This Briefing Paper reexamines what conventional economics actually predicts about the effects of integrating the rich United States and poor global economies. A once again fashionable explanation for this puzzle is that globalization’s benefits are huge but diffuse (primarily, lower prices for imported goods), while its costs are small but concentrated (workers displaced by imports) hence, the gains are hard to see, but the losses are all too visible. Because it is well-known that basic economic theory predicts that global integration leads to gains for all nations, this anxiety is often treated as a political puzzle. The continuing integration of the rich United States with a far poorer global economy has provoked much anxiety among American workers.
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