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Firms' increasing possibilities to offshore jobs to other countries have created new risks as well as new opportunities for workers across the world. We analyze the political conse-quences of this development in advanced capitalist democracies. Building on new develop-ments in trade theory, we argue that low-skilled individuals in easily offshorable occupa-tions face increasing labor market risks, whereas highly educated individuals mainly benefit from the opportunities generated by the increasing possibility to organize production pro-cesses internationally. This affects workers' policy and partisan preferences. Since job off-shorability increases low-skilled workers' demand for social and economic protection, it in-creases their propensity to vote for left parties. Among high-skilled workers, higher levels of job offshorability should increase their their tendency to vote for liberal and center parties. In contrast, offshorability should not be an important issue for partisan preferences for right-wing and green parties. We test our argument with individual-level data from multiple waves of the European Social Survey for a sample of 25 countries and find evidence in favor of our hypotheses. This suggests that globalization has the potential to directly affect demo-cratic policymaking in capitalist democracies. [ABSTRACT FROM AUTHOR]

Why are some policymakers able to adjust their policies in response to deteriorating economic conditions, while other policymakers delay adjustment as long as possible, a policy path that typically ends with an economic crisis? This paper examines this question by focusing on the area of exchange-rate policy, where delayed devaluations frequently end with a currency crisis. I argue that distributional concerns can create strong incentives for policymakers to delay adjustment as long as possible. These incentives are particularly strong when politically influential actors are vulnerable to exchange-rate adjustment and exchange-rate stability can be maintained without a tightening of monetary policy. Since delaying adjustment allows the misalignment to accumulate, however, the costs of adjustment rise and further decrease political incentives to reform. This can cause a negative spiral of delayed reform that is exacerbated by institutions that make adjustment more politically costly. When market pressures escalate, agents reevaluate their policy preferences based on the trade-off between their vulnerability to depreciation and their vulnerability to interest-rate increases. When aversion to internal adjustment is high, a currency crash becomes the most likely outcome. The paper compares the build-up and management of the Asian Financial Crisis to the current financial turmoil and currency crises occurring in Iceland, Hungary and Latvia. [ABSTRACT FROM AUTHOR]

Why do policymakers respond differently to speculative exchange market pressure on their cur-rencies? When deciding about defending or depreciating their currencies against such pressure, policymakers consider private sector vulnerabilities to a depreciation and monetary tightening. These vulnerabilities differ between periods of mild and severe pressure. Faced with mild pres-sure, interest groups evaluate the effects of the two policy options based only on their vulnerabil-ity to depreciation. Only when pressure intensifies, they increasingly take the trade-off between their depreciation vulnerability and their vulnerability to interest-rate increases into account. High interest-rate vulnerabilities can result in a re-assessment of the preferred policy response, leading groups that initially preferred a defense to prefer a depreciation when the pressure intensifies. Comparative case studies of speculative attacks on the currencies of Hong Kong, Korea, Thailand and Taiwan support the argument's empirical implications. The case studies show that policy-makers strongly defended their currencies against mild pressure when the private sector's vulner-ability to depreciation was high. In countries, where interest group vulnerabilities to interest-rate increases exceeded the potential costs of a depreciation, these defenses were subsequently aban-doned when pressure intensified. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]

How do governments react to speculative attacks? Since the decision whether to devalue or to defend is inherently political, the existing economic literature has not been able to convincingly answer this question. Following recent research focusing on political explanations, we argue that authoritarian governments are committed more strongly to a fixed exchange rate than democratic governments for two reasons. First, democratic governments are more hesitant to impose the costs of a defense on their population because this may seriously harm their reelection chances. Second, fixing the exchange rate is an important commitment device to gain anti-inflationary credibility for authoritarian governments because authoritarian governments cannot credibly delegate monetary policy to an independent central bank. We test our hypothesis for a sample of more than 164 speculative attacks in 38 developing and transition countries from 1970 to 2003 using logistic regression analysis. The analysis shows that the probability of a successful currency defense is significantly higher in autocratic than in democratic regimes. A more detailed analysis using a sequential model shows that autocratic and democratic governments do not differ with respect to their decision whether to mount a defense in the first place. Instead, democratic governments are significantly more likely to abort an initial attempt to defend the exchange rate within the 5 months following upon the initial attack. The findings suggest that the importance of political institutions becomes apparent only once the country starts to experience the economic consequences of a defense and popular pressure to devalue increases. ..PAT.-Conference Proceeding [ABSTRACT FROM AUTHOR]