nep-dev New Economics Papers
on Development
Issue of 2006‒09‒03
nine papers chosen by
Jeong-Joon Lee
Towson University

  1. Foreign Ownership, Technological Capabilities and Exports: Evidence from 205 Clothing Firms in Sri Lanka By Wignaraja, Ganeshan
  2. Trust and Economic Growth: A Panel Analysis By Roth, Felix; Schüler, Dana
  3. Resource Booms, Inequality, and Poverty: The Case of Gas in Bolivia By Jann Lay; Rainer Thiele; Manfred Wiebelt
  4. Does Aid for Education Educate Children? Evidence from Panel Data By Axel Dreher; Peter Nunnenkamp; Rainer Thiele
  5. Competition, Innovation and Growth with Limited Commitment By Ramon Marimon; Vincenzo Quadrini
  6. Capital Deepening and Non-Balanced Economic Growth By Daron Acemoglu; Veronica Guerrieri
  7. The value of mortality risk reductions in Delhi, India By Bhattacharya, Soma; Alberini, Anna; Cropper, Maureen L.
  8. Revisiting the Revolving Door: Capital Flight from Southeast Asia By Edsel L. Beja, Jr.
  9. Global Income Inequality: What It Is And Why It Matters? By Branko Milanovic

  1. By: Wignaraja, Ganeshan (Asian Development Bank)
    Abstract: Sri Lanka was the earliest South Asian economy to introduce economic reforms to attract export-oriented FDI. The rise of clothing production for export, apparently mainly driven by foreign firms, is regarded as a major outcome of the reforms. This paper seeks to examine a range of factors underlying firm-level export and technological performance. Econometric analysis (based on a large dataset of 205 clothing enterprises) indicates that foreign ownership, firm size, human capital, technological capabilities and geographical location are all positively associated with export shares. Furthermore, higher levels of technological capability are associated with larger firm size, university-level manpower and formal research and development. Improving the country's investment climate, facilitating the development of business services markets and upgrading SMEs as subcontractors to foreign firms are important policy lessons for developing economies
    Keywords: Sri Lanka, Clothing Industry, Multinational Firms, Foreign Direct Investment, Government Policy, Technological Change
    JEL: F14 L67 F23 F21 O38 O33
    Date: 2006
  2. By: Roth, Felix (University of Göttingen); Schüler, Dana (University of Göttingen)
    Abstract: This paper examines the relationship between trust and economic growth. With the help of panel data we conclude that economic growth is negatively related to an increase in trust. Our result is contrary to works taking a cross section design in which trust is positively related to growth. The relationship is tested in the context of EU countries, OECD countries, transition countries and developing countries. Interpersonal trust and systemic trust is differentiated. The paper tries to explain changes in trust over time to investigate channels through which these have a negative influence on growth.
    Keywords: Social Capital; Trust; Economic Growth; Panel Analyis
    JEL: C23 E01 O40 Z13
    Date: 2006–08–30
  3. By: Jann Lay; Rainer Thiele; Manfred Wiebelt
    Abstract: This paper addresses the question of whether the Bolivian gas boom of the 1990s has bypassed large parts of the poor population, thereby leading to increasing inequalities in an already unequal society. Using a Computable General Equilibrium model that is sequentially linked to a microsimulation model, we examine the transmission channels through which the large resource inflows related to the gas boom, both initial foreign investment in the sector and the subsequent export earnings, as well as large public transfer programs affect the distribution of income. These transfers may well be interpreted as a means of redistributing resource rents. Our focus is on labour market impacts, in particular on shifts between formal and informal employment and changes in relative factor prices. Our simulation results suggest that the gas boom induces a combination of unequalising and equalising forces, which tend to offset each other. As net distributional change is limited, growth generated by the boom reduces poverty despite increasing informality.
    Keywords: Poverty, Distribution, Computable General Equilibrium Model, Microsimulation, Natural Gas, Bolivia
    JEL: D3 D58 O17 O54 Q33
    Date: 2006–07
  4. By: Axel Dreher; Peter Nunnenkamp; Rainer Thiele
    Abstract: This paper empirically analyzes the impact of aid on education for about 100 countries over the period 1970-2005. We estimate a system of equations to test whether and to what extent the impact of sector-specific aid on educational attainment depends on (i) the extent to which aid adds to overall educational expenditure of the recipient government, (ii) the strength of the link between government expenditure and education, (iii) the quality of institutions in the recipient country, and (iv) whether aid encourages institutional reforms. According to our results, aid significantly increases primary school enrolment. This result is robust to the method of estimation, employing instruments to control for the endogeneity of aid, and the measure of institutional quality employed. The degree of institutional quality, however, has no robust impact on this relationship
    Keywords: Aid effectiveness, Education, Sector-specific aid
    JEL: F35 O11 H52 I22
    Date: 2006–08
  5. By: Ramon Marimon; Vincenzo Quadrini
    Abstract: We study how barriers to competition---such as restrictions to business start-up and strict enforcement of covenants or IPR---affect the investment in knowledge capital when contracts are not enforceable. These barriers lower the competition for human capital and reduce the incentive to accumulate knowledge. We show in a dynamic general equilibrium model that this mechanism has the potential to account for significant cross-country income inequality.
    JEL: L14 L16 O4
    Date: 2006–08
  6. By: Daron Acemoglu; Veronica Guerrieri
    Abstract: This paper constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share, but simultaneously induces a reallocation of capital and labor away from that sector. We first illustrate this force using a general two-sector model. We then investigate it further using a class of models with constant elasticity of substitution between two sectors and Cobb-Douglas production functions in each sector. In this class of models, non-balanced growth is shown to be consistent with an asymptotic equilibrium with constant interest rate and capital share in national income. We also show that for realistic parameter values, the model generates dynamics that are broadly consistent with US data. In particular, the model generates more rapid growth of employment in less capital-intensive sectors, more rapid growth of real output in more capital-intensive sectors and aggregate behavior in line with the Kaldor facts. Finally, we construct and analyze a model of “non-balanced endogenous growth,” which extends the main results of the paper to an economy with endogenous anddirected technical change. This model shows that equilibrium will typically involve endogenous non-balanced technological progress.
    JEL: O30 O40 O41
    Date: 2006–08
  7. By: Bhattacharya, Soma; Alberini, Anna; Cropper, Maureen L.
    Abstract: The authors interviewed commuters in Delhi, India, asking them to report their willingness to pay (WTP) to reduce their risk of dying in road traffic accidents in each of three scenarios that mirror the circumstances under which the majority of the road fatalities in Delhi occur. The WTP responses are internally valid, in the sense that WTP increases with the size of the risk reduction, income, and exposure to road traffic risks, as measured by length of commute and whether the respondent drives a two-wheeler. As a result, the " value of a statistical life " (VSL) is individuated-that is, it varies across groups of beneficiaries. For the most likely beneficiaries of road safety programs-the most highly exposed individuals-the VSL is about 150,000 PPP$.
    Keywords: Transport Economics Policy & Planning,Roads & Highways,Airports and Air Services,Road Safety,Insurance & Risk Mitigation
    Date: 2006–08–01
  8. By: Edsel L. Beja, Jr.
    Abstract: The paper revisits hypothesized direct linkages between external borrowing and capital flight. It reviews the cases of Indonesia, Malaysia, the Philippines and Thailand to see if such linkages exist. The results indicate that, indeed, large sums of capital flowed in and out of these four countries in a revolving door process. Thus, the results lend support to the need for: better domestic management of external debt, sound macroeconomic management and solid macro-organizational foundations (with the government at the centre of policy making), active management of capital flows, and effective domestic and international involvement and coordination in capital flows.
    Keywords: capital flight, external debt, revolving door, Southeast Asia
    JEL: F20 F30 O57
    Date: 2006–08
  9. By: Branko Milanovic
    Abstract: The paper presents a non-technical summary of the current state of debate on the measurement and implications of global inequality among citizens of the world. It discusses the relationship between globalization and global inequality, shows why global inequality matters and proposes a scheme for global redistribution.
    Keywords: globalization, global inequality, aid
    JEL: D31
    Date: 2006–08

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