It is commonly assumed by economists and environmentalists alike that greater economtc "openness" will lead to increased industrial pollution in developing countries. This paper challenges the "pollution haven" hypothesis, arguing that liberalization of trade regimes and increased foreign investment in Latin America have not been associated with pollution-intensive industrial development. From case studies and econometric evidence, we conclude that protected economies are more likely to favor pollution intensive industries, while openness actually encourages cleaner industry through the importation of developed-country pollution standards.

Micro empirical studies of labor market outcomes, such as wage rates or labor force participatio n, tend to focus on the impact of human capital in the form of schooling. Some studies with special data suggest that in addition to schooling there also are important usually unobserved (by the researcher) components of human capital that are rewarded in the labor market. In this study we use special data from rural South Central India to estimate the role of unobserved characterist ics of men, estimated from their marriage market experience, on their wage rates and their paid labor market participatio n. This estimation is possible because the marriage to a wife with certain characterist ics (e.g., schooling, age, dowry) depends not only on the man's own schooling and other characterist ics, but also on the characteristi cs of the man's parental household. This allows identificatio n of the man's unobserved characterist ics (as estimated from the determinati on of his w(e's characterist ics) in his labor force experience determinatio n. The estimates suggest that the characterist ics of the man's parents are important in determining characterist ics of his wife and that the man's unobserved human capital as estimated from his marriage market experience has a major impact on the level and rate of growth of his wage rate, his paid labor force participatio n, and his productivity in time spent other than in the labor market.

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This chapter looks at financial crises as a challenge to the international financial system and investigates the “public bad” nature of the phenomenon. The conclusion: excessive financial volatility is a global public bad. Instability is not purely a technical by‐product of the production of financial services. Rather, it is the outcome of market failures, for reasons not yet fully understood. Having laid out this diagnosis, the chapter looks at how existing institutions and policies deal with international financial instability, both to limit its acuity and to deal with its implications. The main emphasis is on drawing lessons from recent experiences (Europe, Mexico, and East Asia) and recent theoretical advances, especially those that have improved our understanding of crises. The chapter presents five main proposals. (1) Proceed with caution in promoting capital liberalization; (2) avoid the restrictive macroeconomic policies, huge loans, and deep structural policies of recent packages; (3) complement today's ex post conditionality with ex ante conditionality; (4) suspend debt repayment in the event of a major crisis accompanied by a collapse of the exchange rate; and (5) end the monopoly of the International Monetary Fund (IMF) by creating regional IMFs.

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