nep-dev New Economics Papers
on Development
Issue of 2005‒03‒20
twelve papers chosen by
Jeong-Joon Lee
Towson University

  2. Machines and the Economics of Growth By Aled ab Iorwerth
  3. Endogenous Growth, Capital Utilization and Depreciation By J. Aznar-Márquez; J. R. Ruiz-Tamarit
  4. Increasing Returns, Input-Output Linkages, and Technological Leapfrogging By Gallo, Fredrik
  5. Why Are Latin Americans so Unhappy about Reforms? By Ugo Panizza; Monica Yañez
  6. The Return to Foreign Aid By Carl-Johan Dalgaard; Henrik Hansen
  7. Globalization and Complementary Policies: Poverty Impacts in Rural Zambia By Jorge F. Balat; Guido Porto
  8. Slow Passthrough Around the World: A New Import for Developing Countries? By Jeffrey A. Frankel; David C. Parsley; Shang-Jin Wei
  9. Returns to Schooling in China Under Planning and Reform By Belton M. Fleisher; Xiaojun Wang
  10. Economic Reform in Tanzania and Vietnam: A Comparative Commentary By Brian Van Arkadie; Do Duc Dinh
  11. Determinants of Employment Growth at MNEs: Evidence from Egypt, India, South Africa and Vietnam By Sumon Kumar Bhaumik; Klaus Meyer; Saul Estrin
  12. Equality of opportunity and other equity principles in the context of developing countries By Denis Cogneau

  1. By: E Philip Davis; Yu-Wei Hu
    Date: 2005–02
  2. By: Aled ab Iorwerth
    Abstract: This paper summarizes the literature on economic growth. This literature suggests that investment in machinery and equipment (M&E) could foster economic growth. But, because of the need to cover the fixed costs of innovating, price is higher than the marginal cost and there will be underinvestment in M&E in a perfectly competitive economy. Further arguments based on public finance are also made about why there may be underinvestment in M&E. <P> L’auteur fait un sommaire de la littérature sur la croissance économique. Cette littérature suggère que l’investissement dans les machines et les équipements puisse augmenter le taux de croissance économique. Mais parce qu’il y a des coûts fixes à innover, le prix des machines et équipements sera supérieur à son coût marginal et donc, dans une économie parfaitement concurrentielle, il y aura sous-investissement. L’auteur mentionne également d’autres arguments, fondés sur la recherche en économie publique, qui abondent dans le sens d’un sous-investissement en machines et équipements dans une économie en concurrence parfaite.
  3. By: J. Aznar-Márquez; J. R. Ruiz-Tamarit
    Abstract: We study an extended version of the one-sector AK growth model introducing adjustment and maintenance costs. Agents are allowed to under-use the installed capital and to vary the depreciation rate. The model is analyzed using particular functional forms and is solved in closed-form. We find that adjustment and maintenance costs (e?- ciency) reduce (increases) investment, depreciation, capital utilization and the rate of growth; impatience reduces the rate of growth but increases depreciation and utilization, which are also negatively related to the rate of population growth; the rate of growth appears positively correlated with the depreciation rate and the rate of capital utilization.
  4. By: Gallo, Fredrik (Department of Economics, Lund University)
    Abstract: Firms agglomerate in one region due to increasing returns, input-output linkages and transportation costs. In the de-industrialised region factor prices are lower and a new technology may be profitable to adopt in that region instead, inducing a change in the technological leadership. This paper shows that the risk of locking in to an old technology is monotonically increasing in the benefits of agglomeration. Greater incompatibility between technologies also increases the risk of rejecting potentially superior manufacturing processes.
    Keywords: agglomeration; lock-in; new economic geography; technological leapfrogging
    JEL: F12 F43 O33
    Date: 2005–03–11
  5. By: Ugo Panizza (Research Department, Inter-American Development Bank); Monica Yañez (Research Department, Inter-American Development Bank)
    Abstract: This paper uses opinion surveys to document discontent with the pro-market reforms implemented by most Latin American countries during the 1990s. The paper also explores four possible sets of explanations for this discontent: (i) a general drift of the populace’s political views to the left; (ii) an increase in political activism by those who oppose reforms; (iii) a decline in the people’s trust of political actors; and (iv) the economic crisis. The paper’s principal finding is that the macroeconomic situation plays an important role in explaining the dissatisfaction with the reform process.
    Keywords: Political economy; Reforms; Crisis; Latin America
    JEL: P16 O54
    Date: 2004–01
  6. By: Carl-Johan Dalgaard (Institute of Economics, University of Copenhagen); Henrik Hansen (Institute of Economics, University of Copenhagen)
    Abstract: This paper investigates the marginal productivity of investment in the world’s poorest economies. The aim is to estimate the return on investments financed by foreign aid as well as by domestic resource mobilization, using crosscountry aggregate data. In practice the return on both investment categories can be expected to vary considerably across countries and time. As a consequence we develop a correlated random coefficients approach to the issue at hand, which allows us to estimate the average aggregate rate of return on “aid investments” and “domestic investments”. Across a wide array of estimators our principal finding is remarkably robust; the average aggregate gross return on “aid investments” falls in a 20-30 percent range, roughly the same as the return on investments funded by other sources than aid. This finding is well in accord with micro estimates of the economic return to aid.
    Keywords: productivity, foreign aid, random coefficients, panel data
    JEL: O47 F35 C23
    Date: 2005–03
  7. By: Jorge F. Balat; Guido Porto
    Abstract: In this paper, we have two main objectives: to investigate the links between globalization and poverty observed in Zambia during the 1990s, and to explore the poverty impacts of non-traditional export growth. We look at consumption and income effects separately. On the consumption side, we study the maize marketing reforms and the elimination of maize subsidies. We find that complementary policies matter: the introduction of competition policies at the milling industry acted as a cushion that benefited consumers but the restriction on maize imports by small-scale mills hurt them. On the income side, we study agricultural export growth to estimate income gains from international trade. The gains are associated with market agriculture activities (such as growing cotton, tobacco, hybrid maize) and rural labor markets and wages. We find that by expanding trade opportunities Zambian households would earn significantly higher income. Securing these higher levels of well-being requires complementary policies, like the provision of infrastructure, credit, and extension services.
    JEL: I32 Q12 Q17 Q18
    Date: 2005–03
  8. By: Jeffrey A. Frankel; David C. Parsley; Shang-Jin Wei
    Abstract: Developing countries traditionally exhibit passthrough of exchange rate changes that is greater and more rapid than high-income countries, but have experienced a rapid downward trend in recent years in the degree of short-run passthrough, and in the adjustment speed. As a consequence, slow and incomplete passthrough is no longer exclusively a luxury of industrial countries. Using a new data set %uF818 prices of eight narrowly defined brand commodities, observed in 76 countries %uF818 we find empirical support for some of the factors that have been hypothesized in the literature, but not for others. Significant determinants of the passthrough coefficient include per capita incomes, bilateral distance, tariffs, country size, wages, long-term inflation, and long-term exchange rate variability. Some of these factors changed during the 1990s. Part (and only part) of the downward trend in passthrough to imported goods prices, and in turn to competitors%u2019 prices and the CPI, can be explained by changes in the monetary environment. Real wages also work to reduce passthrough to competitors%u2019 prices and the CPI, confirming the hypothesized role of distribution and retail costs in pricing to market. Rising distribution costs, due perhaps to the Balassa-Samuelson-Baumol effect, could contribute to the decline in the passthrough coefficient in some developing countries.
    JEL: F3 F4
    Date: 2005–03
  9. By: Belton M. Fleisher; Xiaojun Wang
    Abstract: We estimate returns to schooling using a retrospective work history survey covering more than 4,000 workers over the period 1950 to 1994, with particular emphasis to the returns to schooling for workers who attended institutes of higher education and who graduated from college. We find evidence that schooling returns declined throughout the period leading up to the Cultural Revolution (CR), with returns for workers who did not attend college becoming negligible. Returns to those with some college education remained positive, but low compared to other countries. Consistent with other studies, we find that returns to schooling did not recover from their CR low until the 1990s. Increases in the return to schooling during the transition following the CR were not associated directly with workers changing jobs or with taking “new-economy” jobs but appear to have occurred for most workers across all ownership categories. Workers most likely to leave jobs in the traditional ownership sector for jobs in the private or jointventure categories were those who entered the labor force prior to 1967. We do not find evidence supporting other studies’ finding that schooling returns for college graduates increased more than for workers with lower levels of schooling attainment.
    Keywords: returns to schooling, skills, China
    JEL: J31 J24 O15
    Date: 2004–06–01
  10. By: Brian Van Arkadie; Do Duc Dinh
    Abstract: The economic reforms in Tanzania and Vietnam represent the two typical cases of transition economies in Asia and Africa, particularrly the transformation of the two developing economies from the planned to the market mechanism. In this paper, the two authors, Brian - a British economist and Dinh - a Vietnamese economist, have, basing on a comparative approach, enquired into various economic and social aspects of the economic reforms in the two countries, including the demographic transition, the change in population growth, the investment in human capital, the growth of GDP, the structural sransformation, the linkage between gricultural growth, rural development, food production and poverty alleviation, the reform in the industrial sector and the state enterprises, the change of ownership , the role of the State, the capital formation, the role of the domestic savings, foreign aid, investment and trade, the gains and losses from globalisation, with an aim to find the answer to the question why in the two cases, Tanzania seemed to follow the donors’ guidance better than Vietnam, but achieved smaller successes?
    Keywords: Reform vesus Renovation; Fast Liberalisation vs Step-by-Step Transformation; Privatisation vs Equitisation; Multi-Sector Ownership vs Private Ownership Bias; Industrialisation vs Agriculture-Driven Growth; Active State vs Passive State.
    JEL: E6 F41 F43 H11 N10 N15 N17 O11 O53 O55 O57 P52
    Date: 2004–06–01
  11. By: Sumon Kumar Bhaumik; Klaus Meyer; Saul Estrin
    Abstract: Foreign investors are expected to contribute to economic development through a variety of channels. However, many foreign investment operations are small, and almost insignificant in their impact on the local environment. An important indication of the potential contribution of foreign investors is thus their employment growth. Employees working for, and trained by, a multinational enterprise may become carriers of new technology and business practices. The more employees receive access to new knowledge, the more they in turn may spread the knowledge across the economy, for instance by setting up their own businesses. In this paper, we make a first step in investigating the determinants of this important mediating variable, employment growth. For a dataset covering four diverse emerging economies, we find that wholly-owned FDI operations have higher employment growth, while local industry characteristics moderate the growth effect.
    Keywords: MNE, employment growth, control, institutions, FDI policy
    JEL: O13 O33 J21 F23
    Date: 2004–07–01
  12. By: Denis Cogneau (DIAL, IRD, Paris)
    Abstract: I propose a personal reading of some theories of social justice at a moment when the issue of equality or equity appears to be back on the ‘development agenda’. Nowadays the term equity tends to be most often associated with the equality of opportunity principle. After having briefly summarized the equality of opportunity standpoint, I review the two main criticisms that have been addressed to it inside the economic literature: the right-wing meritocratic criticism on the one hand, and the left-wing egalitarian criticism on the other. I supplement these internal criticisms with a sociological or anthropological standpoint that advocates for a more pluralist definition of justice and gives a central role to the competition between elites for legitimacy. I argue that despite its indubitable potency (even for issues like international inequalities between countries), the equality of opportunity principle is incomplete and that some meritocratic principles and some equalization of outcomes should enter into play when thinking about social justice in a given real society. Moreover, a socially relevant conception of justice should take into account cultural variations in the definition of fairness. A universalist definition of justice is better preserved when the issue of tyranny and separation of powers is considered at both the social and political levels. _________________________________ Je propose une lecture personnelle de quelques théories de la justice sociale au moment où la question de l’égalité ou de l’équité semble être revenue sur l’agenda du développement. De nos jours le terme équité semble être le plus souvent associé au principe d’égalité des chances. Après un court résumé du point de vue de l’égalité des chances, je passe en revue les deux critiques principales qui lui ont été adressées au sein de la littérature économique : la critique méritocratique de droite d’un côté, et la critique égalitariste de gauche de l’autre. J’ajoute à ces deux critiques internes un point de vue historique et sociologique qui prone une définition pluraliste de la justice et fait jouer un rôle central à la compétition des élites pour la légitimité. J’argumente que malgré son indubitable puissance (même dans le domaine des inégalités internationales entre pays), le principe d’égalité des chances est incomplet et que des principes méritocratiques et d’égalisation des résultats doivent entrer en jeu lorsqu’on réfléchit à la justice sociale dans une société réellement existante. De plus, une conception de la justice socialement pertinente doit prendre en compte les variations culturelles dans la définition du juste. Une définition universaliste de la justice est mieux préservée lorsque la question de la tyrannie et de la séparation des pouvoirs est considérée, à la fois sur le plan social et sur le plan politique.
    Keywords: Distributive Justice, Inequality, Equality of Opportunity, Meritocracy, Political Economy, Development, Equity, Separation of Powers, Justice distributive, Inégalité, Egalité des chances, Méritocratie, Economie politique, Développement, Equité, Séparation des pouvoirs.
    JEL: A13 D63 O15 P50
    Date: 2005–01

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