Working Paper: NBER ID: w10626
Authors: Michael P. Dooley; David Folkerts-Landau; Peter Garber
Abstract: This paper sets out the political economy behind Asian governments' participation in a revived Bretton Woods System. The overriding problem for these governments is to rapidly integrate a large pool of underemployed labor into the industrial sector. The principal constraints are inefficient domestic resource and capital markets, and resistance to import penetration by labor in industrial countries. The system has evolved to overcome these constraints through export led growth and growth of foreign direct investment. Periphery governments' objectives for the scale and composition of gross trade in goods and financial assets may dominate more conventional concerns about international capital flows.
Keywords: foreign direct investment; economic development; Bretton Woods system; labor market; export-led growth
JEL Codes: F02; F32; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign direct investment (FDI) (F23) | integration of underemployed labor into the industrial sector (J46) |
| integration of underemployed labor into the industrial sector (J46) | rising real wages (J39) |
| foreign direct investment (FDI) (F23) | rising real wages (J39) |
| political economy guiding Asian governments (P16) | rapid mobilization of labor (J62) |
| rapid mobilization of labor (J62) | growth of the industrial sector (O14) |
| structure of international finance (F30) | domestic economic strategies of Asian countries (O53) |
| distorted exchange rate policy (F31) | transition of labor into productive roles (J89) |
| government actions (H59) | economic performance in trade and labor market dynamics (F16) |