This Means (Trade) War

Kevin Lewis

March 20, 2010

The culturally intelligent negotiator: The impact of cultural intelligence (CQ) on negotiation sequences and outcomes

Lynn Imai & Michele Gelfand
Organizational Behavior and Human Decision Processes, forthcoming

Although scholars and practitioners have repeatedly touted the importance of negotiating effectively across cultures, paradoxically, little research has addressed what predicts intercultural negotiation effectiveness. In this research, we examined the impact of cultural intelligence (CQ) on intercultural negotiation processes and outcomes, controlling for other types of intelligence (cognitive ability and emotional intelligence), personality (openness and extraversion), and international experience. Transcripts of 124 American and East Asian negotiators were coded for sequences of integrative information behaviors and cooperative relationship management behaviors. CQ measured a week prior to negotiations predicted the extent to which negotiators sequenced integrative information behaviors, which in turn predicted joint profit, over and beyond other individual differences. Additional analyses revealed that the level of integrative sequencing was more a function of the lower-scoring than the higher-scoring negotiator within the dyad. Other individual difference characteristics were not related to effective intercultural negotiation processes. Theoretical and practical implications are discussed.


Status Seekers: Chinese and Russian Responses to U.S. Primacy

Deborah Welch Larson & Alexei Shevchenko
International Security, Spring 2010, Pages 63-95

The United States needs support from other states to carry out global governance, particularly from rising powers such as China and Russia. Securing cooperation from China and Russia poses special problems, however, because neither state is part of the liberal Western community, ruling out appeals to common values and norms. Nevertheless, an alternative approach that is rooted in appreciation of China's and Russia's heightened status concerns may be viable. Since the end of the Cold War, Chinese and Russian foreign policy has been shaped by the goal of restoring both countries' great power status, which received major blows after China's Tiananmen Square repression and the Soviet Union's breakup and loss of empire. This desire for status can be explained by social identity theory, which argues that social groups strive for a distinctive, positive identity. Social identity theory provides a typology of strategies that states may use to enhance their relative status and suggests appropriate responses to status concerns of rising powers. Redirecting scholarly attention to status considerations and incentives could contribute to a diplomatic strategy for engaging rising powers.


On the energy content of a money unit

Bernard Beaudreau & Vladimir Pokrovskii
Physica A: Statistical Mechanics and its Applications, forthcoming

In this paper, the concept of "productive energy" as a substitute for conventional labour is examined historically, theoretically and empirically. Over the course of the last centuries, productive energy has been substituted for human, muscle- and brain-based work, providing the wherewithal for the phenomenal growth in material wealth in Western societies. In this era of rising energy costs and increasing energy scarcity, future growth appears to be compromised. To better understand the consequences for society, estimates of the energy content of a dollar's worth of output are provided for the U.S. and Russia.


Determining Trade Policy: Do Voters Hold Politicians Accountable?

Alexandra Guisinger
International Organization, July 2009, Pages 533-557

Models of trade policy often depend on the efficient aggregation of individual preferences. While much of the recent empirical work on trade focuses on whether domestic coalitions form along class or sectoral lines, the process of preference aggregation itself remains understudied. In democratic countries, voting is typically assumed to be an unproblematic mechanism for aggregating preferences, but such an assumption may be misleading when the salience of trade policy is low or heterogeneous throughout the electorate. Using data from a survey of 36,501 potential voters in the 2006 U.S. midterm congressional elections, this article explores the salience of trade policy for voters as a whole and for populations predicted to be most affected by changing trade patterns. The article offers an estimation of trade policy salience based on the degree to which voters held Senate incumbents accountable for their 2005 vote on the Central American Free Trade Agreement, relative to roll call votes on other issues of the day. The article finds trade policy salience to be relatively low in terms of stated importance, in voters' knowledge of their representatives' policy positions, and in its effect on voters' propensity to vote for the incumbent. The low salience of trade policy, particularly among highly affected groups, calls into question voter-driven models of trade policy.


Trade and Foreign Policy Attitudes

Katja Kleinberg & Benjamin Fordham
Journal of Conflict Resolution, forthcoming

Does trade influence whether individuals view other states as friendly or threatening? Liberal theory implies that it should, but the individual-level implications of the liberal argument are rarely tested. Trade should influence individual attitudes more strongly where trade is more economically important. International trade also creates both winners and losers within the trading states, and the foreign policy attitudes of these winners and losers should differ. The authors test hypotheses drawn from this line of argument using a forty-seven-country survey conducted by the Pew Global Attitudes project. They find some evidence that exports but not imports reduce hostile foreign policy attitudes. They find little support for the claim that the trade interests indicated by factor ownership influence attitudes toward trading partners in this broad cross-national sample. On the other hand, attitudes toward trade and foreign direct investment are correlated with broader foreign policy attitudes in the way liberal theory suggests. The authors conclude that there is reason to believe that trade influences individual foreign policy attitudes but that factor ownership does not provide an adequate account of individual interests in international trade in most cases.


Do liberalization and globalization increase income inequality?

Andreas Bergh & Therese Nilsson
European Journal of Political Economy, forthcoming

Using the Standardized World Income Inequality Database, we examine if the KOF Index of Globalization and the Economic Freedom Index of the Fraser institute are related to within-country income inequality using panel data covering around 80 countries 1970-2005. Freedom to trade internationally is robustly related to inequality, also when adding several control variables and controlling for potential endogeneity using GMM. Social globalization and deregulation is also linked to inequality. Reforms towards economic freedom seem to increase inequality mainly in rich countries, and social globalization is more important in less developed countries. Monetary reforms, legal reforms and political globalization do not increase inequality.


U.S. and Them: The Geography of Academic Research

Jishnu Das, Quy Toan Do, Karen Shaines & Sowmya Srinivasan
World Bank Working Paper, December 2009

Using a database of 76,046 empirical economics papers published between 1985 and 2004 in the top 202 economics journals, the authors report two associations. First, per-capita research output on a given country increases with the country's per capita gross domestic product (GDP). Regressions controlling for data availability and quality in the country, indicators of governance and the use of English yield an estimated research-GDP elasticity of 0.37; surprisingly, the United States (US) is not an outlier in the production of empirical research. Second, papers written about the US are far more likely to be published in the top five economics journals, even after the quality of research has been partially controlled for through fixed-effects for the authors' institutional affiliations; the estimates suggest that papers on the US are 2.6 percentage points more likely to be published in the top-five journals. This is a large effect because only 1.5 percent of all papers written about countries other than the US are published in the top-five journals. The authors speculate about the interpretations of these facts, and invite further analysis and additions to the public release of the database that accompanies this paper.


Making Rules for Global Finance: Transatlantic Regulatory Cooperation at the Turn of the Millennium

Elliot Posner
International Organization, October 2009, Pages 665-699

This article explains a shift in the way transatlantic authorities managed conflicts over the cross-border regulation of securities markets: from cooperation skewed heavily toward the preferences of U.S. officials and accepted grudgingly by European counterparts; to a Euro-American regulatory condominium characterized by close interactions among decision makers and mutual accommodation. In the final decades of the twentieth century, the asymmetric influence wielded by U.S. securities market authorities had few parallels in other regulatory areas. Why, then, did U.S. officials become more accommodating and European authorities more influential, and why did the turning point occur in 2002 and 2003, an unlikely moment for intensified transatlantic sovereignty sharing? My study shows that institutional change inside the EU recast the North Atlantic balance of regulatory leverage and thereby was the primary factor behind the reshaping of transatlantic cooperation. Internal EU regulatory centralization changed the expectations of U.S. and European firms and authorities and generated new incentives in Washington, D.C., for accommodation and closer transatlantic coordination. My explanation differs from models that, accepting U.S. financial pre-eminence as a given, attribute variance in cross-border regulatory cooperation to factors such as incentives derived from the particularities of issue areas or preferences rooted in domestic politics. While resonating with a well-established theme from the realist branch of IPE, my findings have broad theoretical significance, and open new avenues for dialogue between realists and constructivists about the social, political, and institutional foundations of power in global economic affairs. The transatlantic political process set off by financial transformation in Europe reveals contemporary sources of systemic change and raises questions about what the EU's ascendance as a global financial regulator will mean in the aftermath of the late-2000s crisis.


Does Agricultural Trade Liberalization Reduce Rural Welfare in Less Developed Countries? The Case of CAFTA

Edward Taylor, Antonio Yúnez Naude & Nancy Jesurun-Clements
Applied Economic Perspectives and Policy, Spring 2010, Pages 95-116

Findings from aggregate economy-wide models suggest that removing tariffs on agricultural imports is detrimental to rural welfare in less developed countries. This paper explores the rural welfare effects of agricultural trade liberalization called for under the Central American Free Trade Agreement (CAFTA), using a disaggregated rural economy-wide model nesting a series of agricultural household models. Lower tariffs reduce nominal incomes for nearly all rural household groups in El Salvador, Guatemala, Honduras and Nicaragua. However, they also lower consumption costs substantially. The net effect on rural households' welfare is positive in most cases, implying that pre-CAFTA agricultural protection policies are disadvantageous for most rural household groups.


The effect of low-wage import competition on U.S. inflationary pressure

Raphael Auer & Andreas Fischer
Journal of Monetary Economics, forthcoming

The effect of import competition from low-wage countries on U.S. inflationary pressure is estimated using a new methodology that identifies the causal response of prices to comparative advantage-induced supply shocks in these nations. The results of a panel covering 325 manufacturing industries from 1997 to 2006 show that imports from nine low-wage countries are associated with strong downward pressure on prices. When these nations capture a 1% share of the U.S. sector, the sector's producer prices decrease by 2.35%. Because import competition also influences the skewness of the distribution of price changes, it is likely to have impacted U.S. equilibrium inflation.


Consumption-based accounting of CO2 emissions

Steven Davis & Ken Caldeira
Proceedings of the National Academy of Sciences, forthcoming

CO2 emissions from the burning of fossil fuels are the primary cause of global warming. Much attention has been focused on the CO2 directly emitted by each country, but relatively little attention has been paid to the amount of emissions associated with the consumption of goods and services in each country. Consumption-based accounting of CO2 emissions differs from traditional, production-based inventories because of imports and exports of goods and services that, either directly or indirectly, involve CO2 emissions. Here, using the latest available data, we present a global consumption-based CO2 emissions inventory and calculations of associated consumption-based energy and carbon intensities. We find that, in 2004, 23% of global CO2 emissions, or 6.2 gigatonnes CO2, were traded internationally, primarily as exports from China and other emerging markets to consumers in developed countries. In some wealthy countries, including Switzerland, Sweden, Austria, the United Kingdom, and France, >30% of consumption-based emissions were imported, with net imports to many Europeans of >4 tons CO2 per person in 2004. Net import of emissions to the United States in the same year was somewhat less: 10.8% of total consumption-based emissions and 2.4 tons CO2 per person. In contrast, 22.5% of the emissions produced in China in 2004 were exported, on net, to consumers elsewhere. Consumption-based accounting of CO2 emissions demonstrates the potential for international carbon leakage. Sharing responsibility for emissions among producers and consumers could facilitate international agreement on global climate policy that is now hindered by concerns over the regional and historical inequity of emissions.


Global patterns of materials use: A socioeconomic and geophysical analysis

Julia Steinberger, Fridolin Krausmann & Nina Eisenmenger
Ecological Economics, 15 March 2010, Pages 1148-1158

Human use of materials is a major driver of global environmental change. The links between materials use and economic development are central to the challenge of decoupling of materials use and economic growth (dematerialization). This article presents a new global material flow dataset compiled for the year 2000, covering 175 countries, including both extraction and trade flows, and comprising four major material categories: biomass, construction minerals, fossil energy carriers and ores/industrial minerals. First, we quantify the variability and distributional inequality (Gini coefficients) in international material consumption. We then measure the influence of the drivers population, GDP, land area and climate. This analysis yields international income elasticities of material use. Finally, we examine the coupling between material flows, and between income and material productivity, measured in economic production per tonne material consumed. Material productivity is strongly coupled to income, and may thus not be suitable as an international indicator of environmental progress - a finding which we relate to the economic inelasticity of material consumption. The results demonstrate striking differences between the material groups. Biomass is the most equitably distributed resource, economically the most inelastic, and is not correlated to any of the mineral materials. The three mineral material groups are closely coupled to each other and economic activity, indicating that the challenge of dematerializing industrial economies may require fundamental structural transformation. Our analysis provides a first systematic investigation of international differences in material use and their drivers, and thus serves as the basis for more detailed future work.


Competition in prescription drug markets: Is parallel trade the answer?

Panos Kanavos & Sotiris Vandoros
Managerial and Decision Economics, forthcoming

This article uses a price determination model with dynamic panel data estimation to examine the extent to which pharmaceutical parallel trade promotes price competition and leads to downward price convergence. Little evidence of sustainable price competition is found. We find that prices are mainly affected by regulation and by competition in the wholesale distribution chain; that the pricing strategy of parallel distributors resembles that of originator drugs in importing countries; and that there may be upward rather than downward price convergence. Drawing on the European evidence, the findings also indicate that opening the US market to parallel imports will not necessarily lead to competition and enhance pharmaceutical cost containment.


Market Imperfections, Wealth Inequality, and the Distribution of Trade Gains

Reto Foellmi & Manuel Oechslin
Journal of International Economics, forthcoming

Globalization increasingly involves less-developed countries (LDCs), i.e., economies which usually suffer from severe imperfections in their financial systems. Taking these imperfections seriously, we analyze how credit frictions affect the distributive impact of trade liberalizations. We find that free trade significantly widens income differences among firm owners in LDCs: While wealthy entrepreneurs are better off, relatively poor business people lose. Intuitively, with integrated markets, profit margins shrink - which makes access to credit particularly difficult for the least affluent agents. Richer entrepreneurs, by contrast, win because they can take advantage of new export opportunities. Our findings resonate well with a number of empirical regularities, in particular with the observation that some liberalizing LDCs have observed a surge in top-income shares.

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