Recent contributions on offshoring often assume that firms can freely split their production process into separate steps which can be ranked according to the cost savings from producing abroad. We replace this assumption by the notion of a technologically determined sequence of production steps....

In this paper, we develop a two-sector general equilibrium trade model which includes offshoring, sequential production, and endogenous market structures. We analyze how relative factor endowments and various forms of globalization and technological change affect equilibrium offshoring patterns....

We present a model of growth and distributional conflict that implies a non-monotonic relationship between average wealth and the likelihood of radical redistribution: while the net benefits of redistribution for members of the poor class are small at low stages of development, a shift towards...

We use a dynamic general-equilibrium model to study how removing barriers to competition in the nontraded goods sector affects the current account of a small open economy. We show that the expansion of the nontraded sector that results from such a "deregulation shock" is associated with an...

Does official aid pave the road for private foreign investment or does it suffocate private initiative by diverting resources towards unproductive activities? In this paper we explore this question using data for a large number of developing and emerging economies. Controlling for countries'...

We explore whether foreign aid affects developing countries' creditworthiness, as proxied by the Institutional Investor's measure of country credit risk. Based on a simple model of international borrowing and lending, we develop the hypothesis that current aid reduces the likelihood of future...

Recent studies on the growth effects of exchange rate regimes offer a wide range of different, sometimes contradictory results. In this paper, we systematically compare three prominent contributions in this field. Using a common data set, a common specification, and common estimation methods, we...

We argue that increased foreign borrowing by the private sector reduces the risk that a developing country's government defaults on its foreign debt. We present a simple model in which private foreign borrowing reflects a surge of private entrepreneurship. A larger "entrepreneurial class" raises...

It is often argued that capital should flow from aging industrialized economies to countries with fast-growing populations. However, institutional failures and the risk of expropriation substantially reduce developing economies' attractiveness for foreign investors. We analyze the influence of a...

We argue that a higher share of the private sector in a country's external debt raises the incentive to stabilize the exchange rate. We present a simple model in which exchange rate volatility does not affect agents' welfare if all the debt is incurred by the government. Once we introduce...