Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery

   (275 K)

This paper sets out the political economy behind Asian governments' participation in a revived Bretton Woods System. The overriding problem for these governments is to rapidly integrate a large pool of underemployed labor into the industrial sector. The principal constraints are inefficient domestic resource and capital markets, and resistance to import penetration by labor in industrial countries. The system has evolved to overcome these constraints through export led growth and growth of foreign direct investment. Periphery governments' objectives for the scale and composition of gross trade in goods and financial assets may dominate more conventional concerns about international capital flows.

Published:

• Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "Direct investment, rising real wages and the absorption of excess labor in the periphery," Proceedings, Federal Reserve Bank of San Francisco, issue Feb. ,
• Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery, Michael P. Dooley, David Folkerts-Landau, Peter Garber, in G7 Current Account Imbalances: Sustainability and Adjustment (2007), University of Chicago Press
  

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