Working Paper: CEPR ID: DP6494
Authors: Dani Rodrik
Abstract: The new conventional wisdom on globalization emphasizes that reaping the benefits of trade and financial integration is not automatic, and requires better domestic institutions, essentially improved safety nets in rich countries and improved governance in the poor countries. The prevailing strategy is predicated on the presumption that insufficiently open markets continue to pose an important constraint on the world economy. In reality, lack of openness is no longer the binding constraint for the global economy. The gains to be reaped by further liberalization of markets are meager for poor and rich countries alike. An alternative approach to globalization would focus on enhancing policy space rather than market access, and on devising the rules of the game to better manage the interface between national regulatory and social regimes. It is possible to envisage such rules without slipping back into protectionism.
Keywords: Globalization; Policy Space
JEL Codes: F02; F15; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| globalization's benefits (F69) | strong domestic institutions (O17) |
| lack of openness (P26) | challenges faced by countries (O57) |
| lack of policy space (F68) | challenges faced by countries (O57) |
| heterodox economic policies (B50) | better outcomes (I14) |
| financial globalization (F30) | increased vulnerability to crises (H12) |
| trade openness (F43) | economic growth outcomes (O49) |