Showing papers in "Development and Comp Systems in 2004"

Political Competition in Economic Perspective

Abstract: It is sometimes argued that political competition yields benefits to the citizens just as competition in economic markets yields benefits to consumers. We consider the economic costs and benefits of political competition and find that the story is somewhat more complicated. We first review the limited existing literature on this topic, and in the process, identify a number of distinct interpretations of what constitutes political competition. We then turn our attention to two forms of political competition based on what we refer to as accountability for incumbents and electoral politics. We find that, while political competition can yield allocative benefits for the public, it can also generate aggregate welfare costs by constricting the set of politically feasible public investments.

Food Aid and Informal Insurance

Abstract: Households in developing countries use a variety of informal mechanisms to cope with risk, including mutual support and risk-sharing These mechanisms cannot avoid that they remain vulnerable to shocks Public programs in the form of food aid distribution and food-for-work programs are meant to protect vulnerable households from consumption and nutrition downturns by providing a safety net In this paper we look into the extent to which food aid helps to smooth consumption by reducing the impact of negative shocks, taking into account informal risk-sharing arrangements Using panel data from Ethiopia, we find that despite relatively poor targeting of the food aid, the programs contribute to better consumption outcomes, largely via intra-village risk sharing

Estimating elasticities of demand and supply for South African manufactured exports using a vector error correction model

Abstract: Elasticities of demand and supply for South African manufactured exports are estimated using a vector error correction model in order to address simultaneity and non-stationarity issues. Demand is highly price-elastic, with elasticities ranging from –3 to –6. The price elasticity of supply is generally about 1, but some estimates are as low as 0.35. Competitors’ prices and world income are important determinants of demand, but domestic capacity utilization is not an important determinant of export supply. Many different data alternatives are sourced, constructed and estimated, showing the results can be sensitive to the choice of series.

Trade Liberalisation and Poverty in Nepal A Computable General Equilibrium Micro Simulation Analysis

Abstract: Concern is growing regarding the poverty impacts of trade liberalization. The strong general equilibrium effects of trade liberalization can only be properly analysed in a CGE model. However, the aggregate nature of CGE models is not suited to detailed poverty analysis. We bridge this gap by constructing a CGE model that explicitly models all households from a nationally representative household survey. We find complex income and consumption effects that would be missed in standard CGE models. Urban poverty falls and rural poverty increases as initial tariffs were highest for agriculture. Impacts increase with income level, resulting in rising income inequality.

Governance Indicators, Aid Allocation, and the Millennium Challenge Account

Abstract: Aid works best when it is directed to countries with relatively good institutions and policies But how should good governance be measured, and how can aid allocation rules be designed in light of the strengths and weaknesses of existing measures? We address in brief a number of methodological and applied challenges, motivated by the US government's recent proposal to allocate resources from the new Millennium Challenge Account (MCA), the issues and recommendations apply more broadly Among others, we discuss the implications of margins of error in governance data, the difficulties in measuring trends, and the need to complement existing cross-country indicators with in-depth country diagnostics

Aid, Public Expenditure and Dutch Disease

Abstract: Contemporary policy debates on the macroeconomics of aid often concentrate on short-run Dutch disease effects, ignoring the possible supply side impact of aid—financed public expenditure. We develop a simple model of aid and public expenditure in which public infrastructure capital generates an inter-temporal productivity spillover for both tradable and non-tradable sectors, where these productivity effects may display sector-specific biases. The model also allows for non-homothetic demands. We then use an extended version of this model, calibrated to contemporary conditions in Uganda, to simulate the effect of a step increase in net aid flows. Our simulations show that beyond the short-run, where Dutch disease effects are present, the relationship between enhanced aid flows, real exchange rates and welfare is less straightforward than simple models of aid suggest. We show that public infrastructure which generates a productivity bias in favour of non-tradable production delivers the largest aggregate return to aid, with the real exchange rate appreciation reduced or reversed and enhanced export performance, but it does so at the cost of a deterioration in the income distribution. Income gains accrue predominantly to urban skilled and unskilled households, leaving the rural poor relatively worse off. Under plausible parameterizations of the model the rural poor may also be worse ff in absolute terms.

Heterogeneity in Convergence Rates and Income Determination across U.S. States: Evidence from County-Level Data

Abstract: We utilize county-level data to explore growth determination in the U.S. and possible heterogeneity in growth determination across individual states. The data includes over 3,000 cross-sectional observations and 39 demographic control variables. We use a consistent two stage least squares estimation procedure. (We report OLS estimates as well.) The estimated convergence rate across the U.S. is about 7 percent per year – higher than the 2 percent normally found with OLS in cross-country, U.S. state, and European region samples. Estimated convergence rates for 32 individual states are above 2 percent with an average of 8.1 percent. For 29 states the convergence rate is above 2 percent with 95 percent confidence. For seven states the convergence rate can be rejected as identical to at least one other state’s convergence rate with 95 percent confidence. In examining the determinants of balanced growth path heights, we find that government at all levels of decentralization is negatively correlated with economic growth. Educational attainment of a population has a non-linear relationship with economic growth according to our estimates: growth is positively related to high-school degree attainment, seemingly unrelated to obtaining some college education, and then positively related to four-year degree or more attainment. Also, finance, insurance and real estate industry and entertainment industry are positively correlated with growth, while education industry is negatively correlated with growth. Heterogeneity in the effects of balanced growth path determinants across individual states is much harder to detect (or dismiss) than in convergence rates.

Survival and Success among African Manufacturing Firms

Abstract: Recent reforms in most African economies of their trading and exchange rate regimes have eliminated much of the protection which previously limited competition. Despite these reforms, African manufacturing firms remain unsuccessful, particularly in international export markets. In this paper we consider the roles of learning, competition and market imperfections in determining three aspects of firm performance, namely firm exit, firm growth and productivity growth. We use a pooled panel data set of firms in Ghana, Kenya and Tanzania that spans a period of five years. We find that the main determinant of exit is firm size, with small firms having much higher exit rates than large ones.Productivity impacts on firm survival among large firms, but not among small firms. Reasons for this result are discussed. We find evidence that, among surviving firms, old firms grow slower than young firms, which is interpreted as evidence consistent with market constraints limiting growth of firms in Africa. We find no evidence that larger firms have faster rates of productivity or input growth, or are more efficient in the sense of benefiting from scale economies. We also find that competitive pressure enhances productivity growth. Given that one of the objectives of the reform programmes implemented in all three countries was to stimulate higher efficiency levels, this finding shows that one aspect of the reform programme has been successful.

Modelli di Agenzie di Sviluppo Regionale: Analisi Teorica ed Evidenza Empirica

Abstract: Questo lavoro intende affrontare la questione degli assetti istituzionali e delle modalita organizzative dell’intervento dello Stato a favore dello sviluppo territoriale. Il tema e di crescente interesse in considerazione del moltiplicarsi dei livelli di governo (sovranazionale, nazionale, regionale e sub-regionale) che si occupano di sviluppo territoriale, ma anche in considerazione della complessita degli interventi. In termini di efficacia, i risultati di una politica territoriale dipendono strettamente dall’assetto delle relazioni tra i soggetti coinvolti nell’attivita di sviluppo. Cio riguarda sia gli aspetti di carattere istituzionale, che le diverse configurazioni dei rapporti di agenzia che possono emergere tra di essi. Il lavoro affronta la questione dell’utilizzo di incentivi ottenuti dalle imprese, riconosciuti dallo Stato e gestiti attraverso Agenzie intermedie.

Nanotechnology and business opportunities: scenarios as awareness instrument

Abstract: For a few years now, n anotechnology has been recognised as a promising new growth innovator This leads to a shift from the exploration of nanotechnology knowledge towards a phase of exploitation The c oming years this commercialisation o f nanotechnology will be extended Nanotechnology is a disruptive technology phenomenon, which leads to more difficulties in ov erseeing business opportunities Additionally, the fact t hat high-tech small firms, especially those dealing with nanotechnology, are highly interested in developments in science and technology, begs the question how to stimulate the awareness for (new) business opportunities in n anotechnology within these firms A promising strategy to stimulate learning and awareness of business opportunities in n anotechnology is the use of scenarios These projections focused on uncertainty stretch the mental m odel of entrepreneurs and/or managers and h ave the a bility to activate learning processes This paper presents the (theoretical) f undaments of scenario u sage in relation to the recognition o f business opportunities in nanotechnology

Openness and Human Capital as Sources of Productivity Growth: An Empirical Investigation

Abstract: Do openness to trade and higher levels of human capital promote faster productivity growth? That they do is a key implication of several versions of endogenous growth theory. To answer the question we use panel data on 93 countries spanning the 1970-2000 period. Controlling for fixed effects as well as endogeneity, the results show a significant effect of openness on productivity growth. If the level of openness of an economy is doubled the underlying rate of technical progress will increase by 0.8 per cent per annum. We find an effect, significant at the ten per cent level, of the level of human capital on the level of income but no effect on underlying productivity growth. Our preferred estimator combines high and low frequency differences of the data. We discuss reasons why this estimator is well suited for empirical analysis of economic growth.

The Transmission of International Commodity Prices to Domestic Producers

Abstract: Using detailed data from three simultaneous surveys of producers, traders, and exporters, this paper examines the transmission of international coffee prices through the domestic value chain in Uganda. We find that fluctuations in the international coffee price are reflected in prices paid by exporters and large traders. However, prices paid at the market level need not reflect prices actually received by farmers. This apparent lack of price transmission may be due to seasonal changes and to the fact that producers are more likely to sell at the farm-gate when prices go up. We also find some evidence that the number of itinerant coffee buyers increases when prices rise.

Scoring Drop-Out at a Microlender in Bolivia

Abstract: This paper presents a scoring model that predicts the risk of drop-out for borrowers at a microfinance lender in Bolivia. Drop-out risk was greater for women, manufacturers, newer borrowers, and those with more arrears. Out-of-sample tests suggest that scoring may help microfinance lenders to detect segments of their clientele (and even specific current clients) who are at-risk of drop-out.

Returns to Education, Child Labor, & Schooling in India

Abstract: In an environment where children's time has an economic value and employment opportunities for educated workers are scarce, parental investments in their children's education may not be driven entirely by poverty and credit constraints. We offer evidence that children's participation in child labor and schooling responds to economic returns to education in India, which suggests implementing policies that raise the economic benefits of education - such as creating more high-skilled jobs and improving the quality of education - in order to lower child labor and increase schooling.

Production Changes In Ghana Cocoa Farming Households Under Market Reforms

Abstract: The Ghana cocoa market has been extensively liberalised over the period since the mid 1980s. Three issues have been prominent in microeconomic research on the effects of liberalisation on agriculture. The first has been the size of any supply response, the second has been the effect on producers of reduced subsidies on inputs, and the third whether innovation has occurred. In this paper we investigate these issues by estimating a production function for cocoa in Ghana drawing on two household surveys covering the period from 1991 to 1998. The estimated production function allows identifying the factors underlying the change in output. The analysis of the micro data shows that the increase in household output has been very modest at 6 per cent. While the effect of liberalisation has been to raise the price of inputs we find that the contribution of such inputs to cocoa production has increased both relative to land and, very substantially, relative to labour. The ratio of both land and nonlabour inputs to labour rose implying a rise in labour productivity of 39 while land productivity was unchanged. We find no evidence that reforms have led to innovation in techniques which raise total factor productivity. Possible reasons for these outcomes are suggested.

Corruption and Firm Performance in Africa

Abstract: This paper uses survey data to investigate empirically the importance of corruption in determining firm performance in Africa We allow for the possibility of perception bias on the part of the respondents and for corruption being endogenous We find that corruption is linked to significant adverse effects on firm performance in two ways At the firm (or ^Slocal^T) level, companies that pay bribes have 20 percent lower levels of output per worker At the economywide (or ^Sglobal^T) level, firms in countries with pervasive corruption are some 70 per cent less efficient than firms in countries free of corruption We thus provide evidence that competitive uncoordinated local corruption has substantial global effects

Income Contributions of Child Work in Rural Ethiopia

Abstract: The income contribution of child work is undoubtedly a key factor influencing child work and schooling decisions. Yet, few studies have attempted to directly measure this contribution. This is particularly the case for work performed on the household farm, as is the case for the vast majority of child workers, rather than for wages. In this study, we estimate a household income function with child labour included as an input. Results using a variety of functional forms and alternative child labour variables are compared. We conclude that children and adults are perfect labour substitutes and that the marginal productivity of children is roughly one-third to one-half that of male adults. The average contribution of each working child is estimated at 4 to 7% of household income, although there is substantial variation with contributions ranging up to 50%. These results underline the dependency of poor households on child work for survival.

The Economics of Open Source Hijacking and Declining Quality of Digital Information Resources: A Case for Copyleft

Abstract: The economics of information goods suggest the need for institutional intervention to address the problem of revenue extraction from investments in resources characterized by high fixed costs of production and low marginal costs of reproduction and distribution. Solutions to the appropriation issue, such as copyright, are supposed to guarantee an incentive for innovative activities at the price of few vices marring their rationale. In the case of digital information resources, apart from conventional inefficiencies, copyright shows an extra vice since it might be used perversely as a tool to hijack and privatise collectively provided open source and open content knowledge assemblages. Whilst the impact of hijacking on open source software development may be uncertain or uneven, some risks are clear in the case of open content works. The paper presents some evidence of malicious effects of hijacking in the Internet search market by discussing the case of The Open Directory Project. Furthermore, it calls for a wider use of novel institutional remedies such as copyleft and Creative Commons licensing, built upon the paradigm of copyright customisation.

Border Controls, Public Policy, Immigration, and Trade with Mexico

Abstract: A review is conducted of economic relations between Mexico and the United States in the aftermath of the 11 September 2001 terrorist attacks. Topics covered include cross-border commuting patterns, merchandise trade flows, immigration, and structural adjustment efforts in Mexico. Potential outcomes associated with a bi-lateral, temporary guest worker program proposal for the United States are also examined.

National Youth Development Policy Reference Manual

Abstract: The last decade has been a period during which the world experienced fundamental, political, economic and socio-cultural changes. These changes will inevitably affect at least the first decade of the twenty- first century as well. Young people represent agents, beneficiaries and victims of major societal changes and are generally confronted by a paradox, seeking to be integrated into an existing order or to serve as a force to transform that order. Young people in all parts of the world, living in countries at different stages of development and in different socio-economic settings, aspire to full participation in the life of society. This national programme for Youth provides a policy framework and practical guidelines for national action and international support to improve the situation of young people in Jamaica. It contains proposals for action to the year 2008, aiming at achieving the objectives of the UN Youth policy objectives and at fostering conditions and mechanisms to promote improved well being and livelihood among young people in Jamaica. This Programme of Action, focuses in particular, on measures to strengthen national capacities in the field of youth and to increase the quality and quantity of opportunities available to young people for full, effective and constructive participation in society.

Wanted dead and alive: Are hunting and protection of endangered species compatible?

Abstract: This paper asks under what conditions it is possible for a wildlife department in west Africa without an external budget to protect all rare and endangered species, and if so, what is the impact on rural inhabitants engaged in hunting Protecting wildlife in this region is particularly tricky Hunting is important for rural livelihoods, but when unregulated can result in the loss of species Government funding for wildlife departments is rarely sufficient and so they must increasingly look towards revenue- generating activities such as the sale of permits for hunting common species combined with fines for those caught with rare species

Evolving Structural Patterns in the Enlarging European Division of Labour: Sectoral and Branch Specialisation and the Potentials for Closing the Productivity Gap

Abstract: The formerly socialist countries in Central East Europe strive to close the development gap between their economies and those of the countries in West Europe. Their main vehicles in support of catch-up development featured the internal and external liberalisation of markets. Internal liberalisation was geared towards replacing the system of economic planning with the governance of markets and external liberalisation aimed at integration into the World market in general and the European market in particular. European integration itself was coined to serve as an engine for economic development: market access, efficient allocation of resources in the international division of labour, and access to more advanced technology were perceived to be the main drivers. The political instrument in support of this is the prospected European Union membership. In fact, a selection of Central East European countries have been admitted and will become full members in April 2004. Today, slightly more than one decade after the outset of systemic transition, most of those countries are widely considered ‘functioning market- economies’. Their markets are well integrated into the European economic area, in as much as foreign trade had been liberalised gradually since the early 1990s and fully-fletched currency convertibility allows trade on the respective capital and foreign exchange markets in East and West. The notable exception, however, remains the labour markets: here political concerns of absorptive capacities in the West still postpone integration. With product markets near to full integration, the economies have undergone a profound process of structural change. The pattern of international specialisation which has emerged as a result of sectoral change is the focus of the research presented here. The main objective of research was to determine the patterns as they have evolved over time, and to assess the prospects of catching up derived from those sectoral patterns. This publication reports research and the results of one of the workpackages in a larger international cooperative research project, financed by the EU in its 5th Framework Programme: EU Integration and the Prospects for Catch-Up Development in CEECs - The Determinants of the Productivity Gap (HPSE-CT-2001-00065). This project is coordinated by the author of this report at the IWH. Whereas research in this workpackage is concluded with this report, other workpackages will continue to assess further determinants until late summer 2004, when the project formally ends. All research proceedings in this project can be revisited on the project internet-site: www.iwh- halle.de/projects/productivity-gap.htm

Information Technology as an Engine of Broad-Based Growth in India

Abstract: In this paper, we survey some of the developments in India’s IT sector, and prospects for broad-based growth led by this sector. We examine the IT sector, discussing the role of software versus hardware, the growth pattern of the software industry and software exports, and the potential problems in IT labor supply to support future growth. We focus on a current bottleneck for the IT sector, namely the telecommunications infrastructure. Issues considered include the basic driver of technological convergence across voice and data communications, problems with current infrastructure, innovations that have the potential to dramatically alter the economics of access to telecoms, and the evolving structure of the telecoms industry. We also examine the policy environment more closely, arguing that government policy is better focused on removing labor market distortions and infrastructure constraints, rather than providing output or export subsidies to the software industry. We discuss the appropriateness of specific policy goals such as universal access, as well as issues of implementation of more general objectives of broader telecoms access. Finally, we map out the possibilities for broad-based IT-led growth, including increasing value-added, using better telecom links to capture more benefits domestically through offshore development for industrial country firms, greater spillovers to the local economy, broadening the IT industry with production of telecom access devices, improving the functioning of the economy through a more extensive and denser communications network, and improving governance.

The Estonian ICT Manufacturing and Software Industry: Current State and Future Outlook

Abstract: This report forms part of the larger study initiated by IPTS on the socio-economic impact of ICTs in the acceding and candidate countries. It aims to describe the ICT manufacturing and software industry in Estonia and also throw light on how this industry will be affected by EU enlargement and how far it will contribute to the achievement of the Lisbon objectives. As well as providing an up-to-date overview of the current situation, including information on the largest ICT manufacturing and software companies, the report also debates possible future scenarios for the Estonian ICT manufacturing and software industry with a closer look at the challenges for the Estonian ICT sector innovation system.

Samaritans, Rotten Kids and Policy Conditionality

Abstract: Donors who try to impose policy conditionality on countries receiving their aid commonly face conflicting incentives between using aid to induce income-increasing reforms and using aid to assist low-income countries: this conflict can lead to a time-consistency problem.This paper offers a contractual analysis of conditionality, showing how conditionality contracts are affected by conflicting donor incentives in the presence of limited commitment power. Conditionality is shown to survive in an environment with weak donor commitment power, and it can eliminate the inefficiency associated with the no-conditionality outcome.However, even when conditionality is successfully imposed by donors, there may be an inverse relationship between aid and reform across different aid recipients. Multi-recipient and hidden-information extensions of the baseline model are also considered.

Firm-Specific Determinants of Productivity Gaps between East and West German Industrial Branches

Abstract: Industrial productivity levels of formerly socialist economies in Central East Europe (including East Germany) are considerably lower than in the more mature Western economies. This research aims at assessing the reasons for lower productivities at the firm level: what are the firm-specific determinants of productivity gaps. To assess this, we have conducted an extensive field study and focussed on a selection of two important manufacturing industries, namely machinery manufacturers and furniture manufacturers, and on the construction industry. Using the data generated in field work, we test a set of determinant-candidates which were derived from theory and prior research in that topic. Our analysis uses the simplest version of the matched-pair approach, in which first hypothesis about relevant productivity level-determinants are tested. In a second step, positively tested hypothesis are further assessed in terms of whether they also constitute firmspecific determinants of the apparent gaps between the firms in our Eastern and such in our Western panels. Our results suggest that the quality of human capital plays an important role in all three industrial branches assessed. Amongst manufacturing firms, networking activities and the use of modern technologies for communication are important reasons for the lower levels of labour productivity in the East. The intensity of long-term strategic planning on behalf of the management turned out to be relevant only for machinery manufacturers. Product and process innovations unexpectedly exhibit an ambiguous picture, as did the extent of specialisation on a small number of products in the firms’ portfolio and the intensity of competition.

Well-being poverty versus income poverty and capabilities poverty?

Abstract: The conventional approach of economists to the measurement of poverty in poor countries is to use measures of income or consumption. This has been challenged by those who favour broader criteria for poverty and its avoidance. These include the fulfilment of 'basic needs', the 'capabilities' to be and to do things of intrinsic worth, and safety from insecurity and vulnerability. This paper asks: to what extent are these different concepts measurable, to what extent are they competing and to what extent complementary, and is it possible for them to be accommodated within an encompassing framework? There are two remarkable gaps in the rapidly growing literature on subjective well-being. First, reflecting the availability of data, there is little research on poor countries. Second, within any country, there is little research on the relationship between well-being and the notion of poverty. This paper attempts to fill these gaps. Any attempt to define poverty involves a value judgement as to what constitutes a good quality of life or a bad one. We argue that an approach which examines the individuals own perception of well-being is less imperfect, or more quantifiable, or both, as a guide to forming that value judgement than are the other potential approaches. We develop a methodology for using subjective well-being as the criterion for poverty, and illustrate its use by reference to a South African data set containing much socio-economic information on the individual, the household and the community, as well as information on reported well- being. We conclude that it is possible to view subjective well-being as an encompassing concept, which permits us to quantify the relevance and importance of the other approaches and of their component variables. The estimated well-being functions for South Africa contain some variables corresponding to the income approach, some to the basic needs (or physical functioning)approach, some to the relative (or social functioning) approach, and some to the security approach. Thus, our methodology effectively provides weights of the relative importance of these various components of well-being poverty.

Do Men Really have no Shame

Abstract: Microfinance is one of the most commonly applied development interventions of our time It is also one of the most gender-biased In part, this is due to targeting However, it might also relate to the emphasis placed by microfinance providers on group-loans If women have a comparative advantage when it comes to functioning in groups, they might self-select into microfinance provided as group loans, while men seek alternative sources of credit This paper explores the possibility that such a comparative advantage exists and that it relates to women’s greater propensity to feel shame and/or induce feelings of shame in others It uses data derived from an economic experiment conducted in 12 Zimbabwean villages to test a series of hypotheses The findings suggest that men regard others less than women when deciding how to behave; that, even after controlling for this, they are more likely to attract criticism; and that they are no less responsive than women to such shame-inducing, social sanctioning Finally, while men are no more inclined to sanction others they are less effective than women at effecting a resultant improvement in behaviour

Rational and Biased Trust

Abstract: This paper investigates whether expectations of trustworthiness and resulting acts of trust accord with an objective model of trustworthiness or are biased. Combining experimental and survey data, I find that Ghanaian workers appropriately take account of the religiousness of trustees, but expect those with more children to be less as opposed to more trustworthy, and females to be less and the associationally active to be more trustworthy when they are neither. Trustors do not account for the negative impact on trustworthiness of various recent negative experiences and the positive impact of involvement in voluntary work, full time work, and indigenousness.

Education, incomes, poverty and inequality in Ghana in the 1990s

Abstract: Three issues are addressed in this paper. First, we use both household and macro data to establish how fast per capita consumption and incomes grew in Ghana in the 1990s. Second, we ask how much of the rise in incomes was due to rises in the level of human capital and how much reflected underlying technical progress. Third, we assess the implications of how incomes rose for the interpretation of changes in the poverty profile.Four household surveys are used to show changes in both expenditures and incomes over the decade. The household surveys show that both consumption per capita and incomes rose by 12 per cent, a rate of 1 per cent per annum. This figure is identical to the growth rate for consumption per capita implied by the macro accounts. The average level of education of the population rose by 27 per cent over the decade which led to a rise of 3 per cent in per capita consumption. We find, on average, no evidence for any underlying technical progress. We show that the rise in income was ssociated with modest falls in the head count and poverty gap measures of poverty but with virtually no change in the severity of poverty measure. The fall in the head count measure was too small to prevent the absolute number of poor people from rising. Inequality increased with he incomes of the non-agricultural self-employed, with given levels of human capital, falling both absolutely and relative to wage workers.