The term BRICS was coined by Jim O’Neill from Goldman Sachs over a decade ago. Unlike many acronyms, this one has stuck - largely because of the growing share of the world economy associated with the emerging economic powers Brazil, India, China, Russia and South Africa (the latter being added somewhat later.) With the greater global footprint, the policy choices of these countries matter more.
A ground-breaking report by New Direction, the Foundation for European Reform, highlights the poor track record of the European Commission in holding trading partners to account.
The report's author, Professor Simon Evenett of the University of St. Gallen, Switzerland, found that the Commission only attempt to tackle 20 percent of complaints reported by European industry.
We introduce quality differentiation into a Ricardian model of international trade. The choice of quality allows firms -- for a given product -- to tailor their output to match the skills of workers in their country. It therefore weakens comparative advantages across products. We demonstrate that this basic observation has profound consequences: (1) Quality differentiation supports a pattern of international specialization where industrialized countries are active across the full board of products, complex and simple ones, while developing countries systematically specialize in the simple products. We present novel stylized facts that point to such a pattern of international specialization in the data. (2) Our theory implies that the gains from international specialization across products mostly accrue to developing countries. (3) It motivates the use of a censored regression model to estimate the link between a country's GDP per capita and the quality of its exports. Following this empirical strategy, we find a much stronger relationship than when using OLS, in line with our theory.
This paper investigates how household income inequality shapes the diffusion of tech-
nologies. A simple demand side model with hierarchical preferences is used to show that
after some minimum level of average income relative to the price of the technology is
achieved, more consumer inequality hinders the diffusion process for new technologies.
Using data on 39 major technologies, the empirical part tests this proposition. It is found
that indeed more inequality, as measured by the Gini coefficient, is detrimental to the
diffusion of new technology, while a large middle class, measured by quantile shares of
income, is conducive to technology diffusion. These effects are stronger for consumer than
for producer technologies. Furthermore, there is some evidence that the negative effect of
inequality on the diffusion of technologies is more pronounced in rich countries.
We analyze public investment in basic research in a multi-country multi-industry environment with international trade. In our economy basic research generates ideas which private firms take up in applied research to develop new varieties. Such development requires industry specific know-how, and countries’ current specialization in international trade therefore determines which ideas can be commercialized domestically. We demonstrate that the equilibrium in our economy is consistent with key patterns observed from the data. We then compare basic research investments of national governments with optimal investments of a global social planner. We show that decentralized investments are inefficient along three dimensions: There is typically too little global investment in basic research. Basic research is too heavily concentrated in industrialized countries. And basic research is potentially not sufficiently directed to support innovation in complex, high-tech industries.
Many countries have witnessed an increase in income shares going to the top 1%, yet little is known about the prevalence of these households at the top. This paper aims at addressing this question in the case of Switzerland, where previous research by Föllmi and Martínez (2016) has found that top income shares have been rising since the mid-1990s, and have become more volatile. Using full-population social security data, I document labor income mobility patterns within the top decile and the rest of the distribution over the period 1981-2010. In addition, I shed light on gender inequality at the top, and the share of foreign-born and self-employed among top earners in Switzerland. I find that persistence has been slightly decreasing. With a share of only 5%, women are strongly under-represented among the top 0.1% of earners. The share of foreign-born among the top 0.1% rose from 20% to 40% in the 2000–2010 period.
This paper establishes a measure of bilateral differences in values using 857 questions from the World Values Survey. We explore the determinants of value distance, linking it to geography as well as the historical relatedness of populations across 90 countries. Furthermore, we explore the explanatory power of value distance for the diffusion of technological development.
