nep-sea New Economics Papers
on South East Asia
Issue of 2006‒06‒03
twenty papers chosen by
Kavita Iyengar
Asian Development Bank

  1. China’s Exchange Rate and International Adjustment in Wages, Prices, and Interest Rates: Japan Déjà Vu? By Ronald Ian McKinnon; Gunther Schnabl
  2. Will China Eat Our Lunch or Take us to Dinner? - Simulating the Transition Paths of the U.S., Eu, Japan and China By Hans Fehr; Sabine Jokisch; Laurence J. Kotlikoff
  3. China%u2019s FDI and Non-FDI Economies and the Sustainability of Future High Chinese Growth By John Whalley; Xian Xin
  4. The Political Economy of Industrial Policy in China: The Case of Aircraft Manufacturing By Andrea Goldstein; ;
  5. Economic Reform and Changing Patterns of Labor Force Participation in Urban and Rural China By Margaret Maurer-Fazio; James Hughes; Dandan Zhang
  6. Comparative social capital: Networks of entrepreneurs and investors in China and Russia By Bat Batjargal; Bat Batjargal;
  7. South German Silver, European Textiles, and Venetian Trade with the Levant and Ottoman Empire, c. 1370 to c. 1720: A non-mercantilist approach By John H Munro
  9. Industry R&D Location – the role of accessibility to university R&D and institutions of higher education By Andersson, Martin; Gråsjö, Urban; Karlsson, Charlie
  10. Absolute and Conditional Convergence: Its Speed for Selected Countries for 1961--2001 By Somesh Kumar Mathur
  11. New risks and opportunities for food security By von Braun, Joachim; Rosegrant, Mark W.; Pandya-Lorch, Rajul; Cohen, Marc J.; Cline, Sarah A.; Brown, Mary Ashby; Bos, Maria Soledad
  12. The Anti-Red Shift – to the Dark Side: Changes in the Colour Patterns and Market Values of Flemish Luxury Woollens, 1300 - 1550 By John H. A. Munro
  13. Control consolidation with a threshold: An algorithm. By Ariane Chapelle; Ariane Szafarz
  14. Tectonic shifts in the structures of international inequality? By Arno TAUSCH
  15. Jamaica 2030: A Strategy For Developed Country Status By Peter W Jones
  16. Exchange-rate policies and trade in the MENA countries By Amina Lahrèche-Révil; Juliette Milgram
  17. The rise and fall of training and visit extension : an Asian mini-drama with an African epilogue By Ganguly, Sushma; Feder, Gershon; Anderson, Jock R.
  18. Is Islam really a development blockade? 12 predictors of development, including membership in the Organization of Islamic Conference, and their influence on 14 indicators of development in 109 countries of the world with completely available data By Arno TAUSCH
  19. Technological and Social Costs and Benefits of Patent Systems By Murat Yildizoglu; Thomas Vallée
  20. Financial integration, international portfolio choice and the European Monetary Union By Roberto A. De Santis; Bruno Gérard

  1. By: Ronald Ian McKinnon; Gunther Schnabl
    Abstract: China keeps its exchange rate tightly fixed to the dollar. Its productivity growth and trade surplus have been high, and it continues to accumulate large dollar reserves. Many observers take this as evidence that the renminbi is undervalued and should be appreciated to reduce the Chinese trade surplus. We argue that an appreciation of the renminbi need not reduce China’s trade surplus but could cause serious deflation in China. To show this, we consider international adjustment between China and the United States from both an asset-market and a labor-market perspective, and compare this to Japan’s unsuccessful appreciation of the yen.
    Keywords: China, exchange rate, adjustment, assets markets, labour markets
    JEL: F15 F31 F33
    Date: 2006
  2. By: Hans Fehr (University of Wuerzburg); Sabine Jokisch (Univeristy of Wuerzburg); Laurence J. Kotlikoff (Institute for Economic Development, Boston University)
    Abstract: This paper develops a dynamic, life-cycle, general equilibrium model to study the interdependent demographic, fiscal, and economic transition paths of China, Japan, the U.S.,and the EU. Each of these countries/regions is entering a period of rapid and significant aging that will require major fiscal adjustments. But the aging of these societies may be a cloud with a silver lining coming, in this case, in the form of capital deepening that will raise real wages. In a previous model that excluded China we predicted that tax hikes needed to pay benefits along the developed world’s demographic transition would lead to a major capital shortage, reducing real wages per unit of human capital over time by one fifth. A recalibration of our original model that treats government purchases of capital goods as investment rather than current consumption suggests this concern was overstated. With government investment included, we find much less crowding out over the course of the century and only a 4 percent long-run decline in real wages. Adding China to the model further alters, indeed, dramatically alters, the model’s predictions. Even though China is aging rapidly, its saving behavior, growth rate, and fiscal policies are currently very different from those of developed countries. If successive cohorts of Chinese continue to save like current cohorts, if the Chinese government can restrain growth in expenditures, and if Chinese technology and education levels ultimately catch up with those of the West and Japan, the model’s long run looks much brighter. China eventually becomes the world’s saver and, thereby, the developed world’s savoir with respect to its long-run supply of capital and long-run general equilibrium prospects. And, rather than seeing the real wage per unit of human capital fall, the West and Japan see it rise by one fifth percent by 2030 and by three fifths by 2100. These wage increases are over and above those associated with technical progress, which we model as increasing the human capital endowments of successive cohorts. Even if the Chinese saving behavior (captured by its time preference rate) gradually approaches that of Americans, developed world real wages per unit of human capital are roughly 17 percent higher in 2030 and 4 percent higher at the end of the century. Without China they’d be only 2 percent higher in 2030 and, as mentioned, 4 percent lower at Century’s end. What’s more, the major short-run outflow of the developed world’s capital to China predicted by our model does not come at the cost of lower wages in the developed world. The reason is that the knowledge that their future wages will be higher (thanks to China’s future capital accumulation) leads our model’s workers to cut back on their current labor supply. So the shortrun outflow of capital to China is met with a commensurate short-run reduction in developed world labor supply, leaving the short-run ratio of physical capital to human capital, on which wages positively depend, actually somewhat higher than would otherwise be the case. Our model does not capture the endogenous determination of skill premiums studied by Heckman and Taber (1996). Doing so could well show that trade with China, at least in the short run, explains much of the relative decline in the wages of low-skilled workers in the developed world. Hence, we don’t mean to suggest here that all US, EU, and Japanese workers are being helped by trade with China, but rather that trade with China is, on average, raising the wages of developed world workers and will continue to do so. The notion that China, India, and other developing countries will alleviate the developed world’s demographic problems has been stressed by Siegel (2005). Our paper, although it includes only one developing country – China – supports Siegel’s optimistic long-term macroeconomic view. On the other hand, our findings about the developed world’s fiscal condition are quite troubling. Even under the most favorable macroeconomic scenario, tax rates will rise dramatically over time in the developed world to pay baby boomers their government-promised pension and health benefits. As Argentina has so recently shown, countries can grow quite well for years even with unsustainable fiscal policies. But if they wait too long to address those policies, the financial markets will do it for them, with often quite ruinous consequences.
    Date: 2005–09
  3. By: John Whalley; Xian Xin
    Abstract: This paper presents assesses of the contribution of inward FDI to China’s recent rapid economic growth using a two stage growth accounting approach. Recent econometric literature focuses on testing whether Chinese growth depends on inward FDI rather than measuring the contribution. Foreign Invested Enterprises (FIEs), often (but not exclusively) are joint ventures between foreign companies and Chinese enterprises, and can be thought of as forming a distinctive subpart of the Chinese economy. These enterprises account for over 50% of China’s exports and 60% of China’s imports. Their share in Chinese GDP has been over 20% in the last two years, but they employ only 3% of the workforce, since their average labor productivity exceeds that of Non-FIEs by around 9:1. Their production is more heavily for export rather than the domestic market because FIEs provide access to both distribution systems abroad and product design for export markets. Our decomposition results indicate that China’s FIEs may have contributed over 40% of China’s economic growth in 2003 and 2004, and without this inward FDI, China’s overall GDP growth rate could have been around 3.4 percentage points lower. We suggest that the sustainability of both China’ export and overall economic growth may be questionable if inward FDI plateaus in the future.
    JEL: F43 O40
    Date: 2006–05
  4. By: Andrea Goldstein; ;
    Abstract: Since 1960, only one new country, Brazil, has succeeded in delivering more than one civil jet per month. Otherwise, all the countries now offering world-class planes were established in aviation by the end of World War I. This being said, low-cost producers within several of the newly emerging markets have already acquired front-end manufacturing expertise as a direct result of industrial offset contracts and/or other forms of technology transfer. In all such cases, government intervention, notably through state ownership, has been predominant, but failures have been numerous in view of the difficulty of aligning ownership structure to financial, managerial, and technological requirements and of garnering the support of domestic interest groups. In this paper the focus is China’s efforts to build a world-class aircraft manufacturing industry. In the first half of the 1990s the potential of the Chinese industry to mount a competitive challenge to Western aircraft builders was largely discounted. Nowadays, as China strives to bear the ARJ-21 project to execution and even considers entering the market for wide-bodies, the threat is taken more seriously. The growth in the Chinese air transport market has reinforced the bargaining power of national aircraft producers and authorities are giving priority to building science and technology capacity in this area. Progress in creating military/civilian synergies has proven much more modest – especially when compared to the shipbuilding industry – and better coordination in the overall industry comes a distant fourth in the explanations’ peaking order.
    Keywords: aerospace, China
    JEL: H11 L62 O14
    Date: 2005–07–01
  5. By: Margaret Maurer-Fazio; James Hughes; Dandan Zhang
    Abstract: In this project, we employ data from the Chinese population censuses of 1982, 1990, and 2000 to examine reform-era changes in the patterns of male and female labor force participation and in the distribution of men’s and women’s occupational attainment. Very marked patterns of change in labor force participation emerge when we disaggregate the data by age cohort, marital status, sex, and rural/urban location. Women have decreased their labor force participation more than men, and urban women much more than rural women. Single young people in urban areas have decreased their labor force participation to stay in school to a much greater extent than single young people in rural areas. The urban elderly have decreased their rates of labor force participation while the rural elderly have increased theirs. We also find evidence of the feminization of agriculture.
    Keywords: China, labor force participation, economic reform, occupational attainment, population censuses
    JEL: J0 J16 J21 J62 O15 O53
    Date: 2005–08–01
  6. By: Bat Batjargal; Bat Batjargal;
    Abstract: Most studies on entrepreneurs’ networks incorporate social capital and networks as independent variables that affect entrepreneurs’ actions and its outcomes. By contrast, this article examines social capital of the Chinese and Russian entrepreneurs and venture capitalists as dependent variables, and it examines entrepreneurs’ social capital from the perspectives of institutional theory and cultural theory. The empirical data are composed of structured telephone interviews with 159 software entrepreneurs, and the data of 124 venture capital decisions in Beijing and Moscow. The study found that social networks of the Chinese entrepreneurs are smaller in size, denser in structure, and more homogeneous in composition compared to networks of the Russian entrepreneurs due to the institutional and cultural differences between the two countries. Furthermore, the study revealed that dyadic (two-person) ties are stronger and interpersonal trust is greater in China than in Russia. The research and practical implications are discussed.
    Keywords: Social capital, entrepreneurs, venture capitalists, China and Russia.
    JEL: M13 F23 G24
    Date: 2005–07–01
  7. By: John H Munro
    Abstract: A recurrent and indeed persistent problem in European economic history – a veritable deus ex machina -- from medieval to modern times, is Europe’s supposed ‘balance of payments’ problem in trade with the ‘East’. This supposed problem has often been couched in Mercantilist overtones: namely, that export of supposedly large volumes of precious metals, especially, silver to conduct trade with, first the Levant, and then with the rest of Asia meant a serious drainage of wealth from western Europe. This seems to be particularly true in the debate about the late-medieval ‘Great Depression’ in which some contend that this balance of payments ‘deficit’ led to monetary contraction, deflation, and then economic depression. This paper, while not denying periodic problems of monetary contraction and indeed deflation, provides a non-Mercantilist perspective on not just European but global trade from the fourteenth to early eighteenth centuries. It offers the following related theses: (1) That late-medieval monetary contraction was far more related to falling outputs of mined silver and to reductions in the income-velocity of coined money and the related problem of hoarding, the roots of which were the growth of international warfare from the 1290s, significantly financed by coinage debasements; and together they provided serious barriers to the international flow of specie and bullion, and indeed to the emergence of bullionist philosophies, which are the very core of Mercantilism. (2) That, insofar as such monetary contractions did lead to deflation, that deflation, in augmenting the purchasing power of silver (gram for gram), provided the profit motive for the technological solutions to this very same problem: namely, innovations in both mechanical and chemical engineering that produced the South German silver-copper mining boom, which quintupled Europe’s silver supplies from the 1460s to the 1540s, when even cheaper supplies of silver were arriving from the Spanish Americas. (3) That South German silver-copper mining boom, controlled by German merchant bankers who also controlled the now thriving fustian-textile (linen-cotton) industry, had two related consequences: (a) it was a major factor in the revival and expansion of the European economy in general and the growth of the Antwerp market in particular, via new transcontinental trading routes from Venice through Germany to the Brabant Fairs, based on a tripod of English woollens, South German metals, and Portuguese spices. (b) at the same time, it promoted a great expansion in Venetian trade with the Levant, to acquire not only Asian spices but also large quantities of Syrian cotton to feed the booming German fustians industry. (4) While the 15th-century Venetian trade with the Levant did indeed require large amounts of silver, perhaps enough to pay for two thirds of goods acquired in the Levant, the 16th century commerce with not just the Levant but the far larger Ottoman Empire benefited from a very new trade: the exports of fine quality Venetian woollens. This paper examines the reasons for both the rise and fall of the Venetian cloth industry (5) While traditional explanations for the rapid decline of the Venetian cloth industry in the 17th century have focused on Venice’s own ‘internal faults’, this paper offers an alternative explanation: how England’s new Levant Company and the English cloth industries so successfully gained a major share of Ottoman and Persian markets, at the direct expense of Venice: through a combination of diplomacy and superior naval technology. Their success meant that even less silver was required to conduct this trade with the Ottoman Empire, than had been true for Venice. (6) A further major factor in the decline of Venice in the 17th century was the final loss of the Asian spice trades, which had involved close Venetian ties with the Ottomans, to the Dutch and the English, who succeeded where the Portugese had failed. That story in turn allows us, with much more ample data, to examine the nature of vastly larger ‘balance of payments deficits’, so that as much as 80 percent of Asian goods had to be acquired with silver. That silver came not from Europe but principally from the Spanish Americas. Thus the major thesis of the paper is that first the South German and then the Spanish American silver mining booms greatly benefited Europe by promoting a vast increase in truly global trade.
    Keywords: Venice, Levant, Ottoman Empire, South Germany, Antwerp, Portugal, England, Asia, East Indies, balance of payments, gold, silver, international trade,
    JEL: E3 E4 F14 F20 F37 F40 H56 L67 L71 L90 N13 N43 N73
    Date: 2006–04–10
    Abstract: The paper analyses economic performance of a sample of developing countries that have undertaken trade liberalization and structural reforms since the early 1980s with the objective of expansion of exports and diversification in favour of manufacturing sector. The results obtained are varied. Forty per cent of the sample countries experienced rapid expansion of exports of manufactured goods. In a minority of these countries, mostly East Asian, rapid export growth was also accompanied with fast expansion of industrial supply capacity and upgrading. By contrast, the experience of the majority of the sample countries, mostly in Africa and Latin America, has not been satisfactory. In fact, half of the sample, most of them low income countries, have faced de-industrialization. Even in some cases where manufactured exports grew extremely fast, e.g. Mexico, MVA did not accelerate and upgrading of the industrial base did not take place. Slow growth of exports and deindustrialization has also been accompanied by increased vulnerability of the economy, particularly the manufacturing sector, to external factors particularly as far as reliance on imports are concerned. Generally speaking, in the case of the majority group, trade liberalization has led to the development and re-orientation of the industrial sector in accordance with static comparative advantage, with the exception of industries that were near maturity. For example, in Latin America the expansion of exports has taken place mainly in resource based industries, the labour intensive stage of production, i.e. assembly operations, and in a few cases in the automobile industry. A number of industries which had been dynamic during the import substitution era continued, however, to be dynamic in terms of production, exports and investment. The industries which were near maturity when the reform started, such as aerospace in Brazil, benefited from liberalization as the competitive pressure that emerged made them more efficient. The reform programmes designed by IFIs also failed to encourage private investment, particularly in the manufacturing sector; the I/GDP ratio fell even where the inflow of FDI was considerable – e.g. in the case of Latin America. Trade liberalization changed the structure of incentives in favour of exports, but the balance between risks and return changed against the manufacturing sector. A major difference between the “minority” and the “majority” groups is that in the case of the former, i.e. East Asian NIEs, at least until recently economic reform, particularly trade liberalization, has taken place gradually and selectively as part of a long-term industrial policy, after they had reached a certain level of industrialization and development. By contrast, the “majority group” embarked, in the main, on a process of rapid structural reform including uniform and across-the-board liberalization. The author argues that no doubt trade liberalization is essential when an industry reaches a certain level of maturity, provided it is undertaken selectively and gradually. Nevertheless, the way it is recommended under the Washington Consensus, it is more likely to lead to the destruction of the existing industries, particularly of those that are at their early stages of infancy without necessarily leading to the emergence of new ones. Further, any new industry that emerges would be in line with static, rather than dynamic, comparative advantage. The low income countries, in particular, will be locked in production and exports of primary commodities, simple processing and at best assembly operation or other labour intensive ones with little prospect for upgrading.
    Date: 2005
  9. By: Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Gråsjö, Urban (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Karlsson, Charlie (
    Abstract: The rapid globalization in recent years has created a radically new competitive situation for the rich industrialized countries. Newly industrialized countries and not least China have become more and more successful in penetrating the markets in the rich industrialized countries with increasingly more advanced export products. This has generated a discussion in the rich industrialized countries on how to meet this increased international competition. In some countries demands for various protective measures have been raised while in others the discussion has mainly focused on how to develop a competitive strategy mainly concentrating on making the own products more sophisticated by increasing their knowledge content. This is by no means since the direct product development is controlled to a high extent by multinational firms, which to an increasing degree are foreign owned. Governments mainly have to rely on indirect measures, such as increasing the volume of higher education and public, mainly university R&D. This raises the question: how responsive is private industry to these kinds of indirect measures. Against this background, the purpose of this paper is to analyze to what extent that the location and the extent of higher education and university R&D, respectively, influence the location and the extent of industry R&D in Sweden using an accessibility approach. After an extensive literature survey, we develop a simple theoretical model for the location of R&D from the perspective of a multinational enterprise. From this theoretical model, we then deduce our empirical model, which we then estimate in the form of a Tobit model using data from Swedish labour market regions and municipalities. We show that the location of industry R&D in Sweden can be partly explained by the intra-municipal accessibility to students in higher education, while the accessibility to university R&D turned out to be insignificant
    Keywords: industry R&D; university R&D; higher education; region; municipality; location; accessibility; Tobit model; Sweden
    JEL: O30 O38 O52 R11 R12 R32
    Date: 2006–05–31
  10. By: Somesh Kumar Mathur (Jamia Millia Islamia)
    Abstract: The study gives the theoretical justification for the per capita growth equations using Solovian model(1956) and its factor accumulation assumptions. The different forms of the per capita growth equation is used to test for 'absolute convergence' and 'conditional convergence' hypotheses and also work out the speed of absolute and conditional convergence for selected countries from 1961-2001.We use cross sectional data of GDP per capita levels and growth rates of European countries EU16(EU15 +United Kingdom), South Asian Countries (5), some East Asian (8) and CIS Countries (15) to test for 'absolute convergence' hypothesis for four different periods 1961-2001,1970-2001,1980-2001,1990-2001.Only EU and East Asian countries together have shown uniform evidence of absolute convergence in all periods. While EU as a region has shown significant evidence of absolute convergence in two periods, 1961-2001 and 1970-2001, there is no convincing statistical evidence in favor of absolute convergence in the last two periods: 1980-2001 and 1990- 2001.This latter evidence with declining rate of economic growth for EU since 1961 points to a challenge for designing EUs regional policies which also have to cope up with many East European and Baltic nations who joined EU recently. The speed of absolute convergence in the four periods range between 0.99-2.56 % p.a. (2% for the EU was worked out by Barro and Xavier Sala-i-Martin, 1995, for European regions) for EU while it ranges between 0.57-1.16 % p.a. for the countries in East Asia and EU regions together. However, there is no evidence of convergence among the South Asian countries in all periods and some major CIS republics since 1966.There is however tendency for absolute convergence among countries of South Asia, East Asia and European Union together particularly after the 1980s. Conditional convergence is prevalent among almost all pairs of regions in our sample except East Asian and South Asian nations together.Speed of conditional convergence ranges from 0.2 % in an year to 22%.In the European nations, the speed of conditional convergence works out be nearly 20 % unlike the speed of absolute convergence which hovered around 2 %.Such results would mean that countries in Europe are converging very quickly to their own potential level of incomes per capita but not so quickly to a common potential level of income per capita.The elasticity of output which is also estimated ranges from 0.54 to 0.91 implying that capital is to be interpreted as broad capital inclusive of human capital stock.It seems that human capital not only affects technological progress but affects output levels directly by increasing capital stock levels implying that the assumption of including human capital stock in the production function were appropriate in Mankiw,Romer and Weil(1992). The results for the speed of conditional convergence favors use of an extended Solovian model inclusive of human capital.Conditional beta convergence seems to be a better empirical exercise(as evident from our theoretical model and empirical results ) because it reflects the convergence of countries after we control for differences in steady states .Conditional convergence is simply a confirmation of a result predicted by the neoclassical growth model:that countries with similar steady states exhibit convergence.It does not mean that all countries in the world are converging to the same steady state,only that they are converging to their own steady states
    Keywords: Growth equation, absolute convergence, conditional convergence, speed of absolute and conditional convergence, elasticity of output with respect to capital, half life of convergence
    JEL: C6 D5 D9
    Date: 2005–03–13
  11. By: von Braun, Joachim; Rosegrant, Mark W.; Pandya-Lorch, Rajul; Cohen, Marc J.; Cline, Sarah A.; Brown, Mary Ashby; Bos, Maria Soledad
    Abstract: "Given the number of undernourished people in the developing world and the increasingly complex risks to food security, policymakers are faced with an enormous agenda. Freeing people from hunger will require more and better-targeted investments, innovations, and policy actions, driven by a keen understanding of the dynamic risks and forces that shape the factors affecting people's access to food and the links with nutrition. The International Food Policy Research Institute's (IFPRI's) International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) provides insight into the management of these risks through appropriate policy actions. By projecting future global food scenarios to 2050, IMPACT explores the potential implications of policy action and inaction in several main risk areas as well as the effects on child malnutrition in the developing world, commodity prices, demand, cereal yields, production, and net trade. In the progressive policy actions scenario, which assumes increased investment in rural development, health, education, and agricultural research and development, developing country governments and the international community are able to dramatically reduce the number of food-insecure people, leading to a worldwide decline in hunger. Under these conditions, Latin America and China are able to virtually eliminate child malnutrition by 2050. Bolstered by the development and dissemination of improved technologies and better infrastructure, crop production and yields increase in developing countries. Notably, the bulk of the growth in production is driven by yield increases rather than by expanding land area. Spurred by growth in the agricultural sector, average incomes in developing countries increase. Rising incomes bolster demand for high-value agricultural products, such as meat, dairy, and fruits and vegetables; global livestock production more than doubles, for example. Average per capita calorie supplies for developing countries exceed 3,400 per day, well in excess of minimum requirements. The policy failure scenario assumes greater political discord and more extensive agricultural protectionism, together with the failure of policies to deal with food emergencies related to conflict. Slow growth and trade restrictions lead to stagnation in average per capita calorie availability, which remains only slightly above minimum requirements until after 2030, when availability increases. In addition, crucial investments in agriculture, rural development, and poverty reduction are forgone or displaced. Because of limited investment in agricultural research and technology, this scenario has a high level of crop area expansion as a result of relatively rapid population growth and slim yield improvements in developing countries. This scenario also results in flat maize prices, declining per capita cereal demand, falling beef prices, and relatively flat meat demand. As a result of the policies in this scenario, the number of malnourished children in developing countries rises between 1997 and 2015, after which there are only modest declines. In the technology and natural resource management failure scenario, yield growth falls even more than under the preceding scenario, forcing farmers to move into marginal producing areas, which causes a more rapid expansion of cereal area into less productive land that does not compensate for the yield shortfalls (and causes environmental degradation). As a result, cereal prices rise substantially through 2030 and then fall off only gradually. Beef and other meat prices, which are affected by the price of feed, follow a similar pattern. Developing-country per capita calorie availability is essentially unchanged over 1997–2050 and remains at a barely adequate average level. Given unequal access to the food that is available, millions of people actually consume less than the minimum. The occurrence of child undernourishment is even higher than under the policy failure scenario in all developing-country regions. Overall, the technology and natural resource management failure scenario results in the worst impact on food security and child malnourishment in the developing world. The progressive policy scenario outlines several of the most crucial positive steps. National governments and the international community must assume a new focus on agricultural growth and rural development, along with increasing their investments in education, social services, and health. Policies to encourage synergistic growth in the nonfarm sectors are also needed to spur broad-based economic growth. Underpinning these strategies and research agendas must be a firm commitment to reducing hunger and improving the welfare of the world's undernourished people." From Authors' Executive Summary
    Keywords: Impact model ,Caloric intake ,Safety nets ,
    Date: 2005
  12. By: John H. A. Munro
    Abstract: The Anti-Red Shift – to the Dark Side: Changes in the Colour Patterns and Market Values of Flemish Luxury Woollens, 1300 - 1550 This study documents, though it cannot fully explain, the striking shift in the spectrum of colour patterns in woollen textiles, from those of the Black Death era in the mid to late fourteenth century to those of the fifteenth and the first half of the sixteenth century, in the southern Low Countries: a radical shift from bright red and vivid colours, especially scarlet, or mixed colours (in medley and striped woollens) to much darker, blue-based colours, ending up with overwhelmingly black colours. The evidence is taken from the annual purchases of high-grade luxury quality woollen textiles for the upper echelons of the civic governments of Bruges (from 1302 to 1496) and of Mechelen (1361-1415, and 1471 - 1550): for the burgermasters or mayors, the aldermen (schepenen), and the upper clerks. . Thus, in the Mechelen civic accounts, 75 percent of the woollens purchased for these civic leaders, from 1471 to 1550, were black, uniformly dark black. In the first half of the sixteenth century, from 1501 to 1550, 98 percent of those woollens were black. While other colours – reds, greens, blues, browns – can also be found, they were purchased only for the lesser officials. Clearly the civic leaders, the urban ‘patriciate’ had acquired a decisive preference for black woollens, one also shown by the nobility. But at Bruges, in the four decades of the mid fourteenth century, from the 1340s (just before the Black Death) to the 1370s, the bright, vivid, red or scarlet, and multi-coloured textiles clearly predominated: varying from 72.4 to 81.7 percent by number purchased, and from 77.25 to 86.19 per cent by value. The differences in percentages by number and value is explained by the decisive prominence of the most costly and luxurious of all medieval woollens: the scarlets, dyed in the extremely costly brilliant red dye kermes (extracted from Mediterranean insects). Scarlets often accounted for over a third of the textiles so purchased in the 14th century, but their number fell sharply in the 15th century, along with the radical shift in the colour spectrum to much darker blue and then black textiles. This study explains the differences in the production costs and values of scarlets and of other dyed woollen broadcloths, while demonstrating with comparative price and wage analyses (i.e., the purchasing power of industrial wages) that only the very rich could afford to buy these textiles: that the principal markets were the nobility, the upper mercantile bourgeoisie, and political leaders. Indeed, a master mason would have to spend more than a year’s income to buy a scarlet. The famed Johan Huizinga (Autumn of the Middle Ages) had indeed commented on this predilection for dark and especially black (with purples) colours in the dress of the mid-fifteenth-century Burgundian court; but he was mistaken in his supposition that by the end of this century, clothing fashions had gone more toward blues, in light of the evidence from the Mechelen accounts. Huizinga and others have suggested various theories for this shift in the colour spectrum for textiles and for the later preference for the ‘dark side’, but none – including any that I can offer – is convincing. Economic historians, however, must not be so supply-side oriented that they ignore the vital question of colours and thus fashions in textiles, in creating market demand. For the subsequent victory of the New Draperies, over the costly, heavy-weight woollens of the Old Draperies, in producing lighter, cheaper, but also more brightly dyed textiles, in more vivid colours, a transformation followed by the massive influx of Asian printed calicoes (with radical floral and geometric designs), helped to create the market conditions for the 18th-century Industrial Revolution, in both geographic range and income distributions. JEL Classifications: F10, L11, L15, L67, M30, N63, N93, O52.
    Keywords: wool, cloth, woollens, worsteds, scarlets, dyes, colours, Flanders, Brabant, civic governments, fashions, markets, Industrial Revolution
    JEL: F10 L11 L15 L67 M30 N63 N93 O52
    Date: 2006–02–13
  13. By: Ariane Chapelle (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.); Ariane Szafarz (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and DULBEA, Brussels.)
    Abstract: Control tunnelling over firms can be reached through pyramids, cross-ownership, and other complex features. This phenomenon is frequent in Europe and in Asia. However, the theoretical literature has not yet converged toward a well-defined and robust measurement of integrated control that takes into account the threshold for control as applied in practice. Based on graph theory, this paper aims at filling this gap and proposes a new algorithm for evaluating the control tunnelling exerted by the firms' ultimate shareholders. Then, the paper discusses the various forms of control existing next to voting shares, like multiple voting rights, board representation and active monitoring, before suggesting ways to include them into the modelling of control.
    Keywords: Ownership, Corporate control, ultimate shareholder.
    JEL: G32 C67 L22
    Date: 2006–05
  14. By: Arno TAUSCH (Department of Political Science, Innsbruck University)
    Abstract: The article analyses further develops the neo-dependency approach already presented by the same author and looks at recent time series trends in the structure of international capital penetration, international savings, and the dynamics of “unequal transfer” and their effects on social well-being today. It emerges that the European Center is going to become the main loser in the structural changes that affect the position of Europe in the 21st Century. The world system approach, pioneered today, above all by Giovanni Arrighi and the late Andre Gunder Frank, teaches us that the centers of gravity in the world economy are dramatically shifting towards the Asia- Pacific region, and that the days of “Eurocentrism” are outnumbered. Foreign savings become an important indicator of the center-periphery structure of the world system and its changing nature (with its ongoing shifts favoring mainly the Asia – Pacific region) as well. Savings rate in Europe almost everywhere decline. It is simply unthinkable that ongoing changes in the structure of unequal transfer (ERDI, with ERDI being the exchange rate deviation index, developed by Stanford Professor Pan Yotopoulos) will not affect the entire system. The center received inputs to the tune of around 8 % of its current GDP through to the middle of the 1990s, however at the end of the 1990s we seem to have arrived at a historical junction where this very structure seems to evaporate and be substituted by another one.By and large, it is shown that the member countries of the “old” EU-15 are on the losing side in the shifts of unequal transfer (ERDI) from 1998 to 2002.. No “old” European country improved its position, on the contrary, “old Europe” becomes a region that is itself a victim of unequal transfer. It also emerges that ceteris paribus the Muslim world indeed became the main loser of these tectonic shifts. It is entirely conceivable that these pressures – as Gernot Kohler has shown – also explain a good part of the negative trends on the labor markets in the Muslim countries and in Europe. It is clear that rising rates of unequal transfer are causing rising rates of unemployment. Our approximate, admittedly crude measure is tto correlate DYN ERDI (in the short term, assuming that this reflects a longer-run tendency as well) with the changes in unemployment over the last 2 decades since 1980, observable from the ILO Laborsta data set. A non-linear function explains 16 % of the rise in unemployment (time series correlations, ILO Laborsta data series). So, while the Muslim world can optimistically evaluate recent trends in world savings, recent changes in unequal exchange rather differentiate between those Muslim countries with a favorable world economic prospect and those that further remain in a peripheral status. Inter alia, prospects for the following Muslim nations deteriorate due to rising unequal exchange, and they will be faced, according to this analysis, with a rising unemployment: Algeria; Bangladesh; Egypt; Eritrea; Iran, Islamic Rep. of; Kazakhstan; Malaysia; Mali; Mauritania; Morocco; Niger; Pakistan; Senegal; Syrian Arab Republic; Tajikistan; Tunisia; Turkey; Uzbekistan. The escalating violence in former Soviet Central Asia, most notably, Uzbekistan, is a dramatic example for the relevance of this approach. Thus it is shown in this article that transnational integration is and remains to be a contradictory process that does not lead 1:1 to a greater amount of social cohesion and sustainable development in the host countries of transnational penetration. Keywords: cross-section models, income distribution, inequality, international economic order, economic welfare, globalization; general welfare, social security and public pensions, macroeconomics – Asia including Middle East; macroeconomic analyses of economic development, comparative economic systems, cultural economics JEL classification: C21, D31, D60, F02, F15, I3, I31, H55, N15; O11; P50; Z10
    Keywords: cross-section models, income distribution, inequality, international economic order, economic welfare, globalization; general welfare, social security and public pensions, macroeconomics – Asia including Middle East; macroeconomic analyses of economic development, comparative economic systems, cultural economics
    JEL: C21 D31 D60 F02 F15 I3 I31 H55 N15 O11 P50 Z10
    Date: 2005–10–10
  15. By: Peter W Jones (Economic development Institute,Jamaica)
    Abstract: In order for Jamaica to transition from a Developing Country to a Developed Country it will be highly necessary to create a Knowledge based society, the inability to seriously overcome this challenge will mean Jamaica will be in transition to a developed country for an infinite number of years. The thinking here is nothing new as the Newly Industrialized Countries (NIC<92>s) of S. E. Asia discovered this 15-20 years ago and much of their successes can be accredited to the building of strong Knowledge based economies, they have now mastered the Knowledge Based concept and their societies are now moving in the direction of Network societies- the latest 21st century paradigm. In Jamaica, the government speaks to this in a limited way in their Public Sector Modernisation Vision And Strategy 2002-2012 September 2002, by outlining their approach over a ten-year period as follows: In order to achieve good governance the government have set the following strategic objectives: Creation of a Knowledge Society, which is fundamental to informed decision-making and concerted action, by: · Facilitating access to information through all available media. Publishing better designed and user-friendly brochures on policy, procedures and government services · Putting in place systems and structures to effectively implement the requirements of the Access to Information Act. Appointing dedicated liaison officers to provide information to the public in all departments and other agencies. However, to complement this a similar commitment from the Private sector in Jamaica will be necessary. At this time this is not self-evident. The concept of the Knowledge society needs to be better articulated by the Information Ministry Of The Government and as such one could draw the conclusion the Information Ministry itself is not truly aufait with the concept and as such they enunciate but they need to articulate strongly in order to facilitate rapid progress in this area. Economic research on knowledge comes in various forms. For example, there has been much research on the importance of human capital, in terms of education and/or skills, to economic growth. Similarly, research has been conducted on innovation and research and development (R&D) that lead to new technology, which ultimately leads to increases in output per capita. In addition, there has been some focus on the effects of information and communication technologies (ICTs) on the flow of knowledge and information and its ultimate effect on economic growth The literature speaks to four preconditions that lead to knowledge becoming an effective engine of growth. These are: An economic and institutional regime to provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship. An educated and skilled population to create, share, and use knowledge well. A dynamic information infrastructure to facilitate the effective communication, dissemination, and processing of information. An efficient innovation system of firms, research centers, universities, consultants, and other organizations to tap into the growing stock of global knowledge, assimilates and adapt it to local needs, and create new technology. However, in order to satisfy these preconditions a seven(7) point strategy will have to be adopted as follows: · Social Development · The Environment · Poverty · Sustainable Economic Development · Competitive Strategy · Modernization Of State · Regional Integration Strategy This document will examine this 7-point strategy as it applies to Jamaica. Realistically, if Jamaica were to adopt this seven-point strategy in 2005, we would not achieve Developed Country status until 2030. As such, Jamaica would not become a developed country until 2030. Political independence was achieved in 1962. The final step, Economic Independence can be achieved by 2030.
    Keywords: Jamaica 2030, Jamaica Development,Jamaica,Jamaica,Jamaica,Development strategy
    JEL: O P
    Date: 2005–02–20
  16. By: Amina Lahrèche-Révil (University of Picardie); Juliette Milgram (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: Compared to the new European members (NEM) and to the new candidate countries, the Middle-East and North African (MENA) countries are a very heterogeneous and fragmented EU frontier. As far as monetary issues are concerned, exchange rate regimes are very different and bilateral exchange rates quite volatile. Moreover, weak trade integration and generalized capital controls constitute major obstacles to economic and financial integration. Existing works yet suggest that anchoring to the euro would undoubtedly be the best exchange-rate strategy for most MENA countries. Monetary integration and trade integration are interdependent. This is especially the case when trade flows are sensitive to the volatility of exchange rates or to movements in relative prices. The objective of this paper is to evaluate the potential of monetary integration in the South Mediterranean area, in a context of trade liberalization and of a strong orientation of trade flows towards the EU. The empirical part of the paper would rely on a gravity equation of trade which would include exchange rates volatility and relative prices, in order to gauge the impact of de facto exchange-rate and monetary conditions on trade integration. The sample of countries is large (OECD, NEM, MENA and Asian countries) in order both to have robust estimates and to investigate whether the MENA countries exhibit a specific sensitivity of trade flows to exchange-rate volatility and exchange-rate misalignments. The impact of the competitiveness of third countries will also be investigated. This latter issue is especially important, though seldom assessed, when it comes to the potential trade-diverting effect of the latest EU enlargement on MENA trade wit the EU. The gravity setting also allows simulating the consequences for the trade of MENA countries of a deeper monetary integration, by comparing the impact on trade of a regional monetary integration and of a euro peg.
    Keywords: Exchange rate regime, trade, regional integration, Euro, MENA
    JEL: F15 F31 F33
    Date: 2006–05–31
  17. By: Ganguly, Sushma; Feder, Gershon; Anderson, Jock R.
    Abstract: The paper reviews the origins and evolution of the Training and Visit (T & V) extension system, which was promoted by the World Bank in 1975-98 in over 50 developing countries. The discussion seeks to clarify the context within which the approach was implemented, and to analyze the causes for its lack of sustainability and its ultimate abandonment. The paper identifies some of the challenges faced by the T & V approach as being typical of a large public extension system, where issues of scale, interaction with the agricultural research systems, inability to attribute benefits, weak accountability, and lack of political support tend to lead to incentive problems among staff and managers of extension, and limited budgetary resources. The different incentives and outlook of domestic stakeholders and external donor agencies are also reviewed. The main cause of the T & V system ' s disappearance is attributed to the incompatibility of its high recurrent costs with the limited budgets available domestically, leading to fiscal unsustainability. The paper concludes with some lessons that apply to donor-driven public extension initiatives, and more generally to rural development fads. The role of timely, independent, and rigorous evaluative studies is specifically highlighted.
    Keywords: Agricultural Knowledge & Information Systems,Rural Development Knowledge & Information Systems,Rural Poverty Reduction,ICT Policy and Strategies,Banks & Banking Reform
    Date: 2006–05–01
  18. By: Arno TAUSCH
    Abstract: With all the talk in Europe about “Islam” and “Muslim culture” it is surprising how little hard-core empirical evidence exists on the compatibility of “Muslim culture” with positive patterns of political, social, and ecological development in the world system in the 1980s, 1990s, and beyond. This article tries to close this gap by using latest (United Nations and other data) and multivariate techniques, investigating the determination of 14 indicators of development in 109 countries with complete data by 12 determinants of development, including membership in the 57 member and 3 observer Organization of the Islamic Conference (OIC), comprising 57 members and 3 observer states. The empirical record, presented in this essay, speaks a clear language in favor of Islamic democracy and against those in the West that attempt to treat Islamic cultural heritage as a general development burden. It should be also clear that a reliance on the “Washington Consensus” alone will not “fix” the performance of countries beyond a better and more predictable “development stability”. The most consistent consequence of the “dependency” analysis of this essay is the realization that a reliance on foreign capital in the short term might bring about positive consequences for employment – especially female employment – but that the long-term negative consequences of dependence in the social sphere, but also for sustainable development, outweigh the immediate, positive effects. Our three-fold empirical understanding of the process of globalization – reliance on foreign savings, MNC penetration and unequal transfer, - goes beyond the average analysis of the workings of dependency structures and shows how different aspects of dependency negatively affect development performance. The integration of the countries of the periphery into larger currency blocs – quite contrary to what the “Washington Consensus” has to say about “competitive currencies” - will be one of the most important tasks for international development strategies for years to come. EU membership, by contrast, under the present institutional conditions of the EU – not as it should be but as it is - fails to have sufficiently enough dynamic effects and its democratic deficits become ever more clear. In terms of the size of the quantitative effects on the 14 dimensions of development under investigation here, it is shown that the new political structures associated with political feminism that substituted patriarchic structures inherent in practically all world regions for much of the 19th and the early 20th Century have a very considerable effect on the development outcomes of today. Feminism in power – i.e. the share of women in positions of political decision making - achieves to transform many aspects of development, but, as other “distribution coalitions” before it, creates certain aspects of stagnation as well and thus is not free from the effects of the logic of “collective action”. Islamic culture is not a development blockade; on the contrary. Membership in the Islamic Conference has – ceteris paribus – a very positive effect on political democracy, on life expectancy, and on our indicators of the Kyoto-process and the eco-social market economy. Far from being a “religion of the Middle Ages” Islam has an important message for the 21st Century. The article also analyses recent trends in the structure of international saving, pension systems and the dynamics of “unequal transfer”. It emerges that the European Center is going to become the main loser in the structural changes that affect the position of Europe in the 21st Century.
    Keywords: cross-section models, income distribution, inequality, international economic order, economic welfare, globalization; general welfare, social security and public pensions, macroeconomics – Asia including Middle East; macroeconomic analyses of economic development, comparative economic systems, cultural economics
    JEL: C21 D31 D60 F02 F15 I3 I31 H55 N15 O11 P50 Z10
    Date: 2005–09–16
  19. By: Murat Yildizoglu; Thomas Vallée
    Abstract: "If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it." Machlup (1958) - cited by Hall (2002) <p>The demand for a stronger patenting system has become in the recent period a major source of tension between the U.S. government and the E.U. The US demand is generally motivated by the conventional economic wisdom affirming that a strong patenting system yields convenient incentives for the private investment in Research and Development (R&D) and hence, for technical progress in Society. This rather mechanistic approach of technological dynamics and of the role of the patenting is mainly based on the neoclassical theory of technical progress that strongly focuses on the agents' incentives rather than on the dynamics of the existent technological systems. Other appreciations of the existing patenting systems have nevertheless continued to be quite critical (see Machlup (1958) and Penrose (1951)). These appreciations are generally based on approaches where the nature of the actual technologies plays a central role. Moreover, the first part of the opinion emitted by Machlup in the above excerpt becomes very urgent since the question of establishing a strong patenting system is actually scrutinized for some industries in Europe (like the software industry) and in some countries (like Russia and China). We should hence consider the social costs of the patenting system, as well as its advantages, in order to guide such decisions. More specifically, it is time to seriously consider and check the old and new criticism of this system. The shortcomings of the standard wisdom have more recently been pointed out by Merges & Nelson (1990) and Mazzoleni & Nelson (1998). We propose to reassess the theoretical social value of patenting through a model founded on the approach adopted by these more empirical and conceptual studies. <p>We develop a simulation model based on the Nelson & Winter (1982), part V. This basic model is completed by a patent system that allows the protection of the innovations. We therefore use this model for evaluating the efficiency of this system under different technological conditions emphasized by Merges & Nelson (1990) and as a function of different dimensions of patents (mainly their length and their breadth). An econometric study of the results from Monte Carlo simulations is used to evaluate the determinants of the Social costs and benefits of patents. These social effects are mainly characterized at two levels: at the level of the efficiency of the technical progress in the industry, and at the level of the social surplus. <p>The neoclassical approaches conclude to a positive effect on both dimensions. Evolutionary approaches point at the contingency of these results with respect to the technological particularities of the industries. For example, Merges & Nelson (1990) distinguishes four classes of technologies in which the role of patents can be strongly contrasted: discrete inventions, cumulative technologies, chemical technologies and sciencebased technologies. We propose to include the specificities of these classes in our analysis, through different calibrations of the technology space of our industry dynamics model. The results of the simulations will then allow us to check the effectiveness of the patenting system in different configurations and with different characteristics measuring its strength. <p>References <p>Hall, B. (2002), "Current issues and trends in the economics of patents", Lecture to the ESSID Summer School in Industrial Dynamics <p>Hall, B. & Ham Ziedonis, R. M. (2001), The effects of strengthening patent rights on firms engaged in cumulative innovation: Insights from the semiconductor industry, in G. Libecap, ed., "Entrepreneurial Inputs and Outcomes: New Studies of Entrepreneurship in the United States", Vol. 13 of Advances in the Study of Entrepreneurship, Innovation, and Economic Growth, Elsevier Science, Amsterdam. <p>Jaffe, A. B. (2000), "The u.s. patent system in transition: Policy innovation and the innovation process", Research Policy 29, 531–557. Machlup, F. (1958), "An economic review of the patent system", Study No. 15 of Commission on Judiciary, Sub comm. on Patents, Trademarks, and Copyrights, 85th Congress, 2d Session. <p>Mazzoleni, R. & Nelson, R. R. (1998), "The benefits and costs of strong patent protection: A contribution to the current debate", Research Policy 27, 273–284. <p>Merges, R. & Nelson, R. R. (1990), "On the complex economics of patent scope", Columbia Law Review 90, 839–916. <p>Nelson, R. R. & Winter, S. (1982), An Evolutionary Theory of Economic Change, The Belknap Press of Harvard University, London. <p>Penrose, E. (1951), The Economics of the International Patent System, John Hopkins University Press, Baltimore
    Keywords: Patent system, social welfare, public policy, intellectual property rights, industrial dynamics
    JEL: O31 O34 O38
    Date: 2004–08–11
  20. By: Roberto A. De Santis (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Bruno Gérard (Norwegian School of Management BI, Elias Smiths vei 18, Box 580 N-1302 Sandvika, Norway.)
    Abstract: We investigate the determinants of bilateral international equity and bond portfolio reallocation across a large cross section of countries over the 1997 to 2001 period. We first argue that financial integration is not a global phenomenon, as equity and bond home biases declined significantly only among European countries, Australia, New Zealand and Singapore. Then, we show that the European Economic and Monetary Union (EMU) eased the access to the equity market and, to a larger extent, the bond market; thereby, enhancing regional financial integration in the euro area. Beside the effect of the EMU, the strongest determinants of the changes in portfolio weights are expected diversification benefits and the initial degree of underweight.
    Keywords: Home bias, Risk diversification, International portfolio weights, EMU.
    JEL: C13 C21 F37 G11
    Date: 2006–05

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