Showing papers on "Developing country published in 2001"

Capital Structures in Developing Countries

Abstract: This study uses a new data set to assess whether capital structure theory is portable across countries with different institutional structures. We analyze capital structure choices of firms in 10 developing countries, and provide evidence that these decisions are affected by the same variables as in developed countries. However, there are persistent differences across countries, indicating that specific country factors are at work. Our findings suggest that although some of the insights from modern finance theory are portable across countries, much remains to be done to understand the impact of different institutional features on capital structure choices. OUR KNOWLEDGE OF CAPITAL STRUCTURES has mostly been derived from data from developed economies that have many institutional similarities. The purpose of this paper is to analyze the capital structure choices made by companies from developing countries that have different institutional structures. The prevailing view, for example Mayer ~1990!, seems to be that financial decisions in developing countries are somehow different. Mayer is the most recent researcher to use aggregate f low of funds data to differentiate between financial systems based on the “Anglo-Saxon” capital markets model and those based on a “Continental-German-Japanese” banking model. However, because Mayer’s data comes from aggregate f low of funds data and not from individual firms, there is a problem with this approach. The differences between private, public, and foreign ownership structures have a profound inf luence on such data, but the differences may tell us little about how profit-oriented firms make their individual financial decisions. This paper uses a new firm-level database to examine the financial structures of firms in a sample of 10 developing countries. Thus, this study helps determine whether the stylized facts we have learned from studies of developed countries apply only to these markets, or whether they have more general applicability. Our focus is on answering three questions:

Distance still matters. The hard reality of global expansion.

Abstract: Companies routinely overestimate the attractiveness of foreign markets. Dazzled by the sheer size of untapped markets, they lose sight of the difficulties of pioneering new, often very different territories. The problem is rooted in the analytic tools (the most prominent being country portfolio analysis, or CPA) that managers use to judge international investments. By focusing on national wealth, consumer income, and people's propensity to consume, CPA emphasizes potential sales, ignoring the costs and risks of doing business in a new market. Most of these costs and risks result from the barriers created by distance. "Distance," however, does not refer only to geography; its other dimensions can make foreign markets considerably more or less attractive. The CAGE framework of distance presented here considers four attributes: cultural distance (religious beliefs, race, social norms, and language that are different for the target country and the country of the company considering expansion); administrative or political distance (colony-colonizer links, common currency, and trade arrangements); geographic distance (the physical distance between the two countries, the size of the target country, access to waterways and the ocean, internal topography, and transportation and communications infrastructures); and economic distance (disparities in the two countries' wealth or consumer income and variations in the cost and quality of financial and other resources). This framework can help to identify the ways in which potential markets may be distant from existing ones. The article explores how (and by how much) various types of distance can affect different types of industries and shows how dramatically an explicit consideration of distance can change a company's picture of its strategic options.

The Well-Being of Nations: The Role of Human and Social Capital. Education and Skills.

Abstract: This report argues that the role of human capital in the economic and social development of nations is commonly acknowledged although its exact effects are still in dispute. Recently, increasing attention has been focused on the role of social capital or the role of social relationships and individual abilities in economic activity and social well-being. The report has three main purposes: (1) to describe the current evidence on investment in human capital and its role in economic growth and social well-being; (2) to describe and clarify the new concept of social capital; and (3) to identify the roles of human and social capital in achieving sustainable economic and social development. The chapters are: Emerging social and economic concerns; The evidence on human capital; The evidence on social capital; Policy implications and further research needs. Appendices: Some measures of well-being; Some trends in the social and economic environments; Determinants of school attainment: the research evidence; The impact of human capital on economic growth: some major studies; Are trust and civic engagement declining in OECD countries?

Causality Tests for Cross-Country Panels: a New Look at FDI and Economic Growth in Developing Countries

Abstract: The remarkable increase in FDI flows to developing countries over the last decade has focused attention on whether this source of financing enhances overall economic growth We use a mixed fixed and random (MFR) panel data estimation method to allow for cross country heterogeneity in the causal relationship between FDI and growth and contrast our findings with those from traditional approaches We find that the relationship between investment, both foreign and domestic, and economic growth in developing countries is highly heterogeneous and that estimation methods which assume homogeneity across countries can yield misleading results Our results suggest there is some evidence that the efficacy of FDI in raising future growth rates, although heterogeneous across countries, is higher in more open economies

The Lost Decades: Developing Countries' Stagnation in Spite of Policy Reform 1980–1998

Abstract: I document in this paper a puzzle thathas not received previous attention in the literature. In 1980–98,median per capita income growth in developing countries was 0.0percent, as compared to 2.5 percent in 1960–79. Yet I documentin this paper that variables that are standard in growth regressions—policieslike financial depth and real overvaluation, and initial conditionslike health, education, fertility, and infrastructure generallyimproved from 1960–79 to 1980–98. Developing countrygrowth should have increased instead of decreased according tothe standard growth regression determinants of growth. The stagnationseems to represent a disappointing outcome to the movement towardsthe ``Washington Consensus'' by developing countries. I speculatethat worldwide factors like the increase in world interest rates,the increased debt burden of developing countries, the growthslowdown in the industrial world, and skill-biased technicalchange may have contributed to the developing countries' stagnation,although I am not able to establish decisive evidence for thesehypotheses. I also document that many growth regressions aremis-specified in a way similar to the Jones (1995) critique thata stationary variable (growth) is being regressed on non-stationaryvariables like policies and initial conditions. It may be thatthe 1960–1979 period was the unusual period for LDC growth,and the 1980–98 stagnation of poor countries representsa return to the historical pattern of divergence between richand poor countries.

United Nations Conference on Trade and Development (UNCTAD): World Investment Report 2000: Cross-Border Mergers and Acquisitions and Development United Nations, New York and Geneva 2000. (Biblio Service)

Abstract: United Nations Conference on Trade and Development (UNCTAD): World Investment Report 2000: Cross-Border Mergers and Acquisitions and Development United Nations, New York and Geneva 2000. 1. Capsule Summary of the Book and Its Review The World Investment Report, published annually by UNCTAD, is celebrating this year its 10th anniversary. Over the years these publications have established themselves an important position within the FDI literature, contributing towards a better understanding of the role of FDI in the world economy and to the ongoing discussions on globalisation and its impact on firms and countries. They provide valuable insights into the activities of TNCs and its consequences for their home countries and for the countries that host them. This review focuses on the recently published World Investment Report 2000: Cross Border Mergers and Acquisitions and Development. It starts by briefly describing the structure and content of this report, highlighting the main issues addressed in each of its sections, and assessing its specific contribution to the existing FDI literature. The review continues by examining some new features of this year's report and by suggesting possible additions and improvements that might be included in future reports. 2. Objective and targeted audience This year's report, like its predecessors, seeks to reach a wide audience interested in FDI-related issues, ranging from academics, national and international policy makers -- notably those with interests in and responsibility for developing countries -- and also, increasingly, practitioners. For this audience, it is a rich and most valuable source of different kinds of information (theoretical, anecdotal, and not least -- data!) on FDI. It adds an important dimension to the growing literature on FDI by contributing to filling a gap between purely academic and otherwise anecdotal research on FDI, and it reflects key aspects of the research agenda on TNCs. 3. Structures and Contents The first part of the report -- like its predecessors -- is devoted to a survey of general FDI developments over the last year at the global and the regional level, and to a description of the activities of the leading TNCs worldwide. In this part, the report documents the large increase in FDIs, which have reached new record in 1999 at $865 billion, an increase of 27% over the previous year. This increase is also presented via the growing number of TNCs world-wide, where about 63,000 parent firms are controlling an estimated 690,000 foreign affiliates. UNCTAD's report is the only source of FDI data which provide this latter kind of information, and in considerable details (broken by countries and regions). Documented is also the country breakdown of 1999 FDI, notably the lead of outward investment being taken this year by the UK, the continued, and rapidly growing, lead of the US as the largest, by far, host country for FDI. Another notable characteristic of the geographic distribution of FDI is the growth of inward flows to Japan, with the ratio between inward and outward becoming far more balanced than ever before. At the regional level, the report highlights the position of the EU as the world's most important source of FDI. The report emphasises the continued trend towards liberalisation of FDI regimes, as countries recognise its economic value for their economies, and seek to attract it. Most interesting is the analysis of the largest TNCs (by the value of their foreign assets), which comprises three parts - the top 100 worldwide, the 50 largest from developing countries and the 25 largest from Central Europe. The report provides illuminating information regarding the geographical and industrial distribution of these firms, in absolute (foreign assets) and relative (transnationality index) terms, and over time, covering the whole 1990s. The report emphasises that the driving force behind the 1999 increase of FDI activity continued to be cross-border mergers and acquisitions (M&As). …

Poverty reduction strategy papers.

Abstract: See also apers p 139 and Education and debate p 152 A path out of abject poverty is currently being beaten by many low income countries which are developing poverty reduction strategy papers (PRSPs) as a condition for debt relief. This new acronym in the alphabet soup of international aid is the latest lifeline being offered by the World Bank and the International Monetary Fund after what many regard as the failure of its predecessor, the structural adjustment programme (SAP). By May, 33 interim and four full poverty reduction strategy papers had been developed: do they offer genuine hope to low income countries or are they the same old approaches under a new name? Structural adjustment was characterised by economic policies such as devaluation and public expenditure reduction coupled with longer term structural reforms such as privatisation and trade liberalisation. It has been blamed for rising food prices, closed schools, and massive lay offs and for delivering the final blow to creaking health systems. Poverty reduction strategies instead offer good intentions such as “national ownership,” “less dictation from Washington,” …

Distribution and Development: A New Look at the Developing World

Abstract: Most of the world's people live in "developing" economies, as do most of the world's poor. The predominant means of economic development is economic growth. In this book Gary Fields asks to what extent and in what circumstances economic growth improves the material standard of living of a country's people. Most development economists agree that economic growth raises the incomes of people in all parts of the income distribution and lowers the poverty rate. At the same time, some groups lose out because of changes accompanying economic growth. Fields examines these beliefs, asking what variables should be measured to determine whether progress is being made and what policies and circumstances cause some countries to do better than others. He also shows how the same data can be interpreted to reach different, even conflicting, conclusions. Using both theoretical and empirical approaches, Fields defines and examines inequality, poverty, income mobility, and economic well-being. Finally, he considers various policies for broad-based growth.Copublished with the Russell Sage Foundation.

Foreign Bank Entry: Experience, Implications for Developing Countries, and Agenda for Further Research

Abstract: Foreign banks are playing an increasingly large role in many developing countries, holding more than 50 percent of banking assets in several of these countries. But important issues about foreign bank entry continue to be debated. In recent years foreign bank participation has increased tremendously in several developing countries. In Argentina, Chile, the Czech Republic, Hungary, and Poland, for example, more than 50 percent of banking assets are now in foreign-controlled banks. In Asia, Africa, the Middle East, and the former Soviet Union the rate of entry by foreign banks has been slower, but the trend is similar. Although the number of countries welcoming foreign banks is growing, many questions about foreign bank entry are still being debated, including: • What draws foreign banks to a country? • Which banks expand abroad? • What do foreign banks do once they arrive? • How does the mode of a bank's entry - for example, as a branch of its parent or as an independent subsidiary company - affect its behavior? Clarke and his coauthors summarize current knowledge on these issues. In addition, since the existing literature focuses heavily on industrial countries, they put forth an agenda for further study of the effects of foreign bank entry in developing countries. This paper - a product of the Office of the Senior Vice President, Development Economics - is a background paper for World Development Report 2002: Institutions for Markets. The authors may be contacted at gclarke@worldbank.org, rcull@worldbank.org, mmartinezperia@worldbank.org, or ssanchez@worldbank.org.

Population matters : demographic change, economic growth, and poverty in the developing world

Abstract: I. SETTING THE STAGE 1. How and Why Population Matters: New Findings, New Issues 2. The Population Debate in Historical Perspective: Revisionism Revised 3. Dependency Burdens in the Developing World II. POPULATION CHANGE AND THE ECONOMY 4. Economic and Demographic Change: A Synthesis of Models, Findings, and Perspectives 5. Demographic Change, Economic Growth and Inequality 6. Saving, Wealth, and Population 7. Cumulative Causality, Economic Growth and the Demographic Transition III. FERTILITY, POVERTY AND THE FAMILY 8. Population and Poverty in Households: A Review of Reviews 9. Demographic Transition and Poverty: Effects Via Economic Growth, Distribution, and Conversion 10. Inequality and the Family in Latin America 11. Demographic Changes and Poverty in Brazil IV. POPULATION, AGRICULTURE AND NATURAL RESOURCES 12. Rural Population Growth, Agricultural Change and Natural Resource Management in Developing Countries: A Review of Hypotheses and Some Evidence from Honduras V. SOME ECONOMICS OF POPULATION POLICY 13. Why Micro Matters 14. New Findings in Economics and Demography: Implications for Policies to Reduce Poverty

International trends and patterns of primary liver cancer

Abstract: Primary liver cancer (PLC) is common in many areas of the developing world, but uncommon in most of the developed world. Some evidence suggests, however, that the global pattern of PLC may be changing. To clarify this issue, we examined incidence rates for PLC over the 15-year time period, 1978-92, in selected cancer registries around the world. With some exceptions, developed countries have experienced PLC increases in incidence whereas developing countries have experienced declines. Although the reasons for the trends are not entirely clear, the increased seroprevalence of HCV in the developed world and the elimination of HBV-cofactors in the developing world are likely to have contributed to the patterns. Further progress against PLC may be seen in the developing world once the HBV-vaccinated segment of the population reaches adulthood. Published 2001 Wiley-Liss, Inc.

Money with a Mean Streak? Foreign Economic Penetration and Government Respect for Human Rights in Developing Countries

Abstract: This study examines the relationship between foreign economic capital and the level of government respect for two types of human rights in developing countries. Two opposing schools of thought offer explanations as to what this relationship might be like. According to the liberal neoclassical school, the acceptance of liberal economic doctrine will provide positive political benefits to developing countries. The “dependency” school, on the other hand, argues that because ties between core and periphery elites give governments in developing nations an incentive to repress, human rights conditions will worsen as foreign economic penetration increases. The results of previous empirical queries into this matter have been mixed. In contrast to most studies, we focus on a broader measure of foreign economic capital, including foreign direct investment, portfolio investment, debt, and official development assistance. Using ordered logit analysis on a cross-national sample of forty-three developing countries from 1981 to 1995, we discover systematic evidence of an association between foreign economic penetration and government respect for two types of human rights, physical integrity rights and political rights and civil liberties. Of particular interest is the finding that both foreign direct investment and portfolio investment are reliably associated with increased government respect for human rights.

Environmental regulation and development : a cross-country empirical analysis

Abstract: The authors develop comparative indices of environmental policy and performance for 31 countries using a quantified analysis of reports prepared for the United Nations Conference on Environmental and Development. In cross-country regressions, they find a very strong, continuous association between their indicators and national income per capita, particularly when adjusted for purchasing power parity. Their results suggest a characteristic progression in development. Poor agrarian economies focus first on natural resource protection. With increased urbanization and industrialization, countries move from initial regulation of water pollution to air pollution control. The authors highlight the importance of institutional development. Environmental regulation is more advanced in developing countries with relatively secure property rights, effective legal and judicial systems, and efficient public administration.

Maternal mortality at the end of a decade: signs of progress?

Abstract: Maternal mortality is an important measure of women's health and indicative of the performance of health care systems. Several international conferences, most recently the Millennium Summit in 2000, have included the goal of reducing maternal mortality. However, monitoring progress towards the goal has proved to be problematic because maternal mortality is difficult to measure, especially in developing countries with weak health information and vital registration systems. This has led to interest in using alternative indicators for monitoring progress. This article examines recent trends in two indicators associated with maternal mortality: the percentage of births assisted by a skilled health care worker and rates of caesarean delivery. Globally, modest improvements in coverage of skilled care at delivery have occurred, with an average annual increase of 1.7% over the period 1989- 99. Progress has been greatest in Asia, the Middle East and North Africa, with annual increases of over 2%. In sub- Saharan Africa, on the other hand, coverage has stagnated. In general, caesarean delivery rates were stable over the 1990s. Countries where rates of caesarean deliveries were the lowest — and where the needs were greatest — showed the least change. This analysis leads us to conclude that whereas there may be grounds for optimism regarding trends in maternal mortality in parts of North Africa, Latin America, Asia, and the Middle East, the situation in sub-Saharan Africa remains disquieting.

The Obsolescing ‘Bargaining Model’? MNC-Host Developing Country Relations Revisited

Abstract: The traditional bargaining model of MNC-host developing country relations has become obsolete. Today, those relations are better understood as the result of a two-tier, multi-party bargaining process. Tier-1 bargaining, between the governments of host and home countries, occurs bilaterally or through multilateral institutions. It produces macro rules on FDI that affect micro negotiations in Tier-2 (per the traditional bargaining model). The extent of FDI liberalization resulting from Tier-1 bargaining varies predictably across home-host country pairs and industries. Suggestions for testing the two-tier bargaining model are also presented.

Happiness and Hardship: Opportunity and Insecurity in New Market Economies

Abstract: Subjective well being, or happiness, has been analyzed in detail by psychologists for decades. Yet only recently has it become the subject of economic analysis. In Happiness and Hardship, Carol Graham and Stefano Pettinato provide a new conceptual framework for analyzing the relationship between subjective well being and the political sustainability of market-oriented economic growth in 17 Latin American countries and Russia. Several variables --such as marital status, employment, and inflation --are known to influence happiness. Graham and Pettinato have identified other variables that have important effects on how individuals perceive their well being: macroeconomic volatility, globalization of information, increasing income mobility, and inequality driven by technology-led growth. The authors begin by explaining data and measurement problems involved in studying mobility, and they summarize general trends in developing countries. Second, they provide new data on subjective well being for Latin America and Russia. They find that the socio-demographic determinants of ""happiness"" --such as the effects of age and unemployment --are very similar to those in the U.S. and Europe. They also find that relative income differences have important effects on how individuals assess their well being. Those in the middle or lower middle of the income distribution are more likely to be dissatisfied than are the very poorest groups. Third, the authors find that volatility in income flows can have negative effects on perceived well being, even among upwardly mobile individuals. Finally, the authors explore the relationship between social capital and mobility. They distinguish between participation driven by economic necessity --such as soup kitchens --and voluntary participation in civic organizations. They find that different objectives underlying civic participation can result in different effects on individual mobility rates, on perceived well being, and on aggregate growth. An age-old puzzle is why some societies seem to tolerate significant degrees of economic hardship and yet retain political and social stability, while others break out into violent protest as a result of much smaller economic declines or shocks. Happiness and Hardship sheds new light on factors that can increase mobility and provide new opportunities for low-income people in developing economies, and possibly improve perceived, as well as actual, well being.

Urban Transport Environment and Equity: The Case for Developing Countries

Abstract: Part 1: Introduction - Introduction * Part 2: Current Conditions of Urban Transport in Developing Countries - Current Transport Conditions in Developing Countries - Current Transport and Traffic Conditions in Developing Countries * Part 3: How it Happened - Sociological and Political Approaches to Transport * The Organization of Urban Space * The City, the Circulation System and Urban Transport Policies * The Use of Roads: the Microphysics of Space * the Political Issue: Agents in Urban Transport Planning * Non-motorized Transport * Public Transport * Private Transport * Mobility * Space, Environment and Energy * Traffic Accidents * the Urban Transport Crises in Developing Countries * Part 4: Proposals - Policy Assumptions and Principles * Proposals for Urban Planning * Transport Planning Proposals * Traffic Planning and Management * Part 5: Conclusions - Conclusions * Notes * References * Inde

Does Direct Foreign Investment Affect Domestic FirmsA Credit Constraints

Abstract: Firms in developing countries cite credit constraints as one of their primary obstacles to investment. Direct foreign investment, by bringing in scarce capital, may ease domestic firms' credit constraints. Alternatively, if foreign firms borrow heavily from domestic banks, they may exacerbate domestic firms' credit constraints by crowding them out of domestic capital markets. One plausible mechanism by which this may happen is indirect. Foreign firms may be more experienced and have better financial ratios and thus, be a safer bet for lending institutions. Using firm-level data from the Ivory Coast for the period 1974-1987 we test the following hypotheses: (1) domestic firms are more credit constrained than foreign firms and (2) borrowing by foreign firms exacerbates the credit constraints of domestic firms. Results suggest that domestic firms are significantly more credit constrained that foreign firms and that borrowing by foreign firms aggravates domestic firms' credit constraints. By splitting the sample into state-owned (SOE) and privately owned domestic enterprises we are able to show that SOEs are less financially constrained than other domestic enterprises, consistent with the notion of a 'soft budget constraint'. Borrowing by foreign firms affects only privately owned enterprises. Finally, we explore possible explanations for the crowding out effect.

Which Types of Capital Inflows Foster Developing‐Country Growth?

Abstract: As a result of the Asian crisis, both the virtues of domestic savings and the risks of foreign savings have been emphasized in the debate on development finance. In particular, East Asia, with its enviable saving rates, it has been argued by economists such as Joe Stiglitz and Jagdish Bhagwati, does not need foreign funds for investment and growth. This paper explores the benefits of private capital inflows by reviewing the analytical arguments advanced in the literature and by building fresh empirical evidence. Par-ticular attention is given to the independent growth impact of the various broad categories of flows in the recipient emerging markets. The paper provides panel data analysis covering 44 countries over the period 1986–97; correcting for standard growth determinants, it measures the independent growth effect of foreign direct investment, portfolio equity investment, bond flows, as well as short-term and long-term bank lending. The findings suggest that developing countries should not solely rely on national savings, but rather should encourage foreign direct investment and portfolio equity inflows so as to stimulate long-term growth prospects.

Investigating New Product Diffusion across Products and Countries

Abstract: As firms jockey to position themselves in emerging markets, firms need to evaluate the relative attractiveness of market expansion in different countries. Since the attractiveness of a market is a function of the eventual market potential and the speed at which the product diffuses through the market, a better understanding of the determinants of market potential and diffusion speed across different countries is of particular relevance to firms deliberating their market expansion strategies. Despite a recent spurt in research on multinational diffusion, there exist significant gaps in the literature. First, existing studies tend to limit their analysis to industrialized countries, thus reducing the ability to generalize the insights to many emerging markets. Second, these studies tend to focus on the coefficients of external and internal influence in the Bass diffusion model, but do not analyze the determinants of market potential. Third, the choice of variables that affect the parameters of the Bass diffusion model has been rather limited. In this paper, we seek to address these gaps in the literature. To address the scope issue, we assembled a novel dataset that captures the diffusion of 6 products in 31 developed and developing countries from Europe, Asia, North and South America. The set of countries in our dataset encompasses 60% of the world population and includes such emerging economies as China, India, Brazil and Thailand. This should provide us a stronger basis to make empirical generalizations about the diffusion process. For firms seeking to expand into emerging international markets, our findings about penetration potential have considerable significance. For example, we find that for the set of products that we analyze the average penetration potential for developing countries is about one-third (0.17 versus 0.52) of that for developed countries. We also find that it takes developing countries on average 17.9% (19.25 versus 16.33 years) longer to achieve peak sales. Thus, despite the well-known positive effect of product introduction delays on diffusion speed, we find that developing countries still continue to experience a slower adoption rate compared to developed countries. Our study also investigated the impact of several new macro-environmental variables on penetration potential and speed. For example, our findings indicate that a 1% change in international trade or urbanization level can potentially change the penetration potential by about 0.5% and 0.2% respectively. These are some of the key variables projected to change significantly over the coming years for developing countries. While business managers have relatively little influence on such variables, our findings can still serve as a valuable empirical guide for the variables that they should consider in evaluating diverse international markets, and for performing sensitivity analysis with respect to their projected trends. Finally, our study also holds implications for managers seeking to combine information about past diffusion patterns across products and countries for better prediction. We pool information efficiently across multiple products and countries using a Hierarchical Bayes estimation methodology. By sharing information across countries and products in a single, coherent framework, we find that this pooling approach leads to substantial improvements in prediction accuracy. Our technique is particularly superior in predicting sales and BDM parameter values in the early years of a new product introduction in a new country, when forecast estimates are managerially most useful. We also decompose the variance in the BDM model parameters into product, country and product-country components. These results give guidelines to managers about which market experience they should weigh more to arrive at forecasts of market potential and diffusion speed. We find that while past experiences of other products in a country (country effects) are relatively more useful to explain penetration level (cumulative sales), past experiences in other countries where a product was earlier introduced (product effects) are more useful to explain the coefficients of external and internal influence (and thus the speed with which the product will attain peak sales).

Trade, Growth, and Poverty

Abstract: The evidence from individual cases and from cross-country analysis supports the view that globalization leads to faster growth and poverty reduction in poor countries. To determine the effect of globalization on growth, poverty, and inequality, Dollar and Kraay first identify a group of developing countries that are participating more in globalization. China, India, and several other large countries are part of this group, so well over half the population of the developing world lives in these globalizing economies. Over the past 20 years, the post-1980 globalizers have seen large increases in trade and significant declines in tariffs. Their growth rates accelerated between the 1970s and the 1980s and again between the 1980s and the 1990s, even as growth in the rich countries and the rest of the developing world slowed. The post-1980 globalizers are catching up to the rich countries, but the rest of the developing world (the non-globalizers) is falling further behind. Next, Dollar and Kraay ask how general these patterns are, using regressions that exploit within-country variations in trade and growth. After controlling for changes in other policies and addressing endogeneity with internal instruments, they find that trade has a strong positive effect on growth. Finally, the authors examine the effects of trade on the poor. They find little systematic evidence of a relationship between changes in trade volumes (or any other measure of globalization they consider) and changes in the income share of the poorest - or between changes in trade volumes and changes in household income inequality. They conclude, therefore, that the increase in growth rates that accompanies expanded trade translates on average into proportionate increases in incomes of the poor. Absolute poverty in the globalizing developing economies has fallen sharply in the past 20 years. The evidence from individual cases and from cross-country analysis supports the view that globalization leads to faster growth and poverty reduction in poor countries. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the department to study the effects of globalization on the poor.

Experience with solar home systems in developing countries: a review

Abstract: Solar energy is widely perceived as a promising technology for electricity generation in remote locations in developing countries. It is estimated that 1.3 million solar home systems had been installed by early 2000. An estimated one-third of installed systems were backed by foreign donor support in government programmes and two-thirds supplied by commercial dealers. The estimated growth in the deployment of solar lanterns is less than for SHS. One out of every 100 households that gain access to electricity in developing countries uses solar power. In spite of these successes, doubts have arisen about the effectiveness and suitability of small PV systems for rural development. Many organisational, financial and technical problems appear to present difficulties. A literature survey has been conducted to make an inventory of experience with solar PV applications for households in developing countries. The main finding is that an adequate service infrastructure is required to make projects viable. Household choice in system sizes is often too restricted in donor-funded projects. Smaller systems sold for cash can be a good alternative to credit systems by offering to increased affordability. Gaps in existing knowledge have been identified, which could be overcome by field monitoring programmes. Copyright © 2001 John Wiley & Sons, Ltd.

Is the export-led growth hypothesis valid for developing countries? a case study of Costa Rica

Abstract: NOTE The views expressed in this study are those of the authors and do not necessarily reflect the views of the UNCTAD secretariat. The designations employed and the presentation of the material do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. Material in this publication may be freely quoted or reprinted, but acknowledgement is requested, together with a reference to the document number. A copy of the publication containing the quotation or reprint should be sent to the UNCTAD secretariat: ABSTRACT The export-led growth hypothesis (ELGH) postulates that export growth is one of the key determinants of economic growth. This study goes beyond the traditional neoclassical theory of production by estimating an augmented Cobb−Douglas production function. The inclusion of exports as a third input provides an alternative procedure to capture total factor productivity (TFP) growth. The study tests the hypothesis by analysing the case of Costa Rica, using annual data for the period 1950−1997. In using several procedures to test for cointegration, it goes beyond the traditional time series studies by examining empirically the short-term as well as the long-run relationship. The study finds that the ELGH is valid in this particular case; however, the empirical results show that physical investment and population mainly drove Costa Rica's overall economic performance from 1950 onwards. From a review of the literature we find that the empirical evidence regarding the relationship between exports and growth is not robust, and although the results of the study suggest that exports have a positive effect on the overall rate of economic growth and could be considered an " engine of growth " as the ELGH advocates, their impact was quantitatively relatively small, in both the short and the long-run. The evidence presented clearly supports the neoclassical theory of production and, to a lesser extent, the so-called new-fashioned economic wisdom. Moreover, it challenges the empirical literature regarding the ELGH and expresses serious doubts with regard to promoting exports as a comprehensive development strategy. The ELGH is probably beneficial only for a limited number of developing countries, and only to a certain extent. ACKNOWLEDGEMENTS I am grateful to Susan Teltscher, Bijit Bora and seminar participants at the United Nations Conference on Trade and Development …