Princeton Center for Globalization and Governance Princeton University
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2006 papers

2006-03 Raymond Hicks -- Globalization and Central Bank Independence: A partisan explanation" (added October 2006)
  Abstract - While globalization has led some scholars to suggest that there has been or will be a convergence in economic policy, especially by leftist governments, evidence in favor of the convergence hypothesis is mixed. Studies have focused largely on the instruments of economic policy such as taxation or spending while ignoring institutional mechanisms that leftist government could use to tie their hands and demonstrate credibility to international investors. I argue that as countries become more globalized, leftist governments will be more likely to reform the central bank while conservative governments will be less likely to reform the bank since granting greater independence to the central bank will remove one of their electoral advantages. The findings using generalized estimating equations and logit analysis are consistent with the hypotheses: as a country becomes more exposed to the international economy, leftist governments are more likely to reform the central bank. There is no relationship between reform of the central bank and exposure to the international economy under conservative governments.
2006-02 Gene M. Grossman and Esteban Rossi-Hansberg -- The Rise of Offshoring: It's Not Wine for Cloth Anymore" (added September 2006)
  Abstract - Much ink has been spilt on the subject of offshoring. But, so far, we lack a simple analytic framework for investigating how improvements in communication and information technologies that give rise to increased offshoring affect labor markets, production patterns, prices, and welfare in the participating countries. In this paper, we will describe such a framework that we have developed more formally in Grossman and Rossi-Hansberg (2006). Our simple model of offshoring allows us to decompose the impact on wages of any improvements in the technology for offshoring into three components: a labor-supply effect that is familiar from the broadcasts and writings of Lou Dobbs and others; a relative-price effect that captures the labor-market implications of any movements in relative prices effected by the improved possibilities for offshoring; and a productivity effect that seems to have been largely overlooked in earlier discussions. We show that the productivity effect can dominate the others in a familiar trade environment, so that improved possibilities for offshoring low-skilled jobs actually will raise the wages of domestic workers who perform these types of tasks. By the same token, improved possibilities for offshoring some high-skilled tasks may boost the wage of domestic white-collar workers.
2006-01 Gene M. Grossman and Esteban Rossi-Hansberg -- "Trading Tasks: A Simple Theory of Offshoring" (added September 2006)
 Abstract - For centuries, most international trade involved an exchange of complete goods. But, with recent improvements in transportation and communications technology, it increasingly entails different countries adding value to global supply chains, or what might be called "trade in tasks." We propose a new conceptualization of the global production process that focuses on tradable tasks and use it to study how falling costs of offshoring affect factor prices in the source country. We identify a productivity effect of task trade that benefits the factor whose tasks are more easily moved offshore. In the light of this effect, reductions in the cost of trading tasks can generate shared gains for all domestic factors, in contrast to the distributional conflict that results from reductions in the cost of trading goods in other neoclassical frameworks.

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