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on Development |
| By: | Shulin Gu; Bengt-Åke Lundvall |
| Abstract: | Observers around the world are impressed by the rapid growth of China’s economy. While outside observers tend to focus on the success story of unprecedented growth policy documents and recent domestic debates in China have pointed to the need for a shift in the growth trajectory with stronger emphasis on ‘endogenous innovation’ and ‘harmonious development’. This paper attempts to capture the current characteristics of China’s production and innovation system; how they were shaped by history and what major challenges they raise for the future. On the basis of the analysis the authors propose that it is possible to link together the two key concepts ‘endogenous innovation’ and ‘harmonious development’ by focusing innovation and development efforts in China on domestic needs, including social needs, rather than a one-sided focus on export-promotion and commodity production. |
| Keywords: | China; economic growth; R&D; innovation systems |
| JEL: | O32 O11 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:06-07&r=dev |
| By: | Wei Huang |
| Abstract: | We examine the effect of financial openness on the development of financial systems in a panel of 35 emerging markets during the period of 1976 to 2003. A group of indicators including variables from banking sector, stock market, and national capital accounts are used as measures of financial openness and financial development. In addition, aggregate index measures are developed to incorporate information from different areas of the financial system. Our empirical results generally suggest that financial openness is the key determinant of cross-country differences in the development of financial systems. When testing financial openness against the development of the banking sector and stock market separately, we found strong and robust evidence that this link between openness and development exists in stock markets. Although a similar link is sometimes found with banking sectors, it is not robust to different indicators of financial openness and model specifications. |
| Keywords: | emerging markets, financial openness, financial development |
| JEL: | F36 F37 G15 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:bri:uobdis:06/588&r=dev |
| By: | Simeon Djankov (The World Bank); Yingyi Qian (UC Berkeley and CEPR); Gerard Roland (UC Berkeley and CEPR); Ekaterina Zhuravskaya (New Economic School/CEFIR and CEPR) |
| Abstract: | Social scientists studying the determinants of entrepreneurship have emphasized three distinct perspectives: the role of institutions, the role of social networks and the role of personal characteristics. We conduct a survey from five large developing and transition economies to better understand entrepreneurship in view of these three perspectives. Using data from a pilot study with over 2,000 interviews in 7 cities across China, we find that compared to non entrepreneurs, entrepreneurs are much more likely to have family members who are entrepreneurs as well as childhood friends who became entrepreneurs, suggesting that social networks play an important role in entrepreneurship. Entrepreneurs also differ strongly from non entrepreneurs in their attitudes towards risk and their work-leisure preferences. |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0047&r=dev |
| By: | Ruben Enikolopov (Harvard University and CEFIR); Ekaterina Zhuravskaya (New Economic School/CEFIR and CEPR) |
| Abstract: | Does fiscal decentralization lead to more efficient governance, better public goods, and higher economic growth? This paper tests Riker’s theory (1964) that the results of fiscal decentralization depend on the level of countries’ political centralization. We analyze crosssection and panel data from up to 75 developing and transition countries for 25 years. Two of Riker’s predictions about the role of political institutions in disciplining fiscally-autonomous local politicians are confirmed by the data. 1) Strength of national political parties significantly improves outcomes of fiscal decentralization such as economic growth, quality of government, and public goods provision. 2) In contrast, administrative subordination (i.e., appointing local politicians rather than electing them) does not improve the results of fiscal decentralization. |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0065&r=dev |
| By: | Habiyaremye, Alexis (UNU-MERIT); Ziesemer, Thomas (UNU-MERIT) |
| Abstract: | This paper examines the extent to which dependence on primary commodities in Sub-Saharan African(SSA) countries can be explained by low levels of absorptive capacity (the ability to acquire, internalize and utilize knowledge developed elsewhere). We examine the individual and combined effects of various indicators of absorptive capacity on export diversification. We test the significance of these effects on a sub-sample consisting of SSA countries and a sample of other developing countries. Our results show that the association between higher levels human capital and basic infrastructure -two crucial components of absorptive capacity -with more export diversification is subject to threshold level effects, while the abundance of natural resources turns out to be impeding diversification in SSA. These results imply that SSA countries need to substantially increase their investments in basic infrastructure as well as reinforce the accumulation pace of human and physical capital to allow active technological learning and reduce their dependence on primary commodities. |
| Keywords: | absorptive capacity, human capital, capital accumulation, export diversification, Sub-Saharan Africa. |
| JEL: | O13 O33 O55 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2006030&r=dev |
| By: | Nava Ashraf (Harvard Business School); Dean Karlan (Economic Growth Center, Yale University); Wesley Yin (University of Chicago) |
| Abstract: | Commitment devices for savings could benefit those with self-control as well as familial or spousal control issues. We find evidence to support both motivations. We examine the impact of a commitment savings product in the Philippines on household decision making power and self-perception of savings behavior, as well as actual savings. The product leads to more decision making power in the household for women, and likewise more purchases of female-oriented durable goods. We also find that the product leads women who appear time-inconsistent in a baseline survey to self-report being a disciplined saver in the follow-up survey. For impact on savings balances, we find that the 81% increase in savings after one year did not crowd out savings held outside of the participating bank, but that the longer-term impact over two and a half years on bank savings dissipated to only a 33% increase, which is no longer statistically significant. We discuss reasons why the effect dissipated and the implications for designing and implementing sustainable, equilibrium-shifting interventions. |
| Keywords: | Savings, Microfinance, Female empowerment, Household Decision making, Commitment |
| JEL: | D12 D63 D91 J16 O12 O16 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:939&r=dev |
| By: | Jaime Marquez; John W. Schindler |
| Abstract: | Though China's share of world trade is comparable to that of Japan, little is known about the response of China's trade to changes in exchange rates. The few estimates available suffer from two limitations. First, the data for trade prices are based on proxies for prices from other countries. Second, the estimation sample includes the period of China's transformation from a centrally-planned economy to a market-oriented system. To address these limitations, this paper develops an empirical model explaining the shares of China's exports and imports in world trade in terms of the real effective value of the renminbi. The specifications control for foreign direct investment and for the role of imports of parts to assemble merchandise exports. Parameter estimation uses disaggregated monthly trade data and excludes the period during which most of China's decentralization occurred. The estimation results suggest that a ten-percent real appreciation of the renminbi lowers the share of aggregate Chinese exports by a half of a percentage point. The same appreciation lowers the share of aggregate imports by about a tenth of a percentage point. |
| Keywords: | Foreign exchange rates - China ; Trade ; Econometric models |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:861&r=dev |
| By: | John Fernald; Brent Neiman |
| Abstract: | The newly industrialized economies (NIEs) of Asia are the fastest-growing economies in the world since 1960. A clear understanding of their rapid development remains elusive, with continuing disputes over the roles of technology growth, capital accumulation, and international trade and investment. We reconcile seemingly contradictory explanations by accounting for imperfections in output and capital markets. For instance, in Singapore, growth-accounting studies using quantities (the primal approach) find rising capital-output ratios and a constant labor share; but studies using real factor prices (the dual approach) find a constant user cost. We provide evidence that "favored" firms reaped economic profits and received preferential tax treatment, subsidies, and access to capital-- market imperfections that are difficult to capture when implementing the dual approach. Further, declining pure profits can reconcile the constant or rising labor shares in revenue in the NIEs with theories of international trade that predict falling labor shares in cost. We provide empirical support for the quantitative importance of profits and heterogeneous user costs, describe the two-sector dynamics, and derive measures of technology growth, corrected for the imperfections that we quantify. We then discuss implications for broader disputes about Asian development. |
| Keywords: | Asia ; Economic conditions ; Productivity |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2006-17&r=dev |
| By: | Lundahl, Mats (Department of Economics); Sjöholm, Fredrik (European Institute of Japanese Studies) |
| Abstract: | Timor-Leste began its independence as one of the poorest nations in the world. Substantial progress has been made thereafter but the challenges for future development are numerous. High population growth and modest growth of GDP means that per capita income is declining and that the extent of poverty is increasing. For this situation to change, income opportunities other than those provided by subsistence agriculture are needed. Considering the low level of education and the keen competition for skilled personnel this, however, is difficult. So far, it seems that most skilled workers are being absorbed by the public sector and that this is pushing up the already high skilled wage level. That, in turn, affects the competitiveness of the private sector negatively and acts as an obstacle to the creation of employment opportunities outside agriculture. |
| Keywords: | Timor-Leste; Job Creation; Development; Industry |
| JEL: | O10 O14 O15 |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:eijswp:0226&r=dev |
| By: | Dean Yang |
| Abstract: | Millions of households in developing countries receive financial support from family members working overseas. How do migrant earnings affect origin-household investments? This paper examines Philippine households’ responses to overseas members’ economic shocks. Overseas Filipinos work in dozens of foreign countries, which experienced sudden (and heterogeneous) changes in exchange rates due to the 1997 Asian financial crisis. Appreciation of a migrant’s currency against the Philippine peso leads to increases in household remittances received from overseas. The estimated elasticity of Philippine-peso remittances with respect to the Philippine/foreign exchange rate is 0.60. These positive income shocks lead to enhanced human capital accumulation and entrepreneurship in migrants’ origin households. Child schooling and educational expenditure rise, while child labor falls. In the area of entrepreneurship, households raise hours worked in self-employment, and become more likely to start relatively capital-intensive household enterprises. |
| JEL: | D13 F22 I2 I3 J22 J23 J24 O12 O15 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12325&r=dev |
| By: | Richard E. Baldwin; Frédéric Robert-Nicoud |
| Abstract: | This paper explores the impact of trade on growth when firms are heterogeneous. We find that greater openness produces anti-and pro-growth effects. The Melitz-model selection effects raises the expected cost of introducing a new variety and this tends to slow the rate of new-variety introduction and hence growth. The pro-growth effect stems from the impact that freer trade has on the marginal cost of innovating. The balance of the two effects is ambiguous with the sign depending upon the exact nature of the innovation technology and its connection to international trade in goods and ideas. We consider five special cases (these include the Grossman-Helpman, the Coe-Helpman and Rivera-Batiz-Romer models) two of which suggest that trade harms growth; the others predicting the opposite. |
| JEL: | H32 P16 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12326&r=dev |
| By: | Marco Arena; Carmen Reinhart; Francisco Vázquez |
| Abstract: | This paper assembles a dataset comprising 1,565 banks in 20 Asian and Latin American countries during 1989-2001 and compares the response of the volume of loans, deposits, and bank-specific interest rates on loans and deposits, to various measures of monetary conditions, across domestic and foreign banks. It also looks for systematic differences in the behavior of domestic and foreign banks during periods of financial distress and tranquil times. Using differences in bank ownership as a proxy for financial constraints on banks, the paper finds weak evidence that foreign banks have a lower sensitivity of credit to monetary conditions relative to their domestic competitors, with the differences driven by banks with lower asset liquidity and/or capitalization. At the same time, the lending and deposit rates of foreign banks tend to be smoother during periods of financial distress, albeit the differences with domestic banks do not appear to be strong. These results provide weak support to the existence of supply-side effects in credit markets and suggest that foreign bank entry in emerging economies may have contributed somewhat to stability in credit markets. |
| JEL: | E51 G21 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12340&r=dev |
| By: | Ann Harrison |
| Abstract: | This essay surveys the evidence on the linkages between globalization and poverty. I focus on two measures of globalization: trade and international capital flows. Past researchers have argued that global economic integration should help the poor since poor countries have a comparative advantage in producing goods that use unskilled labor. The first conclusion of this essay is that such a simple interpretation of general equilibrium trade models is likely to be misleading. Second, the evidence suggests that the poor are more likely to share in the gains from globalization when there are complementary policies in place. Such complementary policies include investments in human capital and infrastructure, as well as policies to promote credit and technical assistance to farmers, and policies to promote macroeconomic stability. Third, trade and foreign investment reforms have produced benefits for the poor in exporting sectors and sectors that receive foreign investment. Fourth, financial crises are very costly to the poor. Finally, the collected evidence suggests that globalization produces both winners and losers among the poor. The fact that some poor individuals are made worse off by trade or financial integration underscores the need for carefully targeted safety nets. |
| JEL: | F1 O1 I3 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12347&r=dev |
| By: | Juan R. de Laiglesia |
| Abstract: | High quality institutions lower transaction costs, encourage trust, reinforce property rights and avoid the exclusion of sections of the population. Overcoming institutional bottlenecks that constrain entrepreneurial activities and the development of the private sector is a prerequisite for achieving pro-poor growth, in particular in Africa. As part of the Development Centre’s Work Programme 2005/2006 on institutional requirements for advancing peace and development in sub-Saharan-Africa, this explorative study sets the stage for forthcoming indepth case studies in Ghana and Cameroon. <BR>La médiocre performance de l’agriculture africaine est à mettre au compte non seulement d’une donnée naturelle difficile et d’une histoire de politiques extractives, mais aussi de goulots d’étranglement institutionnels fondamentaux. Ce document de travail présente un cadre pour l’analyse des goulots d’étranglement empêchant le développement agricole en Afrique sub- Saharienne. Il passe en revue la littérature au sujet des institutions et du développement agricole afin d’identifier les principaux obstacles institutionnels auxquels l’agriculture africaine fait face. |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:oec:devaaa:248-en&r=dev |
| By: | Katsuya Takii (Osaka School of International Public Policy, Osaka University); Ryuichi Tanaka (Graduate School of Information Science and Engineering, Tokyo Institute of Technology) |
| Abstract: | This paper examines how different education systems affect GDP by influencing the diversity of human capital. We construct an overlapping generation model in which agents are heterogeneous in income and innate ability, and the final goods are produced with differentiated intermediate goods. We analyze an economy in which an income distribution converges to a stationary distribution. It is shown that the diversity of human capital induced by income inequality always lowers the GDP of the next period, while the diversity of human capital induced by heterogeneous ability can increase GDP, if the produced intermediate goods are sufficiently substitutable and firms have a large span of control. Hence, as public education equalizes education resources across households, it mitigates the negative effect of income inequality on GDP, while the effects of ability tracking crucially depend on the production structure of the economy. |
| Keywords: | Span of control, Complementarities, Human capital, Ability tracking |
| JEL: | D31 D72 H42 I22 O11 O15 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0619&r=dev |
| By: | Demirguc-Kunt, Asli |
| Abstract: | The empirical literature on finance and development suggests that countries with better developed financial systems experience faster economic growth. Financial development-as captured by size, depth, efficiency, and reach of financial systems-varies sharply around the world, with large differences among countries at similar levels of income. This paper argues that governments play an important role in building effective financial systems and discusses different policy options to make finance work for development. |
| Keywords: | Banks & Banking Reform,Economic Theory & Research,Macroeconomic Management,Pro-Poor Growth and Inequality,Inequality |
| Date: | 2006–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3955&r=dev |
| By: | Martinez Peria, Maria Soledad; Demirguc-Kunt, Asli; Aggarwal, Reena |
| Abstract: | Workers ' remittances to developing countries have become the second largest type of flows after foreign direct investment. The authors use data on workers ' remittance flows to 99 developing countries from 1975-2003 to study the impact of remittances on financial sector development. In particular, they examine whether remittances contribute to increasing the aggregate level of deposits and credit intermediated by the local banking sector. This is an important question considering the extensive literature that has documented the growth-enhancing and poverty-reducing effects of financial development. The findings provide strong support for the notion that remittances promote financial development in developing countries. |
| Keywords: | Remittances,Economic Theory & Research,Pro-Poor Growth and Inequality,Banks & Banking Reform,Financial Economics |
| Date: | 2006–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3957&r=dev |
| By: | Kuijs, Louis |
| Abstract: | This paper investigates how China ' s saving, investment, and saving-investment balance will evolve in the decades ahead. Household saving in China is relatively high compared with OECD countries. However, much of China ' s high economywide saving, and the difference between China and other countries, are due to unusually high enterprise and government saving. Moreover, cross-country empirical analysis shows that economywide saving and investment in China are higher than what would be expected, even adjusting for differences in economic structure. Combined, these findings suggest that much of China ' s high saving is the result of policies particular to China. Looking ahead, the econometric results suggest that purely on the basis of projected structural developments-including development, changes in economic structure, urbanization, and demographics-saving and investment would both decline only mildly in the coming two decades, with ambiguous impact on the current account surplus. However, the potential effect on saving, investment, and the saving-investment balance of several policy adjustments could be large. Several of these policies are identified and their likely impact assessed and quantified. This exercise suggests that rebalancing along these lines should reduce both saving and the current account surplus over time, although the surplus is unlikely to turn into a deficit soon. |
| Keywords: | Economic Theory & Research,Investment and Investment Climate,Economic Investment & Savings,Non Bank Financial Institutions,Contractual Savings |
| Date: | 2006–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3958&r=dev |
| By: | Leonardo Gasparini (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Matías Horenstein (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Sergio Olivieri (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata) |
| Abstract: | This document presents and discusses an extensive set of statistics aimed at characterizing the degree of economic polarisation in the Latin American and Caribbean (LAC) countries. The study is based on a dataset of household surveys from 21 LAC countries in the period 1989-2004. Latin America is characterised by a high level of economic polarisation, compared to other regions in the world. On average, income polarisation has mildly increased in the region since the early 1990s. The country experiences in terms of income polarisation, however, have been heterogeneous. The region has moved forward toward the reduction of educational inequalities, while the gaps between the rich and the poor in terms of access to basic services (water and electricity) have been reduced. |
| Keywords: | polarisation, cohesion, inequality, Latin America, Caribbean |
| JEL: | I3 D3 D6 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0038&r=dev |
| By: | Jens Matthias Arnold (World Bank and Bocconi University); Beata Smarzynska Javorcik (World Bank and CEPR) |
| Abstract: | This paper uses micro data from the Indonesian Census of Manufacturing to analyze the causal relationship between foreign ownership and plant productivity. To control for the possible endogeneity of the FDI decision, a difference-in-differences approach is combined with propensity score matching. An advantage of this method, which has not been previously applied in this context, is the ability to follow the timing of observed changes in productivity and other aspects of plant performance. The results suggest that foreign ownership leads to significant productivity improvements in the acquired plants. The improvements become visible in the acquisition year and continue in subsequent periods. After three years, the acquired plants outperform the control group in terms of productivity by 34 percentage points. The data also suggest that the rise in productivity is a result of restructuring, as acquired plants increase investment outlays, employment and wages. Foreign ownership also appears to enhance the integration of plants into the global economy through increased exports and imports. |
| Keywords: | foreign direct investment, productivity |
| JEL: | F23 O33 D24 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:197&r=dev |
| By: | Alessandra Tucci (University of Milan and Centro Studi Luca d'Agliano) |
| Abstract: | Using Indian firm-level data, this paper examines the combined role of import and export intensity in a context of foreign networks. The more Indian firms are involved in trade networks the more they have a productivity advantage. Finally, information on the origin of import and on the destination of output are used to shed some light on the kind of networks in which firms are involved. We show that the upstream or downstream contact with more developed countries is not correlated with an higher productivity while there it seems to be an advantage for those firms that import and export to the same area. |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:199&r=dev |
| By: | Jiahua Che (Hong Kong University of Science Technology and William Davidson Institute); Giovanni Facchini (University of Illinois and University of Milan) |
| Abstract: | The dual track approach to market liberalization has been widely recognized as the key to the success of the Chinese economic reform. In this paper we study the effectiveness of this strategy in economic environments where the status quo government control is incomplete. We show that in a dynamic context intertemporal arbitrage will emerge, potentially resulting in efficiency losses and/or adverse distributional effects. Only when the status quo involves both price and quantity interventions by the government can dual track liberalization maintain its appeal. Our analysis thus suggests some caution as for the broader applicability of this reform mechanism. |
| Keywords: | Dual Track Liberalization, Intertemporal Arbitrage, Pareto Improving Reforms, China |
| JEL: | H2 P2 F1 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:csl:devewp:204&r=dev |