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.
Ian Goldin, Friday, November 21, 2014
Dalia Marin , Saturday, November 15, 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, Tuesday, November 4, 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%.
Charles A.E. Goodhart, Philipp Erfurth, Monday, November 3, 2014
There has been a long-term downward trend in labour’s share of national income, depressing both demand and inflation, and thus prompting ever more expansionary monetary policies. This column argues that, while understandable in a short-term business cycle context, this has exacerbated longer-term trends, increasing inequality and financial distortions. Perhaps the most fundamental problem has been over-reliance on debt finance. The authors propose policies to raise the share of equity finance in housing markets; such reforms could be extended to other sectors of the economy.
Patricia Ellen, Jaana Remes, Saturday, July 12, 2014
Brazil has grown rapidly and reduced poverty over the past decade, but it has grown more slowly than other emerging economies and its income per capita remains relatively low by global standards. This column points out that sectors of the Brazilian economy that have been opened up to international competition have outperformed those that remain heavily protected. Deeper integration into global markets and value chains could provide competitive pressures that would improve Brazil’s productivity and living standards.
Bernhard Dachs, Georg Zahradnik, Sunday, July 6, 2014
The Global Crisis brought a halt to three decades of R&D internationalisation, in which foreign firms’ share of total R&D expenditure had increased in almost all countries where data is available. However, this column argues that the crisis did not lead to a new global distribution of overseas R&D expenditure, despite the erosion of the EU’s share. The persistence of R&D expenditure is attributed to the costs of relocating R&D and to the autonomy of foreign subsidiaries.
Kerem Cosar, Nezih Guner, James R Tybout, Monday, July 7, 2014
Trade liberalisations are often accompanied by labour market reforms, making it difficult to isolate their effects. This column discusses the effects of trade liberalisation, globalisation, and labour-market reforms on the Colombian labour market. Reduced trade frictions increased cross-firm wage inequality and shifted the firm-size distribution rightward, with offsetting effects on overall wage inequality. Average income increased, but the gains were concentrated among employees of large, productive firms with access to export markets. Greater trade openness also increased job turnover.
Christoph Lakner , Branko Milanovic, Tuesday, May 27, 2014
Since 1988, rapid growth in Asia has lifted billions out of poverty. Incomes at the very top of the world income distribution have also grown rapidly, whereas median incomes in rich countries have grown much more slowly. This column asks whether these developments, while reducing global income inequality overall, might undermine democracy in rich countries.
Amparo Castelló-Climent, Rafael Doménech, Wednesday, April 23, 2014
Most developing countries have made a great effort to eradicate illiteracy. As a result, the inequality in the distribution of education has been reduced by more than half from 1950 to 2010. However, inequality in the distribution of income has hardly changed. This column presents evidence from a new dataset on human capital inequality. The authors find that increasing returns to education, globalisation, and skill-biased technological change can explain why the fall in human capital inequality has not been sufficient to reduce income inequality.
Zhi Wang, Shang-Jin Wei, Kunfu Zhu, Wednesday, April 16, 2014
One common measure of trade linked international production networks is the so-called VAX ratio, i.e. the ratio of value-added exports to gross exports. This column argues that this measure is not well-behaved at the sector, bilateral, or bilateral sector level, and does not capture important features of international production sharing. A new gross trade accounting framework is proposed that can better track countries’ movements up and down global value chains.
Zhi Wang, Shang-Jin Wei, Kunfu Zhu, Monday, April 7, 2014
The growth of international trade in intermediate inputs means that standard trade statistics can give a misleading picture of the real patterns of production behind world trade. This column introduces an accounting framework that decomposes traditional trade flows into components that better reflect the underlying location of the value addition linked to exports.
Nicholas Crafts, Nikolaus Wolf, Tuesday, October 22, 2013
Europeans worry about competition from low-wage economies. This column looks at the basis of the success of the 19th-century Lancashire cotton industry faced with a similar situation. The message is that the productivity benefits of a successful agglomeration can underpin both high wages and competitive advantage in world trade. Policymakers can support such agglomerations by easing land-use restrictions, promoting investments in transport, and providing local public goods.
Marcel Timmer, Bart Los, Robert Stehrer, Gaaitzen de Vries, Wednesday, June 26, 2013
The rise of global value chains (GVCs) is posing new challenges to analyses of countries’ competitiveness. Commonly used measures such as gross exports and revealed comparative advantage are becoming obsolete. This column presents a new measure called ‘global-value-chain income’ that is based on the value added by countries along the international production chain. It shows how this measure can be derived from existing industry-level data and how it changes our view on a country’s competitive strengths.
Richard Dobbs, Susan Lund, Wednesday, June 19, 2013
Is financial globalisation in retreat? This column suggests it might be. There’s been a recent and significant retreat in European financial integration and a retrenchment of global banking (although capital inflows into emerging markets and FDI are only just below their recent peaks). What are we to make of this shift? A more compartmentalised global financial system could certainly reduce the likelihood of a financial crisis spreading from one country to the next. But there is now a danger that the pendulum could swing too far, Policymakers should therefore do more to remove limitations on FDI and investor purchases of foreign equities and bonds, balancing the trade-off between the need for stability and the need to provide financing for economic growth.
Biagio Bossone, Roberta Marra, Saturday, March 16, 2013
Since 2008, we have learned that the root causes of global economic instability are more than the sum of domestic instabilities. This column calls for a broad reconsideration of the principles underpinning current global economic governance; arguing that in a globalised world, isolated domestic economic policymaking is not enough. The international community needs to adhere to a ‘Good Global Citizen’ remit – housed by the IMF – if we are to tackle global economic policy under collective responsibility.
Susan Ariel Aaronson, Saturday, December 22, 2012
The internet is an expanding opportunity for growth. This column argues that in recent years, however, policymakers and market actors have been undermining its potential. Governments and market actors are reducing both access to information and freedom of expression, as well as moving towards a splintered, non-global internet. Commitment to an open, free and global internet will be hard, but if bilateral, regional or multilateral trade agreements encourage interoperability, we might see some harmony among signatories’ privacy, online piracy, and security policies.
Rudolfs Bems, Robert Johnson, Thursday, December 6, 2012
With the rise of complex, globalised supply chains is the real effective exchange rate (REER), the most commonly used measure of competitiveness, now outdated? If it is, what should replace it? This column presents a ‘Value-Added REER’ and shows that it differs substantially from the conventional REER. Because it is possible to construct a new Value-Added REER from existing data, policymakers interested in improving their understanding of competitiveness might well consider including it in their toolbox.
Charles Roxburgh, Richard Dobbs, Jan Mischke, Thursday, May 31, 2012
Are emerging markets a threat to jobs and competitiveness for the industrialised countries? This column argues that such concerns are often based on myths. Armed with the facts, policymakers in mature economies should focus on the opportunities emerging markets present rather than viewing them as a threat.
Richard Baldwin, Toshihiro Okubo, Thursday, May 24, 2012
New-paradigm globalisation – driven by lower coordination costs rather than trade costs – is changing the nature of international commerce, the political economy of trade liberalisation, the nature of trade agreements and much more. This column, using data on Japanese multinationls, presents evidence that the nature of FDI is also changing away from the traditional classification of ‘horizontal’ or ‘vertical’.
Eswar Prasad, Lei (Sandy) Ye, Thursday, February 16, 2012
Is China’s currency destined to become the dominant global reserve currency? This column argues that despite not yet having a flexible exchange rate or open capital account, China’s government is pursuing ‘liberalisation with Chinese characteristics’. It argues that the renminbi will become a reserve currency within the next decade, eroding but not displacing the dollar’s dominance.