Recent NBER Reports

Recent NBER reports include:

• Globalization and Democracy
• Why Have Corporate Tax Revenues Declined? Another Look
• Openness and Industrial Response in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers

Globalization and Democracy
by Barry Eichengreen

Abstract:
The connections between globalization and democracy are a classic question in international political economy and a topic much debated in foreign policy circles.  While the analytical literature is extensive, few previous studies have acknowledged the possibility of bidirectional causality or developed an instrumental variables strategy suitable for addressing it.  We do so in this paper and apply our approach to an extensive historical data set.  The results suggest the existence of positive relationships running both ways between globalization and democracy, though exceptions obtain at particular times (during the Bretton Woods era) and places (in labor scarce economies).

Why Have Corporate Tax Revenues Declined? Another Look
by Alan J. Auerbach

Abstract:
As a share of GDP, U.S. federal tax revenues from nonfinancial corporations have held relatively constant since the early 1980s, after falling precipitously during the late 1960s and the 1970s.  But this relative constancy masks offsetting trends in the ratio of nonfinancial C corporation profits to GDP (declining) and the average tax rate on these profits (increasing).  The average tax rate rose steadily between 1996 and 2003, an increase largely attributable to an unprecedented rise in the importance of tax losses. This rise casts some doubt on the importance of tax planning activities as a vehicle for reducing corporate taxes.  So, too, does the relative stability of the rate of profit (relative to net assets), which might be expected to have declined had the understatement of profits for tax purposes been increasing. 

Openness and Industrial Response in a Wal-Mart World: A Case Study of Mexican Soaps, Detergents and Surfactant Producers
by Beata Smarzynska Javorcik, Wolfgang Keller, James R. Tybout

Abstract:
This paper uses a case study approach to explore the effects of NAFTA and GATT membership on innovation and trade in the Mexican soaps, detergents and surfactants (SDS) industry.  Several basic findings emerge.  First, the most fundamental effect of NAFTA and the GATT on the SDS industry was to help induce Wal-Mart to enter Mexico.  Once there, Walmex fundamentally changed the retail sector, forcing SDS firms to cut their profit margins and/or innovate.  Those unable to respond to this new environment tended to lose market share and, in some cases, disappear altogether.  Second, partly in response to Walmex, many Mexican producers logged impressive efficiency gains during the previous decade.  These gains came both from labor-shedding and from innovation, which in turn was fueled by innovative input suppliers and by multinationals bringing new products and processes from their headquarters to Mexico.  Finally, although Mexican detergent exports captured an increasing share of the U.S. detergent market over the past decade, Mexican sales in the U.S. were inhibited by a combination of excessive shipping delays at the border and artificially high input prices (due to Mexican protection of domestic caustic soda suppliers).  They were also held back by the major re-tooling costs that Mexican producers would have had to incur in order to establish brand recognition among non-Latin consumers, and in order to comply with zero phosphate laws in many regions of the United States.