Financial Globalization and the Emerging Economies

Total Page:16

File Type:pdf, Size:1020Kb

Financial Globalization and the Emerging Economies FINANCIAL GLOBALIZATION AND THE EMERGING ECONOMIES Editors José Antonio Ocampo Stefano Zamagni Ricardo Ffrench-Davis Carlo Pietrobelli ECONOMIC COMMISSION FOR INTERNATIONAL JACQUES LATIN AMERICA AND THE CARIBBEAN Santiago, Chile, 2000 MARITAIN INSTITUTE LC/G.2097-P May 2000 This document has been prepared and published jointly by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Jacques Maritain Institute. Its contents were edited by José Antonio Ocampo, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC); Stefano Zamagni, Professor of Economics at the University of Bologna; Ricardo Ffrench-Davis, Principal Regional Adviser of ECLAC; and Carlo Pietrobelli, Professor of Development Economics at the University of Molise, Campobasso. This book has been published with a special grant from: Compagnia di San Paolo (Turin, Italy) and with the contributions of: Coopération et Solidarité (Brussels), Endesa Group (Madrid), Fondazione Mondo Unito (Vatican City), Ministry for University and Scientific Research of Italy, Ministry of Finance of Chile, Ministry of Foreign Affairs of Italy, Sanpaolo IMI (Turin), Swiss Federal Office for Foreign Economic Affairs. Applications for the right to reproduce this work are welcomed and should be sent to the Secretary of the Publications Board, United Nations Headquarters, New York, N.Y. 10017, U.S.A. Member States and their governmental institutions may reproduce this work without prior authorization, but are requested to mention the source and inform the United Nations of such reproduction. UNITED NATIONS PUBLICATION Sales No. E.00.II.G.39 ISBN 92-1-121265-0 Copyright © United Nations and International Jacques Maritain Institute, 2000 All rights reserved Printed in Chile ECLAC 5 CONTENTS ■ Page Foreword ............................................... 7 About the Editors............................................ 9 INTRODUCTION .......................................... 11 1 International Finance: Factor of Peace or of Conflict?, Roberto Papini............................................ 13 2 Where do we Stand?, José Antonio Ocampo ................... 19 3 Globalization as an Economic and Social Force: Opportunities and Risks from a Humanistic Perspective, Eduardo Aninat...... 25 4 Financial Markets and Globalization: The Perspective of Emerging Economies, Eduardo Frei Ruiz-Tagle ................ 31 I INTERNATIONAL FINANCIAL REFORM ................ 39 5 A Broad Agenda for International Financial Reform, José Antonio Ocampo ...................................... 41 6 International Financial Architecture: Foundations and Framework, Gavin Bingham ................................ 63 7 The New Global Financial Landscape Under Stress, Hans Blommestein ......................................... 77 8 Towards a New Financial Architecture: The Management of Crises, Stephany Griffith-Jones ............................ 103 9 Beyond Bretton Woods: What International Monetary and Financial System for the Twenty-First Century?, Alexander K. Swoboda...................................... 123 10 Taxation and the Architecture of the International Economic System, Vito Tanzi ............................... 139 6 FINANCIAL GLOBALIZATION AND THE EMERGING ECONOMIES Page II NATIONAL POLICIES TO FACE VULNERABILITY........ 151 11 Stabilizing Capital Surges in Emerging Economies, Ricardo Ffrench-Davis ..................................... 153 12 An Asian Perspective on the Desirable International Financial Architecture, Koichi Hamada ............................... 175 13 The Impact of Financial Globalization on Transition Economies, Bernard Snoy ............................................. 193 14 Crisis and Contagion: Some New and Old Ideas, José Luis Machinea ........................................ 211 15 Capital Flows in Chile: Changes and Policies in the 1990s, Carlos Massad............................................ 219 16 Economic Policy Options and Financial Globalization: Mexico, 1988–99, Rocío Ramos de Villarreal and René Villarreal... 233 III STATEMENTS: THE SOCIAL ACTORS IN THE FACE OF VULNERABILITY ....................................... 253 17 The Responsibility of Financial Actors, Angelo Caloia.......... 255 18 International Financial Flows: A Labour Point of View, Luis Anderson ............................................ 267 19 Why Common Good Matters, Jean-Loup Dherse .............. 273 20 Ethics and the Financial Community, Andrew Hilton........... 279 21 A Challenge to Globalization Theory, William Pfaff............ 287 22 Dealing with ‘The Global Governance’ and ‘The Dual Constituency’ Syndromes in Emerging Countries, Louis Sabourin............................................ 293 23 Going with the Flow of the Market, Justin Welby .............. 303 CONCLUSIONS ............................................ 311 24 The Emerging Economies in the Global Financial Market: Some Concluding Remarks, Carlo Pietrobelli and Stefano Zamagni ..... 313 ECLAC 7 FOREWORD ■ Financial globalization has been a most dynamic component of the continued globalization experienced by the world in recent years. Capital flows to a large number of emerging economies expanded rapidly during the 1990s. Such capital surges were often followed by financial crisis affecting several emerging economies of Asia and Latin America in the 1990s. There is a broad recognition that financial instability is deeply rooted in the present operation of markets, which has brought consensus on the need to examine the issue in depth, in order to urgently find better solutions for crises prevention and crises management. The meetings of International Financial Institutions, G-7 and various groupings of developing economies have directed their attention to this issue. This collection of essays results from an international conference convened by ECLAC and the International Jacques Maritain Institute of Rome in Santiago de Chile in 1999. This conference brought together policy-makers, academics, members of international institutions (BIS, EBRD, IMF, OECD), and social actors (mass media, labour unions, churches and financial activity). The book includes four parts. The Introduction collects the opening statements in the conference. Part I contains a discussion of the issues and proposals on how to reform the international financial structure. Part II discusses the national policies to face financial instability, and their role in stabilizing capital flows. Part III includes statements by different social actors on their views on financial globalization and their messages to policy-makers. Santiago, Chile, January 2000 8 FINANCIAL GLOBALIZATION AND THE EMERGING ECONOMIES ECLAC 9 ABOUT THE EDITORS ■ Ricardo Ffrench-Davis, Ph.D. in Economics, University of Chicago (1971). Principal Regional Adviser, ECLAC, Santiago de Chile. Director of Research (1990-92) of the Central Bank of Chile. Co-founder of Center for Economic Research on Latin America (CIEPLAN), Santiago de Chile (1976-89). Professor of Economics at Universidad de Chile; visiting professor at Oxford and Boston Universities. Author or editor of thirteen books and about one hundred articles on international economics, development strategies, foreign financing, and Latin American economies. His most recent publications are Reforming the reforms in Latin America: macroeconomics, trade, finance, 1999 (Macmillan and St Martin’s Press in English and McGraw-Hill in Spanish) and Between neoliberalism and growth with equity in Chile, 1999 (Dolmen Ediciones, in Spanish). José Antonio Ocampo, Ph.D. in Economics from Yale University. Executive Secretary of the Economic Commission for Latin America and the Caribbean. Former Minister of Finance and Public Credit, Director of the National Planning Department, Minister of Agriculture and Director of the Foundation for Higher Education and Development of Colombia. Professor of Economics at Universidad de los Andes and Universidad Nacional de Colombia; visiting Professor at Yale and Oxford Universities. He is author of numerous books and articles on macroeconomic policy and theory, economic development, international trade and economic history. His more recent publication are Foreign Capital in Latin America (co-edited with Roberto Steiner), 1994 (Inter-American Development Bank) and La Reforma del Sistema Financiero Internacional: Un Debate en Marcha, 1999 (Fondo de Cultura Económica). 10 FINANCIAL GLOBALIZATION AND THE EMERGING ECONOMIES Carlo Pietrobelli, Ph. D. in Economics, Oxford University. Professor of Economics at the University of Molise, Campobasso, and at the University of Rome 3. He has been a consultant to the European Union, the World Bank, the IADB, UNCTAD, UNIDO, ECLAC. He has published extensively in specialised international journals and his last book Industry, Competitiveness and Technological Capabilities was published by Macmillan in 1999. Stefano Zamagni, Professor of Economics at the University of Bologna; adjunct professor at Johns Hopkins University, Bologna Center; visiting professor at Bocconi University, Milan. Member of the Executive Committee of the International Economic Association (1989-99). President of ICMC (International Catholic Migration Commission, Geneva). Author of Microeconomic Theory, 1987 (Blackwell); History of Economic Thought, 1993 (Oxford University Press); The Economics of Altruism, 1995 (E. Elgar); The Economics of Organized Crime and Illegal Markets, 1999 (E. Elgar). ECLAC 11 INTRODUCTION 12 FINANCIAL GLOBALIZATION AND THE EMERGING
Recommended publications
  • The Rationale of Central Banking
    THE RATIONALE OF CENTRAL BANKING A Liberty Press Edition Vera C. Smith THE RATIONALE OF CENTRAL BANKING and the Free Banking Alternative PREFACE BY LELAND B. YEAGER r . ,'7/ Liberty Fund Indianapolis LibertyPress is a publishing imprint of Liberty Fund, Inc., a foundation established to encourage study of the ideal of a society of free and responsible individuals. The cuneiform inscription that serves as our logo and as the design motif for our endpapers is the earliest-known written appearance of the word °freedom" (amagiJ, or "liberty _It is taken from a clay document written about 2300 B (. in the Sumerian city-state of Lagash Reprinted by permission of A. Wilson-Smith. Prelate ©1990 by Leland B Yeager All rights reserved.All inquirms should be addressed to Liberty Fund, lnc, 8335 Allison Pointe Trail, Suite 300, Indianapolis, IN 46250-1687. This book was manufactured in the United States of America. Library of Congress Cataloging-in-Publication Data Smith, Vera C., 1912-1976 [Rationale of central banking] The rationale of central banking and the free banking alternative Vera C. Smith; preface by Leland B. Yeager p. cm. Reprint. Originally published" The rationale of central banking. Westminster, England: P.S King & Son Ltd., 1936 Includes bibliographical references 1. Banks and banking, Central 2. Banks and banking, Central-- Europe--History 3. Banks and banking, Central--United States-- History. HG1811.$5 1990 332.1' 1'094--dc20 90-30937 CIP ISBN 0-86597-086-6 ISBN 0-86597-087-4 (pbk) 1098765432 Contents Preface by Leland B. Yeager xiii Publisher's Note xxvii Foreword by Vera C.
    [Show full text]
  • Cosmopolitan Globalism and Human Community
    University of Windsor Scholarship at UWindsor Philosophy Publications Department of Philosophy 2006 Cosmopolitan Globalism and Human Community Jeff Noonan University of Windsor Follow this and additional works at: https://scholar.uwindsor.ca/philosophypub Part of the Philosophy Commons Recommended Citation Noonan, Jeff. (2006). Cosmopolitan Globalism and Human Community. Dialogue, 45 (4), 697-712. https://scholar.uwindsor.ca/philosophypub/10 This Article is brought to you for free and open access by the Department of Philosophy at Scholarship at UWindsor. It has been accepted for inclusion in Philosophy Publications by an authorized administrator of Scholarship at UWindsor. For more information, please contact [email protected]. Dialogue http://journals.cambridge.org/DIA Additional services for Dialogue: Email alerts: Click here Subscriptions: Click here Commercial reprints: Click here Terms of use : Click here Cosmopolitan Globalism and Human Community Jeff Noonan Dialogue / Volume 45 / Issue 04 / September 2006, pp 697 ­ 712 DOI: 10.1017/S0012217300001244, Published online: 27 April 2009 Link to this article: http://journals.cambridge.org/abstract_S0012217300001244 How to cite this article: Jeff Noonan (2006). Cosmopolitan Globalism and Human Community. Dialogue, 45, pp 697­712 doi:10.1017/ S0012217300001244 Request Permissions : Click here Downloaded from http://journals.cambridge.org/DIA, IP address: 137.207.184.12 on 31 Oct 2012 Cosmopolitan Globalism and Human Community JEFF NOONAN University of Windsor ABSTRACT: This article argues that the normative foundations and political impli- cations of David Held’s cosmopolitan social democracy are insufficient as solutions to the moral and social problems he criticizes. The article develops a life-grounded alternative critique of globalization that roots our ethical duties towards each other in consciousness of our shared needs and capabilities.
    [Show full text]
  • Glueck 2016 De-Westernisation
    Antje Glück De -Westernisation Key concept paper November 2015 1 The Working Papers in the MeCoDEM series serve to disseminate the research results of work in progress prior to publication in order to encourage the exchange of ideas and academic debate. Inclusion of a paper in the MeCoDEM Working Papers series does not constitute publication and should not limit publication in any other venue. Copyright remains with the authors. Media, Conflict and Democratisation (MeCoDEM) ISSN 2057-4002 De-Westernisation: Key concept paper Copyright for this issue: ©2015 Antje Glück WP Coordination: University of Leeds / Katrin Voltmer Editor: Katy Parry Editorial assistance and English-language copy editing: Emma Tsoneva University of Leeds, United Kingdom 2015 All MeCoDEM Working Papers are available online and free of charge at www.mecodem.eu For further information please contact Barbara Thomass, [email protected] This project has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement no 613370. Project Term: 1.2.2014 – 31.1.2017. Affiliation of the authors: Antje Glück University of Leeds [email protected] Table of contents 1. Executive Summary ............................................................................................... 1 2. Introduction ............................................................................................................ 1 3. Clarifying the concept: What is De-Westernisation? .............................................
    [Show full text]
  • Free Banking in America: Disaster Or Success?
    Free Banking in America: Disaster or Success? Chris Surro December 17, 2015 Even among the strongest proponents of free markets, there is widespread agreement that there is a role for government in money. We can trust the invisible hand to organize pin factories, but not to issue currency. And in a world where central banks have come to dominate around the world, it becomes hard to imagine any system other than a government monopoly on money. But that wasn't always the case. History has seen many examples where banks freely competed, generating bank notes at their own discretion, usually backed by a commodity but not by a government. In the last thirty years, even as monetary systems have largely converged to centralization, there has been a resurgence in research surrounding alternative arrangements. Economic history has a large role to play in this resurgence. Studying past examples of banking systems, analyzing their strengths and weaknesses, could help us understand and improve modern banking institutions. The American \free banking era," which lasted from roughly 1836-1862, is one ex- ample of a monetary system that has generated substantial research and debate. Before 1836, banks in the United States required a charter from the state they were located in, giving them permission to issue currency. However, starting with Michigan in 1836, many states began to enact laws allowing free entry of banks and by 1860, the number of free banking states had grown to eighteen. Traditional accounts paint a picture of the free banking era as a period of monetary chaos. Lack of regulation allowed \Wildcat banks" to issue more currency than could ever hope to be redeemed, making banking panics frequent.
    [Show full text]
  • Slovenia Have Been Remarkable
    Mrak/Rojec/Silva-Jáur lovenia’s achievements over the past several years Slovenia have been remarkable. Thirteen years after Public Disclosure Authorized independence from the former Socialist Federative egui Republic of Yugoslavia, the country is among the most advanced of all the transition economies in Central and Eastern Europe and a leading candidate for accession to the European Union Sin May 2004. Remarkably, however, very little has been published Slovenia documenting this historic transition. Fr om Y In the only book of its kind, the contributors—many of them the architects of Slovenia’s current transformation—analyze the country’s three-fold ugoslavia to the Eur transition from a socialist to a market economy, from a regionally based to a national economy, and from being a part of the Socialist Federative Republic of Yugoslavia to being an independent state and a member of the European Union (EU). With chapters from Slovenia’s president, a former vice prime minister, Public Disclosure Authorized the current and previous ministers of finance, the minister of European affairs, the current and former governors of the Bank of Slovenia, as well as from leading development scholars in Slovenia and abroad, this unique opean Union collection synthesizes Slovenia’s recent socioeconomic and political history and assesses the challenges ahead. Contributors discuss the Slovenian style of socioeconomic transformation, analyze Slovenia’s quest for EU membership, and place Slovenia’s transition within the context of the broader transition process taking place in Central and Eastern Europe. Of interest to development practitioners and to students and scholars of the region, Slovenia: From Yugoslavia to the European Union is a From Yugoslavia comprehensive and illuminating study of one country’s path to political and economic independence.
    [Show full text]
  • World Bank: Roadmap for a Sustainable Financial System
    A UN ENVIRONMENT – WORLD BANK GROUP INITIATIVE Public Disclosure Authorized ROADMAP FOR A SUSTAINABLE FINANCIAL SYSTEM Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized NOVEMBER 2017 UN Environment The United Nations Environment Programme is the leading global environmental authority that sets the global environmental agenda, promotes the coherent implementation of the environmental dimension of sustainable development within the United Nations system and serves as an authoritative advocate for the global environment. In January 2014, UN Environment launched the Inquiry into the Design of a Sustainable Financial System to advance policy options to deliver a step change in the financial system’s effectiveness in mobilizing capital towards a green and inclusive economy – in other words, sustainable development. This report is the third annual global report by the UN Environment Inquiry. The first two editions of ‘The Financial System We Need’ are available at: www.unep.org/inquiry and www.unepinquiry.org. For more information, please contact Mahenau Agha, Director of Outreach ([email protected]), Nick Robins, Co-director ([email protected]) and Simon Zadek, Co-director ([email protected]). The World Bank Group The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. Its five institutions share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development. Established in 1944, the World Bank Group is headquartered in Washington, D.C. More information is available from Samuel Munzele Maimbo, Practice Manager, Finance & Markets Global Practice ([email protected]) and Peer Stein, Global Head of Climate Finance, Financial Institutions Group ([email protected]).
    [Show full text]
  • Socio-Economic Stability and Independence of Appalachian Women
    SOCIO-ECONOMIC STABILITY AND INDEPENDENCE OF APPALACHIAN WOMEN MICHELE DAWN KEGLEY A DISSERTATION Submitted to the Ph.D. in Leadership & Change Program of Antioch University in partial fulfillment of the requirements for the degree of Doctor of Philosophy December, 2011 This is to certify that the dissertation entitled: SOCIO-ECONOMIC STABILITY AND INDEPENDENCE OF APPALACHIAN WOMEN prepared by Michele Dawn Kegley is approved in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Leadership & Change. Approved by: __________________________________________________________________ Elizabeth Holloway, Ph.D., Chair date __________________________________________________________________ Laurien Alexandre, Ph.D., Committee Member date __________________________________________________________________ Mary K. Anglin, Ph.D., Committee Member date __________________________________________________________________ Kimberly K. Eby, Ph.D., External Reader date Copyright 2011 Michele D. Kegley All rights reserved. Acknowledgments I was sitting in the pew listening to the pastor quote Woody Allen—“Half of life is showing up.” He went on to talk about how in life we have dreams and ambitions, and sometimes we feel like we are failing to meet these aspirations and wonder if we are meeting the expectations for those who depend on us (sermon 5-29-2011). He said, “‘Half of life is showing up,’ and God provides the other half.” His advice to us was just show up and quit worrying. The people I have to thank have done more than show up. They have impacted my life in ways they will never know. I thank God for getting me through this program and sending these special angels into my life. Let me start with my kids who have learned to wash clothes, cook, and understand my own version of what we call phone sign language—codes for I am talking if you are not on fire or bleeding go away and come back when I am off the phone.
    [Show full text]
  • Annual Report
    COUNCIL ON FOREIGN RELATIONS ANNUAL REPORT July 1,1996-June 30,1997 Main Office Washington Office The Harold Pratt House 1779 Massachusetts Avenue, N.W. 58 East 68th Street, New York, NY 10021 Washington, DC 20036 Tel. (212) 434-9400; Fax (212) 861-1789 Tel. (202) 518-3400; Fax (202) 986-2984 Website www. foreignrela tions. org e-mail publicaffairs@email. cfr. org OFFICERS AND DIRECTORS, 1997-98 Officers Directors Charlayne Hunter-Gault Peter G. Peterson Term Expiring 1998 Frank Savage* Chairman of the Board Peggy Dulany Laura D'Andrea Tyson Maurice R. Greenberg Robert F Erburu Leslie H. Gelb Vice Chairman Karen Elliott House ex officio Leslie H. Gelb Joshua Lederberg President Vincent A. Mai Honorary Officers Michael P Peters Garrick Utley and Directors Emeriti Senior Vice President Term Expiring 1999 Douglas Dillon and Chief Operating Officer Carla A. Hills Caryl R Haskins Alton Frye Robert D. Hormats Grayson Kirk Senior Vice President William J. McDonough Charles McC. Mathias, Jr. Paula J. Dobriansky Theodore C. Sorensen James A. Perkins Vice President, Washington Program George Soros David Rockefeller Gary C. Hufbauer Paul A. Volcker Honorary Chairman Vice President, Director of Studies Robert A. Scalapino Term Expiring 2000 David Kellogg Cyrus R. Vance Jessica R Einhorn Vice President, Communications Glenn E. Watts and Corporate Affairs Louis V Gerstner, Jr. Abraham F. Lowenthal Hanna Holborn Gray Vice President and Maurice R. Greenberg Deputy National Director George J. Mitchell Janice L. Murray Warren B. Rudman Vice President and Treasurer Term Expiring 2001 Karen M. Sughrue Lee Cullum Vice President, Programs Mario L. Baeza and Media Projects Thomas R.
    [Show full text]
  • The Oppressive Pressures of Globalization and Neoliberalism on Mexican Maquiladora Garment Workers
    Pursuit - The Journal of Undergraduate Research at The University of Tennessee Volume 9 Issue 1 Article 7 July 2019 The Oppressive Pressures of Globalization and Neoliberalism on Mexican Maquiladora Garment Workers Jenna Demeter The University of Tennessee, Knoxville, [email protected] Follow this and additional works at: https://trace.tennessee.edu/pursuit Part of the Business Administration, Management, and Operations Commons, Business Law, Public Responsibility, and Ethics Commons, Economic History Commons, Gender and Sexuality Commons, Growth and Development Commons, Income Distribution Commons, Industrial Organization Commons, Inequality and Stratification Commons, International and Comparative Labor Relations Commons, International Economics Commons, International Relations Commons, International Trade Law Commons, Labor and Employment Law Commons, Labor Economics Commons, Latin American Studies Commons, Law and Economics Commons, Macroeconomics Commons, Political Economy Commons, Politics and Social Change Commons, Public Economics Commons, Regional Economics Commons, Rural Sociology Commons, Unions Commons, and the Work, Economy and Organizations Commons Recommended Citation Demeter, Jenna (2019) "The Oppressive Pressures of Globalization and Neoliberalism on Mexican Maquiladora Garment Workers," Pursuit - The Journal of Undergraduate Research at The University of Tennessee: Vol. 9 : Iss. 1 , Article 7. Available at: https://trace.tennessee.edu/pursuit/vol9/iss1/7 This Article is brought to you for free and open access by
    [Show full text]
  • Principles of Macroeconomics Module 7.1
    Principles of Macroeconomics Module 7.1 Understanding Balance of Payments 276 Balance of Payments Balance of Payments are the measurement of economic activity a country conducts internationally • Current Account: • Capital Account: 277 Balance of Payments • Current Account: The value of trade of goods and services across boarders • Capital Account: The monetary flows between countries used to purchase financial assets such as stocks, bonds, real estate and other related items Capital Account + Current Account = 0 If Current Account is in deficit, then Capital Account is in surplus If Current Account is in surplus, then Capital Account is in deficit 278 Balance of Payments • Current Account: The value of trade of goods and services across boarders • Capital Account: The monetary flows between countries used to purchase financial assets such as stocks, bonds, real estate and other related items Capital Account + Current Account = 0 If Current Account is in deficit, then Capital Account is in surplus If Current Account is in surplus, then Capital Account is in deficit 279 Balance of Payments Capital Account + Current Account = 0 If Current Account is in deficit, then Capital Account is in surplus If Current Account is in surplus, then Capital Account is in deficit 280 Current Account • Net exports of goods and services, (the difference in value of exports minus imports, which can be written as) NX,(1) • Net investment income • Net transfers à Largest component: Net Exports 281 Factors that Determine Current Account 1. Change in Economic Growth Rates/National Income • Higher domestic growth à more demand overall à more demand for imports too! • Higher foreign growth à more demand for exports • Relative economic growth rates determine if imports or exports rise 2.
    [Show full text]
  • Globalization: What Did We Miss?
    Globalization: What Did We Miss? Paul Krugman March 2018 Concerns about possible adverse effects from globalization aren’t new. In particular, as U.S. income inequality began rising in the 1980s, many commentators were quick to link this new phenomenon to another new phenomenon: the rise of manufactured exports from a group of newly industrializing economies. Economists – trade economists, anyway – took these concerns seriously. After all, standard models of international trade do say that trade can have large effects on income distribution: the famous 1941 Stolper-Samuelson analysis of a two-good, two-factor economy showed how trading with a labor-abundant economy can reduce real wages, even if national income grows. There was every reason to believe that the same principle applied to the emergence of trade with low-wage economies exporting not raw materials but manufactured goods. And so during the 1990s a number of economists, myself included (Krugman 1995), tried to assess the role of Stolper-Samuelson-type effects in rising inequality. Inevitably given the standard framework, such analyses did in fact find some depressing effect of growing trade on the wages of less-educated workers in advanced countries. As a quantitative matter, however, they generally suggested that the effect was relatively modest, and not the central factor in the widening income gap. Meanwhile, the political salience of globalization seemed to decline as other issues came to the fore. So academic interest in the possible adverse effects of trade, while it never went away, waned. 1 In the past few years, however, worries about globalization have shot back to the top of the agenda, partly due to new research, partly due to the political shocks of Brexit and Trump.
    [Show full text]
  • International Capital Movements and Relative Wages: Evidence from U.S
    International Economic Studies Vol. 47, No. 1, 2016 pp. 17-36 Received: 08-09-2015 Accepted: 24-05-2016 International Capital Movements and Relative Wages: Evidence from U.S. Manufacturing Industries * Indro Dasgupta Department of Economics, Southern Methodist University, Dallas, USA Thomas Osang* Department of Economics, Southern Methodist University, Dallas, USA* Abstract In this paper, we use a multi-sector specific factors model with international capital mobility to examine the effects of globalization on the skill premium in U.S. manufacturing industries. This model allows us to identify two channels through which globalization affects relative wages: effects of international capital flows transmitted through changes in interest rates, and effects of international trade in goods and services transmitted through changes in product prices. In addition, we identify two domestic forces which affect relative wages: variations in labor endowment and technological change. Our results reveal that changes in labor endowments had a negative effect on the skill premium, while the effect of technological progress was mixed. The main factors behind the rise in the skill premium were product price changes (for the full sample period) and international capital flows (during 1982-05). Keywords: capital mobility, specific factors, skill premium, globalization, labor endowments, technological change JEL Classification: F16, J31. * Corresponding Author, Email: [email protected] * We would like to thank seminar participants at Southern Methodist University and Queensland University of Technology for useful comments and suggestions. We also thank Peter Vaneff and Lisa Tucker who provided able research assistance. 18 International Economic Studies, Vol. 47, No. 1, 2016 1. Introduction investment is an important factor in The U.S.
    [Show full text]