On the links between globalization and poverty

This article surveys the evidence on the linkages between globalization and poverty, drawing on a new NBER study that has been completed under the direction of one of the authors. We focus on two measures of globalization: trade and international capital flows. Past researchers have argued that global economic integration should help the poor since poor countries have a comparative advantage in producing goods that use unskilled labor. Our first conclusion is that such a simple interpretation of general equilibrium trade models is misleading. Second, the evidence suggests that the poor are more likely to share in the gains from globalization when there are complementary policies in place.Third, trade and foreign investment reforms have produced benefits for the poor in exporting sectors and sectors that receive foreign investment. Fourth, financial crises are very costly to the poor. Finally, the collected evidence suggests that globalization produces both winners and losers among the poor. The fact that some poor individuals are made worse off by trade or financial integration underscores the need for carefully targeted safety nets. We conclude the article by identifying a number of unanswered research questions regarding the impact of globalization on poverty.     

The Mobility of Entrepreneurs and Capital: Taiwanese Capital-Linked Migration

Much of the literature concerning international investment focuses on the movement of capital or trade flows and does not cover the persons who migrate with the capital, even though in a globalizing economic system new conditions emerge for the international migration of capitalists. On the one hand, capital owners have been recruited directly by business migration programmes in countries such as Canada, Australia, and the US. On the other hand, global economic restructuring, one part of which entails increasing foreign direct investment from a wider range of countries, has induced the migration of an entrepreneurial/managerial class. This article analyses the relation between the mobility of capital and of entrepreneurs by investigating Taiwan's capital-linked migrations. It aims to show that people can integrate migration and capital investment as a strategy to best serve their interests. Although their moves are mediated and constrained by different migration channels (governmental policies, recruitment agencies, transnational corporations, etc.), capital-linked migrants are not passive players in international migration systems. They actively position themselves with regard to migration channels and select active strategies that best suit their objectives. Sometimes immigration serves capitalists' interest in capital accumulation, at other times capital investment serves as the means for securing a second nationality. In this way, Taiwanese capitalist mobility has been incorporated into the open-ended logic of flexible capitalism itself. Such understanding of the processes of capital-linked migration and its implications contribute to new theories of the relationship between international flows of capital and international migration.     

US Free Trade Agreements and Policy Flexibility: Will New Rules Hinder Industrialisation?

Free trade agreements have become a central feature of many developing countries' growth strategies, encouraged by an evaluation literature that quantifies their positive impact on trade. However, trade gains come at the cost of policy space, particularly when the partner is a developed country, and though this cost has been acknowledged, its impact has not been explored. This article seeks to address this oversight by detailing changes to the domestic policy environment from the participation of a developing country in a US‐anchored FTA and evaluating whether the resulting policy regime is flexible enough to enable a developmental government to pursue activities associated with industrialisation.     

Does FDI Guarantee the Stability of International Capital Flows? Evidence from Malaysia

The conventional wisdom is that crises are largely due to swings in short‐term capital. Economies that finance their current account deficits mainly via foreign direct investment (FDI) are therefore seen as being less susceptible to a crisis. The analysis in this article, backed up by some empirical evidence drawn from Malaysia, challenges the casual presumption that the switch towards FDI alone will automatically imply that extreme capital instability will become a thing of the past.     

FOREIGN INVESTMENT AND TRADE DEPENDENCE

This article explores the relationship between foreign capital investment and trade dependence in less developed economies. Dependency and world system theorists have argued that foreign investment from the advanced capitalist states promotes export and import dependent forms of development. Using cross-national data for 65 less developed nations between 1960 and 1977, the analysis supports this general claim. Total direct foreign investment has a significant positive impact on the measures of export, import and total trade dependence. However, when the total foreign investment measure is disaggregated by sectoral destination (agriculture, manufacturing, petroleum/extraction) only investment in petroleum/extraction has the expected effect on trade dependence. This finding suggests that a large part of the effect of foreign investment may be due to the structuring influence of investment in mineral/extractive forms of production.     

从中美经贸“恐怖平衡”看我国外经贸模式的转型

在中美经贸金融关系中客观上存在所谓＂恐怖平衡＂,这不仅反映了美国过度消费模式和美元霸权地位所带来的全球经贸＂平衡＂,也反映出我国偏重出口导向型和外资依赖型的经济发展模式的某些特征,凸显了我国对外经济发展中的一些矛盾。这种畸形而充满风险的＂平衡＂状态目前虽有些＂积重难返＂,却是不能长久维持的。因此,从中国的实际出发,亟需大力调整自身的外经贸模式,逐步扭转在国际经贸、金融、产业及市场大格局中的不利地位。同时,应当抓住时机,采取一系列切实有效的措施,扩大对外投资,继续有效利用外资,大力发展服务贸易,促进加工贸易的转型升级,提高出口商品的竞争力,通过深化体制改革和完善政策法规,积极推进内外贸一体化,加快促进我国外经贸模式的调整与转型。     

Financial crises: a culture of complacency

Abstract

The aim of this article is to consider the role of complacency in financial crises over the last two decades, with a closer look at the ongoing subprime mortgage financial crisis. The theme of complacency and the concept of financial crisis are both explored. Financial crises are better understood by explaining their economic drivers and the fundamental role of complacency in the various transmission mechanisms involved. These drivers are then illustrated by means of recent selected financial crises including the crash of 1987, the East Asian financial crisis of 1997, the long-term capital management crisis of 1998, the dot-com crash of 2000 and the current subprime mortgage financial crisis. The article concludes that complacency has not only underlain but also played a pivotal role in the recent financial crises. Complacency increases during periods of economic stability, leading to some departure from rational investment decisions, an effect which is then compounded by herding behaviour. Further, with regard to the governance of markets, complacency is both institutional and institutionalized. Finally, adding to this culture of complacency is the irrational belief that crises are unique and therefore cannot be spotted in advance or even in their early stages. To address this culture of complacency, remedies lie in the re-education of key players and the provision of better financial information, a rethink of market governance structures and some recognition that the transmission mechanisms are both recurring and predictable.     

EXPORT INSTABILITY AND LONG-TERM CAPITAL FLOWS: RESPONSE TO ASSET RISK IN A SMALL ECONOMY

An open capital account allows long-term capital flows to automatically mitigate adverse effects of export instability on domestic saving and investment. An application of portfolio management theory shows that risks that are systematic to the domestic market are diversified internationally. This may help explain why foreign investment finances many high-risk investments in export sectors of LDCs and why results of studies of the effects of export instability show inconsistent results. This theory is presented and tested empirically.     

Policy Linkage and Uncertainty in International Agreements

This article uses noncooperative game theory to analyze the potential benefits of linking trade agreements to agreements covering domestic policies in a world of uncertainty. I show that nonlinkage is more desirable if there is a positive probability that a country will erroneously believe that its trading partner is cheating on the agreement (triggering an unnecessary punishment phase). In contrast, linkage is more desirable if there is a positive probability that cheating will go unnoticed.     

The coevolution of trade agreements and investment treaties: Some evidence from network analysis

Regional trade agreements (RTAs) and bilateral investment treaties (BITs) are expected to promote trade and investment relationships. One critical feature of such agreements is the network, so the multiplex coevolution of RTAs and BITs should be captured by the dynamics of their two networks. Although many studies have examined the roles of RTAs and BITs, most studies do not account for crucial network properties. This study explores how RTAs and BITs coevolve by applying a stochastic actor-oriented model of multiplex network evolution. In particular, we examine the roles of (i) cross-network dyadic interinfluences and (ii) within- and cross-network preferential attachments to discuss the dynamic relationships between RTAs and BITs. The results are as follows. First, our estimation supports cross-network dyadic interinfluences. Countries that sign a BIT are willing to establish an RTA, while those that sign an RTA are reluctant to establish a BIT. Second, concerning preferential attachments, countries prefer to sign BITs with partners that have more RTA and BIT links. However, countries tend to form RTAs with partners that have more BIT links but are reluctant to form RTAs with those that have more RTA links. We discuss possible justifications for these results, including arguments regarding the benefits and costs associated with the formation of RTAs and BITs.     

新形势下上海引进外资问题研究

基于新形势下上海引进外资出现的新情况、新问题,通过对上海投资环境、定位和区位的具体分析,建立上海吸引高端外资的系统框架,并提出上海在市场开放方面,应扩大外资进入领域,鼓励外资投向"上海制造"、"上海服务"、"上海创造"的高端产业,依次引导外资的产业结构升级;在投资环境方面,应建立统一和可预见的法制环境,完善社会信用制度,以此维护市场的竞争秩序;在市场准入方面,应放宽行业限制,不断调整和优化利用外资结构。     

Mexico and Central America

This article reviews the literature on migration and HIV/AIDS in Mexico and Central America, including Belize, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, and Panama. Most migrants travel to the US through Mexico. US-Mexico trade agreements created opportunities for increased risk of HIV transmission. The research literature focuses on Mexico. Most countries, with the exception of Belize and Costa Rica, are sending countries. Human rights of migrants are violated in transit and at destination. Migration policies determine migration processes. The Mexican-born population in the US is about 3% of US population and 8% of Mexico's population. About 22% arrived during 1992-97, and about 500,000 are naturalized US citizens. An additional 11 million have a Mexican ethnic background. Mexican migrants are usually economically active men who had jobs before leaving and were urban people who settled in California, Texas, Illinois, and Arizona. Most Mexican migrants enter illegally. Many return to Mexico. The main paths of HIV transmission are homosexual, heterosexual, and IV-drug-injecting persons. Latino migrants frequently use prostitutes, adopt new sexual practices including anal penetration among men, greater diversity of sexual partners, and use of injectable drugs.     

Effects of Macroeconomic Uncertainty on Investment and Economic Growth: Evidence from Pakistan

The relationship between macroeconomic uncertainty, investment and economic growth is an empirical issue in developing countries. This paper investigates the effects of macroeconomic uncertainty on investment and economic growth in Pakistan for the period 1975–2008 by using the accelerator model of investment and endogenous growth model. The conditional variances, directly estimated through the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model is utilized for erecting the uncertainty variables related to fiscal policy, openness and foreign capital inflows. The results clearly indicate that the macroeconomic uncertainty have significant negative effects on investment and per capita income of Pakistan. We conclude that a reduction in macroeconomic uncertainty through appropriate fiscal and monetary policy, stability in capital inflows and improved trade performance could result in high investment and sustainable economic growth in the country.     

FREE TRADE AGREEMENTS AS DYNAMIC FARSIGHTED NETWORKS

In the presence of multilateral negotiations, are Free Trade Agreements (FTAs) necessary for, or will they prevent, global free trade? I answer this question using a dynamic farsighted model of network formation among asymmetric countries. Ultimately, FTAs prevent global free trade when there are two larger countries and one smaller country but FTAs can be necessary for global free trade when there are two smaller countries and one larger country. The model provides insights into the dynamics of recent real‐world negotiations and recent results in the literature on the empirical determinants of trade agreements. (JEL C71, F12, F13)     

Institutional Conditions of Economic Globalization: Effects of Antitrust and Merger Laws on the Global Integration of the Acquisition Market1

A central insight from institutional theory about markets is that they cannot operate without governing rules to guide interactions among actors. Because most of these rules are made and enforced within national borders, international economic transactions are said to suffer from an “institutional abyss,” the lack of institutional arrangements for economic exchanges. Scholars have found that the abyss can be filled by two factors: network connectedness, such as inter-governmental organizations, and intercountry economic agreements, such as the World Trade Organization or free trade. This article proposes a third factor: the global diffusion of governmental regulations. When countries adopt highly standardized regulations on a particular transaction, it provides legal familiarity for foreigners and reduces procedural uncertainty surrounding how the transaction should be executed. Using fixed-effects models on longitudinal data, I show that the adoption of antitrust and merger laws increases the volume of cross-border mergers—the transaction the laws are meant to regulate. This result stands in direct opposition to financial scholars’ predictions that antitrust and merger laws will reduce cross-border mergers because the laws are meant to restrain, not liberate, the transaction. This article theorizes how the diffusion of regulations, not the elimination of regulations, can facilitate global market integration.     

Workers’ Remittances and Domestic Investment in South Asia: A Comparative Econometric Inquiry

This study explores the effect of workers’ remittances on domestic investment in four selected South Asian countries: Bangladesh, India, Pakistan, and Sri Lanka, using contemporary time series estimation techniques from 1980 to 2017. The estimated results of the ARDL bounds approach to cointegration analysis have revealed that among selected South Asian countries, Pakistan has witnessed a significant negative effect in the long run. Similarly, the findings of other forms of capital flows also revealed varying effects across the countries considered. This study urges the transformation of aggregate economic behaviour from consumption to the production side, by adopting policies that would encourage domestic saving and investment activities. In this regard, among others, reduction in the interest rate and the interest rate spread would be beneficial. It urges the identification of factors that conditions varying effect of workers’ remittances and other capital inflows to mitigate negative effects into positive.     

The Effectiveness of Norway's Readmission Agreements with Iraq and Ethiopia

This article offers an analysis of the effectiveness of Norway's readmission agreements with Iraq and Ethiopia. Through the use of readmission agreements, Norway aims to reduce irregular presence by increasing the number of both voluntary and forced returns, as well as discourage future irregular migration by sending a “clear signal” to individuals without protection needs that they will be returned when their asylum applications are rejected. The effectiveness of these agreements thus lies in the extent to which they fulfill these objectives. While Norway's agreements with Iraq and Ethiopia have been explicitly highlighted as effective by Norwegian authorities, this article argues that readmission agreements may be expected to limit, but not to eliminate, return problems. Readmission agreements, however streamlined, will have different effects on different groups. It finds that Norway's readmission agreements have been only partially successful with Iraq, and wholly unsuccessful with Ethiopia.     

Endogenous productivity and equality of opportunity

We consider a production economy ??à la Mirrlees?? in which the earnings capability of individuals is endogenous. Individuals are heterogeneous with respect to their preferences and their propensity to benefit from a given investment in human capital. We look for allocation rules satisfying properties that capture the objective of equalizing opportunities. We characterize four allocation rules that both encompass different perspectives of equality of opportunity and justify different levels of public intervention.     

中国金融市场开放创新与上海国际金融中心建设

中国金融市场开放创新与上海国际金融中心协同发展的突破口与重点举措有:全面开展以自由贸易账户为基础的资本账户开放, 推动人民币资本项目可兑换先行先试;积极稳妥推进利率市场化,完善利率定价机制;加快外汇管理体制改革,进一步推进投资贸易便利化;加快金融服务业对外开放,建设面向国际的金融基础设施和市场体系;加快金融业务和产品创新,推动人民币在岸离岸中心联动发展等.     

Tax Uncertainty and Investment: A Cross-Country Empirical Examination

An empirical examination of uncertain tax policy is crucial to a full understanding of the interplay between taxes and investment, especially given the ambiguities in the limited theoretical literature. This article empirically investigates the impact on investment of volatility in effective tax rates on capital income in a cross-section of the 15 countries of the European Union, the United States, and Japan. Panel regression results suggest that the volatility of effective tax rates on capital income has a significant negative impact on investment per worker, with elasticities ranging from −0.012 to −0.029.