4th Informal Policy Coherence Initiative Meeting

“Growth, Investment and Jobs”

International Labour Office, Geneva

December 8th, 2005

Following up on the World Commission on the Social Dimensions of Globalization’s (WCSDG) recommendation for greater coordination between the work of international organizations in areas in which their mandates and policies intersect, the 4^th informal meeting on policy coherence (PC) was held at the ILO headquarters in Geneva on December 8^th, 2005.

Duncan Campbell (Policy Integration Department, ILO) opened the meeting by stating the purpose of these policy coherence meetings -- to determine where the views of the participating international organizations coincide, to share methodologies, and to come up with a common language and definition of coherence. These meetings provide a forum for participants to compare notes, identify knowledge gaps and methods by which to approach these gaps collaboratively.

Presentation 1: Financial Openness and Employment

Rolph van der Hoeven and Malte Lüebker. 2005. Financial Openness and Employment: The Need for Coherent International and National Policies. Geneva: ILO.

Presented by Rolph van der Hoeven (Policy Integration Department, ILO)

Rolph van der Hoeven began by acknowledging the WCSDG’s recommendation to adopt an integrated approach to examining the consequences of different elements of globalization under which falls nexus between growth, investment and employment. Studying the impact of trade and financial openness not only on labour, but on global dynamics as a whole is therefore warranted.

This study by van der Hoeven and Lüebker examines the effects of financial liberalization on employment and incomes. The past decade has seen a number of countries push for greater openness but this has coincided with some worrying trends such as greater volatility as a result of international capital movements. This paper argues that this volatility in international financial markets is perhaps the most detrimental factor for labour and enterprises in developing countries.

The presentation began by illustrating that the last decade has seen an increasing adoption of national regulatory changes that are favourable to FDI (with a slight decline from 2002 to 2003). It then looks at FDI inflows by economic groupings revealing significant imbalances in the flow of FDI between industrialized, 12 top tier developing countries¹ and the remaining developing countries. The data show that a global increase in FDI has not led to higher GDP. Reserve holdings by most developing countries in percent of GNI have gone up.

There is evidence that the impact of financial integration via the growth effect is rather small. Furthermore, financial liberalization in developing countries is associated with higher consumption volatility and increased volatility compared to developed countries. Van der Hoeven also noted that net capital flows and fiscal policies are procyclical in most developing countries; that there is some evidence for monetary policy to be procyclical; and for developing countries and especially middle income countries, the capital flow cycle and the macroeconomic cycle reinforce each other – what Kaminsky et al (2004)² term as “when it rains it pours syndrome”.

It is a common assumption that after the cycle, growth will resume; however, van der Hoeven and Lüebker find that a financial crisis can force developing countries off their growth trajectory. Financial crises have a substantial impact on enterprises through exchange rate depreciation in conjunction with exposure to loans in foreign currency, falling domestic demand and lower capacity utilization, and higher interest rates. Tracking the evolution of labour share in national income also shows that crises are damaging to labour. Based on Anne Harrison’s paper, Has Globalization Eroded Labor’s Share³, the authors note that rising trade shares and exchange rate crises reduce labour share while capital controls and government spending increase labour share.

Van der Hoeven suggested that in order to deal with the current anomalies, the international financial system must have three properties: liquidity, stability and policy autonomy for participating countries. He further identified three broad areas for policy coherence, namely policies in industrialized countries, multilateral rules and policies in developing countries. The WCSDG notes that globalization starts at home, therefore, policies in developing countries are critical. Developing countries should be integrated into the financial system but capital account liberalization should depend on a country’s particular circumstances. One solution for increasing growth and employment are flexible capital controls and a managed real effective exchange rate. One can also reduce the financial volatility and contagion in emerging markets by perhaps speeding up the supply of emergency financing.

Trade openness and stabilization policies have dampened worldwide inflationary tendencies. While prices are stable, assets are relatively unstable. Van der Hoeven and Lüebker find that national policy space is restricted by a so-called policy trilemma. The three factors: open capital accounts, stable exchange rates and independent monetary policy are difficult to achieve all at the same time; either something has to give, or further thought needs to be given to avoiding the corner solution, or perhaps the addition of more instruments is required. Polices that stem inequality, which in-turn help reduce inflationary pressures, are an example of national policy instruments that can be utilized to help undercut the policy trilemma. A coherent approach in national and international financial policies can stimulate employment growth; however, a consensus driven model, policy dialogue between the involved parties, and a reduction in inequalities⁴ play a key role in facilitating the implementation of these economic policies.

Discussion

Roger Baxter (Economic Advisor Unit, South Africa Chamber of Mines) noted that the organized business side welcomes this discussion. He went on to say that economics is not an exact science and that we need to be weary of generalizations. For example, he noted that it is a generalization to plainly say that labour share falls as FDI rises. It is also a generalization to assume that labour is immobile; the study does not look at diasporas or the mobility of human capital. In his response, van der Hoeven acknowledged that labour is mobile to an extent, but less so than capital.

With regards to the illustration of reserve holdings in developing countries, Baxter said that the result was not alarming, but we have to be prudent of the “China effect” for example. A number of countries keep currencies artificially weak to boost their manufacturing sectors. The speaker noted that the sequencing of policy reform is vital in building institutions and regulatory frameworks. Van der Hoeven agreed to the importance of sequencing pointing out that the study therefore provides different policy options.

Furthermore, Baxter pointed out that it may be that countries become more robust as a result of financial crises; that crises push countries into better risk management and better management of their financial systems. He disagreed with the idea that enterprises lose firm-specific human capital when workers are retrenched because firms maintain the most productive workers.

Finally, the speaker remarked that the adoption of a consensus driven model to ensure that appropriate polices are implemented is not always a workable model. Governments sometimes have to make harsh decisions that populations do not like as in the case of South Africa. In response, van der Hoeven stressed that consensus building is critical although he acknowledged that it is particularly difficult to deal with governance issues in non-democracies.

Robert P. Vos (UN-DESA) asked whether the impact of financial crises on the labour share is cyclical or permanent? Van der Hoeven responded by saying that it is permanent. Thinking out loud, Vos wondered if the labour share effect could be decomposed? In terms of the policy recommendations for industrialized countries, Vos wondered if exchange rate alignment would do the trick; these can perhaps be explored in further research?

Saleh Nsouli (IMF Office in Europe) pointed out that a quick reading of the paper without examining the caveats may give the impression that financial liberalization leads to financial crisis which in-turn is harmful for employment. This is of course not solely the case as a country’s internal weaknesses and governance issues are often culprits in sparking financial crises. A careful reading of the paper however reveals that in fact the authors advocate paying attention to internal factors. In his response, van der Hoeven agreed that national governance is a very important issue particularly in determining whether the policy trilemma exists.

It is the IMF’s contention that liberalization when performed in a gradual sequenced and carefully planned way can bring about significant benefits. Unemployment does not come from globalization, but from serious structural inadequacies and the political difficulties in addressing the inadequacies. Nsouli noted that the Fund’s medium-term strategy addresses how it can operate within a globalization framework. In conclusion, Nsouli cautioned against drawing the simple conclusion that financial liberalization is bad for employment.

Richard Kozul-Wright (UNCTAD) reiterated that there is a potentially negative impact of rapid and premature financial liberalization and premature de-industrialization as was the case in Brazil. He noted that one consequence of opening up is a shift from wage share to profits; nonetheless, profits are themselves a major source for investment. Van der Hoeven agreed that as wage share goes down, profit share goes up, but how much of this ends up in investment varies from country to country.

Marion Jansen (World Trade Organization) noted that research has been conducted on financial services liberalization, capital account liberalization and their potential effects on volatility and crises, as well as on globalization and the distribution between wage income and corporate profits. She said that she would be interested in hearing the ideas of ICFTU on this matter.

That one size does not fit all is of common knowledge; Luca Barbone (World Bank) pointed out that the issue at hand is whether good country diagnostics are in place to lead to the policy choices outlined by this study. He stressed that governance is an issue that requires persistent attention. Furthermore, the Bank’s World Development Report notes that equality of opportunity is critical to poverty reduction. In many countries where there is local elite capture of financial markets, the effect of liberalizing capital accounts and financial markets may be completely different. The bank is in the process of working on what equality of access and opportunity means ex-ante as opposed to ex-post.

To the point made in the presentation that capital is mobile and labour is not, Barbone pointed to the enormous body of research that discusses the importance of remittances. This new capital inflow is neglected in this study. It is important to look at where the world is headed with respect to remittances and how financial market changes can take these into account in a poverty reduction framework.

Peter Bakvis (ICFTU) acknowledged the important contribution that this study makes to the body of research on the subject. Bakvis opened with two points: First, he agreed that financial crises have a disproportionate impact on labour, and second, that when there is a recovery, labour markets, employment, and wage levels in particular, tend to lag behind GDP recovery. To the points made by the Bank and IMF, Bakvis said that in the past, the institutions did not pay due attention to domestic weaknesses. In fact, capital account liberalization was actually a condition of IMF membership leading up to the 1997 Hong Kong meeting. He sited the IMF’s conditional assistance to Chile as an example.

In response to Roger Baxter’s comments, Peter Bakvis felt the paper put too much emphasis on the negative impact of accumulating currency reserves and not enough on the positive impact. Furthermore, he asked what alternatives may be suggested in lieu of a consensus driven model, if as Baxter suggested, it is not workable? There are costs such as instability that are associated with not seeking consensus. Bakvis said that the ICFTU endorses the use of coordinated wage bargaining as a way to hold down inflation; however, it is worth underlining that the IMF and World Bank discourage coordinated wage bargaining.

Saleh Nsouli responded to Peter Bakvis by saying that while the IMF may have been aware of domestic weaknesses in some countries, the organization is not in a position to compel countries to change. Furthermore, as one cannot point to the specific factors that cause a crisis, it is particularly problematic to single out weaknesses that ought to be changed. Nsouli said that it is common conjecture that controls, such as capital or price controls, introduce distortions. He cautioned that the introduction of capital controls should be adopted very carefully when all other measures have failed; “this is not just IMF policy, but good policy,” he reiterated.

In closing the discussion of van der Hoeven’ s presentation, José Manuel Salazar-Xirinachs (Employment Sector, ILO) highlighted three areas for further policy coherence. First, he noted that understanding of financial liberalization – its accompanying policies and its impact, is not as refined as the understanding of lessons from trade liberalization. Salazar cited the example of Chile and noted that the country institutes a set of capital controls that have proved to be beneficial. Nonetheless, in trade negotiations, countries are often asked to weaken capital controls. This is a particular incoherence that ought to be addressed in future research. Second, Salazar agreed that addressing governance issues provides a promising opportunity for policy coherence. And finally, he asked how labour mobility could be characterized and he encouraged a closer look at the role of remittances.

Van der Hoeven observed that all participants agreed to the relevance of the issue of financial liberalization and he expressed his appreciation for the stimulating discussion and insightful comments.

Presentation 2: Analyzing the Distributional Impact of Reforms in Labour Market Regulations

Coudouel, Aline and Pierella Paci. 2005. Analyzing the Distributional Impact of Reforms in Labour Market Regulations. Washington DC: World Bank.

Presented by Pierella Paci (Poverty Reduction Group, World Bank)

Aline Coudouel and Pierella Paci’s paper is intended to be a chapter in a World Bank publication on the implications of reform for poverty reduction. The chapter uses as a launching board the insider-outsider theory developed by Lindbeck and Snower (1989) that contends that the labour market regime favours workers that are ‘inside’ the labour market while placing those that are ‘outside’ -- the unemployed and informal workers -- at a disadvantage. Similar to the idea of the ‘incumbent advantage’ in politics, Paci’s study is based on the notion that “labor market regulations may act as a double-edged sword by protecting the income levels and security of those employed -- the insiders -- while increasing the vulnerability of the rest of the population -- the outsiders -- who may face increasing barriers to employment and/or have only access to jobs in the uncovered sector of a typically dual labor market” (Coudouel and Paci, 2005; p.3).

The presentation noted the study’s objective to review the potential impact of employment protection legislation, minimum wage and unemployment benefits on the welfare and vulnerability of different groups of individuals and households. The exercise further looks at the potential format of a reform package and how it may impact the distribution of income and poverty. Paci noted that the increasing awareness of the importance of earnings in reducing poverty and promoting pro-poor growth prompted the World Bank’s interest in this issue. She illustrated that contrary to common belief, labour market regulations not only exist in several developing countries, but that they can have a significant impact on growth potential and susceptibility to poverty. Since labour is often the only asset that the poor have, employment plays a critical role in linking growth to poverty reduction. However, the world’s high number of working poor suggests that employment alone is not enough; decent wages, security, and employment conditions that are fair, are all critical factors.

In her presentation Paci laid out the terms of the contentious debate surrounding labour market regulations using the analogy that labour market regulations can be like medicines that are sometimes administered inappropriately; in such instances, they can do more harm than good. Citing the Bank’s publication “Pro-Poor Growth in the 1990s”, Paci noted that case studies of India, Bolivia, Indonesia and Romania illustrated that labour market regulations can reduce growth and the employment elasticity of growth. They can also increase informal employment and introduce labour market rigidities. Therefore, it becomes critical to determine what the optimal design and degree of intervention are, as well as the reforms that may be instituted to reach this optimal design and degree.

In the interest of time, the presentation only discussed employment protection legislation finding this type of legislation to be particularly difficult to reform because it needs the approval of the median voter who is likely to be an insider. With regards to minimum wage, the study also observes that while such regulation is intended to compress the wage distribution, it may not actually do so. Minimum wage legislation can lead to an increase in average wages, which are partly enjoyed by workers that earn more than minimum wage. Furthermore, the paper notes that the imposition of a minimum wage can reduce the demand for labour, thereby reducing employment. As for unemployment benefits, the paper cites evidence that reducing the generosity of unemployment benefits not only provides incentives for the unemployed to find work, but can also decrease labour taxation.

Discussion

Peter Bakvis responded to Paci’s presentation by noting that looking just at wage levels and employment is insufficient. Additionally, he suggested that the methodology of labour market inflexibility indices is faulty. For example, he noted that comparing the labour market rigidity in sub-Saharan Africa to that of the OECD is problematic. In several developing countries, the existence of labour rules does not matter as much as their enforcement. Furthermore, he noted that hours of work could be regulated in a number of ways, such as via collective bargaining mechanisms, and these are not accounted for in assigning the ‘penalty points’ in the indices. Africa for example receives penalty points for having maximum hours rules (while the rules are often not enforced) despite the fact that it does not have collective agreements that restrict hours as in other countries. Unemployment insurance may lead to disincentives to work, but many developing countries do not have unemployment insurance schemes. Bakvis noted that countries that do not have generous severance pay schemes sometimes use unemployment benefits to compensate; this and other such nuances are not captured by indices.

Unions recognize both the benefits and the costs of labour market regulations and are willing to make compromises. He noted however, that the presentation only focused on the negative role of employment protection legislation without acknowledging the benefits. While the insider- outsider analysis is conceptually interesting, Bakvis did not feel that it was particularly useful because the ILO and indeed the Bank’s World Development Report refers to the labour market as a constantly changing environment with people moving in and out.

In agreement, Robert Vos emphasized that while labour regulations may exist in a given country, the degree to which they are enforced varies tremendously. He added that labour market regulations may add rigidities, but there is a degree of ‘flexibility’ (e.g. flexible contracts) that has to be taken into account. Furthermore, he suggested linking this analysis with the impact of other social protection schemes to come up with a more complete cost benefit analysis. Finally, Vos remarked that outsiders could be made insiders through trade union organization.

Irmgard Nübler (IFP/Skills, ILO) observed that it is important to analyze the indirect impacts of labour market regulations that can be positive; for example, job security provisions may contribute to motivation which may in-turn lead to higher productivity. Furthermore, labour market regulations have been analyzed for a long time and aggregate data analysis has not thus far been successful in bringing a resolution to the debate – perhaps more detailed micro-level analysis is required.

Marion Jansen drew attention to the fact that the presentation and the paper do not discuss labour standards. She also raised the issue that maintaining skills and knowledge in an organization are important, and that greater research is needed to see how increasing flexibilization is changing the employment landscape?

Ajit Ghose (EMP/STRAT) remarked that the presentation deals with too many factors. He noted that different countries have different types of regulations and one could look further into whether labour regulations that exist in the formal sector in developing countries have a negative impact on employment growth. Ghose also noted that the formal sectors in developing countries are rather small so labour market regulations only really apply to a very small percentage of the population.

Manas Bhattacharya (Integration, ILO) brought to attention that an analysis of labour markets alone is a partial analysis. Regulations are often targeted at specific parts of the labour market; therefore, to generalize that labour market regulation relates to poverty at large is a large leap. The critical question this presentation raises is what might the optimal level of regulation be? Furthermore, growing informality has introduced a greater degree of flexibility into the system, but we do not see employment elasticity of growth rising.

Duncan Campbell drew attention to the link between tenure and productivity noting that the study does not take into account the positive effects of labour market regulations. Taking Campbell’s point further, Stephen Pursey (Cabinet, ILO) highlighted that there is a great deal of research that shows that labour markets do not function well without some degree of regulation; the question then becomes of how much regulation and what is good regulation? Furthermore, to say that the informal economy is unregulated is not accurate; in fact, the informal economy is subject to different types of informal regulation, which need to be explored in greater detail.

Roger Baxter noted that the impact of labour market regulations varies at different micro- levels. He made the point that there are costs associated not only with the actual reform of the regulation, but for organized business, there are costs of reforming retrenchment patterns. He also asked how one reconciles the rights of the insiders with those of the outsiders? Insiders have an incentive for short-run higher wages, for example, whereas outsiders have an interest in longer-term flexibility and maintaining standards. A detailed cost benefit analysis should take this into account.

Luca Barbone, as a representative of the World Bank, responded to some of the comments made in reaction to Pierella Paci’s presentation by pointing out that this is a “how to” chapter that is intended to analyze the poverty effects of reform. The practical purpose of such an exercise is to determine the analytic framework that governments ought to have when deciding to enact certain labour market reforms. He went on to say that just because labour regulations only apply to a small percentage of the population in developing countries, or because there are difficulties in determining what level of regulation is appropriate, does not mean that researchers can give up analysis of labour market regulations.

Paci reinforced this point stating that the intent of the paper is not to caste labour market regulations in a bad light or to imply that they should be gotten rid off; rather, the paper draws attention to the particular characteristics of labour markets in developing countries and encourages researchers to take a deeper look. In theory, what one would like to see is that everybody is an insider, however, the higher the restrictions, the more difficult it is for outsiders to become insiders. Empirical evidence suggests that regulations do restrict employment. The study does not talk about formal and informal workers, but rather about those that are covered and those that are not covered by formal regulations.

Presentation 3: Rethinking the Role of Foreign Direct Investment in Africa

Richard Kozul-Wright. 2005. Economic Development in Africa: Rethinking the Role of Foreign Direct Investment. Geneva: UNCTAD.

Presented by Richard Kozul-Wright (Department of Globalization & Development Strategies, UNCTAD)

Wright began by saying that FDI is often seen as the private capital of choice, but that his is a story that goes against conventional wisdom on FDI, for Africa in particular. FDI increased greatly after 1989 but Africa remained on the marginal fringes of this FDI boom. Over the years, Africa’s lack of FDI inflows was attributed to a number of factors including its inward oriented development, its governance struggles and to unfavourable geography. However, a detailed look at these factors suggests that the FDI Africa attracted is in enclaves of export-oriented primary production, using imported technology, with limited linkages to the rest of the economy and low reinvested profits. As such, the key point is that FDI in Africa is not tantamount to promoting development nor is it a surrogate for a dynamic investment climate. FDI is not the lead variable in the growth process, rather it is a lag variable.

The common assumption is that what is good for the investing country is good for the host, but there are costs associated with hosting FDI – these can be in terms of crowding out or strangulating local investment and/or access to technology to give an example. The question is not why does so little FDI go into Africa, but rather why does Africa attract FDI? Looking at FDI inflows per capita, the picture suggests that a vast majority of FDI in Africa goes to the primary sector. Over 50% of stocks are in the primary sector. The 24 African countries that are classified as oil and mineral dependent on average, accounted for 75% of the FDI inflows into Africa during the last two decades.

The shares of government revenue from the primary sector are very low in African countries; for example, the share of government revenue from the fuel industry in Chad is only 6.7%. Several economies are simply not in any shape to attract FDI. Many of them are faced with premature deindustrialization as explained in UNCTAD’s 2003 Trade and Development Report. Sub-Saharan Africa and Latin America are faced with a reduction in the share of employment taken by the manufacturing sector.

In light of these facts, the study proposes three main conclusions for policy makers to help resituate the role of FDI in African development. First, downsizing the role of the State and opening up its markets is not the solution. Second, complementary interactions with domestic investment in both private and public sectors are critical to supplement FDI and to establish an overall dynamic investment process. Third, the recent surges in FDI to the extractive sectors of some countries should be approached with caution as dependence on commodities for sustained growth can have a distortionary impact on other parts of the economy. Greater focus should be placed on internal integration rather than the current model focussed on external integration. What is needed is a more strategic and balanced approach with greater emphasis on appropriate industrial policies, more coherent fiscal policies to prevent a race to the bottom, and international action to create the policy space so that bargaining with transnational corporations brings maximum benefits.

Discussion

Luca Barbone agreed that FDI is not a panacea; but there have been cases, Botswana for example, where FDI had a significant bearing on the country’s direction. One cannot underestimate the problems that come about when there is a lack of property rights, rule of law, State capacity and productivity issues particularly in manufacturing. In certain cases where mining is the main industry, it may be that the government receives very low tax revenues from investors, but this is because the mines that have been inherited are old and dilapidated. Evidence suggests that countries that were successful in mining also had growth above the regional average.

Joe Ingram commented that the presentation did not focus enough on the costs associated with FDI. On the point of Chad, Ingram noted that the World Bank is in discussion with the Government of Chad; the original agreement with the World Bank was that 10% of oil revenues would be clearly earmarked for pro-poor policies. Nonetheless, in the last month, the Chad government has said that they want to use this money for military expenditures. While this move suggests poor governance, the Bank can do very little.

Peter Bakvis pointed out however that the Bank did not monitor the situation in Chad closely enough. The Civil Society Committee that was established to oversee government expenditures of oil revenues was ineffective – the oversight process was flawed from the beginning. Bakvis reiterated the importance of ensuring that there is a strong, accountable State to manage these programmes; otherwise he suggested, that the international community should not finance such projects.

K. Uno (UNIDO) agreed with the presenter in noting that there are many factors, other than FDI, that are important for growth and development in Africa. In 2001 UNIDO formed an African promotion agency to conduct research on pertinent issues such as strategies to optimize local linkages and capture spill over benefits; to explore how much FDI comes from Africa and from South-South investment; and how regional trade agreements can be better administered with development in mind. The most recent study was conducted in 2003.

In response, Wright agreed that mining plays an important role in Africa, but he went on to say that in a continent that is woefully short on formal employment, mining cannot serve as an engine of growth. The question is whether Africa can use its resources to develop a non-mining focussed development path? Regarding governance, Wright noted that it is not the only issue that explains why Africa has done poorly in attracting FDI. Measuring corruption is a difficult task, but it is not the explanation for Africa’s slow growth. China, for example, does not necessarily have good governance and established property rights, yet it is growing with enormous rapidity.

Presentation 4: The Impact of Globalization on the Informal Economy

Radhicka Kapoor. 2005. The Impact of Globalization on the Informal Economy: A Macro-level Cross Country Study. Geneva: ILO.

Presented by Radhicka Kapoor (Policy Integration Department, ILO)

This paper seeks to examine empirically the implications of globalization for the informal economy from a macro perspective. It does so by examining two measures -- namely the share of the informal economy in GNP and informal economy employment. The study found a statistically positive impact of globalization on informal economy employment and a significant negative impact on both the percentage contribution of the informal economy to GNP, and informal economy employment via its effect on the growth rate. These results suggest that while globalization initially increases employment in the informal economy, over time, growth resulting from globalization generates jobs in the formal economy thereby reducing employment in the informal economy. The time period for this process is however unspecified. Due to time constraints, participants were invited to respond to this presentation via e-mail.

Closing Remarks and Discussion of Ways to Move Forward

Duncan Campbell closed the meeting by thanking the participants and acknowledging that the meeting achieved its purpose in facilitating an exchange of knowledge between the participants, and in identifying gaps that can inspire further research. Some questions that warrant research moving forward are: What would an optimal level of labour market regulation be? What are the labour market effects of trade liberalization and what do adjustment policies look like? Campbell also noted that the WTO and ILO are conducting joint work on the informal economy. He proposed an electronic dialogue to come up with a specific theme for the next meeting.

Campbell asked the participants to suggest what the appropriate frequency of these meetings ought to be. Finally, he noted that the ILO would welcome the initiative of the other institutions to organize future meetings. He mentioned that it was suggested that the next Policy Coherence meeting may be held in Washington D.C. following the spring meeting of the international financial institutions.

¹ Identified according to their total FDI inflows during the 1990s; they are: China, Brazil, Mexico, China (Hong Kong SAR), Singapore, Argentina, Malaysia, Bermuda, Chile, Thailand, Rep. of Korea and Venezuela.

² Kaminsky et al. (2004): When it rains, it pours: Procyclical capital flows and Macro Economic policies. Cambridge, M.A.: NBER Working Paper No. 10780.

³ Harrison, Anne (2002): Has globalization eroded Labor’s Share? Some cross country evidence. Cambridge, M.A.: NBER, mimeo.

⁴ Van der Hoeven, Rolph and Catherine Saget (2004): ‘Labour Market Institutions and Income Inequality: What are the New Insights after the Washington Consensus?’, in: Giovanni Andrea Cornia (ed.), Inequality, Growth, and Poverty in an Era of Liberalization and Globalization. WIDER Studies in Development Economics. Oxford: Oxford University Press, pp. 197-220.