nep-dev New Economics Papers
on Development
Issue of 2007‒09‒30
25 papers chosen by
Jeong-Joon Lee
Towson University

  1. Fiscal policy in developing countries : a framework and some questions By Perotti, Roberto
  2. The Diffusion of Development By Enrico Spolaore; Romain Wacziarg
  3. "Role of Courts in Economic Development: A Case of Prewar Japan" By Masaki Nakabayashi; Tetsuji Okazaki
  4. Property rights in a very poor country : tenure insecurity and investment in Ethiopia By Gautam, Madhur; Dercon, Stefan; Ali, Daniel Ayalew
  5. Aid and Trade By Suwa Eisenmann, Akiko; Verdier, Thierry
  6. Structure and performance of the services sector in transition economies By Fernandes, Ana M.
  7. Labor market policy in developing countries : a selective review of the literature and needs for the future By Fields, Gary S.
  8. Institutions and Foreign Investment: China versus the World By Joseph P.H. Fan; Randall Morck; Lixin Colin Xu; Bernard Yeung
  9. Testing Limits to Policy Reversal: Evidence from Indian Privatizations By Siddhartha G. Dastidar; Raymond Fisman; Tarun Khanna
  11. Developing economies and international investors. Do investment promotion agencies bring them together? By Torfinn Harding and Beata Smarzynska Javorcik
  12. Economy-wide and distributional impacts of an oil price shock on the south African economy By Thierfelder, Karen; Robinson, Sherman; Korman, Vijdan; Kearney, Marna; Go, Delfin S.; Essama-Nssah, B.
  13. Assessing the distortions of mandatory pensions on labor supply decisions and human capital accumulation : how to bridge the gap between economic theory and policy analysis By Rutkowski, Michal; Robalino, David; Bodor, Andras
  14. A micro-decomposition analysis of the macroeconomic determinants of human development By van de Walle, Dominique; Ravallion, Martin; Lambert, Sylvie
  15. Corruption, business environment, and small business fixed investment in India By Mengistae, Taye; Honorati, Maddalena
  16. Limited access orders in the developing world :a new approach to the problems of development By Weingast, Barry R.; Webb, Steven B.; Wallis, John Joseph; North, Douglass C.
  17. Foreign direct investment in Latin America during the emergence of China and India : stylized facts By Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
  18. Substitution between foreign capital in China, India, the Rest of the world, and Latin America : much ado about nothing ? By Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
  19. The economic impact of climate change on agriculture in Cameroon By Lambi, Cornelius M.; Molua, Ernest L.
  20. Investing back home : return migration and business ownership in Albania By Zezza, Alberto; Davis, Benjamin; Carletto, Gero; Kilic, Talip
  21. The vanishing farms ? the impact of international migration on Albanian family farming By Zezza, Alberto; Davis, Benjamin; Carletto, Gero; Miluka, Juna
  22. Trade costs, barriers to entry, and export diversification in developing countries By Shepherd, Ben; Dennis, Allen
  23. Capital Flight and Economic Performance By Beja, Jr., Edsel
  24. Cross-Country Analyses of Economic Growth: An Econometric Survey By Llussa, Fernanda
  25. Trade Openness and Growth: Is There Any Link? By Sarkar, Prabirjit

  1. By: Perotti, Roberto
    Abstract: This paper surveys fiscal policy in developing countries from the point of view of long-run growth. The first section reviews existing methodologies to estimate the effects of fiscal policy shocks and of systematic fiscal policy, with time series or with cross-sectional methods, and their applicability to developing countries. The second section surveys optimal fiscal policy in developing countries, by considering the role of the intertemporal government budget, and sustainability and solvency. It also reviews the fuzzy deba te on " fiscal space " and " macroeconomic space " - and the usefulness (or lack thereof) of these terms for policy analysis. The third section asks what theory tells us about the optimal cyclical behavior of fiscal policy in developing countries. It shows that it very much depends on the assumptions about the interactions between credit market imperfections at the individual, firms, or government level, and on the supply of external funds to the country. Different sets of assumptions lead to different implications about optimal cyclical behavior. The available evidence on the cyclical behavior of fiscal policy, and possible reasons for the observed prevalence of a procyclical behavior in developing countries, is also reviewed. If one agrees that fiscal policy is indeed less countercyclical than we think is optimal, the issue is how to correct the problem. One obvious question is why government do not self-insure, i.e. why they do not accumulate assets in upturns and decumulate them in downturns. This leads to the analysis of fiscal rules and stabilization funds, in the fourth section. The last section concludes with what the author considers important research and policy questions in each part.
    Keywords: Economic Stabilization,Debt Markets,Public Sector Expenditure Analysis & Management,Economic Theory & Research,
    Date: 2007–09–01
  2. By: Enrico Spolaore; Romain Wacziarg
    Abstract: This paper studies the barriers to the diffusion of development across countries from a longterm perspective. We find that genetic distance, a measure associated with the amount of time elapsed since two populations’ last common ancestors, bears a statistically and economically significant relationship with pairwise income differences, even when controlling for various other measures of geographical, climatic, cultural and historical differences. We provide an economic interpretation of these findings, within a framework in which (a) genetic distance captures divergence in characteristics, including cultural traits, that are transmitted vertically across generations within populations over the long term, and (b) such differences in verticallytransmitted characteristics act as barriers to the horizontal diffusion of innovations from the world technological frontier. The empirical evidence over time and space is consistent with this barriers interpretation.
    Date: 2007
  3. By: Masaki Nakabayashi (Department of Economics, University of Tokyo); Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: In this paper, we explore the role of courts in the Japanese economic development, using prefecture-level litigation statistics. Since the late nineteenth century, the Japanese people brought many cases before the courts. The dominant part of the cases dealt with monetary issues, which implies that the court played a substantial role in arbitrating disputes related to economic transactions. Through regression analyses of prefecture-level panel data, it was found that frequency of law suits was positively correlated with the scale of economic activities, but that it was only in case economic development was accompanied by urbanization or decline of local communities. At the same time, it is found that increase of the capacity of the legal system enhanced financial development. In this case also, the importance of the capacity of legal system was conditional on the function of local communities.
    Date: 2007–09
  4. By: Gautam, Madhur; Dercon, Stefan; Ali, Daniel Ayalew
    Abstract: This paper provides evidence from one of the poorest countries of the world that the property rights matter for efficiency, investment, and growth. With all land state-owned, the threat of land redistribution never appears far off the agenda. Land rental and leasing have been made legal, but transfer rights remain restricted and the perception of continuing tenure insecurity remains quite strong. Using a unique panel data set, this study investigates whether transfer rights and tenure insecurity affect household investment decisions, focusing on trees and shrubs. The panel data estimates suggest that limited perceived transfer rights, and the threat of expropriation, negatively affect long-term investment in Ethiopian agriculture, contributing to the low returns from land and perpetuating low growth and poverty.
    Keywords: Common Property Resource Development,Forestry,Municipal Housing and Land,Rural Development Knowledge & Information Systems,Urban Housing
    Date: 2007–09–01
  5. By: Suwa Eisenmann, Akiko; Verdier, Thierry
    Abstract: The paper surveys the interactions between aid and trade, distinguishing between policies and outcomes as well as between various instruments. It first discusses the theoretical literature, focusing on the causal impact of aid on the recipient’s welfare via the trade channel, before turning to the empirical and institutional literature on the topic. It dentifies the main conclusions that are suggested by the literature and discusses the gaps that need to be filled out in order to get plausible policy recommendations.
    Keywords: aid; development; trade
    JEL: F13 F35 O10
    Date: 2007–09
  6. By: Fernandes, Ana M.
    Abstract: This paper examines the structure and performance of the services sector in Eastern European and Central Asian countries during 1997-2004. Services represent an increasing share of total value added and employment with the major sub-sectors being wholesale trade, retail trade, inland transport, telecommunications, and real estate activities. A clear divide separates EU-5 countries from South Eastern European countries and Ukraine in terms of services labor productivity. Although a large gap in productivity also separates EU-8 countries from EU-15 countries, that gap was reduced from 1997 to 2004 as most services sub-sectors experienced fast productivity growth. High skill intensive sub-sectors and information and communications technology producers and users have exhibited higher productivity levels and growth rates relative to other sub-sectors since 2000. The author finds a positive effect of services liberalization on the productivity growth of services sub-sectors. The author also finds a positive and significant effect of services liberalization in both finance and infrastructure on the productivity of downstream manufacturing.
    Keywords: Labor Policies,E-Business,Labor Markets,Economic Theory & Research,Transport Economics Policy & Planning
    Date: 2007–09–01
  7. By: Fields, Gary S.
    Abstract: This paper presents a selective overview of the literature on modeling labor market policies in developing countries. It considers welfare economics, theoretical models, and empirical evidence to highlight the three general features needed in future research on labor market policy in developing countries. The author identifies desirable research components (welfare economics, theoretical modeling, and empirical modeling) and pitfalls in the literature (inappropriate use of productivity, reliance on wrong kinds of empirical studies, lack of cost-benefit analysis, attention to only a subset of the goods and bads, and fallacy of composition). The paper concludes with suggested topics and methods for future research. The author states that sound labor market policy requires sound labor market models. The paper makes a case for developing policy based on explicit evaluation criteria, specific theoretical models, and comprehensive empirical evidence.
    Keywords: Labor Markets,Labor Policies,,Markets and Market Access,Population Policies
    Date: 2007–09–01
  8. By: Joseph P.H. Fan; Randall Morck; Lixin Colin Xu; Bernard Yeung
    Abstract: Weak institutions ought to deter foreign direction investment (FDI), and mass media stories highlight China's institutional deficiencies, yet China is now one of the world's largest FDI destinations. This incongruity characterizes China's paradoxical growth. Cross-country regressions show that China's FDI inflow is not exceptionally large, given the quality of its institutions and its economic track record. Institutions clearly determine a country's allure as an FDI destination, but standard measures of institutional quality can be problematic for countries undergoing rapid institutional development, and can usefully be augmented by economic track record measures. Deng Xiaoping's 1993 "southern tour" heralded sweeping reforms, and this regime shift is insufficiently reflected in commonly used measures of institutional quality. China's FDI inflow surge after these reforms resembles similar post-regime shift surges in the East Bloc, and so is also unexceptional. Recent arguments that China's FDI inflow is inefficiently large because weak institutions deter domestic investment while special initiatives attract FDI are thus either unsupported or not unique to China.
    JEL: F21 F23 G15 G38 O19 O43 O53 P34
    Date: 2007–09
  9. By: Siddhartha G. Dastidar; Raymond Fisman; Tarun Khanna
    Abstract: We examine the effect of regime change on privatization using the 2004 election surprise in India. The pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for definite privatization by the BJP dropped by 3.5 percent relative to private firms. Surprisingly, government-controlled companies that were only under study for possible privatization fell by 7.5 percent relative to private firms. We interpret this as evidence of investor belief of policy irreversibility, where reforms may reach a stage beyond which future regimes have difficulty reversing those policies. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to the government's privatization agenda.
    JEL: G15 G38 H11 L33
    Date: 2007–09
  10. By: Jing Gao (Département des sciences administratives, Université du Québec (Outaouais))
    Abstract: The Agricultural Development Bank of China (ADBC) seeks a complete economic evaluation of the Loaning Funds Program to support private agricultural product processing factories. This paper aims at economically evaluate one loaning project of ADBC : the soybean processing of Huabao Industrial Co. Ltd.
    Keywords: Project management, Cost-benefit analysis
    JEL: M
    Date: 2007–09–17
  11. By: Torfinn Harding and Beata Smarzynska Javorcik (Statistics Norway)
    Abstract: Many countries spend significant resources on investment promotion agencies (IPAs) in the hope of attracting inflows of foreign direct investment (FDI). Despite the importance of this question for public policy choices, little is known about the effectiveness of investment promotion efforts. This study uses newly collected data on national IPAs in 109 countries to examine the effects of investment promotion on FDI inflows. The empirical analysis follows two approaches. First, we test whether sectors explicitly targeted by IPAs receive more FDI in the post-targeting period relative to the pre-targeting period and non-targeted sectors. Second, we examine whether the existence of an IPA is correlated with higher FDI inflows. Results from both approaches point to the same conclusion. Investment promotion efforts appear to increase FDI inflows to developing countries. Moreover, agency characteristics, such as its legal status and reporting structure, affect the effectiveness of investment promotion. There is also evidence of FDI diversion due to investment incentives offered by other countries in the same geographic region.
    Keywords: foreign direct investment; investment promotion; investment incentives
    JEL: F21 F23 O1
    Date: 2007–09
  12. By: Thierfelder, Karen; Robinson, Sherman; Korman, Vijdan; Kearney, Marna; Go, Delfin S.; Essama-Nssah, B.
    Abstract: As crude oil prices reach new highs, there is renewed concern about how external shocks will affect growth and poverty in developing countries. This paper describes a macro-micro framework for examining the structural and distributional consequences of a significant external shock-an increase in the world price of oil-on the South African economy. The authors merge results from a highly disaggregative computable general equilibrium model and a micro-simulation analysis of earnings and occupational choice based on socio-demographic characteristics of the household. The model provides changes in employment, wages, and prices that are used in the micro-simulation. The analysis finds that a 125 percent increase in the price of crude oil and refined petroleum reduces employment and GDP by approximately 2 percent, and reduces household consumption by approximately 7 percent. The oil price shock tends to increase the disparity between rich and poor. The adverse impact of the oil price shock is felt by the poorer segment of the formal labor market in the form of declining wages and increased unemployment. Unemployment hits mostly low and medium-skilled workers in the services sector. High-skilled households, on average, gain from the oil price shock. Their income rises and their spending basket is less skewed toward food and other goods that are most affected by changes in oil prices.
    Keywords: Economic Theory & Research,,Labor Policies,Markets and Market Access,Access to Finance
    Date: 2007–09–01
  13. By: Rutkowski, Michal; Robalino, David; Bodor, Andras
    Abstract: Mandatory pension systems play a major role in individual savings and labor supply decisions. In particular, it is well known that defined benefit pension schemes, which are not actuarially fair, can create incentives for early retirement and therefore reduce labor supply and the stock of human capital in a given country. This is an important policy issue in middle-income countries, with still low participation rates in the labor force, where the " window " opened by the demographic transition is already closed or will close in the near future. In these countries, policies to stimulate private sector growth, competitiveness, and employment creation should be accompanied by policies that increase labor force participation, raising the ratio of active to inactive population and therefore the potential for higher income per capita growth. Unfortunately, the analytical tools developed to assess pension reform options tend to focus on the financial sustainability of the schemes and the adequacy of benefits. Little attention is given in practice to the social costs imposed by distortions on the supply of labor. In part, this is given by the lack of analytical tools that, in the context of limited information regarding individual preferences and behavior, can be used to assess the magnitude of these distortions. This paper d evelops methodologies that can bridge the gap between economic theory and the practices of pension policy personnel under conditions of deep uncertainty regarding the variables driving individual behavioral responses to policy changes. First, the paper develops an indicator to predict the age-specific retirement probabilities induced by a particular pension system, given heterogeneous individual preferences over risk, consumption, and leisure. The paper then describes how this indicator can be used to project the size of the labor force by gender, age and skill level and therefore the dynamics of human capital accumulation. The integration of these two analytical tools allow us to show the impact of a particular pension reform proposals on the dynamics of labor supply, human capital and, given the dynamics of capital and total factor productivity, economic growth. Furthermore, the paper develops a set of life-cycle income measures for typical individual paths that allow us to measure the contribution of segmented pension schemes to the segmentation of the labor market. The methods are applied to the case of Morocco.
    Keywords: ,Labor Markets,Labor Policies,Pensions & Retirement Systems,Debt Markets
    Date: 2007–09–01
  14. By: van de Walle, Dominique; Ravallion, Martin; Lambert, Sylvie
    Abstract: This paper shows how differences in aggregate human development outcomes over time and space can be additively decomposed into a pure economic-growth component, a component attributed to differences in the distribution of income, and components attributed to " non-income " factors and differences in the model linking outcomes to income or non-income characteristics. The income effect at the micro level is modeled non-parametrically, so as to flexibly reflect distributional changes. The paper illustrates the decomposition using data for Morocco and Vietnam, and the results offer some surprising insights into the observed aggregate gains in schooling attainments. A user friendly STATA program is available to implement the method in other settings.
    Keywords: Primary Education,Education For All,Population Policies,Rural Poverty Reduction,Inequality
    Date: 2007–09–01
  15. By: Mengistae, Taye; Honorati, Maddalena
    Abstract: This paper estimates a structural dynamic business investment equation and an error correction model of fixed assets growth on a sample of predominantly small and mid-size manufacturers in India. The results suggest that excessive labor regulation, power shortages, and problems of access to finance are all significant factors in industrial growth in the country. The estimated effects of labor regulation, power shortages and access to finance on the rate of busines s investment all vary by states ' levels of industrial development and. Perhaps more importantly, they also depend on a fourth institutional factor, namely, corruption. The rate of fixed investment is significantly lower where power shortages are more severe and labor regulation is stronger over the full sample, but each of these impacts is also greater for businesses self-reportedly affected by corruption. Although access to finance does not seem to influence the rate of investment for most firms, there is evidence that investment decisions are constrained by cash flow in enterprises that are unaffected by corruption or power shortages. There are nuances to this story as we take into account regional specificity, but the key result always holds that labor regulation, power shortages and access to finance influence the rate of fixed investment in ways that depend on the incidence of corruption. In interpreting this finding, we would like to think of corruption as a proxy for the quality of property rights institutions in the sense of Acemoglu and Johnson (2005). On the other hand, we regard labor regulation and the financial environment of small businesses in India as instances of what Acemoglu and Johnson (2005) call ' contracting institutions ' . The analysis finds that the interaction between corruption and other aspects of the institutional environment of fixed investment decisions could be seen consistent with the Acemoglu-Johnson view that the quality of property rights institutions exerts more abiding influence on economic outcomes than the quality of contracting institutions.
    Keywords: Access to Finance,Economic Theory & Research,Labor Policies,Emerging Markets,Labor Markets
    Date: 2007–09–01
  16. By: Weingast, Barry R.; Webb, Steven B.; Wallis, John Joseph; North, Douglass C.
    Abstract: The upper-income, advanced industrial countries of the world today all have market economies with open competition, competitive multi-party democratic political systems, and a secure government monopoly over violence. Such open access orders, however, are not the only norm and equilibrium type of society. The middle and low-income developing countries today, like all countries before about 1800, can be understood as limited access orders that maintain their equilibrium in a fundamentally different way. In limited access orders, the state does not have a secure monopoly on violence, and society organizes itself to control violence among the elite factions. A common feature of limited access orders is that political elites divide up control of the economy, each getting some share of the rents. Since outbreaks of violence reduce the rents, the elite factions have incentives to be peaceable most of the time. Adequate stability of the rents and thus of the social order requires limiting access and competition-hence a social order with a fundamentally different logic than the open access order. This paper lays out such a framework and explores some of its implications for the problems of development today.
    Keywords: Corporate Law,Labor Policies,Public Sector Corruption & Anticorruption Measures,E-Business,Disability
    Date: 2007–09–01
  17. By: Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
    Abstract: In spite of the growing concerns about foreign direct investment being diverted from Latin America to China and India, the best available data show that Latin America has performed relatively well since 1997. Foreign capital stocks from OECD countries and the United States in particular in China and India are still far from those in the largest Latin American economies. The evidence shows that foreign capital stocks in China increased more than in Latin America during 1990-1997, but not as much since 1997. In fact, Latin America has actually performed better than China since 1997 given its lack of relative growth. The growth of foreign capital stocks in India was more stable than in China. Nonetheless, after controlling for shocks emanating from the source countries and bilateral distance between source and host countries, this paper finds a significant change in foreign capital stocks relative to China between 1990 and 1997, but no change relative to India.
    Keywords: Debt Markets,Transport and Trade Logistics,Common Carriers Industry,,Corporate Law
    Date: 2007–09–01
  18. By: Olarreaga, Marcelo; Lederman, Daniel; Cravino, Javier
    Abstract: This paper explores the impact of the emergence of China and India on foreign capital stocks in other economies. Using bilateral data from 1990-2003 and drawing from the knowledge-capital model of the multinational enterprises to control for fundamental determinants of foreign capital stocks across countries, the evidence suggests that the impact of foreign capital in China and India on other countries ' foreign capital stocks has been positive. This finding is robust to the use of ordinary least squares, Poisson, and negative binomial estimators; to the inclusion of time and country-pair fixed effects; to the inclusion of natural-resource endowments; and to the use of the sum of foreign capital stocks in Hong Kong (China) and mainland China instead of using only the latter ' s foreign capital stocks. There is surprisingly weak evidence of substitution in manufacturing foreign capital stocks away from Central America and Mexico in favor of China, and from the Southern Cone countries to India, but these findings are not robust to the use of alternative estimation techniques.
    Keywords: E-Business,Foreign Direct Investment,Economic Theory & Research,Debt Markets,Currencies and Exchange Rates
    Date: 2007–09–01
  19. By: Lambi, Cornelius M.; Molua, Ernest L.
    Abstract: This study examines the impact of climate change on crop farming in Cameroon. The country ' s economy is predominantly agrarian and agriculture and the exploitation of natural resources remain the driving force for the country ' s economic development. Fluctuations in national income are due not merely to the decline in world demand for Cameroon ' s traditional agricultural exports or to mistakes in economic policy making, but also to the vagaries of the weather. Based on a farm-level survey of more than 800 farms, the study employs a Ricardian cross-sectional approach to measure the relationship between climate and the net revenue from crops. Net revenue is regressed on climate, water flow, soil, and economic variables. Further, uniform scenarios assume that only one aspect of climate changes and the change is uniform across the whole country. The analysis finds that net revenues fall as precipitation decreases or temperatures increase across all the surveyed farms. The study reaffirms that agr iculture in Cameroon is often limited by seasonality and the availability of moisture. Although other physical factors, such as soil and relief, have an important influence on agriculture, climate remains the dominant influence on the variety of crops cultivated and the types of agriculture practiced.
    Keywords: Climate Change,Environmental Economics & Policies,Global Environment Facility,Common Property Resource Development,Economic Theory & Research
    Date: 2007–09–01
  20. By: Zezza, Alberto; Davis, Benjamin; Carletto, Gero; Kilic, Talip
    Abstract: In view of its increasing importance, and the dearth of information on return migration and its impacts on source households, this study uses data from the 2005 Albania Living Standards Measurement Study survey and assesses the impact of past migration experience of Albanian households on non-farm business ownership through instrumental variables regression techniques. Moreover, consideri ng the differences in earning potentials and opportunities for skill acquisition in different destination countries, the impact of household past migration experience is differentiated by main migrant destinations, namely Greece and Italy. The study also tests for the hypothesis of the existence of migration cycles, by differentiating the time spent abroad based on the year of return. The empirical results indicate that household past migration experience exerts a positive impact on the probability of owning a non-farm business. While one additional year in Greece increases the probability of household business ownership by roughly 7 percent, a similar experience in Italy or further destinations raises the probability by over 30 percent. Although past migration experience for the period 1990-2000 is positively associated with the likelihood of owning a household enterprise, a similar impact does not materialize for the period 2001-2004. The latter finding seems suggestive of the fact that more recent migrants are yet to attain a target level of required savings and skills in order to successfully establish a new business upon return.
    Keywords: Population Policies,Access to Finance,Debt Markets,,Voluntary and Involuntary Resettlement
    Date: 2007–09–01
  21. By: Zezza, Alberto; Davis, Benjamin; Carletto, Gero; Miluka, Juna
    Abstract: This paper investigates the impact of international migration on technical efficiency, resource allocation and income from agricultural production of family farming in Albania. The results suggest that migration is used by rural households as a pathway out of agriculture: migration is negatively associated with the allocation of both labor and non-labor inputs in agriculture, while no significant differences can be detected in terms of farm technical efficiency or agricultural income. Whether the rapid demographic changes in rural areas triggered by massive migration, possibly combined with propitious land and rural development policies, will ultimately produce the conditions for more viable, high-return agriculture attracting larger investments remains to be seen.
    Keywords: Population Policies,Access to Finance,Agricultural Knowledge & Information Systems,Rural Development Knowledge & Information Systems,Economic Theory & Research
    Date: 2007–09–01
  22. By: Shepherd, Ben; Dennis, Allen
    Abstract: This paper finds that a 1 percent reduction in the cost of exporting or the cost of international transport is associated with an export diversification gain of 0.3 percent or 0.4 percent respectively. Lower domestic market entry costs can also promote diversification, but the elasticity is weaker (-0.1). To obtain these results, the authors construct new measures of export diversification for 118 developing countries using highly detailed 8-digit mirror data from the European Union. The analysis also incorporates new export cost data from the World Bank ' s Doing Business database, covering document preparation, inland transport, administrative fees, and port/customs charges. Findings are highly robust, including to the use of geography and colonial history as instruments for trade and entry costs. Both the signs and relative magnitudes of these effects are consistent with predictions from a heterogeneous firms model of trade with asymmetric costs.
    Keywords: Housing & Human Habitats,E-Finance and E-Security,Mining & Extractive Industry (Non-Energy),Educational Technology and Distance Education,Transport Economics Policy & Planning
    Date: 2007–09–01
  23. By: Beja, Jr., Edsel
    Abstract: Capital flight aggravates resource constraints and contributes to undermine long-term economic growth. Counterfactual calculations on the Philippines suggest that capital flight contributed to lower the quality of long-term economic growth. Sustained capital flight over three decades means that capital flight had a role for the Philippines to lose the opportunities to achieve economic takeoff. Unless decisive policy actions are taken up to address enduring capital flight and manage the macroeconomy more effectively, the Philippines remains caught in the perpetuity of crises, its economy hollowed-out, the people trapped in poverty, and once again, the country is frustrated from realizing a takeoff.
    Keywords: Capital flight; economic growth; Philippines
    JEL: O53 E10 O40
    Date: 2007–02–12
  24. By: Llussa, Fernanda
    Abstract: This paper reviews the econometric methodology on panel data estimation and testing as applied to the study of convergence in growth empirics. The concept of absolute convergence states that the poorer economies should be growing at a faster rate, catching up the richer ones. The empirical failure of absolute convergence resulted in the development of alternative theories to explain long-term growth: the endogenous growth theories and the conditional convergence, the idea that countries may have different steady-states and it is the distance from their own steady-state that determines the rate of economic growth. This paper focuses on conditional convergence and its empirical testing. It discusses and compares the different econometric methodologies used in cross-section and panel data studies of conditional convergence. Also presented are the empirical results obtained by the various authors.
    Date: 2007
  25. By: Sarkar, Prabirjit
    Abstract: The present study examines the relationship between openness (trade-GDP ratio) and growth. Our cross-country panel data analysis of a sample 51 countries of the South during 1981-2002 shows that for only 11 rich and highly trade-dependent countries a higher real growth is associated with a higher trade share. Time series study of individual country experiences shows that the majority of the countries covered in the sample including the East Asian countries experienced no positive long-term relationship between openness and growth during 1961-2002. Our study of the experience of various regions and groups shows that only the Middle Income group exhibited a positive long-term relationship.
    Keywords: growth; opening up; liberalization; less developed countries and globalization.
    JEL: F02 F43 O50
    Date: 2007–09

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