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The United States and other nations are facing large-scale risks at an accelerating rhythm. In 2005, three major hurricanes—Katrina, Rita, and Wilma—made landfall along the U.S. Gulf Coast within a six-week period. The damage caused by these storms led to insurance reimbursements and federal disaster relief of more than $180 billion—a record sum. Today we are more vulnerable to catastrophic losses because of the increasing concentration of population and activities in high-risk coastal regions of the country. The question is not whether but when, and how frequently, future catastrophes will strike and the extent of damages they will cause. Who should pay the costs associated with catastrophic losses suffered by homeowners in hazard-prone areas? This book analyzes how we currently mitigate, insure against, and finance recovery from natural disasters in the United States. It offers long-term solutions for reducing losses and providing financial support for disaster victims that define a coherent strategy to assure sustainable recovery from future large-scale disasters.

This book considers patterns of inward foreign investment in emerging economies. Foreign Direct Investment (FDI) has long been recognized as a potential source of developmental benefits for host countries, but existing studies have not always considered the heterogeneity of FDI or the types of activities pursued by multinationals in peripheral markets. This book examines the uneven spread of innovation-intensive investment to emerging economies, and asks questions about its determinants. Through use of large scale firm surveys, firm and country level data, and case studies, this book demonstrates that host country institutions and policies have a strong impact on the likelihood and intensity of local innovation by multinationals. This book unpacks the multifaceted concept of innovation, and proposes multiple measures including R&D spending, patents, and other indicators. The analysis also considers sectoral differences in innovation patterns, and how innovative foreign firms do or do not become embedded in host economies. This book modifies comparative institutional analysis for an era of multinational production, and has important implications for industrial policy and investment promotion practices. Host country institutions, which serve as intermediaries between foreign forms and domestic markets, have an important role to play in reducing the risk inherent in decentralized innovation. This book therefore contributes to diverse literatures on the political economy of FDI, development, and international business studies.

This book examines the causes and consequences of war from a political economy perspective, taking as its premise that a consideration of the incentives and constraints faced by individuals and groups is paramount in understanding conflict decision making. The contributors—economists and political scientists—believe that this perspective offers deeper insights into war and peace choices than the standard state-centric approach. The chapters offer both theoretical and empirical support for the political economy perspective on conflict. Several broad themes cut across the chapters: war as an equilibrium phenomenon rather than an exogenous process; the interaction of politics, economics, and institutions and its effect on the frequency and severity of conflicts; the cost of fighting; and the often innovative character of conflict. Topics addressed include theoretical aspects of the ways in which domestic politics affects the decision to go to war; globalization and its effect on the net supply of terrorism; open markets and the likelihood of war and domestic insecurity; the costs of going to war in Iraq as compared to the costs of containment; the economic effects of the Rwandan genocide at a household level; and the evolving industrial organization of terrorist groups.

Governments around the world are deeply divided over the proper role of industrial policy, with some politicians arguing for hands-off governance and others supporting government intervention to promote “national champions”—firms that receive government support for both political and economic reasons. This book gathers together economists who present the pros and cons of government support for national champions. The contributors test industrial policy for national champions by using the rigor of economic models, offering a quantitative perspective that complements and extends existing qualitative studies, and focus on issues emerging from the European Union’s substantial degree of market integration. In this book, many arguments in favor of or against policies promoting national champions are made; in a dynamic context, the book presents chapters that take a dynamic economy view, chapters that examine the political economy of the decision-making process, and chapters that offer “classical” models of market imperfections in static equilibrium. The different models provide a deeper understanding of industrial policy than a single stand-alone model could have done. What becomes clear from these different perspectives is that it is difficult to make a general case in favor of policies promoting national champions on purely economic grounds, and that these policies are best understood in political terms.

The book objective is two-fold: First, the book provides rigorous analysis of some of the major globalization episodes during the decade's long emergence of the economy of Israel. Second, the book spells out, empirically, how the globalization played a crucial role in advancing Israel's economic progress. That is, economists and policy makers can gain insights as to how a globalized economy takes advantage of international trade, labor mobility, its international financial links, and at the same time push up against globalization headwinds, such as those triggered by the 2008 global financial crisis. A general lesson which comes out is that once a gradual opening up process is set, time-consistent macroeconomic policy is adapted, and well-regulated institutional setup is put in place, Israel’s economy has been able ride on growth-enhancing globalization flows, and weather its chilly storms. The book analyzes these game-changing events, evaluates their role in Israel remarkable development, and compares these developments to groups of developed and emerging- market economies in similar circumstances. To gain broader perspective, the book also looks back into recent history. The unique saga of Israel’s high-inflation crisis and the long period where it rebuilt the major financial, and monetary institutions, and regulatory bodies. These elements provided better macroeconomic stability and help mitigate business cycle fluctuations, and get the economy through military conflicts and boycotts. The book also surveys trending developments that remain challenging. The exceptionally high fertility among ultra-Orthodox Jews, and Arab minority, increasing portions of the population, is the main reason for the flagging labor-force participation. High fertility diminishes skill attainment. A rise in income inequality in all advanced economies, which also takes place in Israel, has a potential for setting off social-political divide. In the case of Israel, its fast development came, however, at the cost of rising income inequality and social polarization. Israel now has the most unequal distribution of income among OECD countries and its public education has declined from one of the best to one of the worst in the OECD. Israel’s income redistributive policies, from rich to poor, from healthy to the sick and from young to old, is significantly less comprehensive in scope, compared to the European systems. It has been becoming even less so over the last decades. Israel has an unusually high fertility rate among the developed economies. The book endeavors to marry economic theory, empirical evidence, and narrative presentation. It does so in a way that is enlightening to the specialist, but remains digestible for the non-professional reader. It provides an opportunity for the reader to look through the rear mirror at the saga of Israel’s high-inflation, and the inflation conquest. To connect to the earlier literature, the book provides a review of books surveys of the earlier phases in the development of the economy of Israel. There could be at least two potential groups of readers: a. Policy makers, academic and non-academic (international institutions, banks, etc.) researchers and students interested in the Israeli Economy; b. Policy makers, academic and non-academic researches, interested in the effects of globalization; and, c. Advanced undergraduate, and graduate students in international macroeconomics courses.

Nobel laureate economist Milton Friedman once noted that free immigration cannot coexist with a welfare state. A welfare state with open borders might turn into a haven for poor immigrants, which would place such a fiscal burden on the state that native-born voters would support less-generous benefits or restricted immigration, or both. And yet, a welfare state with an aging population might welcome young, skilled immigrants. The preferences of the native-born population toward migration depend on the skill and age composition of the immigrants, and migration policies in a political-economy framework may be tailored accordingly. This book examines how social benefits–immigrations political economy conflicts are resolved, with an empirical application to data from Europe and the developed countries, integrating elements from population, and international, public, and political economics into a unified static and dynamic framework. Using a static analytical framework to examine intra-generational distribution, the authors first focus on the skill composition of migrants in both free and restricted immigration policy regimes, drawing on empirical research from EU-15 and non-EU-15 states. They then offer theoretical analyses of similar issues in dynamic overlapping generations settings, studying not only intragenerational but also intergenerational aspects, including old–young dependency ratios and skilled–unskilled conflicts. Finally, they examine overall gains from or costs of migration in both host and source countries, and the race-to-the-bottom argument of tax competition between states in the presence of free migration.

High inequality in incomes and assets and persistent poverty continue to plague Latin America and remain a central economic policy challenge for Latin American policymakers. At the same time, improved methods and data allow researchers to analyze these problems and how they are affected by economic policy. In this book, experts on Latin American economic affairs use these approaches to examine the dynamics of poverty and inequality in Latin America and the ability of the policy to address them. The contributors first analyze the historical evolution of inequality in Latin America, examining such topics as the origins of inequality in colonial land distribution, the impact of educational opportunities on earnings inequality in Brazil, and racial discrimination in Brazil’s labor market. Contributors then use panel data techniques to analyze the regional dynamics of poverty and inequality in Peru and Brazil, considering whether there are spatial poverty traps and, if so, what determines such traps. Finally, contributors use impact evaluation and modeling techniques to examine specific policy issues: devaluation and dollarization in Bolivia, the Oportunidades conditional cash transfer program in rural Mexico, and the distributional effect of Brazil’s tax-benefit system.

The General Agreement on Tariffs and Trade (GATT) was created alongside other towering achievements of the post-World War II era, including the United Nations, the World Bank, and the International Monetary Fund. GATT, the first successful agreement to generate multilateral trade liberalization, became the principal institution to administer international trade for the next six decades. This book offers detailed examination of the GATT regime for international trade, discussing the negotiating record, policy background, economic rationale, and case law. This book offers a substantive first chapter that provides a detailed historical background to GATT that stretches from the 1927 World Economic Conference through Bretton Woods and the Atlantic Charter. Each of the following chapters examines the disciplines agreed to, their negotiating record, their economic rationale, and subsequent practice. It focuses on cases that have influenced the prevailing understanding of the norm, as well as on literature that has contributed to its interpretation, and the final outcome. In particular, it examines quantitative restrictions and tariffs; the most favored nation clause (MFN), the cornerstone of the GATT edifice; preferential trade agreements and special treatment for products originating in developing countries; domestic instruments; and exceptions to the obligations assumed under GATT. This book’s companion volume examines World Trade Organization (WTO) agreements regulating trade in goods.

The General Agreement on Tariffs and Trade (GATT) has extended its institutional arsenal since the Kennedy round in the early 1960s. The current institutional design is the outcome of the Uruguay round and agreements reached in the ongoing Doha round (begun in 2001). One of the institutional outgrowths of GATT is the World Trade Organization (WT0), created in 1995. This book offers a detailed examination of WTO agreements regulating trade in goods, discussing legal context, policy background, economic rationale, and case law. Each chapter examines a given legal norm and its subsequent practice. In particular, it discusses agreements dealing with customs clearance; “contingent protection” instruments, which allow WTO members unilaterally to add to the negotiated amount of protection when a certain contingency (for example, dumping) has occurred; TBT (Technical Barriers to Trade) and SPS (Sanitary and Phyto-sanitary Measures) agreements, both of which deal with such domestic instruments as environmental, health policy, or consumer information; the agreement on Trade Related Investment Measures (TRIM); sector-specific agreements on agriculture and textiles; plurilateral agreements (binding a subset of WTO membership) on government procurement and civil aviation; and transparency in trade relations. This book’s companion volume examines the GATT regime for international trade.