Publications by Type: Unpublished

Recent econometric estimates suggest that currency unions have far greater effects on trade patterns than previously believed. Since currency unions are good for trade, and trade is good for growth, that is one major argument in favor of EMU. If there were evidence that the boost to trade within EMU was likely to come in part at the expense of trade with outsiders, that would imply something stronger, for a neighbor such as the United Kingdom: that life outside EMU would get progressively less attractive in the future. But there is no such evidence, either for currency unions in general (according to Frankel–Rose) or for the first three years of EMU in particular (according to Micco, Stein, and Ordoñez). Furthermore, there are the usual countervailing arguments for retaining monetary independence, particularly the famous asymmetric shocks. One possible argument for waiting is that UK trade with euroland is still increasing, probably due to lagged effects of joining the EU and the Single Market initiative. Estimates suggest that the growing trade links in turn lead to growing cyclical correlation. The implication is that the UK may better qualify for the optimum currency area criteria in the future than in the past. On the other hand, if, as a result of waiting to enter, London loses to Frankfurt its position as the leading financial center in the European time zone, that loss may not be readily recoverable in the future.

The turn to "geography" in the social sciences has been evident in recent years, but the insights from this literature have largely bypassed scholarship on international organizations (IOs). Does geography matter at all for how IOs behave? We argue that, from both rationalist and constructivist approaches, there are theoretical reasons why location, controlling for power and interest, affects institutional design and performance. We suggest how preferences over location arise; what determines where IOs are located; and how and when location affects the design and performance of IOs. To assess the plausibility of our ideas, we provide empirical examples of the effect and importance of location, focusing on evidence from specific IOs; evidence regarding how location influences the staffing of IOs; and evidence on the clustering of IOs geographically.

In recent years and decades, a widespread assumption that the world is experiencing a global rise of religion has persisted. Yet, the hypothesis of a "global resurgence of religion" has not been tested by means of empirical evidence. This study uses statistical time series and crosscountry data to test the hypothesis of "a global religious resurgence," and to assess its scope.

To address this question, the study examines global trends in religious adherence, and measures change of religious behavior and values over time in a multitude of countries spanning across six continents. The study identifies seven criteria by which the degree of religiosity among a certain population can be measured, using time–series and cross–country data. The study also examines other global religious trends, including a comparative overview over the relationship between religion and state in most countries, scanning variables such as the performance of religious parties in elections; preferential treatment of religions; countries with an official state religion; references to religion in constitutions; and countries under Sharia law.

The study concludes that there is ample evidence that the argument of a "global resurgence of religion" can largely be sustained, with the notable exception to this trend being the postindustrial countries—where the trend towards secularization itself, however, is far from consistent.

When Russia launched mass privatization, it was widely believed that it would create a powerful constituency for the rule of law. That didn?t happen. We present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the Pareto efficient "rule of the game." The reason is that uncertainty about the legal regime can lead to asset stripping, and stripping can give agents an interest in prolonging the absence of the rule of law.

To quantify the implications of common currencies for trade and income, we use data for over 200 countries and dependencies. In our two–stage approach, estimates at the first stage suggest that belonging to a currency union/board triples trade with other currency union members. Moreover, there is no evidence of trade–diversion. Our estimates at the second stage suggest that every one percent increase in a country's overall trade (relative to GDP) raises income per capita by at least one third of a percent. We combine the two estimates to quantify the effect of common currencies on output. Our results support the hypothesis that important beneficial effects of currency unions come through the promotion of trade.

This paper investigates the determinants of corporate expatriations. American corporations that seek to avoid U.S. taxes on their foreign incomes can do so by becoming foreign corporations, typically by "inverting" the corporate structure, so that the foreign subsidiary becomes the parent company and U.S. parent company becomes a subsidiary. Three types of evidence are considered in order to understand this rapidly growing practice. First, an analysis of the market reacton to Stanley Works's expatriation decision implies that market participants expect its foreign inversion to be accompanied by a reduction in tax liabilities on U.S. source income, since savings associated with the taxation of foreign income alone cannot account for the changed valuations. Second, statistical evidence indicates that the large firms, those with extensive foreign assets, and those with considerable debt are the most likely to expatriate – suggesting that U.S. taxation of foreign income, including the interest expense allocation rules, significantly affect inversions. Third, share prices rise by an average of 1.7 percent in response to expatriation announcements. Ten percent higher leverage ratios are associated with 0.7 percent market reactions to expatriations, reflecting the benefit of avoiding the U.S. rules concerning interest expense allocation. Shares of inverting companies typically stand only at 88 percent of their average values of the previous year, and every ten percent of prior share price appreciation is associated with 1.1 percent greater market reaction to an inversion announcement. Taken together, these patterns suggest that managers maximize shareholder wealth rather than share prices, avoiding expatriations unless future tax savings – including reduced costs of repatriation taxes and expense allocation, and the benefits of enhanced worldwide tax planning opportunities – more than compensate for current capital gains tax liabilities.

We derive a general, cross-national measure of trade policy orientations by using fixed country-year effects in a gravity model estimated with data on bilateral trade flows across 82 nations between 1960 and 1992. The approach provides an attractive alternative to existing methods for estimating general levels of trade restrictions for a wide array of nations over a substantial period of time. Existing indicators are either gravely biased or demand immense amounts of detailed data (or both). Our measure is theoretically grounded, easy to calculate with available data, consistent with the accepted contrasts drawn between notoriously closed and open economies in different periods, and it moves closely in line with well-documented policy reforms made recently in a variety of nations. At the same time the measure differs markedly from the most commonly used indexes of trade policy in a variety of important ways and cases, suggesting, for example, that those indexes dramatically overstate the degree of change in U.S. trade policy over the last three decades and the differences between U.S. and Japanese policy openness. Use of the new measure may thus have an important impact on results in several key fields of research—including studies of the effects of trade openness on growth and income inequality, and analyses of the politics of protectionism.

This paper analyzes the determinants of partial ownership of the foreign affiliates of U.S. multinational firms and, in particular, why partial ownership has declined markedly over the last 20 years. The evidence indicates that whole ownership is most common when firms coordinate integrated production activities across different locations, transfer technology, and benefit from worldwide tax planning. Since operations and ownership levels are jointly determined, it is necessary to use the liberalization of ownership restrictions by host countries and the imposition of joint venture tax penalties in the U.S. Tax Reform Act of 1986 as instruments for ownership levels in order to identify these effects. Firms responded to these regulatory and tax changes by expanding the volume of their intrafirm trade as well as the extent of whole ownership; four percent greater subsequent sole ownership of affiliates is associated with three percent higher intrafirm trade volumes. The implied complementarity of whole ownership and intrafirm trade suggests that reduced costs of coordinating global operations, together with regulatory and tax changes, gave rise to the sharply declining propensity of American firms to organize their foreign operations as joint ventures over the last two decades. The forces of globalization appear to have increased the desire of multinationals to structure many transactions inside firms rather than through exchanges involving other parties.

Late in 2001 the new Deputy Managing Director of the International Monetary Fund (IMF), Anne Krueger, boldly suggested that under certain conditions international debt repayments by a sovereign borrower (= government) should be temporarily suspended while negotiations take place on restructuring its debt. Thus the IMF officially endorsed one of the more radical suggestions for improvements in the international financial architecture that have been made since the Mexican financial crisis of 1995 and the several Asian crises of 1997. This article provides analytical and historical background to evaluate this and other proposals for reform.

This paper addresses the influence of foreign trade and investment on inequality or, more generally, on the distribution of income, with a focus on developing countries. There has been some scholarly debate on the influence on economic growth of economic openness to the rest of the world. Since growth affects the level of poverty and the distribution of income, the trade–growth nexus is also addressed.

"Distribution of income" has several quite different meanings, apart from the issue of the specific measurements that are used to describe it. Economic theory has mainly been concerned with the functional distribution of income, that is, with the returns to different identifiable factors of production and their respective shares in total income of a particular country, such as the share of labor income in national income. Popular and political discourse is more concerned with the size distribution of income, such as the fraction of national income accruing to the top ten percent, or the bottom decile, of residents of the country in question — and in particular on whether inequality has risen or declined. In recent years, concern with the size distribution of income has extended to the global distribution, where observations are on countries, grouped by per capita income, rather than on individuals.

The two concepts of distribution are related by the ownership of the factors of production, especially land in a predominantly agrarian economy, capital in a modern economy. If ownership of land and capital were evenly distributed across a population, even significant changes in the functional distribution of income would have little impact on the size distribution of income.

While governments have access to multiple tax instruments, studies of the effect of tax policy on the location of multinational investment typically focus exclusively on host country corporate income tax rates and their interaction with home country tax rules. This paper examines the impact of indirect (non–income) taxes on foreign direct investment by American multinational firms, using confidential affiliate–level data that permit the introduction of controls for parent companies and host countries. Indirect tax burdens significantly exceed foreign income tax obligations for these firms and appear to influence strongly their behavior. Estimates imply that 10 percent higher indirect tax rates are associated with 1.3 percent lower assets, 3.1 percent lower property plant and equipment, and 1.6 percent smaller trade surpluses with parent companies. Corporate income tax rate differences have comparable effects. The estimated combined effects of indirect and income taxes are similar to earlier estimates of investment responses to income taxes, which raises the possibility that some of the effects commonly attributed to income taxes also reflect the impact of indirect taxes.

Most explanations of female under-representation in democratic polities emphasize either demand for female representatives (say, as a function of female labor force participation), the political mobilization of women, or overt or covert discrimination by male-dominated political organizations. We offer a different—though not necessarily competing—explanation based on an analysis of democratic politics as a particular type of career market. Because seniority is an important factor in legislative effectiveness in candidatecentered systems, career interruptions for the sake of childcare and other family work hurts female aspiring politicians more seriously in majoritarian systems than in PR systems where political parties control the policy platform and constituency service is a minor consideration in the careers of candidates. We find support for this explanation from several sources. First, we find that personalistic electoral systems penalize females (following the rank ordering technique provided by Carey and Shugart 1995). Second, we find that in countries with mixed electoral systems women do better in seats elected by PR than by SMP.

This essay presents what we believe to be the consensus among political scientists with regard to the analysis of the politics of international economic relations. The review we present is not intended to be exhaustive. We do not, for example, attempt to include the work of scholars who challenge the positivist approach that is assumed here. We believe that this survey does, nonetheless, reflect the principal focuses of North American scholarship in IPE. Most scholarship published in the principal journals of the profession and the sub–discipline, and most graduate training and research, are within the range of the theoretical and empirical topics and approaches presented here.

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.

In the Internet age, access has become a key issue for regulation and antitrust. Many Internet libertarians count on low costs of entry and a robust competitive environment, but many segments of the new Internet-based economy, driven by the perceived requirement to show worldwide presence to reach scale economies, might develop towards structures controlled by highly dominant enterprises.

Against this background, this paper reviews, from a European Union perspective, three issues which in the view of the author are fundamental to driving theory and practice with regard to access to telecommunications and the Internet in the European Union: it reviews the current EU framework of access and interconnection to the basic layer of Internet access, the telecommunications network; it then takes a closer look at the recent changes of the system, even if the current reform process has not yet concluded; and it discusses access and control of the Internet and the concept of "top-level Internet connectivity" which has lately become central in this context.

Behind the global effects of "top-level-connectivity" looms a fundamental challenge for global antitrust governance. Given the lack of efficient multilateral structures to deal with this challenge, the major regions are struggling to deal with this new phenomenon in existing frameworks– unilaterally within their local markets, as well as through bilateral cooperation in global markets.

In conclusion, the paper assesses the critical role now played by bilateral international antitrust cooperation–global governance by default.

This paper is about trade liberalization, not globalization. It considers whether the significant steps that have been taken in this direction since the formation of the General Agreement on Tariffs and Trade (GATT) in 1948, have resulted not only in the freer movement of goods and services across borders, but also in a fairer, more open international trading system.