Does Foreign Direct Investment Promote Growth? Exploring the Role of Financial Markets on Linkages. Laura Alfaro, March 2010, Paper. “Do multinational companies generate positive externalities for the host country? The evidence so far is mixed varying from beneficial to detrimental effects of FDI on growth, with many studies that find no effect. In order to provide an explanation for this empirical ambiguity, we formalize a mechanism that emphasizes the role of local financial markets in enabling foreign direct investment (FDI) to promote growth through backward linkages. Using realistic parameter values, we quantify the…” Link

Tags: ,

Agglomeration Economics. Edward Glaeser, February 2010, Book Chapter. “When firms and people are located near each other in cities and in industrial clusters, they benefit in various ways, including by reducing the costs of exchanging goods and ideas. One might assume that these benefits would become less important as transportation and communication costs fall. Paradoxically, however, cities have become increasingly important, and even within cities industrial clusters remain vital. Agglomeration Economics brings together a group of essays that examine the reasons why economic activity continues to cluster together despite…” Link

Tags: ,

Redemption or Abstinence? Original Sin, Currency Mismatches and Counter-Cyclical Policies in the New Millenium. Ricardo Hausmann, February 2010, Paper. “This paper updates our previous work on the level and evolution of original sin. It shows that while the number of countries that issue local-currency debt in international markets has increased in the past decade, this improvement has been quite modest. Although we find that countries have been borrowing at home, thanks to deepening domestic markets, we document that foreign participation in these markets is more limited than what is usually assumed…” Link

Tags: , , , , , ,

Imperfect Information and Aggregate Supply. N. Gregory Mankiw, February 2010, Paper. “This paper surveys the research in the past decade on imperfect information models of aggregate supply and the Phillips curve. This new work has emphasized that information is dispersed and disseminates slowly across a population of agents who strategically interact in their use of information. We discuss the foundations on which models of aggregate supply rest, as well as the micro-foundations for two classes of imperfect information models: models with partial information, where agents observe economic conditions…Link

Tags: ,

 The Global Gender Gap Report 2010. Ricardo Hausmann, 2010, Paper. “Nordic countries Iceland, Norway, Finland and Sweden continue to demonstrate the greatest equality between men and women, according to the World Economic Forum’s Global Gender Gap Report 2010. The Global Gender Gap Index was created with the specific purpose of being comparable across time. The 2010 Report aggregates five years of data and seeks to reveal country progress in a transparent manner…” Link

Tags: ,

Efficient Regulation. Andrei Shleifer, January 2010, Book Chapter. “Regulation of economic activity is ubiquitous around the world, yet standard theories predict it should be rather uncommon. I argue that the ubiquity of regulation is explained not so much by the failure of markets, or by asymmetric information, as by the failure of courts to solve contract and tort disputes cheaply, predictably, and impartially. The approach accounts for the ubiquity of regulation, for its growth over time, as well as for the fact that contracts themselves are heavily regulated. It also makes predictions, both across activities and across jurisdictions, for the...” Link

Tags: ,

Potential Growth of the World Economy. Dale Jorgenson, 2010, Paper. “This paper introduces a new framework for projecting potential growth of the world economy, emphasizing the contribution of information technology. We first analyze the sources of economic growth for the world economy, seven regions, and fourteen major economies during four periods – 1989-1995, 1995-2000, 2000-2004, and 2004-2008. The contribution of investment in information technology has increased in all regions, but especially in industrialized economies and Developing Asia. We then project the potential growth rates…” (May require user account or purchase) Link

Tags: ,

The Squam Lake Report: Fixing the Financial System. John Campbell, Jeremy Stein, 2010, Book. “In the fall of 2008, fifteen of the world’s leading economists–representing the broadest spectrum of economic opinion–gathered at New Hampshire’s Squam Lake. Their goal: the mapping of a long-term plan for financial regulation reform. The Squam Lake Report distills the wealth of insights from the ongoing collaboration that began at these meetings and provides a revelatory, unified, and coherent voice for fixing our troubled and damaged financial markets. As an alternative to the patchwork...” (May require user account or purchase) Link

Tags: , ,

Trade Policy and Firm Boundaries. Laura Alfaro, January 2010, Paper. “We study how trade policy affects firms’ ownership structures. We first embed a model of vertical integration decisions into a standard perfectly-competitive international trade framework. In the model, integration decisions are driven by a trade-off between the pecuniary benefits of coordinating production decisions and the managers’ private benefits of operating in preferred waysThe price of output is a crucial determinant of this choice, since it affects the size of the pecuniary benefits: higher prices lead to more integration. Through its effect on product prices, trade policy…” Link

Tags: ,

Cost-Benefit Analysis and Relative Position. Cass Sunstein, January 1, 2010, Paper. “Current estimates of regulatory benefits are too low, and likely far too low, because they ignore a central point about valuation – namely, that people care not only about their absolute economic position, but also about their relative economic position. We show that where the government currently pegs the value of a statistical life at about $4 million, it ought to employ a value between $4.7 million and $7 million. A conservative reading of the relevant evidence suggests that when government agencies are unsure how to value regulatory benefits along a…” Link 

Tags: ,