nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2009‒08‒02
four papers chosen by
Karl Petrick
University of the West Indies

  1. Has Trade Liberalisation in Poor Countries Delivered the Promises Expected? By Penélope Pacheco-López; A.P. Thirlwall
  2. Arms Trade Offsets: What Do We Know? By Jurgen Brauer; J Paul Dunne
  3. Hungary: The Janus-faced Success Story By Csaba, Laszlo
  4. Reforming Institutions: Where to Begin? By M. Idrees Khawaja; Sajawal Khan

  1. By: Penélope Pacheco-López; A.P. Thirlwall
    Abstract: The paper reviews the evidence of the impact of trade liberalisation on the economic performance of poor developing countries with respect to poverty reduction, the distribution of income within countries, the distribution of income between countries, trade and the balance of payments, and economic growth, and finds that liberalisation has not delivered the benefits expected. Economic theory, and the historical and contemporary evidence, all provide arguments for protection of industrial activities in developing countries.
    Keywords: Trade liberalisation; trade policy; income distribution; poverty
    JEL: F10 F13 F43
    Date: 2009–07
  2. By: Jurgen Brauer (Augusta State University); J Paul Dunne (Department of Economics, British University in Egypt and UWE, Bristol)
    Abstract: This chapter is a review of our empirical knowledge regarding arms trade offsets. Extant evidence suggests that offset arrangements do not yield net benefits for a country’s economic development. As a general rule arms trade offset deals are more costly than off-the-shelf arms purchases, create little by way of new or sustainable employment, do not appear to contribute in any substantive way to general economic development, and with very few exceptions do not result in significant technology transfers, not even within the military sector. As of 2009, the United States and the European Union have taken official government positions against offset deals. Nonetheless, arms trade offsets are a flourishing practice.
    Keywords: Arms Offsets; defence; arms trade
    JEL: H56 F13
    Date: 2009–07
  3. By: Csaba, Laszlo
    Abstract: This paper offers a broad overview of the Hungarian development strategy over the past two decades. Combining historical and functional analysis, some major strengths and weaknesses are identified, with special emphasis on the country.s open-door policies and the role played by the European Union. The paper investigates why the impetus of institutional and financial integration was lost by about 2004 when policy drifting took over the role of strategies. Some ideas on how to remedy the situation are being offered. Paradoxically, the Hungarian success and failure both testify to the relevance of a neo-institutionalist/political economy approach to sustainable development. It also examines the limitations of external anchoring by the EU as well as of the spontaneous bottom-up evolution of institutions when policy drifting continues.
    Keywords: structural reform, sustainability, EU accession, regulation, FDI, trust
    Date: 2009
  4. By: M. Idrees Khawaja (Pakistan Institute of Development Economics, Islamabad); Sajawal Khan (State Bank of Pakistan, Karachi)
    Abstract: No society is devoid of institutions but many live with poor institutions. Institutions promote growth. This is a view now held firmly and widely. The task then is to ‘engineer’ growth-promoting institutions. Endogeneity characterises institutions; for example, groups enjoying political power influence economic institutions, but political power itself is a function of wealth. Given endogeneity, if the task is to design institutional reforms, the question then arises, as to what to reform first. We use the theories of institutional evolution put forth by Douglas North, Darron Acemoglu and Dani Rodrik and the historical experiences of different countries in the context of development (or non-development) of institutions, to determine the starting-point of institutional reforms, if the objective is to design institutional reforms. We argue that in Pakistan, neither large commercial interest nor fiscal constraints can force the de jure power to reform institutions. Typically, large commercial interests in Pakistan have thrived on favours from de jure power, and therefore do not have teeth. Given strategic interests of foreign powers, foreign aid will alleviate the fiscal constraint and the ruler-citizens bargain—though reforming institution in exchange for tax revenue will remain a dream. The country does not seem ready for a revolution either; the thought process that typically precedes revolutions seems to have barely begun. The alternative, that remains, then is the gradualist approach preferred by North, Acemoglu, and Rodrik. Institutional reforms in Pakistan should begin with reform of the educational system—the introduction of a common educational system for all and sundry up to a certain level. Two reasons make us chose the educational system as the candidate to start the process of institutional reform. First, a common educational system will produce a shared value system which, in turn, will reduce the heterogeneity in the society. Lesser heterogeneity in society will then facilitate an agreement over the minimal set of institutional reforms. Second, politicians being myopic, the de jure power is more likely to concede to the demand for reform of the educational system as compared to the demand to, say, put an end to rent-seeking. The former will affect the de jure power a generation hence, while the latter will affect them today.
    Keywords: Institutional Evolution, Institutional Change, Human Behaviour
    JEL: D02 P16
    Date: 2009

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