nep-dev New Economics Papers
on Development
Issue of 2004‒12‒12
thirty-two papers chosen by
Jeong-Joon Lee
Towson University

  5. Export Diversification, Externalities and Growth By Dierk Herzer; Felicitas Nowak-Lehmann D.
  6. Population, Population Density, and Technological Change By Stephan Klasen; Thorsten Nestmann
  7. Dualism and cross-country growth regressions By John Temple; Ludger Woessmann
  8. Dynamic Optimal Capital Structure and Technical Change By Lööf, Hans
  9. Parent Altruism, Cash Transfers and Child Poverty By Sonia Bhalotra
  10. Effects of Human Capital on Farm and Non-Farm Productivity and Occupational Stratification in Rural Pakistan By Takashi Kurosaki; Humayun Khan
  11. Early Childhood Investments in Human Capital: Parental Resources and Preferences By Sonia Bhalotra
  12. Convergence Across Italian Regions and the Role of Technological Catch-Up By Marco Maffezzoli
  13. Capital Utilization and the Foundations of Club Convergence By Carl-Johan Dalgaard; Jes Winther Hansen
  14. When Does Patent Protection Stimulate Innovation? By Andreas Panagopoulos
  15. Competition and Growth in Neo-Schumpeterian Models By Piercarlo Zanchettin; Vincenzo Denicolò
  16. The Effects of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia By Marcela Eslava; John Haltiwanger; Adriana Kugler; Maurice Kugler
  17. Trade, Extent of the Market, and Economic Growth 1960-1996 By Francisco Alcalá; Antonio Ciccone
  18. Relative Profitability, Supply Shifters and Dynamic Output Response:The Indian Foodgrains By SUNIL KANWAR
  19. Internal Migration and Borrowing Constraints: Evidence from Peru By Sonia Laszlo; Eric Santor
  20. Enhanced Trade Integration with Europe: Prospects of Growth and Development for Libya By Rolf Bergs
  21. What Do Endogenous Growth Models Contribute? By Dave Mare
  22. The Anarchy of Numbers: Aid, Development, and Cross-country Empirics By David Roodman
  23. An Index of Donor Performance By David Roodman
  24. Transaction Costs, Information Technology and Development By Nirvikar Singh
  25. Regional Inequality in India: A Fresh Look By Nirvikar Singh; Laveesh Bhandari; Aoyu Chen; Aarti Khare
  26. Information Technology and India’s Economic Development By Nirvikar Singh
  27. Fear of China: Is there a future for manufacturing in Latin America? By Mauricio Mesquita Moreira
  28. Foreign Capital, Inflation, Sterilization, Crowding-Out and By Nirvikar Singh; T.N. Srinivasan
  29. The Role of the State in Economic Development By Guido Tabellini
  30. To what extent are African education policies pro-poor ? By Jean-Claude Berthélemy
  31. "Institutional profiles" : presentation and analysis of an original database of the institutional characteristics of developing, in transition and developed countries By Pierre Berthelier; Alain Desdoigts; Jacques Ould Aoudia
  32. South-South Trade : Geography Matters By Souleymane Coulibaly; Lionel Fontagné

  1. By: Ana Maria Bianchi
    Abstract: This paper discusses Albert Hirschman's writings that resulted from his professional experience in Colombia, Brazil, Chile and other Latin American countries during the 1950s and 1960s. The focus is on the trilogy written by Hirschman in the field of development economics, which comprises: The Strategy of Economic Development (1958), Journeys Toward Progress (1963) and Development Projects Observed (1967). Some methodological aspects of those writings, which tend to be recurrent throughout the author's whole intelectual career, are emphasized.
    JEL: B31 B41
    Date: 2004
  2. By: Tiago V. de V. Cavalcanti; José Tavares
    Abstract: The secular rise in female labor force participation, highlighted in the recent macroeconomics literature on growth and structural change, has been associated with the declining price and wider availability of home appliances. This paper uses a new and unique country dataset on the price of home appliances to test its impact on female labor supply. We assess the role of the price of appliances in raising participation by comparing it to the impact of fertility and other macroeconomic factors. A decrease in the relative price of appliances - the ratio of the price of appliances to the consumer price index - leads to a substantial and statistically significant increase in female labor force participation. The impact of the price of appliances is quantitatively of the same order of magnitude as that of fertility. This result is robust to the inclusion of additional controls, such as income per capita, government spending, and male and female unemployment rates. To assess causality, we test for exogeneity and use the lagged relative price of appliances and the food price index as instrumental variables, confirming that lower appliance prices lead to increased female participation.
    JEL: O11 J22
    Date: 2004
  3. By: Nelson H. Barbosa Filho
    Abstract: This paper presents a one-sector demand-led model where capital and non-capital expenditures determine income growth and distribution. The basic idea is to build a simple dynamical accounting model for the growth rate of the capital stock, the ratio of non-capital expenditures to the capital stock, and the labor share of income. By inserting some stylized behavioral functions in the identities, the paper analyzes the implications of alternative theoretical closures of income determination (effective demand) and distribution (social conflict). On the demand side, two behavioral functions define the growth rates of capital and non-capital expenditures as functions of capacity utilization (measured by the output-capital ratio) and income distribution (measured by the labor share of income). On the distribution side, another two behavioral functions describe the growth rates of the real wage and labor productivity also as functions of capacity utilization and income distribution. The growth rates of total factor productivity and employment follow residually from the accounting identities and, in this way, the demand-led model can encompass supply-driven models as a special case.
    JEL: E25 O40 E32 O41
    Date: 2004
  4. By: Vladimir Kühl Teles; Joaquim P. Andrade
    Abstract: The main objective of this paper was to visualize the relation between government spending on basic education and the human capital accumulation process, observing the impacts of this spending on individual investments in higher education, and on economic growth. From the results obtained, we may reach the central conclusion that basic education affects agents' decisions over their lifetime, and that the significance of the relation between public spending on education and economic growth is altered by changes in the composition of government spending with regard to basic and higher education, and this relation may be insignificant when higher education is not promoted.
    JEL: O11 O23 I28
    Date: 2004
  5. By: Dierk Herzer; Felicitas Nowak-Lehmann D. (Ibero-Amerika Institut)
    Abstract: It is frequently suggested that export diversification contributes to an acceleration of growth in developing countries. Horizontal export diversification into completely new export sectors may generate positive externalities on the rest of the economy as export oriented sectors gain from dynamic learning activities due to contacts to foreign purchasers and exposure to international competition. Vertical diversification out of primary into manufactured exports is also associated with growth since primary export sectors prevalently do not exhibit strong spillovers. Thus, it is to be expected that both horizontal and vertical export diversification are positively correlated with economic growth. Yet there have been remarkably few empirical investigations into the link between export diversification and growth. This paper attempts to examine the hypothesis that export diversification is linked to economic growth via externalities of learning-by-doing and learning-by-exporting fostered by competition in world markets. The diversification-led growth hypothesis is tested by estimating an augmented Cobb-Douglas production function on the basis of annual time series data from Chile. Based on the theory of cointegration three types of statistical methodologies are used: the Johansen trace-test, a multivariate error-correction model and the dynamic OLS procedure. Given Chile\'s dramatic changes in economic policy, time series techniques considering structural breaks are applied. The estimation results suggest that export diversification plays an important role in economic growth.
    Keywords: Export diversification, growth, Chile, cointegration
    JEL: F10 O10 C22
    Date: 2004–09–01
  6. By: Stephan Klasen (Universität Göttingen); Thorsten Nestmann
    Abstract: In a model on population and endogenous technological change, Kremer combines a short-run Malthusian scenario where income determines the population that can be sustained, with the Boserupian insight that greater population spurs technological change and can therefore lift a country out of its Malthusian trap. We show that a more realistic version of the model, which combines population and population density, allows deeper insights into these processes. The incorporation of population density also allows a superior interpretation of the empirical regularities between the level of population, population density, population growth, and economic development, both at aggregated and disaggregated levels.
    JEL: O3 J1 N3
    Date: 2004–11–12
  7. By: John Temple; Ludger Woessmann
    Abstract: This paper examines whether growth regressions should incorporate dualism and structural change. If there is a differential across sectors in the marginal product of labour, changes in the structure of employment can raise aggregate total factor productivity. The paper develops empirical growth models that allow for this effect in a more flexible way than previous work. Estimates of the models imply sizeable marginal product differentials, and reveal that the reallocation of labour can explain a significant fraction of the international variation in TFP growth.
    Keywords: growth, dualism, structural change
    JEL: O10 O40
    Date: 2004–09
  8. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The importance of capital structure is explored by comparing existing archetypes of financial systems through a new methodological application. Differences in firms’ cost of capital show that capital structure is relevant in R&D and other investment decisions. The conclusions are that 1) there are large and also unexpected cross-country differences in determinants to optimal capital structure; 2) observed leverage is often different from target in both equity (or stock market based) and debt (or bank based) dominated systems; 3) faster speed towards the target is observed in the equity based system indicating a higher flexibility.
    Keywords: Capital structure; dynamic adjustment; panel data; optimal leverage; financial markets; cross-country comparison; technological change; creative destruction.
    JEL: C23 C51 G32 O16 O31
    Date: 2004–12–09
  9. By: Sonia Bhalotra
    Abstract: This paper investigates the contemporary sharing of household resources between parents and co-resident children, motivated by the increasing popularity of cash transfers targeted at children, and limited evidence of their efficacy. It argues that this provides information on parental altruism which, though commonly assumed, has been challenged in recent research. The main finding is that the within-household allocation of resources is consistent with altruism. A further finding is that households that smoke (spend on tobacco) systematically spend less on children.
    Keywords: altruism, m-demands, intra-household allocation, human capital, child labour, education
    JEL: C2 I2 O1 R2
    Date: 2004–11
  10. By: Takashi Kurosaki; Humayun Khan
    Abstract: This paper investigates the effects of human capital on productivity using micro panel data of rural households in the NorthWest Frontier Province, Pakistan, where a substantial job stratification is observed in terms of income and education. To clarify the mechanism underlying this stratification, the human capital effects are estimated for wages(individual level) and for self-employed activities(household level), and for farm and non-farm sectors. Estimation results show a clear contrast between farm and non-farm sectors - wages and productivity in non-farm activities rise with education at an increasing rate, whereas those in agriculture respond only to the primary education.
    Keywords: human capital, returns to education, non-farm employment, self-employment
    JEL: O12 J24 Q12
    Date: 2004–11
  11. By: Sonia Bhalotra
    Abstract: This paper investigates the way in which parental human capital investment in young co-resident children varies with their own consumption. It is motivated by rejection of parental altruism in recent research, the unexpectedly small effects of parental income on child outcomes found in a number of studies, and the claim in several historical and anthropological studies of child labour that parents are selfish. Models of child labour and human capital typically assume parental altruism and, in many cases, this assumption is critical to the model. The results suggest that, in the preference function of parents, child human capital is a normal good and that child labour is a bad, consistent with altruism.
    Keywords: altruism, m-demands, intra-household allocation, cash transfers, child poverty, tobacco
    JEL: C2 I2 O1 R2
    Date: 2004–11
  12. By: Marco Maffezzoli
    Abstract: This paper suggests that the main (and possibly unique) source of ?? and ?? convergence in GDP per worker (i.e. labor productivity) across Italian regions over the 1980-2000 period is the change in technical and allocative efficiency, i.e. convergence in relative TFP levels. To reach this conclusion, I construct an approximation of the production frontier at different points in time using Data Envelope Analysis (DEA), and measure efficiency as the output-based distance from the frontier. This method is entirely data-driven, and does not require the specification of any particular functional form for technology. Changes in GDP per worker can be decomposed in changes in relative efficiency, changes due to overall technological progress, and changes due to capital deepening. My results suggest that: (i) differences in relative TFP are quantitatively important; (ii) while technological progress and capital deepening are the main, and equally important, forces behind the rightward shift in the distribution of GDP per worker, convergence in relative TFP is the main determinant of the change in the distribution’s shape.
  13. By: Carl-Johan Dalgaard (Institute of Economics, University of Copenhagen); Jes Winther Hansen (Institute of Economics, University of Copenhagen)
    Abstract: Club convergence may arise as an empirical prediction from standard neoclassical growth models where the aggregate production technology displays diminishing returns to capital. This requires that the propensity to save from wage income is greater than the propensity to save from capital income. This paper shows how endogenous capital utilization may produce such savings behavior in an otherwise standard Solow model. That is, even if households save a constant fraction of total income multiple stable steady states may arise when capital utilization is endogenously determined.
    Keywords: economic growth; capital utilization; multiple eqilibria
    JEL: O10 O41
    Date: 2004–11
  14. By: Andreas Panagopoulos
    Abstract: Patents act as an incentive to innovate. However, as this paper argues, patents can lead the patent holder to rest on his laurels and at the same time discourage some innovators from innovating, reducing knowledge spillovers. The combined result of the above suggests an inverse U relationship between patent protection and output growth.
    Keywords: Intellectual property, patent races, growth.
    JEL: K0 O11
    Date: 2004–11
  15. By: Piercarlo Zanchettin; Vincenzo Denicolò
    Abstract: We study the effect of product market competition on the incentives to innovate and the economy's rate of growth in an endogenous growth model. We extend previous works in industrial organization by assuming that innovation is sequential and cumulative, and early endogenous growth models by accounting for the possibility that in each period many asymmetric firms (i.e., an endogenously determined number of successive innovators) are simultaneously active. We identify the price effect, the front loading of profits, and the productive efficiency effect associated with an increase in competitive pressure. The price effect reduces the incentives to innovate, but both the front loading of profits and the productive efficiency effect raise the incentives to innovate. We demonstrate circumstances in which the productive efficiency effect dominates the price effect. In these circumstances, the front loading of profits and the fact that the productive efficiency effect dominates the price effect compound to make the equilibrium rate of growth increase with the intensity of competition.
    Date: 2004–10
  16. By: Marcela Eslava; John Haltiwanger; Adriana Kugler; Maurice Kugler
    Abstract: Estimates for the U.S. suggest that at least in some sectors productivity enhancing reallocation is the dominant factor in accounting for producitivity growth. An open question, particularly relevant for developing countries, is whether reallocation is always productivity enhancing. It may be that imperfect competition or other barriers to competitive environments imply that the reallocation process is not fully e?cient in these countries. Using a unique plant-level longitudinal dataset for Colombia for the period 1982-1998, we explore these issues by examining the interaction between market allocation, and productivity and profitability. Moreover, given the important trade, labor and financial market reforms in Colombia during the early 1990's, we explore whether and how the contribution of reallocation changed over the period of study. Our data permit measurement of plant-level quantities and prices. Taking advantage of the rich structure of our price data, we propose a sequential mehodology to estimate productivity and demand shocks at the plant level. First, we estimate total factor productivity (TFP) with plant-level physical output data, where we use downstream demand to instrument inputs. We then turn to estimating demand shocks and mark-ups with plant-level price data, using TFP to instrument for output in the inversedemand equation. We examine the evolution of the distributions of TFP and demand shocks in response to the market reforms in the 1990's. We find that market reforms are associated with rising overall productivity that is largely driven by reallocation away from low- and towards highproductivity businesses. In addition, we find that the allocation of activity across businesses is less driven by demand factors after reforms. We find that the increase in aggregate productivity post-reform is entirely accounted for by the improved allocation of activity.
    Keywords: TFP measurement, productivity and demand decompositions, structural reforms
    JEL: E23 L16 L60 O14 O24 O54
    Date: 2004–05
  17. By: Francisco Alcalá; Antonio Ciccone
    Abstract: We find that trade and domestic market size are robust determinants of economic growth over the 1960-1996 period when trade openness is measured as the US dollar value of imports and exports relative to GDP in PPP US$ ('real openness'). When trade openness is measured as the US dollar value of imports and exports relative to GDP in exchange rate US$ ('nominal openness') however, trade and the size of domestic markets are often non-robust determinants of growth. We argue that real openness is the more appropriate measure of trade and that our empirical results should be seen as evidence in favor of the extent-of-the-market hypothesis.
    Keywords: Extent of the market, institutions, growth
    JEL: F43 O40
    Date: 2003–02
  18. By: SUNIL KANWAR (Delhi School of Economics)
    Abstract: The realisation that the wage-goods constraint, if binding, could stall the growth process of a developing country, prompted policy makers to encourage agriculture by various means. The success of public policy depends, however, on how strongly farmers respond to the incentives provided. Using a large panel dataset pertaining to Indian agriculture - spanning the period 1967-68/1999-00, and covering the 6 important food crops cultivated across 16 major states - we provide estimates of area, yield and output elasticities w.r.t price and nonprice factors. We find consistent evidence, that the supply response of food crops is influenced by rainfall, input availability (specifically irrigation, fertilizer and improved seeds), and relative profits, in that order of importance. Our results prompt us to conclude, that all things considered, the preferred policy should be to encourage irrigation, fertilizer use and the use of modern seeds, rather than raise output support/procurement prices period after period.
    Keywords: wage-goods, price incentives, supply shifters
    JEL: O13
    Date: 2004–11
  19. By: Sonia Laszlo (McGill University); Eric Santor (Bank of Canada)
    Abstract: The decision to migrate has received substantial attention from both theoretical and empirical perspectives. Underlying most analyses is the desire to understand why individuals relocate within their own country, or more drastically, migrate to another country. While there are numerous reasons to migrate, economists have focused their research on the notion that there are gains to be made from migration: ceteris paribus, migrants are expected to earn more than non-migrants (Todaro, 1989). This paper utilizes a rich data set from Peru to assess the determinants of migration. We find that, when controlling for self- selection, migrants do not earn more than “stayers.”
    Keywords: Economic Development, Migration, Credit Constraints.
    JEL: O P
    Date: 2004–11–23
  20. By: Rolf Bergs (Policy Research & Consultancy)
    Abstract: The paper deals with the prospects of economic recovery and growth of Libya after the suspension of the UN sanctions. Here the risks and chances of Libya’s participation in the so-called ‘Barcelona Process’ are viewed. Based on the results of a similar study for Egypt and an empirical analysis of Libya’s trade performance, the findings suggest that Libyan-EU trade is characterised on the one hand by a high gravity, but on the other hand by a strong dissimilarity, making economic integration difficult. Free-trade as a stand-alone measure would not be necessarily conducive to Libya, however, the secondary effects of free trade, fuelled by enhanced incentive to pursue courageous structural reforms could have important effects on an improvement of international economic competitiveness of Libya, a dire need with a view to the limited crude oil resources.
    Keywords: European Integration, Free Trade, Gravity, Intra-industry Trade, Similarity of Trade
    JEL: F15 O10
    Date: 2004–11–25
  21. By: Dave Mare (Motu Economic & Public Policy research)
    Abstract: Endogenous growth theory is one of the mainstream economics approaches to modelling economic growth. This paper provides a non-technical overview of some key strands of the endogenous growth theory (EGT) literature, providing references to key articles and texts. The intended audience is policy analysts who want to understand the intuition behind EGT models. The paper should be accessible to someone without much economics training.
    Keywords: Endogenous Growth, Innovation
    JEL: O31 O40
    Date: 2004–12–05
  22. By: David Roodman (Center for Global Development)
    Abstract: Recent literature contains many stories of how foreign aid affects economic growth. All the stories hinge on the statistical significance in cross-country regressions of a quadratic term involving aid. Among the stories are that aid raises growth (on average) 1) in countries where economic policies are good; 2) in countries where policies are good and a civil war recently ended; 3) in all countries, but with diminishing returns; 4) in countries outside the tropics; 5) in countries with difficult economic environments, characterized by declining or volatile terms of trade, natural disasters, or low population; or 6) when aid increases in countries experiencing negative export price shocks. The diversity of results prima facie suggests that many are fragile. Easterly et al. (2004) find the aid-policy story (Burnside and Dollar, 2000) to be fragile in the face of an expansion of the data set in years and countries. The present study expands that analysis by applying more tests, and to more studies. Each test involves altering just one aspect of the regressions. All 19 tests are derived from sources of variation that are minimally arbitrary. Twelve derive from specification differences between studies, what Leamer (1983) calls “whimsy.” Three derive from doubts about the appropriateness of the definition of one variable in one study. The remaining four derive from the passage of time, which allows sample expansion. This design allows an examination of the role of “whimsy” in the results that are tested while minimizing “whimsy” in the testing itself. Among the stories examined, the aid-policy link proves weakest, while the aid-tropics link is most robust.
    Keywords: foreign aid, economic growth, robustness testing
    JEL: O P
    Date: 2004–12–06
  23. By: David Roodman (Center for Global Development)
    Abstract: The Commitment to Development Index of the Center for Global Development rates 21 rich countries on the “development-friendliness” of their policies. It is revised and updated annually. In the 2004 edition, the component on foreign assistance combines quantitative and qualitative measures of official aid, and of fiscal policies that support private charitable giving. The quantitative measure uses a net transfers con- cept, as distinct from the net flows concept in the net Official Development Assistance measure of the Development Assistance Committee, which does not net out interest received. The qualitative factors are three: a penalty for tying aid; a discounting system that favors aid to poorer, better-governed recipients; and a penalty for “project proliferation.” The selectivity weighting approach avoids some conceptual problems inherent in the Dollar and Levin (2004) elasticity- based method. The proliferation pen-alty derives from a calibrated model of aid transaction cost developed in Roodman (forthcoming). The charitable giving measure is based on an estimate of the share of observed private giving to developing countries that is attributable to a) lower overall taxes (income effect) and b) specific tax incentives for giving (price effect). Despite the adjustments, overall results are dominated by differences in quantity of official aid given. This is because while there is a seven-fold range in net concessional transfers/GDP among the score countries, variation in overall aid quality across donors appears far lower, and private giving is generally small. Denmark, the Netherlands, Norway, and Sweden score highest while the largest donors in absolute terms, the United States and Japan, score in the bottom third. Standings by the 2004 methodology have been relatively stable since 1995.
    Keywords: foreign aid, selectivity, performance measurement
    JEL: O P
    Date: 2004–12–06
  24. By: Nirvikar Singh (University of California, Santa Cruz)
    Abstract: This paper explores potential channels through which information technology (IT) affects economic development. The channel emphasized here is the reduction of transaction costs through the use of information technology. We discuss the nature of transaction costs, their possible impacts on economic outcomes, and the impacts of IT on transaction costs. We provide a theoretical discussion of how a reduction in transaction costs may affect the number of intermediate goods that are produced, and in turn how that number may affect the development path of the economy. We then draw on our fieldwork in rural India that examined the economics of rural Internet kiosks, and relate this multifaceted case study to the theoretical discussion of transaction costs. We conclude with a broader discussion of the potential impact of IT on developing economies.
    Keywords: transaction costs, information technology, Internet, development, India
    JEL: O12 O3 L31 P2
    Date: 2004–12–06
  25. By: Nirvikar Singh (University of California, Santa Cruz); Laveesh Bhandari (Indicus Analytics); Aoyu Chen (University of California, Santa Cruz); Aarti Khare (Indicus Analytics)
    Abstract: There are concerns that regional inequality in India has increased after the economic reforms of 1991. This concern is supported by various statistical analyses. In this paper, we show that the conclusions are sensitive to what measures of attainment are used. In particular, human development indices do not show the same increase in regional inequality. Furthermore, looking at consumption and credit indicators for regions disaggregated below the state level also suggests that inequality trends may not be as bad as suggested by State Domestic Product data, although the greater strength of the economies of the western and southern states emerges in our results. Finally, we briefly discuss policy implications within the context of India’s evolving federal polity.
    Keywords: regional inequality, federalism, human development
    JEL: D63 H73 O10 O53
    Date: 2004–12–07
  26. By: Nirvikar Singh (University of California, Santa Cruz)
    Abstract: This paper discusses the possibilities for broad-based IT-led economic growth in India, including increasing value-added, using better telecom links to capture more benefits domestically through offshore development for developed country firms, greater spillovers to the local economy, broadening the IT industry with production of telecom access devices, improving the functioning of the economy through a more extensive and denser communications network, and improving governance. We also examine the policy environment, arguing that government policy is better focused on removing labor market distortions and infrastructure constraints, rather than providing output or export subsidies to the software industry.
    Keywords: information technology, software, complementarities, telecommunications
    JEL: M21 L63 O12 O3
    Date: 2004–12–07
  27. By: Mauricio Mesquita Moreira (Inter-American Development Bank)
    Abstract: China’s emergence has raised pointed questions about the future of manufacturing in Latin America. Once saw as its economic future, the viability of this activity in the region has long been challenged by traditional trade theory and, in practical terms, by at least three generations of Asian Tigers. China and its “unlimited supply of labor”, rapid productivity growth, scale, and extremely interventionist state has brought the practical challenge to unprecedented levels. This paper, using mainly descriptive production and trade statistics, looks at the nature of this challenge and its implications. It begins by dealing with a central issue: Does manufacturing still matter for Latin America’s development? It argues that even though there are other options that should be exploited, the region cannot afford to completely turn its back to a well-proven road to development. It then moves on to examine the scope and nature of the Chinese challenge. It shows that endowments, productivity, scale and the government role, all work together to make China a formidable competitor. The importance of this challenge is confirmed by an analysis of the trade data, which suggests a small impact so far, but a trend that should make Latin American policy makers uncomfortable in their seats. The paper concludes by discussing, in general terms, the (difficult) policy options available.
    Keywords: Latin America, China, Manufacturing
    JEL: O P
    Date: 2004–12–09
  28. By: Nirvikar Singh (University of California, Santa Cruz); T.N. Srinivasan (Yale University)
    Abstract: This paper discusses some puzzles in the contemporary macroeconomic scene in India, from the perspective of public finance and economic development. These include a fiscal deficit higher than it was during the 1991 crisis, but without a large current account deficit or rise in inflation or interest rates, a rising inflow of external capital, accompanied by the RBI’s sterilizing these inflows and accumulating large reserves, even in the face of low inflation. We offer a critique of some previous analyses, and some models that are suggestive of how real and monetary factors might be integrated in providing a firmer grounding for the policy debates current in India.
    Keywords: foreign capital, sterilization, absorption, crowding out, inflation, growth
    JEL: F30 F41 F43 H62 O4
    Date: 2004–12–06
  29. By: Guido Tabellini
    Date: 2004–12–02
  30. By: Jean-Claude Berthélemy (TEAM)
    Abstract: This paper discusses the distributive nature of education policies in developing countries, with a specific emphasis on sub-Saharan Africa. We show that human capital is particularly unequally distributed in sub-Saharan African countries and in Middle-East and North Africa and South Asian regions as well, after taking into account the inevitable (arthmetical) correlation which exists between the aggregate level of human capital and its concentration. We provide further evidence, based on sub-Saharan Africa schooling structure data, that these countries pay, relatively speaking, little attention to primary education, to the benefit of secondary education. We interpret this bias as the result of specific institutional characteristics of sub-Saharan Africa, which are deeply-rooted in its history (in particular its post-colonial legacy), its demography and its geography.
    Keywords: Education, distributive policy, institutions, Africa
    JEL: D31 I28 O15
    Date: 2004–01
  31. By: Pierre Berthelier (Direction de la Prévision); Alain Desdoigts (EUREQua et LEG, Université de Bourgogne); Jacques Ould Aoudia (Direction de la Prévision)
    Abstract: The disparity between the development paths followed by the economies of a limited number of countries, known as "emerging", and the bulk of the other developing countries has shown the limitations of previous development strategies. As a consequence, at the beginning of the 1990s, the question of institutions has been propelled to the top of the economic agenda. The empirical literature has now solidly documented and validated the general relationship between institutions and development. With this as a starting point, attention is now being concentrated on the actual nature of the institutional mechanisms at work, the inter-relationships between them and their combined impact on development. Whereas previous analysis of development had mainly drawn on the instruments derived from national accounts, there are not as yet internationally standardised observation instruments for tackling the questions now being raised. A few institutional indicators were created since the end of the 1990s but these cover only a limited part of the institutional domain. This document attempts to fill the gap, putting forward an original database covering a broad and detailed field of institutional characteristics for 51 countries (developing, in transition and developed countries). The basic data were collected using a questionnaire completed in 2001 by the economic missions of the French Ministry of the Economy, Finance and Industry in the selected countries, enabling us to cover 80% of the world's GDP and population. In this document, we set out the method used for the construction of our indicators. We then compare them with other existing indicators, noting the existence of convergence for elements that are common to the respective inquiries. On the basis of our indicators we confirm the causal relationship between institutions and levels of development. We then go on to explore the database using a non-inferential (data analysis) approach. We identify an "institutional core" consisting of four major institutional characteristics (governance, security of transactions, innovation and regulations), leading us to draw up an initial typology of institutional profiles : "Authoritarian-paternalistic", "mild liberal", "pure liberal" and "informal". This typology is then supplemented by a combination of both institutional and economic variables, highlighting the main thrusts providing the framework for the database : welfare and reform. The Classification obtained aggregates countries by relevant sub-groups. This approach, which was initiated by the Ministry for economic policy purposes, has since been opened up, first, to the academic world, by bringing together a scientific committee composed of development economists in order to monitor the progress of the work described here, and second by making it possible for Research Centres to use the database.
    Keywords: Institutions, development, indicators, database
    JEL: C8 C13 O10 O17 O57 Z13
    Date: 2004–01
  32. By: Souleymane Coulibaly (DEEP-HEC et TEAM); Lionel Fontagné (CEPII et TEAM)
    Abstract: Intra-subsaharan African trade appears to be very low, an outcome that is often justified on the grounds of the size of the exporting and the importing economies. If that were the explanation, there would be no untapped trade potential. We argue instead that the main determinant of this "missing trade" is geography. Being landlocked (and poor) translates into very high trade costs. In this paper, we try to measure the impact of geographical impediments on South-South trade. We focus on the intra and extra regional trade of the countries belonging to the West African Economic and Monetary Union, which have been involved in an integration process since the early days of their independence. We derive and estimate an Armington-based model in order to evaluate the impact ofgeographical impediments on bilateral trade flows within this region.We alternatively and simultaneously use COMTRADE and West AfricanEconomic and Monetary Union data to perform these estimations.
    Keywords: South-South trade, landlocked, transport infrastructure, border infrastructure
    JEL: F11 F15 O55
    Date: 2004–04

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