Tariffs,capital mobility,and foreign ownership

This paper is concerned with the welfare effects of a small capital movement from one country to another followed by the repatriation of that capital's marginal product. Although this issue has been addressed previously, especially from the point of view of the host country, there seems to exist no formal analysis which treats simultaneously the interdependent welfare effects on the investing and host countries and thus on world real income. The purpose of this paper is to develop such an analysis in order to determine the conditions under which a capital flow will help or harm a country.     

Welfare implications of trade liberalization and fiscal reform: A quantitative experiment

This paper studies the welfare implications of revenue-neutral trade liberalization and fiscal reform programs for developing economies using a multi-sector dynamic general equilibrium model of a small open economy. We analyze how different combinations of tariffs – on imported consumption goods, intermediate inputs, and capital goods – and taxes – on consumption, labor income and capital income – affect the transitional and long-run welfare. We report three main findings. First, trade liberalization programs financed by consumption and labor income taxes tend to result in substantial welfare gains, but financing the lost tariff revenue through capital income taxes can have an adverse impact on welfare. Second, a significant fraction of welfare changes is due to transitional effects stemming from the allocation of resources in response to changes in tariffs and taxes. Third, trade liberalization and fiscal reform programs often translate into much larger welfare gains in countries that are more open to international financial markets.     

Money,saving and growth in an international economy with perfect capital mobility

The effects of differential national saving rates on current accounts, foreign indebtedness and the welfare of the countries involved are examined within the framework of a two-country, three-asset and one-good model of growth with international capital mobility. It is argued that the persistent current account imbalance and its implied national indebtedness are a natural consequence of differential national saving rates in the world of integrated capital markets, that any direct interference hampering an orderly flow of capital makes both countries worse off, that changes in the exchange rate mainly reflect the differential growth rates of two currencies and have little effect on the current account, and that persistent current account deficits do not necessarily imply an ever-increasing debt burden. While an increase in the saving rate of the high-saving country benefits the low-saving country, an increase in the saving rate of the low-saving country harms the high-saving country both in the short run and the long run.     

Temporary controls on capital inflows

During the past decade a number of countries imposed capital controls that had two distinguishing features: they were asymmetric, in that they were designed principally to discourage capital inflows, and they were temporary. This paper studies formally the consequences of these policies, calibrates their potential effectiveness, and assesses their welfare implications in an environment in which the level of capital inflows can be sub-optimal. In addition, motivated by the fact that these types of controls have often been left in place after the dissipation of the shock that lead to the controls being implemented, the paper evaluates the welfare cost of procrastination in removing these types of controls.     

Taxation and entrepreneurship in a welfare state

Does tax policy affect the rate of self-employment in a modern welfare state? This question is analyzed empirically based on Swedish data for the entire postwar period. Available tax data indicate that payroll taxes have had a negative influence on the unincorporated rate of self-employment, though the effect is modest. No effects from regular labor income taxation or capital gains taxation are found. The paper improves upon earlier studies in that it tries to separate the effects of different taxes and uses cointegration techniques. A further extension is that it studies a Scandinavian high-tax welfare state. Earlier time-series studies analyzing self-employment and taxation have, with few exceptions, been based on data from countries with relatively low tax levels and less comprehensive welfare systems, notably the USA and the UK.     

Unionized labor markets and globalized capital markets

This paper studies the effects of international integration of capital markets in a world where countries differ in their labor market institutions: one country has a perfectly competitive labor market while the other is unionized. We show that workers should favor autarky in the unionized country, but oppose it in the non unionized country and vice versa for owners of capital. Aggregate gains from integration, however, are negative. We also show that, under capital mobility, an increase in relative bargaining power of unions does not always improve workers' welfare.     

Is FTA/EPA effective for a developing country to attract FDI? The knowledge‐capital model revisited

To prepare an answer to the question of how a developing country can attract foreign direct investment (FDI), this paper explored the factors and policies that may help bring FDI into a developing country by utilising an extended version of the knowledge‐capital model. With a special focus on the effects of a free trade agreement (FTA) or an economic partnership agreement (EPA) between a pair of market and non‐market countries, simulations with the model revealed the following: (i) although FTA/EPA generally tends to increase FDI to a developing country, the possibility of improving welfare through increased demand for skilled and unskilled labour decreases as the size of the country grows; (ii) a developing country may suffer severe welfare losses through FTA/EPA if the availability of skilled labour is extremely limited; and (iii) a developing country can enhance welfare gains from a FTA, and it is even possible to recover the welfare effects from negative to positive, by making the arrangement an EPA.     

Incomplete market participation, endogenous endowment risks and welfare

This paper investigates the equilibrium growth rate of capital stock and social welfare when risk-sharing externalities are incorporated into the infinite-horizon model where endowment risks are endogenized by the degree of incomplete market participation. There exist Nash equilibria depending on the degree of market participation. Under equilibrium with incomplete market participation, the endowment risks cannot be fully diversified as they induce precautionary savings and the over-accumulation of capital stocks while spillover effects on production technologies lead to the under-accumulation of capital stocks. This may have desirable effects on economic growth and improve social welfare.     

Globalization,labour and the state: the case of Indonesia

Globalization has allowed internationally mobile capital to successfully ‘demand’ favourable investment climates, thereby increasing pressure on states to restrict the activities of organized labour. In the advanced industrial countries, the enhanced bargaining position of capital has helped to undermine the welfare state, the great compromise between state, capital and labour. But newly emerging labour movements in late industrializing countries like Indonesia are especially disadvantaged because of the global context characterized by the weakened bargaining position of labour. Nevertheless, labour strife has been on the rise in Indonesia in spite of long-established state mechanisms of labour control, usually legitimized in official discourse by reference to supposedly authentic Indonesian values that eschew conflict. This has to do with the gradual development of an urban-based industrial working class as the product of sustained industrialization until the economic debacle of 1997.     

Trade Unionism and Welfare Consequences of Trade and Investment Reforms in A Developing Economy

This paper explains the existence of intersectoral wage differential in a developing economy in terms of trade union behavior in the formal sector industry and analyzes its role in predicting the outcomes of trade and investment reforms on welfare. It provides theoretical explanations of certain real life phenomena e.g. why the developing countries are yearning for foreign capital despite the standard immiserizing result and why these countries are not reducing the tariff rates beyond certain levels although they have chosen free trade as their development strategy.     

Trade and the distribution of human capital

We develop a two-country, two-sector model of trade where the only difference between the two countries is their distribution of human capital endowments. We show that even if the two countries have identical aggregate human capital endowments the pattern of trade depends on the properties of the two human capital distributions. We also show that the two distributions of endowments also completely determine the effects of trade on income inequality. We also look at a simple majority voting model. It turns out autarky and free trade with and without compensation may be the voting outcome.     

Trade and the distribution of human capital

We develop a two-country, two-sector model of trade where the only difference between the two countries is their distribution of human capital endowments. We show that even if the two countries have identical aggregate human capital endowments the pattern of trade depends on the properties of the two human capital distributions. We also show that the two distributions of endowments also completely determine the effects of trade on income inequality. We also look at a simple majority voting model. It turns out autarky and free trade with and without compensation may be the voting outcome.     

How and how far to liberalize a developing economy with informal sector and factor market distortions

Whether a liberalizing developing economy should implement the entire WTO-prescribed package, and to what extent this is expedient, are two important questions, especially because the available empirical evidence suggests that developing countries have been facing substantial adjustment costs in their endeavour to implement trade and investment reform. The present paper makes a humble effort to provide answers to the above questions in terms of a three-sector general equilibrium model with informal sectors. Welfare implications of three liberalization policies: inflow of foreign capital, tariff reduction and labour market reform, have first been analysed in a full-employment framework. Later, the paper has been extended into a Harris?–?Todaro framework with an urban informal sector and capital market distortion. We have shown that welfare consequences of a tariff reform and/or a policy of deregulating the labour market crucially depend on the presence and magnitude of foreign capital in the economy. It is argued here that unless a proper choice among different prescribed policies, compatible with the internal institutional, technological and trade-related characteristics, is made, drastic implementation of reform measures may produce counterproductive results for the welfare of the relevant country.     

转轨制国家国内横向资本税竞争的模型分析

本文分析了转轨制国家国内地方政府间的资本税竞争,认为一定条件下的地方政府间资本税竞争可以在一定程度上提高全国居民的福利水平;不过,经济转轨初期的各地方政府似乎更愿意采取协同一致的税收政策,因为实行这样的税收政策对地方政府的自身利益较为有利。     

跨国污染转移经济效应分析

跨国污染转移给发展中国家和发达国家都带来正的社会经济效应和负的社会经济效应.单一国家的局部均衡模型和国际一般博弈模型显示,只有各国对污染的自愿治理量达到一定程度,才能实现社会经济效应的最大化.文章对跨国污染转移给我国带来的就业增长和出口增长的正效应,以及使我国环境污染严重、污染治理成本增加和使我国出口遭到更多的"绿色壁垒"的负效应进行了实证分析.从长期来看,如果我国对跨国污染转移不加以控制,其负效应将要大于正效应,不利于我国经济的可持续发展.     

Locational Competition: A Neglected Paradigm in the International Division of Labour

Krugman's verdict that competitiveness of countries is a largely meaningless concept is a serious misjudgement of the economics profession. Countries compete for the mobile factors of production, most importantly for capital and technology. The exit‐option of these factors and of firms changes the calculus of national governments. This paper sets out the main elements of the concept of competition between locations – locational competition – and analyses its impact on welfare and employment of the capital‐exporting country. It also looks at whether competition between countries necessarily results in a race to the bottom or whether it can function as a controlling mechanism for governments and as a discovery device. The paper discusses under which conditions common rules are needed to reduce transaction costs and to prevent strategic, opportunistic behaviour of countries and which common rules thus reduce transaction costs. Finally, it deals with the question whether one institutional equilibrium in the world economy can be expected or whether many national equilibriums can coexist.     

FISCAL POLICY AND ECONOMIC GROWTH IN THE IMPERFECT LABOR MARKET

Using a simple overlapping generations model with the growth engine of public capital by incorporating the union wage setting, we examine the effects of fiscal policies on unemployment, economic growth and welfare in the imperfect labor market. We demonstrate that the growth‐maximizing tax in the imperfect labor market is larger than that of the perfect labor market. However, as the allocation ratio of public capital increases, the growth‐maximizing tax in the imperfect labor market approaches that of the perfect labor market, thus reducing the unemployment rate. The policy implications of the intergenerational welfare aspects are also mentioned.     

Is FDI doing good? A golden rule for FDI ethics

Ethical and economic perspectives on foreign direct investment (FDI) often appear in opposing frameworks. To combat this antagonism, this research proposes a consolidation between foreign private wealth and general welfare in host countries. The first contribution of this study is to provide a comprehensive conceptual approach to the study of FDI ethics. The second key contribution is to present empirical analysis of the differential influence of the level of democratic rights on foreign employment, new projects, and FDI capital flows. Results suggest that FDI incentivizes general welfare in least developed countries with high degrees of volatility. Additionally, policymakers face a dilemma in which democracy and legal rights seem to be mutually incompatible with fostering foreign employment. Practitioners find a way to evaluate the ethical implications of international business activities. The study analyzes FDI data from 161 countries between 2003 and 2010 by means of the FDI gravity equation.     

国际贸易中劳工标准执行手段对发展中国家福利后果比较

贸易和劳工标准问题近二十年来一直是国际贸易谈判中的热点问题,其对发展中国家出口的影响日益凸显。文章在局部均衡的框架之内侧重分析了发达国家不同的劳工标准执行手段对发展中国家福利的影响,并在此基础上提出了对策建议。     

Financial Globalisation and Emerging Markets Volatility

The volatility of capital flows to emerging market (EM) countries and frequency of financial crises have imposed high welfare costs on the countries involved. The empirical literature provides, at best, a mixed picture on the relationship between long‐run EM country growth and financial integration. Meanwhile, the prevailing policy discourse regarding reform of the international financial system remains incomplete: the focus has largely been on either institutional and policy measures required of EM countries or international crisis‐resolution procedures. The role played by private financial markets and institutions in the developed world has not received adequate attention. This paper describes some of the structural features inherent in today's financial markets that directly contribute to the instability in EM capital flows.