Economic liberalisation can go wrong when the objectives and corporate governance of the firms in the deregulated industry are not adequately taken into account. This column presents evidence on the deregulation of the Spanish savings banks, known as ‘cajas’, which led to a dramatic expansion of lending and branching, increase in risk taking, and the final implosion of the whole savings-bank sector in Spain in 2012.
Manuel Illueca, Lars Norden, Gregory Udell, 26 June 2013
Juan Marchetti, Michele Ruta, Robert Teh, 02 January 2013
Globally, large current account imbalances prevail. This column argues that they also continue to represent a systemic risk for the world economy. The WTO has a clear-cut role in the institutional effort to address these imbalances. However, this role has more to do with opening services and government procurement markets than with the often invoked trade sanctions in response to exchange rate misalignments.
Oleg Itskhoki, Marc Muendler, Stephen Redding, Elhanan Helpman, 20 May 2012
What is the effect of trade on inequality? This column presents a unique study examining wage inequality in Brazil after liberalisation. Starting from a closed economy, the column finds that wage inequality will initially rise as only some firms take advantage of the new opportunities. But as trade costs continue to fall and more firms start to trade, wage inequality peaks and begins to fall back.
Jens Arnold, Beata Javorcik, Molly Lipscomb, Aaditya Mattoo, 12 October 2010
Conventional explanations for the post-1991 growth of India’s manufacturing sector focus on trade liberalisation and industrial de-licensing. This column examines 4,000 Indian firms from 1993 to 2005 and argues that a key factor for the success of Indian manufacturing may lie outside of manufacturing – in the services sector.
Laura Alfaro, Anusha Chari, 12 December 2009
What microeconomic forces drove the structural transformation of India’s economy in recent decades? This column studies firm-level data and portrays a dynamic economy driven by the growth of private and foreign firms. But the Indian economy did not go through an industrial shakeout phase driven by creative destruction. The endurance of incumbent firms prevented a dramatic microeconomic transformation.
Kym Anderson, Alan Winters, 21 April 2008
Current prospects for liberalisation of barriers to international trade and migration seem dim. In this column, the authors of the Copenhagen Consensus paper on global economic integration outline the magnitude of the gains that politicians are opposing.