Volume 10, Issue 2

This paper uses changes in intra-industry specialization indicators to assess factor adjustment pressures that may have been experienced by U.S. industries as a result of growth in U.S.-Mexico trade over the North American Free Trade Agreement (NAFTA) implementation period. Many industries experienced large increases in intra-industry trade. Few U.S. industries were candidates for significant factor adjustment pressures. Industries facing adjustment pressures accounted for nineteen percent of total U.S. imports from Mexico. Findings should lessen opposition to the North American Free Trade Agreement and future regional integration initiatives in the Western Hemisphere by easing fears that jobs will disappear.

In the post 9/11 era, there is growing interest in the complex relationship between religion, economics, finance, politics, law, and social behavior. This has brought with it a disagreement on how to investigate the impact of religiosity, whether religion affects the economic, political, and social outlook of countries or whether these factors affect religiosity? In other words, should religion be viewed as a dependent or an independent variable? In this paper we ask what we believe to be the precursor question to such linkages, namely, do self-declared Islamic countries, as attested by membership in the OIC (Organization of Islamic Conference), embrace policies that are founded on Islamic teachings? We believe that only once this question is addressed can one begin to estimate how Islam adherence to Islam may affect economic, political and social behavior. In the first part of the paper we present what we believe should be the characteristics and scaffolding of an “Islamic" country. We base our depiction on the Quran, and the life, practices and sayings of the Prophet Mohammad -- the two principal channels that provide Muslims with the road map. In the second part, we develop an index to measure the “Islamicity" of Islamic and non-Islamic countries. This IslamicityIndex (or I2) measures 208 countries adherence to Islamic principles using four sub-indices related to economics, legal and governance, human and political rights, and international relations.

The process of globalization is being harshly criticized for a variety of reasons, but mostly because the income of large and/or vocal segments of the population of this and other countries is threatened by the dislocation and competition of trade and investment and by the inability or unwillingness of states to compensate the losers. Based on analysis with the International Futures Model, this paper concludes that if globalization halts or recedes the results will be profoundly negative for most countries and most income groups. While a retreat into protectionism may improve income equality in some countries, it will reduce incomes of both the poor and the rich and poverty headcounts will be increased. In addition, political instability will rise in a majority of countries and the probability of interstate war will increase. These results suggest that it would be far better to deal with the negative aspects of globalization directly by improving trade adjustment assistance, providing more secure access to health care, and negotiating new international agreements that benefit all countries.

The paper studies the effects of a one-sided minimum wage in a two-country model of intra-industry trade, in which multinational firms arise endogenously. With positive levels of intra-industry trade the adverse employment and welfare effects of an asymmetric minimum wage are significantly larger than in a non-trading economy. Multinational firms generally mitigate the effect somewhat. Even though factor prices are not equalized across countries, a (binding) wage floor in one country will prop up wages in the other. The flexible-wage country is insulated from shocks caused by factor accumulation in the rigid-wage country, while an increase in the labor supply of the latter economy may have profound impacts on labor market outcomes in both countries.

This study shows that the policy rate reacts positively to the inflation rate, the output gap, and the lagged real effective exchange rate for Australia, Canada, and New Zealand and negatively to the current real effective exchange rate for Australia and Canada. The inflation rate has a greater impact on the policy rate for New Zealand than for Australia and Canada whereas the output gap has a greater effect on the policy rate for Australia and Canada than for New Zealand. Since the adoption of inflation targeting, the intercept of the monetary-policy function has decreased in each of the three countries, and the slope coefficient of the inflation rate has increased for Australia and New Zealand but has decreased for Canada.

Throughout its long years of civil war, Sri Lanka maintained a healthy rate of GDP growth and increasing levels of military spending. Now that the war has ended, Sri Lanka faces the challenge of rebuilding and switching to a peace-time economy with potentially lower levels of defense spending. We employ a cointegration analysis and an error correction model to examine the relationship between non/military spending in Sri Lanka and identify the possible economic benefits of decreased military spending. We find that GDP growth in Sri Lanka is generally not responsive to military spending, but responds positively to non-military spending. Although non-military spending exerts a positive effect upon economic growth compared to military spending, the outcome is still sub-optimal due to the absence of an income multiplier effect. This prefaces potentially good economic news for Sri Lanka in the coming years assuming that hostilities do not resume, that the government can successfully divert resources from the military to the non-military sector and that private sector investment can be effectively encouraged to exert a crowding in effect.

This paper assesses Barbados' competitiveness within the EU market in light of its recent signing of an Economic Partnership Agreement (EPA) with the EU in 2008. Using SITC data from 1992-2006, indices of revealed comparative advantage (RCA) were calculated. We found that Barbados possesses comparative advantages in Live Animals; Raw Sugars, Beet and Cane; and Spirits. However, policies such as the EU's Common Agricultural Policy (CAP), stringent sanitary and phytosanitary requirements, onerous rules of origin and non-tariff barriers including technical barriers to trade, threaten to undermine these advantages. These developments strongly suggest that Barbados must move agriculture up the value chain and increase value-added, as well as integrate it more fully with other sectors of its economy. Greater attention must be focused on countries in the EU other than the UK, if full advantage is to be taken of the EPA, as the UK market is already mature. There is evidence that export opportunities to these countries exist in other commodity groups (Fuels, Lubricants, etc.; Animal, Vegetable Oils Fats, Wax; Chemicals, Related Products; Manufactured Goods). When these issues are placed within the context of Barbados' history of weak capacity to take advantage of the market access opportunities available from their trading arrangements, the overarching challenge for Barbados is one of effective market access. This will require, among other things, a capable export promotion agency. The export of non-traditional commodities should be promoted, and greater support, perhaps in the form of incentives, should be provided to large firms that are not yet exporters to encourage them to look beyond the domestic market.

This paper empirically analyses the prospective impact of global demographic change on the time path of the optimal carbon price, global emissions and global carbon abatement. The approach is to apply a simple Ramsey model in order to examine the effect of global demographic change on the fundamental drivers of the optimal carbon price and optimal abatement. The results suggest a policy trade-off to some extent between mitigating population ageing and mitigating climate change. The lower fertility scenario, which implies an older future population, results in lower carbon emissions and therefore a lower optimal carbon price. Policies to mitigate population ageing would therefore increase carbon emissions and increase the carbon price.