The dramatic expansion of international trade and investment over the last six decades has likely promoted economic efficiency. However, the implication for the

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I stand here with deeply conflicting emotions. I am honored to be delivering this prestigious lecture. I am profoundly sad that Rudi Dornbusch, who should have delivered the Ely Lecture, died in July last year and that I am here in his place. So I would like to start by talking about Rudi. Rudi was born and grew up in Krefeld, Germany. He was an undergraduate at the University of Geneva and completed his Ph.D. at the University of Chicago in 1971, which is where we met. He was a student of Robert Mundell, and both the subject matter (the development of the Mundell-Fleming model) and the elegance and insights of his early work reflected Mundell’s influence. He taught at the University of Rochester and at the University of Chicago before accepting an offer from MIT in 1975. In 1976, soon after coming to MIT, Rudi wrote his most famous and influential theoretical article, “Expectations and Exchange Rate Dynamics. ” As Ken Rogoff (2002 p. 1) said in his celebratory lecture on the 25th anniversary of its publication, “The ‘overshooting ’ paper... marks the birth of modern international macroeconomics.” From the late 1970’s, Rudi became increasingly interested in policy issues. Within a decade, he had become one of the outstanding

In this paper we present two composite indices of globalization. The first is based on the Kearney/Foreign Policy magazine and the second is obtained from principal component analysis. They indicate which countries have become most globalized and show how globalization has developed over time. The indices are composed of four components: economic integration, personal contact, technology and political engagement, each generated from a number of variables. A breakdown of the index into major components provides possibilities to identify sources of globalization and associate it with economic policy measures. The empirical results show that a low rank in the globalization process is due to political and personal factors with limited possibility for the developing countries to affect. The high ranked developed countries share similar patterns in distribution of various components. The indices were also used in a regression analysis to study the causal relationship between income inequality and globalization. Globalization indices explain only 7 to 11 per cent of the variations in income inequality among countries.

International integration strengthening intra-industrial trade may have important implications for employment, wages and inequality. The reason is that product market integration enhances export possibilities through easier access to foreign markets, but also import threats arising from foreign firms entering the domestic market. We explore the implications of these mechanisms in a genereal equilibrium version of a Ricardian trade model allowing for heterogeneity and imperfect competition in both product and labour markets. International integration is interpreted as a reduction in trade frictions. We find that wage dispersion may increase or be U-shaped in product market integration, that is, further integration may first lower and then increase wage dispersion. This finding has important implications not only for the "globalization " debate, but also for empirical analysis. JEL:F15,J39,J50.

This paper evaluates theories aiming to explain the size and growth of government spending, develops a framework inclusive of the so-called guns vs. butter tradeoff effect, and offers insights especially for the period 1870-1938. There were differences between the excessive and responsive government explanations, and between the long-run and short-run explanations, as well as cross-section and time series approaches. Here central government spending, conditioned by the regime characteristics, is proposed to be analyzed on the basis of the demand characteristics of military spending and social spending, their interaction, public debt constraints, as well as institutional constraints and other environmental variables. Do not quote without the author’s permission! 1