It is hypothesized that the institutional acceptability of child labor will be more prevalent when the other members of a society gain from its use. Therefore, the cross-country variation in the prevalence of child labor depends on the degree to which child labor affects the welfare of the remaining members of a society. It is demonstrated theoretically that the non-child-labor factors gain from child labor when the economy is closed. As an economy becomes more open to international trade, those gains diminish and even turn negative as the size of the economy increases. Child labor will not exist in capital abundant countries since, in them, child labor makes the non-child-labor factors worse off. It is shown empirically that the cross-country prevalence of child labor falls with increases in a nation's per capita income, its openness to trade, and its economic size. It is argued that trade sanctions, as a remedy for child labor, may be counter-productive since an open economy reduces the benefits of child labor to the other members of a society, and thereby reduces the society's incentive to allow child labor. The model also demonstrates that the economic changes brought on by democracy undermine the practice of child labor. Copyright Blackwell Publishers Ltd 2001.
Many of the emerging market economies in Europe are presently running current account deficits which are quite high relative to any global or historical standard and are fundamentally unsustainable. This includes the three poorer European Union (EU) members of the old Europe (Greece, Portugal, and Spain), many of the EU's new member states (largely the former transition economies which have joined since 2004), most of those non-EU members in south-east Europe, and a number of the CIS economies in eastern Europe and the Caucasus. The unweighted average current account deficit for this group has more than doubled from under four percent of GDP in 2003 to well over eight percent in 2007. This trend is significantly different than what has evolved in many of the world's other emerging markets; these other economies have generally been running current account surpluses. This paper documents this development, describes the underlying factors that have brought it about, assesses the underlying vulnerability that has been created, and discusses the implications of this development for other emerging markets and global financial stability more generally. In addition, how these risks have evolved since the appearance of the global credit crisis beginning in the summer of 2007 is examined.
The factors that explain the level of intra-industry trade and its share of total trade in a multi-country version of the Helpman-Krugman model are derived. The role of similarity of endowment ratios and similarity of economic sizes differ in the multi-country version from the two country version of this model. It is also demonstrated that the volume of total trade, the volume of intra-industry trade and the volume of inter-industry trade can each be described by a modified gravity equation. A new diagrammatical device is introduced that illustrates the relationship between trade volume and similarity in country size. [F12]
in September 2006. The views expressed in this paper are those of the authors and do not necessarily reflect the official positions of their respective institutions. We very much appreciate the comments of Jose Palacin on an earlier draft and the assistance of Dani Rodrik and Oeindrila Dube in providing some of the data used in section VI of this analysis. 1 The regional grouping CIS is used to refer to the 12 former members of the Soviet Union minus the three Baltic states and does not explicitly refer to the institutional arrangement of that name which is discussed in more detail in section X. 2 GDP growth and especially per capita GDP growth essentially ceased during the 1980s (Dobrinsky, Hesse, and Traeger, 2006). 3 In addition, the break up of the Soviet Union was not always peaceful, as armed conflicts occurred in several of the republics including Armenia (1991-94), Azerbaijan (1991-94), Georgia (1989-99), Moldova (1991-92), and Tajikistan (1990; and the war in Chechnya has continued to drain resources in Russia. Berengaut and Elborgh-Woytek (2005) shown that these conflicts are a significant explanation of the size of the output declines during the transitional recession. 4 The tasks of adjusting to these real changes were magnified by the accompanying major problems of macroeconomic stabilization such as annual inflation rates of over several hundred per cent during the early 1990s.
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