Making Globalization More Inclusive

Making Globalization More Inclusive:

Lessons from experience with adjustment policies

Edited by Marc Bacchetta (WTO and University of Neuchâtel), Emmanuel Milet (Geneva School of Economics and Management) and José-Antonio Monteiro (WTO and University of Neuchâtel)

Policies aimed at helping workers adjust to the impact of trade or technological changes can provide a helping hand to the workforce and increase the benefits of open trade and new technologies.… read more ...

Do Macro Production Functions Differ Across Countries?

Markus Eberhardt (University of Nottingham) and Francis Teal (Centre for the Study of African Economies, University of Oxford)

“We compare this [input] index with our output index and call any discrepancy ‘productivity’… It is a measure of our ignorance, of the unknown, and of the magnitude of the task that is still ahead of us.” Zvi Griliches (1961)

It is an unfortunate misconception that the canonical Solow-Swan growth model necessarily implies that all economies in the world, rich or poor, industrialised or agrarian, possess the same production technology.… read more ...

Financial Constraints, Institutions and Foreign Ownership

Ron Alquist, (AQR Capital Management), Nicolas Berman (Aix-Marseille University), Rahul Muhkerjee (Graduate Institute, Geneva), and Linda L. Tesar (University of Michigan)

Cross border mergers and acquisitions (CBMA) as a form of foreign direct investment (FDI) by multinational corporations (MNCs) have grown rapidly in the last two decades.… read more ...

Summary of the 5th InsTED Workshop at Syracuse University

We would like to thank The Department of Economics and the Maxwell School of Citizenship and Public Affairs, Syracuse University, for hosting and sponsoring the 5th InsTED Workshop.  We are also grateful for sponsorship and organizational support from the Moynihan Institute of Global Affairs, as well as sponsorship from the Program for the Advancement of Research on Conflict and Collaboration (PARCC) and the University of Exeter Business School.  The workshop took place at the Maxwell School from May 15th-16th 2018.  Special thanks go to Kristy Buzard and Devashish Mitra as joint chairs of the local organizing committee, and Juanita Horan for her extremely helpful interactions with everyone.… read more ...

Foreign Investment Boosts Sophistication of Domestic Manufacturing: New Evidence from Turkey

By Beata Javorcik (University of Oxford), Alessia Lo Turco, (Marche Polytechnic University), Daniela Maggioni (University of Catania)

Recently, there has been a renewal of interest in industrial policy across the world.… read more ...

Global Inequality, Investment, and Trade Frictions in Capital Goods

Since 1950 the global Gini coefficient for between-country income inequality has stood at about 55, reflecting a twenty five-fold difference in wealth between the richest and poorest countries. A well-known stylized fact underpinning this feature of the world economy is that the real investment rate of wealthy countries such as Norway and the United States is roughly two to three times that of poor countries such as Mali and Kenya.  Based on this evidence, the literature seeking to understand international inequality has attributed a key role to differences in physical capital intensity.… read more ...

Solutions to the Lucas Paradox

The Lucas Paradox draws attention to the fact that capital should flow from rich to poor countries, but that on average the flow is in the other direction.  Lucas’ original (1990) illustration of this phenomenon was couched in terms of a neoclassical model in which two identical countries produce identical goods from a common constant returns to scale production technology.  With all else equal, differences in income per capita reflect differences in capital per capita.  Incomes are lower in the country where capital is more scarce, and returns to capital there are higher to reflect this scarcity.  If capital is allowed to flow freely between the two countries, then the higher returns in the poorer country should bring about a net capital inflow.  So why do we not tend to observe this in the data?  The theoretical literature has identified two main reasons.  The first is due to differences in features of the economy that affect production, including differences in technology, differences in the availability of human capital, differences in the stability of government and differences in the quality of underlying institutions.  The second is due to differences in the functioning of capital markets; even though the expected returns to capital in a given country may be high, a high level of uncertainty associated with the returns may dissuade capital from flowing there.  Recent empirical work has begun to substantiate these theoretical explanations.

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