ASCENT AFTER DECLINE Regrowing Global Economies after the Great Recession

322 Pages·2012·4.24 MB·English

by  World Bank Group

d OTAVIANO CANUTO AND DANNY M. LEIPZIGER, EDITORS
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ASCENT

AFTER DECLINE

ASCENT
AFTER DECLINE
Regrowing Global Economies
after the Great Recession
OTAVIANO CANUTO
AND
DANNY M. LEIPZIGER
© 2012 The International Bank for Reconstruction and Development / International Development
Association or The World Bank
1818 H Street NW
Washington DC 20433
Telephone: [phone]
Internet: www.worldbank.org
All rights reserved
1 2 3 4 15 14 13 12
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ISBN: 978-0-8213-8942-3
eISBN: 978-0-8213-8943-0
DOI: 10.1596/978-0-8213-8942-3
Library of Congress Cataloging-in-Publication Data
Ascent after decline: regrowing global economies after the great recession / edited by Otaviano
Canuto and Danny Leipziger.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8213-8942-3—ISBN 978-0-8213-8943-0 (electronic)
1. Economic policy. 2. Economic development. 3. Recessions. 4. Global Financial Crisis,
2008–2009. I. Canuto, Otaviano. II. Leipziger, Danny M. III. World Bank.
HD87.A754 2011
338.9—dc23
2011040045
Cover illustration: Michael S. Geller, An Idea of Order, 2010, oil on canvas, 36'' (cid:2) 36''
Cover design: Drew Fasick
Photo credit: David Scavone
Contents
About the Editors and Contributors xi
Preface xv
Acknowledgments xix
Abbreviations xxi
Part 1 Diagnosing the Challenges 1
1 The Challenges of Growth 3
by Otaviano Canuto, Danny M. Leipziger, and Brian Pinto
2 Rebalancing Global Growth 35
Menzie Chinn, Barry Eichengreen, and Hiro Ito
3 Fiscal Policy and Growth:
Overcoming the Constraints 87
Carlo Cottarelli and Michael Keen
4 Infrastructure Policy for Shared
Growth Post-2008: More and Better,
or Simply More Complex? 135
Antonio Estache
Part 2 The Way Forward 179
5 Rethinking Growth and the State 181
Philippe Aghion and Julia Cagé
v
vi Contents
6 Financial Shocks and the Labor Markets:
Should Economic Policy Save Jobs? 201
Tito Boeri and Pietro Garibaldi
7 Information Technology, Globalization,
and Growth: The Roles of Scale
Economies, Terms of Trade, and Variety 219
Catherine L. Mann
8 Innovation-Driven Growth: Analytical
Issues and Policy Implications 247
Paolo Guerrieri and Pier Carlo Padoan
Index 281
Box
1.1 Policy Challenges for the G-20 9
Figures
2.1 Current Account Balances, 1996–2016 37
2.2 U.S. Saving, Investment, and Current Account,
1968–2011 38
2.3 Current Account Balance as a Percentage of
Euro Area GDP, 1995–2010 41
2.4 Out-of-Sample Current Account Predictions for
Selected Countries, 2011–15 63
2.5 Out-of-Sample Current Account Predictions for
Selected Countries, 2006–08 and 2011–15 66
2.6 U.S. Current Account Projections under Three
Scenarios 70
2.7 Chinese Current Account Projections under
Liberalization of Financial Markets 71
2.8 Chinese Current Account Projections under
Liberalization and Development of Financial Markets 73
3.1 General Government Balances in Group of Seven
Economies, 1998–2007 90
Contents vii
3.2 General Government Debt in Group of Seven
Economies, 1950–2007 92
3.3 Predicted Old-Age Dependency Ratio, 2009–50 93
3.4 Projected Pension Spending with and
without Reforms, 2010–30 93
3.5 General Government Debt in Emerging Economies,
1998–2007 94
3.6 General Government Balances and Debt in
Advanced vs. Emerging Economies, 2007–15 95
3.7 General Government Net Debt Projections for
Advanced Economies, Projected to 2030 96
3.8 Precrisis and Postcrisis Output in Advanced
Economies, Projected to 2014 97
3.9 Actual and Debt-Stabilizing General Government
Primary Balances, by Debt Ratio, 2010 98
3.10 Scenarios for Primary Balance Adjustment and Debt
in Advanced and Emerging Economies, 2007–30 101
3.11 Corporate Income Tax Statutory Rates and
Revenue in OECD Countries, 1985–2008 122
4.1 PPI Commitments to Infrastructure Projects in
Developing Countries, by Implementation Status,
1990–2009 150
5.1 Relation between University Output and
Autonomy in Selected European Countries 183
5.2 Relation between Changes in Inherited Trust and
Per Capita Income, 1935–2000 191
5.3 Relation between Distrust and Extent of
Entry Regulation 192
5.4 General Government Balances of Selected
Countries, 2007 vs. 2009 194
5.5 Gross Government Debt of Selected Countries,
2007 vs. 2009 195
5.6 Relation between Taxation and Growth in
High-Corruption OECD Countries 196
5.7 Relation between Taxation and Growth in
Low-Corruption OECD Countries 197
6.1 U.S. and Euro Area Unemployment Rates, 2000–10 202
viii Contents
6.2 Stock Market Capitalization and Unemployment,
Euro Area and United States, 2000–10 204
6.3 Unemployment-to-Output Response in G-7 Countries 206
6.4 Employment-to-Output Elasticities in Advanced
Countries, by Recession Type 208
7.1 Transformative Technology and Social Surplus 223
7.2 Growth and International IT Trade: The Hypotheses 232
7.3 Growth and International Trade in IT: The Calculations 233
7.4 Social Surplus and IT Trade in Selected Economies,
2000–07 235
7.5 Variety vs. Concentration in Product Trade,
Selected Countries 239
8.1 Real Income Sources in Europe and Japan
Compared with the United States, 2007 255
8.2 E ff ects of Deregulation and Harmonization on
Selected Variables 268
8.3 E ff ect of a 5 Percent Increase in Human Capital on
Selected Variables 269
8.4 Comparative Eff ects of Policy Scenarios on Output 270
8.5 Impact of Structural Changes on Selected Variables 272
8.6 Cost of Delaying Deregulation 273
8.7 A ggregate Eff ect of Coordinated Policies:
Increasing Human Capital and Deregulation 274
Tables
2.1 Fiscal Adjustment in the Euro Area, 2010–11 42
2.2 Actual and Projected Current Account Balances
in the Euro Area, 2008–16 43
2.3 Current Account Regression without Institutional
Variables 55
2.4 National Saving and Investment Regression without
Institutional Variables 57
2.5 Current Account Regression with Institutional Variables 59
2.6 National Saving and Investment Regression with
Institutional Variables 60
2A.1 Mnemonics for Variables in Analysis 79