This paper demonstrates that there is a robust empirical association between the extent to which an economy is exposed to trade and the size of its government sector. This association holds for a large cross-section of countries, in low- as well as high-income samples, and is robust to the...

To explain the fact that government spending and tax policy are procyclical in emerging and developing countries, we develop a model for the joint behavior of optimal tax rates and government spending over the business cycle. Our set-up relies on financial frictions, which have been shown to be...

We contribute to the debate on the macroeconomic effects of fiscal stimuli by showing that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a...

It is well-known by now that government spending has typically been countercyclical in industrial countries and procyclical in developing economies. Most of this literature has focused on analyzing aggregate government spending or discretionary spending categories such as government consumption...

International economic integration increases exposure to external risk and intensifies domestic demands for social insurance through government programs. But international economic integration also reduces the ability of governments to respond to such pressure by rendering the tax base...

This paper explores the implications for less developed countries the hypothesis that workers' productivity depends on the wages they receive. In particular, we show that this hypothesis may explain the high urban wages and unemployment found in many such countries. The market equilibrium is...

Many of the exports of developing countries are channeled through global value chains (GVCs), which also act as conduits for new technologies. However, new capabilities and productive employment remain limited so far to a tiny sliver of globally integrated firms. GVCs and new technologies...

Progress in artificial intelligence and related forms of automation technologies threatens to reverse the gains that developing countries and emerging markets have experienced from integrating into the world economy over the past half century, aggravating poverty and inequality. The new...

The focus of policy reform in developing countries has moved from getting prices right to getting institutions right, and accordingly countries are increasingly being advised to move towards "best-practice" institutions. This paper argues that appropriate institutions for developing countries...