CAN TRADE REALLY HURT? AN EMPIRICAL FOLLOW‐UP ON SAMUELSON'S CONTROVERSIAL PAPER

This paper investigates Samuelson's [Samuelson, P. A. “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization.” Journal of Economic Perspectives, 18(3), 2004, 135–46] argument that technical progress of the trade partner may hurt the home country. We illustrate this prospect in a simple Ricardian model for situations with outward knowledge spillovers. Within this framework Samuelson's Act II effects may occur. Based on industry level panel data for 17 OECD countries for the period 1973–2000 we show econometrically that the outflow of domestic knowledge via exports or foreign direct investment (FDI) to the rest of the world may have a negative impact on industry output in the home country. This is particularly so when exporting to technologically less advanced countries and, more specifically, China. (JEL F10, F11, F14, O30)     

BOON OR BURDEN? THE EFFECT OF PRIVATE SECTOR DEBT ON THE RISK OF SOVEREIGN DEFAULT IN DEVELOPING COUNTRIES

We explore how the share of the private sector in total external debt affects perceived creditworthiness and the likelihood of sovereign default in developing countries. While there are theoretical arguments both in favor and against a stabilizing role of private‐sector borrowing, the evidence supports the notion that a greater share of the private sector in total external debt is associated with a reduced likelihood of sovereign default. (JEL F34, O16)     

The Ethics of Tax Evasion

A wide and growing consensus views taxation as fundamentally coercive in nature. Regardless of the magnitude of the tax or the agents perpetrating it, this fundamental coercive element remains. Tax evasion must consequently be treated as an effort to convert this coercive behavior into voluntary transactions. By altering the conditions of payment and receipt of goods and services, taxation veils both consumers' and producers' preferences. Critics of tax evasion have left unanswered the question as to how society will efficiently allocate its scarce resources under coercively falsified preference signals. Accepting that preferences are best signaled voluntarily and via market participants directly, we argue that tax evasion must result in increased economic efficiency, as well as allow for a reinstatement of an individual's right to contract freely.