration.
Topic:: Security, Foreign Policy, and International Trade and Finance
Political Geography:: Russia, United States, Japan, China, Europe, Israel, and Asia

1408. Complementarity and Social Networks

Author:: Yann Bramoulle
Publication Date:: 10-2001
Content Type:: Working Paper
Institution:: The Brookings Institution
Abstract:: I investigate complementarity games played on graphs, which model negative externalities embedded in structures of interaction. On the complete graph, the traditional economic analysis applies: the number of agents playing one strategy is proportional to its payoff. I show that, in general and contrary to coordination games, the structure crucially influences the equilibria. On an important class of graphs, called bipartite graphs, the equilibria do not depend on strategies' payoffs. On certain highly asymmetric graphs, an increase in the payoff of a strategy even decreases the number of agents playing this strategy. In most cases, equilibria do not maximize welfare.
Topic:: Economics and International Trade and Finance
Political Geography:: United States and Latin America

1409. The Japan-China Summit and Joint Declaration of 1998: A Watershed for Japan-China Relations in the 21st Century?

Author:: Kazuo Sato
Publication Date:: 01-2001
Content Type:: Working Paper
Institution:: The Brookings Institution
Abstract:: The November 1998 state visit to Japan by Chinese President Jiang Zemin was historically significant in that it was the first visit to Japan by a Chinese head of state. However, many people, including policymakers in Japan, had the impression that the visit not only failed to promote Japan-China relations, but actually strengthened anti-Chinese sentiments among the Japanese public. Nevertheless, both governments treated the Japan-China Joint Declaration On Building a Partnership of Friendship and Cooperation for Peace and Development—issued by the two governments on the occasion of visit—as a third important bilateral document, following the 1972 Joint Communiqué and the 1978 Treaty of Peace and Friendship. The two sides repeatedly have stressed that all problems should be handled in line with these three documents. There is a belief, especially among policymakers, that the 1998 Joint Declaration will be the bilateral framework upon which a strong partnership will be built for at least the first decade of the 21st century.
Topic:: Security, Foreign Policy, and International Trade and Finance
Political Geography:: Russia, United States, Japan, China, Europe, Israel, East Asia, and Asia

1410. Perceptions on Free Trade: The Korean Debate Over the Japan-Korea Free Trade Agreement

Author:: Chungsoo Kim
Publication Date:: 09-2001
Content Type:: Working Paper
Institution:: The Brookings Institution
Abstract:: This paper analyzes the Korean public mindset on the country's external economic relations in general, and its efforts of market opening in particular, with the Japan-Korea Free Trade Area (JKFTA) as the case in point.
Topic:: Security, Foreign Policy, and International Trade and Finance
Political Geography:: Russia, United States, China, Europe, Israel, East Asia, and Asia

1411. Significant Changes in the Chinese Television Industry and Their Impact in the PRC: An Insider's Perspective

Author:: Li Xiaoping
Publication Date:: 08-2001
Content Type:: Working Paper
Institution:: The Brookings Institution
Abstract:: The television services of China have undergone dramatic changes since the policy of open door economic reform was introduced in the late 1970s. Few research studies, however, have been conducted in the United States and other Western countries on what, specifically, these changes are, and how they affect the lives of Chinese people and shape the media's role in Chinese society. This paper will outline the significant structural changes in the Chinese television industry, particularly at China Central Television (CCTV); it will also analyse the phenomenon of a highly popular program, 'Focus', (Jiao Dian Fang Tan) and its impact on Chinese politics and society. Based on this analysis, this paper will discuss relevant issues surrounding mainland Chinese media, including its editorial freedom and independence, expanding impact on policymaking, and, finally, its future role in the continued liberalization and democratization of China.
Topic:: Security, Foreign Policy, and International Trade and Finance
Political Geography:: Russia, United States, China, Europe, Israel, East Asia, and Asia

1412. Hong Kong Under One Country Two Systems: Promises and Realities

Author:: Chris Yeung
Publication Date:: 06-2001
Content Type:: Working Paper
Institution:: The Brookings Institution
Abstract:: The return of Hong Kong to Chinese rule captured the attention of the entire world. While most people conceded that the untried formula of “one country, two systems” was the best possible option for the people of Hong Kong, there were persistent doubts and anxiety about its viability and the sincerity of Beijing in honoring its promises. Whether or not the policy would work was definitely in the eye of beholder.
Topic:: Security, Foreign Policy, and International Trade and Finance
Political Geography:: Russia, United States, China, Europe, Israel, East Asia, and Asia

1413. Russia's Image of China and Russian-Chinese Relations

Author:: Alexander Lukin
Publication Date:: 06-2001
Content Type:: Working Paper
Institution:: The Brookings Institution
Abstract:: Discussion and debate about Russian-Chinese relations is on the rise and attracts the attention of experts and policy-makers around the world. From the Russian perspective, the importance of developing relations with its neighbor is determined by several considerations: shared interests and concerns about the international situation, the need to secure a peaceful international environment for economic development, worries about the future of the Russian Far East, and advantages from trade and economic cooperation with the fastest growing Asian economy. Russian approaches to China differ among various groups, political trends and individual experts; moreover, they exist not in vacuum, but within the framework of more general perceptions of the international situation and Russia's position therein. Based on these perceptions, it can be expected that Russia will develop closer relations with China for the foreseeable future. However, since the official Russian attitude toward China strongly depends on Russia's relations with the West, especially with the United States, US policy towards Russia and China will significantly influence the future Russian-Chinese partnership.
Topic:: Security, Foreign Policy, and International Trade and Finance
Political Geography:: Russia, United States, China, Europe, Israel, East Asia, and Asia

1414. Pitfalls on the Road to Fiscal Decentralization

Author:: Vito Tanzi
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Carnegie Endowment for International Peace
Abstract:: IN PAST YEARS, the subject of fiscal decentralization interested mainly specialists—even though several countries, including the United States, came into existence through the political and economic integration of already existing political entities, such as states or principalities. Recently, however, fiscal decentralization has been attracting more general attention, largely because of pressures for greater fiscal decentralization in many countries around the world. The purpose of this paper is to discuss a range of issues related to fiscal decentralization, focusing in particular on possible alternatives to decentralization and various pitfalls that may be associated with it. Unlike much of the previous literature on the subject, therefore, this paper will pay less attention to the actual processes of decentralization and more on whether decentralization is the right direction for a country to choose.
Topic:: Economics, Government, and International Trade and Finance
Political Geography:: United States

1415. Report from Havana: Time for a Reality Check on U.S. Policy toward Cuba

Author:: Jonathan G. Clarke and William Ratliff
Publication Date:: 10-2001
Content Type:: Working Paper
Institution:: The Cato Institute
Abstract:: Official U.S. and Cuban depictions of the effects of the U.S. embargo differ notably from Cuban economic reality. This report, based on the authors' recent visits to Havana and interviews with top Cuban officials, dissidents, and other private citizens, shows that the embargo is not responsible for Cuba's poor economic condition—as Havana claims—nor has it been effective at achieving Washington's goal of isolating the Cuban regime.
Topic:: Economics, International Political Economy, and International Trade and Finance
Political Geography:: United States, Cuba, Latin America, Caribbean, and Havana

1416. The Case for Open Capital Markets

Author:: Robert Krol
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: The Cato Institute
Abstract:: Recent financial problems in emerging economies have led to calls for a new international financial architecture. Proposals include restricting short-term capital flows and extending the International Monetary Fund's role to that of an international lender of last resort. Both “reforms” would be mistakes.
Topic:: Economics, Emerging Markets, International Organization, and International Trade and Finance

1417. The Politics of Pensions in European Social Insurance Countries

Author:: Martin Schludi
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: This paper analyzes national processes of pension reform in countries with systems of old-age provision largely following the Bismarckian type (Austria, France, Germany, Italy, Sweden). Operating on a defined benefit/pay-as-you-go basis and mainly financed out of wage-based social contributions, pension systems in these countries are highly vulnerable to demographic and economic pressures. Therefore, pension reform has emerged as a major issue in these countries since the early 1990s. Although there are substantial similarities in the direction of reform, the degree of policy change varies considerably even among countries with similar legacies in pension policy. As a closer inspection of national patterns of pension policy-making shows, the political feasibility of pension reforms and the degree of adjustment in pension policy critically depends on the government's ability to orchestrate a reform consensus either with the parliamentary opposition or with the trade unions. The paper tries to identify the conditions under which a “pension pact” between those actors is likely to emerge.
Topic:: Economics, Government, and International Trade and Finance

1418. Do Affluent Countries Face an Incomes-Jobs Tradeoff?

Author:: Lane Kenworthy
Publication Date:: 10-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: A commonly-held view suggests that affluent nations face a tradeoff between incomes and jobs. According to this view, in the United States pay for workers at the bottom of the earnings distribution (relative to those in the middle) is very low and government unemployment-related benefits (the “replacement rate”) are stingy, but this facilitates the creation of lots of new jobs and encourages such individuals to take those jobs. The result is a high rate of employment and low unemployment. In much of Western Europe relative pay levels are higher for those at the bottom and benefits are more generous, but this is said to discourage job creation and to reduce the willingness of the unemployed to accept low-wage jobs. The consequence is low employment and high unemployment. I undertake a comparative assessment of this tradeoff view, based on pooled cross-section time-series analyses of 14 OECD countries in the 1980s and 1990s. The findings suggest that greater pay equality and a higher replacement rate do reduce employment growth in low-productivity private-sector service industries and in the economy as a whole. However, these effects are relatively weak. The results point to a variety of viable options for countries wishing to maintain or move toward a desirable combination of jobs and equality.
Topic:: Economics and International Trade and Finance
Political Geography:: United States and Europe

1419. Global Markets, National Tax Systems, and Domestic Politics: Rebalancing Efficiency and Equity in Open States' Income Taxation

Author:: Steffen Ganghof
Publication Date:: 09-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: Competitive pressure on some capital income tax rates reinforces a generic "quadrilemma" or a four-way tradeoff in domestic income taxation. To maintain competitiveness, governments have to cut some tax rates on capital income down to "international standards." If these cuts lead to a de-alignment of different rates on capital income, domestic allocation becomes more inefficient, all else being equal. Cutting all tax rates on capital income to a uniform low level, while maintaining high and progressive tax rates on labor incomes, avoids this inefficiency, but sacrifices comprehensive income taxation, that is, joint and equal taxation of capital and labor incomes. Finally, reducing all income tax rates to international standards, including top rates on labor income, implies a strong significant reduction in the progressiveness of labor income taxation (and/or significant revenue losses). As a result, governments that aim at all four goals” competitiveness, allocative efficiency, horizontal equity (comprehensive income taxation) and progressivity – and want to maintain a given revenue level cannot avoid seriously compromising one of them. This paper analyzes how this income tax quadrilemma has played out in seven OECD countries: Australia, Denmark, Finland, Germany, New Zealand, Norway, and Sweden. Combining the results of this matched comparison with exploratory data analysis for all OECD countries, the paper discusses the general implications of the quadrilemma for the domestic political economy of tax competition and the future of "domestic compensation" in open states.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Finland, Norway, Denmark, Georgia, Australia, Sweden, and New Zealand

1420. The Effects of Convergence: Internationalisation and the Changing Distribution of Net Value Added in Large German Firms

Author:: Anke Hassel and Jürgen Beyer
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: The paper examines whether and how the increasing internationalisation of firms impacts on the operation of a co-ordinated market economy. Following the tenets of agency theory it assumes that an emerging market for corporate control changes the monitoring mechanisms that oversee management. Since Anglo- American forms of monitoring are usually associated with a higher return for investors compared with Continental European firms, a change in the distribution of the net value added of firms is expected. Using financial data on 59 large German companies, the paper shows that the emerging convergence of German corporate governance practices to Anglo-American standards has had a weak, but significant, impact on the distribution of net value added. This is in contrast to the impact of the internationalisation of firms on product markets, which does not have an effect. Since the market for corporate control is, however, still underdeveloped in Germany, the main effects remain to be seen.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: America, Europe, and Germany

1421. Institutional Change and the Uses and Limits of Path Dependency: The Case of German Finance

Author:: Richard Deeg
Publication Date:: 06-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: How can we determine when an existing institutional path or trajectory is ending and being replaced with a new one? How does such a process take place? How can we distinguish between institutional innovation within an existing trajectory and a switchover to a new trajectory or path? This paper explores these questions by examining the pattern of institutional change in the German financial system. The paper advances four theoretical claims: First, that endogenous developments can disrupt an institutional path and lead to a new one. Second, that an event sequence involving a move to a new institutional path may not follow from a contingent event yet may nonetheless be marked by increasing returns processes. Third, that increasing returns in politics are not automatic and must be cultivated by actors in order to be realized. Finally, that the concept of path is still in need of a measurable conceptualization before any further advances in path dependent arguments can be made.
Topic:: Economics and International Trade and Finance
Political Geography:: Germany

1422. Corporate Governance in Transition: Ten Empirical Findings on Shareholder Value and Industrial Relations in Germany

Author:: Martin Hopner
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: Within the context of debates over national “varieties” of capitalism, this paper discusses the shareholder value orientation of the 40 largest listed German companies. Three dimensions of shareholder value are distinguished: the communicative dimension, the operative dimension and the dimension of managerial compensation. A shareholder value index compiling data on accounting, investor relations, variable top-management compensation and the implementation of profitability goals makes it possible to compare the shareholder orientations of the companies. The shareholder value phenomenon is explained first by the exposure to markets – the international product market, capital market pressures and the market for corporate control – and, secondly, by internal developments – changing management careers, increasing management compensation and reduced monitoring by banks and corporate networks – which cause external impulses to increase shareholder value to fall on fertile ground. Conflicts over shareholder orientation result in changing coalitions between shareholders, management, and employees. Shareholder value does not make companies opt out of central collective agreements or endanger the existence of employees' codetermination, but it does lead to more market-driven industrial relations.
Topic:: Economics, Industrial Policy, and International Trade and Finance
Political Geography:: Germany

1423. An Emerging Market for Corporate Control? The Mannesmann Takeover and German Corporate Governance

Author:: Gregory Jackson and Martin Hopner
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: Corporate governance in Germany is often described as a bank-oriented, blockholder or stakeholder model where markets for corporate control have not played a significant role. This case study of the hostile takeover of Mannesmann AG by Vodafone in 2000 demonstrates how systemic changes during the 1990s have eroded past institutional barriers to takeovers. These changes include the strategic reorientation of German banks from the “house bank” to investment banking, the growing consensus and productivity orientation of employee codetermination and corporate law reform. A significant segment of German corporations are now subjected to a market for corporate control. The implications for the German model are examined in light of both claims by agency theory for the efficiency of takeover markets, as well as the institutional complementarities within Germany's specific “variety” of capitalism. While the efficiency effects are questionable, the growing pressures for German corporations to achieve the higher stock market valuations of their Anglo-American competitors threaten the distributional compromises underlying the German model.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: America and Germany

1424. What Have We Learned?[1] Problem-Solving Capacity of the Multilevel European Polity.

Author:: Fritz W. Scharpf
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: This Working Paper is an attempt, occasioned by the evaluation of the Max Planck Institute for the Study of Societies, to provide a conceptual framework within which institute research on multi-level European problem solving could be discussed in the context of a more comprehensive overview of the literature. The framework combines an institutional dimension (distinguishing between supranational, joint-decision and intergovernmental modes of EU policy making) and a policy dimension (distinguishing between market-creating, market-enabling, market-correcting and redistributive policies). As institutional modes differ in their capacity for conflict resolution, and as policy types differ in the likelihood of severe policy conflict, greater or lesser problem-solving capacity can be explained by the location of a particular policy area on both of these dimensions.
Topic:: Economics, Government, and International Trade and Finance
Political Geography:: Europe

1425. Globalization, Tax Competition, and the Fiscal Viability of the Welfare State

Author:: Philipp Genschel
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: Does globalization undermine the fiscal basis of the welfare state? The conventional wisdom believes so: open borders cause tax competition, which in turn leads to a race to the bottom in capital taxation. However, the data show that revenues from capital taxation are fairly stable in OECD countries. Some observers conclude from this that globalization does not pose much of a challenge to the welfare state. This conclusion is unwarranted because it overlooks that tax competition was not the only challenge facing welfare states during the 1980s and 1990s. There was also slow growth, rampant unemployment, and high levels of precommitted spending. These problems exerted countervailing pressures that prevented a race to the bottom in taxation. Yet, this does not mean that national autonomy has not been diminished. The welfare state is trapped in between external pressures to reduce the tax burden on capital and internal pressures to maintain revenue levels and relieve the tax burden on labor.
Topic:: Economics, Globalization, Human Welfare, and International Trade and Finance

1426. How Bargaining Mediates Wage Determination: An Exploration of the Parameters of Wage Functions in a Pooled Time-Series Cross-Section Framework

Author:: Bernhard Kittel
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: The process of wage determination is mediated by the institutional framework of the labor market. Bargaining systems differ not only in their mode of governance, but also in the way that wages are related to unemployment, inflation, and productivity growth. Based on annual data for the period 1971–1996 from 20 OECD countries, the paper uses a pooled time-series cross-section model to show that bargaining modes affect the speed at which wages are adjusted and the extent to which macroeconomic factors affect wages. Contrary to the expectations of mainstream economics, uncoordinated bargaining does not turn out to be the most flexible mode. Pattern setting and peak-level coordination, if legally enforceable, are modes of labor market governance that are at least as flexible and responsive, if not more so. Hence these labor market institutions cannot be blamed for excessive rigidity.
Topic:: Economics and International Trade and Finance

1427. Breaking with Tradition: Service Trade Liberalization in the EU and Germany

Author:: Jette Steen Knudsen
Publication Date:: 06-2001
Content Type:: Working Paper
Institution:: Danish Institute for International Studies (DIIS)
Abstract:: This chapter asks why and how services that were not previously thought of as tradable have increasingly been opened up to international competition in EU member states including even in Germany. The chapter contrasts an explanation that focuses on the impact of economic interests with an explanation that focuses on the impact of EU membership. The chapter argues that lobbying by producers or users of services cannot fully explain reform nor does EU membership simply constrain reluctant member state governments to adopt new legislation. Instead the chapter argues that in important service sectors the German government has promoted trade reform even sometimes in the face of strong opposition from providers, consumers, and unions. The chapter maintains that a crucial key to liberalisation is the emergence of a break in government opposition. In particular, the ability of the government to re-interpret services as regular tradable products combined with new regulation to "shelter" exposed groups such as consumers and workers against potential harm. Implications of this claim for future service sector liberalisation are subsequently discussed.
Topic:: Economics and International Trade and Finance
Political Geography:: Europe and Germany

1428. In Tempestuous Waters: Denmark and the WTO Regime

Author:: Erik Beukel
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Danish Institute for International Studies (DIIS)
Abstract:: International trade negotiations and the World Trade Organisation (WTO) have come into the public limelight. Until a few years ago, the governance of the world trading system, encapsulated in General Agreement on Tariffs and Trade (GATT), was considered a mundane and dull subject to which only a few people with a special economic interest payed attention. Today, however, the problems dealt with in the WTO affect much broader economic interests and attract attention from different political persuasions and social movements, as illustrated by the battle in Seattle, in December 1999, when the Third Ministerial conference of the WTO was met by massive demonstrations organised by multifarious NGOs. Generally, multilateral economic institutions, such as the World Bank, the International Monetary Fund (IMF), and the WTO, have become tempestuous waters, because among other things these institutions are contested by a medley of non-governmental organisations (NGOs) and grass roots movements (O'Brien et al. 2000). The conflict centres on “globalisation”, a controversial and ambiguous notion (Hirst and Thompson 2000), and the WTO is a focal point of the globalisation storm (Hart 1997).
Topic:: Economics, International Trade and Finance, and Politics
Political Geography:: Europe

1429. Foreign Direct Investment in New Electricity Generating Capacity in Developing Asia: Stakeholders, Risks, and the Search for a New Paradigm

Author:: Robert Thomas Crow
Publication Date:: 01-2001
Content Type:: Working Paper
Institution:: Walter H. Shorenstein Asia-Pacific Research Center
Abstract:: The rate of investment sufficient to provide developing Asia with a reasonably adequate supply of electricity is immense, ranging from a World Bank estimate of 2000 megawatts (MW) each month (which translates into an annual investment of about $35 billion per year) to even higher estimates. All of the larger countries of developing Asia have been looking for foreign direct investment (FDI) to provide a significant amount of the needed capital. In 1996, financial closings for new power projects in developing Asia reached $13.7 billion, or almost 40 percent of the lower range of the estimated requirement. Although data on the foreign share of the monetary value of financial closings is not available, it is likely to be over 80 percent. Thus, the foreign share of total direct investment in power projects in developing Asia appeared to have been around 30 percent before the East Asian currency crisis.
Topic:: Economics, Energy Policy, and International Trade and Finance
Political Geography:: East Asia and Asia

1430. Democratizing U.S. Trade Policy

Author:: Pat Choate and Bruce Stokes
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Council on Foreign Relations
Abstract:: Storm clouds signaling trouble with American trade policy have been gathering for some time. In the early 1990s, Congress barely approved creation of the North American Free Trade Agreement (NAFTA), and only strenuous efforts by the Clinton administration and the business community ensured passage of legislation creating the World Trade Organization (WTO). In the late 1990s, President Clinton twice failed to obtain congressional renewal of his trade-negotiating authority. The massive demonstrations during the meeting of the world's trade ministers in Seattle in 1999 reflected a widespread public unease with the impact of trade policy on a range of issues, from clear-cutting practices in the forests of Indonesia to the price of AIDS drugs in southern Africa. Today, public opinion polls consistently demonstrate that, although the American public supports freer trade in theory, it often has profound reservations about trade liberalization in practice. And the current global economic slowdown may only further polarize public opinion on trade issues.
Topic:: Economics, Government, and International Trade and Finance
Political Geography:: United States, Indonesia, South America, and North America

1431. The Declining Use of Unskilled Labour in Italian Manufacturing: Is Trade to Blame?

Author:: Paul Brenton and Anna Maria Pinna
Publication Date:: 12-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: As in other industrialised countries, the manufacturing sector in Italy has recently experienced a substantial increase in the use of skilled relative to unskilled workers — skill upgrading. In this paper we estimate a model, based upon the notion of outsourcing, of the relative demand for skilled labour which allows identification of the roles of technological change and trade, the two main culprits, in skill upgrading. Compared to previous studies of Italy the model is applied to highly disaggregated industrial data and in addition the impact of trade is more precisely measured through the separate identification of import flows from low-wage labour abundant countries and those from OECD partners. Furthermore we also introduce a measure of trade variability. Our results show firstly that economic variables played little or no role in determining the relative demand for unskilled workers in the 1970s in Italy, reflecting the nature of Italian labour market institutions in the period. Subsequently, in the 1980s and 1990s, following some labour market reforms, we find that international competition, in terms of import penetration and the variability of trade prices, had a significant effect on the relative demand for blue-collar workers in Italy in skilled intensive sectors. In unskilled intensive sectors, such as textiles and clothing, where the impact of imports from low-wage countries might be expected to be more pronounced, we do not find a significant effect from imports but rather that the most important role has been played by technological change. The result is consistent with previous studies that indicate that Italian textile and clothing firms have remained internationally competitive by increasingly switching to high quality segments of the industry.
Topic:: Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:: Europe and Italy

1432. Shaping Europe's Migration Policy

Author:: Joanna Apap
Publication Date:: 12-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: During the 1990s, Justice and Home Affairs moved, in an unexpected way, to centre stage in the European debate. Concern had been growing about immigration policy since the Maastricht Treaty institutionalised the third pillar of the European Union. This concern had been stimulated by several factors – the persistence of irregular migration and tragic incidents, such as the one in Dover in July 2000 in which 58 Chinese nationals lost their lives trying to enter illegally into the United Kingdom, the need for immigrant workers in some sectors, and the spectre of an ageing European population. More generally, the Treaty of Amsterdam, since its entry into force in 1999, represents a major development in overall Justice and Home Affairs policy, and the implementation of the treaty provisions in Justice and Home Affairs was described as the next major EU initiative after the single currency.
Topic:: Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:: Europe

1433. What Are the Limits to Economic Integration?

Author:: Paul Brenton
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper discusses the continuing importance of borders, even within the EU, for the volume of international trade and global capital flows. It suggests that a range of factors, including the nature of the commercial, social and legal fabric of a country and the structure of consumers' preferences, act to constrain cross-border exchanges relative to internal transactions. Hence, whilst the process of globalisation may continue, there are likely to be distinct limits to the extent of economic integration. This entails that the traditional roles of governments in OECD countries in providing social welfare and regulating the market economy within national boundaries will not be seriously undermined. However, the situation may differ in developing countries where existing social and legal institutions may be compromised by globalisation rather than acting to dampen its impact.
Topic:: Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:: Europe

1434. Fiscal Policy Spillovers in the Euro Area: Where Are They?

Author:: Daniel Gros and Alexandr Hobza
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: What impact would a fiscal expansion in Germany have on the rest of the euro area? It has been generally suggested that it could go in either of two opposite directions, depending on the relative strength of two effects: the direct trade linkage and the financial market repercussions. A review of the results from four major macroeconomic models shows that the cross-country spillover effects of fiscal policy are indeed of uncertain sign and magnitude. Different models give quite different results if used in standardised simulations in terms of the sign, magnitude and time profile of the impact of a fiscal expansion in one member country (e.g. Germany) on other euro area countries. Fewer results are available concerning the potential spillover effects of structural policies, but they are similar to the ones concerning a budgetary stimulus: the magnitude of the spillover is small and varies across countries and over time.
Topic:: Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:: Europe and Germany

1435. Extending Citizenship Rights to Third Country Nationals

Author:: Joanna Apap
Publication Date:: 10-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Various issues arise in the European context with respect to the boundaries of citizenship; one of the main questions is to what extent the division between the European Union citizens and third country nationals will increase, especially if “deepening” of the Union leads to more tightening of its external borders. This paper addresses the question of how far citizenship rights can be extended to third country migrants in the EU?
Topic:: Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:: Europe

1436. What Drove Relative Wages in France? Structural Decomposition Analysis in a General Equilibrium Framework, 1970-92

Author:: Sébastien Jean and Olivier Bontout
Publication Date:: 09-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper confronts a CGE model to observed evolutions in France, between 1970 and 1992, through a structural decomposition analysis. The choice of the model and the assumption of constant elasticities over time enable the structural change of the economy between two equilibria to be summarised through a set of four types of state variables, reflecting the effect of technical change, changes in factor supplies, shifts in consumption patterns, and international trade. Simulations then allow the contribution of each of these shocks to be assessed. We find that technical change had a strong positive impact on the relative wage of skilled to unskilled workers, while the impact of changes in factor supplies is strongly negative. The effect of international trade is far less important. However, if we take into account a trade-induced effect on productivity, then we find that trade substantially increased wage inequalities.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: China, Europe, and France

1437. Is the ECB Sufficiently Accountable and Transparent?

Author:: Daniel Gros and Lorenzo Bini-Smaghi
Publication Date:: 09-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: More than two years after its inception, the ECB is still perceived as lacking transparency by many academics and market participants. Our analysis, based on a series of indicators, suggests instead that the ECB is, at least on paper, one of the most transparent and accountable central banks. The discrepancy between theory and public perception suggests that much remains to be done within the given institutional framework to improve the transparency of the ECB. What is the best way to achieve this goal? Several suggestions have been put forward, such as publishing the detailed minutes of the ECB Governing Council meetings. This would result in shifting the true debate to informal meetings of the Governing Council, while formal meetings would only record pre-packaged consensus with no or little discussion. In our view, the best way to make the ECB more accountable is to engage it in substantive discussions about its policy. The ECB should provide more information about the background analysis that leads to policy decisions. For example, the ECB should transform its 'staff projections' into true inflation forecasts and it should be more open about the arguments that shape the internal debates, which precedes decisions. Accountability cannot be ensured by the ECB alone. An important role has to be played by its counterparts, such as the European Parliament, the Council of EU Finance Ministers and the public at large.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

1438. Maastricht the Choice of Exchange Rate Regime in Transition Countires During the Run-Up to EMU

Author:: György Szapáry
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper raises some specific issues concerning the choice of exchange rate regime in transition countries during the run-up to EU/EMU membership. It argues that there is no "one-size-fits-all" exchange rate regime that accession countries should uniformly adopt. It also argues that the Maastricht criterion on inflation is inconsistent with the catching-up process because of the Balassa-Samuelson effect and that this inconsistency will encourage a "weighing-in" syndrome: like the boxer who refrains from eating for hours prior to the weigh-in only to consume a big meal once the weigh-in is over, the candidate country will maintain very tight monetary policy and resort to all sorts of techniques (freezing of administered prices, lowering of consumption taxes, etc.) to squeeze down inflation prior to accession only to shift back gears after it has joined the EMU. Indeed, the convergence of short-term interest rates to EMU levels that will come with accession will automatically mean a loosening of monetary policy after the country has become a member of the monetary union. That loosening will be reinforced if the country had previously allowed its exchange rate to appreciate against the euro. The result of this stop-go cycle is that the efficiency of economic management will suffer. It would be better to recognize the principle of the Balassa-Samuelson effect explicitly in the Maastricht criteria by giving more room for maneuver than the one provided by the present rule. The paper makes suggestions on how the Maastricht criterion on inflation could be adjusted and discusses their merits. It concludes that a reasonable compromise would be to define the permissible inflation deviation in reference to the average inflation rate of the euro zone, not the three EU members with the lowest inflation rate.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

1439. Foreign Direct Investment and Company Taxation in Europe

Author:: Agnès Bénassy-Quéré, Lionel Fontagné, and Amina Lahrèche-Révil
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: The growing globalisation of OECD economies, associated to the progresses in European integration, tends to increase the mobility of capital and to deepen the pressure on tax policies. On the one hand, tax policies are tied by the Stability Pact criteria: the limit imposed on budget deficits leaves little scope for tax rates to decrease. On the other hand, the growing mobility of capital tends to increase the elasticity of tax bases to tax rates, hence reducing the autonomy of governments in increasing taxes.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

1440. Economic Integration Between the EU and the CEECS: A Sectoral Study

Author:: Francesca di Mauro
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Economic integration between the EU and the CEECs has proceeded at high speed over the 90's, with the main channels of such integration being trade and FDI. Some authors believe that the 'commercial transition' is now complete and that a new, deeper phase of integration has started, with growing flows of FDI in the region. Following a gravity-type approach, in this paper I tackle two difficult issues surrounding the EU-CEECs integration: has FDI in the CEECs region substituted EU exports, therefore harming employment at home? Has FDI in the CEECs region been redirected away from similarly attractive countries, such as Spain and Portugal? By using a unique database on FDI broken down by country and by sector, which allows more detailed qualifications than possible in previous work, the answers to these two questions appear to be negative.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe, Spain, and Portugal

1441. Who Needs an Extenal Anchor?

Author:: Daniel Gros
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper argues that there might be non-monotonic relationship between the strength of the domestic framework for fiscal policy and the interest of a country to use an external anchor to achieve price stability. Countries with a strong domestic framework, e.g. low public debt, little pressure for excessive expenditure and an efficient tax system, would anyway enjoy low inflation rates and therefore have little need for an external anchor. Countries with high debt or very weak institutions would greatly benefit from an external anchor to save them from the extreme inflation rates they would otherwise have to endure because the market knows that the temptation for them to inflate public debt away is so strong. By contrast, countries with moderately weaknesses might be in a situation where they need some inflation to supplement government revenues with seigniorage, but the inflation resulting from the interaction with the market, which knows about this, is still moderate.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

1442. What's Trade Got To Do With It? Relative Demand for Skills within Swedish Manufacturing

Author:: Paul Brenton, Bob Anderton, and Eva Oscarsson
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper seeks to identify the contribution of trade and technological change to the increase in inequality between skilled and unskilled workers in Sweden since the 1970s. An empirical approach is adopted which allows for the outsourcing of the low-skill parts of the production chain within industries to low-wage locations and is applied to detailed industry and trade data, the latter distinguishing between low-wage sources of imports and OECD countries. Another feature of the study is the use of data on patents to capture technological change. The paper finds that, in contrast to previous studies, trade with low-wage countries may have contributed to the rise in inequality in Swedish manufacturing. Here we identify this effect through changes in relative import prices and through changes in import penetration measured in volume terms. Changes in import penetration measured in value terms, which have been used in previous studies, are not found to be significant. In addition imports seem to have had a larger effect on inequality in high-skill intensive sectors rather than the low-skill sectors. The empirical results also suggest that the increased use of technology also played a role in creating greater inequality between skilled and unskilled workers in Sweden with the magnitude of this impact increasing in the 1990s.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe and Sweden

1443. Skill Upgrading and Production Transfer within Swedish Multinationals in the 1990s

Author:: Pär Hansson
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper studies the link between production transfer in Swedish-headquartered multinational enterprises (MNEs) and skill upgrading in Swedish manufacturing in the 1990s. The analysis distinguishes between horizontal and vertical foreign direct investment (FDI). The increased employment share in affiliates in non-OECD countries (vertical FDI) has a non-trivial, significantly positive effect on the share of skilled labour in the Swedish parents. On the other hand, the skill upgrading in the parents is unrelated to employment changes in their affiliates in other OECD countries (horizontal FDI). The latter is consistent with implications of the newly developed horizontal MNE models.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe and Sweden

1444. European Labour Markets and the Euro: How Much Flexibility Do We Really Need?

Author:: Michael C. Burda
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Widespread concern over real effects of EMU is consistent with new Keynesian approaches to macroeconomic fluctuations, but more difficult to reconcile with a real business cycle (RBC) paradigm. Using a model with frictions as a point of departure, I speculate that nominal price rigidity in Europe is likely to increase, while real rigidities are likely to decrease, as a consequence of monetary union. This logic implies a new European macroeconomic regime in which monetary policy is increasingly "effective" in influencing output in the short run. Similarly, changes in the nature of real and nominal price determination are likely to increase the volatility of the European business cycle. Empirical evidence of increasing covariation of price inflation and declining correlation of wage inflation and real wage growth within EMU countries in the last decade is consistent with this conjecture. Calls for additional labour market flexibility, given the magnitude of what is already in store for Europe, may be unwarranted.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

1445. Fiscal Decentralisation Economic Growth in High-Income OECD Countries

Author:: Ulrich Thießen
Publication Date:: 01-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Following a brief review of the benefits and shortcomings of fiscal decentralisation, the paper attempts to empirically analyse for high-income OECD countries the relationship between per capita economic growth, capital formation and total factor productivity growth, on the one hand, and indicators of fiscal decentralisation, on the other hand. The evidence appears to be consistent with the hypothesis that the benefits of fiscal decentralisation on economic growth and capital formation are limited. However, satisfactory indicators of fiscal decentralisation are yet not existing so that the results are subject to serious qualifications.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

1446. Asymmetric Labour Markets in a Converging Europe: Do Differences Matter?

Author:: Ray Barrell and Karen Dury
Publication Date:: 01-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: Asymmetric economic structures across Europe may result in common shocks having asymmetric effects. In this paper we investigate whether the differences in the structure and dynamics that we observe in the European economies matter for policy design. In particular it is widely believed that labour market responses are different, with the structure of labour demand and the nature of the bargain over wages differing between countries. In addition the European economies move at different speeds in response to common shocks. In this paper we construct three different models of Europe, one where the labour market relationships are separately estimated and assumed to be different, one where the most statistically acceptable commonalties are imposed and one where common labour market relationships are imposed across all member countries. We use panel estimation techniques to test for the imposition of commonalties among countries. We find that it is possible to divide Europe into sub-groups, but it is not possible to have one model of European labour markets. We use stochastic simulation techniques on these different models of Europe and find that the preferred rule for the ECB is a combined nominal aggregate and inflation-targeting rule. We find that while this rule is dominant in all our models, the more inertia that is introduced into the labour markets, the more a nominal aggregate-targeting rule alone may be preferred. However, we conclude, that differences in the labour market transmission mechanisms across the European countries appear to have little influence on the setting of monetary policy for the ECB, although this depends on the relative importance of the different components in the welfare loss function.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

1447. Trade Jobs in Portugal: A Microeconomic Approach

Author:: Ana Rute Cardoso
Publication Date:: 01-2001
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: The Portuguese economy presents a low unemployment rate when compared to its European counterparts and it has been claimed that this is partly due to the slow restructuring of the economy, which has been keeping its specialisation in traditional industries, some of them major exporting industries. This study analyses job creation and job destruction at the firm level across skill groups, during the 1980s and the 1990s. The major aim is to explore the role of international trade against alternative explanations of job flows, providing an answer to the question: did international trade help sustain the employment of particular groups of workers, namely the least skilled, in the Portuguese economy? Could conditions in international markets therefore have contributed to keep a low unemployment rate? A matched data set on workers and firms is used, which includes a direct measure of the skill of the worker. Results indicate that technology indicators are more relevant determinants of job flows than conditions in international product markets. Indeed, import prices have no impact on job creation or job destruction for the unskilled or on job creation for the skilled. Higher export prices lead to job creation for the skilled labour force, thus pointing to a certain skill upgrading.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

1448. Can International Capital Standards Strengthen Banks in Emerging Markets?

Author:: Liliana Rojas-Suarez
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Who should determine banks' capital standards: authorities or markets? What is the right definition of core capital: equity only or equity plus subordinated debt? Can the assessment of banks' individual credit risks by external rating agencies be of equal or better quality than the assessments derived from banks' own internal rating systems? These are some of the key financial regulatory issues currently being discussed by analysts in industrial countries, especially in the context of the proposed modification to the Basel Capital Adequacy Accord: Basel II is expected to replace the original 1988 Accord.
Topic:: Economics, International Trade and Finance, and Political Economy

1449. Macroeconomic Implications of the New Economy

Author:: Martin Neil Baily
Publication Date:: 09-2001
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Together with many policymakers and economists, I see in the 1990s expansion signs that new technologies that had been emerging for some time were finally paying off in stronger economic performance. I will use the expression 'new economy' to describe this period, although I recognize the pitfalls in this name. New economy is probably too broad a term and implies both more change and more permanent change than actually took place. But 'information economy' seems too narrow a term to describe the set of interrelated forces bringing about change in the economy, that include increased globalization, a more intense pressure of competition, the rapid development, adoption and use of information and communications technology (IT) and a favorable economic policy environment.
Topic:: Economics, Government, International Trade and Finance, and Political Economy

1450. Finance and Changing US-Japan Relations: Convergence Without Leverage—Until Now

Author:: Adam S. Posen
Publication Date:: 08-2001
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: In the postwar era, US-Japan economic relations have been characterized by substantial tensions, yet this has not damaged the underlying security relationship or critically harmed the multilateral economic framework. In fact, these two economies have become more integrated over time even as these tensions played out. These tensions, however, have required an enormous expenditure of political capital and officials' time on both sides of the Pacific and have led to foregone opportunities for institution building and policy coordination. They have deepened since Japan “caught up” with the United States around 1980, and Japanese and US firms began increasingly to compete for profits and market share in the same sectors. Moreover, as both the US and Japanese economies continue to mature – both in terms of the age of their populations and their industrial mix – they will likely face even greater tensions between them over allocating the management and costs of industrial adjustment.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: United States, Japan, Israel, and East Asia

1451. Beyond Bipolar: A Three-Dimensional Assessment of Monetary Frameworks

Author:: Adam S. Posen and Kenneth N. Kuttner
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: A great deal of attention has been focused recently on the impact of exchange rate regimes, just as previous empirical research examined central bank autonomy and announced targets for domestic monetary policy. To date, however, these three elements of monetary frameworks have been assessed in isolation from one another, and all have been viewed in terms of a unidimensional spectrum of fixity versus flexibility. Using a newly-constructed dataset, this paper jointly analyzes and compares all three elements' effects on inflation and exchange rate behavior. The results show that each of the three elements has independent and distinct effects on nominal outcomes. Key findings include: (1) although hard pegs do tend to reduce inflation and attenuate exchange rate fluctuations within some range, they are clearly characterized by large devaluations; (2) central bank autonomy is associated with a more stable exchange rate and lower inflation; and (3) explicit inflation targeting reduces both inflation and its persistence, consistent with the view that inflation targeting increases flexibility through transparency. These results raise the possibility that a combination of central bank autonomy, inflation targeting, and a free float might offer the same benefits as any intermediate exchange rate regime on its own, without the proclivity to occasional large depreciations.
Topic:: Economics, International Trade and Finance, and Political Economy

1452. Rating Banks in Emerging Markets: What Credit Rating Agencies Should Learn From Financial Indicators

Author:: Liliana Rojas-Suarez
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The rating agencies' and bank supervisors' records of prompt identification of banking problems in emerging markets has not been satisfactory. This paper suggests that such deficiencies could be explained by the use of financial indicators that, while appropriate for industrial countries, do not work in emerging markets. Among the conclusions, this paper shows that the most commonly used indicator of banking problems in industrial countries, the capital-to-asset ratio, has performed poorly as an indicator of banking problems in Latin America and East Asia. This is because of (a) severe deficiencies in the accounting and regulatory framework and (b) lack of liquid markets for bank shares, subordinated debt and other bank liabilities and assets needed to validate the “real” worth of a bank as opposed to its accounting value.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: East Asia and Latin America

1453. Unchanging Innovation and Changing Economic Performance in Japan

Author:: Adam S. Posen
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The Toyota Commemorative Museum of Industry and Technology gives its visitors much to ponder. Established at the site in Nagoya where in 1911 Sakichi Toyoda founded his automatic loom factory (the basis of the family fortune, which later funded his son Kiichiro's development of automobile production), the museum was opened on June 11, 1994, the 100th anniversary of Toyoda's birth. It is a popular stop on field trips for Japanese schoolchildren, who are required to study in the 3rd grade the automobile industry. The messages, which Toyota wishes to instill in its young visitors, are the importance of “making things” and of “creativity and research.” And confronting all museum visitors upon entry, having central place in the vast and largely empty first room of the exhibits, is Sakichi Toyoda's one-of-a-kind vertical circular loom.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Japan, Israel, and East Asia

1454. IMF Structural Conditionality: How Much Is Too Much?

Author:: Morris Goldstein
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: “...detailed conditionality (often including dozens of conditions) has burdened IMF programs in recent years and made such programs unwieldy, highly conflictive, time consuming to negotiate, and often ineffectual.” “The IMF should cease lending to countries for long-term development assistance (as in sub-Saharan Africa) and for long-term structural transformation (as in post-Communist transition economies)...The current practice of extending long-term loans in exchange for member countries' agreeing to conditions set by the IMF should end.”
Topic:: Economics, International Organization, and International Trade and Finance
Political Geography:: Africa

1455. Foreign Direct Investment in China: Effects on Growth and Economic Performance

Author:: Edward M. Graham and Erika Wada
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: By almost all accounts, foreign direct investment (FDI) in China has been one of the major success stories of the past 10 years. Starting from a base of less than $19 billion in 1990, the stock of FDI in China rose to over $300 billion at the end of 1999. Ranked by the stock of inward FDI, China thus has become the leader among all developing nations and second among the APEC nations (only the United States holds a larger stock of inward FDI). China's FDI consists largely of greenfield investment, while inward FDI in the United States by contrast has been generated more by takeover of existing enterprises than by new establishment, a point developed later in this paper. The majority of FDI in China has originated from elsewhere in developing Asia (i.e., not including Japan). Hong Kong, now a largely self-governing “special autonomous region” of China itself, has been the largest source of record. The dominance of Hong Kong, however, is somewhat illusory in that much FDI nominally from Hong Kong in reality is from elsewhere. Some of what is listed as Hong Kong-source FDI in China is, in fact, investment by domestic Chinese that is “round-tripped” through Hong Kong. Other FDI in China listed as Hong Kong in origin is in reality from various western nations and Taiwan that is placed into China via Hong Kong intermediaries. Alas, no published records exist to indicate exactly how much FDI in China that is nominally from Hong Kong is in fact attributable to other nations.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: United States, Japan, China, Israel, East Asia, Asia, and Hong Kong

1456. The Growth and Development of the Internet in the United States

Author:: Martin Kenney
Publication Date:: 06-2001
Content Type:: Working Paper
Institution:: Berkeley Roundtable on the International Economy
Abstract:: Rarely does a new technology emerge that galvanizes a dramatic rethinking of the nature of commerce. The Internet is such a technology. At this early stage, it is difficult to appreciate fully the importance of the Internet, but some speculate it might be as momentous as the arrival of the telegraph (Cohen et al. 2000; Standage 1999). Radically new communication technologies such as the Internet have multiple applications and often become ubiquitous. As such, the adoption, diffusion, and development of this new technology provide an especially penetrating view of how different national innovation systems have responded to and shaped the commercial possibilities inherent in the Internet. Of course, such an assessment for an economy as large as that of the U. S. is difficult. It is further complicated by the peculiar way in which communications technologies permeate and facilitate connections and relationships. Often the action of such technologies is imperceptible to most of the actors involved and even to aggregate statistics; e. g., better information transfer between customers and suppliers is not manifested in the finished good, though it is embodied in the good in terms of lower cost and/ or higher quality. Given the diffuse nature and the speed of the Internet's evolution, any analysis can only be tentative.
Topic:: International Political Economy, International Trade and Finance, and Science and Technology
Political Geography:: United States

1457. The Internet and E-commerce Development in Mexico

Author:: Martin Kenney, James Curry, and Oscar Contreras
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Berkeley Roundtable on the International Economy
Abstract:: The Internet is by all accounts one of the most important innovations of the late twentieth century. As yet the Internet's impact on the economies of developed countries is not obvious, and the economic implications for developing countries are even more unclear. Already much has been written about a supposed "digital divide" within nations and between nations, but no one has a clear understanding of the exact dimensions or implications of this divide. This paper does not take any position on whether Mexico is suffering from a digital divide or is likely to do so in the future; rather, it focuses on the recent rise of Internet sites and e-commerce in Mexico.
Topic:: International Political Economy, International Trade and Finance, and Science and Technology
Political Geography:: Mexico

1458. Creating an Environment: Developing Venture Capital in India

Author:: Rafiq Dossani and Martin Kenney
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Berkeley Roundtable on the International Economy
Abstract:: In the last decade, one of the most admired institutions among industrialists and economic policy makers around the world has been the U. S. venture capital industry. A recent OECD (2000) report identified venture capital as a critical component for the success of entrepreneurial high-technology firms and recommended that all nations consider strategies for encouraging the availability of venture capital. With such admiration and encouragement from prestigious international organizations has come various attempts to create an indigenous venture capital industry. This article examines the efforts to create a venture capital industry in India.
Topic:: International Political Economy, International Trade and Finance, and Science and Technology
Political Geography:: United States and India

1459. The Role of the State in the Labour Market: Its Impact on Employment and Wages In Portugal as Compared with Spain

Author:: José Da Silva Lopes
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Minda de Gunzburg Center for European Studies, Harvard University
Abstract:: The role of the State in the economy and in the social arena was deeply transformed in the second half of the 1970s, on account of the change of the political regime. The integration into the European Union since 1985 has brought new radical changes in that role. The paper describes the most important of those changes, putting a special emphasis on social policies and on the labour market, and on the challenges that have to be faced because of European Monetary Union.
Topic:: Government and International Trade and Finance
Political Geography:: Europe

1460. Fifteen Years On: Spanish Membership in the European Union Revisited

Author:: Charles Powell
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Minda de Gunzburg Center for European Studies, Harvard University
Abstract:: This paper attempts to describe and account for the major changes undergone by Spain as an EU player since her accession in 1986. Many analysts appear to have espoused the view that most if not all of these can be attributed to the fact that, following the 1996 general election, a decidedly pro-integrationist Felipe González was replaced as prime minister by a vaguely eurosceptical José María Aznar. Undoubtedly, ideological considerations (and, more importantly perhaps, differences in political culture) must be taken into account when examining the evolution of Spain's European policy over the past fifteen years. However, this paper will argue that changing policy styles and contents should be understood in terms of both the learning process undergone by all new member states as they mature, and the need to adapt and respond to developments within the EU, most notably the evolution of the European integration process itself.
Topic:: Development and International Trade and Finance
Political Geography:: Europe

1461. Potential Sources of Financing for U.S. Ventures in Russia

Author:: Askar Askarov, Katharine Reed, and Linn E. Schulte-Sasse
Publication Date:: 12-2001
Content Type:: Working Paper
Institution:: Center for International Security and Cooperation (CISAC), Stanford University
Abstract:: Following the end of the Cold War, the United States and its allies recognized that it was in their vital security interests to promote stable transitions in the countries of Central and Eastern Europe (CEE) and the New Independent States (NIS) of the former Soviet Union. For the most part, such transitions would depend on the efforts of the states in transition themselves, including many that had been newly formed. However, one way in which the Western nations could help was by economic assistance -- both financial and technical.
Topic:: International Trade and Finance and Political Economy
Political Geography:: Russia, United States, Europe, Eastern Europe, Asia, and Soviet Union

1462. "Injustes" sanctions: les constructions internationales de la dénonciation des embargos et l'escalade de la vertu abolitionniste

Author:: Ariel Colonomos
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Centre d'Etudes et de Recherches Internationales
Abstract:: At a time when the use of sanctions has intensified considerably, criticism directed at embargos is gaining ground. In interpreting this significant rise in opposition, this article shows how and why mobilization against sanctions has developed, what sort of actors are involved and what forms it takes. This research brings to light the formation of networks and coalitions against both unilateral and multilateral measures. It underlines the role, status and scope of those whose business it is to fashion norms, by questioning the main analytical categories their strategies are usually based on. An expertise in embargo assessment, destined to levy judgment on a type of very specific violence, is developing in both national and transnational public spaces. This research, analyzing the emergence of this expertise, sheds light on the development of a conception of unjust sanctions and identifies the mechanisms of its construction on an international scale. This text in particular underlines the importance of traditions of just war, especially their reinterpretation by actors on the international scene and its moral norm-makers. Considering the development of these standards allows us to grasp one of the most decisive aspects of the use of force in the post-cold war world, as well as the establishment of certain international reforms.
Topic:: Development, Economics, International Cooperation, and International Trade and Finance
Political Geography:: Global Focus

1463. The Politics of Trade in North America: Comparing Models and Industries

Author:: Arturo Borja Tamayo, Philippe Faucher, Scott Morgenstern, and Daniel Nielson
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: Centro de Investigación y Docencia Económicas
Abstract:: This working paper studies the negotiations of the North American Free Trade Agreement (NAFTA) in two industrial chains: textile-apparel and auto parts-automotive. It compares two theoretical models. The first uses two internal variables (interest group strength and industry competitiveness) to explain the tariffs that were negotiated for the phase-out period of NAFTA. The second explores alternatives to increase the explanatory capacity of two-level games models. It incorporates the element of asymmetry between countries, and questions Putnam's (1988) hypothesis on the impact of domestic politics upon international negotiations. This second model explains the difference in the rules of origin that were adopted in NAFTA for the two industrial chains. The work reaches three conclusions. First, it confirms the necessity to specify different dependent variables to explain the outcomes of international trade agreements. Second, it concludes that a model using the two-level logic has explanatory advantages over one that does not combine levels. Third, it points out the potential to combine elements from the two models to reach a more complete explanation.
Topic:: Economics, Industrial Policy, and International Trade and Finance
Political Geography:: North America

1464. Government - Financial Sector Relations and the New Financial Structure in Mexico

Author:: Charles W. Parker III and Susan Minushikin
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: Centro de Investigación y Docencia Económicas
Abstract:: For the first time in its modern history, Mexico is confronting a financial sector that is controlled by foreign investors. At the same time it is highly concentrated. The economic challenges that such an industry structure presents were the focus of public debate over the sales of Bancomer and Banco Serfin. The political challenges have not yet become a part of the public debate. These include changing relations between the banks and the government. This paper traces the history of government-bank relations and speculates on how this relationship may change given the new structure of Mexico's financial sector.
Topic:: Economics, Industrial Policy, and International Trade and Finance
Political Geography:: North America and Mexico

1465. Governing Global Finance: Financial derivatives, liberal states and transformative capacity

Author:: William D. Coleman
Publication Date:: 10-2001
Content Type:: Working Paper
Institution:: Institute on Globalization and the Human Condition, McMaster University
Abstract:: Global finance is simultaneously one of the most globalized and one of the most esoteric sectors in the world economy. Within global finance, perhaps no activity is more esoteric and more difficult to understand than the buying and selling of derivatives. Their names are familiar perhaps – futures, options, forwards, swaps – but their nature is obscure. Simply put, derivatives are financial instruments that are used to hedge risk. If a Canadian corporation knows that it will want to buy 50 million US dollars on foreign exchange markets in three months time, it can arrange a fixed price for that purchase using a financial contract called a derivative. In doing so, it lowers the risk of the price of the currency changing drastically before it purchases the amounts it needs.
Topic:: Globalization, Government, International Trade and Finance, and Markets
Political Geography:: United States and Canada

1466. Targeted Financial Sanctions: A Manual for Design and Implementation

Author:: Thomas J. Biersteker, Sue Eckert, Natalie Reid, and Peter Romaniuk
Publication Date:: 01-2001
Content Type:: Working Paper
Institution:: Watson Institute for International and Public Affairs at Brown University
Abstract:: In recent years, the concept and strategy of targeted sanctions imposed by the United Nations Security Council under Chapter VII of the Charter of the United Nations, have been receiving increased attention. Practitioners and analysts generally agree that better targeting of such measures on the individuals responsible for the policies condemned by the international community, and the elites who benefit from and support them, would increase the effectiveness of sanctions, while minimizing the negative impact on the civilian population. The considerable interest in the development of targeted sanctions regimes has focused primarily on financial sanctions, travel and aviation bans, and embargoes on specific commodities such as arms or diamonds.
Topic:: Security, Foreign Policy, Human Rights, and International Trade and Finance
Political Geography:: United Nations

1467. Macroeconomic Policy and Sustainability

Author:: Jonathan Harris
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: Global Development and Environment Institute at Tufts University
Abstract:: The trend in mainstream economic thought about macroeconomic policy has been towards minimalism. In the optimistic Keynesian phase of the 1960's, it was assumed that both fiscal and monetary policy were effective tools for macroeconomic management. But the influence of monetarist and New Classical critiques has led to a gradual erosion of theoretical support for activist government policy. First fiscal policy fell by the wayside, perceived as too slow and possibly counterproductive in its impacts. Then New Classical and rational expectations critiques suggested that even monetary policy was ineffective. Thus the role of government policy has been reduced to a cautious effort not to make things worse -- in effect a return to an economics of laissez- faire.
Topic:: Development, Economics, International Political Economy, and International Trade and Finance

1468. Dirt is in the Eye of the Beholder: The World Bank Air Pollution Intensities for Mexico

Author:: Kevin Gallagher, Francisco Aguayo, and Ana González
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: Global Development and Environment Institute at Tufts University
Abstract:: This paper identifies a number of errors and inconsistencies in a series of air pollution intensities for Mexico that were recently created by the World Bank. Because these data are being used to conduct public policy analysis and advice for Mexico and countries at similar levels of development, knowledge of the limits of these data is of utmost importance. In addition to identifying the problems with these data, this paper makes a series of adjustments to offer a corrected dataset. These newly corrected data are available on the World Bank's New Ideas in Pollution Regulation (NIPR) web page.
Topic:: Economics, Environment, and International Trade and Finance
Political Geography:: Mexico

1469. Community Control in a Global Economy: Lessons from Mexico's Economic Integration Process

Author:: Eliza Waters and Tim Wise
Publication Date:: 02-2001
Content Type:: Working Paper
Institution:: Global Development and Environment Institute at Tufts University
Abstract:: The North American Free Trade Agreement appeared to promise economic growth for Mexico and improved living conditions for its people. While the Mexican economy has recovered significantly from its post-NAFTA collapse, there is mounting evidence that many of the pre-NAFTA warnings of worsening poverty and deteriorating environmental conditions were true, if exaggerated. However one interprets the statistics, there is little doubt that the economic integration process, which began a full decade before NAFTA took effect, has created a significant restructuring of the Mexican economy, with some of the country's most vulnerable residents facing the harshest conditions.
Topic:: Agriculture, Economics, Globalization, International Trade and Finance, and Political Economy
Political Geography:: North America

1470. Civil Economy and Civilized Economics: Essentials for Sustainable Development

Author:: Neva Goodwin
Publication Date:: 01-2001
Content Type:: Working Paper
Institution:: Global Development and Environment Institute at Tufts University
Abstract:: This essay will consider the relevance of the social sciences - especially economics - to the foundations of sustainable development. Looming environmental crises have served as a prime motivating force for reevaluating fundamental principles. In particular, the concept of sustainability, carrying with it clear requirements for values, goals and ethics, has begun to reshape economics. The broadest conception of sustainability is found if we understand sustainable development to mean Socially And Environmentally Just And Sustainable development - "SAEJAS development".
Topic:: Development, Economics, Globalization, International Trade and Finance, and Political Economy

1471. The Taxing Task of Taxing Transnationals

Author:: Thomas A. Gresik
Publication Date:: 06-2001
Content Type:: Working Paper
Institution:: Kellogg Institute for International Studies
Abstract:: Financial and real investment flexibility, tax competition, and superior economic information by transnationals both creates a rationale for corporate income taxation and limits the effectiveness of such taxation. While these factors have led to a variety of transnational tax policies, such as deferral, double taxation, apportionment, and trade rules, very few of these institutional features have been integrated into tax competition and agency models. This paper shows how the integration of investment flexibility, tax competition, and agency issues is crucial to our understanding of corporate tax policies.
Topic:: Economics, Government, and International Trade and Finance

1472. A Mediterranean Economic Policy from Europe at the Enlargement Cross-Roads

Author:: Roberto Aliboni
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: Istituto Affari Internazionali
Abstract:: Admittedly, the results of the EU's economic policy towards the Mediterranean are to some extent disappointing. What do we have to do? Do all we need is to modify and improve such policy? Or do we have to bring in some more substantive changes? Is the policy disappointing in itself or because of the way it is implemented? Furthermore, we are aware that these questions come up in conjunction with the advancement of the EU enlargement to Eastern European countries. Thus, a further question is what is the impact of the enlargement on EU economic co-operation with the Mediterranean. According to EU's own decisions, there must be a link between enlargement and Euro-Med Partnership: that is a fair balance between enlargement towards the East and co-operation towards the South. Is indeed that balance there? or there is a polarisation towards the East which demands for corrections?
Topic:: Economics, International Cooperation, and International Trade and Finance
Political Geography:: Europe

1473. India: Economic Growth and Poverty Reduction During the 1990s

Author:: Catherine G. Corey
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: United States Agency for International Development
Abstract:: The fiscal crisis that struck India in 1991, as the result of myriad internal and external factors, compelled the nation to adopt a series of economic reforms and liberalization policies. The genesis of the fiscal crisis lay partly in the highly protected domestic economy that maintained extensive subsidization, licensing and investment regulations, thus placing considerable burdens on the expenditures of the central government. Compounding this problem was a rapidly expanding current account deficit that had grown over time as import demand steadily increased and exports and foreign investment lagged. These conditions, in combination with external factors, generated a severe balance of payments crisis in which India came perilously close to defaulting on loans from international lenders. Under the leadership of Prime Minister Narasimha Rao and Financial Minister Manmohan Singh, the Indian government initiated a series of macroeconomic reforms. This included reductions in fiscal expenditure, privatization of state-run industries, promotion of foreign investment, and liberalization of international trade policy.
Topic:: Development, Economics, International Trade and Finance, and Poverty
Political Geography:: South Asia and Asia

1474. Self-Control for the Righteous: toward a Theory of Luxury Pre-Commitment

Author:: Ran Kivetz and Itamar Simonson
Publication Date:: 08-2001
Content Type:: Working Paper
Institution:: Institute for Social and Economic Research and Policy at Columbia University
Abstract:: Prior research has examined consumers' use of self-control to avoid hedonic (myopic) temptations, such as overbuying and smoking. We propose that consumers often exercise the opposite form of self-control, whereby they attempt to avoid default forms of spending on necessities and savings in favor of luxury, hedonic purchases. In particular, given the difficulty of choosing hedonic luxury items over necessities and cash in everyday (local) decisions, under certain conditions, consumers pre-commit to hedonic luxury consumption. Such pre-commitments to hedonic luxuries are more likely to occur when their psychological cost is less concrete. These propositions were tested in a series of studies involving real and hypothetical choices as well as process measures. The results indicate that a substantial segment of consumers choose hedonic luxury prizes over cash of equal or greater value; most of these consumers explain such choices as motivated by the need to pre-commit in order to guarantee a hedonic luxury experience and that the award does not end up in the pool of money used for necessities. In addition, consistent with our analysis, the likelihood of pre-committing to hedonic luxuries is enhanced when (a) the consequences of the decision will be realized farther in the future, (b) the odds of winning the reward are lower, and (c) consumers anticipate how they will use each possible award. We also show that hedonic luxury awards are more effective than cash as incentives for participation in a (real) lottery. The theoretical and practical implications of the results are discussed.
Topic:: Demographics, Economics, and International Trade and Finance

1475. An Empirical Comparison of Bundesbank and ECB Monetary Policy Rules

Author:: John H. Rogers, Jonathan H. Wright, and Jon Faust
Publication Date:: 08-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: We estimate a monetary policy reaction function for the Bundesbank and use it as a benchmark to assess the monetary policy of the ECB since the launch of the euro in January 1999. We find that euro interest rates are low relative to this benchmark. We consider several possible reasons for this, including the divergence between core and headline inflation, inflation having turned out to be higher than could have been foreseen by the ECB and the possibility that the ECB is focussing only on macroeconomic conditions in a subset of member countries. We argue that these potential explanations cannot account for the difference between recent interest rates and our estimated Bundesbank benchmark. Our results suggest that the reaction function of the ECB features a high weight on the output gap relative to the weight on inflation, compared to the Bundesbank.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States

1476. Monetary Policy and Exchange Rate Pass-Through

Author:: Jane Ihrig and Joseph E. Gagon
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: The pass-through of exchange rate changes into domestic inflation appears to have declined in many countries since the 1980s. We develop a theoretical model that attributes the change in the rate of pass-through to increased emphasis on inflation stabilization by many central banks. This hypothesis is tested on twenty industrial countries between 1971 and 2003. We find widespread evidence of a robust and statistically significant link between estimated rates of pass-through and inflation variability. We also find evidence that observed monetary policy behavior may be a factor in the declining rate of pass-through.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States

1477. Permanent and Transitory Components of Business Cycles: Their Relative Importance and Dynamic Relationship

Author:: Chang-Jin Kim, Jeremy Piger, and Richard Startz
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: This paper investigates the relationship between permanent and transitory components of U.S. recessions in an empirical model allowing for business cycle asymmetry. Using a common stochastic trend representation for real GNP and consumption, we divide real GNP into permanent and transitory components, the dynamics of which are different in booms vs. recessions. We find evidence of substantial asymmetries in postwar recessions, and that both the permanent and transitory component have contributed to these recessions. We also allow for the timing of switches from boom to recession for the permanent component to be correlated with switches from boom to recession in the transitory component. The parameter estimates suggest a specific pattern of recessions: switches in the permanent component lead switches in the transitory component both when entering and leaving recessions.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States and Mexico

1478. The Use of Cyclical Indicators in Estimating the Output Gap in Japan

Author:: Jane Haltmaier
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: The paper uses capital and labor utilization rates to derive estimates of the Japanese output gap and potential output. Two techniques are used. The first uses the cyclical indicators to adjust potential output estimates derived from a Hodrick-Prescott filter over the most recent period when such estimates are generally considered to be unreliable. The second estimates equilibrium levels of the cyclical indicators and uses an Okun's Law-type relationship to derive output gaps and potential output. The second method is also applied to the components of potential output to derive a third estimate. These methods suggest that the current Japanese output gap is considerably larger than a simple Hodrick-Prescott filter would suggest.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: United States and Japan

1479. Home Bias and High Turnover Reconsidered

Author:: Francis E. Warnock
Publication Date:: 04-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: The Tesar and Werner (1995) finding of very high turnover rates on foreign equity portfolios is based on an underestimation of cross-border equity positions. Foreign turnover rates calculated using information from comprehensive benchmark surveys on cross-border holdings are much lower than previously reported and comparable to domestic turnover rates. However, the basic intuition from the Tesar-Werner study, that transaction costs do not help explain the observed home bias, is confirmed using data on transaction costs in 41 markets.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: United States

1480. A Retrospective on J. Denis Sargan and His Contributions to Econometrics

Author:: Neil R. Ericsson, Esfandiar Maasoumi, and Grayham E. Mizon
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: This retrospective provides a biographical history of Denis Sargan's career and reviews his contributions to econometrics, emphasizing the breadth of his work in both theoretical and applied econometrics. We include a complete bibliography for Denis and a list of PhD theses that he supervised--students were a substantive facet of his professional life. Finally, two of Denis's previously unpublished manuscripts on model building now appear in print.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: United States

1481. Border Effects within the NAFTA Countries

Author:: John H. Rogers and Hayden P. Smith
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: Using consumer price indexes from cities in the U.S., Canada and Mexico, we estimate the "border effect" on U.S.-Mexican relative prices and find that it is nearly an order of magnitude larger than for U.S.-Canadian prices. However, during a very stable sub-period in Mexico (May 1988 to November 1994), the "width" of the U.S.-Mexican border falls dramatically and becomes approximately equal to the U.S.-Canadian border. We then show that when consideration is limited to cities lying geographically very close to the U.S.-Mexican border--San Diego, Los Angeles, Houston, Dallas, Tijuana, Mexicali, Juarez, and Matamoros--the border width falls compared to that estimated with the full sample of U.S. and Mexican cities, but falls only very slightly. We also present evidence that the border effect in U.S.-Mexican prices is not primarily due to the border effect in U.S.-Mexican wages. Finally, using the prices of 276 highly dis-aggregated goods and services, we estimate the variability of relative prices of different items within Mexican cities. This measure of relative price variability declines during the stable peso sub-period, but by less than the decline in nominal and real (i.e., CPI-based) exchange rate variability. Our results are strong evidence of a "nominal border effect" in relative prices within NAFTA, but also indicate that real side influences are important.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: United States, Canada, North America, and Mexico

1482. Price Level Convergence, Relative Prices, and Inflation in Europe

Author:: John H. Rogers
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: If price levels are initially different across the euro area, convergence to a common level of prices would imply that inflation will be higher in countries where prices are initially low. Price level convergence thus provides a potential explanation for recent cross-country differences in European inflation, a worrisome development under the ECBs "one-size-fits-all" monetary policy. I present direct evidence on price level convergence in Europe, using a unique data set, and then investigate how much of the recent divergence of national inflation rates can be explained by price level convergence. I show that between 1990 and 1999 prices did become less dispersed in the euro area. Convergence is especially evident for traded goods, and more in the first half of the 1990s than the second half. By some measures, traded goods price dispersion across the euro area is now close to that across U.S. cities. Despite an on-going process of convergence, deviations from the law of one price are large. Finally, I find a statistically-significant and robust negative relationship between the 1999 price level and 2000 inflation rate in Europe, and that the contribution of price level convergence to explaining inflation differentials is often quite important economically. Still, factors other than price convergence explain most of the cross-country inflation differences.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: Europe

1483. Forecast Uncertainty in Economic Modeling

Author:: Neil R. Ericsson
Publication Date:: 02-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: This paper provides an introduction to forecast uncertainty in empirical economic modeling. Forecast uncertainty is defined, various measures of forecast uncertainty are examined, and some sources and consequences of forecast uncertainty are analyzed. Empirical illustrations with the U.S. trade balance, U.K. inflation and real national income, and the U.S./U.K. exchange rate help clarify the issues involved.
Topic:: Economics and International Trade and Finance
Political Geography:: United States and United Kingdom

1484. Patience, Persistence, and Welfare Costs of Incomplete Markets in Open Economies

Author:: Jinill Kim, Andrew Levin, and Sunghyun Henry Kim
Publication Date:: 02-2001
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: In this paper, we investigate the welfare implications of alternative financial market structures in a two-country endowment economy model. In particular, we obtain an analytic expression for the expected lifetime utility of the representative household when sovereign bonds are the only internationally traded asset, and we compare this welfare level with that obtained under complete asset markets. The welfare cost of incomplete markets is negligible if agents are very patient and shocks are not very persistent, but this cost is dramatically larger if agents are relatively impatient and shocks are highly persistent. For realistic cases in which agents are very patient and shocks are highly persistent (that is, the discount factor and the first-order autocorrelation are both near unity), the welfare cost of incomplete markets is highly sensitive to the specific values of these parameters. Finally, using a non-linear solution algorithm, we confirm that a two-country production economy with endogenous labor supply has qualitatively similar welfare properties.
Topic:: Economics, Human Welfare, and International Trade and Finance
Political Geography:: United States

1485. Linkage and Legalism in Institutions: Evidence From Agricultural Trade Negotiations

Author:: Christina Davis
Publication Date:: 02-2001
Content Type:: Working Paper
Institution:: Weatherhead Center for International Affairs, Harvard University
Abstract:: In a comparative study of Japanese and European trade policy, this paper explains how the institutional context of negotiations affects political outcomes. I examine two pathways by which negotiation structure promotes liberalization: issue linkage and legal framing. Broadening stakes through issue linkage mobilizes domestic lobbying for liberalization. Use of GATT/WTO trade law in dispute settlement legitimizes arguments favoring liberalization. This study on international institutions addresses the theoretical debates in the field regarding how interdependence and the legalization of international affairs change the nature of state interaction.
Topic:: International Political Economy and International Trade and Finance
Political Geography:: United States, Japan, Europe, and Israel

1486. Caribbean Tourism: Igniting the Engines of Sustainable Growth

Author:: Anthony T. Bryan
Publication Date:: 11-2001
Content Type:: Working Paper
Institution:: The North-South Center, University of Miami
Abstract:: Tourism drives economic growth in ways that make it one of the best engines for job creation and development for poor countries that possess natural beauty and relevant infrastructure. The industry is highly labor intensive and encourages entrepreneurship. Under its ambit, property owners, restaurants, and local suppliers of goods and services, among others, develop the habits of risk taking without which no economy can realize its full potential. Tourism holds out the prospect of a better life for those stakeholders who make money from it. Not unlike trade, it improves an economy's competitiveness. Trade does so because it stimulates local suppliers to match the quality and variety of imported goods. Tourism does so because returning travelers to a destination demand the goods and services they have seen in other countries (Elliott 2001).
Topic:: Development, Environment, and International Trade and Finance
Political Geography:: United States, Latin America, and Caribbean

1487. Protest and Collaboration: Transnational Civil Society Networks and the Politics of Summitry and Free Trade in the Americas

Author:: Patricio Korzeniewicz and William C. Smith
Publication Date:: 09-2001
Content Type:: Working Paper
Institution:: The North-South Center, University of Miami
Abstract:: This paper examines the politics of hemispheric integration exemplified by the Summits of the Americas held in Miami (1994), Santiago (1998), and Quebec (2001) and the negotiations over the creation of a Free Trade Area of the Americas (FTAA). Our basic premise is that political and institutional arrangements articulating state, society, and economy in Latin America are currently in the midst of a process of reconfiguration unleashed by the acceleration of globalization and attendant crises of state-centered development strategies. More specifically, we believe the Americas are witnessing the emergence of an ensemble of new social and political actors, among the most salient of which are new social movements and civil society organizations (CSOs), organized in networks operating at the domestic, regional, and global levels.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: United States, America, South America, Latin America, Central America, Caribbean, North America, and Miami

1488. The Impact of MERCOSUR on the Automobile Industry

Author:: Jerry Haar and Thomas A. O'Keefe
Publication Date:: 09-2001
Content Type:: Working Paper
Institution:: The North-South Center, University of Miami
Abstract:: A transformation of the automotive industry, particularly the segment involved in production of finished vehicles, has taken place in the Southern Common Market (Mercado Común del Sur/Mercado Comum do Sul—MERCOSUR/MER-COSUL) region of South America, at a time when MERCOSUR member states opened their economies to global competition and to participation in an ambitious subregional economic integration project. This Agenda Paper provides an overview of the factors that have contributed to this recent industry transformation. The paper also examines the factors involved in the formal incorporation of the automotive sector into the MERCOSUR project and discusses the impact this development is like-ly have on the subregional automobile industry,
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: United States, South America, Latin America, and North America

1489. Preferential Treatment in Trade: Is There Any Room Left in the Americas?

Author:: Fernando Masi
Publication Date:: 08-2001
Content Type:: Working Paper
Institution:: The North-South Center, University of Miami
Abstract:: This paper evaluates the costs and benefits of changes brought by the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) on special and differential treatment (S); shows how these changes affected the new regional integration processes in the American continent; and examines whether this issue is still a priority of developing countries' agendas. Large concessions offered by developing countries in exchange for access to markets automatically led to “trade graduation.” Thus, S has lost its former significance among developing countries. Moreover, nonreciprocal treatment was retained for least developed countries, which do not even enjoy this type of treatment under the so-called “new trade-related issues” of services, investment, and intellectual property rights.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: United States, America, South America, Latin America, Central America, Caribbean, and North America

1490. Geography, Markets, Resources, and Development: The Assets of the Americas Revisited

Author:: L. Ronald Scheman
Publication Date:: 07-2001
Content Type:: Working Paper
Institution:: The North-South Center, University of Miami
Abstract:: In May 1996, the price of copper crashed from US$2,600 to $1,775 per ton. The Sumitomo Corporation of Japan acknowledged unprecedented losses of $2.6 billion from unauthorized trading by its chief copper trader, one of the faceless manipulators of the international commodities markets, Yasuo Hamanaka. Among the major banks caught in this modern variation of the Ponzi scheme were J.P. Morgan and the London Metal Exchange. Chile, whose economy was highly dependent on income from the commodity, was quickly and painfully reminded that the highly leveraged markets on which it depended, even in the hands of the most reputable institutions, are fragile and subject to unexpected forces beyond its control. Copper prices began a downward spiral, and they have not yet recovered.
Topic:: Development, Environment, and International Trade and Finance
Political Geography:: United States, America, and Caribbean

1491. Free Trade and Worker Displacement: The Trade Adjustment Assistance Act and the Case of NAFTA

Author:: Jerry Haar and Antonio Garrastazu
Publication Date:: 02-2001
Content Type:: Working Paper
Institution:: The North-South Center, University of Miami
Abstract:: Trade liberalization, a fundamental feature of U.S. economic policy since the end of the Second World War, has increasingly become a contentious domestic political issue during the last decade. Proponents and opponents of free trade transcend political party affiliation, industry, occupation, geographical locale, income level, age, and other socioeconomic and demographic factors. In addition, the U.S. public and its leaders for the most part hold qualified, mixed, or inconsistent opinions about trade liberalization and the larger and rapidly increasing phenomenon known as globalization. In a February 9-14, 2000, nationwide poll conducted by Princeton Survey Research Associates, a majority of respondents (64 percent compared to 27 percent) stated that free trade with other countries is good for the United States. On the other hand, an NBC News/ W all Street Journal poll several months later asked interviewees to respond to the following statement: “Foreign trade has been bad for the U.S. economy because cheap imports from abroad have hurt wages and cost jobs here at home.” Forty-eight percent of the respondents answered that it has been “bad” and 34 percent “good.”
Topic:: Industrial Policy and International Trade and Finance
Political Geography:: United States and Latin America

1492. Lovely but dangerous: The impact of patent citations on patent duration

Author:: Per Botolf Maurseth
Publication Date:: 03-2001
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: What is the impact of patent citations on patent renewal behaviour? Patent citations are commonly used as an indicator of technology spillovers. For cited patents therefore, patent citations have a potentially ambiguous impact. On the one hand, patent citations may indicate a scientific breakthrough, a high value of the cited patent and therefore a long survival period. On the other hand, patent citations may indicate competing innovations that render the cited patent obsolete. By discriminating patents by technology field, it is demonstrated that patents that receive citations across technology fields survive longer than other patents. Patents that receive citations within the same technology field lapse earlier.
Topic:: Development, International Trade and Finance, and Science and Technology
Political Geography:: Europe

1493. Meet Me Halfway but don't Rush—Absorptive capacity and strategic R investment revisited

Author:: Leo A. Grünfeld
Publication Date:: 12-2001
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: In this paper, we analyse how R investment decisions are affected by R spillovers between firms, taking into consideration that more R investment improves the ability to learn from competing firms - the so-called absorptive capacity effect of R The model in this paper is an extension of d'Aspremont and Jacquemin (1988), where they show that exogenous R spillovers reduce the incentive to invest in R when firms compete in a Cournot duopoly. Our model treats R spillovers as endogenous, being a function of absorptive capacity effects. Contrary to earlier studies, we show that absorptive capacity effects do not necessarily drive up the incentive to invest in R This only happens when the market size is small or the absorptive capacity effect is weak. Otherwise firms will actually chose to cut down on R Furthermore, absorptive capacity effects also increase the critical rate of spillovers that determines whether participating in research joint ventures leads to lower or higher R investment. Finally, we show that strong learning effects of own R are not necessarily goodfor welfare. Moreover, if the market size is large, welfare will be at its highest when the learning effect is small.
Topic:: Economics, Industrial Policy, and International Trade and Finance
Political Geography:: Europe

1494. Firms' export decisions—fixed trade costs and the size of the export market

Author:: Hege Medin
Publication Date:: 10-2001
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: This article presents two models of international trade under monopolistic competition. In increasing returns sectors firms face fixed, in addition to variable, trade costs, therefore both exporters and non-exporters may coexist. While nonexporters benefit from access to large domestic markets, exporters benefit from access to large foreign markets. Consequently, a small country has a higher share of exporting firms than a large one. In contrast to standard models, increasing returns sectors turn out more open in small countries than in large ones, and small countries may be net exporters of such commodities, despite the disadvantage of a smaller home market.
Topic:: Economics and International Trade and Finance
Political Geography:: Europe

1495. Should one bargain over two issues simultaneously or separately?

Author:: Bård Harstad
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: International negotiations on trade (e.g. GATT and TRIPS) have typically been of the package-form, and different issues have therefore been linked to each other. Trade issues have not been linked to e.g. environmental agreements in negotiations, however. This paper studies the outcome of linked bargaining, where two issues are simultaneously negotiated over by two countries. We notice that there always exist gains from linkages in bargaining, and that such linking will always occur in equilibrium if there is a pre-stage where the countries are bargaining over the agenda. The outcome under linked bargaining is compared with the outcome under separate negotiations, and the circumstances where a country will gain or lose from linking are characterized. The results help us to understand different countries' preferences for linkages in bargaining.
Topic:: International Relations, Environment, and International Trade and Finance
Political Geography:: Europe

1496. Recent Advances in Growth Theory. A Comparison of Neoclassical and Evolutionary Perspectives

Author:: Per Botolf Maurseth
Publication Date:: 05-2001
Content Type:: Working Paper
Institution:: Norwegian Institute of International Affairs
Abstract:: Research on economic growth has experienced remarkable progress the last decade. The neoclassical perspective has benefited from development of new mathematical methods and new approaches to market structure, economics of scale and spillover effects. At the same time evolutionary theories on economic development have appeared, partly competing but also complementary to neoclassical theorising. In this paper, the development of the two perspectives on economic growth is reviewed and they are compared with each other. Despite evident differences there seems to be convergence between the two traditions. The two perspectives therefore do not belong to different paradigms in the Kuhnian sense and they can hardly be categorised as two isolated research programmes in the sense of Imre Lakatos. Evolutionary and neoclassical growth economics draw inspiration from similar sources, they are overlapping and to some extent complementary. The two traditions also interact with each other.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: Europe

1497. Wage Coordination and the Welfare State: Germany and Japan Compared

Author:: Philip Manow
Publication Date:: 12-2000
Content Type:: Working Paper
Institution:: Max Planck Institute for the Study of Societies
Abstract:: Is there a relation between welfare state regimes and national wage setting systems? Peter Swenson in his research on the historical dynamics of the US-American and Swedish welfare state has recently claimed that such a relation does indeed exist. The essay aims to check if this also holds true for the German and Japanese case. In the post-war period both countries have established systems of wage-bargaining that are less centralized than the Swedish system, but in which wages are highly coordinated both within and across sectors, and, subsequently, in which wage compression is relatively high as well. Thus, both countries are confronted with the same problems of wage- and welfare-drift and of firms' exit from the 'solidaristic' or coordinated wage setting that are so typical for Sweden. At the same time the German and Japanese welfare state differ from each other in almost all dimensions. Thus, both cases seem to be ideally suited to provide for a plausibility-check of the Swenson hypothesis. The essay reaches the conclusion that there is indeed ample evidence that both the German and the Japanese welfare state contributed critically to the stability of wage coordination in the era of high growth after World War II. They thus have to be understood as an integral part of the German and Japanese post-war growth model.
Topic:: Economics, Human Welfare, and International Trade and Finance
Political Geography:: United States, Japan, America, and Germany

1498. EMU Effects on International Trade and Investment

Author:: Harry Flam and Per Jansson
Publication Date:: 04-2000
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The partial effect of nominal exchange rate volatility on exports from each EMU member to the rest of the EMU is estimated on annual data for 1967-97, using modern time-series methods. The long-run relations between exchange rate volatility and exports are mostly negative and in several cases insignificantly different from zero. Thus, these estimates do not provide much support for the hypothesis that the elimination of nominal exchange rate volatility will significantly increase trade within the EMU. However, the EMU will presumably lead to geographical concentration of production and therefore indirectly to increased trade within the EMU and, during a transitional stage, to increased foreign direct investment, both within the EMU and between the EMU and the rest of the world.
Topic:: Economics, Government, International Political Economy, and International Trade and Finance
Political Geography:: Europe

1499. A Financial Architecture for Middle-Class-Oriented Development

Author:: Walter Russell Mead and Sherle R. Schwenninger
Publication Date:: 10-2000
Content Type:: Working Paper
Institution:: Council on Foreign Relations
Abstract:: The Case For Middle-Class-Oriented Development International financial architecture works best when it serves social goals that command widespread support and legitimacy. Without neglecting the more conventional goal of allowing the greatest possible global flow of capital with the least risk of financial crisis, the primary goal of international financial reform, for both economic and political reasons, ought to be to promote middle-class-oriented development around the world.
Topic:: Development, Economics, Government, and International Trade and Finance
Political Geography:: United States

1500. Institutions Structural Unemployment: Do Capital-Market Imperfections Matter?

Author:: Ansgar Belke and Rainer Fehn
Publication Date:: 11-2000
Content Type:: Working Paper
Institution:: Centre for European Policy Studies (CEPS)
Abstract:: This paper analyses whether differences in institutional structures on capital markets contribute to explaining why some OECD-countries, in particular the Anglo-Saxon countries, have been much more successful over the last two decades in producing employment growth and in reducing unemployment than most continental-European OECD-countries. It is argued that the often-blamed labour market rigidities alone, while important, do not provide a satisfactory explanation for these differences across countries and over time. Financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural change and against moving successfully toward the “new economy”. Highly developed venture capital markets should help to alleviate such financial constraints. This view that labour-market institutions should be supplemented by capital market imperfections for explaining differences in employment performances is supported by our panel data analysis, in which venture capital turns out to be a significant institutional variable.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: Europe

Search

Search Constraints

Search Results

Refine your search

Topic

Political Geography

Content Type

Publishing Institution

Author

Publication Year

COLUMBIA UNIVERSITY PRESS