Showing papers on "Economic sector published in 2005"

Financial Dependence, Banking Sector Competition, and Economic Growth

Abstract: The relationships among competition in the financial sector, access of firms to external financing, and associated economic growth are ambiguous in theory. Moreover, measuring competition in the financial sector can be complex. In this paper Claessens and Laeven first estimate for 16 countries a measure of banking system competition based on industrial organization theory. They then relate this competition measure to growth of industries and find that greater competition in countries' banking systems allows financially dependent industries to grow faster. These results are robust under a variety of tests. The results suggest that the degree of competition is an important aspect of financial sector funding. This paper - a product of the Financial Sector Operations and Policy Department - is part of a larger effort in the department to study competition in banking.

Corporate Social Responsibility: An Economic and Financial Framework

Abstract: I analyze corporate social responsibility (CSR) from economic and financial perspectives, and suggest how it is reflected in financial markets. CSR is defined as a programme of actions to reduce externalized costs or to avoid distributional conflicts. It has evolved in response to market failures, a Coasian solution to problems associated with social costs. The analysis suggests that there is a resource-allocation role for CSR programmes in cases of market failure through private–social cost differentials, and also where distributional disagreements are strong. In some sectors of the economy private and social costs are roughly in line and distributional debates are unusual: here CSR has little role to play. Such sectors are outnumbered by those where CSR can play a valuable role in ensuring that the invisible hand acts, as intended, to produce the social good. It can also act to improve corporate profits and guard against reputational risks.

Making Space for “Neo-communitarianism”? The Third Sector, State and Civil Society in the UK

Abstract: During the 1990s the urban became an important “institutional laboratory” for state-initiated policy experiments to address the social costs and political repercussions of economic polarisation and social exclusion associated with neo-liberalism. One such policy experiment has been neo-communitarianism, emphasising the contribution of the “third sector” to improving social welfare and reinvigorating a sense of civil society. Focusing on the UK, I examine the background to and implications of the emergence of a neo-communitarian strategy under the “new” Labour government, which came to power in 1997. First, I consider the repositioning of the third sector within contemporary policy discourse as a result of the Labour government's programme of welfare reforms and Prime Minister Blair's “Third Way” political philosophy, which attempts to combine neo-liberalism with a neo-communitarian stance of stressing the importance of civil society for social cohesion. Then, I draw on Foucauldian notions of governmentality to examine how Labour's neo-communitarian agenda has involved a fundamental reconfiguration of the governance of the third sector, centred on the creation of government–voluntary sector “compacts” at national and local levels. These compacts are of strategic importance for the restructuring of the UK third sector and so the local implications of such restructuring are then considered. In particular, case study evidence from Glasgow is used to critically evaluate government claims that the third sector can contribute to the “reinvigoration of civic life” by highlighting the importance of the internal characteristics and political environment of local third sector organisations for the differential development of social capital and citizenship.

Will Services be the New Engine of Indian Economic Growth

Abstract: This article revisits the role of manufacturing and services in economic development in the light of a number of new phenomena: a faster growth of services than of manufacturing in many developing countries; the emergence of ‘de-industrialization’ in several developing countries, at low levels of per capita income; jobless growth in the formal sector, even in fast-growing countries such as India; and a large expansion of the informal sector in developing countries. Although this article examines these phenomena in the specific context of the Indian economy, the analysis has much wider application and implications, both for economic policy and for theories of growth and structural change.

Getting on or getting by? Employee flexibility and coping strategies for home and work

Abstract: Recent speculation about the impact on family life of contemporary patterns of work has prompted considerable and concerted social research activity in which the workplace and household have figured prominently. This article extends these studies to examine employment in prototypical new sectors of the economy, namely call centres and software, which at the time of the study were enjoying spectacular growth. Employees in both sectors reported spillover from work to home, though the extent, nature and intensity of spillover varied significantly between the sectors. The study identified the different and hitherto unexplored ways in which employees in these different sectors attempt to cope with complex articulations between home and work, and the varying resources which they bring to bear in doing so. Contemporary work settings indicate little change from more established sectors in that gender, status and labour market strength are important factors in offering work boundary discretion.

Survival and Longevity in the Business Employment Dynamics Data

Abstract: The 1 990s saw many sectors of our economy grow apace, through either mergers, buyouts, or new openings Signs of the times (figuratively and literally, as one bank bought out or merged with another) were on hometown banks, and the fruits of new construction festooned many neighborhoods In addition to new homes going up, new businesses were moving in to take advantage of the growing wealth in the United States Our understanding of new businesses has been limited largely to the manufacturing sector and to the scale of the firm, not to the establishment 1 The main reason for this shortcoming is limitations on the data available for study In many countries—including the United States until recently—manufacturing was the only sector for which data with the capability of linking firms across time were compiled on a regular basis Thus, except for firms in the manufacturing sector, no history of a firm’s behavior could be constructed This research summary examines the business survival characteristics of all establishments that started in the United States in the late 1990s, when the boom of much of that decade was not yet showing signs of weakness The analysis presented builds on and extends a report from the Minnesota Department of Economic Security on business churning from 1993 to 1995 2 The report profiled business births, survival rates, and deaths during the early years of the decade, when the boom was just starting This article follows the businesses reported on into the recession of 2001 to see how they fared once the economy took a downturn The analysis follows a birth cohort from the second quarter of 1998 through the next 16 quarters, differing from previous analyses in both focus and time frame The focus is on only completely new entrants—that is, new firms which open a single establishment The analysis encompasses all sectors of the economy; survival rates of establishments, as well as several measures of employment, are reported and compared across sectors

Agriculture and national welfare around the world: causality and international heterogeneity since 1960

Abstract: Calculations of marginal welfare effects suggest that agricultural development has had important positive effects on national welfare, especially in developing countries. Latin American and Caribbean countries have also benefited from agricultural growth, but non-agricultural production has had marginal welfare effects that are greater in magnitude than those provided by agricultural activities. In contrast, the industrialized, high-income countries experienced marginal welfare gains from non-agricultural activities that are much greater than those derived from agriculture, whose impact is actually negative. These calculations of marginal welfare effects across regions depend on econometric estimates of elasticities linking agricultural and nonagricultural economic activities to four elements in a national welfare function: national GDP per capita, average income of the poorest households within countries, environmental outcomes concerning air and water pollution and deforestation, and macroeconomic volatility. The econometric analyses are motivated by theoretical treatments of key issues. The empirical models are estimated with various econometric techniques that deal with issues of causality and international heterogeneity.

Problems with private water concessions: a review of experiences and analysis of dynamics

Abstract: Based on empirical evidence, this paper looks at experience with privatized water supply and sanitation concessions and operating contracts in transition and developing countries, with particular reference to Latin America. The paper is an attempt to address the complexity of issues affecting private sector participation in the water sector from a dynamic point of view, taking into account how the interests, objectives and resources of private sector operators continuously shape their relationships with local stakeholders, citizens and local governments alike, and how the interaction between multinational companies and other actors affect the developmental impact of private sector participation. It is argued that the introduction of commercial considerations into the system and the profit-seeking behaviour of private water operators are major determinants of the economic, social, political and environmental results of public–private partnerships (PPPs). Such factors may explain the discrepancy between the...

Break-Through Innovations and Continuous Improvement: Two Different Models of Innovative Processes in the Public Sector

Abstract: How do we understand innovation in the public sector? A look at the public and private sector understanding of innovation helps us begin to see how important new ideas are born, nurtured, tested and disseminated.

The roles of research at universities and public labs in economic catch-up

Abstract: We draw upon historical evidence from several countries and contemporary studies of national innovation systems to argue that indigenous systems of academic training and public research have been in the past important elements of the institutional structures supporting a country’s economic catch up. Recent changes in the international economic environment, and the growing scientific basis for contemporary technologies, will make those systems even more important in the future. The contributions of universities and public labs to the development of indigenous technological capabilities have taken different forms in different countries and economic sectors. However, we note that, in contrast with current emphasis on university-based embryonic inventions and fundamental research, effective research programs have predominantly occurred in the application-oriented sciences and engineering, and have been oriented towards problem-solving, and the advancement of technologies of interest to a well-defined user-community.

Industrialization and Economic Growth in Mexico after NAFTA: The Road Travelled: Industrialization and Economic Growth in Mexico after NAFTA

Abstract: This article examines Mexico's industrial policy and economic performance, focusing on an analysis of the structural changes in its manufacturing sector associated with NAFTA The aim of the article is to improve our understanding of why the post-NAFTA evolution of the Mexican economy has been characterized by lights and shadows, with low inflation, low budget deficits and a surge in non-oil exports on the one hand, and on the other hand a slower than expected expansion of economic activity and employment The article also presents some policy implications on the need for a new development agenda if Mexico is to finally succeed in its quest for high and sustained economic growth

THE NATURE OF SOUTH AFRICA'S TRADE PATTERNS BY ECONOMIC SECTOR, AND THE EXTENT OF TRADE LIBERALIZATION DURING THE COURSE OF THE 1990′s

Abstract: We explore changing trade protection of the South African economy by means of E¤ective Protection Rates (EPR’s). Results on EPR’s for 28 manufacturing sectors over the 1988-98 period are presented. Findings suggest that trade liberalization of the South African economy has been less dramatic than is popularly thought. Analyzers proceed to suggest that trade liberalization is di¢cult to associate with increased import penetration of the SA economy, though liberalized sectors do appear to have demonstrated improved export performance.

Economic Impacts of Cultural Events on Local Economies: An Input—Output Analysis of the Kaustinen Folk Music Festival:

Abstract: This paper examines the economic impacts of Finland's Kaustinen Folk Music Festival. The impacts are calculated on output, demand and wages, employment and on national and regional taxes. The results indicate, first, that the effects of the festival on output are about ₠1.7 million. Kaustinen can also be seen as a good investment for the local municipality, as regional tax revenues increased by about ₠65,600 in the year studied, while the annual subsidy was ₠40,365. From the perspective of the Keski-Pohjanmaa region as a whole, the Kaustinen Folk Music Festival has a substantial impact on regional incomes through subsidies (about one-fifth of the costs of the festival is offset by subsidies from the Arts Council of Finland (Ilmonen et al, 1995) and the direct and indirect effects of consumption by festival visitors in different economic sectors. The impact on employment in the region is low (27 employees). The mobilization of voluntary labour, not measured in this study, is, however, considerable. Althoug...

The use of information technology to transform the banking sector in developing nations

Abstract: No Abstract

Financial intermediation and economic growth: evidence from Western Africa

Abstract: The relationship between finance and economic growth has received considerable attention in economic development literature during recent decades. However, little interest has been devoted to African countries, and specifically, to West African countries. This paper tries to fill that gap, by using causality tests to empirically examine the relationship between finance and economic growth, in the context of West African country members of the Economic Community of West African States (ECOWAS). In all but a few countries, results indicate a weak causal relationship between finance and economic development on one side, and between economic development and finance on the other side. These results imply, ceteris paribus, that leaders of West African countries should focus their economic and monetary policies on the development of financial intermediation, which in turn will favour economic growth.

Wealth as a Determinant of Comparative Advantage

Abstract: This paper shows that a country’s wealth can be an important determinant of comparative advantage when access to credit differs across sectors of the economy. Wealthier nations exhibit a comparative advantage toward goods produced in sectors facing more severe financial imperfections. These sectors are typically populated by small firms. Empirically this paper documents that these sectors are also labor intensive. Consequently, this theory partially offsets traditional sources of comparative advantage and offers an explanation for Trefler’s missing trade mystery and the Leontief paradox. Furthermore, the theory makes the relation between trade and income distribution endogenous.

India's and China's Recent Experience with Reform and Growth

Abstract: India and China: An Essay in Comparative Political Economy M.Desai India's Growth Experience K.Singh & S.Bery China's Economic Growth and Poverty Reduction (1978-2002) H.Angang, H.Linlin & C.Zhixiao Reform Strategies in the Indian Financial Sector S.Bhattacharya & U.R.Patel Financial System Reform and Economic Development C.Yuan Bank Financing in India A.Banerjee, S.Cole & E.Duflo Trade Liberalization and Its Role in Chinese Economic Growth N.R.Lardy India in the 1980s and 1990s: A Truimph of Reforms A.Panagariya Effects of Financial Globalization on Developing Countries: Some Empirical Evidence E.Prasad, K.Rogoff, S-J.Wei & M.A.Kose Understanding India's Services Revolution J.Gordon & P.Gupta Capital Account Controls and Liberalization: Lessons for India and China J.Anderson Capital Account Liberalization: The Indian Experience N.Jadhav

Public Sector Support for Sport Tourism Events: The Role of Cost-benefit Analysis

Abstract: Economic analysis is important in assessing the impacts and net benefits of sport tourism. The economic impacts of sporting events include the contribution to employment and income, both nationally and regionally. Sport tourism is also regarded as associated with a range of other benefits (and costs) of a more ‘intangible’ nature that impact on local communities as well as on entire regions. This study provides an overview of the framework of event impact assessment, distinguishing between a ‘narrower’ and ‘wider’ set of economic impacts and also ‘intangible’ impacts. It then explores the role of cost benefit analysis in the public support of special events.

Foreign Direct Investment in the Financial Sector. The Engine of Growth for Central and Eastern Europe

Abstract: This paper examines the impact of financial sector foreign direct investment (FSFDI) on economic growth by estimating a panel data model for 11 Central and Eastern European countries (CEECs) between 1996 and 2003 in a cross-country growth accounting framework. The analysis concentrates on the efficiency channel linking FSFDI to economic growth. The results clearly indicate that there can be a relationship between FSFDI and economic growth. Approaching a medium degree of financial M&A is rewarded by higher economic growth after two periods. Beyond it, FSFDI seems to spur economic growth depending on a higher human capital stock. FSFDI-induced knowledge-spillovers to domestic banks can be an explanation for this phenomenon. Above a certain threshold, the crowding-out of local physical capital caused by the entry of a foreign bank seems to hamper economic growth. The value of the paper lies in (1) providing novel data on FSFDI in CEECs, (2) analyzing the impact of FDI on a sectoral level and (3) in modeling the hitherto only qualitatively discussed relationship between foreign banks and economic development into a structural, econometric model that combines two streams of economic research: the FDI-growth-literature and the finance-growth-literature. (author's abstract)

Preferential Trade Agreements in the Asia-Pacific Region

Abstract: Preferential trade agreements (PTAs) in the Asia-Pacific region have proliferated rapidly over the past five years and are creating a complex web of intersecting bilateral and regional trade agreements. This paper describes the proliferation of these PTAs, discusses their characteristics and implementation, and assesses their potential effects. Realizing the potential gains from Asia-Pacific PTAs requires a commitment to liberalize sensitive sectors, to maintain consistent provisions, and to enforce agreements. Other factors, including administrative complications, also could undermine any potential gains.

Chapter 15 National Policies and Economic Growth: A Reappraisal

Abstract: The new growth literature, using both endogenous growth and neoclassical models, has generated strong claims for the effect of national policies on economic growth. Empirical work on policies and growth has tended to confirm these claims. This paper casts doubt on this claim for strong effects of national policies, pointing out that such effects are inconsistent with several stylized facts and seem to depend on extreme observations in growth regressions. More modest effects of policy are consistent with theoretical models that feature substitutability between the formal and informal sector, have a large share for the informal sector, or stress technological change rather than factor accumulation.

The Measurement and Management of Intellectual Capital in the Public Sector: Taking the Lead or Waiting for Direction?

Abstract: This article compares and contrasts the stage of development reached by the public and private sectors with regard to intellectual capital. Whereas the private sector in many parts of the developed world has still not fully embraced the importance of measuring intangible assets, the public sector, with its different objectives, has always had to focus on non-financial results. This has become more critical in recent years due to successive government initiatives that have required the use of a number of prescribed performance indicators. Having briefly outlined the history of both intellectual capital and the culture of performance measurement this article analyses the results of a survey of public sector organizations in Northern Ireland to assess how they are dealing with both the measurement and management of intellectual capital assets.

A model of Dutch agriculture based on Positive Mathematical Programming with regional and environmental applications

Abstract: In the Netherlands few sectors are in the news as often as the agricultural sector is, and the news is rarely good. Nearly every day, in newspapers, on television and on the radio we are confronted with BSE, foot and mouth disease, swine and chicken fever, polluted animal feed, manure surpluses, subsidies, European Common Agricultural Policy (CAP), farmers' incomes and rural poverty. A lot of people in the Netherlands have written off the Dutch agricultural sector and believe that, as an economic activity, this sector is set to disappear in the near future just like the textile and shipbuilding industries did. However, the Dutch agricultural sector is continuously in a state of flux in order to adjust to ever changing circumstances. Besides, the agricultural sector is not an isolated activity, but embedded in and economically supported by other compartments of the agricultural production chain (agricultural processing and input delivering industries). This thesis contains a quantitative description of the Dutch agricultural sector. By means of a mathematical model insight is provided into the relationship between production and profits. Profits are achieved through the production of outputs. In chapters 1 to 4 we describe the sectors and the outputs that are included in the model. Next the mechanisms that determine the production of outputs in the agricultural sectors are described. We focus in particular on the use of joint resources in agriculture, manure markets and technology changes in dairy farming. Chapters 5 and 6 present the economic and environmental effects for the Dutch agricultural sector of changes in the CAP of the European Community and Dutch manure and nutrients policies. Chapter 7 discusses the strengths of the model and areas for improvement. It is concluded that in spite of rather drastic policy changes, the agricultural sector in the Netherlands still has a future.

Impact of Privatization on Economic Growth

Abstract: This paper examines the relationship between growth and privatization from an incentives perspective. Privatization, a method of reallocating assets and functions from the public sector to the private sector, appears to be a factor that could play a serious role in the quest for growth. This article is available in Undergraduate Economic Review: http://digitalcommons.iwu.edu/uer/vol2/iss1/7 1 Adnan Filipovic Furman Univeristy Impact of Privatization on Economic Growth The concept of economic growth is a fundamental part of the field of macroeconomics, which is masterfully captured in William Easterly’s The Elusive Quest for Growth. Easterly powerfully depicts the real, long term economic crisis that many countries are facing around the world, and he stimulates the reader to take part in the search for economic growth. In the early parts of The Elusive Quest for Growth, one begins to appreciate the meaning behind the book’s title. Individual policies such as aid for investment, population control, and human capital investment have all failed as a solution to the lack of economic growth in underdeveloped countries. In other words, Easterly alludes to an idea that a combination of different factors (investment, education, technological innovation), along with a fundamental structural change might be the path to long term economic growth. One of the underlying themes throughout Easterly’s book is the idea that people respond to incentives. In fact, most of Easterly’s analysis of various economic models throughout the book is an analysis of the incentives created by those models (Easterly, 2001). This paper examines the relationship between growth and privatization from an incentives perspective. Privatization, a method of reallocating assets and functions from the public sector to the private sector, appears to be a factor that could play a serious role in the quest for growth. In recent history, privatization has been adopted by many different political systems and has spread to every region of the world. The process of privatization can be an effective way to bring about fundamental structural change by formalizing and establishing property rights, which directly creates strong individual incentives. A free market economy largely depends on well-defined 1 Filipovic: Impact of Privatization on Economic Growth Published by Digital Commons @ IWU, 2006 2 property rights in which people make individual decisions in their own interests. The importance of property rights is captured by economist Hernando de Soto as he states, “Modern market economies generate growth because widespread, formal property rights permit massive, low-cost exchange, thus fostering specialization and greater productivity” (1996). Along with creating strong incentives that induce productivity, privatization may improve efficiency, provide fiscal relief, encourage wider ownership, and increase the availability of credit for the private sector. This paper will analyze the effects and the influence of privatization on the rate of economic growth, stimulated by the idea of people responding to incentives. Ultimately, the goal of this paper is to evaluate and analyze the idea of privatization as a possible factor of economic growth. The first section of the paper will begin with a brief historic overview of privatization in the past few decades. The main content of the first section will be an introduction to the Coase Theorem and an analysis of the theoretical framework for privatization. The material in this section will be centered around Robert W. Poole’s “Privatization for Economic Development” and Hernando de Soto’s “The Missing Ingredient.” The second section of the paper will describe different methods of privatization as well as provide examples of privatization taking place around the world (with an emphasis on Eastern Europe). The third section of the paper will present an empirical study done by Paul Cook and Yuichiro Uchida, analyzing the effects of privatization on economic growth in developing countries. The fourth section will introduce and discuss the results of my own empirical study. In the final section of the paper I will attempt to draw useful conclusions regarding privatization as an economic growth policy. I. Theoretical Framework 2 Undergraduate Economic Review, Vol. 2 [2006], Iss. 1, Art. 7 http://digitalcommons.iwu.edu/uer/vol2/iss1/7 3 A world-wide era of privatization has been picking up momentum in recent decades, making it a fairly new trend in the area of economic policy. The modern idea of privatization as an economic policy was pursued for the first time by the Federal Republic of Germany in 1957, when the government eventually sold majority stake of Volkswagen to private investors. The next big move in privatization came in the 1980s with Margaret Thatcher’s privatization of Britain Telecom and Chirac’s privatization of large banks in France. Privatization spread to other continents as Japan and Mexico privatized government owned communication companies (Megginson, Nash, and Randenborgh, 1996). Another major contribution to the world-wide process of privatization has been the fall of the communist regime in Eastern Europe and the former Soviet Union. In recent times, countries like China and Cuba, as well as many other developing countries, have begun to implement privatization in the hope of stimulating economic growth. Over the of 10 year period between 1984 and 1994, there has been a world-wide shift of $468 billion in assets from the public sector to the private sector (Poole, 1996). The theoretical framework behind the idea of privatization is largely dependent on understanding the concept of property rights. In order to develop an expanded, specialized market system, a society must have an efficient way of dealing with numerous transactions that take place in a specialized economy. Specialization and allocation of resources depends on low transactions costs, which are dictated by prices in market economies. Competitive markets, in which transactions are effectively handled by market prices, rely heavily on formal, well-defined property rights (Mankiw, 2001). De Soto explains, “To be exchanged in expanded markets, property rights must be ‘formalized’, in other words, embodied in universally obtainable, standardized instruments of exchange that are registered in a central system governed by legal 3 Filipovic: Impact of Privatization on Economic Growth Published by Digital Commons @ IWU, 2006 4 rules” (1996). In fact, de Soto argues that the lack of formal property rights is “the missing ingredient” that is keeping underdeveloped countries from sustaining long-term growth. Furthermore, the lack of property rights limits the amount of goods and services that can be exchanged in the market. An important implication of well-defined property rights is that it creates strong individual incentives, which, according to Easterly, is a significant factor in the quest for long term growth. By creating strong incentives, property rights lead to an increase in investment since people are certain and secure about the ownership of their property. Furthermore, individuals gain an access to credit since they can use their formal titles as a collateral for loans, ultimately leading to an increase in investment. Finally, property rights give people an incentive to pursue long-term rather than short term economic goals. In the case of land ownership, individuals who have secure and well-defined ownership will invest in their land instead of continuously draining new land (Soto, 1996). Another fundamental aspect of privatization, which plays an essential part in the efficiency improvement associated with privatization, is embedded in the Coase Theorem. Ronald Coase proposes that the private sector is effective in solving the problem of externalities, through costless bargaining, driven by individual incentives. According to the Coase Theorem, individual parties will directly or indirectly take part in a cost-benefit analysis, which will eventually result in the most efficient solution (Mankiw, 2001). Thus, Coase argues the role of the legal system is to establish rights that would allow the private sector to solve the problem of externalities with the most effective solution. A major implication of the Coase Theorem is the fact that the initial allocation of rights does not affect the outcome as long as the rights are well-defined. Furthermore, the solution that results from bargaining of private parties 4 Undergraduate Economic Review, Vol. 2 [2006], Iss. 1, Art. 7 http://digitalcommons.iwu.edu/uer/vol2/iss1/7 5 will be a Pareto optimal solution. From the perspective of privatization, the Coase Theorem implies that by shifting the assets from the state to the private investors, the market will become more effective in dealing with numerous externalities (Medema and Zerbe, 1999). There are many theoretical economic benefits that are connected to the process of privatization. One of the main reasons why countries pursue privatization is in order to reduce the size of the existing government, based on the idea that many governments have become too large and overextended, consisting of unnecessary layers of bureaucracy. Therefore, many countries require restructuring in order to improve efficiency, which can be achieved through privatization. The private sector responds to incentives in the market, while the public sector often has non-economic goals. In other words, the public sector is not highly motivated to maximize production and allocate resources effectively, causing the government to run highcost, low-income enterprises. Privatization directly shifts the focus from political goals to economic goals, which leads to development of the market economy (Poole, 1996). The downsizing aspect of privatization is an important one since bad government policies and government corruption can play a large, negative role in economic growth

Public Sector Management in Africa

Abstract: Even though the public sector in African countries was expected to spearhead socioeconomic development to reduce poverty, it has proved largely ineffective in performing this task. Some of the reasons for this ineffectiveness are excessive politicization, lack of accountability and representation, inability to promote the public interest and authoritarian tendencies. The ineffectiveness has led to the call for a redefinition of the role of the public sector. As a contribution to the debate over the proper role of the public sector and how it has coped with the New Public Management reforms, this paper assesses the state of public sector management in Africa by focusing specifically on the strengths and challenges facing the state and its bureaucracy in relation to socioeconomic development and how the challenges can be addressed. Some of the issues the paper examines include: • the existing and/or evolving theoretical paradigms and their relevance to the public sector management; • the inability of the African state to promote development in comparison to the Asian “developmental” state; • various public sector reforms (civil service, decentralization, privatization, deregulation, co-production, public-private partnerships, judicial, tax) initiated to improve state capacity and their outcomes; • the effectiveness of strategies implemented to promote accountability and minimize corruption; and • the issues and problems in aid management and coordination in Africa. In addition to these issues, the paper also highlights possible policy options for the future and their relevance in addressing the challenges facing public sector management.