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Level 31

Nation & International Economy

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Key claims that nations are no longer powerful? (since 1960s)
Race to the Bottom: FDI would move easily between nations, chasing low taxes and low regulation
Lucas Paradox
The Lucas paradox is the observation that capital does not flow from developed countries to developing countries despite the fact that developing countries have lower levels of labour costs. The key issue is productivity, w…
(Endogenous growth theory)
This theory emphasizes technical change and skills as crucial for growth, not just the quantity of investment. The major change is to think about growth in terms of quality (technology, education, etc.) rather than quantity.
Race to the bottom (RTB)
The race to the bottom is a phenomenon in which governments pursue deregulation in order to attract or retain economic activity in their jurisdiction.
Footlose companies?
Footlose companies are considered to move readily from one country to another in order to find conditions of less regulation.
Arguments against FDI and the RTB?
Social Stability: MNCs require national law and regulatory regimes, national education and training regimes
Change between state and growth?
Before 1970s, many nation states were interventionist. The state was tightly interwoven with the regulation of economic activity
Arguments against RTB (Rodrik)
Positive correlation between an economy's exposure to international trade and the size of its government
Arguments against RTB (Mosley)
Government spending: Economic openness increases demand for public sector intervention as a means for compensating the global economic volatility
Access to capital market: difference btw developed and developing countries?
Developed countries can borrow money at relatively low rates of interests
Are national policies converging due to RTB? (Mosley)
Developed countries: No convergence, cross-national diversity remains