Andres Rodríguez-Clare, Mauricio Ulate, Jose P. Vasquez, 17 May 2022

Concerns about international trade have grown, as recent studies document a negative effect of Chinese import competition on US labour markets. This column provides a new framework to explain this observation, which relies on the presence of downward nominal wage rigidity in US labour markets. The increased competition from China improves US terms of trade, but nominal wage frictions prevent the labour market from adjusting, so that both employment and labour force participation fall in the short run. The welfare implications vary substantially across states, but the favourable terms-of-trade shock drives a positive overall effect.

Michele Ruta, 05 May 2022

The war in Ukraine has suddenly increased geopolitical risks. This column argues that firms will respond to the shock by reassessing security-related risks, leading to changes in the structure of supply chains. But given the capital in place, the cost of searching for alternatives, and factors such as wage differentials across countries, this process is likely to be gradual rather than sudden and will affect different sectors and products differently. It will not result in a reversal of globalisation, unless it is supported by pronounced government intervention.

Markus K Brunnermeier, Harold James, Jean-Pierre Landau, 05 April 2022

The freezing of Russian foreign exchange reserves will have long-term and systemic consequences. This column argues, however, that the dominant role of the dollar as a reserve currency will be unaffected. No other country can provide the world with a large, liquid government bond market and a fully open capital account. Sanctions may have significant long-term effects on the demand for reserves. Countries may reduce their dependence on reserves by limiting their exposure to financial shocks and partially restricting capital movements. The international monetary system may evolve towards to a new architecture, where cross-border financial integration is reduced.

Klaus Schwab, Sean Doherty, 23 February 2022

Concerns about globalisation have intensified in recent years. A recent survey from the World Economic Forum revealed that while three-quarters of those surveyed thought expanding trade was a good thing, less than half thought globalisation was good for their own country. This column argues that globalisation contributes broadly to prosperity and freedom, but that it must be harnessed in ways that bring improved living standards and justice to all. Faster progress toward these goals demands effective public-private cooperation.  

David Dorn, Peter Levell, 14 February 2022

The consensus view until the 2010s was that trade had little impact on inequality in high-income countries. This column reviews the recent evidence that challenges this view. Manufacturing employment contracted sharply in countries like the US and the UK which faced rapid net import growth from China. The resulting, persistent adverse effects on employment and incomes of low-skilled workers do not appear to have been offset by trade’s effect on prices, which seems to have benefited rich and poor households alike. Mitigating these effects is an important but difficult task for policymakers. 

Gene Grossman, Ezra Oberfield, 13 January 2022

After a century of stability, the labour share of national income began to decline around 2000 in the US and many other countries. This column reviews the growing literature examining the potential reasons for the decline of the labour share, which include (1) capital-biased technical change, (2) globalisation and the rise of China, (3) increasing industry concentration and market power, (4) unionisation, and (5) population growth. The column also discusses pitfalls associated with common empirical strategies in the literature and suggests that more work is needed to understand fundamental, rather than proximate, causes of the decline. 

Pavel Chakraborty, Devashish Mitra, Asha Sundaram, 07 December 2021

The global market size of outsourcing doubled between 2000 and 2019. While most studies look at foreign outsourcing, this column uses new data on Indian firms to analyse the effects of increased competition from Chinese imports on the domestic outsourcing of manufacturing jobs. It finds that greater import competition is associated with a significant increase in domestic outsourcing. Additionally, it shows that this effect is only present in Indian states with pro-worker labour regulations. Thus, it highlights the important role of domestic institutions in how firms adapt to globalisation. 

Maurice Obstfeld, 15 October 2021

Even after their role in the global financial crisis, globalised, minimally regulated financial markets are still regarded as inevitable and, on balance, good for us. Maurice Obstfeld of Berkeley tells Tim Phillips about the short but action-packed history of financial globalisation and asks whether we should be rethinking this aspect of capitalism too.

Read more about the research presented and download the free discussion paper:

Obstfeld, M. 2021. 'The Global Capital Market Reconsidered'. CEPR

Mirco Balatti, Juan Carluccio, Francesco Chiacchio, Nuno Coimbra, Susana Parraga, Daniele Siena, Sebastian Stumpner, Fabrizio Venditti, Tina Žumer, 11 October 2021

Since the start of the pandemic, inflation has re-entered mainstream discussion. This column reviews the analysis of globalisation and inflation conducted in the context of the ECB strategy review. Although global factors (mainly commodity prices) matter for inflation synchronisation, their role in lowering both inflation and its sensitivity to the business cycle in advanced economies has been limited since the late 1980s. Global shocks can exert temporary pressure on price dynamics, but the destiny of inflation remains in the hands of central banks.

Rabah Arezki, Yang Liu, 30 September 2021

Covid-19 has further exposed the growing interdependence between advanced economies and emerging markets. Most of the existing research on cross-border spillovers has focused on the spillover effects from advanced economies to emerging markets. This column shows that spillovers from emerging markets to advanced economies over the past 25 years are about a fifth of those running in the opposite direction, and have increased significantly over time because of the evolving interdependence between these blocks. 

Nuno Limão, Yang Xu, 07 August 2021

Production is increasingly specialised, with firms concentrating workers on certain tasks that take advantage of outsourced intermediate inputs. This column uses a new framework where firms can adopt intermediate-intensive technologies to study the relationship between globalisation and specialisation, and its implications for the labour share and income. It finds that an expansion in market size such as that resulting from globalisation increases production specialisation, decreases labour cost shares, and increases profit concentration.

Pamina Koenig, Sebastian Krautheim, Claudius Löhnert, Thierry Verdier, 30 July 2021

With economic globalisation facing a legitimacy crisis fuelled by various scandals associated with globalised value chains, advocacy NGOs and their campaigns are in the limelight. Still, little systematic knowledge has been generated on how global sourcing and exporting decisions of firms interact with the upsurge of this international social activism. This column uses a unique dataset on NGO campaigns against firms to show how the internationalisation and geographical structure of NGO campaigns are closely intertwined with patterns of global production and trade. 

Lutz Kilian, Nikos Nomikos, Xiaoqing Zhou, 15 July 2021

An essential feature of the globalisation of the economy since the 1990s has been the growing importance of sea-borne container trade for supply chains. This column develops a monthly index of North American container trade since 1997 and incorporates it into a model of the US economy. It shows that rising and falling frictions in container shipping markets help explain the US business cycle and recovery from the Covid-19 recession. The model suggests that the recovery since the start of the pandemic has been slower than raw data suggest and finds evidence of favourable foreign demand and container market shocks. 

Alessandra Bonfiglioli, Federica De Pace, 25 June 2021

The rise in income inequality and, more prominently, in the wage gap between men and women has been one of the major concerns among policymakers and the public in recent years. This column presents new evidence from Germany on the impact of exports on the gender wage gap which shows that an increase in a plant’s exports significantly reduces the wage gap between male and female co-workers in white-collar occupations, but widens it for employees in blue-collar occupations. The findings suggest that designing policies that support women taking part in trade, especially in positions in which they would benefit from their comparative advantage, is crucial to maximise the potential benefits from globalisation.    

Ian Goldin, 20 June 2021

Despite the tragic deaths, suffering and sadness that it has caused, the pandemic could go down in history as the event that rescued humanity. This column argues that the pandemic has created a hinge moment of change, in which governments and citizens have demonstrated their ability to undertake reforms which would have been impossible before the pandemic. Sustaining and building on this momentum for reform is vital if we are to address the critical challenges facing humanity, stop future pandemics and build a more inclusive world of shared prosperity. 

Rebecca Freeman, John Lewis, 02 June 2021

Better communications, enhanced transport links, integration agreements between governments, and other factors have all helped increase global economic interconnectedness over the past few decades. This column compares a state-of-the-art gravity model for trade versus migration to reveal that there are in fact important differences in the evolution of globalisation over time on flows of goods versus people. For trade, the boost from free trade agreements declines the farther apart signatories are, but for migration the boost increases with distance between signatories. Further, while both border and distance frictions have declined for trade over time, this is not the case for migration flows.

Wolf-Fabian Hungerland, Nikolaus Wolf, 02 May 2021

The history of globalisation is usually told in two parts, separated not only by two world wars but also by changes in technology, institutions, and economic logic. This column reconsiders that narrative. Using detailed new evidence on Germany’s foreign trading practices from 1800 to 1913 (the ‘first’ globalisation), it finds that most growth took place along the extensive margin, while 25–30% of trade was intra-industry. If the first globalisation saw substantial heterogeneity within countries and industries, it may be time to re-think the ‘classical’ versus ‘new’ trade paradigm. 

Assaf Razin, 23 April 2021

Concerns associated with the Covid-19 pandemic have led to new rationales of protectionism, with renewed emphasis on domestic production and sourcing. This column compares the current economic crisis brought on by the pandemic to previous major economic crises and examines what this could mean for the future of various aspects of globalisation.

Jérôme Adda, Yarine Fawaz, 09 March 2021

Globalisation has affected workers and firms in developed countries over the last decades, leading to loss of employment and worker displacement. This column exploits data on over 40 million Americans to evaluate the many diverse health effects of such an economic shock. It shows that import competition has affected both health and health behaviour, increasing hospital admissions for conditions ranging from infectious diseases to cancer, as well as for mental health issues and substance abuse. However, these effects are only present in areas where jobs tend to involve a high level of routine tasks.

Adnan Seric, Holger Görg, Wan-Hsin Liu, Michael Windisch, 07 January 2021

The Covid-19 pandemic has exposed the fragility of the global trade network underpinning global value chains. Initial disruptions in the supply chains for key medical goods due to surges in demand and newly erected trade barriers have prompted policymakers around the world to question their country’s reliance on foreign suppliers and international production networks. This column takes a closer look at China’s post-pandemic recovery and argues that its response may hold clues to the future of global value chains.

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