- L -
Labeling 1. A requirement to label imported goods with information about how they were produced. This is often suggested as an alternative to trade restrictions as a means to pursue particular trade-related objectives involving, for example, environment or labor standards.
2. Country of Origin Labeling
Labor abundant A country is labor abundant if its relative endowment of labor is large compared to other countries. Relative labor abundance can be defined by either the quantity definition or the price definition.
Labor augmenting Said of a technological change or technological difference if one production function produces the same as if it were the other, but with a larger quantity of labor. Same as factor augmenting with labor the augmented factor. Also called Harrod neutral.
Labor force The number of available workers in a country, defined as the sum of those who are employed and those who are classed as unemployed.
Labor intensive Describing an industry or sector of the economy that relies relatively heavily on inputs of labor, usually relative to capital but sometimes relative to human capital or skilled labor, compared to other industries or sectors. See factor intensity.
Labor market A market for labor. Can refer to anything from local interactions between workers and employers to country-wide (not usually world-wide) markets dominated by broadly based labor unions, industry associations, and sometimes governments.
Labor market efficiency A term encompassing several features of labor markets as ranked by the World Economic Forum.
Labor market restriction A market restriction in the labor market, most often limits on wages and on the ability of firms to terminate workers.
Labor mobility The ability of workers to move between industries and locations to obtain higher wages or more favorable working conditions. Most models of international trade assume that labor is perfectly mobile within a country between industries and locations but not mobile at all between countries.
Labor productivity The value of output per unit of labor input. The reciprocal of the unit labor requirement.
Labor right See labor standard.
Labor-saving A technological change or technological difference that is biased in favor of using less labor, compared to some definition of neutrality.
Labor scarce A country is labor scarce if its relative endowment of labor is small compared to other countries. Relative labor scarcity can be defined by either the quantity definition or the price definition.
Labor standard Any of many conditions of workers in the workplace that are viewed as important for their well being, and minimum levels of which are advocated by labor rights activists and have been agreed to by many of the countries that are members of the ILO.
Labor standards argument for protection The view that trade restrictions (trade sanctions) should be used as a tool to improve labor standards, for example by limiting imports from countries that do not enforce such labor rights as freedom of association and collective bargaining.
Labor theory of value The theory that the value of any produced good or service is equal to the amount of labor used, directly and indirectly, to produce it. Sometimes said to underlie the Ricardian Model of international trade because it has labor as the only factor.
Labor-using A technological change or technological difference that is biased in favor of using more labor, compared to some definition of neutrality.
Lading See bill of lading.
Lafay index An index of specialization or revealed comparative advantage that takes account of both exports and imports and is therefore suitable for a country with intra-industry trade. Due to Lafay (1992). This index for country i good j is LIij = 100[(Xij−Mij)/(Xij+Mij)−Σk(Xik−Mik)/Σk(Xik+Mik)] (Xij+Mij)/Σk(Xik+Mik), where X and M are exports and imports.
Lafay RCA Lafay index
Laffer Curve An inverse-U-shaped curve representing tax revenue as a function of the tax rate, named after economist Arthur Laffer, who is said to have sketched it on a napkin during lunch with Nixon/Ford administration officials, in order to argue for a tax cut. Although the idea that a rise in tax rate can reduce tax revenue is mostly based on induced reduction of work effort, for some types of taxes -- especially corporate -- movement of activity to another tax jurisdiction or country can have the same effect.
LAFTA Latin American Free Trade Association
Lagging indicator A measurable economic variable that varies over the business cycle, reaching peaks and troughs somewhat later than other macroeconomic variables such as GDP and unemployment. Contrasts with leading indicator.
Lagrangian A function constructed in solving economic models that include maximization of a function (the "objective function") subject to constraints. It equals the objective function minus, for each constraint, a variable "Lagrange multiplier" times the amount by which the constraint is violated.
LAIA Latin American Integration Association
Laissez faire Free enterprise. The doctrine or system of government non-interference in the economy except as necessary to maintain economic freedom. Includes free trade.
Land reform The process of changing the pattern of ownership of land in a country, usually by breaking up large holdings and distributing smaller parcels of land to a larger portion of the population. This can be done in various ways, including with or without compensation of the previous owners.
Landed duty paid The landed value of a good plus any import duties.
Landed value CIF value.
Large country A country that is large enough for its international transactions to affect economic variables abroad, usually for its trade to matter for world prices. Contrasts with a small open economy.
Laspeyre price index A price index that uses quantities from the base year, qb, as weights: I Laspeyre = 100Σpgqb / Σpbqb, where pb, pg are prices in the base and given years respectively. Known to overstate the adverse effects of price changes, as it fails to capture substitution away from higher priced goods. Contrasts with Paache price index.
Latin American Debt Crisis The default on government debt, and subsequent rescheduling, by more than two dozen less developed countries including many in Latin America, in the early 1980s starting with Mexico on August 12, 1982.
Latin American Free Trade Association A group of Latin American countries formed in 1960 with the aim of establishing a free trade area. This aim was never achieved, and LAFTA was replaced in 1980 with the Latin American Integration Association.
Latin American Integration Association An organization of Latin American countries that replaced the failed LAFTA. LAIA (ALADI in Spanish) has the more limited goal of encouraging free trade but with no timetable for achieving it.
Latin American Reserve Fund Fondo Latinoamericano de Reservas
Latin phrases Several phrases from Latin are commonly used in international economics. Several are listed here.
Laurel-Langley Agreement A trade agreement between the Philippines and the United States replacing the Bell Trade Act, signed in 1955 and expired in 1974. It made reciprocal a controversial "parity" clause of the Bell Act, whereby Americans were given some of the same rights as Filipinos within the Philippines.
Laursen-Metzler effect See Harberger-Laursen-Metzler Effect.
Lava Jato Code name meaning "car wash" for the investigation of a major corruption scandal in Brazil, beginning in 2014 and involving the state-owned oil company, Petrobras. Though centered in and investigated by Brazil, the scandal has spilled over into a large number of other countries, mostly in Latin America.
Law of Comparative Advantage The principle that, given the freedom to respond to market forces, countries will tend to export goods for which they have comparative advantage and import goods for which they have comparative disadvantage, and that they will experience gains from trade by doing so. Idea due to Ricardo (1817). [Origin]
Law of Demand The observation that when price rises, quantity demanded falls. This is not necessary in theory, but it is very rarely violated in practice, including in demands for imports and exports, as well as demand for foreign exchange (barring effects on expectations).
Law of Diminishing Returns The principle that, in any production function, as the input of one factor rises holding other factors fixed, the marginal product of that factor must eventually decline.
Law of One Price The principle that identical goods should sell for the same price throughout the world if trade were free and frictionless.
Law of similars Regulations that limit imports of a good, or alter its tariff if a "similar" good is produced in the country. Also called a market reserve policy.
Law of supply and demand This says, most simply, that prices depend on supply and demand. More precisely, price is determined so as to equate quantities supplied and demanded. Even more precisely, a price tends to rise when demand exceeds supply, and vice versa.
Lawfare "The deployment of legal capacity to defend trade interests ... in a political game for economic dominance." [Source]
Lawson Doctrine The view, attributed to Nigel Lawson, U.K. Chancellor of the Exchequer in the 1980s, that a current account deficit that results from a shift in private-sector savings or investment, is not a cause for concern.
LDA London Debt Agreement
LDC For many years, the acronym LDC has stood for less developed country, which was more or less the same as developing country. However, in recent years LDC has also been used for Least Developed Country, which has a narrower and more formal definition.
LDP Landed duty paid
Le Châtelier Principle The principle formulated by Samuelson (1947) that constraints on some variables reduce the movement of others. The main implication is that elasticities tend to be smaller in the short run, when some variables are constrained, than in the long run. The mechanism is similar to Le Châtelier's Principle in chemistry.
Lead time The amount of time between when an action is initiated and when it is completed; thus how long ahead you must initiate the action. In commerce, this often refers to how long before you want something to be delivered that you must order it, a time that is likely to be longer if it involves transport from abroad.
Leading indicator A measurable economic variable that varies over the business cycle, reaching peaks and troughs somewhat earlier than other macroeconomic variables such as GDP and unemployment, and therefore useful for forecasting them. Contrasts with lagging indicator.
League of Arab States An association of mainly Arabic-speaking countries founded in Cairo in 1945 to strengthen ties amoung the members, coordinate policies among them, and promote their common interests. As of February 2024, it had 22 members.
League of Nations An intergovernmental organization founded at the end of World War I to prevent wars. Its main tool was economic sanctions to curb aggressive behavior. The US did not join, however, and although the League had some successes, it failed to prevent World War II and was replaced after that by the United Nations.
League to Enforce Peace American NGO formed in 1915 to push for an international organization to prevent wars by agreeing to "jointly use their economic and military force against any one of their number that ... commits acts of hostility against another." It later supported the League of Nations and ceased operations in 1923. [Source]
Leamer triangle A diagram introduced by Leamer (1987) depicting both relative factor endowments and relative factor intensities with three factors and any number of goods.
Lean manufacturing Just in time
Leaning against the wind Use of exchange market intervention to try to slow the movement of the exchange rate under a managed float, and/or to reduce the amplitude of its fluctuations.
Learning by doing Refers to the improvement in technology that takes place in some industries, early in their history, as they learn by experience, so that average cost falls as accumulated output rises. See infant industry protection, dynamic economies of scale.
Learning curve A relationship representing either average cost or average product as a function of the accumulated output produced. Usually reflecting learning by doing, the learning curve shows cost falling, or average product rising.
Least Developed Country A country designated by the UN as least developed based on criteria of low per capita GDP, weak human resources (life expectancy, calorie intake, etc.), and a low level of economic diversification (share of manufacturing and other measures). As of February 2024, 45 countries were designated as LDCs.
Legal person "A human or non-human entity that is treated as a person for limited legal purposes." These include "business organizations (i.e. corporations, partnerships, limited liability companies, etc.)." [Source]
Legatum Institute "A London-based think-tank with a global vision: to see all people lifted out of poverty." It fosters "open economies, inclusive societies and empowered people" by measuring and analyzing poverty and identifying actions to "enable transformational change."
Legatum Prosperity Index A project of the Legatum Institute, this measures prosperity for 149 societies (148 countries plus Hong Kong) of the world and reports both country rankings and an indices of prosperity. The index encompasses nine "pillars," ranging from "economic quality" to "natural environment."
Lemon-grabbing FDI FDI that takes the form of acquiring only firms whose productivity is lower than average, with the intent of improving it. To the extent his happens, it complicates the problem of determining empirically whether FDI improves the productivity of acquired firms.
Lend-Lease Act of 1941 This act of Congress permitted the US to lend or lease (rather than sell) war supplies to other nations "vital to the defense of the United States." It permitted the US to assist the UK, and later the USSR, China, and others, in the war with Germany while remaining neutral, prior to joining the war later that year. [Source]
Lender of Last Resort An institution that has the capacity and willingness to make loans when no one else can. Within a country, the central bank may play that role, since it can create money. Some have argued that the IMF or other institution should play that role internationally, to avert financial crises.
Lending-into-Arrears Policy The policy of the IMF that "governs if and when [it] lends to a country in default on obligations to its commercial creditors and/or official bilateral or multilateral creditors." [Source]
Lens condition In a high dimensional H-O model, a necessary condition for free and frictionless trade to lead to factor price equalization. Due to Deardorff (1994), it requires that a lens-shaped set of countries' factor endowments encompass a lens-shaped set of industry factor intensities in the IWE. Formalizes that factor intensities are more similar than factor endowments.
Leontief composite A composite of two or more goods or factors that includes them in fixed proportions, analogous to the Leontief technology.
Leontief Paradox The finding of Leontief (1953) that U.S. imports embodied a higher ratio of capital to labor than U.S. exports. This was surprising because it was presumed that the U.S. was capital abundant, and the Heckscher-Ohlin Theorem would then predict that U.S. exports would be relatively capital intensive. [Origin]
Leontief production function See Leontief technology.
Leontief technology A production function in which no substitution between inputs is possible: F(V) = mini(Vi/ai), where V is a vector of inputs Vi, and ai are the constant per unit input requirements. Isoquants are L-shaped.
Leprechaun economics Term coined by Paul Krugman in 2016 for the misleadingly large expansion reported for the GDP of Ireland that included a large increase due to multinationals transferring ownership of patents to their Irish subsidiaries, so as to take advantage of Ireland's low tax rate.
Lerner Diagram
This diagram, drawn for given prices and technology, uses unit-value isoquants of two or more goods to deduce patterns of specialization and factor prices as they depend on goods' prices and factor endowments. Due originally to Lerner (1952) and popularized by Findlay and Grubert (1959). [Origin]
Lerner index A simple measure of a firm's market power: (p−c)/p, where p is price and c is marginal cost. Thus it is the markup over marginal cost as a fraction of price. Due to Lerner (1934).
Lerner paradox The possibility, noted by Lerner (1936), that a tariff might worsen a country's terms of trade. This happens only if the country spends the tariff revenue disproportionately on the imported good, and it will not happen (from a stable equilibrium) if tariff revenue is redistributed. See offer curve diagram. [Origin]
Lerner-Pearce Diagram This name is sometimes given (for years, by me at least) to the Lerner Diagram. In fact, Pearce's (1952) diagram uses unit isoquants rather than unit-value isoquants and is much more cumbersome.
Lerner Symmetry Theorem The proposition that a tax on all imports has the same effect as an equal tax on all exports, if the revenue is spent in the same way. The result depends critically on balanced trade, as in a real model, so that a change in imports leads to an equal change in the value of exports. Due to Lerner (1936).
Less developed country Refers to any country whose per capita income is low by world standards. Same as developing country.
Less-than-fair-value Less than fair value in a case of dumping.
Lesser duty rule Setting an anti-dumping duty equal to the injury margin when that is smaller than the dumping margin. This is the practice in the European Union, but not in the United States.
Letter of credit A common means of payment in international trade, this is a written commitment by a bank to make payment to an exporter on behalf of an importer, under specified conditions.
Level playing field 1. The goal of those who advocate protection on the grounds that foreign firms have an unfair advantage. A level playing field would remove such advantages, although it is sometimes unclear what sorts of advantage (including comparative advantage) could remain. See fairness argument for protection.
2. The more limited goal of subjecting all market participants to the same policies and regulations by governments, including either removing all subsidies or providing comparable subsidies to all. [Origin]
Leverage The use of borrowing achieve larger holding of assets than could be afforded with existing funds.
Levy 1. A tax or tariff.
2. To impose and collect a tax or tariff.
LHS Left-hand side, usually referring to what appears to the left of the equal sign in an equation, and therefore usually the dependent variable that is explained by the right-hand side.
Liability An amount that is owed, in contrast to an asset. A liability may result from borrowing, from obligation to pay for a product or service received, etc.
Liberal 1. Associated with freedom. In England to be liberal (or to be a liberal) is to favor free markets, including free trade.
2. Associated with generosity. In the U.S. it tends to mean favoring a generous, active government pursuing social and redistributive policies, with no implication for views on free trade.
Liberal trade Free trade, or something approximating that. Thus a trade regime in which tariffs are low or zero and in which nontariff barriers are largely absent.
Liberalism The set of views associated with being liberal, in the sense of freedom.
Liberalization 1. The process of making policies less constraining of economic activity.
2. Trade liberalization
LIBOR London interbank offered rate. Created in 1969 by Minos Zombanakis, banker for Iran, who "clubbed together a syndicate of banks which would each lend some of the money." To minimize risks to the banks, he created LIBOR, an average of each bank's reported cost of borrowing. [Source]
LIC Low income country.
Licensing 1. The requirement that importers and/or exporters get government approval prior to importing or exporting. Licensing may be automatic, or it may be discretionary, based on a quota, a performance requirement, or some other criterion.
2. Granting of permission, in return for a licensing fee, to use a technology. When done by firms in one country to firms in another, it is a form of technology transfer. See compulsory licensing.
Life cycle See product cycle.
Life expectancy The expected value of the number of years a person has yet to live at a given age or, if age is unspecified, at birth, based on the distribution of actual deaths in the population to which the person belongs. Life expectancy in a country is an important indicator of its level of development and well-being.
Lifetime employment The practice of workers remaining employed by the same large firm from graduation to retirement. Common in Japan from the early 20th century, it once covered 20% of labor, but less today. It results from a non-contractual understanding that firms would not lay off (male) workers and workers would not resign.
LIFFE London International Financial Futures and Options Exchange
Light manufacturing Sectors of the economy that produce manufactured goods without large amounts of physical capital, thus likely to be labor intensive.
Like-Minded Group 1. This refers to groups of developing and/or middle-income countries that have emerged at various times to advocate for their collective interests in the WTO, UN, and other international fora.
2. A group of developing countries that, together with G-33, "blocked the inclusion of three ... Singapore issues [all but trade facilitation] as part of the WTO's negotiating mandate in 2004, and demanded special and differential treatment for developing countries in WTO negotiations." [Source]
Limit pricing The act of setting a selling price just below the level at which other sellers would find it profitable to enter a market.
Limits to Growth The Limits to Growth, published in 1972 by the Club of Rome, had as its main message that "The earth’s interlocking resources ... probably cannot support present rates of economic and population growth much beyond the year 2100, if that long."
Limited liability The most that an business owner (or partial owner, such as a stockholder or partner) can be made to lose if the business fails or becomes insolvent. Some forms of business organization, such as corporations or limited partnerships, set the limit at the amount that the owner has contributed to the business.
Linder hypothesis The theory that a country's ability to export depends on domestic demand, so that countries that demand similar goods will trade more with each other than will countries with dissimilar demands. From Linder (1961).
Linear cut A reduction in tariffs with the size of reduction linearly related to the initial tariff: %Δt = a + bt, where %Δt is the percent reduction in the tariff, t is the initial tariff, and a,b are constants. The simplest linear cut, a horizontal reduction, reduces all tariffs by the same percentage. Contrasts with the Swiss Formula.
Linear function A function in which a variable or vector of variables is transformed by multiplying by and/or adding constants. Example: z(x,y) = a0 + a1x + a2y.
Linear reduction Same as linear cut.
Linear regression model A linear relationship between a dependent variable Y and one or more independent variables X plus a stochastic disturbance u: Yi=b0+b1X1i+...+bnXni+ui.
Linear transformation In mathematics this seems to be defined the same as linear function above, without the possibility of adding constants.
Linearly homogeneous Homogeneous of degree 1. Sometimes called linear homogeneous.
Liner Code The United Nations Convention on a Code of Conduct for Liner Conferences
Liner conference An agreement between two or more shipping companies to coordinate schedules and prices. Likely to be anti-competitive.
LINK See Project LINK.
Linkage Hirschman (1958) defined forward linkages and backward linkages and argued that they are especially important for developing countries when the linkages are to more advanced countries, helping them to learn about their markets and technologies.
Linking scheme A requirement that, in order to get an import license, the importer must buy a certain amount of the same product from local producers.
Liquid Possessing liquidity.
Liquid assets The assets in a portfolio that possess liquidity, or the total value of those assets.
Liquidity 1. The property of an asset that it can be turned quickly into cash. Cash itself (i.e., money) is the most liquid asset.
2. In a portfolio of assets, the value of the portion that has this property.
Liquidity crisis A financial crisis that occurs due to lack of liquidity. In international finance, it usually means that a government or central bank runs short of international reserves needed to peg its exchange rate and/or to service its foreign loans.
Liquidity trap A situation in which monetary expansion fails to stimulate the economy. As used by Keynes (1936), this meant interest rates so low that expectations of their increase made people unwilling to hold bonds. Today it usually means a nominal interest rate so near zero that lowering it further is impossible or ineffective.
Lira 1. The main currency unit of Turkey. It is divided into 100 kurush.
2. The main currency unit of Italy before it adopted the euro.
Lisbon Treaty The treaty that went into force on December 1, 2009, revising the institutions of the European Union. It is intended to make the EU more democratic and more efficient.
Live Aid A pair of concerts performed on the same day, July 13, 1985, in London and New York City to raise money for famine relief in Africa, especially Ethiopia. Organized by singer Bob Geldof, it was repeated years later as Live 8, in July 2005 in 11 countries, to raise awareness of global poverty.
Living agreement Said to characterize the Trans-Pacific Partnership, meaning that it will be open to new members and to changes in its terms as the need arises.
Living standard Standard of living
Living wage A real wage that is high enough for the worker and family to survive and remain healthy and comfortable, sometimes called meeting basic needs. Term is used in calling for higher wages in both developed and developing countries, where concepts of basic needs may be very different.
LM Curve In the IS-LM model, the curve representing combinations of income and interest rate at which demand for money equals the money supply in the domestic money market. It is normally upward sloping because an increase in income increases demand for money while an increase in the interest rate reduces it.
LME London Metal Exchange
LMST method A method for assigning shadow prices in performing cost-benefit analysis in developing countries. It uses international prices directly for tradables and indirectly, where possible, for nontradables. Named for Little and Mirrlees (1974) and Squire and van der Tak (1975), who developed and refined the method.
Loan An amount, usually of money, conveyed by one to another in the expectation that it will be returned, perhaps with specified interest, at a later date. When the lender and borrower are in different countries with separate monetary and legal systems, loans bear extra risk.
Lobby To attempt to influence government policy by talking to lawmakers and bureaucrats, and perhaps by using other means such as assistance or monetary contributions. Lobbyists often play a role in influencing trade policies, including tariffs and administered protection.
Local content requirement Same as domestic content requirement.
Local optimum An allocation that by some criterion is better than all those in its neighborhood.
Localization economy See Marshallian externality.
Localization requirement See data localization requirement.
Locational advantage Any reason for a firm to locate production, or a stage of production, in a particular place, such as availability of a natural re[Source], transport cost, or barriers to trade. May explain why a country's firms succeed in trade, or why a multinational firm locates there. (See OLI.)
Locational Gini Index A measure of how unequally economic activity is distributed across space, and thus how concentrated it is in some locations. It is analogous to the Gini coefficient for income inequality with incomes replaced by regional shares of population, employment, or economic activity. Due to Krugman (1991a).
Locomotive effect The effect that economic expansion in one large country can have on other parts of the world economy, causing them to expand as well, as the large country demands more of their exports.
Log point A log point measures the difference between natural logarithms of two numbers. Numbers x and y differ by one log point if ln(x)−ln(y)=0.01. When small, the difference in log points is approximately equal to the percentage difference. For example, ln(105)−ln(100)=0.0488.
Logarithm A particular mathematical transformation often used to express economic variables. Advantages: 1) If a variable grows at a constant percentage rate over time, the graph of its logarithm is a straight line. 2) A small change in the logarithm of a variable is approximately its percentage change.
Logistics The process of getting products from where they were produced to where they will be used, including transportation, warehousing, and all of the information management that must accompany them.
Logrolling The exchange of political favors, especially among legislators who agree to support each others' initiatives. Logrolling contributed importantly to the Smoot-Hawley Tariff.
LOLR Lender of Last Resort [Source]
Lomé Convention An agreement originally signed in 1975 committing the EC to programs of assistance and preferential treatment for the ACP Countries. The Lomé Convention replaced the Yaoundé Convention and was itself replaced by the Cotonou Agreement in June 2000.
London Debt Agreement A plan approved in 1953 by the Western Allied Powers from World War II to forgive half of Germany's external debt and provide generous repayment provisions for the rest.
London Economic and Monetary Conference See World Economic Conference.
London Gold Market "London is the largest and most important gold market in the world." It's origins date back to 1684, but it achieved its eminence in the 19th century "both for the refining and marketing of gold bullion and also for the exchange and disposal of gold coins of various countries." [Source]
London Gold Pool See Gold Pool.
London interbank offered rate The interest rate that the largest international banks charge each other for loans, usually of Eurodollars but also of other currencies. LIBOR was long used as a benchmark for other transactions. It has now been replaced for that purpose by SOFR.
London International Financial Futures and Options Exchange An organized market for a variety of financial instruments, including short term interest rate futures, bonds, swaps, equities, and commodities.
London Metal Exchange "The LME is the trading and price-formation venue of choice for industrial metals globally."
London School of Economics and Political Science A renowned university with a traditional strength in international economics.
London Stock Exchange A company that handles the trading of the stocks of around 3000 companies from over 70 countries.
Long and variable lags The observation by Friedman (1961) that the macroeconomic effects of monetary policy occur only after lags that are long and hard to predict, making the use of active monetary policy difficult.
Long position Opposite of a short position, a person with a long position has acquired an asset (or a currency) and is holding it in expectation that it will rise in value.
Long run Referring to a long time horizon. This is not always well defined, but in trade models it usually means long enough for industries to vary the amounts of all factors they employ, and therefore for the factors to be mobile across industries. Contrasts with short run.
Long-run aggregate supply In the aggregate supply and demand model, the aggregate supply curve that applies in the long run, which is vertical.
Long-Term Arrangment Successor to the Short-Term Arrangement, this went into effect October 1, 1962 and controlled trade in cotton textiles. Trade in textiles other than cotton grew disproportionately during the LTA, leading to negotiation of the Multifiber Arrangement in 1974. [Source]
Long-term capital In the capital account of the balance of payments, long-term capital movements include FDI and movements of financial capital with maturity of more than one year (including equities).
Long-Term Refinancing Operations Becoming common in the 2008 European sovereign debt crisis, these were loans by the ECB to commercial banks with much longer maturity than had been done previouysly.
Look East The policy initiated by India in 1991 after the end of the Cold War, aimed at developing political, economic, and security relations with Southeast Asia. In 2003, the policy was expanded to include Australia and East Asia. In 2014, the Policy was given a new thrust under the name Act East. [Source]
LOP Law of One Price. Sometimes LOOP.
Lorenz curve The graph of the percent of income owned by the poorest x percent of the population, for all x. Provides a picture of the income distribution within the population, and is used to construct the Gini Coefficient.
Lost Decade There is, sadly, no single meaning for this term, as it has been applied to many episodes of economies that stagnated for most of a decade. Examples: Argentina and other Latin America in the 1980s; Japan in the 1990s; and the least developed countries in the 1990s.
Louvre Accord An agreement reached in 1987 among the central banks of France, Germany, Japan, US, and UK to stop the decline in the value of the US dollar that they had initiated at the Plaza Accord.
Love of variety Preference for variety.
Low Income Country The bottom income group in the World Bank's classification of countries by GNI per capita, calculated by the Atlas Method. As of February 2024, these were countries with incomes of $1,135 or less in 2023. Other groups are Middle Income Countries and High Income Countries.
Lower-Middle Income Country See Middle Income Country.
Lowflation A rate of inflation that is positive but sufficiently low as to cause concern of deflation. Term introduced at the IMF by Moghadam et al. (2014) in response to such concerns especially in the euro zone.
lp Abbreviation for log point.
LRAS Long-Run Aggregate Supply
LSE 1. London School of Economics and Political Science
2. London Stock Exchange
LTA Long-Term Arrangment.
Ltd The abbreviation used in the United Kingdom to represent a limited liability company, thus analogous to "Inc", for incorporated, in the United States and AG in German speaking countriess.
LTRO Long-Term Refinancing Operations
Lucas critique The observation that economic equations estimated under one policy regime are likely not valid under another, since agents take policy regime into account in forming behavior. What is needed is to model rational expectations, which internalize all information, including the policy regime. Due to Lucas (1976).
Lump of labor fallacy The mistaken view often taken by opponents of trade that there is only a fixed amount of labor needed for production of society's needs, so that any that is rendered unemployed due to imports will not find jobs. The same view can underpin opposition to changes in technology that replace workers with machines. [Origin]
Lump sum Describes a tax or subsidy that does not distort behavior. By using a tax or subsidy in an amount (the lump sum) independent of any aspect of behavior, it does not alter behavior. Nondistorting lump sum taxes and subsidies do not exist but are a convenient fiction for theoretical analysis, especially of gains from trade.
Lumpy country A country in which one or more factors are unable to move across geographic regions within the country, so that factor prices are not equalized across regions, with implications for the pattern of the country's trade. Due to Courant and Deardorff (1992).
LuxLeaks A scandal that broke in November 2014 with the publication by the International Consortium of Investigative Journalists of thousands of pages of leaked documents. These revealed how major companies operating in Luxembourg reduced their tax bills by taking advantage of Luxembourg's tax treaties.