Working Papers 2005


ST/ESA/2005/DWP/1 A Broad View of Macroeconomic Stability

This paper recommends a broad concept of macroeconomic stability, whereby “sound macroeconomic frameworks” include not only price stability and sound fiscal policies, but also a well-functioning real economy, sustainable debt ratios and healthy public and private sector balance sheets. These multiple dimensions imply using multiple policy instruments. The paper elaborates a framework for developing countries that involves active use of counter-cyclical macroeconomic policies (exchange rate, monetary and fiscal), together with capital management techniques (capital account regulations and prudential rules incorporating macroeconomic dimensions). It also explores the role of international financial institutions in facilitating developing countries’ use of counter-cyclical macroeconomic policies. Go back to list of papers

ST/ESA/2005/DWP/2 A Converging or Diverging World?

This paper discusses some of the problems of method and data in measuring world inequality. It describes some recent attempts to do so and produces its own estimates. There is no simple answer to the question of whether or not the world is becoming more unequal. If a variety of methods are employed and compared, a complex answer emerges, showing that inequality is both declining in some ways and increasing in others. However, there has clearly been an enormous, recent increase in the gap between the very rich and the very poor. Go back to list of papers

ST/ESA/2005/DWP/3 Policy Reform and Income Distribution

The paper analyses the relationship between within-country income inequality and policies of domestic liberalization and external globalization. The models used to provide the rationale for such reforms — such as the Hecksher-Ohlin model — usually predict a decline in inequality. However, the evidence shows that inequality often rose with the introduction of such reforms. The paper tries to explain this discrepancy by identifying the conditions under which the models’ conclusions do not hold. Indeed, such models are based on a simplified view of reality and restrictive assumptions, and their predictions do not necessarily hold in conditions of institutional weakness, structural rigidities, inefficient markets, asymmetric information and persistent protectionism. Go back to list of papers

ST/ESA/2005/DWP/4 The Economic and Social Effects of Financial Liberalization: A Primer for Developing Countries

This paper considers the main elements of the standard pattern of financial liberalization that has become widely prevalent in developing countries. The theoretical arguments in favour of such liberalization are considered and critiqued, and the political economy of such measures is discussed. The problems for developing countries, with respect to financial fragility and the greater propensity to crisis, as well as the negative deflationary and developmental effects, are discussed. It is concluded that there is a strong case for developing countries to ensure that their own financial systems are adequately regulated with respect to their own specific requirements. Go back to list of papers

ST/ESA/2005/DWP/5 Trade Liberalization and Employment

This paper reviews both multi-country and country studies on the impact of trade liberalization on growth and employment in developing countries. These studies reveal sharply contrasting effects of trade liberalization on employment, suggesting that country-specific and contingent factors are important. In particular, differences in how trade liberalization is implemented are particularly important. In order to be successful, trade liberalization needs to be embedded within a coherent set of macroeconomic, structural and social policies. Go back to list of papers

ST/ESA/2005/DWP/6 Inequality Trends in Some Developed OECD Countries

This paper argues that income inequality has increased in several, but not all, developed countries over the last twenty years. The increase in some countries supports the conclusion that the deregulation of markets, resulting in the concentration of economic power, is the fundamental cause as well as the gross manifestation of inequality of both income and wealth. Go back to list of papers

ST/ESA/2005/DWP/7 Trade and Employment: Stylized Facts and Research Findings

The substantial literature investigating the links between trade, trade policy, and labour market
outcomes has generated a number of stylized facts, but many open questions remain. A common
finding is that much of the shorter-run impacts of trade and reforms involve reallocation of labour
or wage impacts within sectors. Wage responses to trade and trade reforms are generally greater
than employment impacts, but trade can only explain a small fraction of the general increase in
wage inequality observed in recent decades. A priority area for future research is to study the
employment effects of services trade and investment reforms.
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ST/ESA/2005/DWP/8 Dynamic Links between the Economy and Human Development

This paper empirically confirms the significance of various links in each of two chains over time: from economic growth (EG) to human development (HD), including EG itself, income distribution, the social expenditure ratio and female education; from HD to EG, including HD itself, along with the investment ratio. Our most important conclusion concerns sequencing over time. EG, which is an important input into HD improvement, is itself not sustainable without such improvement, either prior or simultaneous. Therefore, traditional policy advice, which argues that HD improvements must wait until EG expansion makes it affordable, is likely to be in error.
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ST/ESA/2005/DWP/10 International Capital Flows, Financial Stability and Growth

The explosion and dramatic reversal of capital flows to emerging markets in the 1990s have ignited a heated debate, with many arguing that globalization has gone too far and that international capital markets have become extremely erratic. In contrast, others have emphasized that globalization allows capital to move to its most attractive destination, fuelling higher growth. This paper re-examines the characteristics of international capital flows since 1970 and summarizes the findings of research of the 1990s on the behaviour of international investors as well as the short- and long-run effects of globalization on financial markets and growth.
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