Green and Brown? Globalization and the Environment

Globalization—viewed as a process of economic integrationthat embraces governance as well as markets—could leadto worldwide convergence toward higher or lower environmentalquality, or to environmental polarization in which the ‘greening’of the global North is accompanied by the ‘browning’of the global South. The outcome will not be dictated by aninexorable logic. Rather it will depend on how the opportunitiescreated by globalization alter balances of power within countriesand among them.     

Does international trade competition influence candidates and voters? The case of Japanese Lower House elections

In this study, we explore the effects of regional exposure to manufacturing imports and exports on candidates and voters in national elections through panel data analyses, dealing with the possible endogeneity issues. We show that candidates tailor their stances toward trade policy in response to changes in local trade exposure. Increased manufacturing exports drive candidates to support relatively open trade policies; however, increased manufacturing imports do not influence candidates’ stances on trade policy. We also find that changes in local trade exposure influence citizens’ voting behavior. In districts with increased exports of manufacturing products, voters tend to cast ballots for parties that pledge to promote a free trade agreement as opposed to those that adopt a cautious attitude toward it. In districts that experience increased imports of manufacturing products, voters tend to support parties that are clearly opposed to establishing it. The economic issues related to international trade appear to be important to both candidates and voters in elections.     

An ideal Kyoto protocol: emissions trading, redistributive transfers and global participation

We demonstrate that an interregional policy scheme featuringtrading of carbon dioxide emissions, redistributive resourcetransfers and global participation, a scheme which we call ‘IdealKyoto Protocol’, yields an efficient equilibrium allocationfor a global economy. An altruistic international agency—say,the Global Environment Facility—should operate the resourcetransfer mechanism. In addition, regional governments shouldbe able to make independent policy commitments regarding howto control regional emissions of carbon dioxide in anticipationof the redistributive transfers. Our efficiency result suggeststhat the USA should be ‘bribed’ to reverse its decisionof not participating in the Kyoto Protocol.     

The Evolving Accidental Information Super-Highway

The technology of the Internet is not static. Although its ‘end-to-end’architecture has made this ‘connection-less’ communicationssystem readily ‘extensible’, and highly encouragingto innovation both in hardware and software applications, thereare strong pressures for engineering changes. Some of theseare wanted to support novel transport services (e.g. voice telephony,real-time video); others would address drawbacks that appearedwith the opening of the Internet to public and commercial traffic—e.g.the difficulties of blocking delivery of offensive content,suppressing malicious actions (e.g. ‘denial of service’attacks), pricing bandwidth usage to reduce congestion. Theexpected gains from making improvements in the core of the networkshould be weighed against the loss of the social and economicbenefits that derive from the end-to-end architectural design.Even where technological ‘fixes’ can be placed atthe networks' edges, the option remains to search for alternative,institutional mechanisms of governing conduct in cyberspace.     

Management Practices, Work--L ife Balance, and Productivity: A Review of Some Recent Evidence

Increasing product-market competition is believed to be a drivingforce behind higher productivity. However, even those criticsof globalization who accept this argument claim that there isa hard trade-off because tougher competition comes at the priceof reducing work—life balance (WLB). Optimists, by contrast,argue that competition can spur better WLB practices and thereforehigher productivity, so there is a ‘win—win’situation. To address this issue we use an innovative surveytool to collect the first international data on management practicesand WLB practices, surveying 732 medium-sized manufacturingfirms in the USA, France, Germany, and the UK. We find thatthe USA has the best management practices but the worst work—lifebalance. When we look within countries, however, we reject thepessimistic ‘trade-off’ model. First, WLB outcomesare significantly associated with better management, so thatwell-run firms are both more productive and offer better conditionsfor their employees. Second, tougher competition increases averagemanagement quality but does not negatively affect employees'working environment. As with many other studies, better WLBpractices are associated with significantly higher productivity.This relationship disappears, however, after controlling forthe overall quality of management. Footnotes ¹ E-mail addresses: nbloom{at}stanford.edu; j.vanreenen{at}lse.ac.uk     

Measuring and Managing the Costs of Red Tape: A Review of Recent Policy Developments

Over the last few years, red tape has come to be identifiedas an important policy area, and there has been rapid and relativelywidespread adoption—in one form or another—of aDutch-developed set of reforms aimed at significantly reducingthe costs of compliance with government-imposed obligationsto provide information (which have come to be referred to as‘administrative burdens’). This paper begins byexamining the characteristics of the policy problems that thesereforms are intended to address, and highlighting some of thechallenges that the reforms can be expected to face. The Dutch-developedapproach, and the UK adaptation of it, are then described, andspecific ways in which the reforms have sought to influenceinformation and incentive conditions—so as to generatereductions in administrative burdens—are assessed. Footnotes ¹ E-mail address: tim.keyworth{at}rpieurope.org     

Transfer pricing rules and competing governments

The literature on the regulation of multinationals' transferprices has not considered the possibility that governments mayuse transfer pricing rules strategically when they compete withother governments. The present paper analyses this case andshows that, even in the absence of agency considerations, anon-cooperative equilibrium is characterised by above-optimallevels of effective taxation. We then derive conditions underwhich harmonization of transfer pricing rules lead to a Paretoimprovement, and show that harmonization according to the ‘arm'slength’ principle—the form of harmonization advocatedby the OECD—may not be Pareto improving.     

Product quality, lender liability, and consumer credit

Under ‘linked credit’ (also known as ‘connectedlending’), the buyer obtains a loan from a lender withthe specific purpose of purchasing a certain product. Creditis arranged directly by the seller, who acts as an intermediaryfor the finance company. Within this form of financing, thelender often accepts a measure of liability for defective products.We show that ‘connected-lender liability’ can workas a signalling device for the reliability of sellers, so asto alleviate the market failure that arises when sellers arebetter informed than consumers about the quality of their products.     

The Social Cost of Carbon and its Policy Implications

The shadow price, or ‘social cost’, of carbon isan important indicator of the global incremental damage doneby emitting greenhouse gases today. Cost–benefit analysiswould set the optimal amount of greenhouse-gas-emission reductionat the point where this social cost just equals the incrementalcost of controlling emissions. The higher the value for thesocial cost of carbon, the more control is warranted. This comparisonassumes that cost–benefit analysis is the correct wayof determining climate-change policy, and many believe thisis not the case because of the very long-term, irreversible,and potentially catastrophic nature of global warming. But,in the short run at least, a comparison of cost and benefitsis required, and, in any event, all decisions imply costs andbenefits. But what is the ‘right’ figure for thesocial cost of carbon? This paper reviews the UK government'sassessment of the cost and concludes that it has been set fartoo high because of a misreading of the integrated assessmentmodels used to balance costs and benefits. Moreover, adoptionof the UK government's shadow price would have formidable implicationsfor energy policy in the UK, and for policies on afforestation.     

The Assessment: EMU, Four Years On

This paper reviews the functioning of the Economic and MonetaryUnion over the first 4 years of its existence. Monetary policyis viewed as having been of the ‘inflation-targeting’type, but with a tendency towards delay and conservatism inadjustment, which may also reflect over-optimistic output growthforecasts. The resulting pressure on the Stability and GrowthPact (SGP) illustrates the weakness in the ‘consensusview’ of the harmonious interaction of monetary, fiscal,and supply-side policies, which requires policy in all threeareas to be ‘correct’. In discussing reform of theSGP, a looser but still constraining form of fiscal agreementis advocated. The supply-side and balance-of-payments issuesinvolved in inter-country adjustment also interact importantlywith the SGP and are identified as key areas of difficulty ina still ‘immature’ monetary union, with separatelabour-market structures. Here the mechanisms for coordinationare more or less absent.     

Complementing EMU: Rethinking Cohesion Policy

Under EMU, the less competitive regions of the EU—usuallyassumed to be peripheral—have been widely expected tolose ground, yet it is the core of the EU that, so far, hasappeared to have suffered from the advent of the euro. Thispaper looks at the processes behind regional divergence in theEU, and presents evidence on recent and prospective trends asEMU is consolidated. Bearing in mind that the imminent enlargementof the EU will radically change the political economy of theEU's efforts to assure ‘cohesion’, policy issuesare then discussed. Looking forward to the next renegotiationof the Structural Funds, it is argued that difficult decisionshave to be taken about the extent and character of EU policy.The option of an open method of coordination for cohesion policyis put forward as a means of resolving some of the hard choices.     

Redesigning Regulation of Pensions and Other Financial Products

We observe that financial regulation is ever-growing, with thelatest area to experience increased supervisory attention beingpensions. Yet this has not made the financial world or consumerssafer, and for pensions in particular there are unexpected andundesired consequences. We explore the current policy approachto supervision, which is ‘bottom up’, i.e. assessmentand regulation of individual institutions, with the aim ofmakingthe financial system safe by making each institution safe. Weshow that this is both damaging (because it stifles innovation)and does not work (because risk will always be squeezed fromthe regulated institutions to the less regulated and less seen).Instead, we advocate a ‘top-down’ approach, whichfocuses on making the system safe first. We conclude that onceyou have made systems safe, detailed supervision of individualinstitutions is less necessary, thus reducing the burden ofsupervision. We believe that this approach will lead to a moresuitable and diverse treatment of different risks that willincrease both systemic and consumer safety. ‘If you haveten thousand regulations you destroy all respect for the law’,Winston Churchill (1931). ‘The ultimate result of shieldingmen from the effects of folly is to fill the world with fools’,Herbert Spencer (1891). Footnotes ¹ E-mail addresses: n.barr{at}lse.ac.uk; john_nugee{at}ssga.com     

Incentives, Choice, and Accountability in the Provision of Public Services

This paper discusses a theoretical framework to study the issuesof competition and incentives without relying on the standardprofit-oriented ‘market’ model in the context ofthe debates about public-service reform in the UK. It uses theidea that the production of public services coheres around amission, and discusses how decentralized service provision canraise productivity by matching motivated workers to their preferredmissions. Our focus on competition and incentives cuts acrosstraditional debates about public versus private ownership andallows for the possibility of involving private non-profit organizations.We also address concerns about the consequences of allowingmore flexibility in mission design and competition on inequality.     

THE EMPIRICAL FAILURE OF THE LIFE CYCLE MODEL WITH PERFECT CAPITAL MARKETS

The paper calibrates a life cycle model which incorporates standardassumptions, similar to those in Modighani's (1986) ‘strippeddown’ version, including perfect capital markets. Theresulting model generates strongly counter-factual predictions,planned wealth is negative for all or most of life, followinga W-shaped rather than a hump-shaped profile. (Equivalently,the debt profile is M-shaped.) The paper argues that introducingcapital market imperfections can resolve many of the problems,though some issues remain, and further research is warranted ‘The hypothesis of utility maximisation (and perfect markets)has, all by itself, one very powerful implication—theresources that a representative consumer allocates to consumptionat any age, t, will depend only on his life resources (the presentvalue of labour income plus bequests received, if any) whencombined with the self-evident proposition that the representativeconsumer will choose to consume at a reasonably stable rate,close to his anticipated average life consumption the size ofsaving over short periods of time, like a year, will be swayedby the extent to which current income departs from average liferesources the main parameter that controls the wealth-incomeratio and the saving rate for given growth is the prevailinglength of retirement’ (Modigliani, 1986, pp 299 and 301)     

THE BEHAVIOUR OF CERTIFICATE OF DEPOSIT RATES IN THE UK

Using a number of maturities of up to one year and weekly highquality data on UK, CD rates, 1975–92, we provide a varietyof tests of the expectations hypothesis (EH) of the term structure.Our results appear to give more support to the EH than do earlierstudies, which often use longer maturities and data of a lowerfrequency on coupon paying bonds and yield data on ‘bundlesof bonds’. If one is willing to assume that noise traderspredominate in the bond market at very short horizons, we canprovide some insights into empirical results, found in the literature.     

Gender Role Attitudes and the Labour-market Outcomes of Women across OECD Countries

This paper uses data from the World Value Surveys (1990, 1995,1999)to investigate the impact of gender role attitudes and workvalues on women's labour-market outcomes across 25 OECD countries.Anti-egalitarian views are found to display the strongest negativeassociation with female employment rates and the gender paygap. These views are, however, softening among recent cohorts.On the other hand, perceptions of women's role as homemakers,which are likely formed in youth and linked to religious ideology,are more persistent over time. They could be implicated in therecent slowdown of the gender convergence in pay. Finally, theunavoidable clash between family values and egalitarian views,that takes the form of an inner conflict for many women—theso-called ‘mother's guilt’—is another obstaclein the path towards greater gender equality in the labour market. Footnotes ¹ E-mail address: nifortin{at}interchange.ubc.ca     

The empirical relationship between UK net corporate borrowing and stockbuilding

The literatures on net corporate borrowing and stockbuildingby firms are both based on a simple linear-quadratic (L-Q) model,but they have been developed independently. This paper exploresthe possibility that a firm may jointly optimise its borrowingand stockbuilding decisions, where previous papers have imposed‘decision rule decompositions’. The resulting modelis estimated using UK corporate data and demonstrates that netcorporate borrowing and stockbuilding are indeed used as substitutesin production smoothing.     

MULTI-PRODUCT COST ATTRIBUTES: A STUDY OF U.K. BUILDING SOCIETIES

A translog multi-product cost function is estimated jointlywith a derived input cost share equation to obtain estimatesof overall economies of scale and ‘augmented’ overalleconomies of scale for the United Kingdom building society industry.The ‘augmented’ measure takes into account inducedchanges in the number of building society branch offices asthe outputs vary. The parameter estimates are then used to computethe derivatives of the marginal costs of each product to testfor product-specific economies of scale and economies of scope.     

An enduring need: multilateralism in the twenty-first century

That the global economy has been hugely successful over thepast 50 years is unquestionable. A major underpinning of thatsuccess has been the open multilateral system, which has enabledthe emergence of a truly international financial system, reciprocalreduction of trade barriers, and the emergence of many previouslypoor countries into the status of ‘emerging markets’or even ‘developed’. The open multilateral system,however, is increasingly under-appreciated and taken for granted.Preferential trading arrangements have proliferated, and withthem the possibility of discriminatory arrangements for capitalflows. The absence of an international regime for capital flowspermits this development and poses a threat to the system, asdo all of the issues on which countries' governments assert‘their’ interests, and ignore their interests inthe overall health of the system. It is to be hoped that thebenefits of multilateralism are more greatly appreciated, andthat the current trend toward increasing regionalism and departuresfrom the post-war system is reversed.     

INVESTMENT AND GROWTH: PART 1: THE MAIN CONCEPTS AND THEIR IMPLICATIONS

‘Change is not made without inconvenience, even from worseto better.’(Richard Hooker, quoted by Samuel Johnson inthe Preface to the English Dictionary.)