The vote for Brexit was seen by some as a vote of ignorance, laced with xenophobia. This column argues that it was not an irrational vote of the ignorant, but a highly rational vote by the same losers from trade as elsewhere across the world. To compensate them, efforts should be made to upskill displaced workers and build them affordable homes to rent in places where the new jobs are. Ignoring this rise of trade nationalism would be far more dangerous than leaving the EU.
Avinash Persaud, 26 August 2016
Melissa Dell, Pablo Querubin, 16 August 2016
The nature of US military interventions has become relevant in the face of new growing threats, particularly from so-called Islamic State. While top-down strategies that rely on overwhelming firepower are sometimes favoured by politicians, longer-term strategies use a bottom-up approach, gaining citizens’ support through civic engagement. This column introduces evidence from US actions during the Vietnam War to show that bottom-up approaches are more successful in countering insurgencies than violent, top-down interventions.
Kevin O’Rourke, 07 August 2016
After the Brexit vote, it is obvious to many that globalisation in general, and European integration in particular, can leave people behind – and that ignoring this for long enough can have severe political consequences. This column argues that this fact has long been obvious. As the historical record demonstrates plainly and repeatedly, too much market and too little state invites a backlash. Markets and states are political complements, not substitutes
Diane Coyle, 05 August 2016
How much was Brexit a result of the UK’s industrialised regions losing out from globalisation? Bob Denham (Econ Films) talks to Diane Coyle (University of Manchester) to discuss the decimation of communities in the late 80s and early 90s, as well as the failure of policy-makers to fix this ever since.
Diane Coyle, 05 August 2016
The UK's "Leave" vote could be seen as a vote against globalisation and its uneven impact on different parts of the country, rather than a vote specifically against the EU. The proportions voting for Leave were higher in the Midlands and North of England, where deindustrialisation struck hardest and where average incomes have stagnated. London, the UK's only truly global city, saw growth and a high share of Remain voters. This column argues that the new Conservative administration, swept in by the Brexit vote, should reinforce the very recent policy emphasis on economic growth outside global London and its hinterland.
Wolfgang Keller, Hâle Utar, 05 July 2016
Recent shifts in political sentiment regarding EU membership have been caused in part by a growing hostility towards globalisation. This column uses Danish evidence to analyse whether globalisation causes a polarisation of jobs in developed countries, and in particular whether it causes a loss of middle-income jobs. Rising import competition can increase income inequality, but it also accounts for a substantial part of all high-wage employment gains. The task for policymakers is to make these gains felt by the majority of citizens.
Stela Rubínová, Emmanuel Dhyne, 04 July 2016
Even in export-oriented industries, only a handful of firms ship their goods abroad. These firms are systematically different from their purely domestic counterparts. This column sheds light on the domestic supply chain of exporters to uncover firms whose production is exported indirectly. Accounting for indirect exporters brings the empirics of international trade closer to the modern structure of production, characterised by many stages in possibly many locations. These findings suggest that the distributional effects of globalisation go beyond the exporters versus non-exporters dichotomy.
Branko Milanovic, 01 July 2016
The effects of of globalisation on income distributions in rich countries have been studied extensively. This column takes a different approach by looking at developments in global incomes from 1988 to 2008. Large real income gains have been made by people around the median of the global income distribution and by those in the global top 1%. However, there has been an absence of real income growth for people around the 80-85th percentiles of the global distribution, a group consisting of people in ‘old rich’ OECD countries who are in the lower halves of their countries’ income distributions.
The global financial crisis has had a profound impact on output and productivity in advanced and emerging economies. In response, policymakers around the world have acted boldly with monetary policy, macro-prudential policy and regulation.
Is productivity being held back by financial factors - such as the lack of long term finance for long term investment - or is productivity being held back by real economy factors, such as globalisation and demographics? The recent crisis has also spurred a reassessment of the relationship between the level (and type) of finance and growth. Could weak productivity growth owe in part to wasteful investment spending or an undersupply of financial services? How does the mix of early and late stage financing drive investment and productivity? This conference aims to bring together perspectives on these big questions, as they will provide important guidance for future policy actions.
Joshua Aizenman, Hiro Ito, 23 June 2016
In the aftermath of the Asian financial crises in the late 1990s and the early 2000s, many Asian emerging market economies started rapidly increasing their international reserve holdings. This column assesses the East Asian economies’ openness to cross-border capital flows and exchange rate arrangements over the past decades. Financial globalisation has made asset prices and interest rates in these economies more vulnerable to global movements of capital, and to US monetary policy. If China succeeds in efforts to internationalise its currency, the dynamics between the US and Asia will most likely change. For now, however, the Asian region’s international finance continues to be dollar-centric.
Francisco Buera, Ezra Oberfield, 12 June 2016
Free trade often comes hand in hand with economic growth. The opportunity for gain is relatively small, according to quantitative models that rely on standard static mechanisms. This column introduces a model to study the diffusion of ideas across countries as a means of increasing productivity, and a quantitative assessment of the role of trade in the transmission of knowledge. How much the transmission of knowledge will impact productivity depends on the openness of the trading countries, current stock of knowledge, and a diffusion parameter.
Peter Egger, Sergey Nigai, Nora Strecker, 21 May 2016
Increased globalisation since the mid-1990s has eroded some of the tax bases of many economies. At the same time, demand for public goods has risen and governments face the challenge of financing greater public expenditure with lower tax revenues. This column discusses tax policy responses to increasing globalisation, showing that since the mid-1990s governments in OECD countries have increasingly relied on revenues from employee-borne rather than firm-borne taxes. Due to the greater mobility of capital and high-skilled workers, who are able to escape higher taxes more easily, the middle classes have carried much of the additional tax burden.
Cecília Hornok, Miklós Koren, 07 May 2016
Most economists view trade as benefiting countries overall but leading to winners and losers within nations. This column summarises a recent survey about winners and losers from globalisation prepared in the context of the FP7 COEURE project. It stresses that the policy debate should focus on identifying and compensating the losers from globalisation rather than on considering protectionist measures that are detrimental to growth.
Giovanni Federico, Antonio Tena-Junguito, 18 April 2016
The slowdown of global trade growth since the Global Crisis has raised concerns across the world. This column puts recent changes into perspective by presenting evidence on the export/GDP ratio and a rough measure of the gains from trade back to 1830. It shows that the interwar period was marked by a reversal of globalisation that makes recent trends look like a small blip.
Wolfgang Dauth, Sebastian Findeisen, Jens Südekum, 21 February 2016
A common theme of recent trade theory models is that globalisation-related shocks induce worker sorting across industries, labour markets, and plants. However, there is little empirical evidence of shocks causing such endogenous mobility responses. This column explores how rising international trade exposure affected the job biographies and earnings profiles of German manufacturing workers since the fall of the Berlin Wall. Individuals are found to systematically adjust to globalisation, with a notable asymmetry in the individual labour market responses to positive and negative shocks. Critically, the push effects out of import-competing manufacturing industries are not mirrored by comparable pull effects into export-oriented branches.
Sascha Becker, Marc Muendler, 06 February 2016
Offshoring and global value chains have reshaped global trade patterns. This column describes how the German economy has been exposed to significant offshoring for at least three decades. The authors find an increasing importance of high-end tasks in the country. Organising and consulting activities under deadlines, changing business conditions, and tougher performance standards are an increasingly common reality in German workplaces. Labour market institutions in German trade partners are largely unrelated to the changing content of German imports.
Yin-Wong Cheung , Sven Steinkamp, Frank Westermann, 27 January 2016
Since the beginning of the Global Crisis, illicit capital flows out of China have been in decline. This column argues that a key factor behind this is the relative money supply between China and the US. China’s rapidly increasing money supply, combined with the Fed’s expansionary monetary policy, prompted investors to reallocate their portfolios between the two countries. Another contributing factor is China’s gradual process of capital account liberalisation. The Fed’s interest rate hike in December may see a resurgence in China’s capital flight.
Pierre-Louis Vézina, David von Below, 20 January 2016
The price of oil rose to unprecedented highs in the 2000s, and its recent plunge took many by surprise. Although there are many consequences of such price fluctuations on the world economy, they are notoriously difficult to pin down. This column examines the trade consequences of varying shipping costs caused by oil price fluctuations. High oil prices are found to increase the distance elasticity of trade, making trade less global. The recent drop in oil prices could thus be a boon for globalisation.
Konstantins Benkovskis, Julia Woerz, 14 January 2016
Global value chains have increased the complexity of good economic analysis no end. This column assess the extent to which global value chains change how we think about the world, and argues that the evolution of global market shares is no longer an adequate indicator of a country’s competitiveness in most cases. ‘Made in China’ has changed almost everything.
Joonhyung Lee, 20 December 2015
Globalisation in the form of offshoring can impact the domestic labour market. This column investigates how offshoring affects workers based on their contract type. The findings indicate that the wages of South Korean manufacturing workers increase as offshoring increases, but that this impact is significantly weaker for temporary workers. One potential channel for globalisation to exacerbate inequality is therefore the contract type.