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on Development |
| By: | Watu Wamae |
| Abstract: | This paper attempts to theoretically understand the process of catching-up or falling behind particularly within the context of developing countries. The main aim of the paper consists in investigating the impact of domestic innovation, via its interaction with the learning capability, on the technology gap of an economy. More specifically, we seek to shed some light on why the tendency for poor countries to fall further behind, despite efforts to improve their learning capabilities, appears pervasive. Our analysis is based on a simple model of technology gap elaborated by Verspagen (1991). We find that domestic innovation, a critical component for the development of an absorptive capacity, is a significant determinant of whether an economy catches-up or falls further behind. |
| Keywords: | Technology gab; absorptive capacity; developing countries |
| JEL: | O11 O15 O38 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:06-02&r=dev |
| By: | Klingebiel, Daniela; Kroszner, Randall S; Laeven, Luc |
| Abstract: | This paper investigates the growth impact of banking crises on industries with different levels of dependence on external sources of finance to analyze the mechanisms linking financial shocks and real activity. If the banking system is the key element allowing credit constraints to be relaxed, then a sudden loss of these intermediaries in a system where such intermediaries are important should have a disproportionately contractionary impact on the sectors that flourished due to their reliance on banks. Using data from 38 developed and developing countries that experienced financial crises during the last quarter century, we find that sectors highly dependent on external finance tend to experience a substantially greater contraction of value added during a banking crisis in deeper financial systems than in countries with shallower financial systems. On average, in a country experiencing a banking crisis, a sector at the 75th percentile of external dependence and located in a country at the 75th percentile of private credit to GDP would experience a 1.6 percent greater contraction in growth in value added between the crisis and pre-crisis period than a sector at the 25th percentile of external dependence and private credit to GDP. This effect is sizeable compared with an overall mean decline in growth of 3.5 percent between these two periods. Our results, however, do not suggest that on net the externally dependent firms fare worse in deep financial systems. |
| Keywords: | banking and financial crises; credit channel; financial development; financing constraints |
| JEL: | G21 O16 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5623&r=dev |
| By: | Sirimaneetham, Vatcharin; Temple, Jonathan |
| Abstract: | We examine the view that high-quality macroeconomic policy is a necessary, but not sufficient, condition for economic growth. We first construct a new index of the quality of macroeconomic policy. We then directly compare growth rate distributions across countries with good and bad policies; use Bayesian methods to examine the partial correlation between policy and growth; and outline how growth and steady-state income levels might have differed, had all countries achieved good policy outcomes. One finding is that bad macroeconomic policies can be offset by other factors, but the fastest-growing countries in our sample all shared high-quality macroeconomic management. |
| Keywords: | Bayesian Model Averaging; counterfactuals; economic growth; macroeconomic policy; Washington Consensus |
| JEL: | O23 O40 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5642&r=dev |
| By: | Temple, Jonathan; Woessmann, Ludger |
| Abstract: | This paper develops empirical growth models suitable for dual economies, and studies the relationship between structural change and economic growth. Structural change matters because, if the marginal product of labour varies across sectors, changes in the structure of employment can raise aggregate productivity. The models in the paper incorporate this effect in a more flexible way than previous work. Estimates of the models imply sizeable marginal product differentials, and indicate that the reallocation of labour makes a significant contribution to the international variation in productivity growth. |
| Keywords: | dualism; structural change; TFP growth; wage differentials |
| JEL: | O11 O40 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5655&r=dev |
| By: | Fan, Xuejun; Jacobs, Jan; Lensink, Robert (Groningen University) |
| Abstract: | This paper contributes to the empirical finance-growth literature by examining the relationship between financial depth, banking sector development, stock market development and economic growth in China. After an extensive survey on recent financial reforms in China, we apply Granger (non-)causality tests for non-stationary variables to examine long-run and short-run causality between economic growth and financial development. We find positive relationships between financial depth, banking sector development and growth. However, stock market development does not seem to have a positive effect on long-run economic growth. |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:rugccs:2005/09&r=dev |
| By: | Hiroyuki Kasahara (University of Western Ontario); Beverly Lapham (Queen's University) |
| Abstract: | This paper develops an open economy model with heterogeneous final goods producers who simultaneously choose whether to export their goods and whether to use imported intermediates. The model highlights mechanisms whereby import policies affect aggregate productivity, resource allocation, and industry export activity along both the extensive and intensive margins. Using the theoretical model, we develop and estimate a structural empirical model that incorporates heterogeneity in productivity and shipping costs using Chilean plant-level manufacturing data. The estimated model is consistent with the key features of the data regarding productivity, exporting, and importing. We perform a variety of counterfactual experiments to assess quantitatively the positive and normative effects of barriers to trade in import and export markets. These experiments suggest that there are substantial aggregate productivity and welfare gains due to trade. Furthermore, because of import and export complementarities, policies which inhibit the importation of foreign intermediates can have a large adverse effect on the exportation of final goods. |
| Keywords: | exporting; importing; firm heterogeneity; aggregate productivity; resource allocation |
| JEL: | O40 F12 E23 C23 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:epuwoc:20062&r=dev |
| By: | John Gibson (University of Waikato); Susan Olivia (University of California, Davis); Scott Rozelle (University of California, Davis) |
| Abstract: | This paper investigates whether there is a non-linear relationship between income and the private transfers received by households in developing countries. If private transfers are unresponsive to household income, expansion of public social security and other transfer programs is unlikely to crowd out private transfers, contrary to concerns first raised by Barro and Becker. There is little existing evidence for crowding out effects in the literature, but this may be because they have been obscured by methods that ignore non-linearities. If donors switch from altruistic motivations to exchange motivations as recipient income increases, a sharp non-linear relationship between private transfers and income may result. In fact, threshold regression techniques find such non-linearity in the Philippines and after accounting for these there is evidence of serious crowding out, with 30 to 80 percent of private transfers potentially displaced for low-income households [Cox, Hansen and Jimenez 2004, 'How Responsiveare Private Transfers to Income?' Journal of Public Economics]. To see if these non-linear effects occur more widely, semiparametric and threshold regression methods are used to model private transfers in four developing countries - China, Indonesia, Papua New Guinea and Vietnam. The results of our paper suggest that non-linear crowding-out effects are not important features of transfer behaviour in these countries. The transfer derivatives under a variety of assumptions only range between 0 and -0.08. If our results are valid, expansions of public social security to cover the poorest households need not be stymied by offsetting private responses. |
| Keywords: | crowding out; private transfers; social security |
| JEL: | H55 O15 |
| Date: | 2006–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:01/06&r=dev |
| By: | Porto, Guido G.; Brambilla, Irene |
| Abstract: | This paper investigates the impacts of cotton marketing reforms on farm productivity, a key element for poverty alleviation, in rural Zambia. The reforms comprised the elimination of the Zambian cotton marketing board that was in place since 1977. Following liberalization, the sector adopted an outgrower scheme, whereby firms provided extension services to farmers and sold inputs on loans that were repaid at the time of harvest. There are two distinctive phases of the reforms: a failure of the outgrower scheme, and a subsequent period of success of the scheme. The authors ' findings indicate that the reforms led to interesting dynamics in cotton farming. During the phase of failure, farmers were pushed back into subsistence and productivity in cotton declined. With the improvement of the outgrower scheme of later years, farmers devoted larger shares of land to cash crops, and farm productivity significantly increased. |
| Keywords: | Crops & Crop Management Systems,Economic Theory & Research,Livestock & Animal Husbandry,Rural Poverty Reduction,Rural Development Knowledge & Information Systems |
| Date: | 2006–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3904&r=dev |
| By: | Porto, Guido G.; Galiano, Sebastian |
| Abstract: | The authors provide new evidence on the impacts of trade reforms on wages and wage inequality in developing countries. While most of the current literature on the topic achieves identification by comparing outcomes before and after one episode of trade liberalization across industries, they propose a stronger identifying strategy. The authors explore the recent historical record of policy changes adopted by Argentina: from significant protection in the early 1970s, to the first episode of liberalization during the late 1970s, back to a slowdown of reforms during the 1980s, to the second episode of liberalization in the 1990s. These swings in trade policy comprise broken trends in trade reforms that they can compare with observed trends in wages and wage inequality. After setting up unusual historical data sets of trends in tariffs, trends in wages, and trends in wage inequality, the evidence supports two well-known hypotheses: trade liberalization, other things being equal, (1) has reduced wages, and (2) has increased wage inequality. |
| Keywords: | Free Trade,Economic Theory & Research,Trade Policy,Export Competitiveness,Labor Markets |
| Date: | 2006–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3905&r=dev |
| By: | Stan du Plessis (Department of Economics, Stellenbosch University); Ronelle Burger (Department of Economics, Stellenbosch University) |
| Abstract: | This research challenges previous findings regarding the robustness of the African growth dummy by expanding the list of variables to include those suggested by Easterly and Levine (1998) and Sachs and Warner (1997b). Using the Bayesing Averaging of Classical Estimates Approach, this paper concludes that the African growth dummy does not appear to be robustly related to growth. This supports the interpretation that the presence of the African dummy in other studies results from misspecification. This paper also contributes to the debate on growth strategies for Africa by assessing the robustness of divergent perspectives offered in the recent literature. |
| Keywords: | growth, Africa, model specification, robustness |
| JEL: | C11 O11 O40 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers17&r=dev |
| By: | Olga M. Fuentes (Institute for Economic Development,Boston University); Simon Gilchrist (Institute for Economic Development,Boston University) |
| Abstract: | We examine the evolution of the demand for skilled workers relative to unskilled workers in the Chilean manufacturing sector following Chile’s liberalization of trade in the late 1970’s. Following such trade reforms, the standard Heckscher-Olin model predicts that a low labor-cost country like Chile should experience an increased demand for low skilled workers relative to high skilled workers. Alternatively, if trade liberalization is associated with the adoption of new technologies, and technology is skill-biased, the relative demand for skilled workers may rise. Using a newly available plant-level data set that spans the sixteen year period 1979-1995, we find that the relative demand for skilled workers rose sharply during the 1979-1986 period and then stabilized. The sharp increase in demand for skilled workers coincided with an increased propensity to adopt new technologies as measured by patent usage. Plant-level analysis of labor demand confirms a significant relationship between the relative demand for skilled workers and technology adoption as measured by patent usage and other technology indicators. Our results suggest that skill-biased technological change is a significant determinant of labor demand and wage structures in developing economies. |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-150&r=dev |
| By: | Pranab Bardhan (University of California at Berkeley); Dilip Mookherjee (Institute for Economic Development, Boston University) |
| Abstract: | The impact of government decentralization on economic performance and growth is a hotly contested issue. Waves of decentralization occurred in many developing countries over the past few decades, following the demise of a development paradigm in which centralized states played a leading role (see for instance, case studies of decentralization covering over half the world’s population in Bardhan and Mookherjee 2005b). The trends toward greater decentralization has been motivated by disenchantment with previous centralized modes of governance, owing partly to a perception that monolithic government bred high levels of rent-seeking, corruption and lack of accountability of government officials. An important research question, therefore, concerns the effects of decentralization on corruption. Can decentralization be a useful institutional reform to reduce corruption, or might corruption increase as political power shifts downward? |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-152&r=dev |
| By: | Abhijit Banerjee; Pranab Bardhan (University of California at Berkeley); Kaushik Basu; Ravi Kanbur; Dilip Mookherjee (Institute for Economic Development, Boston University) |
| Abstract: | In May 2004 a conference was held at Cornell University entitled “75 Years of Development Research.”. Apart from the usual array of theoretical and empirical papers on development, a number of panels took stock of the state of development economics and discussed a range of methodological issues. One commentary that stood out in the challenge it posed to the current state of development economics was, “Is there Too Little Theory in Development Economics Today?” by Dilip Mookherjee. He answered his own question in the affirmative. Given the debate it generated, after the conference it was circulated to a number of leading development economists who had been present at the conference, and responses were invited. Pranab Bardhan sent in a response, “Theory or Empirics in Development Economics,” as did Kaushik Basu, “The New Empirical Development Economics: Remarks on its Philosophical Foundations.” These papers were largely supportive of the position taken by Mookherjee. There then followed a response to all three of these papers by Abhijit Banerjee, “‘New Development Economics’ and the Challenge to Theory,” which mounted a defense of the current empirical methods in development economics. Ravi Kanbur then followed with his comments, “Goldilocks Development Economics.” Ravi Kanbur also took the responsibility of coordinating the contributions. These five papers are being brought together here in this symposium in Economic and Political Weekly. |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-153&r=dev |
| By: | Sujata Visaria (Institute for Economic Development, Boston University); |
| Abstract: | This paper investigates the micro-level link between judicial quality and eco- nomic outcomes. It uses a loan-level data set from a large Indian bank to es- timate the impact of a new quasi-legal institution, Debt Recovery Tribunals, which are aimed at accelerating banks' recovery of non-performing loans. I use a dfferences-in-dfferences strategy based on two sources of variation: the mon- etary threshold for claims to be eligible for these tribunals, and the staggered introduction of tribunals across Indian states. I find that the establishment of tribunals reduces delinquency in loan repayment by between 3 and 11 percent. The ffect is statistically significant within loans as well: for the same loan, in- stallments that become due after the loan becomes treated are more likely to be paid up on time than those that become due before. Furthermore, interest rates on loans sanctioned after the reform are lower by 1.4-2 percentage points. These results suggest that legal reform and the improved enforcement of loan contracts can reduce borrower delinquency, and can lead banks to provide cheaper credit. Thus the paper illustrates a microeconomic mechanism through which improve- ments in legal institutions might affect credit market outcomes. |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-157&r=dev |
| By: | Patrick Legros (ECARES, Université Libre de Bruxelles; and CEPR); Andrew F. Newman (Institiute for Economic Development, Boston University); Eugenio Proto (University of Warwick) |
| Abstract: | We consider an endogenous growth model in which appropriate organization fosters innovation, but because of contractibility problems, this benefit cannot be internalized. The organizational design element we focus on is the division of labor, which as Adam Smith argued, facilitates invention by observers of the production process. However, entrepreneurs choose its level only to facilitate monitoring their workers. Whether there is innovation and growth depends on the interaction of the markets for labor and for inventions. Because of a credit market imperfection, the relative scarcity of entrepreneurs and workers depends on the wealth distribution. A high level of specialization is chosen when the wage share is low, i.e. when there are few wealthy. But in this case there are also few entrepreneurs and a consequent small market for innovations, which discourages inventive activity. When there are many wealthy, the innovation market is large, but the rate of invention is low because there is little specialization. Sustained technological progress and economic growth therefore require only moderate levels of inequality. The model also suggests that the growth rate need not be monotonic in the "quality of institutions," such as the degree of credit market imperfection. |
| URL: | http://d.repec.org/n?u=RePEc:bos:iedwpr:dp-158&r=dev |
| By: | Leonardo Gasparini (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Martín Cicowiez (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata) |
| Abstract: | This paper assesses the likelihood of meeting the Millennium Development Goal of halving poverty by 2015 in Argentina, Chile, Paraguay and Uruguay. We simulate the poverty impact of changes in growth rates and redistributive policies, and trace the poverty consequences of various alternative economic scenarios using microeconometric decompositions. Sustainable and vigorous productivity growth seems to be a necessary condition to meet the poverty MDG by 2015 in Argentina, Paraguay and Uruguay. The required growth rate could be significantly lower if some modest well-targeted redistribution could be performed. In contrast to its neighbors, Chile has already achieved the poverty MDG. |
| Keywords: | MDG, poverty, Argentina, Chile, Paraguay, Uruguay |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0023&r=dev |
| By: | Leonardo Gasparini (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Federico Gutiérrez (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Guido G. Porto (Development Research Group, The World Bank.) |
| Abstract: | This paper explores the potential link between trade and labor outcomes in rural areas in Latin America by estimating cross household-survey regression models with microdata from 60 Latin American household surveys and country aggregate data. We find a significant positive association between labor outcomes in rural areas and some measures of international trade, in particular exports, trade as a share of GDP, and the price of exports. International trade has been associated with higher wages and labor income in rural areas, in particular for those workers located in the bottom quantiles of the conditional wage distribution. Instead, our results suggest that all individuals in rural areas benefit about the same due to higher export prices. Results for urban areas are rarely statistically significant. |
| Keywords: | trade, wages, labor, rural, Latin America |
| JEL: | F02 F16 J31 J43 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0025&r=dev |
| By: | Leonardo Gasparini (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Federico Gutiérrez (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Leopoldo Tornarolli (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata) |
| Abstract: | This paper provides evidence on growth and income poverty in Latin American and the Caribbean. Results are obtained by processing microdata from household surveys of 18 LAC countries covering the 1990s and early 2000s. Over this period the LAC economies have experienced very heterogeneous patterns of growth and poverty changes. Most countries in the region have had a rather meager performance in terms of poverty reduction. Episodes of positive, significant and unambiguously pro-poor income growth have been rare in Latin America in the last 15 years. |
| Keywords: | poverty, growth, inequality, pro-poor growth, Latin America. |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0030&r=dev |