nep-dev New Economics Papers
on Development
Issue of 2005‒01‒23
seven papers chosen by
Jeong-Joon Lee
Towson University

  1. Firm Tunrover and the Rate of Macroeconomic Growth - Simulating the Macroeconomic Effects of Schumpeterian Creative Destruction By Eliasson, Gunnar; Johansson, Dan; Taymaz, Erol
  2. Openness and Human Capital as Sources of Productivity Growth: An Empirical Investigation from the MENA Countries By Haouas, Ilham; Yagoubi, Mahmoud
  3. Infrastructure, Public Education and Growth with Congestion Costs By P R Agénor
  4. Is Poland the Next Spain? By Francesco Caselli; Silvana Tenreyro
  5. Does Food Aid Harm the Poor? Household Evidence from Ethiopia By James Levinsohn; Margaret McMillan
  6. Social Capital, Creative Destruction and Economic Growth By Uwe Dulleck; Dirk J. Bezemer; Paul Frijters
  7. Economic Development in China and Its Implications for East Asia By Chung H. Lee

  1. By: Eliasson, Gunnar (Royal Institute of Technology); Johansson, Dan (The Ratio Institute); Taymaz, Erol (Middle East Technical University)
    Abstract: The positive effects of new innovative entry and fast and efficient allocation of resources are balanced against the efficiency of price signaling in markets in a non-linear micro based simulation model of an Experimentally Organized Economy (EOE). In this model increasingly rapid reallocation of resources over markets, moved by innovative new entry and competitive exit (the rate of firm turnover) generates faster growth in output, but eventually, if too fast, is shown to affect the reliability of price signaling in markets and to raise the frequency of investment mistakes. Beyond a certain level of the rate of firm turnover the aggregate effects at the macro level, therefore, turn negative. This optimal growth trajectory depends on the balance between the rates of entry and exit and on the performance of new firms compared to incumbents, their size compared to incumbents and the variation in the same characteristics.
    Keywords: Business Mistakes; Economic Systems Stability; Endogenous Growth; Experimentally Organized Economy (EOE); Firm Turnover
    JEL: C15 C45 C62 C81 L16 O12
    Date: 2005–01–18
  2. By: Haouas, Ilham (TEAM, University of Paris 1 and IZA Bonn); Yagoubi, Mahmoud (MATISSE, University of Paris 1)
    Abstract: This paper investigates the impact of openness to trade and higher levels of human cap ital on the economies of some MENA countries. To answer the question: whether either human capital or openness can be shown to cause productivity, we use panel data on 16 countries spanning the 1965 -2000 period. Controlling for fixed effects as well as endogeneity, the results show a significant impact of openness on productivity growth. We find also an effect, significant at the ten per cent level, of the level of human capital on the level of income but no effect on underlying productivity growth. Our pre ferred estimator combines high and low frequency differences of the data. We discuss reasons why this estimator is well suited for empirical analysis of economic growth.
    Keywords: productivity, openness, human capital, growth, panel data, MENA countries
    JEL: F43 O11 O53
    Date: 2005–01
  3. By: P R Agénor
    Abstract: This paper studies the optimal allocation of public expenditure between infrastructure and education services in an endogenous growth framework. Raw labor must be educated to become productive. The balanced-growth path is derived and the transitional dynamics associated with an increase in the share of spending on infrastructure are characterized. The growth-maximizing share is shown to depend on the elasticities of output with respect to both infrastructure services and the supply of educated labor. If the supply of raw labor is increasing in wages, the growth-maximizing share of government spending on infrastructure depends negatively on the degree of congestion in schooling.
    Date: 2005
  4. By: Francesco Caselli; Silvana Tenreyro
    Abstract: We revisit Western Europe's record with labor-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and greater total factor productivity gains. These (relatively) high rates of capital accumulation and TFP growth reflect convergence along two margins. One margin (between industry) is a massive reallocation of labor from agriculture to manufacturing and services, which have higher capital intensity and use resources more efficiently. The other margin (within industry) reflects capital deepening and technology catch-up at the industry level. In Eastern Europe the employment share of agriculture is typically quite large, and agriculture is particularly unproductive. Hence, there are potential gains from sectoral reallocation. However, quantitatively the between-industry component of the East's income gap is quite small. Hence, the East seems to have only one real margin to exploit: the within-industry one. Coupled with the fact that within-industry productivity gaps are enormous, this suggests that convergence will take a long time. On the positive side, however, Eastern Europe already has levels of human capital similar to those of Western Europe. This is good news because human capital gaps have proved very persistent in Western Europe's experience. Hence, Eastern Europe does start out without the handicap that is harder to overcome.
    JEL: F15 F43 N10 O11
    Date: 2005–01
  5. By: James Levinsohn; Margaret McMillan
    Abstract: This paper uses household-level data from Ethiopia to investigate the impact of food aid on the poor. We find that food aid in Ethiopia is "pro-poor." Our results indicate that (i) net buyers of wheat are poorer than net sellers of wheat, (ii) there are more buyers of wheat than sellers of wheat at all levels of income, (iii) the proportion of net sellers is increasing in living standards and (iv) net benefit ratios are higher for poorer households indicating that poorer households benefit proportionately more from a drop in the price of wheat. In light of this evidence, it appears that households at all levels of income benefit from food aid and that %u2013 somewhat surprisingly %u2013 the benefits go disproportionately to the poorest households.
    JEL: F1 O1
    Date: 2005–01
  6. By: Uwe Dulleck; Dirk J. Bezemer; Paul Frijters
    Abstract: A distinction between individual and communal aspects of social capital is introduced, and their roles in production explored. Contacts are required to transact. contact formation and replacement are mediated by either market institutions or, less efficiently, by informal networks. Replacement of contacts is part of Schumpeterian creative destruction, leading to technological progress but with a negative externality. For output to increase, a "fundamental transformation" from informal to formal contact creation institutions is required. This may be blocked if political elite interests are threatened by the externality. Growth experiences in transition and developing countries are interpreted in this frameword.
    JEL: O11 O41 P16
    Date: 2004–04
  7. By: Chung H. Lee (Department of Economics, University of Hawaii at Manoa)
    Abstract: In the aftermath of the economic crisis of 1997-98 South Korea has undertaken a number of major institutional reforms. What are these reforms? Why were they undertaken? What is the outcome of the reforms? In answering these questions the paper examines the influence that the ideas of political leaders on political economy had in setting forth the reform agenda and the role that various interest groups have played in implementing the reform. It argues that there was a shift in the developmental paradigm in the early 1980s, that the new paradigm guided reforms in Korea during the 1980s and 1990s but with initial conditions and interest politics influencing the implementation and actual outcome of reform, and that the post-crisis reform was a culmination of the reform process that began in the early 1980s.
    Keywords: Korea, Institutional Reform, Asian Financial Crisis.
    JEL: O5 P1 G1
    Date: 2004

This nep-dev issue is ©2005 by Jeong-Joon Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.