The U.S. economy and the economies of the rest of the world intersect
through international transactions. These have received more attention in
the Brookings Papers, although again largely with a U.S. focus. I will
address this intersection with respect to the large global imbalances that
exist today, although I will deviate from the usual practice here by adopting
a rest-of-the-world rather than a U.S. perspective.In this brief paper I want to cast doubt on two related propositions that
are widely accepted as truths: that Americans save too little, and that the
U.S. current account deficit is unsustainably large, risking a disorderly
adjustment that would be damaging to the world economy in the relatively
near (but usually unspecified) future. These remarks should not be
treated as new truths, but as plausible alternative hypotheses about how
the world works these days, how we reached our current circumstances,
and what the future may bring.
Also Brookings Papers on Economic Activity, 2:2007.Download PDF
We present evidence from a field experiment in Lusaka, Zambia that male involvement in the
decision to seek out family planning services leads to substantial reductions in utilization. This
phenomenon appears to be driven by average differences by gender in the demand for children
rather than by a general distrust of or lack of information about family planning technologies
among men. Study participants were offered a voucher that granted access to an appointment
with a family planning nurse without a wait in line. Demand for family planning services is high,
as evidenced by the 41 percent overall rate at which these vouchers were redeemed. Women
were randomly assigned to receive the voucher either by themselves in private, or together with
their husbands. Takeup among women assigned to receive the vouchers with their husbands was
9 percentage points (18 percent) lower than among women randomly assigned to receive the
vouchers alone. We find evidence that this reduction in takeup was larger if husbands wanted
more children than their wives, and stronger evidence that this reduction was larger among
young couples than among older couples with completed fertility. There is no evidence that
assignment to couples treatment reduces voucher use for women whose husbands want no more
children, and evidence for a 12 percentage point reduction in use in the subsample of women
whose husbands do want more children. Taken together, these results suggest that the unitary
and collective bargaining models do not sufficiently richly describe the bargaining process over
fertility within the household. Furthermore, policies or technologies that shift relative control
of contraceptive methods from men to women may significantly increase contraceptive use and
reduce average fertility in some contexts.
Building on recent work in evolutionary psychology, we predict substantial gender-related
differences in demand for scandalous political news. We argue that individuals’ self-images can
alter their motivation to seek information about potential sexual competitors and mates, even
when those figures are “virtual”—appearing in mass media. Individuals perceiving themselves as
attractive will seek negative news about attractive same-gender individuals, whereas individuals
perceiving themselves as unattractive will seek negative information about the opposite gender.
We test our hypotheses in three ways. First, we investigate partially disaggregated national
opinion data regarding news attention. Second, we conduct an experiment in which we asked
participants to choose the two most interesting stories from a menu of headlines. We varied the
gender and party affiliation of the individual featured in the story. Each participant saw a
headline promoting a DUI arrest of an attractive male or female “rising star” from one of the two
parties. Finally, we repeat the experiment with a national sample, this time also varying the
valence of the tabloid story. We find strong correlations between respondents’ self-image and
their likelihood of seeking and distributing positive or negative information about “virtual”
competitors and mates.
Research has shown that messages of intra-party harmony tend to be ignored by the news media,
while internal disputes, especially within the governing party, generally receive prominent
coverage. We examine how messages of party conflict and cooperation affect public opinion
regarding national security, as well as whether and how the reputations of media outlets matter.
We develop a typology of partisan messages in the news, determining their likely effects based on
the characteristics of the speaker, listener, news outlet, and message content. We hypothesize that
criticism of the president by his fellow partisan elites should be exceptionally damaging (especially
on a “conservative” media outlet), while opposition party praise of the president should be the
most helpful (especially on a “liberal” outlet). We test our hypotheses through an experiment and a
national survey on attitudes regarding the Iraq War. The results show that credible communication
(i.e., “costly” rhetoric harmful to a party) is more influential than “cheap talk” in moving public
opinion. Ironically, news media outlets perceived as ideologically “hostile” can actually enhance
the credibility of certain messages relative to “friendly” news sources.
The causes and consequences of public support, or the lack thereof, for the overseas
application of military force is a subject of longstanding scholarly debate. The most widely
accepted explanations emphasize rational public responses to events as they unfold. Such
“event-based” explanations hold that a president’s ability to sustain public support for a U.S.
military engagement depends primarily on its degree of success, the number of or trend in U.S.
casualties, or the U.S. goals in a given conflict. Yet, recent research into the framing of foreign
policy has shown that public perceptions concerning, success or failure, the implications of
casualties, and the offensive or defensive nature of U.S. military engagements are often
endogenous to the domestic political circumstances surrounding them, including the efforts of
political and media elites to frame events to their own advantage.
In this study, we develop and test a series of hypotheses concerning media coverage of,
and public opinion regarding, the war in Iraq. In the former case, in prior research (Baum and
Groeling 2004, 2005) we report evidence that journalists’ preferences lead traditional news
programs to disproportionately feature instances of members of the presidential party criticizing
their fellow partisan president and, albeit to a somewhat lesser extent, of the opposition party
praising him. Moreover, because they represent costly speech, presidential party attacks are
highly credible to consumers, as is opposition party praise. In contrast, in more ideologically
narrow “new media” outlets, we anticipate that the balance will likely differ substantially.
We test our hypotheses concerning media coverage through a comprehensive content
analysis of all coverage of the war from September 2004 through February 2007 appearing on
the CBS Evening News, NBC Nightly News and FOX’s Special Report with Brit Hume. We test
our public opinion hypotheses using that same dataset, as well as an expert survey on conditions
in Iraq and national opinion toward the Iraq War broken down by party. We find significant
differences in both the composition and impact of partisan messages on public opinion across
How vulnerable are economic interventions to political capture, how are captured resources
used, and how costly are the resulting distortions? This paper answers these questions in the
context of the credit market in India. Integrating theories of political budget cycles with theo-
ries of tactical electoral redistribution yields a compelling framework to test for the presence of
capture. I nd that government-owned banks are subject to substantial capture: the amount
of agricultural credit lent by public banks is 5-10 percentage points higher in election years
than in years following an election, and in election years more loans are made to districts in
which the ruling state party had a narrow margin of victory (or a narrow loss) in the previous
election. This targeting does not occur in non-election years. Politically motivated loans are
costly: they are less likely to be repaid, and election year credit booms do not measurably
a¤ect agricultural output.
Gender Based Taxation (GBT) satisfies Ramsey’s optimal criterion by taxing less the more elastic labor supply of (married) women. This holds when different elasticities between men and women are taken as exogenous and primitive. But in this paper we also explore differences in gender elasticities which emerge endogenously in a model in which spouses bargain over the allocation of home duties. GBT changes spouses’ implicit bargaining power and induces a more balanced allocation of house work and working opportunities between males and females. Because of decreasing returns to specialization in home and market work, social welfare improves by taxing conditional on gender. When income sharing within the family is substantial, both spouses may gain from GBT.
We study the trade policy choices of governments in an environment in which some of the trade flows being taxed or subsidized involve the exchange of customized inputs, and the contracts governing these transactions are incomplete. We show that the second-best policies that emerge in this environment entail free trade in fi nal goods but not in intermediate inputs, since import or export subsidies targeted to inputs can alleviate the international hold-up problem. We next show that the Nash equilibrium policy choices of governments do not coincide with internationally efficient choices, and that the Nash policies imply an inefficiently low level of intermediate input trade across countries. The reason is that in our environment trade policy
choices serve a dual role: they can enhance investment by suppliers but, because of ex-post bargaining over prices, they can also be used to redistribute pro ts across countries. The inefficiencies inherent in the Nash policy choices of governments not only result in suboptimal input subsidies, but also in positive distortions in fi nal-good prices, even when countries cannot affect world (untaxed) prices in those goods. As a result, an international trade agreement that brings countries to the efficiency frontier will necessarily increase trade in inputs, but it may require a reduction in final-goods trade. When governments are not motivated by the impact of their policies on ex-post negotiated international input prices, the resulting policy choices are efficient,
and hence a modifi ed terms-of-trade interpretation of the purpose of trade agreements can be offered, but only when governments maximize real national income. If governments preferences are sensitive to political economy (distributional) concerns, the purpose of a trade agreement
becomes more complex, and cannot be reduced to solving a simple terms-of-trade problem.
The classical Heckscher-Ohlin-Mundell paradigm states that trade and capital mobility are
substitutes, in the sense that trade integration reduces the incentives for capital to ow to
capital-scarce countries. In this paper we show that in a world with heterogeneous nancial
development, the classic conclusion does not hold. In particular, in less nancially developed
economies (South), trade and capital mobility are complements. Within a dynamic framework,
the complementarity carries over to ( nancial) capital ows. This interaction implies that
deepening trade integration in South raises net capital inows (or reduces net capital outows).
It also implies that, at the global level, protectionism may back re if the goal is to rebalance
capital ows, when these are already heading from South to North. Our perspective also has
implications for the e¤ects of trade integration on factor prices. In contrast to the Heckscher-
Ohlin model, trade liberalization always decreases the wage-rental in South: an anti-Stolper-
This paper examines how costly nancial contracting and weak investor protection inuence the cross-border operational, nancing and investment decisions of
rms. We develop a model in which product developers can play a useful role in
monitoring the deployment of their technology abroad. The analysis demonstrates
that when rms want to exploit technologies abroad, multinational rm (MNC) activity and foreign direct investment (FDI) ows arise endogenously when monitoring
is nonveri able and nancial frictions exist. The mechanism generating MNC activity is not the risk of technological expropriation by local partners but the demands
of external funders who require MNC participation to ensure value maximization by
local entrepreneurs. The model demonstrates that weak investor protections limit
the scale of multinational rm activity, increase the reliance on FDI ows and alter
the decision to deploy technology through FDI as opposed to arms length licensing.
Several distinctive predictions for the impact of weak investor protection on MNC
activity and FDI ows are tested and con rmed using rm-level data.
Satisfactory calculations of the welfare cost of aggregate consumption uncertainty require
a framework that replicates major features of asset prices and returns, such as the high
equity premium and low risk-free rate. A Lucas-tree model with rare but large disasters
is such a framework. In the baseline simulation, the welfare cost of disaster risk is
large—society would be willing to lower real GDP by about 20% each year to eliminate
all disaster risk. In contrast, the welfare cost from usual economic fluctuations is much
smaller, though still important—corresponding to lowering GDP by around 1.5% each
The paper investigates the effects of checks and balances on corruption. Within a presidential system, effective separation of powers is achieved under divided government, with the executive and legislative branches being controlled by different political parties. When government is unified, no effective separation exists even within a presidential system, but, we argue, can be partially restored by having an accountable judiciary. Our empirical findings show that divided government and elected, rather than appointed, state supreme court judges are associated with lower corruption and, furthermore, that the effect of an accountable judiciary is stronger under unified government, where government cannot control itself.
How can we help African American and Latino students perform better in the classroom and on exams? In Keepin' It Real: School Success Beyond Black and White, Prudence Carter argues that what is needed is a broader recognition
of the unique cultural styles and practices that non-white students
bring to the classroom. Based on extensive interviews and surveys of
students in New York, she demonstrates that the most successful
negotiators of our school systems are the multicultural navigators,
culturally savvy teens who draw from multiple traditions, whether it be
knowledge of hip hop or of classical music, to achieve their high
Winner of the 2006 Oliver Cromwell Cox Award, Finalist for the 2005 C.
Wright Mills Award, and Honorable Mention of the ASA Race, Gender, and
Class Section's 2007 Distinguished Contribution to Scholarship Book
"Constructive engagement" became a catchphrase under the Clinton administration for America's reinvigorated efforts to pull China firmly into the international community as a responsible player, one that abides by widely accepted norms. Skeptics questioned the effectiveness of this policy and those that followed. But how is such socialization supposed to work in the first place? This has never been all that clear, whether practiced by the Association of South East Asian Nations (ASEAN), Japan, or the United States. Social States is the first book to systematically test the effects of socialization in international relations—to help explain why players on the world stage may be moved to cooperate when doing so is not in their material power interests. Alastair Iain Johnston carries out his groundbreaking theoretical task through a richly detailed look at China's participation in international security institutions during two crucial decades of the "rise of China," from 1980 to 2000. Drawing on sociology and social psychology, this book examines three microprocesses of socialization—mimicking, social influence, and persuasion—as they have played out in the attitudes of Chinese diplomats active in the Conference on Disarmament, the Comprehensive Nuclear Test Ban, the Convention on Conventional Weapons, and the ASEAN Regional Forum. Among the key conclusions: Chinese officials in the post-Mao era adopted more cooperative and more self-constraining commitments to arms control and disarmament treaties, thanks to their increasing social interactions in international security institutions.Alastair Iain JohnstonExecutive Committee; Faculty Associate; Governor James Noe and Linda
Noe Laine Professor of China in World Affairs, Department of
Government, Harvard University
Johnston, Alastair Iain. Social States: China in International Institutions, 1980-2000. Princeton, NJ: Princeton University Press, 2007.
The theory of incomplete contracts has been recently questioned using or extending the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of this mechanism to the introduction of small amounts of asymmetric information. Our main result is that the mechanism may not yield (even approximately) truthful revelation as the amount of asymmetric information goes to zero.
Can public policy a¤ect culture, such as beliefs and norms of cooperation? We investigate this question by evaluating how state regulation of minimum wage interacts with unionization behavior and social dialogue. International data shows a negative correlation between union density and the quality of labor relations on one hand, and state regulation of the minimum wage on the other hand. To explain this relation, we develop a model of learning of the quality of labor relations. State regulation crowds out the possibility for workers to experiment negotiation and learn about the true cooperative nature of participants in the labor market. This crowding out e¤ect can give rise to multiple equilibria: a "good" equilibrium characterized by strong beliefs in cooperation, leading to high union density and low state regulation; and a "bad" equilibrium, characterized by distrustful labor relations, low union density and strong state regulation of the minimum wage. We then use surveys on social attitudes and unionization behavior to document that minimum wage legislation and union density do a¤ect beliefs about the scope of cooperation in the labor market.
This paper examines the relationship between culture and poverty, paying special attention to cultural diversity, economic development, and the challenges facing the reduction of poverty in a culturally complex world. Over the last several decades, anthropologists, sociologists, political scientists, and even economists have examined the relationship between culture and poverty in an international context, producing a remarkably diverse and in recent years increasingly sophisticated literature (Rao and Walton 2004). Yet the term “culture” has meant different things to different scholars, and part of our challenge is to assess those meanings against what we know about poverty and development. We cannot hope in these few pages to cover all this work, address all its complexities, or even summarize it faithfully. Instead, we cover a narrow but critical set of issues we find especially important for those attempting to reduce poverty or its consequences in the globalized world in which we live.
Background paper prepared for the World Report on Cultural Diversity, UNESCO.Download PDF
Desmond Tutu was a high school teacher in Johannesburg before he entered the ministry, and all these years later he is still very much the pedagogue.
“Good afternoon,” he said emphatically as he stepped to the podium at the Loeb Drama Center to deliver the Warren and Anita Manshel Lecture in American Foreign Policy on Nov. 15.
The answer from the standing-room-only audience was feeble, and Tutu responded with a look of affronted surprise, a familiar goad in the arsenal of effective teachers everywhere. There was a burst of laughter, followed by a hearty second try: “Good afternoon!”
Now the archbishop emeritus of Cape Town, Tutu rose to international prominence in the 1980s for his opposition to South Africa’s apartheid government. He received the Nobel Peace Prize for that work in 1984. After the fall of apartheid, Tutu headed the Truth and Reconciliation Commission. In 2007, Tutu convened a group of world leaders known as the Global Elders, dedicated to bringing their collective experience and insight to bear on some of the world’s most intractable problems.
He began his talk, titled “Goodness Triumphs Ultimately,” by remarking that the journal Foreign Policy recently asked him and other world figures to answer the question, “What gesture can the incoming United States president make to counteract anti-American feeling abroad?”
Tutu said he was not aware of any anti-American feeling. What he was aware of was “resentment and hostile opposition to this particular administration.”
This was not the first time he has made such a distinction. The Reagan administration, for example, turned a deaf ear to Tutu’s call for sanctions against South Africa’s apartheid government. But, Tutu said, “that did not make me anti-American. We appealed over the head of the president to the American people, and soon afterward Congress passed anti-apartheid legislation.”
Far from harboring anti-American feeling, Tutu said that he has been inspired by the United States ever since picking up a copy of Ebony magazine as a child and reading about Jackie Robinson breaking into major league baseball.
“I didn’t know anything about baseball, but what mattered was that a black man had made it against huge odds. I was sold on America from then on.”
News of African-American sports heroes and entertainers provided “an antidote to self-hatred” for black South Africans living under apartheid, Tutu said. In fact, the apartheid government tried to expunge American history from the school curriculum because it feared that the struggle of African Americans for equality would encourage South African blacks to rise up against oppression.
When the United States was attacked on 9/11, the world responded with “an outpouring of love, sympathy, and support,” Tutu said. President Bush should, Tutu suggested, have responded to the attacks “not as an act of war, but as an egregious crime. The perpetrators should have been apprehended and tried before an international criminal court. If that had happened, the whole world would have cooperated.”
Instead, Tutu contended, the Bush administration responded to the attacks according to “a simplistic world view” that looked at events in terms of “them and us, baddies and goodies.” Such a view required that the United States respond to 9/11 not as a criminal act, but as an act of war.
“But according to the rules of war, there has to be a nation, so Iraq was recruited,” Tutu said.
“The emergence of an enemy galvanized U.S. patriotism,” Tutu said, enabling the administration to manipulate patriotic feeling in order to pursue its own agenda. He compared this purported manipulation to methods used in South Africa.
“The apartheid government used similar techniques to impugn the patriotism of anyone who dared to criticize the government.”
Through its unilateral policies in Iraq, Tutu said, the United States has “thumbed its nose at the rest of the world” and has been “intent on throwing its weight around like a reckless bully.”
Tutu said he was shocked by what he sees as America’s willingness to abrogate the rule of law and to equivocate about the legality of waterboarding and other interrogation methods. Evoking the specter of an evil and powerful enemy as an excuse to jettison established values is another technique the Bush administration has in common with the apartheid government of South Africa, he claimed.
But despite the harshness of his criticism of recent U.S. foreign policy, Tutu’s feelings for the United States remain on the whole extremely positive.
“I speak as one who has not just admiration but a big love for this country.”
He praised President Bush’s recent stand against the military junta in Burma and thanked the United States for its generosity in the global struggles against AIDS, tuberculosis, and malaria.
Returning to the question posed by Foreign Affairs, Tutu said, “There is one magnanimous act the new president could make. The new president would be surprised by the world’s reaction if he were to say, ‘We made a big mistake over Iraq. We’re sorry.’”
Such a gesture would not only serve to sweeten world opinion, Tutu said, but would help to bring about the outcome promised in the title of his lecture.
“This is a moral universe. Right and wrong actually do matter. Ultimately, truth, justice, goodness, and compassion will triumph over their ghastly counterparts.”
This article is media coverage that followed the 2007 Warren and Anita Manshel Lecture in American Foreign Policy
given by the Most Reverend Desmond Tutu,
Archbishop Emeritus, Cape Town, and Nobel Peace Prize Laureate, 1984.
The lecture, entitled “Goodness Triumphs Ultimately,” was delivered on
November 15, 2007.
Desmond Tutu, Archbishop Emeritus of Cape Town and 1984 Nobel Peace
Prize laureate, spoke yesterday on American foreign policy at an event
commemorating the 50th anniversary of Harvard’s Weatherhead Center for
International Affairs.Five hundred people lined up outside the American Repertory
Theater beginning two and a half hours before the event to hear from
the noted South African social justice advocate. Hundreds more were
turned away at the door.Tutu’s talk, entitled “Goodness Triumphs Ultimately,”
denounced current American foreign policy and stressed the importance
of the United States’ position as a global leader.While Tutu counted the U.S. as a strong ally in the fight
against apartheid, he has been critical of American foreign policy
during the Bush administration.“You taught us no government worth its salt can subvert the
rule of law. We believed you,” Tutu said at a gathering of Nobel
laureates last year, according to The Washington Post. “That’s part of
what you have as a gift for the world. Then how can you commit
Guantanamo Bay? Take back your country.”The crowd at yesterday’s talk appreciated Tutu’s message.“He’s incredible. The zeal, the way he speaks—he could sell
toilet paper and you’d want to buy it,” Libby A. Cunningham, a student
at the Harvard School of Public Health, said.“He was just so affable, he addressed the management of world affairs but with a real personal touch,” Brian S. Reale said.“I think he inspired faith in the possibility of progress in a sometimes confusing world,” Utpal Sandesara ’08 said.Sandesara added that, while the talk was motivational, he felt
Tutu somewhat over-simplified the dichotomy between justice and
injustice. He cited Tutu’s attempt to explain the current situation in
the Middle East in terms of absolute good and evil.“His framework is a very different one,” said Yinliang He
’08. “It’s beyond argument and counterargument. It’s theologically
based.”Outside the Loeb, a handful of protesters held signs denouncing Tutu and accused him of being “an imperialist.”Tutu is here for the two-day conference of Weatherhead Center
alumni fellows called “The Search for Solutions to the World’s
Intractable Problems.”“Archbishop Emeritus Desmond Tutu’s opposition to apartheid,
his commitment to stopping AIDS and treating its victims, his advocacy
of inclusiveness for his church, and his dedication to peace
distinguish him as one of the most significant social figures as well
as humane individuals of our time,” Beth A. Simmons, director of the
Weatherhead Center, said in a press release.“I think it was very fitting and appropriate that Desmond Tutu
was chosen and invited to be the keynote speaker,” Kathleen S. Molony,
director of the fellows program at the center, said after the talk. “It
was a great launchpad for our whole conference.”
This article is media coverage that followed the 2007 Warren and Anita Manshel Lecture in American Foreign Policy
given by the Most Reverend Desmond Tutu,
Archbishop Emeritus, Cape Town, and Nobel Peace Prize Laureate, 1984.
The lecture, entitled “Goodness Triumphs Ultimately,” was delivered on
November 15, 2007.
the causes of the mortgage crisis are myriad, a central problem was
that many borrowers took out loans that they did not understand and
could not afford. Brokers and lenders offered loans that looked much
less expensive than they really were, because of low initial monthly
payments and hidden, costly features. Families
commonly make mistakes in taking out home mortgages because they are
misled by broker sales tactics, misunderstand the complicated terms and
financial tradeoffs in mortgages, wrongly forecast their own behavior
and misperceive their risks of borrowing. How many homeowners really
understand how the teaser rate, introductory rate and reset rate relate
to the London interbank offered rate plus some specified margin, or can
judge whether the prepayment penalty will offset the gains from the
teaser rate? While disclosure alone is unlikely to help, there's
another option. In retirement policy, behavioral research has led
Congress to promote
“opt out” plans under which employers sign workers up for retirement
benefits unless the worker chooses not to participate. This policy has
significantly improved people's retirement savings. Why not have an opt-out home mortgage plan, based, for
example, on a
30-year, fixed-rate loan, with sound underwriting and straightforward
terms? Eligible borrowers would be offered a
standard mortgage (or set of mortgages) and that's the mortgage they
would get—unless they choose to opt out in favor of another option,
after honest and comprehensible disclosures from brokers or lenders
about the risks of the alternative mortgages. An opt-out mortgage
system would mean borrowers would be more likely to get straightforward
loans they could understand. But given lender
incentives to hide true costs from borrowers, we need to give the
opt-out plan some bite. Under our plan, lenders would have stronger
incentives to provide meaningful disclosures to those whom they
convince to opt out, because if default occurs when a borrower opts
out, the borrower could raise the lack of reasonable disclosure as a
defense to bankruptcy or foreclosure. If the court determined that the
disclosure would not effectively communicate the key terms and risks of
the mortgage to the typical borrower, the court could modify or rescind
the loan contract. This approach would allow
lenders to continue to develop new kinds of mortgages, but only when
they can explain them clearly to borrowers. To avoid the next mortgage
crisis, we should use behavioral insights to make it harder for lenders
to put borrowers where they will make predictable and consequential