nep-dev New Economics Papers
on Development
Issue of 2005‒04‒09
three papers chosen by
Jeong-Joon Lee
Towson University

  1. Public Education and Capital Accumulation By Michele Boldrin
  2. Ex Ante Carrots instead of Ex Post Sticks: Two Examples By Joshua Aizenman
  3. Price-Channel Effects of North-South Trade on the Direction of Technological Knowledge and Wage Inequality By Óscar Afonso; Álvaro Aguiar

  1. By: Michele Boldrin
    Date: 2005–04–05
  2. By: Joshua Aizenman
    Abstract: This paper argues that the limited ability to help developing countries in a crisis should shift the focus to policies helping in reducing the ex ante probability of crises. Indirectly, such policies would also alleviate the depths of realized crises. Two specific ideas are explored: I. International reserves escrow accounts: Managing international reserves provides an effective mechanism for self insurance. The hazard of this mechanism is that international reserves are easy prey for opportunistic policy makers in polarized countries characterized by political instability. This hazard may be alleviated by escrow accounts run by the International Financial Institutions (IFIs), where part of the international reserves of a country are saved and would be used if pre-set conditions, like large TOT deteriorations, are met. The IFIs may offer a subsidized return on these escrow accounts in order to encourage countries to reduce external borrowing and to increase fiscal savings. Such subsidies may be welfare improving due to the over borrowing bias induced by sovereign risk. II. IFIs as lenders of last resort to finance fiscal reforms: I illustrate this possibility in a modified version of Cukierman, Edwards and Tabellinis (AER 1992) model. I identify conditions where IFIs function as the lenders of last resort, financing fiscal reforms. IFIs financing may shift the equilibrium from an inefficient outcome with a low tax base and high inflation to a superior outcome, associated with a more sound tax system.
    JEL: F15 F21 F34
    Date: 2005–04
  3. By: Óscar Afonso (CEMPRE, Faculdade de Economia do Porto); Álvaro Aguiar (CEMPRE, Faculdade de Economia do Porto)
    Abstract: This paper develops a general equilibrium endogenous growth model that emphasizes the mechanisms, other than market size, through which trade-induced North-South technological knowledge diffusion influences the direction of technological progress and, thus, the path of intra and inter-country wage inequality. In contrast with the market-size effect, more common in previous literature on skill-biased technological change, the operation of the price channel, central to this paper, predicts an increasing high-skilled technological bias following openness, which is more in line with the recent trends observed in developed and developing countries.
    Keywords: North-South trade; Technological knowledge diffusion; Direction of technological progress; Wage inequality.
    JEL: F16 F43 O31 O33
    Date: 2005–03

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