trade politics in the third world a case study of mexican gatt decision in 1980 mexico decided not to join the general agreement on tariffs and trade gatt certain objective conditions formed a positive environment for mexican adherence but president l6pez portillo postponed mexican entry indefinitely this critical decision is examined from two perspectives a left leaning foreign policy and domestic constraints in the mexican political system major foreign policy factors were a growing resentment of u s dominance combined with a preference for conducting relations with the u s on a bilateral basis internal political pressures reflected the continued reform of the mexican political system at the upper levels and the relative autonomy of some elite groups from the state l6pez portillo s decision did not constitute an outright rejection of trade liberalization however the decision could have international repercussions in politicizing u s mexican trade relations in slowing trends toward freer trade especially in latin america and in strengthening multilateral organizations like unctad in which third world countries exercise considerable power

political cycles in oecd economies this paper studies whether the dynamic behaviour of gnp growth unemployment and inflation is systematically affected by the timing of elections and of changes of governments the sample include the last three decades in 18 oecd economies we explicitly test the implication of several models of political cycles both of the opportunistic and of the partisan type also we confront the implication of recent rational models with more traditional approaches our results can be summarized as follows a the political business cycle hypothesis as formulated in nordhaus 1975 on output and unemployment is generally rejected by the data b inflation tends to increase immediately after elections perhaps as a result of pre electoral expansionary monetary and fiscal policies c we find evidence of temporary partisan differences in output and unemployment and of long run partisan differences in the inflation rate as implied by the rational partisan theory by alesina 1987 d we find virtually no evidence of permanent partisan differences in output growth and unemployment

understanding international trade policies an emerging synthesis the international trade problems of the 1980s stimulated an expansion of scholarship on trade policies by economists and political scientists at least four distinct theoretical perspectives weave their way through recent literature that concentrates on the united states emphasizing market conditions policy beliefs and values national political institutions and global structures respectively new studies in each of these traditions advance beyond the work of their predecessors but none of the perspectives has yet proved adequate as a single unifying vehicle nevertheless we can also see clear movement toward a synthesis with single works blending insights from several traditions thus the books under review do not all fall neatly into the familiar exclusive categories of economics or political science the emerging synthesis needs strengthening in several ways including the development of conditioning hypotheses that will reduce remaining apparent confusions

economists capitalists and the making of globalization north american free trade in comparative historical perspective why did globalization happen current explanations point to a variety of conditions under which states have made the free market policy changes driving international economic integration since the 1980s such accounts disagree however about the key actors involved this article provides a reconciliation showing how two different combinations of actors and two different political economic pathways have led to globalization in recent decades in developed countries mobilization by business has been central elsewhere technocrats both constrained and empowered by international finance have pursued globalization more independently of business in both contexts economists technical authority has helped legitimate liberalization despite the limited diffusion of their ideas the article validates and elaborates this model using a comparative historical study of how the united states canada and mexico proposed negotiated and ratified agreements for free trade in north america

exchange rate volatility and intervention implications of the theory of optimum currency areas we show that variables pointed to by the theory of optimum currency areas ocas help to explain patterns of exchange rate variability and intervention across countries but oca considerations affect exchange market pressures and intervention in different ways exchange market pressures mainly reflect asymmetric shocks while intervention largely reflects the variables that oca theory suggests cause countries to value stable exchange rates small size and the extent of trade links intervention and exchange market pressure also vary with the structure of the international monetary system

microenterprise growth and the flypaper effect evidence from a randomized experiment in ghana standard models of investment predict that credit constrained firms should grow rapidly when given additional capital and that how this capital is provided should not affect decisions to invest in the business or consume the capital we randomly gave cash and in kind grants to male and female owned microenterprises in urban ghana for women running subsistence enterprises we find no gain in profits from either treatment for women with larger businesses we strongly reject equality of the cash and in kind grants only in kind grants cause growth in profits suggesting a flypaper effect whereby capital coming directly into the business sticks there but cash does not the results for men also suggest a lower impact of cash but differences between cash and in kind grants are less robust there is suggestive evidence that the difference in the effects of cash and in kind grants is associated more with lack of self control than with external pressure

policy effectiveness in an open multi market economy with risk neutral exchange rate speculation abstract in an open multi market equilibrium model of the business cycle the informational role of a forward exchange market is that the forward rate aggregates individual perceptions of the aggregate state of the economy in the case of risk neutral exchange rate speculation the forward rate perfectly reveals average expectations of current nominal shocks that hit the economy this paper analyzes the informational implications of forward speculation when markets are structurally diverse the two types of structural diversity considered are heterogeneous price elasticities of output demand and supply and asymmetric information between traders in output markets and traders in asset markets in contrast to previous results the paper shows that risk neutral speculation is not in general sufficient to generate a fully revealing rational expectations equilibrium in which monetary policy is ineffective

aggregate information and the role of monetary policy in an open economy a model of a small open economy in which agents trade in local goods markets and an economy wide asset market is developed purchasing power parity is assumed to hold at the aggregate level however because of local deviations from purchasing power parity agents possess differential information using this framework it is shown that when the exchange rate is flexible monetary policy can influence the distribution of real output by altering the information content of the exchange rate however when monetary policy is committed to fixing the exchange rate by a feedback rule the distribution of real output is independent of the particular exchange rate rule chosen the stability of real output under the two regimes is compared and it is demonstrated that regardless of the stability of domestic monetary policy a flexible exchange rate regime is superior in this respect possible qualifications and extensions of these results are also discussed

international transmission of anticipated inflation under alternative exchange rate regimes this paper studies the international transmission of anticipated inflation a two country two good two currency cash in advance model is used to examine analytically and numerically the consequences of changes in a country s inflation rate domestic monetary policy influences real activity at home through an inflation tax channel these real effects are transmitted to the foreign country via fluctuations in the real exchange rate under a flexible nominal exchange rate inflation is a beggar thy neighbor policy under a fixed nominal exchange rate each country suffers a welfare loss when one country inflates the quantitative results are fairly insensitive to variations in the cash credit mix used to finance investment expenditures 2001 elsevier science ltd all rights reserved

women empowerment and economic development women empowerment and economic development are closely related in one direction development alone can play a major role in driving down inequality between men and women in the other direction empowering women may benefit development does this imply that pushing just one of these two levers would set a virtuous circle in motion this paper reviews the literature on both sides of the empowerment development nexus and argues that the interrelationships are probably too weak to be self sustaining and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women

the information content of the exchange rate and the stability of real output under alternative exchange rate regimes abstract when the exchange rate is flexible and thus responds to market forces it provides agents with useful information while when it is fixed by a feedback rule it does not the implications of this asymmetry for the stability of real output under the two regimes is discussed it is shown that whenever shocks are predominantly of one variety or when domestic monetary shocks accompanied by one real shock a flexible exchange rate does a better job of stabilizing real output than does a fixed exchange rate these results undermine arguments favoring fixed exchange rates because they discipline monetary policy in addition it is demonstrated that managed floating rules and exchange rate feedback rules are irrelevant for the distribution of real output

corporatism trade liberalization and sectoral responses the case of venezuela 1989 99 abstract the venezuelan manufacturing sector unlike agriculture cooperated with state s efforts to liberalize trade in the 1990s despite the economic costs it absorbed and the political opportunities to sabotage the reforms this paper offers two explanations for this which modify and conciliate traditional interest based and corporatist theories of state society relations high levels of sectoral autonomy from the bureaucracy and political parties and hence congress together with low levels of involvement in profit making on the part of the associations representing the sector encourage sectoral cooperation with costly and risky state policies in addition traditional corporatist instruments used by states inducements and constraints hurt rather than enhance state sector cooperation

free trade agreements for better or worse this paper cites reasons why regional free trade agreements fta s may be better than previously recognized when they are formed or expand as in nafta and why they may be worse when they multiply as is now common just about everywhere else if this argument stands it implies a fundamental reevaluation of fta s and their design

the impact of ideas on trade policy the origins of u s agricultural and manufacturing policies since the close of world war ii the united states has supported contradictory trade policies in manufacturing the united states has fostered a liberal trade regime spurning government involvement in market transactions in agriculture it has sanctioned policies of import restrictions export subsidies and import fees this variation is rooted in decisions that were made in the 1930s and institutionalized in the 1940s in the wake of the great depression policymakers concluded that state intervention helped agriculture and hurt industry this article argues that the choice of government policy and its appropriateness to the economic problems faced by each sector reflect the accepted knowledge at the time neither liberalization nor subsidization was inevitable both were economically viable options however central decision makers made choices that were often based on inaccurate beliefs about the utility of different policy options

the demand for international reserves and exchange rate adjustments thecase of ldcs 1964 1972 in this paper the relationship between the demand for international reserves and exchange rate adjustments is empirically investigated for agroup of ldc s it is shown that countries that have maintained a fixed exchange rate for a long period of time have a different demand function than countries that have occasionally used exchange rate adjustments for correcting payments imbalances the dynamics of the adjustment for both groupsof countries are also analyzed the results show that while both groups tend to eliminate reserve disequilibria fast those countries that have maintained a fixed rate tend to do it more slowly than countries that have occasionally devalued their currency it is also shown that the year prior to a devaluation international reserves have been on average 30 below their short run desired level these results are important since they indicate that not all ldc s should be aggregated for prediction purposes the results also have implications for the analysis of the adequacy of international reserves in less developed countries this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract wa this abstract was borrowed from another version of this item

why free trade losers support free trade industrialists and the surprising politics of trade reform in brazil the rush to free trade that began in latin america in the 1980s remains inadequately explained among several puzzles connected with this shift the degree of support for free trade among industrialists especially stands out this article argues that the inability to account for industrialists behavior lies in political economy s tendency to derive preferences from market position instead the author argues that contextual factors shape preferences and behavior he makes the argument by examining brazilian industrialists a least likely group to endorse the policy shift the author provides evidence that brazilian industrialists supported commercial liberalization despite real distributive consequences factors that help explain support include the effects of economic crisis bundling of free trade with other desirable policies the prevalence of adjustment options and the absence of a distinct class of losers the author relies on survey evidence business rankings and documentary evidence to mak

the comparative politics of labor initiated reforms swedish cases of success and failure this article explores the reasons why some reform initiatives launched by the swedish labor movement have succeeded and others have failed it presents four case studies two success stories the pension reform of 1959 and the industrial democracy reforms of the 1970s and two failures inheritance taxation in the 1920s and 1940s and wage earner funds in the 1970s the article casts these case studies in an analytical framework that emphasizes three variables to the extent that they challenge the interests of capital labor s reform initiatives are likely to precipitate a powerful countermobilization but the politics of reformism are also shaped by the extent to which labor s initiatives embody a universalistic conception of social justice and or appeal to the material interests of swing voters

bridging the gender gap identifying what is holding self employed women back in ghana rwanda tanzania and the republic of congo quantile decomposition methods are used to study the determinants of the gender gap in self employment earnings across the earnings distribution of four sub saharan countries the republic of congo

the short run relation between growth and inflation in latin america reply sebastian edwards uses a new unexpected money variable based on the addition of the contemporaneous fiscal deficit to my autoregressive money growth equations to argue that 1 in brazil and chile there is no significant relationship between unexpected money growth and output growth 2 unexpected money growth has different estimated effects on output in colombia peru and mexico and these effects substantially exceed those estimated in brazil and chile and 3 thus my 10 percent rule for the effect of unexpected money growth on output growth does not hold in addition edwards incorporates the terms of trade in his output equations and finds they are important in the case of chile and mexico finally edwards takes issue with my use of lagged inflation to explain output edwards and i use somewhat different data not only in terms of sources but also edwards often uses m2 rather than ml in reporting his best results however edwards and my basic results are broadly similar compare his table 1 and my original tables 1 and 4 this is encouraging and in general makes it seem not worth quibbling over the differences in data however there is one difference which affects the results that i will discuss later the inclusion of the fiscal deficit in the money growth equation is a key difference in our work as i pointed out in my earlier article fiscal and monetary policy often are closely related in latin america thus it is not surprising that edwards finds the deficit divided by lagged money is a significant factor in explaining money growth however the point is not to explain money growth but to estimate a relationship which the public could have been using to predict how much money and thus nominal aggregate demand has grown since the last observation on the money stock 2 it strains credulity to assume that in latin america the budget deficit could be used by the public to estimate money growth contemporaneously data on the cash deficit usually are available publicly only with a long lag moreover many alternative versions of a deficit involving creative accounting methods are reported for example for many years in colombia the reported deficit which is available with about a one quarter lag treated both the unspent portion of the budget and the accounting profits from the revaluation of the local currency value of exchange reserves as income procedures which caused great confusion inside as well as outside the government despite such problems the cash deficit still might be useful as a monetary growth predictor for example it may be correlated with some other easily available contemporaneous indicator of money growth however its usefulness can best be judged from a comparison of the results when the deficit is used only as the money growth predictor to determine unexpected money a constrained equation with those obtained when it is used as an additional independent variable an unconstrained equation a test robert barro has suggested in another context world bank the views and interpretations expressed in this article are my own and should not be attributed to the world bank its affiliated organizations or to any individual acting in their behalf edwards also uses the seemingly unrelated regression technique to take into account possible interrelationships in the error terms across countries judging from the reported t statistics this procedure did not improve the fits greatly 2surprisingly the deficit is not significant in explaining domestic credit in mexico this result and the estimated negative relationship between edwards domestic credit series and output suggest a problem in the domestic credit variable

bourgeois revolutions the policy consequences of resurgent conservatism much of the literature on reform politics has focused on social democratic governments this article reexamines the dynamics of reform by concentrating on conservative governments in four advanced

the cross industry effects of unanticipated money in an equilibrium business cycle model abstract this paper examines the differential real effects of monetary policy across industries the purpose is to test whether these differential effects can be accounted for by an incomplete information rational expectations model of the business cycle in the lucas barro tradition such a model implies a positive relation across markets between the variability of market specific shocks and the reduced form output effect of a monetary shock this proposition is tested using industry level post war u s data and support is found the exploration also uncovers other interesting industry level and aggregate results

economic crisis and policy choice the politics of adjustment in the third world the acute economic pressures of the 1980s have forced virtually all of latin america and africa and some countries in asia into painful austerity programs and difficult economic reforms scholars have intensively analyzed the economics of this situation but they have given much less attention to the political forces involved in this volume a number of eminent contributors analyze the politics of adjustment in thirteen countries and nineteen governments drawing comparisons not only across the full set of cases but also within clusters selected to clarify specific issues why do some governments respond promptly to signs of economic trouble while others muddle indecisively for years why do some confine their response to temporary macroeconomic measures while others adopt broader even sweeping programs of reform what leads some countries to experiment with heterodox approaches while most however reluctantly pursue orthodox courses why confronted with intense political protest have some governments persisted while others have altered or abandoned course the answers to these questions are political not economic and they are examined here by thomas m callaghy stephan haggard miles kahler robert r kauman joan m nelson and barbara stallings

the politics of structural change swedish social democracy and thatcherism in comparative perspective the 1930s and the 1980s were decades of significant political economic change in the capitalist democracies depression and the rise of the industrial working class created opportunities for the establishment of social democracy in the 1930s stagflation and the decline of the working class made possible waves of radical rightist reform however this article suggests that only governments that do not have to concentrate myopically on the exigencies of winning the next election have the political space to undertake structural changes the benefits of which may only be manifest in the medium term in turn successful reforms are likely to entail changes in underlying social structural conditions such as the strengthening or weakening of organized labor movements that both expand the electoral constituencies of the government s partisanpreferred policies and improve their macroeconomic efficacy these propositions are examined with respect to the construction social democracy in sweden in the 1930s and the

real exchange rate effects of monetary shocks under fixed and flexible exchange rates abstract we analyze how the real exchange rate effects of monetary and real shocks depend on the exchange rate regime within a two country rational expectations model with confusion about money and real shocks the model demonstrates that the real exchange rate effect of unanticipated monetary shocks is negatively related to the variance of the domestically created money supply growth and that the effects of increasing domestic money variance on the real exchange rate are less under a fixed rate regime than under a flexible rate regime

public opinion and market reforms the limits of economic voting the broadly held view that promarket reforms are good for most people is in conflict with the equally broadly held view that in democracies reforms will generate widespread resistance resistance is expected because reforms typically produce economic downturns at least over the short term under normal circumstances we expect citizens to withdraw support from governments during periods of economic decline if citizens withdraw support then governments worried about the next election may abandon reforms but our expectations should be different of new democracies pursuing promarket reforms citizens may believe governments when they claim that things have to get worse before they get better or that economic stagnation is the fault of the past model research in poland peru and mexico reported in this special issue supports these expectations hence under democracy there is more scope for support of painful reforms than frequently acknowledged

timing is everything elections and trade liberalization in the postcommunist world in the wake of the soviet bloc s collapse various postcommunist countries rushed to gain greater access to foreign markets many of them have made substantial progress in liberalizing commerce but the movement toward free trade has been by no means universal one prominent view is that the establishment of democratic institutions has stimulated economic reform in thepostcommunist world the authors conduct one of the first studies on this topic and find that democracies are indeed more likely to liberalize trade than nondemocracies they also find that the electoral calendar has a potent influence on the timing of commercial reform in postcommunist democracies controlling for a range of factors politicians are most likely to reduce trade barriers immediately after voters go to the polls trade liberalization is much less likely to occur at other points in a democracy s electoral calendar and elections have no effect on commercial reform in nondemocracies

regime dynamics the rise and fall of international regimes the dynamics of international regimes are treated as social institutions how and why do regimes arise from the interactions of individual actors over time three developmental sequences are identified and the resultant regimes are described as spontaneous orders negotiated orders and imposed orders how do regimes change once they have become established in specific social settings three major types of pressure for regime change arise from internal contradictions shifts in underlying power structures and exogenous forces the next task in studying the dynamics of international regimes is to seek a more sophisticated understanding of the factors determining the incidence of these developmental sequences and pressures for change

information aggregation and policy the function of monetary policy to alter the informational content of money price signals is examined in a model where traders can observe an economy wide financial signal and a local commodity price under a passive policy money demand disturbances which are not directly observable are shown to be confused with real productivity shocks and thereby preclude prices from fully reflecting all information even when the policy authority has no informational advantage prospective money growth feedback rules can improve the structure of available information applications of the rational expectations hypothesis to monetary theory have focused on the informational aspects of money price signals a key element of the models of lucas 1972 1975 barro 1976 and sargent and wallace 1975 is that agents have limited powers of information acquisition and use prices as imperfect summaries from the rest of the world those works have suggested that monetary policy can affect the informational content of observed price signals and thereby affect real variables in weiss 1980a it was shown systematic money growth feedback rules can contribute to economic efficiency when the money demands of one group are based on factors not directly observed by all in this context monetary policy can alter the information content transmitted from the informed to the uninformed through observation of nominal price signals a limitation of these analyses is the omission of economy wide financial signals clearly stock and bond prices are observed accurately and costlessly empirically there are strong comovements between financial signals and economic activity traditional keynesian theory argues that financial signals exert an important influence on output by affecting the demand for new capital goods understanding the informational role of such signals is crucial to any theory which explains fluctuations as arising from incomplete information the present analysis investigates the structure of available information with its implications for real variables in a model where agents trade on both an economy wide capital market and a local commodity market the model has positive implications for the comovements of money demand disturbances aggregate investment expected and realized returns as well as normative implications for the conduct of policy the structure of exogenous information in the model differs from that of my earlier paper rather than assuming two types of traders informed and uninformed the model considers traders to have symmetric although noisy exogenous private information in this framework the economy wide market both aggregates and transmits individuals information about an aggregate structural variable this modification is both analytically convenient and illustrates how noise in the price system alters the importance of public relative to private sources of information the idea that prices aggregate individual information was first formalized in grossman 1976 in that paper a non monetary model of a speculative market was developed in which the price system conveyed all relevant information so as to yield an efficient allocation however this feature was also shown to break down if prices are influenced by

the state and industrial strategy abstract the debate about the role of the state in promoting industrial growth in developing economies is reviewed we begin with the ideas of the early development economists of the 1950s and 1960s then take up two waves of neoclassical criticism respectively emphasizing the primacy of the market and the lack of autonomy and competence of the developmentalist state and sketch the elements of a countercritique the fact that all successfully developing economies apply industrial strategies incorporating institutional change is emphasized and boundary conditions and lessons from experience which delimit sensible strategic choices are pointed out

returns to capital in microenterprises evidence from a field experiment small and informal firms account for a large share of employment in developing countries the rapid expansion of microfinance services is based on the belief that these firms have productive investment opportunities and can enjoy high returns to capital if given the opportunity however measuring the return to capital is complicated by unobserved factors such as entrepreneurial ability and demand shocks which are likely to be correlated with capital stock the authors use a randomized experiment to overcome this problem and to measure the return to capital for the average microenterprise in their sample regardless of whether they apply for credit they accomplish this by providing cash and equipment grants to small firms in sri lanka and measuring the increase in profits arising from this exogenous positive shock to capital stock after controlling for possible spillover effects the authors find the average real return to capital to be 5 7 percent a month substantially higher than the market interest rate they then examine the heterogeneity of treatment effects to explore whether missing credit markets or missing insurance markets are the most likely cause of the high returns returns are found to vary with entrepreneurial ability and with measures of other sources of cash within the household but not to vary with risk aversion or uncertainty

beyond the policy frontier canada mexico and the ideological origins of nafta why are certain foreign policy options considered taboo or simply kept off the agenda as necessarily unthinkable or self destructive and under what conditions can governments transcend such policy frontiers this article seeks to answer these questions by examining the circumstances that brought about canada s and mexico s entry into the north american free trade agreement nafta a move that constituted a surprising reversal of historic prohibitions on formalizing bilateral economic integration that had long been entrenched in these two nations foreign policies policy frontiers develop as certain elements of the national interest sovereignty security and identity become equated with the legitimation of state elites when these leaders defend the policy frontier ostensibly to defend the nation they are also defending their own political power these barriers are constructed in a path dependent fashion through a critical juncture that first establishes the frontier and then are maintained over time by institutional and ideological mechanisms of reproduction for the frontier to be transcended a critical juncture combining an exogenous shock with an internal legitimacy crisis must undermine and then reconfigure both mechanisms of reproduction the origins of nafta in the canadian and mexican embrace of the once forbidden bilateral free trade option in 1985 and 1990 respectively illustrate this dynamic while the individual cases offer variations on the policy frontier model that can provide insights into the analysis of other cases of historically resisted foreign policy change

real exchange rate effects of monetary disturbances under different degrees of exchange rate flexibility an empirical analysis abstract we examine the effects of monetary policy on the real exchange rate in a cross country analysis we find that the variability of money shocks and the degree of informativeness of the exchange rate are important determinants of the magnitude of the real exchange rate effects of domestic money shocks our results are consistent with previous cross country evidence on the output effects of money shocks but also highlight the role of the exchange rate regime

cross regime evidence of macroeconomic rationality rational expectations macromodels predict that the short run effects of monetary shocks on real output x should be negatively related across policy regimes to the variability of such shocks this paper presents cross regime tests of this and related propositions based on a sample of 47 countries the within regime estimates reveal a consistent pattern of positive short run real output effects with neutrality of money holding in the long run the cross regime tests show that x is negatively related to the variance of monetary shocks positively related to the variance of real output shocks negatively related to the variance of velocity shocks and unrelated to either the mean or variance of anticipated money growth

limiting the unintended consequences of institutional change students of institutional change pay insufficient attention to the conditions under which institutional reform produces unintended procedural and policy consequences the authors contend that the b

power politics and the free trade bandwagon what explains the world s newfound enthusiasm for free trade are government leaders integrating their economies to achieve pareto improving gains or is it because a critical mass of pro free trade governments has acquired the capacity to go it alone leaving would be protectionists with a choice between a bad option opening their markets at very high political cost and an even worse alternative incurring the still higher political costs of exclusion this article suggests that in practice mutual gains seeking motivations are frequently dominated by defensive ones the north american free trade agreement is a case in point without in any way being bullied or coerced the mexican and canadian governments agreed to take part in a multilateral arrangement that the evidence suggests neither much liked although hard to reconcile with the political economy literature s positive sum model of international cooperation this finding is consistent with the broader power politics model introduced here

monetary policy and the information content of prices rational expectations and cleared markets lead to the proposition that feedback monetary policy is irrelevant to real activity as in the analyses of sargent and wallace however if agents are differentially informed and have access to a common price then prospective monetary policy actions future feedback to imperfectly known current circumstances can alter real activity by changing the information content of prices

the limits of trade policy reform in developing countries trade reform is now raising some new issues this paper deals with three sets of questions first how can trade reform be sustained can governments convince business labor or consumers that trade reform will be lasting so as to forestall possible adverse reactions that would jeopardize the sustainability of the reform second what role should trade reform play when it is implemented in the context of macroeconomic instability are there potential conflicts between the standard desiderata for trade reform and the requirements of macro stability finally should we be worried about the consequences of trade reform in the imperfectly competitive market environments that characterize the developing economies

explaining choice of development strategies suggestions from mexico 1970 1982 economic development requires choices among a broad spectrum of alternative strategies and as the recent experience of mexico suggests those choices are not easy a complex politics is involved in the transition from one development strategy to another the international political economy and domestic social coalitions both influence the costs and benefits associated with various development policies they rule out some choices but numerous options still remain how can one explain actual outcomes observers may significantly increase their ability to explain outcomes by incorporating a statist component into their analyses within the very broad parameters set by the international political economy the state influences but does not determine the creation and the demands of the social coalition itself in addition the state may use policy instruments and advantages from the domestic and international arenas to implement policy even in the face of domestic opposition the structure of the domestic political economy determines the space within which the statist perspective contributes to explanatory power eventually it is in a historically based ideology that the chief explanation for the state s choice of policy and the construction of particular domestic coalitions is to be found

does anticipated monetary policy matter an econometric investigation a heated debate has arisen over the policy ineffectiveness proposition associate with the work of lucas sargent and wallace it postulates that anticipated aggregate demand policy will have no effect on business cycle fluctuations so that one deterministic feedback policy rule is as good as any other from the point of view of stabilizing the economy this paper develops a methodology for empirically analyzing rational expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

energy shocks crises and the policy process a review of theory and application what motivates changes in energy policy typically the process begins with a notable exogenous event a shock often the shock leads to what is perceived to be a crisis this review essay surveys theories of crisis policymaking from the social science literature and considers their application to changes in energy policy two cases one from the u s the other from germany are examined in more detail from the standpoint of the theories discussed suggestions are made for improving energy policy analysis in the future

human and financial capital for microenterprise development evidence from a field and lab experiment microenterprises constitute an important source of employment and developing such enterprises is a key policy concern in most countries but what is the most efficient tool for microenterprise development we study this question in a developing country context tanzania where microenterprises are the source of employment for more than half of the labor force and we report from a field experiment that jointly investigated the importance of a human capital intervention business training and a financial capital intervention business grant using data from three survey rounds a lab experiment and administrative records of the microfinance institution we present evidence on business performance management practices happiness business knowledge and noncognitive abilities our study demonstrates strong effects of the combination of the two interventions on male entrepreneurs while the effects on female entrepreneurs are much more muted the results suggest that long term finance is an important constraint for microfinance entrepreneurs but that business training is essential to transform financial capital into productive investments our study also points to the need for more comprehensive measures to promote the businesses of female entrepreneurs data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1933 this paper was accepted by john list behavioral economics

opening the window for reform mandates crises and extraordinary policy making under what conditions are governments within established democratic political systems willing and able to launch ambitious reform programs in other words what conjunctural factors generally serve to open the window for reform the central argument of this article is that extraordinary policy making generally becomes possible only when a macro window is opened by a government s achievement of an impressive mandate and or by the onset of a severe socioeconomic crisis the mandate reform hypothesis is tested with data from britain france and the united states then the significance of both mandates and crises is demonstrated through an analysis of eight reform government case studies ranging from the new deal to thatcher s britain

self employment in the developing world summary this paper analyzes heterogeneity among the self employed in 74 developing countries representing two thirds of the population of the developing world after profiling how worker characteristics vary by employment status it classifies self employed workers outside agriculture as successful or unsuccessful entrepreneurs based on two measures of success whether the worker is an employer and whether the worker resides in a non poor household four main findings emerge first jobs exhibit a clear pecking order with household income and worker education highest for employers followed by wage and salaried employees non agricultural own account workers non agricultural unpaid family workers and finally agricultural workers second a substantial minority of own account workers reside in non poor households suggesting that their profits are often a secondary source of household income third as per capita income increases across countries the structure of employment shifts rapidly first out of agriculture into unsuccessful non agricultural self employment and then mainly into non agricultural wage employment finally roughly one third of the unsuccessful entrepreneurs share similar characteristics with their successful counterparts suggesting they have the potential to be successful but face constraints to growth the authors conclude that although interventions such as access to credit can benefit a substantial portion of the self employed effectively targeting the minority of self employed with higher growth potential is important particularly in low income contexts the results also highlight the potential benefits of policies that facilitate shifts in the nature of work first from agricultural labor into non agricultural self employment and then into wage and salaried jobs

trade liberalization and economic stabilization in mexico lessons of experience abstract this article reviews the mexican trade liberalization of the past decade special attention is paid to the circumstances by which it was triggered to the macroeconomic environment and to the design of the process particularly the speed and extent of the trade reforms it is argued that although far reaching liberalization measures were carried out in a relatively short period of time the exposure of domestic industry to foreign competition was delayed considerably as a result of the exchange rate management during the process

the origins and sustainability of mexico s free trade policy standard explanations for trade liberalization do not fully account for mexico s turn toward free trade during the 1980s to a large extent the initiative came from within the country even many mexican entrepreneurs whose sectors seem likely to lose from increased competition now support trade liberalization four conditions lowered the political cost benefit ratio for policymakers and entrepreneurs first mexico s leaders dispersed implementation into several financial ministries thereby better insulating this policy from lobbying by the likely losers second potential losers were less well informed than were likely winners third under these conditions the liberal ideological biases of mexican elite policymakers and investors flourished prompting them to accept a higher political cost than would have been tolerated otherwise finally many mexicans came to perceive trade liberalization as a necessary tool in the fight against inflation each of these hypotheses however also flags a possible threat to the policy s future political survival