World Markets
Reverse Globalization: Does High Oil Price Volatility Discourage International Trade?
Shiu-Sheng Chen & Kai-Wei Hsu
Energy Economics, forthcoming
Abstract:
This paper examines whether higher oil price volatility causes a reversal in globalization. Using a large annual panel data set covering 84 countries all over the world from 1984 to 2008, we investigate the impacts of oil price fluctuations on international trade, namely exports and imports. We present strong and robust evidence that international trade flows will be lower when oil prices fluctuate significantly. We therefore conclude that oil price volatility hurts globalization.
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Price Behavior in the Roman Empire
Peter Temin
MIT Working Paper, March 2012
Abstract:
Prices were stable for approximately three centuries in the late Republic and Early Roman Empire, to the extent that we know what prices were. This stability was followed by several centuries of inflation after 200 CE, in the Late Roman Empire. I explore this price behavior in three ways. I propose new indices of inflation and political instability. I discuss possible factors that can explain the change from one price regime to the other, including the Antonine Plague. And I present evidence and a possible explanation for the apparent stop-and-go process of ancient inflation.
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Medical Regulation and Health Outcomes: The Effect of the Physician Examination Requirement
Anca Cotet & Daniel Benjamin
Health Economics, forthcoming
Abstract:
This article investigates the effect on health outcomes of the regulation prohibiting physicians from prescribing drugs without a prior physical examination. This requirement could improve health by reducing illegal access to prescription drugs. However, it reduces access to health care by making it more difficult for patients and physicians to use many forms of telemedicine. Thus, this regulation generates a trade-off between access and safety. Using matching techniques, we find that the physician examination requirement leads to an increase of 1% in mortality rates from disease, the equivalent of 8.5 more deaths per 100,000 people, and a decrease of 6.7% in injury mortality, the equivalent of 2.5 deaths per 100,000 people. The magnitude of these effects is larger in rural areas and in areas with low physician density and is accompanied by an 18% increase in the number of days lost each month to illness.
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Baris Ata, Anton Skaro & Sridhar Tayur
Northwestern University Working Paper, December 2011
Abstract:
There are over 80,000 patients in the US waiting for a kidney transplant. Under the current allocation policy, the vast majority of deceased organs are allocated locally. This causes significant disparities in waiting times and access to transplant across different geographical areas. To ameliorate this inequity we propose an operational solution that offers affordable jet services (OrganJet) to patients on the transplant waiting list, allowing them to multiple list in a different, and possibly very distant, donor service areas (DSA) of their choosing. We model the patients' problem of choosing a location to multiple list through a selfish routing game in which each patient tries to minimize his "congestion cost," i.e. maximize his life expectancy. The equilibrium solution to this game (using UNOS data) reveals that OrganJet helps remedy current disparities provided a small fraction (15%) of patients choose to multiple list, resulting in more uniform waiting times and access to transplant in the US. The equilibrium solution also identifies the network of fly-out/fly-in DSAs. For implementation purposes, we select and recommend a subnetwork of this solution, which retains most of the value offered by OrganJet. In other words, we present a partial but implementable solution (using UNOS data). Finally, we consider several extensions of the basic model to show that multiple listing can increase systemwide total life years and decrease organ wastage.
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The US Distribution of Physicians from Lower Income Countries
Fuller Torrey & Barbara Boyle Torrey
PLoS ONE, March 2012
Introduction: Since the 1960 s, the number of international medical graduates (IMGs) in the United States has increased significantly. Given concerns regarding the effects of this loss to their countries of origin, the authors undertook a study of IMGs from lower income countries currently practicing in the United States.
Methods: The AMA Physician Masterfile was accessed to identify all 265,851 IMGs in active practice in the United States. These were divided by state of practice and country of origin. World Bank income classification was used to identify lower income countries.
Results: 128,729 IMGs were identified from 53 lower income countries, constituting 15 percent of the US active physician workforce. As a percentage of the workforce, West Virginia (29%), New Jersey (27%), and Michigan (26%) had the most IMGs from lower income countries, and Montana, Idaho, and Alaska (all less than 2%), the least. The countries with the greatest loss of physicians to the United States per 100,000 population were the Philippines, Syria, Jordan, and Haiti.
Discussion: The reliance of US medicine on physicians from lower income countries is beneficial to the United States both clinically and economically. However, it results in a loss of the lower income country's investment in the IMG's education. We discuss possible mechanisms to compensate the lower income countries for the medical education costs of their physicians who immigrate to the US.
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The macro-financial factors behind the crisis: Global liquidity glut or global savings glut?
Thierry Bracke & Michael Fidora
North American Journal of Economics and Finance, August 2012, Pages 185-202
Abstract:
It has been argued that the global financial crisis 2007-2009 was intrinsically related to two largely unprecedented phenomena in the global economy: (i) exceptionally benign financial market conditions as mirrored in historically low risk premia and buoyant asset price developments as well as (ii) an unprecedented widening of external imbalances. This paper explores to what extent these global trends can be understood as a reaction to three structural shocks to the macro-financial environment of the global economy: (i) monetary shocks ("excess liquidity" hypothesis), (ii) preference shocks ("savings glut" hypothesis), and (iii) investment shocks ("investment drought" hypothesis). In order to uniquely identify these shocks in an integrated framework, we estimate structural VARs for the two main regions with widening imbalances, the United States and emerging Asia, using sign restrictions that are compatible with standard New Keynesian and Real Business Cycle models. Our results show that (US) monetary policy shocks explain the largest part of the variation in imbalances and financial market prices. We find that savings shocks and investment shocks explain less of the variation. Hence, a "liquidity glut" may have been a more important driver of real and financial imbalances in the US and emerging Asia that ultimately triggered the global financial crisis.
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The Great Deflation of 1929-33: It (almost) had to happen
Sandeep Mazumder & John Wood
Economic History Review, forthcoming
Abstract:
There are many explanations of the fall in prices and production called the Great Depression of 1929-33, but this article argues that a sufficient explanation of the price fall - the Great Deflation - was the resumption of the gold convertibility of currencies at prewar parities. The value (general purchasing power) of a convertible currency must be the relative cost of producing gold and other goods, which did not change significantly between 1914 and the 1930s. Monetary and fiscal policies might have affected the timing but not the ends of the price paths that were determined by the decisions to resume.
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When Is Trade Protection Good for Growth?
Jenny Minier & Bulent Unel
Economic Inquiry, forthcoming
Abstract:
The empirical relationship between trade protection and economic growth is surprisingly fragile, as shown in a number of other papers. We address one possible explanation for these findings: that the relationship is contingent on the pattern of comparative advantage, following the endogenous growth literature. Our findings suggest that such contingencies do in fact exist - in particular, the correlation between tariffs and growth is strong and positive for skill-abundant countries - and are robust to the choice of control variables.
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Multinationals and environmental regulation: Are foreign firms harmful?
Evangelina Dardati & Meryem Saygili
Environment and Development Economics, April 2012, Pages 163-186
Abstract:
The rise of globalization has directed the attention of economists to the effect of trade and multinational production on the environment. We explore whether multinational firms, frequently the target of environmentalists, are harmful for a host country's environment. We introduce environmental regulation in a two-country model of heterogeneous firms with monopolistic competition. Using plant-level data from Chile, we test the model implications. We find that foreign firms are cleaner than domestic plants even after controlling for productivity that is likely to be negatively correlated with emissions. We also show that increasing the stringency of environmental regulations in a previously unregulated market affects the domestic firms more than the multinationals.
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Derek Kellenberg
Journal of Environmental Economics and Management, forthcoming
Abstract:
The international trade of waste products is large and has grown substantially in the past decade. While a sizeable literature has flourished around the notion of international pollution havens (the movement of goods production with polluting by-products to low environmental regulation countries), this paper is the first to explicitly test the hypothesis that differences in environmental regulation across countries can create international waste haven effects (the exporting of physical waste by-products, rather than goods production, to low environmental regulation countries). Using bilateral waste trade data and an index of environmental stringency for 92 countries, compelling evidence is found that waste imports increase for a country whose environmental regulations deteriorate vis-à-vis it's trading partner, implying that differences in environmental standards play an important role in international waste trade flows for some country pairs.
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Globalization and human well-being
Nisha Mukherjee & Jonathan Krieckhaus
International Political Science Review, March 2012, Pages 150-170
Abstract:
Over the past half-century we have witnessed a gradual trend towards increased globalization. This phenomenon includes such diverse processes as the greater mobility of capital, goods, and services, as well as increasing diffusion of ideas, technology, and norms. Given the ubiquitous and multi-faceted nature of globalization, we evaluate the effect of economic, social, and political global integration on a particularly important outcome - human well-being. Theoretically, we argue that globalization has a large number of different effects on human well-being, including multiple positive effects and multiple negative effects. Empirically, we analyze the impact of globalization on well-being using a pooled data set, including 132 countries over the time period 1970-2007. We find that, on balance, all three forms of globalization positively affect well-being.
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The Strategic Perils of Low Cost Outsourcing
Qi Feng & Lauren Xiaoyuan Lu
Management Science, forthcoming
Abstract:
The existing outsourcing literature has generally overlooked the cost differential and contract negotiations between manufacturers and suppliers (by assuming identical cost structures and adopting the Stackelberg framework). One fundamental question yet to be addressed is whether upstream suppliers' cost efficiency is always beneficial to downstream manufacturers in the presence of competition and negotiations. In other words, does low cost outsourcing always lead to a win-win outcome? To answer this question, we adopt a multiunit bilateral bargaining framework to investigate competing manufacturers' sourcing decisions. We analyze two supply chain structures: one-to-one channels, in which each manufacturer may outsource to an exclusive supplier; and one-to-two channels, in which each manufacturer may outsource to a common supplier. We show that, under both structures, low cost outsourcing may lead to a win-lose outcome in which the suppliers gain and the manufacturers lose. This happens because suppliers' cost advantage may backfire on competing manufacturers through two negative effects. First, a decrease of upstream cost weakens a manufacturer's bargaining position by reducing her disagreement payoff (i.e., her insourcing profit) because the competing manufacturer can obtain a low cost position through outsourcing. Second, in one-to-two channels, the common supplier's bargaining position is strengthened with a lower cost because his disagreement payoff increases (i.e., his profit from serving only one manufacturer increases). The endogeneity of disagreement payoffs in our model highlights the importance of modeling firm negotiations under competition. Moreover, we identify an interesting bargaining externality between competing manufacturers when they outsource to a common supplier. Because the supplier engages in two negotiations, his share of profit from the trade with one manufacturer affects the total surplus of the trade with the other manufacturer. Because of this externality, surprisingly, as a manufacturer's bargaining power decreases, her profit under outsourcing may increase and it may be more likely for her to outsource.
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How Mafias Take Advantage of Globalization: The Russian Mafia in Italy
Federico Varese
British Journal of Criminology, March 2012, Pages 235-253
Abstract:
How do mafias operate across territories? The paper is an in-depth study of the foreign operations of a Russian mafia group. It relies on a unique set of data manually extracted from an extensive police investigation that lasted several years, including a set of phone intercepts over nine months. Using quantitative content analysis and multiple correspondence analyses (homals), the study reconstructs the activities of the group and its organizational structure in Italy. The paper shows that the core activity of the group -- protecting racketeering -- remains located in the territory of origin, while the Italian branch was monitoring investments in the legal economy. The structure of the group abroad indicates that a division of labour developed, alongside extensive contacts with local criminals and entrepreneurs. The paper contributes to broader debates on globalization and organized crime, moral panics, the structure of informal groups and the role of women in organized crime.
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Brides for Sale: Cross-Border Marriages and Female Immigration
Daiji Kawaguchi & Soohyung Lee
Harvard Working Paper, March 2012
Abstract:
Every year, a large number of women migrate as brides from developing countries to developed countries in East Asia. This phenomenon virtually did not exist in the early 1990s, but foreign brides currently comprise 4 to 35 percent of newlyweds in these developed Asian countries. This paper argues that two factors account for this rapid increase in "bride importation": the rapid growth of women's educational attainment and a cultural norm that leads to low net surplus of marriage for educated women. We provide empirical evidence supporting our theoretical model and its implications, using datasets from Japan, Korea, Taiwan, and Singapore.
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"Living Cadavers" in Bangladesh: Bioviolence in the Human Organ Bazaar
Monir Moniruzzaman
Medical Anthropology Quarterly, March 2012, Pages 69-91
Abstract:
The technology-driven demand for the extraction of human organs - mainly kidneys, but also liver lobes and single corneas - has created an illegal market in body parts. Based on ethnographic fieldwork, in this article I examine the body bazaar in Bangladesh: in particular, the process of selling organs and the experiences of 33 kidney sellers who are victims of this trade. The sellers' narratives reveal how wealthy buyers (both recipients and brokers) tricked Bangladeshi poor into selling their kidneys; in the end, these sellers were brutally deceived and their suffering was extreme. I therefore argue that the current practice of organ commodification is both exploitative and unethical, as organs are removed from the bodies of the poor by inflicting a novel form of bioviolence against them. This bioviolence is deliberately silenced by vested interest groups for their personal gain.
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(Interstate) Banking and (interstate) trade: Does real integration follow financial integration?
Tomasz Michalski & Evren Ors
Journal of Financial Economics, April 2012, Pages 89-117
Abstract:
We conjecture that banks present in two regions charge the appropriate risk premiums for trade-related projects between these markets, whereas higher rates are charged for projects involving shipments to markets where they are absent. These differences affect regional trade flows. US interstate banking deregulation serves as a natural experiment to test our model's implication with the Commodity Flow Survey data. Difference-in-differences estimates suggest that the trade share of state-pairs that allowed pairwise interstate entry increased by 14% over 10 years relative to non-integrated state-pairs. Instrumental variables estimates suggest that an actual increase in bank integration from zero to 2.28% (the mean) increases trade 17% to 25%.
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The Evolution of Brand Preferences: Evidence from Consumer Migration
Bart Bronnenberg, Jean-Pierre Dubé & Matthew Gentzkow
American Economic Review, forthcoming
Abstract:
We study the long-run evolution of brand preferences, using new data on consumers' life histories and purchases of consumer packaged goods. Variation in where consumers have lived in the past allows us to isolate the causal effect of past experiences on current purchases, holding constant contemporaneous supply-side factors. We show that brand preferences form endogenously, are highly persistent, and explain 40 percent of geographic variation in market shares. Counterfactuals suggest that brand preferences create large entry barriers and durable advantages for incumbent firms, and can explain the persistence of early-mover advantage over long periods.
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Long-Run Effects of Mergers: The Case of U.S. Western Railroads
Clifford Winston, Vikram Maheshri & Scott Dennis
Journal of Law and Economics, May 2011, Pages 275-304
Abstract:
We provide a retrospective assessment of the effects of the two recent major railroad mergers in the western United States (Burlington Northern-Atchison-Topeka-Santa Fe and Union Pacific-Southern Pacific) on the price of rail transport of export grain. Estimation accounts for selectivity bias that arises because rail prices are observed only for routes with traffic. Despite concerns that both mergers could harm consumers by reducing carrier competition, we find that, in the long run, the mergers have had negligible effects on grain transportation prices and consumer welfare.
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Markups in the Euro area and the US over the period 1981-2004: A comparison of 50 sectors
Rebekka Christopoulou & Philip Vermeulen
Empirical Economics, February 2012, Pages 53-77
Abstract:
This article provides estimates of price-marginal cost ratios or mark-ups for 50 sectors in eight Euro area countries and the US over the period 1981-2004. The estimates are obtained applying the methodology developed by Roger (J Polit Econ 103:316-330, 1995) on the EU KLEMS March 2007 database. Five stylized facts are derived. First, perfect competition can be rejected for almost all sectors in all countries; markup ratios are generally larger than 1. Second, average markups are heterogeneous across countries. Third, markups are heterogeneous across sectors, with services having higher markups on average than manufacturing. Fourth, services sectors generally have higher markups in the euro area than the US, whereas the pattern for manufacturing is the reverse. Fifth, there is no evidence that there is a broad range change in markups from the 1980s to the 1990s.
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Deconstructing the Argument for Free Trade: A Case Study of the Role of Economists in Policy Debates
Robert Driskill
Economics and Philosophy, March 2012, Pages 1-30
Abstract:
This paper argues that, in light of the apparent settled nature of economists' judgement on the issue of trade liberalization, the profession has stopped thinking critically about the question and, as a consequence, makes poor-quality arguments justifying their consensus. To develop support for this claim, the paper first recounts what economic analysis can say about trade liberalization. Then it analyses the quality of the arguments that economists make in support of free trade. The paper argues that the standard argument made by economists in favour of free trade is either incoherent or implicitly imposes philosophical value judgements about what is good for a nation or society, or it makes leaps of empirical faith about how the world works. The paper concludes with suggestions for better arguments.