Research Library

1999
Cooper, Richard N. 1999. “Exchange Rate Choices”. Abstract

This paper will suggest that the responses that have been given by many economists concerning exchange rate policy over the past few decades are inadequate and possibly quite poor advice to decision–makers.

Cooper, Richard N. 1999. “Prospects for the World Economy”. Abstract

This paper explores four factors which we hardly notice from year to year, but which accumulate relentlessly over time, such that by 2015 they will have profoundly transformed the world as we now know it. The four factors are population growth, growth in per capita income, increasing international mobility among national firms and individuals, both made possible and driven by technological changes in transportation and communication, and the aging of existing political leaders (as well as everyone else).

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.

Cooper, Richard N. 1999. “Should Capital Controls Be Banished?”. Abstract

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.


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Caselli, Francesco, and Massimo Morelli. 1999. “Bad Politicians”. Abstract

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.

Caselli, Francesco, and John Coleman. 1999. “How Regions Converge (Forthcoming in Journal of Political Economy )”. Abstract
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.

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.

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).

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.


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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.

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".

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.

Sherkat, Darren, and Alfred Darnell. 1999. “The Effect of Parents' Fundamentalism on Children's Educational Attainment: Examining Differences by Gender and Children's Funda.” Journal for the Scientific Study of Religion 38 (1): 23-35. Abstract

New light has recently been shed on the influence of fundamentalist Protestant orientations on educational attainment; such reexamination has revived debates over the material consequences of culture. In this paper, Darren Sherkat and Alfred Darnell consider the effect of parents' fundamentalist orientation on their childrens' educational attainment. Using data from the Youth Parent Socialization Panel Study, Sherket and Darnell divide the sample to show how the influence of parents' fundamentalism varies by gener of the child and by the youth's fundamentalism. They find that fundamentalist parents hinder the educational attainment of their nonfundamentalist children, and also that such parents are more supportive of male fundamentalist children's education that are non–fundamentalist parents.

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The focus of this paper is on interactive problem solving, an unofficial, academically–based, third–party approach to the resolution of international and intercommunal conflicts. The methods of interactive problem solving are applicable to a wide variety of conflicts and have indeed been applied in a number of protracted conflicts between identity groups around the world, including Cyprus, Sri Lanka, Bosnia, and Northern Ireland. My own focus, however, for some thirty years, has been on the Arab Israeli conflict and especially on the Israeli–Palestinian component of that conflict.

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Alesina, Alberto. 1999. “Fiscal Policy, Profits and Investment”. Abstract

This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. We find a sizeable negative effect of public spending – and in particular of its wage component – on profits and on business investment. This result is consistent with models in which government employment creates wage pressure for the private sector. Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than those of taxes. Our results can explain the so called "non–Keynesian" (i.e. expansionary) effects of fiscal adjustments.

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Kelman, Herbert C. 1999. “The Future Israeli-Palestian Relationship”. Abstract

In this concept paper, the Joint Working Group on Israeli–Palestinian Relations—a group of influential Palestinians and Israelis that has been meeting periodically since 1994 to discuss final–status issues in the Israeli–Palestinian negotiations—explores the future relationship between the two societies after the signing of a peace agreement. The paper considers a relationship based on total separation between the two societies and states as neither realistic nor desirable. Instead, it envisages a future relationship based on mutually beneficial cooperation in many spheres, conducive to stable peace, sustainable development, and ultimate reconciliation. The basis for such a relationship must be laid in the process and outcome of the final–status negotiations and in the patterns of cooperation established on the ground.

Efforts at cooperation and reconciliation cannot be pursued apart from their political context. The paper argues that the only feasible political arrangement on which a cooperative relationship can be built is a two–state solution, establishing a genuinely independent Palestinian state alongside of Israel. The resolution of final–status issues must be consistent with the sovereignty, viability, and security of both states.

The paper then proceeds to describe several models for the relationship between the two states and societies. It advocates a model of close cooperation, but proposes that this relationship be built in stages. The scope and speed of expanding and institutionalizing cooperative activities must be determined by experience—by the extent to which such activities meet the needs of both parties, enhance mutual trust, and reduce inequalities between the parties.

Finally, the paper discusses three avenues for promoting a cooperative relationship based on equality, reciprocal benefit, and mutual trust and respect: the development of functional ties and civil–society institutions across national borders; programs directed toward attitude change and stereotype reduction; and efforts to close the economic and political gap between the two societies.

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The interactions between identity groups engaged in a protracted conflict lack the conditions postulated by Gordon Allport in The Nature of Prejudice (1954) as necessary if contact is to reduce intergroup prejudice. The article examines the Israeli–Palestinian conflict from this perspective. After summarizing the history of the conflict, it proposes that a long–term resolution of the conflict requires development of a transcendent identity for the two peoples that does not threaten the particularistic identity of each. The nature of the conflict, however, impedes the development of transcendent identity by creating a state of negative interdependence between the two identities such that asserting one group’s identity requires negating the identity of the other. The resulting threat to each group’s identity is further exacerbated by the fact that each side perceives the other as a source of some of its own negative identity elements, especially a view of the self as victim and as victimizer. The article concludes with a discussion of ways of overcoming the negative interdependence of the two identities by drawing on some or the positive elements in the relationship, most notably the positive interdependence between the two groups that exists in reality. Problem–solving workshops represent one setting for equal–status interactions that provide the parties the opportunity to "negotiate" their identities and to find ways of accommodating the identity of the other in their own identity.

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This paper surveys the issues involved in cooperation among nations to slow down the climate change which many believe the extensive consumption of fossil fuels and other aspects of modern life are generating, through emissions of greenhouse gases, especially carbon dioxide. It addresses the possible social and economic impacts of global warming, the elements involved in evaluating the pros and cons of taking steps to reduce those impacts, and the issues involved in engaging most of the world's states, with diverse economic circumstances, in a cooperative endeavor to reduce greenhouse gas emissions. It expresses doubts about the efficacy of a global approach based on national emission targets, such as those set by the 1997 Kyoto Protocol, and favors instead mutually agreed actions, focused on a common emissions tax.

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Cooper, Richard. "International Approaches to Global Climate Change." Working Paper 99–03, Weatherhead Center for International Affairs, Harvard University, 1999.


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Simmons, Beth A. 1999. “The Internationalization of Capital”. Abstract

The purpose of this essay is to describe the recent internationalization of capital, and to explore the implications for the industrialized countries of the Organization for Economic Cooperation and Development (OECD). The first section describes capital controls under the Bretton Woods regime and their subsequent liberalization. Bretton Woods endorsed capital controls, but these were relaxed in the 1970s and virtually eliminated in the 1980s and 1990s in most OECD countries. The second section describes the increase in transnational capital movements, and the third reviews the evidence of capital market integration since the 1960s. The fourth section explores the consequences of more integrated capital markets on national politics and policy making, and the final section offers conclusions.

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