Information Technology, Globalization, and Growth: Role for Scale Economies, Terms of Trade, and Variety

This paper considers three channels through which globalization of information technology products may affect economic growth: Terms of trade in IT products in international trade, economies of scale in IT production and trade, and variety in IT consumption and trade. The empirical question relevant for policy makers is, what is the relative magnitudes of these channels. To catalyze economic growth and enhance performance, should policymakers promote IT exports to exploit economies of scale in production? Or, should they promote imports and domestic consumption of a variety of IT products to gain from falling IT prices, get more variety, and through these channels support faster TFP? Using a sample of 36 countries for 2000-2007, the findings are: (1) Importers of IT gain relatively more than exporters, on average, from the declining prices of IT coming through international trade. (2) Despite falling IT prices, most exporters enjoy positive economy-wide benefits of trading in IT because of economies of scale in production. (3) The extent of variety of traded IT products is related to the deviation of a country’s experience from that of the average country in its peer group. Controlling for trade patterns, the countries that are below average (in terms of economy-wide benefits from trade in IT) are also those that import and export the least variety of IT products. This suggests that gains to variety in consumption outweigh gains from economies of scale in production.

Protection and Retaliation: Changing the "Rules of the Game"

macroeconomics, trade protection, trade policy

Breaking Up is Hard to Do: Global Co-Dependency, Collective Action, and the Challenges of Global Adjustment

Leistungsbilanz, Zahlungsbilanzungleichgewicht, Vereinigte Staaten, Current account balance, Balance of payments imbalances, United States

Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth

Businesses throughout the US economy continue to transform even after the technology boom has faded. The key sources of this continuing transformation are investment in the information technology (IT) package (hardware, software, and business-service applications) and reorientation of business activities and processes to use both information and technology effectively.

This is Bangalore calling: hang up or speed dial? what technology-enabled international trade in services means for the U.S. economy and workforce

The U.S. service sector is in the midst of a transformation similar to the one undergone by the manufacturing sector. Some jobs are moving to other countries, some are disappearing, some are being born. But the service-sector transformation is likely to be different. Technological advances and globalization are making it possible, but these factors reinforce each other in such a way that the gains to the U.S. economy are likely to be greater than with manufacturing, and the transition costs more widespread. Thus, superior and better coordinated domestic and international policies are needed to address the challenges and opportunities.Service industries

Electronic Commerce in Developing Countries

Electronic commerce and its related activities over the internet can be the engines that improve domestic economic well-being through liberalization of domestic services, more rapid integration into globalization of production, and leap-frogging of available technology. Electronic commerce integrates the domestic and global markets from its very inception. Negotiating on trade issues related to electronic commerce will demand self-inspection of key domestic policies, particularly in telecommunications, financial services, and distribution and delivery. Technical aspects of electronic commerce, its complexity and the characteristic of network externalities should change the way that developing countries approach the external negotiating process to depend more on cooperative effort through their regional forums (APEC, FTAA). Second, since electronic commerce is characterized by “network externalities,” developing countries should take advantage of the technical leadership coming out of the private sector in the most advanced countries (and their own private sector, even if nascent) and “draft” in behind. E-commerce is not a service, nor a good, but something that is comprised of both. In the context of WTO commitments, embracing this idea could lead to a liberalizing bias in favor of electronic delivery of goods and services as compared to delivery by a scheduled mode. Rather than view this outcome with alarm, developing countries should encourage it as a positive force that furthers the development both of electronic commerce, as well as engenders deeper liberalization and deregulation throughout the economy.

Transatlantic Issues in Electronic Commerce

The global and dynamic e-commerce marketplace will increasingly impact the nature of national and international economic and government relations. This paper highlights three areas where the United States and European Union (EU) governments differ in their approaches as to how best to serve their domestic constituencies: treatment of trade flows, approach to tax regimes, manner of protecting personal data. Because the Internet marketplace is global but policy jurisdictions remain local, policy conflicts can develop. Policymakers on both sides need to harness technology and promote incentives for the private sector to help solve problems caused by the jurisdictional overlap. In addition to cross-border jurisdictional overlap, problems within a country can develop from issue convergence and policy overlap. That is, because the e-commerce marketplace is so integrated, the policy toward handling one issue, even within the national context, has implications for the policy set that is available to policymakers on other issues. Therefore, policies within a country must be more carefully meshed with each other with an eye toward consistency in the face of the forces of electronic commerce.transatlantic issues, electronic commerce

Globalization and Productivity in the United States and Germany

This paper investigates the impact of globalization on productivity growth and the procyclicality of productivity growth in manufacturing industries in the United States and Germany. For U.S. industries, the analysis suggests that changes in international demand affects productivity growth differently from changes in exposure to international competition. An increase in foreign demand for U.S. exports raises trend productivity growth, but to a lesser degree than does a similar demand shock from domestic buyers. On the other hand, whereas an increase in U.S. imports reduces trend productivity growth of U.S. industries, a loss of market share to imports is associated with gains to productivity growth. For Germany, neither international demand shocks nor exposure to international competition seem to be associated with productivity growth rates, perhaps because German industries experienced a smaller increase in exposure to international competition over the time period. Comparing the U.S. and German results suggests that "going global" may affect productivity growth rates more than simply "being global". As for the procyclical characteristics of productivity growth, the U.S. and German measures evidence different procyclical behavior. For many industries, both U.S. and German labor productivity growth rates exhibit some degree of procyclicality. For German industries, this procyclicality of productivity growth disappears with broader measures of productivity growth that include utilization of capital and intermediates inputs. For U.S. industries, the degree of procyclicality increases when productivity growth is measured on these broader bases. Moreover, in the United States, procyclicality appears to be accentuated by export demand growth and dampened by import demand growth.

Commentary : the end of large current account deficits : 1970-2002 : are there lessons for the United States?

Greenspan, Alan ; Interest rates ; Deficit financing

The Financial Structure of Startup Firms: The Role of Assets, Information, and Entrepreneur Characteristics

Using the Kauffman Firm Survey, we examine how characteristics of a startup's assets, information about the startup, and entrepreneur attributes relate to financial structure at inception. Startups with more physical assets or those where the entrepreneurs have other similar businesses are more likely to use external debt in the financial structure since these assets have a high liquidation value. Startups with human capital embodied in the entrepreneur or intellectual property assets have a lower probability of using debt, consistent with the higher asset specificity and lower collateral value of these assets. Startups characterized as small, unincorporated, solo, first-time, or home-office-based are more likely to be financed by self, family and friends, and importantly through credit cards, as these have both highly specific assets and information opacity. More educated founders and non-African American founders are more likely to be financed by external sources. Controlling for other attributes of the startup, the financial structure of women-owned startups does not differ from that of other startups. Hi-tech startups' financial structure differs significantly from that of startups in other business sectors.Capital Structure, Asset Specificity, Information Opacity, Startup Financing