Globalization

In recent years there have been enormous changes in our technology, our economy, and our society. But has there been progress? From most economists the first reaction to this question is: Of course there must have been progress! After all, the growth of new technologies expands opportunity sets, what we can do, the amount of output per unit input. We can choose either to have more output, more goods and services, or to work less. However we make the choice, surely we are better off. But what, then, about the sweeping changes we associate with the phenomenon of globalization?

The purpose of this panel is to make significant headway in assessing and developing multilateral strategies to promote democracy. Throughout, we will focus on constructive avenues for change rather than on critique and lamentation. We begin with two diagnostic questions: What is the state of democratization in the world today? How have strategies for the promotion of democracy changed since September 11, led by the transformed U.S. agenda of war on terror? Here we will discuss recent interventions in Afghanistan and Iraq, as well as new developments in other parts ofthe world.

A strand of recent literature shows that a reform of import tariff (export tax) and consumption tax (production tax) that keeps consumer (producer) price unchanged enhances welfare and increases revenue under plausible conditions. It has been argued that the results provide an ex post justification for the widely implemented reform policies in developing countries that reduce trade taxes and increase consumption tax like VAT for revenue.

The research for which George Akerlof, Mike Spence, and I are being recognized is part of a larger research program which, today, embraces hundreds, perhaps thousands, of researchers around the world. In this lecture, I want to set the particular work which was sited within this broader agenda, and that agenda within the broader perspective of the history of economic thought. I hope to show that Information Economics represents a fundamental change in the prevailing paradigm within economices.

We propose an exogenous measure of a country's growth opportunities by interacting the country's local industry mix with global price to earnings (PE) ratios. First, we find that these exogenous growth opportunities strongly predict future changes in real GDP and investment in a large panel of countries. This relation is strongest in countries that have liberalized their capital accounts, equity markets, and banking systems. Second, we re-examine the link between financial development, external finance dependence, investor protection, capital allocation, and growth.

We examine the effects of both equity market liberalization and capital account openness on real consumption growth variability. We show that financial liberalization is mostly associated with lower consumption growth volatility. Our results are robust, surviving controls for business-cycle effects, economic and financial development, the quality of institutions, and other variables. Countries that have more open capital accounts experience a greater reduction in consumption growth volatility after equity market openings.

In this essay, I want to look at certain ethical aspects of the way that globalization has proceeded in recent years. I shall argue that in the way that they have sought to shape globalization, the advanced industrial countries have violated some basic ethical norms.

While today it is recognized that globalization may have adverse effects on particular groups, in this essay, I want to set forth some of the reasons why globalization, when not managed well, may actually be adverse to overall economic growth, and the ability of countries to take advantage of the advances associated with the New Economy. Not just the poor may suffer. There are several channels through which the adverse effects may run.

We investigate the ability of several international asset pricing models to price the returns on 36 FTSE global industry portfolios. The models are the international capital asset pricing model (ICAPM) the ICAPM with exchange risks, and global two-factor and three-factor Fama-French (1996, 1998) models. We apply the methodology of Hansen and Jagannathan (1997).