This book reports the results of our research on the role of special interest groups in the process of trade policy formation. However, there is little that is unique about this particular type of policy. The methods that interest groups use to affect trade outcomes are the same as the ones they use to influence a myriad of other policy decisions, including both economic issues and issues outside of the economic realm.
In an initial attempt to fill the previous void in the economic literature, this paper summarizes a series of studies, undertaken as part of a larger project sponsored by the Inter–American Development Bank, on the role of political economy factors in the making of exchange rate policy. While these factors are, of course, examined in conjunction with economic and macroeconomic variables, they have previously received little attention in their own. These political economy factors most notably include the role of interest groups, electoral competition, and election timing. This paper presents some simple analytical arguments, then summarizes evidence contained in other papers in this project.
The structure of international monetary relations has gained increasing prominence over the past two decades. Both national exchange rate policy and the character of the international monetary system require explanation. At the national level, the choice of exchange rate regime and the desired level of the exchange rate involve distributionally relevant tradeoffs. Interest group and partisan pressures, the structure of political institutions, and the electoral incentives of politicians therefore influence exchange rate regime and level decisions. At the international level, the character of the international monetary system depends importantly on strategic interaction among governments, driven by their national concerns and constrained by the international environment. A global or regional fixed–rate currency regime, in particular, requires at least coordination and often explicit cooperation among national governments.
The process of European monetary integration varied widely among countries and over time. This paper argues that an important explanation for the evolution of European exchange rate arrangements was the sectoral impact of their expected effects on European trade and investment. In this perspective, the principal benefit of European MI was its expected easing of cross–border trade and investment within the EU, while its principal cost was the loss of national governments' ability to use currency policy to improve the competitive position of their producers. Empirical results indeed indicate that a stronger and more stable currency was associated with variables used as proxies for private economic interests — the importance of manufactured exports to the DM zone, and improvements in net exports. This suggests a powerful impact of private–interest factors in determining national currency policies.
This paper explores the impact of political economy factors on exchange rate policy in Latin America. It studies the determinants of the choice of exchange rate regime in Latin America, placing special emphasis on political, institutional and interest group explanations. The presumption is that differences in institutional and political settings, as well as differences in economic structure, can have an effect on the choice of regime and, more generally, on exchange rate policy. In addition to these structural elements, the paper examines whether such political events as elections and changes in government affect the pattern of nominal and real exchange rates.(Revised version of "Politics and Exchange Rates: A Cross-Country Approach for Latin America")
In The Currency Game: Exchange Rate Politics in Latin America, edited by Jeffry Frieden and Ernesto Stein. Baltimore: Johns Hopkins University Press, 2001.Download PDF
We use data on imports of computer equipment for a large sample of countries between 1970 and 1990 to investigate the determinants of computer-technology adoption. We find strong evidence that computer adoption is associated with higher levels of human capital and with manufacturing trade openness vis-a-vis the OECD. We also find evidence that computer adoption is enhanced by high investment rates, good property rights protection, and a small share of agriculture in GDP. Finally, there is some evidence that adoption is reduced by a large share of government in GDP, and increased by a large share of manufacturing. After controlling for the above-mentioned variables, we do not find an independent role for the English- (or European-) language skills of the population.
In this paper I argue that there is a significant isomorphism between a host country?s political system and newcomers? participation. During the "first wave" of mass migration to North America from 1880 to 1920 some immigrants brought radical new ideas, significantly influencing worker and socialist movements. The influence of "second wave" immigrants appears more subtle, a careful jockeying for space within existing political structures. I suggest that political institutions exert a selection effect on potential immigrant community leaders both before and after migration. These selection processes reinforce prevailing political discourses and ways of participating.
Census data for 1990/91 indicate that Australian and Canadian female immigrants appear to have higher levels of English fluency, education, and income (relative to natives) than do U.S. female immigrants. This skill deficit for U.S. female immigrants arises in large part because the United States receives a much larger share of immigrants from Latin America than do the other two countries. However, even among women originating outside Latin America, the proportion of foreign–born women in the United States who are fluent in English is much lower than among foreign–born women in Australia. Furthermore, immigrant/native education gaps are reduced but not eliminated by the exclusion of Latin American women from the analysis. In contrast, other evidence for men suggests that the gap in observed skills among male immigrants to the United States is completely eliminated when Latin American immigrants are excluded from the estimation sample (Borjas, 1993; Antecol, et al., 2001). The importance of national origin and the general consistency in the results for men (who are routinely subjected to the selection criteria of various immigration programs) and women (who are not) suggests that many factors other than immigration policy per se are at work in producing skill variation among these three immigration streams.
Who will provide for America’s children, elderly, and working families? Not since the 1930s has our nation faced such fundamental choices over how to care for all its citizens. Now, amid economic prosperity, Americans are asking what government, business, and nonprofit organizations can and can’t do—and what they should and shouldn’t be asked to do. As both political parties look to faith-based organizations to meet material and spiritual needs, the center of this historic debate is the changing role of religion. These essays combine a fresh perspective and detailed analysis on these pressing issues. They emerge from a three-year Harvard Seminar sponsored by the Center for the Study of Values in Public Life that brought together scholars in public policy, government, religion, sociology, law, education, and nonprofit leadership. By putting the present moment in broad historical perspective, these essays offer rich insights into the resources of faith-based organizations, while cautioning against viewing their expanded role as an alternative to the government’s responsibility. In Who Will Provide? community leaders, organizational managers, public officials, and scholars will find careful analysis drawing on a number of fields to aid their work of devising better partnerships of social provision locally and nationally. It was named a Choice Outstanding Academic Book of 2001.
In Dinah Shelton (ed.) Commitment and Compliance: The Role of Non–binding Norms in the International Legal System. Oxford University Press, 2000, 244–263The explosion of international financial activity over the last decade has been a central fact of international economic life. Balance of payments statistics indicate that cross–border transactions in bonds and equities for the G–9 states rose from less than 10 percent of gross domestic product in 1980 to over 140 percent in 1995. International bond markets have reached staggering proportions: by the end of 1995, some US$2.803 trillion of international debt securities were outstanding worldwide. Capital flows to developing countries and countries in transition grew from US$57 billion in 1990 to over US$211 billion in 1995. Foreign lending in form of international syndicated credit facilities has surged since the 1980s, to over US$320 billion at the end of 1995. Foreign exchange transactions – which represent the world?s largest market – reached an estimated average daily turnover of nearly US$1.2 trillion in 1995 compared to US$590 billion daily turnover in 1989.
Why do sovereign governments make international legal commitments, and what effect does international law have on state behavior? Very little empirical research tries to answer these questions in a systematic way. This article examines patterns of commitment to and compliance with international monetary law. I consider the signal governments try to send by committing themselves through international legal commitments, and I argue that reputational concerns explain patterns of compliance. One of the most important findings is that governments commit to and comply with legal obligations if other countries in their region do so. Competitive market forces, rather than overt policy pressure from the International Monetary Fund, are the most likely "enforcement" mechanism. Legal commitment has an extremely positive effect on governments that have recently removed restrictive policies, which indicates a desire to reestablish a reputation for compliance.
The explosion of international financial activity over the last decade has been a central fact of international economic life. Balance of payments statistics indicate that cross–border transactions in bonds and equities for the G–7 states rose from less than 10 percent of gross domestic product in 1980 to over 140 percent in 1995. International bond markets have reached staggering proportions: by the end of 1995, some US$ 2.803 trillion of international debt securities were outstanding worldwide. Capital flows to developing countries and countries in transition grew from US$ 7 billion in 1990 to over US$ 211 billion in 1995. Foreign lending in the form of international syndicated credit facilities has surged since the 1980s, to over US$ 320 billion at the end of 1995. Foreign exchange transactions – which represent the world's largest market – reached an estimated average daily turnover of nearly US$ 1.2 trillion in 1995 compared to US$ 590 billion daily turnover in 1989... Money laundering cannot be handled effectively on a unilateral or bilateral basis. Significantly different rules across jurisdictions invite "forum shopping," the shifting of business to countries with weaker controls. When the United States passed the Bank Secrecy Act of 1970, tightening reporting requirements for cash transactions over US$ 10,000, illicit money moved to Europe... To yield significant benefits, near–global cooperation is a virtual necessity...
This article seeks to contribute to our understanding of international law compliance by focusing on a particular area – the public international law of money. This is a critical terrain for examining compliance with international commitments, for money has traditionally been one of the key aspects of national sovereignty. The creation, valuation, and convertibility of a state's national currency has long been considered a national legal prerogative, as well as a potent symbol of national autonomy. Yet, after World War II, governments established for the first time in history a public international law of money, which required adherents to maintain par values for their currencies, maintain a unified exchange rate regime, keep their current accounts free from restrictions, and consult on a regular basis regarding these matters. The development of these rules allows us to ask and attempt to answer questions that go to the very purposes of international law itself: Why do sovereign governments commit themselves to international rules that will bind their future behavior? Once committed, what conditions are associated with compliance? Do governments that make specific behavioral commitments behave any differently than similarly situated countries who do not commit? The argument developed here suggests that an international legal commitment is a signaling device that governments use to convince private market actors as well as other governments of a serious intent to eschew the proscribed behavior...
Sovereign control over money is one of the most closely guarded national prerogatives. Creating, valuating, and controlling the distribution of national legal tender is viewed as an inherent right of a nation–state in the modern period.Yet over the course of the twentieth century, international rules of good monetary conduct have become "legalized" in the sense developed in this volume. This historic shift took place after World War II in an effort to bolster the confidence that had been shattered by the interwar monetary experience. If the interwar years taught monetary policymakers anything, it was that economic prosperity required credible exchange–rate commitments, open markets, and nondiscriminatory economic arrangements. International legalization of monetary affairs was a way to inspire private actors to once again trade and invest across national borders.
Can unofficial, academically based, third–party approaches contribute to the prevention and resolution of international and intercommunal conflicts? The article focuses on one such approach, interactive problem solving, which the author has applied primarily in the Israeli–Palestinian conflict. After describing the central took of the approach, the problem–solving workshop, the article goes on to address the role of interactive problem solving and related approaches to the larger process of conflict resolution. In this context, it discusses the relationship of the microprocess of problem–solving workshops to macroprocess on international conflict resolution; the relationship between official and unofficial diplomacy; the relationship between practice and scholarship in conflict resolution; the role of the university in the process; and the possibilities for institutionalizing this model of conflict resolution.
European Economic Review, 44, 683-693Regimes controlled by a rich elite often collapse and make way for democracy amidst widespread social unrest. Such regime changes are often followed by redistribution to the poor at the expense of the former elite. We argue that the reason why the elite may have to resort to full–scale democratization, despite its apparent costs to themselves, may be that lesser concessions would be viewed as a sign of weakness and spur further unrest and more radical demands. The elite may therefore be forced to choose between repression and the most generous concession, a transition to full democracy.
Journal of Political Economy, 108, 663-679We build a model of child labor and study its implications for welfare. We assume that there is at trade–off between child labor and the accumulation of human capital. Even if parents are altruistic and child labor is socially inefficient, it may arise in equilibrium because parents fail to fully internalize its negative effects. This occurs when bequests are zero or when capital markets are imperfect. We also study the effects of a simple ban on child labor and derive conditions under which it may be Pareto improving in general equilibrium. We show that the implications of child labor for fertility are ambiguous.
We study the implications of the trade–off between child quality and child quantity for the efficiency of the rate of population growth. We show that if quantity and quality are inversely related then, even in the case of full altruism within the family, population growth is inefficiently high, if the family does not have, or does not choose to use, compensating instruments (for example, bequests or savings are at a corner). In non–altruistic models this trade–off certainly generates a population problem. We therefore prove that the repugnant conclusion is not only repugnant, it may be inefficient. Moreover, we cannot expect intra–family contracting to resolve the inefficiency since it involves contracts which are not credible.
During the nineteenth century most Western societies extended voting rights, a decision that led to unprecedented redistributive programs. We argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution. Political transition, rather than redistribution under existing political institutions, occurs because current transfers do not ensure future transfers, while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution. Our theory also offers a novel explanation for the Kuznets curve in many Western economies during this period, with the fall in inequality following redistribution due to democratization.