Globalization

How can the poorer countries of the world be helped to help themselves through freer, fairer trade? In this challenging and controversial book Nobel prize-winning economist Joseph E. Stiglitz and his co-author Andrew Charlton address one of the key issues facing world leaders today. They put forward a radical and realistic new model for managing trading relationships between the richest and the poorest countries.

Membership in certain intergovernmental organizations (IGOs), such as the World Trade Organization, has long been argued to stimulate trade. Yet, evidence linking IGOs to trade is mixed. We argue that identifying the influence of IGOs requires attention not only to the institutions IGOs enact, but to the network through which they enact them. We incorporate the full set of IGOs by using shared-IGO membership to create a network of connectivity between countries.

The current consensus on indirect tax reform in developing countries favors a reduction in trade taxes with an increase in VAT to raise revenue. The theoretical results on selective reform that underlie this consensus are, however, derived from partial models that ignore the existence of an informal economy. Once the incomplete coverage of VAT due to an informal economy is acknowledged, we show that, contrary to the current consensus, the standard revenue-neutral selective reform of trade taxes and VAT reduces welfare under plausible conditions.

We propose a measure of capital market integration arising from a conditional regime-switching model. Our measure allows us to describe expected returns in countries that are segmented from world capital markets in one part of the sample and become integrated later in the sample. We find that a number of emerging markets exhibit time-varying integration. Some markets appear more integrated than one might expect based on prior knowledge of investment restrictions. Other markets appear segmented even though foreigners have relatively free access to their capital markets.

We perform an econometric analysis of the effect of new drug launches on longevity, using data from the IMS Health Drug Launches database and the WHO Mortality Database. Our data cover virtually all of the diseases borne by people in 52 countries during the period 1982-2001 and enable us to control, to an unusually great extent, for the effects of other potential determinants of longevity, e.g., education, income, nutrition, the environment, and "lifestyle." We find that launches of new chemical entities (NCEs) have a strong positive impact on the probability of survival.

In earlier work we presented a mathematical exposition of a theory that demonstrated that mass privatization without institutions to limit asset-stripping may not lead to a demand for the rule of law. The present note makes the same argument in terms of simple diagrams. The central idea is that economic actions (to build value or strip assets) and political positions of individuals are interdependent.

Traditional explanations for high rates of indirect trade have focused on the role of specialized agents in processing and distribution. We provide an alternative explanation based on the differential ability to evade tariffs from some trade entrepôts. Using data on exports to mainland China, we find that the fraction of goods that are routed through Hong Kong (rather than sent directly) is positively correlated with the Chinese tariff rates, both in the cross section and in differences, even though there is no legal tax advantage to sending goods via Hong Kong.