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.
Joshua Aizenman, Hiro Ito, 23 June 2016
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 O. 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.
Joon H. 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.
Juan Carluccio, Alejandro Cuñat, Harald Fadinger, Christian Fons-Rosen, 14 December 2015
The increase in the skill premium – wages of skilled workers relative to unskilled workers – has prompted research on its causes and potential remedies. This column presents new evidence suggesting that the impact of globalisation on the income distribution in industrialised countries is much stronger than initially thought. The productivity gains from having access to cheaper inputs through offshoring are not being distributed equally between the different economic actors in our rich societies.
Italo Colantone, Rosario Crinò, Laura Ogliari, 04 December 2015
Influential studies have shown that trade liberalisation is associated with substantial adjustment costs for workers in import-competing jobs. This column uses UK data to shed light on one such cost that has not been considered to date – subjective well-being. Import competition is found to substantially raise mental distress, through worsened labour market conditions and increased stress on the job. These findings provide evidence of an important hidden cost of globalisation.
Laura Alfaro, Pol Antràs, Davin Chor, Paola Conconi, 14 November 2015
Trade in intermediate inputs now accounts for as much as two-thirds of international trade. Firms must decide which segments of their production processes to own and which to outsource. Using global plant-level data, this column empirically examines firms’ organisational choices along value chains. Decisions to integrate or outsource upstream and downstream functions are found to depend on demand elasticity relative to the substitutability of inputs. These results provide strong evidence that integration decisions are driven by contractual frictions.
Petr Matous, Yasuyuki Todo, 16 June 2015
Japanese business groups, or keiretsu – cartels of companies with interlocking interests – have contributed much to the success of Japanese manufacturing in the 20th century. This column explores the future of this form of corporate governance, amid increasing calls for their dissolution. An examination of trade networks in the automotive industry shows that automakers no longer exhibit a preference for dealing with keiretsu partners. Globalisation, procurement scandals, and advances in modularisation have helped to erode the benefits of these long-term relationships.
Esther Ann Bøler, Beata Javorcik, Karen-Helene Ulltveit-Moe, 18 May 2015
The gender wage gap persists even in gender equal societies such as the Nordic countries. This column suggests that globalisation may play a role in that. The authors show that exporting firms have higher gender wage gaps although the effect is only present among college graduates. The heightened competition faced by exporters requires greater commitment and flexibility on the part of the workers, which leads to statistical gender discrimination.
Michael Huberman, Christopher M. Meissner, Kim Oosterlinck, 06 February 2015
Understanding the relationship between trade and growth is still at the core of the economics profession. This column seeks to identify the pathways by which globalisation affects economic growth looking at the case of Belgium in the decades preceding the First World War. It argues that the collapse in fixed export costs promoted the entry of uncompetitive firms into export markets and as the trade component of GDP rose, the share of high performing firms contracted, slowing growth.
Ian Goldin, 21 November 2014
Global hyperconnectivity and increased system integration have led to vast benefits in terms of income, education, innovation and technology. Yet globalisation has also created serious concerns about how local events can so easily cascade over national borders to become crises that affect everyone. This Vox Talk discusses the widening gap between systemic risks and their effective management. Goldin argues that the new dynamics and complexities of globalisation are endemic and will potentially destabilise our societies unless they are addressed immediately and more effectively.
Dalia Marin , 15 November 2014
Recent advances in artificial intelligence could affect manufacturing and the labour markets in a number of ways. This column explores two of them. First, it finds no confirmation that machines have decreased the cost of labour and brought manufacturing back to rich countries. Second, it argues that machines could replace highly skilled workers rather than increase the demand for their labour. Technology and skills are thus substitutes not complements.
Charles A.E. Goodhart, Philipp Erfurth, 04 November 2014
Most of the world is now at the point where the support ratio is becoming adverse, and the growth of the global workforce is slowing. This column argues that these changes will have profound and negative effects on economic growth. This implies that negative real interest rates are not the new normal, but rather an extreme artefact of a series of trends, several of which are coming to an end. By 2025, real interest rates should have returned to their historical equilibrium value of around 2.5–3%.