|
on Development |
| By: | Daron Acemoglu; Simon Johnson; James Robinson |
| Abstract: | This paper develops the empirical and theoretical case that differences in economic institutions are the fundamental cause of differences in economic development. We first document the empirical importance of institutions by focusing on two “quasi-natural experiments” in history, the division of Korea into two parts with very different economic institutions and the colonization of much of the world by European powers starting in the fifteenth century. We then develop the basic outline of a framework for thinking about why economic institutions differ across countries. Economic institutions determine the incentives of and the constraints on economic actors, and shape economic outcomes. As such, they are social decisions, chosen for their consequences. Because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over these social choices, ultimately resolved in favor of groups with greater political power. The distribution of political power in society is in turn determined by political institutions and the distribution of resources. Political institutions allocate de jure political power, while groups with greater economic might typically possess greater de facto political power. We therefore view the appropriate theoretical framework as a dynamic one with political institutions and the distribution of resources as the state variables. These variables themselves change over time because prevailing economic institutions affect the distribution of resources, and because groups with de facto political power today strive to change political institutions in order to increase their de jure political power in the future. Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad-based property rights enforcement, when they create effective constraints on power-holders, and when there are relatively few rents to be captured by power holders. We illustrate the assumptions, the workings and the implications of this framework using a number of historical examples. |
| Keywords: | development |
| JEL: | N11 |
| Date: | 2004–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000138:000684&r=dev |
| By: | Nabil Annabi; Fatou Cissé; John Cockburn; Bernard Decaluwé |
| Abstract: | Much current debate focuses on the role of growth in alleviating poverty. However, the majority of computable general equilibrium (CGE) models used in poverty and inequality analysis are static in nature. The inability of this kind of model to account for growth (accumulation) effects makes them inadequate for long run analysis of the poverty and inequality impacts of economic policies. They exclude accumulation effects and do not allow the study of the transition path of the economy where short run policy impacts are likely to be different from those of the long run. To overcome this limitation we use a sequential dynamic CGE microsimulation model that takes into account accumulation effects and makes it possible to study poverty and inequality through time. Changes in poverty are then decomposed into growth and distribution components in order to examine whether de-protection and factor accumulation are pro-poor or not. The model is applied to Senegalese data using a 1996 social accounting matrix and a 1995 survey of 3278 households. The main findings of this study are that trade liberalisation induces small increases in poverty and inequality in the short run as well as contractions in the initially protected agriculture and industrial sectors. In the long run, it enhances capital accumulation, particularly in the service and industrial sectors, and brings substantial decreases in poverty. However, a decomposition of poverty changes shows that income distribution worsens, with greater gains among urban dwellers and the non-poor. |
| Keywords: | Dynamic CGE model, trade liberalisation, poverty, inequality, Senegal |
| JEL: | D33 D58 E27 F17 I32 O15 O55 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0512&r=dev |
| By: | Caesar B. Cororaton; John Cockburn |
| Abstract: | The paper employs an integrated CGE-microsimulation approach to analyze the poverty effects of tariff reduction. The results indicate that the tariff cuts implemented between 1994 and 2000 were generally poverty-reducing, primarily through the substantial reduction in consumer prices they engendered. However, the reduction is much greater in the National Capital Region (NCR), where poverty incidence is already lowest, than in other areas, especially rural, where poverty incidence is highest. Tariff cuts lower the cost of local production and bring about real exchange rate depreciation. Since the non-food manufacturing sector dominates exports in terms of export share and export intensity, the general equilibrium effects of tariff reduction is an expansion of this sector and a contraction in the agricultural sector. This, in turn, leads to an increase in the relative returns to factors, such as capital, used intensively in the non-food manufacturing sector and a fall in returns to unskilled labor. As rural households depend more on unskilled labor income, income inequality worsens as a result. |
| Keywords: | Dynamic CGE model, trade liberalisation, poverty, inequality, Senegal |
| JEL: | D33 D58 E27 F13 F14 I32 O15 O53 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0513&r=dev |
| By: | Arslan Razmi (University of Massachusetts Amherst) |
| Abstract: | This paper extends the framework developed by Krugman and Taylor (1978) to take into account nuances related to the evolving structure of international trade. In particular, the increasing presence of transnational production chains and differential pricing behavior of de- veloping country exports destined for industrial and developing countries are accommodated. Individual country and panel data pass-through estimates are then provided to justify the va- lidity of the latter extension. The theoretical likelihood of contractionary short-run effects of nominal devaluations is shown to be positively related to the proportion of a country's exports destined for other developing countries. The policy implications emerging from the extended framework underline the need to take into account these nuances of international trade while designing exchange rate policies. JEL Categories: F12, F14, F23, F41 |
| Keywords: | Nominal devaluations, differential pass-through elasticities, contractionary deval- uations, income effects, transnational corporations. |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2005-09&r=dev |
| By: | Volker Caspari (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Günther Rehme (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Jens Rubart (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)) |
| Abstract: | It is obvious that the German economy exhibits a significant decline in economic growth during the last two decades. Although the German economy has still to overcome the burden of the reunification in 1990 it is shown that this burden might be only one reason of this decline. In this study we follow the new growth theory and develop and com-pare indicators for the educational and R&D systems of the U.S. and Germany. In this line, we show that on average the German system can compete with the U.S. one, but a lack of human capital at very high skill levels becomes obvious. This lack, particularly leads to a lower performance of German R&D and could, therefore, possibly explain the decline of the German growth trend. |
| Keywords: | Human Capital, Research and Development, Efficiency of Educational Systems; Sources of Economic Growth |
| JEL: | O11 O30 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:tud:ddpiec:138&r=dev |
| By: | Günther Rehme (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)) |
| Abstract: | This paper analyzes the link between growth and public policy when the latter depends on economically important fundamentals. When policy is endogenous the measured effects of policy on growth will generally be biased. Using a widely quoted theoretical model, the signs of the biases are derived. It is shown that the usually reported effects on growth of tax rate variables related to GDP, the ratio of public investment to total investment and the ratio of redistributive transfers to GDP are generally biased downwards. Based on these signed biases the paper discusses some empirical results that seem puzzling from a theoretical viewpoint. |
| Keywords: | Growth, Public Policy, Cross-Sectional Models |
| JEL: | O4 C2 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:tud:ddpiec:140&r=dev |