Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-09T03:33:07.442Z Has data issue: false hasContentIssue false
  • English
  • Français

Dependency Revisited: International Markets, Business Cycles, and Social Spending in the Developing World

Published online by Cambridge University Press:  24 April 2006

Erik Wibbels
Erik Wibbels
Affiliation:
University of Washington, ewibbels@u.washington.edu
Get access

Abstract

While increased exposure to the global economy is associated with increased welfare effort in the Organization for Economic Cooperation and Development (OECD), the opposite holds in the developing world. These differences are typically explained with reference to domestic politics. Tradables, unions, and the like in the developing world are assumed to have less power or interests divergent to those in the OECD—interests that militate against social spending. I claim that such arguments can be complemented with a recognition that developed and developing nations have distinct patterns of integration into global markets. While income shocks associated with international markets are quite modest in the OECD, they are profound in developing nations. In the OECD, governments can respond to those shocks by borrowing on capital markets and spending countercyclically on social programs. No such opportunity exists for most governments in the developing world, most of which have limited access to capital markets in tough times, more significant incentives to balance budgets, and as a result cut social spending at the times it is most needed. Thus, while internationally inspired volatility and income shocks seem not to threaten the underpinnings of the welfare state in rich nations, it undercuts the capacity of governments in the developing world to smooth consumption (and particularly consumption by the poor) across the business cycle.The author would like to thank Steph Haggard, Kristin Bakke, Wongi Choe, Tim Jones, and seminar participants at Duke University, Penn State University, Washington University, MIT, and the University of New Mexico for their helpful comments. Nancy Brune, Mark Hallerberg and Rolf Strauch, and Nita Rudra were very generous in providing their capital account, OECD fiscal, and potential labor power data, respectively.

Type
Research Article
Information
International Organization , Volume 60 , Issue 2 , April 2006 , pp. 433 - 468
Copyright
© 2006 The IO Foundation and Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Adserà, Alícia, and Carles Boix. 2002. Trade, Democracy, and the Size of the Public Sector: The Political Underpinnings of Openness. International Organization 56 (2):229–62.Google Scholar
Agénor, Pierre-Richard, C. John McDermott, and Eswar Prasad. 2000. Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts. World Bank Economic Review 14 (2):251–85.Google Scholar
Ahmed, Shaghil. 2003. Sources of Economic Fluctuations in Latin America and Implications for Choice of Exchange Rate Regimes. Journal of Development Economics 72 (1):181–202.Google Scholar
Albuquerque, Rui, Norman Loayza, and Luis Servén. 2003. World Market Integration Through the Lens of Foreign Direct Investors. Policy Research Working Paper 3060. Washington, D.C.: World Bank.
Beck, Nathaniel, and Jonathan N. Katz. 1995. What to Do (and Not to Do) with Time-Series Cross-Section Data. American Political Science Review 89 (3):634–47.Google Scholar
Boix, Carles. 1998. Political Parties, Growth, and Equality: Conservative and Social Democratic Economic Strategies in the World Economy. Cambridge: Cambridge University Press.
Borensztein, Eduardo, and Carmen Reinhart. 1994. The Macroeconomic Determinants of Commodity Prices. International Monetary Fund Staff Papers 41 (2):236–62.Google Scholar
Brown, David, and Wendy Hunter. 1999. Democracy and Social Spending in Latin America, 1980–92. American Political Science Review 93 (4):779–90.Google Scholar
Burgoon, Brian. 2001. Globalization and Welfare Compensation: Disentangling the Ties that Bind. International Organization 55 (3):509–51.Google Scholar
Calvo, Guillermo, Alejandro Izquierdo, and Luis-Fernando Mejía. 2004. On the Empirics of Sudden Stops: The Relevance of Balance-Sheet Effects. NBER Working Paper 10520. Cambridge, Mass.: National Bureau of Economic Research.
Cameron, David. 1978. The Expansion of the Public Economy: A Comparative Analysis. American Political Science Review 72 (4):1243–61.Google Scholar
Cardoso, Fernando Henrique, and Enzo Faletto. 1979. Dependency and Development in Latin America. Berkeley: University of California Press.
Comisión Económica Para América Latina (CEPAL). 1999. Social Panorama of Latin America, 1998–99. Santiago, Chile: CEPAL.
Comisión Económica Para América Latina (CEPAL). 2000. Social Panorama of Latin America, 1999–2000. Santiago, Chile: CEPAL.
Comisión Económica Para América Latina (CEPAL). 2003. Social Panorama of Latin America, 2002–2003. Santiago, Chile: CEPAL.
Coppedge, Michael. N.d. Latin American Party Systems Database. Unpublished data set, University of Notre Dame, South Bend, Ind. Available at 〈http://www.nd.edu/∼mcoppedg/crd/datalaps.htm〉. Accessed 23 January 2006.
Cornia, Giovanni, Richard Jolly, and Frances Stewart, eds. 1987. Adjustment with a Human Face. Oxford: Clarendon Press.
de Ferranti, David, Guillermo Perry, Indermit Gill, and Luis Servén. 2000. Securing Our Future in a Global Economy. Washington, D.C.: World Bank.
Dornbusch, Rudiger, and Sebastian Edwards. 1991. The Macroeconomics of Populism in Latin America. Chicago: University of Chicago Press.
Evans, Peter. 1979. Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil. Princeton, N.J.: Princeton University Press.
Galiani, Sebastian, and Pablo Sanguinetti. 2003. The Impact of Trade Liberalization on Wage Inequality: Evidence from Argentina. Journal of Development Economics 72 (2):497–513.Google Scholar
Garrett, Geoffrey. 1998. Partisan Politics in the Global Economy. Cambridge: Cambridge University Press.
Garrett, Geoffrey. 2001. Globalization and Government Spending Around the World. Studies in Comparative International Development 35 (4):3–29.Google Scholar
Garrett, Geoffrey, Nancy Brune, Alexandra Guisinger, and Jason Sorens. 2001. The Political Economy of Capital Account Liberalization. Working paper. Los Angeles: University of California Department of Political Science.
Garrett, Geoffrey, and Deborah Mitchell. 2001. Globalization, Government Spending and Taxation in the OECD. European Journal of Political Research 39 (2):145–77.Google Scholar
Gavin, Michael, Ricardo Hausmann, and Leonardo Leiderman. 1995. The Macroeconomics of Capital Flows to Latin America: Experience and Policy Issues. Working Paper 310. New York: Inter-American Development Bank.
Gavin, Michael, Ricardo Hausmann, Roberto Perotti, and Ernesto Talvi. 1996. Managing Fiscal Policy in Latin America and the Caribbean: Volatility, Procyclicality, and Limited Creditworthiness. Working Paper 326. New York: Inter-American Development Bank.
Gibson, Edward, and Ernesto Calvo. 2000. Federalism and Low-Maintenance Constituencies: Territorial Dimensions of Economic Reform in Argentina. Studies in Comparative International Development 35 (3):32–55.Google Scholar
Greene, William. 2003. Econometric Analysis. 5th ed. Upper Saddle River, N.J.: Prentice Hall.
Haggard, Stephan, and Robert R. Kaufman. 1995. The Political Economy of Democratic Transitions. Princeton, N.J.: Princeton University Press.
Hallerberg, Mark, and Rolf Strauch. 2002. On the Cyclicality of Public Finances in Europe. Empirica 29:183–207.Google Scholar
Hicks, Norman, and Quentin Wodon. 2000. Economic Shocks, Safety Nets, and Fiscal Constraints: Social Protection in Latin America. Unpublished manuscript. Washington, D.C., World Bank.
Huber, Evelyne, Francois Nielsen, Jenny Pribble, and John Stephens. 2004. Social Spending and Inequality in Latin America and the Caribbean. Paper presented at the Annual Meeting of the Society for the Advancement of Socio-Economics, Washington, D.C., July.
Inter-American Development Bank (IDB). 1995. Economic and Social Progress in Latin America: Overcoming Volatility. Washington, D.C.: IDB.
Inter-American Development Bank (IDB). 2005. Poverty and Equity Data. Available at 〈http://www.iadb.org/sds/doc/ApendtableA5.pdf〉. Accessed 23 January 2006.
International Monetary Fund (IMF). Various years. Government Finance Statistics. Washington, D.C.: IMF.
International Monetary Fund (IMF). Various years. Annual Report on Exchange Arrangements and Exchange Restrictions. Washington, D.C.: IMF.
International Monetary Fund (IMF). 2003. Global Financial Stability Report. Washington, D.C.: IMF.
Iversen, Torben, and Thomas R. Cusack. 2000. The Causes of Welfare State Expansion: Deindustrialization or Globalization? World Politics 52 (3):313–49.Google Scholar
Iversen, Torben, and David Soskice. 2002. Electoral Systems and the Politics of Coalitions: Why Some Democracies Redistribute More than Others. Paper presented at the Annual Meeting of the American Political Science Association, Boston, August–September.
Kaminsky, Graciela, and Carmen Reinhart. 2002. Financial Markets in Times of Stress. Journal of Development Economics 69 (2):451–70.Google Scholar
Kaminsky, Graciela, Carmen Reinhart, and Carlos Végh. 2004. When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies. Working Paper 10780. Cambridge, Mass.: National Bureau of Economic Research.
Kaufman, Robert, and Joan Nelson, eds. 2004. Crucial Needs, Weak Incentives: Social Sector Reform, Democratization, and Globalization in Latin America. Baltimore: Johns Hopkins University Press.
Kaufman, Robert, and Alex Segura-Ubiergo. 2001. Globalization, Domestic Politics and Social Spending in Latin America: A Time-Series Cross-Section Analysis, 1973–97. World Politics 53 (4):553–87.Google Scholar
Kingstone, Peter R. 1999. Crafting Coalitions for Reform: Business Preferences, Political Institutions, and Neoliberal Reform in Brazil. University Park: Pennsylvania State University Press.
Kitschelt, Herbert, Peter Lange, Gary Marks, and John D. Stephens, eds. 1999. Continuity and Change in Contemporary Capitalism. Cambridge: Cambridge University Press.
Kouparitsas, Michael. 1998. North-South Business Cycles. Federal Reserve Bank of Chicago Working Paper. Chicago: Federal Reserve Bank of Chicago.
Lagos, Marta. 2004. Latinobarometer Poll, 2004—Summary Report. Santiago, Chile.
Levitsky, Steven, and Lucan Way. 1998. Between a Shock and a Hard Place: The Dynamics of Labor-Backed Adjustment in Poland and Argentina. Comparative Politics 30:171–92.Google Scholar
Lindert, Peter. 2001. Voice and Growth: Was Churchill Right? Working Paper 9749. Cambridge, Mass.: National Bureau of Economic Research.
Mares, Isabela. 2003. The Sources of Business Interest in Social Insurance: Sectoral vs. National Difference. World Politics 55:229–58.Google Scholar
Marshall, Monty, and Keith Jaggers. 2005. Polity IV Project: Political Regime Characteristics and Transitions, 1800–2003. College Park, Md.: Integrated Network for Societal Conflict Research. Country Reports available at 〈http://www.cidcm.umd.edu/inscr/polity/report.htm〉. Accessed 23 January 2006.
Mendoza, Enrique. 1995. The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations. International Economic Review 36 (1):101–37.Google Scholar
Mesa-Lago, Carmelo. 1994. Changing Social Security in Latin America: Toward Alleviating the Social Costs of Economic Reform. Boulder, Colo.: Lynne Rienner.
Mosley, Layna. 2003. Global Capital and National Governments. New York: Cambridge University Press.
Musgrave, Richard. 1959. The Theory of Public Finance: A Study of Public Economy. New York: McGraw-Hill.
Mussa, Michael. 2002. Argentina and the Fund: From Triumph to Tragedy. Washington, D.C.: Institute for International Economics.
Nelson, Joan. 1992. Poverty, Equity, and the Politics of Adjustment. In The Politics of Economic Adjustment, edited by Stephan Haggard and Robert Kaufman, 221–69. Princeton, N.J.: Princeton University Press.
Organization for Economic Cooperation and Development (OECD). 2004. Social Expenditure database (SOCX), 1980–2001. Paris: OECD. Available at 〈http://www.oecd.org/document/2/0,2340,en_2649_34635_31612994_1_1_1_1,00.html〉. Accessed 23 January 2006.
Pierson, Paul. 1994. Dismantling the Welfare State? Reagan, Thatcher, and the Politics of Retrenchment. New York: Cambridge University Press.
Quinn, Dennis. 1997. The Correlates of Change in International Financial Regulation. American Political Science Review 91 (3):531–51.Google Scholar
Remmer, Karen. 2002. The Politics of Economic Policy and Performance in Latin America. Journal of Public Policy 22 (7):29–59.Google Scholar
Roberts, Kenneth, and Erik Wibbels. 1999. Party Systems and Electoral Volatility in Latin America: A Test of Economic, Institutional and Structural Explanations. American Political Science Review 93 (3):575–90.Google Scholar
Rodrik, Dani. 1997. Has Globalization Gone Too Far? Washington, D.C.: Institute for International Economics.
Rodrik, Dani. 1999. Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses. Journal of Economic Growth 4 (4):385–412.Google Scholar
Rudra, Nita. 2002. Globalization and the Decline of the Welfare State in Less-Developed Countries. International Organization. 56 (2):411–45.Google Scholar
Samuels, David. 2003. Fiscal Straightjacket: The Political Economy of Macroeconomic Reform in Brazil, 1995–2002. Journal of Latin American Studies 35 (3):1–25.Google Scholar
Servén, Luis. 2002. Real Exchange Rate Uncertainty and Investment in Developing Countries. Policy Research Working Paper 2823. Washington, D.C.: World Bank.
Skidmore, Thomas E. 1977. The Politics of Economic Stabilization in Postwar Latin America. In Authoritarianism and Corporatism in Latin America, edited by James M. Malloy, 149–90. Pittsburgh: University of Pittsburgh Press.
Stallings, Barbara. 1992. International Influence on Economic Policy: Debt, Stabilization, and Structural Reform. In The Politics of Economic Adjustment: International Constraints, Distributive Conflicts, and the State, edited by Stephan Haggard and Robert R. Kaufman, 41–88. Princeton, N.J.: Princeton University Press.
Swank, Duane. 2002. Global Capital, Political Institutions, and Policy Change in Developed Welfare States. New York: Cambridge University Press.
Talvi, Ernesto, and Carlos Végh. 2000. Tax Base Variability and Procyclical Fiscal Policy. NBER Working Paper 7499. Cambridge, Mass.: National Bureau of Economic Research.
Tornell, Aaron, and Philip Lane. 1999. The Voracity Effect. American Economic Review 89:22–46.Google Scholar
United Nations Conference on Trade and Development (UNCTAD). 2003. Trade and Development Report, 2003: Capital Accumulation, Growth and Structural Change. Available at 〈www.unctad.org〉. Accessed 6 October 2003.
Universidad de Lima. 2003. “Perúmetro 6: Situación Económia y Empresarial del Perú: Opinión de los Líderes Empresariales.” Available at 〈http://www.ulima.edu.pe/webulima.nsf/default/4BE58345536EB3BC05256E630017BCED/$file/bemp4.pdf〉. Accessed 23 January 2006.
Waterbury, John. 1993. Exposed to Innumerable Delusions: Public Enterprise and State Power in Egypt, India, Mexico, and Turkey. Cambridge: Cambridge University Press.
Wibbels, Erik, and Moisés Arce. 2003. Globalization, Taxation, and Burden-Shifting in Latin America. International Organization 57 (1):111–36.Google Scholar
World Bank. 1990. World Development Report 1990: Poverty. Washington, D.C.: World Bank.
World Bank. 2000a. World Development Indicators. CD-ROM. Washington, D.C.: World Bank.
World Bank. 2000b. World Development Report 2000: Attacking Poverty. Washington, D.C.: World Bank.
World Bank. 2004. World Development Indicators. CD-ROM. Washington, D.C.: World Bank.