Michael Hiscox on Economy

Michael Hiscox on Economy - Michael Hiscox Domestic Sources...

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1 Michael Hiscox, “Domestic Sources of Foreign Economic Policies” Each government/country makes a different choice about how to manage its economy with respect to the global economy in terms of: o Position of national market towards international trade, sectors o International flows of investment o Migration of workers o Exchange rate and the national currency policies Our goal is to: o 1) Identify the policy preferences of different groups in domestic economy s How are people affected by their nations’ tie to global economy? o 2) Specify how political institutions determine the way these preferences are aggregated or converted into actual gov. decisions s How are political representatives elected and what kind of power do lobby groups yield? POLICY PREFRENCES People concerned about how different policy choices affect their income. They may also have non-material concerns (i.e. impact on environment, human rights…) 1) Trade [pg. 281] s Can be very controversial. Examples: o USA – NAFTA (North America Free Trade Agreement 1993) o European Union – Common Agricultural Policy o World Trade Organization Protests s Trade provides mutual gains, when countries exchange goods and services they’re all generally better off s Why so controversial? Because it creates winners and losers s Have lots of land [Australia/Canada] b export agricultural products (wheat…) s Have lots of labourers [China/India] b export things that require intensive labour (textiles, footwear…) s Have lots of capital [USA/Europe/Japan] b export capital intensive goods (cars, pharmaceuticals…) o Import labour-intensive goods from locations with low supplies of capital compared to labour s Stopler-Sammuelson theorem (1941) [pg. 281] o “Trade benefits those who own the factors of the production with which the economy is relatively well-endowed, and trade hurts owners of scarce factors.” o Owner of locally abundant factor b OPEN TRADE o Owner of locally scarce factor b PROTECTIONISM s (for example in US/Europe farmers have called for greater protectionism)
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2 s Applied: In Canada/Australia (with lots of land, but scarce labour)
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Michael Hiscox on Economy - Michael Hiscox Domestic Sources...

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