Governments often promote inward foreign investment to encourage technology 'spillovers' from foreign to domestic firms. Using panel data on Venezuelan plants, the authors find that foreign equity participation is positively correlated with plant productivity (the 'own-plant' effect), but this relationship is only robust for small enterprises. They then test for spillovers from joint ventures to plants with no foreign investment. Foreign investment negatively affects the productivity of domestically owned plants. The net impact of foreign investment, taking into account these two offsetting effects, is quite small. The gains from foreign investment appear to be entirely captured by joint ventures.

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Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela

The study develops an index of globalization covering its three main dimensions: economic integration, social integration, and political integration. Using panel data for 123 countries in 1970–2000 it is analysed empirically whether the overall index of globalization as well as sub-indexes constructed to measure the single dimensions affect economic growth. As the results show, globalization indeed promotes growth. The dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries. Although less robustly, information flows also promote growth whereas political integration has no effect.

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Does Globalization Affect Growth? : evidence from a new Index of Globalization

A detailed review of the education sector in Australia as in the data provided by the 2006 edition of the OECD's annual publication, 'Education at a Glance' is presented. While the data has shown that in almost all OECD countries educational attainment levels are on the rise, with countries showing impressive gains in university qualifications, it also reveals that a large of share of young people still do not complete secondary school, which remains a baseline for successful entry into the labour market.

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Education at a Glance

This paper uses new statistical techniques and two new databases to reassess the relationship between ,, , , , () ' −= − + + +

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Does Foreign Direct Investment Accelerate Economic Growth

The recent wave of financial globalization since the mid-1980s has been marked by a surge in capital flows among industrial countries and, more notably, between industrial and developing countries. While these capital flows have been associated with high growth rates in some developing countries, a number of countries have experienced periodic collapse in growth rates and significant financial crises over the same period, crises that have exacted a serious toll in terms of macroeconomic and social costs. As a result, an intense debate has emerged in both academic and policy circles on the effects of financial integration for developing economies. But much of the debate has been based on only casual and limited empirical evidence.

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Effects of Financial Globalization on Developing Countries: Some Empirical Evidence

We explore the extent to which present day economic development at the sub-national level, captured by GDP per capita, urbanization, and night-time light density, is correlated to regional economic development in the year 1850. Drawing on historical city data, we construct a measure of urban population density and other features of urbanization in 1850 for as many as 2,054 sub-national regions covering 135 countries. In our baseline estimates, a one standard deviation increase in 1850 urban density raises 2005 GDP per capita by almost 10%. Further, presence of the largest national city in 1850 confers significant advantages to the region even 150 years later. Though our findings are robust to a large range of geographic and spatial controls, proximity to the coast and rivers continues to have a significant effect. While persistence is generally true, there is also considerable heterogeneity, with it being strongest in Asia and West Europe. Early urbanization is also associated with human capital and infrastructure differences across regions. Finally, for a limited sample of countries that were not subject to European colonization, we find that even urbanization in the year 1500 is significantly associated with modern development.

Early Urbanization and the Persistence of Regional Disparities within Countries

This paper provides a framework which decomposes aggregate TFP into a component reflecting relative efficiency across sectors, and another component which reflects the absolute level of efficiency. A development accounting analysis suggests that as much as 85 percent of the international variation in aggregate TFP can be attributed to variation in relative efficiency across sectors. Estimation results show that recent findings highlighting the importance of good institutions, and to some extent trade, on levels of TFP, can be explained by their impact on relative efficiency.

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Dual Economies and International Total Factor Productivity Differences

This paper examines the various links among foreign direct investment, financial markets and growth. We model an economy with a continuum of agents indexed by their level of ability. Agents can either work for the foreign company in the FDI sector; or they can undertake entrepreneurial activities, which are subject to a fixed cost. Better financial markets allow agents to take advantage of knowledge spillovers from FDI. Empirical analysis, using cross-country data between 1975-1995, shows that FDI alone plays an ambiguous role in contributing to economic growth. However, countries with well-developed financial markets gain significantly from FDI.

FDI Spillovers, Financial Markets, and Growth

This note provides a brief overview of India's demonetization off currency notes in November 2016. Written shortly after the announcement, the note uses the quantity theory of money as a basic framework to analyze the effects on GDP under various scenarios. Further, using anecdotal evidence, it discusses the factors determining the success or failure of the policy.

Notes (and Anecdotes) on Demonetization in India

We construct an overlapping generations model to study the effect of capital controls on human capital investments and the incidence of redistributive taxation in a growing economy. We argue that the conventional wisdom linking higher capital controls to lower growth is reproduced only when an economy is sufficiently developed. For under-developed countries, higher capital controls are beneficial for human capital as well as domestic physical capital accumulation suggesting that the conventional wisdom does not apply. In an augmented version of the model, we show that a modern sector characterized by positive levels of investment in education may not exist unless capital controls are sufficiently high. Higher capital controls make it feasible for a modern sector to exist by lowering the threshold income level required by workers to invest in human capital. Our results are consistent with recent evidence suggesting that capital account liberalization positively affects growth only after a country has achieved a certain threshold level of absorptive capacities.

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Areendam Chanda

Papers

Early Urbanization and the Persistence of Regional Disparities within Countries

Dual Economies and International Total Factor Productivity Differences

FDI Spillovers, Financial Markets, and Growth

Notes (and Anecdotes) on Demonetization in India

Education, Growth, and Redistribution in the Presence of Capital Flight