New Economy in Progress

Globalization produces discontent and policy needs to take costs and compensation more seriously.


Leider ist der Eintrag nur auf Amerikanisches Englisch verfügbar.

Read Part 1: Making Globalization work for all: The Challenge

Read Part 2: Making Globalization work for all: What went wrong?

Harvard economist Dani Rodrik has been one of the first and most famous economists to have warned that globalization may have quite negative impacts. Rather early Rodrik pointed out the losers as well as the shrinking gains from liberalizing trade when countries have reached a certain level of integration (Rodrik, 1998). Today, there is an emerging consensus among critical economists that liberalizing trade ever more cannot become an end to itself. Even the formerly highly orthodox OECD has recently published an entire report on “making trade work for all” (OECD, 2017). In practice, the reduction and harmonization of trade barriers has also had a detrimental impact on employment and wages in many regions around the world. While theoretically the winners could have compensated the losers for their losses, in practice this has never happened. New research tries to better understand the impacts of globalization and it evaluates adequate policy tools to cope with the negative effects of trade liberalization. While it is difficult to imagine another shock as severe as the integration of China into the global economy, there still seems to be a lot to learn for the future. The rise in employment of robots and artificial intelligence, for example, might very well be comparable in terms of its disruptive impact on labor markets.

Currently discussed policy recommendations to better manage globalization include the following:

  • Labor market and distribution policies: International organizations such as the OECD (2017), IMF, World Bank and WTO (2017) have called for more active labor market policies, such as training programs and job search assistance, as well as more effective redistribution through social insurance and income support programs. Some academics like Branko Milanovic have gone further and called for a broader redistribution of the gains from globalization, for example through the introduction of an inheritance tax (Milanovic, 2017).
  • Macroeconomic policies: For workers displaced by globalization a lot of distress can be alleviated if these workers can quickly acquire new employment. Because it is easier for workers to find a job during periods of growth, it has been suggested that macroeconomic policies should be used to stabilize economic growth (IMF, World Bank and WTO, 2017).
  • Regional policies: Regions are affected differently by a trade shock. Regions that have a high concentration of export-competing industries may gain, while regions facing strong import-competition may lose from the liberalization of trade. Some authors have therefore suggested that regional policies should be employed to promote businesses in depressed areas (IMF, World Bank and WTO, 2017; Südekum, 2017).
  • “Shallow” trade agreements: Some authors have argued that the efficiency gains from further trade liberalization are relatively small, whereas the distributional effects are relatively large. Dani Rodrik (2016) has argued that policy makers should refrain from “deep” trade agreements. However, this is still a fringe opinion.
  • Increasing cross-border labor mobility: Some authors have argued for allowing more workers to migrate from poor to rich countries. Rodrik (2016) and Milanovic (2017) argue that the benefits from large, but controlled migration flows come at relatively little distribution costs.
  • Industrial policies in developing countries: Other authors have emphasized the need for industrial policies, such as government support, subsidies or protectionism of selected industries in developing countries (Chang, 2002).

This knowledge base tries to summarize the broad lines of the paradigm debate for a broader public. The goal is to continuously expand and improve the knowledge base as it becomes progressively clearer what a new paradigm could consist of.


  • Adam, M. C. (2019). Return of the tariffs: The interwar trade collapse revisited. Freie Universität Berlin, School of Business & Economics Discussion Paper, (8).
  • Alston, R. M., Kearl, J. R., & Vaughan, M. B. (1992). Is There a Consensus among Economists in the 1990's? The American Economic Review, 82(2), 203-209.
  • Alvaredo, F., Chancel, L., Piketty, T., Saez, E., & Zucman, G. (Eds.). (2018). World inequality report 2018. Belknap Press.
  • Autor, D., Dorn, D., Hanson, G., & Majlesi, K. (2016). Importing political polarization? The electoral consequences of rising trade exposure (No. w22637, pp. 936-53). Cambridge, MA: National Bureau of Economic Research.
  • Chang, H. J. (2002). Kicking away the ladder: development strategy in historical perspective. Anthem Press.
  • Dauth, W., Findeisen, S., & Suedekum, J. (2014). The rise of the East and the Far East: German labor markets and trade integration. Journal of the European Economic Association, 12(6), 1643-75.
  • Dippel, C., Gold, R., Heblich, S., & Pinto, R. (2019). Instrumental Variables and Causal Mechanisms: Unpacking the Effect of Trade on Workers and Voters.
  • Dullien, S. (2018). Shifting Views on Trade Liberalisation: Beyond Indiscriminate Applause. Intereconomics, 53(3), 119-24.
  • Franz, C., Fratzscher, M., & Kritikos, A. (2019). Grüne und AfD als neue Gegenpole der gesellschaftlichen Spaltung in Deutschland. DIW-Wochenbericht, 86(34), 591-602.
  • Funke, M., Schularick, M., & Trebesch, C. (2016). Going to extremes: Politics after financial crises, 1870–2014. European Economic Review, 88, 227-60.
  • International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO). (2017). Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment.
  • Kindleberger, C. P. (1986). The world in depression, 1929-1939 (Vol. 4). Univ of California Press.
  • Lakner, C., & Milanovic, B. (2013). Global income distribution: From the fall of the Berlin Wall to the Great Recession. The World Bank.
  • New York Times (2015). Economists actually agree on this point: The wisdom of free trade.
  • Milanovic, B. (2016). Global inequality: A new approach for the age of globalization. Harvard University Press.
  • Monnat, S. M. (2016). Deaths of despair and support for Trump in the 2016 presidential election. Pennsylvania State University Department of Agricultural Economics Research Brief, 5.
  • Monnat, S. M., & Brown, D. L. (2017). More than a Rural Revolt: Landscapes of Despair and the 2016 Presidential Election. Journal of rural studies, 55, 227-36.
  • New York Times (2016). Transcript: Donald Trump’s Foreign Policy Speech.
  • OECD (2017). Making Trade Work for All.
  • Rodrik, D. (1998). Has globalization gone too far?. Challenge, 41(2), 81-94.
  • Rodrik, D. (2017). Straight talk on trade: Ideas for a sane world economy. Princeton University Press.
  • Südekum, J. (2017). Die Globalisierungsverlierer kompensieren—aber wie?. Wirtschaftsdienst, 97(8), 566-70.
  • Tooze, A. (2015). The deluge: the Great War, America and the remaking of the global order, 1916-1931. Penguin Group USA.
  • Tooze, A. (2018). Crashed: How a decade of financial crises changed the world. Penguin.
  • Washington Post (2019)

Diese Webseite verwendet u.a. Cookies zur Analyse und Verbesserung der Webseite, zum Ausspielen personalisierter Anzeigen und zum Teilen von Artikeln in sozialen Netzwerken. Unter Datenschutz erhalten Sie weitere Informationen und Möglichkeiten, diese Cookies auszuschalten.