Stiglitz on Globalization and Development with an Eye to Keynes

Abstract

Joseph Stiglitz has laid out many of the issues central to the debate on globalization in a compelling story in a recent influential book. Globalization has become a contentious issue because the economic policies advocated for and, at times, almost imposed upon developing countries by international organizations such as the International Monetary Fund, the World Bank and the World Trade Organization are based on misconceptions about how market systems work. Market fundamentalism underlies the entire policy framework of the Washington Consensus. The limits of this approach are nowhere clearer than in the examples presented by developing and transition economies. Many policy missteps could have been avoided by adopting the main insights of traditional Keynesian theory, the basic lessons of which remain valid, even if it has been largely excised from the IMF's recipe book. The results of 20 years of market fundamentalism make it clear that globalization and development are distinct issues and that the former does not necessarily entail the latter. In order to understand how they are connected we need to supplement macroeconomic analysis with studies of how international economic integration comes about.     

The effects of universities' proximity to industrial districts on university–industry collaboration

There is increasing awareness that university–industry collaboration provides an important knowledge transfer channel and, thus, is a powerful driver of innovation. Universities are increasingly being asked to play incisive roles in the process of regional economic development. This paper assesses the extent to which university–industry collaboration, expressed in terms of private funding for university consulting research activities, is affected by the geographic proximity of an academic institution to an Industrial District (ID). Although the economic literature insists on the positive effects of proximity for these collaborations, empirical work on Italian ID so far shows no particular effects. This paper provides new insights into the effects of academic proximity to ID on university–industry collaboration, by presenting robust evidence that proximity to districts promotes the establishment of collaboration agreements. This sheds new light on the need for targeted policies to support local productive systems. The empirical evidence is based on an analysis of qualitative information and an econometric analysis of financial data for the whole population of Italian university departments engaged in research in the Engineering and Physical Sciences.     

Why Do Some Multinational Firms Respond Better Than Others to the Hostility of Host Governments? Proximal Embedding and the Side Effects of Local Partnerships

Using a multiple-case study of alleged expropriations reported before the World Bank, we examine how multinational companies (MNC) react to the escalating hostility of host governments. Our study reveals how different choices regarding the interaction with local nonmarket stakeholders – which we refer to as proximal vs. mediated embedding – shape how managers respond to these disputes by affecting their ability to collect, process and interpret information, and to act upon it in a way that effectively mobilizes local and international support. In contrast to the prevailing view that local partners in international joint ventures shelter MNCs from abuse from political authorities, our findings show that primary reliance on local partners to manage the local nonmarket environment can actually reinforce a liability of outsidership and even create a ‘liability of insidership’, to the extent that relying on local partners prevents the MNC from establishing quality connections with a broad range of nonmarket stakeholders, reducing its alertness and responsiveness to hostile acts from host governments.     

Linking learning with governance in networks and clusters: key issues for analysis and policy

In this paper we analyse the relationship between governance and learning in clusters and networks. In particular, we see these two key elements as interdependent, suggesting that, under particular circumstances, such interdependence may drive clusters and networks towards a dynamic development trajectory. A pure ‘governance perspective’ makes the development of any locality dependent on the system of powers which exists within the locality or across the global value chain. In parallel, a pure ‘competence-based approach’ focuses mainly on the capabilities of actors to learn and undertake activities. In contrast, we open the prospects for an interdependent relation that may change the actual competences of actors as well as the governance settings and dynamics in networks and clusters. When supported by public policies, the learning process may have the potential to modify the governance environment. Simultaneously, the learning process is intrinsically influenced by economic power, which may seriously affect the development prospects of clusters and networks. This is why an intertwined consideration of both aspects is necessary to promote specific approaches to learning and to design appropriate policies. In this paper we offer two preliminary case studies to clarify some of these dynamics: the first taken from the computers cluster in Costa Rica and the second from an Italian bio-pharmaceutical firm and its production network. The first case study refers to the software cluster that was created from scratch in Costa Rica thanks to an enlightened government policy in coordination with new local enterprises and an important foreign direct investor; while the second reflects on the ability of an individual company to create a network of relationships with large transnational companies in order to acquire new competences without falling into a subordinate position with respect to its larger partners.     

A revised version of the Cathcart & El-Jahel model and its application to CDS market

Decisions in Economics and Finance - The paper considers the pricing of credit default swaps (CDSs) using a revised version of the credit risk model proposed in Cathcart and El-Jahel (2003)....     

The effect of a Durbin–Watson pretest on confidence intervals in regression

Consider a linear regression model and suppose that our aim is to find a confidence interval for a specified linear combination of the regression parameters. In practice, it is common to perform a Durbin–Watson pretest of the null hypothesis of zero first‐order autocorrelation of the random errors against the alternative hypothesis of positive first‐order autocorrelation. If this null hypothesis is accepted then the confidence interval centered on the ordinary least squares estimator is used; otherwise the confidence interval centered on the feasible generalized least squares estimator is used. For any given design matrix and parameter of interest, we compare the confidence interval resulting from this two‐stage procedure and the confidence interval that is always centered on the feasible generalized least squares estimator, as follows. First, we compare the coverage probability functions of these confidence intervals. Second, we compute the scaled expected length of the confidence interval resulting from the two‐stage procedure, where the scaling is with respect to the expected length of the confidence interval centered on the feasible generalized least squares estimator, with the same minimum coverage probability. These comparisons are used to choose the better confidence interval, prior to any examination of the observed response vector.     

Appropriate technology in a Solovian nonlinear growth model

We propose a Solovian growth model with a convex–concaveproduction function and international technological spillovers.We test the empirical implications of the model, analysing theeffects of the productivity slowdown that followed the oil shocksof the 1970s. We argue that this slowdown, altering the worldincome distribution, affected the pattern of international technologicalspillovers, taking the poorest countries further away from thetechnological leaders, and therefore unable to exploit theirtechnologies. The result is the emergence of a poverty trapfor low-income countries.