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

16 Pages Posted: 15 Jul 2012 Last revised: 16 Jul 2022

See all articles by Michael P. Dooley

Michael P. Dooley

University of California at Santa Cruz; National Bureau of Economic Research (NBER)

David Folkerts-Landau

Deutsche Bank, London; National Bureau of Economic Research (NBER)

Peter M. Garber

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2004

Abstract

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.

Suggested Citation

Dooley, Michael P. and Folkerts-Landau, David and Garber, Peter M., Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery (July 2004). NBER Working Paper No. w10626, Available at SSRN: https://ssrn.com/abstract=2107100

Michael P. Dooley (Contact Author)

University of California at Santa Cruz ( email )

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David Folkerts-Landau

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Peter M. Garber

Brown University - Department of Economics ( email )

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