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411. The OECD's "Action Plan" to Raise Taxes on Multinational Corporations

Author:
Gary Clyde Hufbauer, Eujiin Jung, Tyler Moran, and Martin Vieiro
Publication Date:
09-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Hufbauer and colleagues critically evaluate the Organization for Economic Cooperation and Development’s ambitious multipart project titled Base Erosion and Profit Shifting (BEPS), which contains 15 "Actions" to prevent multinational corporations (MNCs) from escaping their "fair share" of the tax burden. Spurred by G-20 finance ministers, the OECD recommends changes in national legislation, revision of existing bilateral tax treaties, and a new multilateral agreement for participating countries. The proposition that MNCs need to pay more tax enjoys considerable political resonance as government budgets are strained, the world economy is struggling, income inequality is rising, and the news media have publicized instances of corporations legally lowering their global tax burdens by reporting income in low-tax jurisdictions and expenses in high-tax jurisdictions. Given that the US system taxes MNCs more heavily than other advanced countries and provides fewer tax incentives for research and development (R&D), implementation of the BEPS Actions would drive many MNCs to relocate their headquarters to tax-friendly countries and others to offshore significant amounts of R&D activity.
Topic:
Development, Economics, International Political Economy, and International Trade and Finance
Political Geography:
Global Focus

412. The Tradability of Services: Geographic Concentration and Trade Costs

Author:
Antoine Gervais
Publication Date:
08-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
To date, empirical studies have focused almost exclusively on the trade exposure of the manufacturing sector, implicitly assuming that services are not tradable. However, because service trade has grown over time and now accounts for about 20 percent of global international transactions (and 30 percent of US exports), the traditional assumption that goods are tradable and services are not is increasingly inadequate. Gervais and Jensen use a unique dataset on the distribution of producers and consumers across regions of the United States to estimate the share of economic activity exposed to international competition. Their estimation method is a natural extension of the gravity model of trade and identifies trade costs in the absence of trade data. The estimated trade costs are higher on average for service industries, but there is considerable variation across industries within sectors. Using the trade cost estimates, they classify industries into tradable and nontradable categories. They find that accounting for tradable service industries nearly doubles the international exposure of the US economy, tradable services value added is unevenly distributed across geographical regions, labor productivity and wages are higher on average for tradable industries, and potential welfare gains from trade liberalization in the service sector are sizable.
Topic:
Economics, International Trade and Finance, Labor Issues, and Global Markets
Political Geography:
Global Focus

413. An Old Boys' Club No More: Pluralism in Participation and Performance at the Olympic Games

Author:
Marcus Noland and Kevin Stahler
Publication Date:
05-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Decades ago, the Summer Olympic Games were an old boys' club; by many measures the Winter Games still are. Now, however, this old boys' club must compete with talented athletes from almost every country on earth, large and small, rich and poor, many of whom have found their comparative sporting niches. Looking forward, the image of the incumbent champion—rich, European, and male—will become ever more antiquated. This paper models the historical determinants of success at the Olympic Games in the context of their growing pluralism, evolving from their aristocratic and largely European male roots to the more gender-inclusive and geographically diverse showcase of athletic talent that is seen today. A wide set of socioeconomic variables is correlated with winning medals, particularly with respect to the Summer Games and women's events. Host advantage is particularly acute in judged contests such as gymnastics. However, there is evidence that the influence of correlates such as country size, per capita income, and membership in the communist bloc is declining over time as competition becomes increasingly diverse. These effects are less evident in the Winter Games, events that require significant capital investments, and judged contests.
Topic:
Diplomacy, Economics, Gender Issues, and Sports
Political Geography:
Global Focus

414. Testing the Modigliani-Miller Theorem of Capital Structure Irrelevance for Banks

Author:
William R. Cline
Publication Date:
04-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Some advocates of far higher capital requirements for banks invoke the Modigliani-Miller theorem as grounds for judging that associated costs would be minimal. The M&M theorem holds that the average cost of capital to the firm does not depend on its capital structure (ratio of equity finance to debt finance), because any reduction in capital cost from switching to higher leverage using lower-cost debt is exactly offset by an induced increase in the unit cost of higher-cost equity capital as a consequence of the associated rise in risk. Statistical tests for large US banks in 2002–13 find that less than half of this M&M offset attains in practice. Higher capital requirements would thus impose increases in lending costs, with associated output costs from lower capital formation. These costs to the economy would need to be compared with benefits from lower risk of banking crises to arrive at optimal levels of capital requirements.
Topic:
Economics, International Trade and Finance, Markets, Politics, and Budget
Political Geography:
Global Focus

415. The 2015 Survey of Progress in International Economic Governance

Author:
Domenico Lombardi and Kesley Shantz
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
The annual CIGI Survey of Progress in International Economic Governance assesses progress in five areas of international economic governance: macroeconomic and financial cooperation; cooperation on financial regulation; cooperation on development; cooperation on trade; and cooperation on climate change.
Topic:
Climate Change, Economics, Financial Crisis, and Governance
Political Geography:
Global Focus

416. Growth, Innovation and Trade in Environmental Goods

Author:
Céline Bak
Publication Date:
10-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
Reporting on global trade in environmental goods would provide a comprehensive lens into diversification that will be needed for the transition to low-carbon economies, help countries benchmark the shorter- and longer-term impact of policies such as regulation and fiscal stimulus targeted at green growth, as well as innovation, and strengthen the G20 leaders’ commitment to inclusive and sustainable growth by providing visibility into the pace of investments to address climate change.
Topic:
Climate Change, Economics, International Trade and Finance, and G20
Political Geography:
Global Focus

417. Global Sustainability, Climate Change and Finance Policy: A South African Perspective

Author:
Penelope Hawkins and Olaf Weber
Publication Date:
09-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
One of the most important and topical discussions within the global multilateral arena is the challenge of meeting the world’s climate finance needs in order to reduce carbon emissions to sustainable levels and support adaptation strategies. The mobilization of finance is key in supporting the transition away from traditional high-carbon or business-as-usual economic pathways toward low-carbon, climate-resilient economic systems. A conference, Global Sustainability, Climate Change and Finance Policy, organized by the Centre for International Governance Innovation and the South African Institute for International Affairs and held in Johannesburg from July 1 to July 3, considered aspects of the debate.
Topic:
Climate Change, Economics, Environment, and International Trade and Finance
Political Geography:
Global Focus

418. Populist Movements: A Driving Force behind Recent Renationalization Trends

Author:
Jonathan Diab and Anna Klimbovskaia
Publication Date:
09-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
Populist uprisings often call for the renationalization or buying back of public goods that were originally privatized as a result of austerity measures established and disseminated by the International Monetary Fund and the World Bank.
Topic:
Economics, International Monetary Fund, Financial Crisis, World Bank, and Popular Revolt
Political Geography:
Global Focus

419. Global Patent Pledges: A Collaborative Mechanism for Climate Change Technology

Author:
Bassem Awad
Publication Date:
11-2015
Content Type:
Working Paper
Abstract:
Access to and timely diffusion of green technologies required for adaptation and mitigation are among the major challenges faced by the international community. The role of the patent system has become the subject of increased attention in climate change discussions on technology transfer. New mechanisms for collaborative innovation are required to foster the green technology sector.
Topic:
Climate Change, Economics, Environment, Markets, and Science and Technology
Political Geography:
Global Focus

420. Understanding the Great Recession

Author:
Mario Seccareccia and Marc Lavoie
Publication Date:
12-2015
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Some Fundamental Keynesian and Post-Keynesian Insights, with an Analysis of Possible Mechanisms to Achieve a Sustained Recovery Fears of deflation and long-term stagnation have become more commonplace since the Great Recession. Yet, within the mainstream, economists are divided into two camps: those who see the benefits of downward wage and price adjustment, as a private sector stabilizer, and those who fear deflationary pressures because of their destabilizing consequences. This paper reviews this theoretical literature using a simple “New Consensus” framework of analysis and it also seeks to describe how mainstream and heterodox economists analyzing the consequences of deflationary pressures come to very different conclusions on the nature of private sector stabilizers in a recessionary environment. After reviewing the different perspectives, the paper undertakes a comparative analysis of the experience of both the Great Depression and the Great Recession by looking at the behavior of certain key variables in three countries: Canada, the United States and the United Kingdom. The paper concludes that, if it was not for the quick actions of governments in stabilizing the economy through activist macroeconomic policies during the Great Recession, private sector stabilizers were actually less significant during the recent crisis than they were during the 1930s.
Topic:
Economics, Global Recession, Economic Theory, Sustainability, and Economic Recovery
Political Geography:
Global Focus