THE RENAISSANCE OF CHINA AND INDIA: IMPLICATIONS FOR THE ADVANCED ECONOMIES

Using simple convergence equations, this paper projects that by mid-century per capita incomes in China and India will on average be about half the US level. In terms of total production, both countries should overtake the USA by 2050. Such developments will affect the advanced economies through several channels. The terms of trade of these economies will deteriorate as labour intensive imports, such as clothing or holidays, become more expensive when ultra-cheap supplies from China (and later India) dry up. Resource-based imports may also become more expensive in response to rising demand from China and India. Orders of magnitude suggest that such terms of trade losses may be fairly easy to absorb if they are spread over many years. On the positive side, as China and India develop they will become major innovators in their own right and the advanced countries will benefit by importing technology from them. The development of China and India may also affect the internal distribution of income within the advanced economies. If transnational corporations can earn higher profits by moving production to China and India they may use this as a credible threat to extract concessions from their existing workers in the advanced economies. An appendix to the paper presents a simple mathematical model and some numerical examples that inform the discussion in the text.

DE-INDUSTRIALIZATION AND THE BLANCE OF PAYMENTS IN ADVANCED ECONOMIES

This paper defines de-industrialization as a secular decline in the share of manufacturing in national employment. De-industrialization, in this sense, has been a universal feature of economic growth in advanced economies in recent decades. The paper considers briefly what explains this development and quantifies some of the factors responsible. It then examines the experience of the United Kingdom and the United States, which are two countries that have combined rapid de-industrialization with a strong overall economic performance. The paper considers both the domestic situation of manufacturing industry in these countries and its foreign trade performance, and examines in detail the United Kingdom’s balance of payments, and documenting how improvements in the non-manufacturing sphere have helped offset a worsening performance in manufacturing trade. It concludes that manufacturing still matters to economic performance even at the highest levels of economic development, and that “premature de-industrialization” could lead to serious mismanagement of the integration of developing countries into the global economy.

Property Rights, Warfare and the Neolithic Transition

This paper explains the multiple adoption of agriculture around ten thousand years ago, in spite of the fact that the …first farmers suffered worse health and nutrition than their hunter gatherer predecessors. If output is harder for farmers to defend, adoption may entail increased defense investments, and equilibrium consumption levels may decline as agricultural productivity increases over a signi…ficant range, before eventually increasing thereafter. Agricultural adoption may have been a prisoners’ dilemma in that adoption was individually attractive even though all groups would have been better off committing not to adopt while the initial productivity advantage of agriculture remained low.agriculture, defense, property rights, contest functions, Neolithic transition

Will Stability Last?

There is no consensus about the causes of the reduction in business cycle volatility seen in many major economies over the last decade. Using stylised models of the economies of the US, Euro area, UK and Japan, we argue that economic stability has been fostered by improved monetary policy and by associated changes in the behaviour of inflation, which has itself led to a reduction in the volatility of economic shocks. Assuming an absence of cataclysmic events, our projections suggest that most major economies should continue to enjoy an unusual degree of stability.growth volatility, inflation, stabilisation, business cycles, US, UK, Euro area, Japan

GLOBALIZATION AND ECON0MIC CONVERGENCE: AN ASSESSMENT

This paper offers a critical survey of a strong globalization thesis that predicts a direct link from more open trade and investment regimes to faster economic growth in developing countries and income convergence across the global economy. Its examination of recent experience suggests that while in a more open and integrated world economy both the quantity and the quality of investment are influenced by external factors the forces driving capital accumulation retain strong domestic roots and remain open to the influence of various types of policy initiative.

The impact on advanced economies of north-south trade in manufacturing and services

Many types of production are being transferred from the rich economies of the North to the poorer economies of the South. Such changes began in manufacturing but are now spreading to services. This paper provides estimates of their past and future impact on employment in the North. About 5 million manufacturing jobs have been lost over the past decade because of trade with low-wage economies. A similar number of service jobs may be lost to low-wage economies over the next decade. Although small compared to total employment, such losses may seriously harm certain localities or types of worker

Property Rights, Warfare and the Neolithic Transition

This paper explains the multiple adoption of agriculture around ten thousand years ago, in spite of the fact that the first farmers suffered worse health and nutrition than their hunter gatherer predecessors. If output is harder for farmers to defend, adoption may entail increased defense investments, and equilibrium consumption levels may decline as agricultural productivity increases over a significant range, before eventually increasing thereafter. Agricultural adoption may have been a prisoners’ dilemma in that adoption was individually attractive even though all groups would have been better off committing not to adopt while the initial productivity advantage of agriculture remained low

Theories of the evolution of cooperative behaviour: A critical survey plus some new results

Gratuitous cooperation (in favour of non-relatives and without repeated interaction) eludes traditional evolutionary explanations. In this paper we survey the various theories of cooperative behaviour, and we describe our own effort to integrate these theories into a self-contained framework. Our main conclusions are as follows. First: altruistic punishment, conformism and gratuitous cooperation co-evolve, and group selection is a necessary ingredient for the co-evolution to take place. Second: people do not cooperate by mistake, as most theories imply; on the contrary, people knowingly sacrifice themselves for others. Third: in cooperative dilemmas conformism is an expression of preference, not a learning rule. Fourth, group-mutations (e.g., the rare emergence of a charismatic leader that brings order to the group) are necessary to sustain cooperation in the long run.Cooperation; altruism; altruistic punishment; conformism; group-selection

The Political Economy of Full Employment in Modern Britain

This paper examines the regional aspects of structural change and unemployment in the UK. Manufacturing decline has severely hit the industrial conurbations of the North. Although reflecting long-run trends, this decline has been exacerbated by poor macroeconomic management. New service jobs have been created but most of these are in the South. This growing North-South divide is reflected in a southward drift of population. The extent of the northern decline is masked by government expenditures that help to maintain employment in depressed areas. But this is only a temporary solution. As population drifts away from the depressed areas, public expenditures will eventually be cut, causing further loss of employment and population in these areas. Using a simple export base model, the paper quantifies the underlying decline of the northern economy. In relative terms, this decline has been almost as fast in the 1990s as in the previous decade of industrial crisis.Unemployment, Structural Change, Migration, Regions

The economics of social stratification in premodern societies

We present a microeconomic model of social stratification, which includes an endogenous fertility component. In the model, egalitarian and stratified societies coexist. The latter are divided into two hereditary classes: a warrior elite and a productive class. The model entails that the extra cost warriors must incur to train and equip their children for war determines the relative sizes of both classes and the degree of economic inequality. Higher costs of warrior children imply a greater economic advantage for warriors and a smaller ratio of warriors to producers. These results are consistent with the historical evidence. Finally, we explore conditions under which the social contributions of the warrior elite could discourage a revolution