MICHAEL KLEIN – PROFESSOR OF INTERNATIONAL ECONOMICS
Professor of International Economics Michael Klein is currently writing a book Exchange Rate Regimes in the Modern Era, which will be published by MIT Press in 2009. In an example of the strong faculty-student relationships that are forged at Fletcher, Klein’s co-author is Jay Shambaugh, a Fletcher ’96 graduate who went on to receive his PhD from Berkeley, and who recently received tenure from the Economics Department of Dartmouth College. Klein and Shambaugh have published several articles together, and these articles, as well as independent research, form the basis of the book.
Klein's research on economic performance and the effect of open capital accounts (that offer individuals the ability to transfer funds offshore, and also to borrow from abroad) is referenced in the book. Klein points out that the topic is a controversial one. "Even economists who are in favor of free trade, like Jagdish Bhagwati at Columbia, are not in favor of free capital account transactions. In my work, I show that capital account transactions do, in fact, promote growth, but only for countries that have good-quality institutions and government." For this study, Klein developed a theoretical model and then tested it using data from 1976 to 1995 for a panel of over 70 countries. "The results show that countries with good institutions benefit from open capital accounts, but countries without good institutions do not," he says.
In the fall of 2008, Klein will be teaching a modular course at Fletcher called "Empirical Topics in Globalization." The goal of the course is to demonstrate how to use data to address topical issues like the effects of international trade on jobs and wages, and the links between globalization and inequality. Though these topics, and the other ones that will be examined in the course, are hotly debated, the course emphasizes data-crunching because, “too often people make assertions that are not backed up by solid empirical analysis,” says Klein. This course, like others Klein teaches, is aimed at “making students appreciate the power of the tools of economics and statistics for public policy,” he says. “This approach is reflected in a bumper sticker I produced that says ‘Ideas, Not Slogans’—which is a slogan we can all live by.”
Previously, Klein co-authored a book on the effect of international competition on manufacturing jobs in the United States. The book, Job Creation, Job Destruction, and International Competition, published in 2003 by the Upjohn Institute, was co-authored by Scott Schuh and Bob Triest, both of the Federal Reserve Bank of Boston. "In this book, we show that labor markets in the US are characterized by a lot of creation and destruction of jobs—so-called 'churning’," says Klein. "International competition is one source of job destruction, but only one of many. International competition is also a source of job creation. However, this point is often missed in the media since job destruction makes for better press. Protectionism is not a good response to job destruction since international competition may not be a source of that destruction. Most importantly, we should help people, not industries, and the focus should be on retraining and education, along with providing a social safety net. Protectionism only raises costs to sectors other than those being protected, and hurts consumers."