From financial crisis to stagnation: the destruction of shared prosperity and the role of economics

501 Pages·2012·4.597 MB·English

by  Palley, Thomas I

AN INTRODUCTION TO INTERNATIONAL ECONOMICS
NewPerspectivesontheWorldEconomy
Thisbookisdesignedforaone-semesterortwo-semestercourseininternationaleconomics,
primarily targeting non-economics majors and programs in business, international rela-
tions, public policy, and development studies. It has been written to make international
economics accessible to wide student and professional audiences. The book assumes a
minimal background in microeconomics and mathematics and goes beyond the usual
trade–finance dichotomy to give equal treatment to four “windows” on the world econ-
omy:internationaltrade,internationalproduction,internationalfinance,andinternational
development. It takes a practitioner point of view rather than a standard academic view,
introducingstudentstothematerialtheyneedtobecomeeffectiveanalystsininternational
economicpolicy.Thewebsiteforthetextisfoundathttp://iie.gmu.edu.
Kenneth A. Reinert is Professor of Public Policy in the School of Public Policy at George
MasonUniversity,wherehewonaDistinguishedTeachingAward.Heheldpastpositions
atKalamazooCollege,WellesleyCollege,andtheU.S.InternationalTradeCommission.He
haspublishedmorethan60articlesandbookchaptersintheareasoftrade,development,
andenvironmentalpolicy.Inadditiontothefirstreleaseofthisbook,WindowsontheWorld
Economy: An Introduction to International Economics, his books include The Princeton
EncyclopediaoftheWorldEconomy(co-editedwithRamkishenRajan,2009),Globalization
forDevelopment(co-authoredwithIanGoldin,2006;revisededition,2007),andApplied
Methods for Trade Policy Analysis (co-edited with Joseph Francois; Cambridge University
Press,1998).

AN INTRODUCTION
TO INTERNATIONAL
ECONOMICS
New Perspectives on
the World Economy
KENNETH A. REINERT
SchoolofPublicPolicy
GeorgeMasonUniversity
cambridgeuniversitypress
Cambridge,NewYork,Melbourne,Madrid,CapeTown,
Singapore,Sa˜oPaulo,Delhi,Tokyo,MexicoCity
CambridgeUniversityPress
32AvenueoftheAmericas,NewYork,NY10013-2473,USA
www.cambridge.org
Informationonthistitle:www.cambridge.org/9780521177108
(cid:2)C KennethA.Reinert2012
Thispublicationisincopyright.Subjecttostatutoryexception
andtotheprovisionsofrelevantcollectivelicensingagreements,
noreproductionofanypartmaytakeplacewithoutthewritten
permissionofCambridgeUniversityPress.
Firstpublished2012
PrintedintheUnitedStatesofAmerica
AcatalogrecordforthispublicationisavailablefromtheBritishLibrary.
LibraryofCongressCataloginginPublicationdata
Reinert,KennethA.
Anintroductiontointernationaleconomics:newperspectivesontheworldeconomy/
KennethA.Reinert.–2nded.
p. cm.
Rev.ed.of:Windowsontheworldeconomy/KennethA.Reinert.2005.
Includesbibliographicalreferencesandindex.
ISBN978-1-107-00357-6(hardback)–ISBN978-0-521-17710-8(paperback)
1.Internationaleconomicrelations. 2.Internationaltrade. 3.Internationalfinance.
I.Reinert,KennethA.Windowsontheworldeconomy. II.Title.
HF1411.R4198 2012
337–dc22 2011015937
ISBN978-1-107-00357-6Hardback
ISBN978-0-521-17710-8Paperback
Additionalresourcesforthispublicationathttp://iie.gmu.edu
CambridgeUniversityPresshasnoresponsibilityforthepersistenceoraccuracyofURLsforexternalor
third-partyInternetwebsitesreferredtointhispublicationanddoesnotguaranteethatanycontentonsuch
websitesis,orwillremain,accurateorappropriate.
ToGelaye,Oda,andAyantu
Summary Contents
Preface pagexvii
Acknowledgments xix
Acronyms xxi
Symbols xxvii
1 WindowsontheWorldEconomy 1
parti. internationaltrade
2 AbsoluteAdvantage 19
3 ComparativeAdvantage 33
4 Intra-IndustryTrade 45
5 ThePoliticalEconomyofTrade 57
6 TradePolicyAnalysis 75
7 TheWorldTradeOrganization 93
8 PreferentialTradeAgreements 117
partii. internationalproduction
9 ForeignMarketEntryandInternationalProduction 141
10 ForeignDirectInvestmentandIntra-FirmTrade 159
11 ManagingInternationalProduction 173
12 Migration 189
partiii. internationalfinance
13 AccountingFrameworks 207
14 ExchangeRatesandPurchasingPowerParity 227
15 FlexibleExchangeRates 245
16 FixedExchangeRates 265
vii
viii SUMMARYCONTENTS
17 TheInternationalMonetaryFund 283
18 CrisesandResponses 307
19 MonetaryUnions 331
partiv. internationaldevelopment
20 DevelopmentConcepts 353
21 GrowthandDevelopment 371
22 InternationalProductionandDevelopment 391
23 TheWorldBank 413
24 StructuralChangeandAdjustment 435
Glossary 455
Index 467
Detailed Contents
Preface pagexvii
Acknowledgments xix
Acronyms xxi
Symbols xxvii
1 WindowsontheWorldEconomy 1
InternationalTrade 3
InternationalProduction 4
InternationalFinance 6
InternationalDevelopment 8
ConnectingWindows 9
AnalyticalElements 12
Conclusion 13
ReviewExercises 13
FurtherReadingandWebResources 14
References 14
parti. internationaltrade
2 AbsoluteAdvantage 19
SupplyandDemandinaDomesticMarket 20
AbsoluteAdvantage 21
InternationalTrade 23
GainsfromTrade 26
Limitations 28
Conclusion 29
ReviewExercises 29
FurtherReadingandWebResources 29
Appendix:ConsumerandProducerSurplus 30
References 30
3 ComparativeAdvantage 33
AutarkyandComparativeAdvantage 34
InternationalTrade 37
GainsfromTrade 39
ix
x DETAILEDCONTENTS
Conclusion 41
ReviewExercises 41
FurtherReadingandWebResources 41
Appendix:TheProductionPossibilitiesFrontier 42
References 44
4 Intra-IndustryTrade 45
Intra-IndustryandInter-IndustryTrade 46
GlobalPatternsofIntra-IndustryTrade 48
AnExplanationofIntra-IndustryTrade 51
Conclusion 53
ReviewExercises 53
FurtherReadingandWebResources 54
Appendix:TheGrubel-LloydIndex 54
References 55
5 ThePoliticalEconomyofTrade 57
ApproachestothePoliticalEconomyofTrade 59
ComparativeAdvantageRevisited 60
TradeandFactorsofProduction 61
North-SouthTradeandWages 64
TheRoleofSpecificFactors 67
Conclusion 69
ReviewExercises 69
FurtherReadingandWebResources 70
Appendix:EndogenousProtection 70
References 72
6 TradePolicyAnalysis 75
AbsoluteAdvantageRevisited 76
TradePolicyMeasures 77
ATariff 81
Terms-of-TradeEffects 82
AQuota 83
ComparativeAdvantageModels 85
Conclusion 86
ReviewExercises 87
FurtherReadingandWebResources 87
AppendixA:TheImperfectSubstitutesModel 87
AppendixB:ATariffRateQuota 89
References 91
7 TheWorldTradeOrganization 93
TheGeneralAgreementonTariffsandTrade 94
TheWorldTradeOrganization 97
TradeinGoods 99
TradeinServices 100
DETAILEDCONTENTS xi
IntellectualProperty 102
DisputeSettlement 106
TheEnvironment 108
DohaRound 109
Conclusion 111
ReviewExercises 111
FurtherReadingandWebResources 112
Appendix:WTOMembershipandMultilateralTradeNegotiations 112
References 114
8 PreferentialTradeAgreements 117
PreferentialTradeAgreements 119
TheEconomicEffectsofPreferentialTradeAgreements 122
TheEuropeanUnion 124
TheNorthAmericanFreeTradeAgreement 127
MercosurandtheFTAA 129
ASEANandAFTA 130
RegionalismandMultilateralism 131
Conclusion 133
ReviewExercises 133
FurtherReadingandWebResources 134
Appendix:RulesofThumbinEvaluatingPTAs 134
References 135
partii. internationalproduction
9 ForeignMarketEntryandInternationalProduction 141
ForeignMarketEntry 142
MotivationsforInternationalProduction 146
EntryModeChoice 148
TheRiseofMultinationalEnterprisesandInternationalProduction 150
Conclusion 153
ReviewExercises 154
FurtherReadingandWebResources 155
Appendix:FDIandComparativeAdvantage 155
References 156
10 ForeignDirectInvestmentandIntra-FirmTrade 159
ValueChainsandGlobalProductionNetworks 160
Firm-SpecificAssetsandInternalization 162
Intra-FirmTrade 165
ACostViewofInternalization 167
TyingThingsTogether:TheOLIFramework 168
Conclusion 169
ReviewExercises 170
FurtherReadingandWebResources 170
Appendix:TheGravityModel 170
References 171