US Secretary of Treasury Rubin was doubtless not aware when last year he urged a review of the international financial architecture that he was opening a Pandora's Box, unleashing a torrent of metaphors. My remarks will be organized under four architectural headings, ranging from standing pat, to renovating the wiring and plumbing, through replacing the roof and facade, to dismantling the existing structure to the foundation to make room for a new common currency.
Unless certain conditions are met, serious misallocation could occur if capital movements are fully liberalized; and considerable vulnerability is created for economies where the exchange rate is strongly influenced by changes in sentiment by owners — residents as well as non–residents — of liquid assets. Countries in this condition — most of them in today's world — may find themselves having to make an uncomfortable choice between tieing their currencies strongly to a major currency, e.g. with a currency board, and maintaining restrictions on capital movements, particularly those that are subject to rapid changes in sentiment and are easily reversible.
Cooper, Richard. "Should Capital Controls Be Banished?" Working Paper 99–09, Weatherhead Center for International Affairs, Harvard University, April 1999.Download PDF
We present a simple theory of the quality of elected officials. Quality has (at least) two dimensions: competence and honesty. Voters prefer competent and honest policymakers, so high–quality citizens have a greater chance of being elected to oce. But low–quality citizens have a iacomparative advantageli in pursuing elective oce, because their market wages are lower than the market wages of high–quality citizens (competence), and/or because they reap higher returns from holding oce (honesty). In the political equilibrium, the average quality of the elected body depends on the structure of rewards from holding public oce. Under the assumption that the rewards from once are increasing in the average quality of once holders there can be multiple equilibria in quality. Under the assumption that incumbent policymakers set the rewards for future policymakers there can be path dependence in quality.Discussion Paper 134, Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis, 2000.
I present a simple model of technological revolutions. A technological revolution is the introduction of a new generation of machines that can only be operated by workers who have learned a set of machine-specific skills. If learning the new skills is more (less) costly than learning the skills associated with pre-existing technologies, the revolution is skill biased (deskilling). On impact, skill-biased (deskilling) revolutions trigger a reallocation of capital from high (low) learning cost to low(high) learning cost workers, thereby reducing the relative and absolute wage of the former. Thus, the model of skill-biased revolutions replicatesthe observed recent changes in the wage structure, and constitutes a possible interpretation of the Information Technology Revolution. It also provides insight into the future possible behavior of the wage structure, as the diffusion of information technology continues. The model of deskilling revolutions constitutes a possible interpretation of the introduction ofthe assembly line in the early 1910s. I also present some new facts from the Annual Survey of Manufacturing. The inter-industry dispersion of capital-labor ratios has increased substantially and abruptly after 1975. Increases in capital-labor ratios between 1975 and 1990 are positively correlated across industries with changes in pay per worker, changes in the proportion of non-production workers in total employment, high average-wage levels in 1975, and high non-production worker shares in 1975. I argue that my theory constitutes one possible explanation for these facts.
We present a joint study of the US structural transformation (the decline of agriculture as the dominating sector) and regional convergence (of Southern to Northern average wages). We find that empircally most of the regional convergence is attributable to the structural transformation: the nation-wide convergence of agricultural wages to non-agricultural wages, and the faster rate of transition of the Southern labor force from agricultural to non-agricultural jobs.
This paper discusses the challenges and opportunities facing efforts to shape a transition toward more sustainable relations between humans and their planet. It begins with a review of international goals for human development and environmental conservation, past trends in interactions between the earth’s social and natural systems that set the stage for contemporary efforts to meet those goals, and some of the foreseeable problems that will have to be addressed in the years ahead. Arguing that the successful strategies for navigating a sustainability transition will necessarily be knowledge intensive, the paper discusses strategies for social learning about sustainability. It closes with a review of the institutional reforms that will be necessary to implement such strategies.
This study, conducted during the 1998–99 academic year at Harvard University, takes a look at the foreign affairs landscape on the eve of the new millennium. Its emphasis is on examining the challenges the Department of State faces in applying updated information technology (IT) and related organizational restructuring to sustain its leadership in managing foreign affairs on behalf of the secretary of state and the president. The study is based on academic research at Harvard, close scrutiny of two reports done on State in the fall of 1998, as well as the Department's own plan for improving its IT capabilities during the first five years of the 21st century. It also includes findings from a large number of interviews with officials in Washington at the State Department, the Department of Defense, and the Central Intelligence Agency, and at overseas posts (Ottawa, Paris, Lyon, Vienna and Frankfurt).
The focus of this paper is to elaborate on the issue of economic cooperation and integration within the framework of the Association of Southeast Asian Nations (ASEAN). The opportunities and challenges facing Vietnam in its regional economic cooperation and integration will also be discussed.
I have been asked to speak today about the role of Congress in the formulation of foreign policy. This certainly is a broad mandate, but I will do my best to address the issue. Let me say at the outset that my remarks will be general, and designed to provoke follow–up questions. I propose to: First, spend a few minutes explaining the different roles for the Executive branch and the legislature as set forth in the Constitution. While this may seem elementary, it is essential to a proper understanding of current role of Congress in foreign policy. Second, discuss specific trends in congressional foreign policy—institutional trends like the increased power of the Appropriations Committee, and general policy trends like the increased reliance on sanctions, a somewhat decreased appreciation for security concerns, and continued suspicion of multi–national agencies and initiatives. And, finally, I will take a moment to discuss how the recent election and the transition from Speaker Gingrich to speaker Livingston and other leadership changes might affect congressional foreign policy.
Bereuter, Doug. "Key Issues in Congressional Foreign Policy Making." Working Paper 99–02, Weatherhead Center for International Affairs, Harvard University, March 1999.Download PDF
Ethnicity plays an ambiguous role in the great transformation. On the one hand, ethnicity creates: by providing incentives that organize the flow of resources across generations, it provides the capital for urban migration and the acquisition of skills for industrial employment. On the other hand, ethnicity destroys: ethnic conflict leads to costly acts of violence. Using data drawn largely from Africa, this paper explores the two faces of ethnicity. In so doing, it finds that the presumed link between ethnicity and violence is more complex and less threatening than most assume. Those who claim a straightforward link are making an elementary error in the reading of tabular data.
Working Paper 99–11, Weatherhead Center for International Affairs, Harvard University, October 1999.
The United States entered the 1990s on a roll, emerging from the Cold War as the globe?s single remaining superpower. America led its allies to a decisive victory in the Gulf War, less than fourteen months into the decade, demonstrating competence and confidence in this new role. Vetoes of multilateral initiatives by permanent members of the United Nations Security Council, commonplace during the Cold War, became rare.1 Once–adversarial Council members, such as China and Russia, responded favorably to U.S. leadership while engaging with America economically. Also, the reputation of the United Nations improved following peacekeeping successes in Namibia, Cambodia and El Salvador. With U.S. leadership and a cooperative Security Council, there appeared no limit to what could be achieved – in the interest of peace – as the world closed out the bloodiest century in its history. Multilateral peace operations became more feasible, in the absence of the bipolar superpower stalemate, but regrettably, the United States did not have sufficient time to develop a peace operations doctrine before it was compelled into action.
This paper examines the regional distribution of public employment in Italy. It documents two sets of facts. The first is the use of public employment as a subsidy from the North to the less wealthy South. We calculate that about half of the wage bill in the South of Italy can be identified as a subsidy. Both the size of public employment and the level of wages are used as a redistributive device. The second set of facts concerns the effects of a subsidized public employment on individuals? attitudes toward job search, education, "risk taking" activities etc. Public employment discourages the development of market activities in the South.
Critics of foreign aid programs argue that these funds often support corrupt governments and inefficient bureaucracies. Supporters argue that foreign aid can be used to reward good governments. This paper documents that there is no evidence that less corrupt governments receive more foreign aid. This result holds for the allocation aid as well as for debt relief and it is robust across different corruption measures and for different time periods. Thus, there is no evidence that the allocation of aid or debt relief was targeted to the less corrupt countries even in recent periods. As to the dynamics of the relationship between foreign aid and corruption we find some indication that increases in aid are associated with contemporaneous increases in corruption, a result that is supportive of the so called "voracity effect".
Students of comparative politics have long faced a vexing dilemma: how can social scientists draw broad, applicable principles of political order from specific historical examples? In Analytic Narratives, five senior scholars offer a new and ambitious methodological response to this important question. By employing rational-choice and game theory, the authors propose a way of extracting empirically testable, general hypotheses from particular cases. The result is both a methodological manifesto and an applied handbook that political scientists, economic historians, sociologists, and students of political economy will find essential.
In their jointly written introduction, the authors frame their approach to the origins and evolution of political institutions. The individual essays that follow demonstrate the concept of the analytic narrative - a rational-choice approach to explain political outcomes - in case studies. Avner Greif traces the institutional foundations of commercial expansion in twelfth-century Genoa. Jean-Laurent Rosenthal analyzes how divergent fiscal policies affected absolutist European governments, while Margaret Levi examines the transformation of nineteenth-century conscription laws in France, the United States, and Prussia. Robert Bates explores the emergence of a regulatory organization in the international coffee market. Finally, Barry Weingast studies the institutional foundations of democracy in the antebellum United States and its breakdown in the Civil War. In the process, these studies highlight the economic role of political organizations, the rise and deterioration of political communities, and the role of coercion, especially warfare, in political life. The results are both empirically relevant and theoretically sophisticated.
Analytic Narratives is an innovative and provocative work that bridges the gap between the game-theoretic and empirically driven approaches in political economy. Political historians will find the use of rational-choice models novel; theorists will discover arguments more robust and nuanced than those derived from abstract models. The book improves on earlier studies by advocating - and applying - a cross-disciplinary approach to explain strategic decision making in history.
"The transformation of politics in Latin America, the consolidation of a democratic consensus in the Anglophone Caribbean, and the able performance of many democratic governments in fashioning economic policies made this book intellectually possible. Most of Latin America's democratic governments have carried economic reforms more effectively than their authoritarian predecessors and have remained stunningly resilient despite many problems. The naysayers have not been proven right. Indeed, even if democratic governments were to be overthrown tomorrow, the history of democratic politics in the 1980s and 1990s is already noteworthy."—from the IntroductionIn Democratic Politics in Latin America and the Caribbean, Jorge Domínguez focuses on the successful accomplishments of democratic politics in the region—a process that nations in Eastern Europe, Asia, and Africa seek to emulate. Domínguez considers the role of British colonial rule and United States policies. But he also examines the development of parties, other civil institutions, and competitive markets, which lend permanence to democracy. He also discusses the prospects for democracy in Cuba and Mexico. Despite recurrent problems, Dom?nguez concludes, the outlook is good for stable democracies in Latin America and the Caribbean.
Students of comparative politics have long faced a vexing dilemma: how can social scientists draw broad, applicable principles of political order from specific historical examples? In Analytic Narratives, five senior scholars offer a new and ambitious methodological response to this important question. By employing rational-choice and game theory, the authors propose a way of extracting empirically testable, general hypotheses from particular cases. The result is both a methodological manifesto and an applied handbook that political scientists, economic historians, sociologists, and students of political economy will find essential.In their jointly written introduction, the authors frame their approach to the origins and evolution of political institutions. The individual essays that follow demonstrate the concept of the analytic narrative—a rational-choice approach to explain political outcomes—in case studies. Avner Greif traces the institutional foundations of commercial expansion in twelfth-century Genoa. Jean-Laurent Rosenthal analyzes how divergent fiscal policies affected absolutist European governments, while Margaret Levi examines the transformation of nineteenth-century conscription laws in France, the United States, and Prussia. Robert Bates explores the emergence of a regulatory organization in the international coffee market. Finally, Barry Weingast studies the institutional foundations of democracy in the antebellum United States and its breakdown in the Civil War. In the process, these studies highlight the economic role of political organizations, the rise and deterioration of political communities, and the role of coercion, especially warfare, in political life. The results are both empirically relevant and theoretically sophisticated.Analytic Narratives is an innovative and provocative work that bridges the gap between the game-theoretic and empirically driven approaches in political economy. Political historians will find the use of rational-choice models novel; theorists will discover arguments more robust and nuanced than those derived from abstract models. The book improves on earlier studies by advocating—and applying—a cross-disciplinary approach to explain strategic decision making in history.
Coffee is traded in one of the few international markets ever subject to effective political regulation. In Open-Economy Politics, Robert Bates explores the origins, the operations, and the collapse of the International Coffee Organization, an international "government of coffee" that was formed in the 1960s. In so doing, he addresses key issues in international political economy and comparative politics, and analyzes the creation of political institutions and their impact on markets. Drawing upon field work in East Africa, Colombia, and Brazil, Bates explores the domestic sources of international politics within a unique theoretical framework that blends game theoretic and more established approaches to the study of politics. The book will appeal to those interested in international political economy, comparative politics, and the political economy of development, especially in Latin America and Africa, and to readers wanting to learn more about the economic and political realities that underlie the coffee market. It is also must reading for those interested in "the new institutionalism" and modern political economy.
This article argues that the strictly pragmatic, step–by–step approach of Oslo has reached a dead end and that cajoling the parties into signing an agreement is now irrelevant. To move the peace process to a successful conclusion, the parties must now commit themselves to a principled solution whose key elements include prior commitment to a genuine two–state solutions the end point of the final status negotiations, provision of meaningful citizenship to the Palestinians of the territories and the refugees, and mutual acknowledgment of the other?s nationhood and humanity. Such a proposal, though seemingly utopian, represents the most realistic option at the present juncture.Published in Journal of Palestine Studies 28, no. 1 (1998): 36-50; and Peace and Conflict: Journal of Peace Psychology 5, no. 2 (1999): 101-115.
Since the original goals of Zionism have largely been accomplished or are less relevant today, conditions are ripe for Israel’s transition from Zionism to post–Zionism. A post–Zionist Israel – while maintaining its Jewish character and special relationship to world Jewry – would be a state primarily committed to protecting and advancing the interests of its citizens, regardless of ethnicity. In a post–Zionist Israel, the status of non–Jewish Israelis would be upgraded and the status of non–Israeli Jews downgraded. Moreover, Israel would be integrated into the region and engaged in normal, peaceful relations with its neighbors. Many forces are promoting this transition, including the peace process, changes in Israeli–Diaspora relations, and the liberalization of the society. Countervailing forces stem mostly from the ultra–nationalist and orthodox religious sectors in the society. To advance the transition, Israel will have to address four major divisions within the society: the divisions between citizens and noncitizens, Jewish and Palestinian citizens, Ashkenazi and Sephardi Jews, and religious and secular Jews.