nep-dev New Economics Papers
on Development
Issue of 2006‒07‒15
twenty-six papers chosen by
Jeong-Joon Lee
Towson University

  1. Poverty Dynamics, Violent Conflict and Convergence in Rwanda By Patricia Justino; Philip Verwimp
  2. Chinese Manufacturing Performance from Multilateral Perspective: 1980-2004 By Ruoen Ren; Haitao Zheng
  3. The long-term educational cost of war: evidence from landmine contamination in Cambodia By Ouarda Merrouche
  4. Contributions of Zvi Griliches By James J. Heckman
  5. The Growth Performance of Developing Countries in the Last Thirty Years. Who gained? Who Lost? By Horst Siebert
  6. Distributional Effects of FDI: How the Interaction of FDI and Economic Policy Affects Poor Households in Bolivia By Peter Nunnenkamp; Rainer Schweickert; Manfred Wiebelt
  7. State Dependence and Causal Feedback of Poverty and Fertility in Ethiopia By Arnstein Aassve; Abbi M. Kedir; Habtu Tadesse Woldegebriel
  8. Indian Poverty during the 1990s: Resolving Methodological Issues from the 55th NSS Round. By Melanie Morten
  9. China's Competitive Threat to Latin America: An Analysis for 1990-2002 By Sanjaya Lall (QEH) and John Weiss
  10. Causes of conflict in Sudan: Testing the Black Book By Alex Cobham (QEH)
  11. Is African Industry Competing? By Sanjaya Lall (QEH)
  12. The 'Sophistication' Of Exports: A New Measure Of Product Characteristics By Sanjaya Lall (QEH), John Weiss and Jinkang Zhang
  13. Membership Based Indigenous Insurance Associationsin Ethiopia and Tanzania By Stefan Dercon (QEH), Joachim De Weerdt, Tessa Bold, Alula Pankhurst
  14. Returns to Education in Bangladesh By Mohammad Niaz Asadullah (SKOPE, Department of Economics)
  15. Non-protected Labour in one West African Capital: Characteristics of Jobs and Occupational Mobility in Abidjan, Cote d'Ivoire By Yvan Guichaoua (CRISE/QEH)
  16. Human Development: beyond the HDI By Gustav Ranis, Frances Stewart and Emma Samman
  17. Technological Transfers, Limited Commitment and Growth By Alexandre Dmitriev
  18. S-shaped Transition and Catapult Effects By Hyeok Jeong; Yong Kim
  19. Global redistribution of income By Rosenblatt, David; Levin, Victoria; Bourguignon, Francois
  20. Financial development in Latin America : big emerging issues, limited policy answers By Schmukler, Sergio L.; Gozzi, Juan Carlos; de la Torre, Augusto
  21. Income diversification in Zimbabwe : welfare implications from urban and rural areas By Ersado, Lire
  22. Household financial assets in the process of development By Honohan, Patrick
  23. Can information campaigns spark local participation and improve outcomes ? A study of primary education in Uttar Pradesh, India By Khemani, Stuti; Glennerster, Rachel; Duflo, Esther; Banerji, Rukmini; Banerjee, Abhijit
  24. Earnings Inequality in India: Has the Rise of Caste and Religion Based Politics in India had an Impact? By Sumon Kumar Bhaumik; Manisha Chakrabarty;
  25. Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector By Sumon Kumar Bhaumik; Shubhashis Gangopadhyay; Shagun Krishnan
  26. Regulatory Barriers & Entry in Developing Economies By John Bennett; Saul Estrin;

  1. By: Patricia Justino (Institute of Development Studies); Philip Verwimp (Institute of Social Studies)
    Abstract: Civil war and genocide in the 1990-2000 period in Rwanda - a small, landlocked, densely populated country in Central Africa - have had differential economic impacts on the country’s provinces. The reasons for this are the death toll of the genocide, the location of battles, the waves of migration and the local resurgence of war. As a result, the labour/land and labour/capital ratios at the provincial level changed considerably during that period. Using two cross-sections, we find empirical evidence for convergence between provinces following the conflict shocks: previously richer provinces in the east and in the north of the country experienced lower, even negative, economic growth compared to the poorer western and southern provinces. This has in turn affected significantly the dynamics of household poverty in Rwanda in the same period. Using a small but unique panel of households surveyed before and after the conflict period, we find that households whose house was destroyed or who lost land ran a higher risk of falling into poverty. This was particularly the case for households who were land-rich before the genocide. We do not find this for the loss of household labour. In the latter case the effect depends on the violent or non-violent character of the loss.
    Date: 2006–04
  2. By: Ruoen Ren; Haitao Zheng
    Abstract: Based on our research work of 1998, we discuss Chinese manufacturing performance from multilateral perspective in 1980-2004 through performing the comparison of labour productivity between China and its trade partners so as to better understand the problems of RMB exchange rate. We talk about Chinese manufacturing competitiveness through the multilateral comparison of PPPs, relative price levels, labor productivity and ULCs, with the PPPs being standardized according to the base year 1997. All of the results are compared with those in the year 1987. The following findings are presented: in Chinese manufacturing, the various PPPs in the base year 1997 are approximately 3.7 yuan/international $. After the middle 1980s, the relative price turns the lowest in all the five investigation countries. Furthermore, it is still trending downward. ULC is declining albeit the fluctuations. In the 1980s, there is no "catch-up" rapid growth in labor productivity. However, after 1992, it has shown a distinct "catch-up", though with the low level.
    Keywords: Multilateral comparison, Manufacturing, International competitiveness
    JEL: O47 O57 F14
    Date: 2006–06
  3. By: Ouarda Merrouche
    Abstract: The economic impact of war may be visible in the long run and particularly its impact on human capital. I use unique district level data on landmine contamination intensity in Cambodia combined with individual survey data to evaluate the long run cost of Cambodia’s 30 years war (1970-1998) on education levels and earnings. These effects are identified using difference-in-differences (DD) and instrumental variables (IV) estimators. In the DD framework I exploit two sources of variation in an individual’s exposure to the conflict: her age in 1970 and landmine contamination intensity in her district of residence. The IV specification uses an indicator of distance to the Thai border-average district fluency in Thai- as an exogenous source of variation in landmine contamination intensity. I show that young individuals who had not yet attended school before 1970 received less education (relative to the older cohort) and this effect was higher in regions where conflict has been more intense. However, immediately after the war there are no visible effects on earnings. I argue that the destruction of physical capital is the major factor that drives down the returns to education in Cambodia post-war.
    JEL: O1 O55
    Date: 2006–06
  4. By: James J. Heckman (University of Chicago and IZA Bonn)
    Abstract: In this article, I summarize Griliches’ contributions to economics and to applied econometrics.
    Keywords: social rate of return, growth, productivity improvement
    JEL: B31 D24 O33
    Date: 2006–06
  5. By: Horst Siebert
    Abstract: This paper answers the question which developing countries have gained and which have lost in the international division of labor during the last thirty years. The indicators used are GDP per capita in constant purchasing power parity and relative distance to the United States. Nearly all developing countries have improved in absolute terms over the last thirty years; many, among them China and India with large populations, have also reduced their relative distance to the United States. The paper classifies developing countries and discusses impediments to economic development and core elements of a growth strategy.
    Keywords: Economic development, growth, GDP per capita, stages of development, classification of developing countries, newly industrializing countries, core elements of a growth strategy, growth and equity, impediments to growth
    JEL: F O O40 N
    Date: 2006–06
  6. By: Peter Nunnenkamp; Rainer Schweickert; Manfred Wiebelt
    Abstract: This paper provides a computable general equilibrium analysis of the medium to long-run impact of FDI inflows on poverty and income distribution in Bolivia. The CGE analysis addresses several important transmission channels which have been neglected in the empirical literature by (i) investigating the impact of FDI inflows on incomes of urban and rural households; (ii) taking into account informal activities; and (iii) differentiating between various segments of the urban workforce, whereas previous studies are typically confined to the dichotomy between white-collar and blue-collar workers in manufacturing industries. The simulation results suggest that FDI inflows add to Bolivia’s investment ratio, enhance economic growth, and reduce poverty. However, the income distribution typically becomes more unequal. In particular, FDI widens income disparities between urban and rural areas Our results point to two levers through which the Bolivian government may promote growthenhancing and poverty-alleviating effects of FDI. First, it seems important to overcome labor market segmentation. Second, complementary public investment in infrastructure may help remove bottlenecks in the absorptive capacity of the economy that tend to limit productive employment of the poor. Yet, simulated policy reforms or alternative productivity scenarios are hardly effective in reducing the divide between urban and rural areas.
    Keywords: Foreign direct investment, poverty and income distribution, Bolivia, computable general equilibrium analysis
    JEL: C68 D3 F21 O5
    Date: 2006–06
  7. By: Arnstein Aassve; Abbi M. Kedir; Habtu Tadesse Woldegebriel
    Abstract: The paper implements simultaneous random effect models as a means to analyse causality issues related to poverty and fertility in Ethiopia, a country which is plagued by high and persistent poverty and very high fertility rates in rural areas. Using longitudinal data from both urban and rural areas of Ethiopia, we analyse the relationship between childbearing and poverty. In addition to identifying state dependence in poverty and fertility, we investigate to what extent fertility act as a feedback mechanism leading to higher poverty and vice versa. We find that poverty itself has little effect on fertility, whereas there is evidence of state dependence in poverty and important feedback from fertility on future poverty. Not unexpected, we find substantial differences between rural and urban areas.
    Date: 2006–06
  8. By: Melanie Morten
    Abstract: The fieldwork for the 61st National Sample Survey (NSS) has recently been completed and Indian poverty estimates for 2004/05 are currently being calculated. We revisit the debate over the 55th NSS round, which produced incomparable poverty estimates due to a change in the recall period used in the survey. The adjustment methods of Sundaram and Tendulkar (2003a; 2003b); Deaton (2003a and Drèze 2002); and Kijima and Lanjouw (2003) are analysed, and the underlying assumptions of each method are probed. We conclude that the use of the Employment/Unemployment surveys is not valid, reject the assumption of a stable Engel curve but cannot reject the assumption that returns to factors are constant. With the caveat that there has been no structural shift in the relationship between income and expenditure, we accept Kijima and Lanjouw’s adjustment method. This implies that poverty reduction during the 1990s was considerably slower than prior to the 1991 economic reforms.
    Date: 2006
  9. By: Sanjaya Lall (QEH) and John Weiss
    Abstract: This paper explores China's competitive threat to Latin America in trade in manufactures. The direct threat in exports to third country markets appears small: LAC's trade structure is largely complementary to that of China. In bilateral trade, several LAC countries are increasing primary and resource-based exports to China. However, the pattern of trade, with LAC specializing increasingly in resource-based products and China in manufactures, seems worrying. Given cumulative capability building, China's success in increasingly technology-based products with strong learning externalities can place it on a higher growth path than specialisation in 'simpler' goods, as in LAC. China may thus affect LAC's technological upgrading in exports and industrial production. The issue is not so much current competition as the 'spaces' open for LAC in the emerging technology-based world.
  10. By: Alex Cobham (QEH)
    Abstract: The Black Book of Sudan claims to identify a pattern of political control - by people of its northern regions - which is unbroken during the post-independence period. This is the basis for the view of many of the rebels in the south and west of the country that the conflicts are the result not of racial or religious discrimination but rather of regional marginalisation. This paper uses the available data to evaluate the extent to which differences in regional access to power have resulted in differential human development progress. Indicators ranging from infant mortality to adult literacy, coupled with data on regional expenditure allocations, offer substantial support to the idea that policy has discriminated against the population of the southern and western regions, not least Darfur. The danger is that development community efforts that do not recognise the basis for the conflict may facilitate a continuation of the same distortions and sow the seeds for future conflict even before peace is achieved.
  11. By: Sanjaya Lall (QEH)
    Abstract: Africa's industrial performance has been poor and its ability to industrialize successfully is under increasing question. This paper argues that industrialization remains vital to African development. It describes the current global industrial setting and analyses the recent performance of African manufacturing relative to that of other developing regions. It finds that Africa is becoming increasingly marginal to the technological dynamics of global economy. It shows few signs of a responding to the competitive stimulus of liberalization or of attracting more mobile foreign productive factors. It analyses the reasons for this performance and argues that the basic problem of African industry lies not in the investment climate (which can certainly be improved) or in gaining market access to rich countries (which is already very good for manufactures, and has improved with initiatives like AGOA) but in the low level of its industrial capabilities. The paper concludes with the need to reconsider current African industrial strategy and to evolve a new strategy focused on building capabilities.
  12. By: Sanjaya Lall (QEH), John Weiss and Jinkang Zhang
    Abstract: Trade data are often classified by product characteristics in the trade, technology and development literature to analyze trade patterns, competitive performance and structural change. However, existing classifications are constrained in that trade data are far more detailed than the industry data on which categories are based (e.g. current classifications only have 4-5 technology groups). We propose a new classification - 'sophistication' - as a means of analyzing product characteristics in great detail, based on the average income of exporting economies. Sophistication captures more than technical characteristics; it includes product differentiation, production fragmentation, resource availability and other factors. However, it has the advantage of providing unique continuous scores for each product at any level of detail. We calculate sophistication scores for 237 exports at the 3-digit SITC level and 766 exports at the 4-digit level for 1990 and 2000 (detailed values can be provided on request). We show sophistication scores for exports by selected countries, technology groups and industries. Our intention is to provide a database for further empirical analysis.
  13. By: Stefan Dercon (QEH), Joachim De Weerdt, Tessa Bold, Alula Pankhurst
    Abstract: Indigenous insurance associations are a prevalent form of membership based organisations of the poor, at least in the rural areas in Ethiopia and Tanzania surveyed by the authors. Results show how villagers with few links to any formal kind of insurance market have established membership-based indigenous insurance associations to protect themselves against unexpected expenditures, mainly for funerals and hospitalisation. Many of these institutions tend to co-exist within the same community and are based on well-defined rules and regulations, well beyond informal reciprocal relations. They tend to offer premium-based insurance for funeral expenses, as well as, in many cases, other forms of insurance and credit to help address hardship. These groups are completely owned and managed by their members. They were locally initiated and have been continually developing through the actions of their own members, without involvement from the government or donors. Using detailed group membership data linked to household survey data we show that (i) these institutions are widely prevalent in the surveyed areas, (ii) households typically belong to several groups at the same time, (iii) they display a large degree of inclusiveness and (iv) they insure an important part of some shocks, but still leave households prone to the effects of risk
  14. By: Mohammad Niaz Asadullah (SKOPE, Department of Economics)
    Abstract: This paper reports labour market returns to education in Bangladesh using national level household survey data. Returns are estimated separately for rural and urban samples, males, females and private sector employees. Substantial heterogeneity in returns is observed; e.g. estimates are higher for urban (than rural sample) and female samples (compared to their male counterparts). Our ordinary least square estimates of returns to education are robust to control for types of schools attended by individuals and selection into wage work.
  15. By: Yvan Guichaoua (CRISE/QEH)
    Abstract: The microeconomic analysis of labour mobilisation and labour relationships in developing countries, though diverse in its hypotheses, methods and results, still nurtures the idea of dualistically segmented labour markets. This binary rural/urban segmentation leaves in the dark an important stratum of developing countries' labour markets, namely the urban informal sector. How does this huge group of unprotected workers gain access to jobs? Do labour relations comprise a social security dimension? We focus on the contractual forms that unregistered employment relationships take. We successively explore the content of employment relationships and compare it to existing classifications. We also assess the role of friends and families in accessing jobs and the changing social embeddedness over time of labour arrangements to highlight the crucial importance of interpersonal ties for informal work trajectories.
  16. By: Gustav Ranis, Frances Stewart and Emma Samman
    Abstract: The well-known Human Development Index (HDI) encompasses only three rather basic aspects of human welfare. This paper aims to go beyond this, by identifying 11 categories of human development. We next propose plausible candidates as indicators of these categories. We then estimate correlations among the indicators within each category, discarding those that are highly correlated with others. This left 39 indicators to encompass the categories. Of these, eight indicators are highly correlated with the HDI and may therefore be represented by it. But 31 are not highly correlated, suggesting that a full assessment of human development requires a much broader set of indicators than the HDI alone. Repeating the same exercise, we find that under five mortality rates do equally well as HDI, and PPP income per capita is less representative of other dimensions of human development. The HDI (and the other two broad indicators) are shown to be worse indicators of the extended categories of human development for OECD countries than for developing countries.
  17. By: Alexandre Dmitriev (Dept. d'Economia i d'Historia Economica Universitat Autònoma de Barcelona)
    Keywords: Incentive compatibility, technological diffusion, international capital flows, default risk, numerical algorithm.
    JEL: C63 F34 O33
    Date: 2006–07–04
  18. By: Hyeok Jeong; Yong Kim
    Abstract: Among the rich economies of the world today, per capita output levels had diverged before converging to the per capita output level of the frontier economy. Since frontier economies have grown at stable rates, non-frontier economies display an S-shape aggregate transition path. Along this transition, there are "catapult effects": longer episodes of divergence are associated with faster subsequent rates of convergence to the frontier. We construct and quantitatively assess a model of S-shaped transition with catapult effects. Deviations in per capita output from frontier economy levels are endogenous, while conventional growth accounting would classify these as TFP differences.
    Keywords: S-shaped transition; catapult effects; TFP
    JEL: O11 O41 O57
    Date: 2006–06
  19. By: Rosenblatt, David; Levin, Victoria; Bourguignon, Francois
    Abstract: The actual distribution of world income across countries is extremely unequal, much higher than the within country inequality faced by most countries. The question studied in this paper is: How do international policies on aid, trade, and factor movements affect the international distribution of income? To begin to answer this question, the authors calculate the impact by decile of the actual level of aid flows and the effect on potential income of merchandise trade restrictions by high-income countries. They find that aid ' s distributional impact is equality enhancing. While it is extremely small in terms of changes in standard inequality measures, it is of some importance for the lowest decile of the world ' s income distribution. The authors also find that some of this impact is counteracted by lost potential income in the lower deciles from merchandise trade barriers imposed by high-income countries. In brief, there is a contradiction in international policies where aid ' s equality-enhancing effect is somewhat offset by protectionism. They also discuss some of the analytical difficulties with extending this analysis of redistribution to other forms of international factor flows-more specifically, migrant worker and profit remittances. The analysis presented is partial and static and ignores within country distribution. As such, the authors suggest that future research should explore the distributional consequences of the broader general equilibrium effects, dynamic effects, and externalities associated with aid, trade, and factor flows. Future research should also analyze the within country distributional impacts of international policies.
    Keywords: Economic Theory & Research,Inequality,Country Strategy & Performance,Poverty Impact Evaluation,Population Policies
    Date: 2006–07–01
  20. By: Schmukler, Sergio L.; Gozzi, Juan Carlos; de la Torre, Augusto
    Abstract: This paper argues that the dominant policy paradigm on financial development is increasingly insufficient to address big emerging issues that are particularly relevant for financial systems in Latin America. This paradigm was shaped over the past decades by a fundamental shift in thinking toward market-based financial development and a complex process of financial crises interpretation. The result has been a richly textured policy paradigm focused on promoting financial stability and the convergence to international standards. It argues, however, that there is a growing dissonance between the current paradigm and the emerging issues, which is illustrated by discussing challenges in three areas: stock markets, small and medium enterprise loans, and defined-contribution pension funds. The paper concludes that the dominant policy paradigm is ill-suited to provide significant guidance in relation to the big emerging issues. It emphasizes the need to take a fresh look at the evidence, improve the diagnoses, revisit expectations, and revise the paradigm.
    Keywords: Financial Economics,Economic Theory & Research,Financial Intermediation,Macroeconomic Management,Markets and Market Access
    Date: 2006–07–01
  21. By: Ersado, Lire
    Abstract: The author examines, taking into account the urban-rural divides, the changes and welfare implications of income diversification in Zimbabwe following macroeconomic policy changes and droughts of the early 1990s. Data from two comparable national income, consumption and expenditure surveys in 1990-91 and 1995-96, which straddled a period of economic volatility and natural disasters, show that the percentage of households earning income from private and informal sources grew considerably, while that from government and formal sources declined in the aftermath of the drought and policy changes. The author finds that, in general, rural households tend to have a more diversified portfolio of income compared with their urban counterparts, and the degree of diversification decreases with the level of urbanization. However, there are important differences in the level of diversification within the rural and urban areas depending on wealth: While the relatively better-off households have a more diversified income base in rural areas, it is the poor who pursue multiple income sources in urban areas. A decomposition of changes in welfare indicates that the total contribution of income diversification is large and increased between 1990-91 and 1995-96 in both urban and rural areas. On the other hand, there were significant declines in returns to human and physical capital assets during the same period. The findings suggest that households with a more diversified income base are better able to withstand the unfavorable impacts of the policy and weather shocks. The fact that relatively better-off households have a more diversified income base following the shocks implies that the poor are more vulnerable to economic changes unaccompanied by well-designed safety nets.
    Keywords: Rural Poverty Reduction,Inequality,Poverty Diagnostics,Economic Theory & Research
    Date: 2006–07–01
  22. By: Honohan, Patrick
    Abstract: Systematic information on household financial asset holdings in developing countries is very sparse. The author reviews some available data and current policy debates. Although financial asset holdings by households are highly concentrated, deeper financial systems are correlated with improved income distribution. For low-income countries, the relevant question for poor households is not how much financial assets they have, but whether they have any access to financial products at all. Building on and synthesizing disparate data collection efforts by others, the author produces new estimates of access percentages for over 150 countries. Across countries access is negatively correlated with poverty rates, but the correlation is not a robust one: thus the supposed anti-poverty potential of financial access remains econometrically elusive. Despite policy focus on the value of credit instruments, it is deposit products that tend to be the first to be used as prosperity increases, before more sophisticated savings products and borrowing.
    Keywords: Economic Theory & Research,Banks & Banking Reform,Investment and Investment Climate,Financial Intermediation,Settlement of Investment Disputes
    Date: 2006–07–01
  23. By: Khemani, Stuti; Glennerster, Rachel; Duflo, Esther; Banerji, Rukmini; Banerjee, Abhijit
    Abstract: There is a growing belief in development policy circles that participation by local communities in basic service delivery can promote development outcomes. A central plank of public policy for improving primary education services in India is the participation of village education committees (VECs), consisting of village government leaders, parents, and teachers. The authors report findings from a survey in the state of Uttar Pradesh, of public schools, households, and VEC members, on the status of education services and the extent of community participation in the public delivery of education services. They find that parents do not know that a VEC exists, sometimes even when they are supposed to be members of it; VEC members are unaware of even key roles they are empowered to play in education services; and public participation in improving education is negligible, and correspondingly, people ' s ranking of education on a list of village priorities is low. Large numbers of children in the villages have not acquired basi c competency in reading, writing, and arithmetic. Yet parents, teachers, and VEC members seem not to be fully aware of the scale of the problem, and seem not to have given much thought to the role of public agencies in improving outcomes. Learning failures coexist with public apathy to improving it through public action. Can local participation be sparked through grassroots campaigns that inform communities about the VEC and its role in local service delivery? Can such local participation actually affect learning outcomes, and can any impact be sustained? The authors describe information and advocacy campaigns that have been experimentally implemented to address some of the problems with local participation, and future research plans to evaluate their impact.
    Keywords: Primary Education,Education For All,Teaching and Learning,Tertiary Education,Access & Equity in Basic Education
    Date: 2006–07–01
  24. By: Sumon Kumar Bhaumik; Manisha Chakrabarty;
    Abstract: Since 1989, there has been a sharp increase in the role of caste and religion in determining political fortunes at both state and federal levels in India. As a consequence, significant intercaste and inter-religion differences in earnings have the potential to stall the process of economic reforms. Yet, the patterns and determinants of such differences remain unexplored. We address this lacuna in the literature, and explore the determinants of the differences in inter-caste and inter-religion earnings in India during the 1987-99 period, using the 43rd and 55th rounds of National Sample Survey (NSS). Our results suggest that (a) earnings differences between “upper” castes and SC/ST have declined between 1987 and 1999, (b) over the same period, earnings differences between Muslims and non-Muslims have increased, to the detriment of the former, and (c) inter-caste and inter-religion differences in earnings can be explained largely by corresponding differences in educational endowment and returns on age (and, hence, experience). However, differences in returns on education do not explain inter-caste and interreligion earnings differences to a great extent.
    Keywords: Inequality, Caste, Religion, India
    JEL: O15 O17
    Date: 2006–03–01
  25. By: Sumon Kumar Bhaumik; Shubhashis Gangopadhyay; Shagun Krishnan
    Abstract: It is now stylized that, while the impact of ownership on firm productivity is unclear, product market competition can be expected to have a positive impact on productivity, thereby making entry (or contestability of markets) desirable. Traditional research in the context of entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry. However, following De Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using 3-digit industry level data from India, for the 1984-97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post-1991 reforms, variations entry rates during the 1990s were explained largely by state level institutional and legacy factors. We also find evidence to suggest that, in India, entry rates were positively associated with growth in total factor productivity.
    Keywords: Entry, Productivity, Institutions, Regulations, India, Reforms
    JEL: L11 L52 L64 L67 O14 O17
    Date: 2006–03–01
  26. By: John Bennett; Saul Estrin;
    Abstract: We model entry by entrepreneurs into new markets in developing economies with regulatory barriers in the form of licence fees and bureaucratic delay. Because laissez faire leads to ‘excessive’ entry, a licence fee can increase welfare by discouraging entry. However, in the presence of a licence fee, bureaucratic delay creates a strategic opportunity, which can result in both greater entry by first movers and a higher steady-state number of firms. Delay also leads to speculation, with entrepreneurs taking out licences to obtain the option of immediate entry if they later observe the industry to be profitable enough.
    Keywords: Entry, Entry Barriers, Developing Economy.
    JEL: L15 O14
    Date: 2006–03–01

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