Showing papers on "Purchasing power published in 1972"

Shadow prices for project evaluation in less developed countries

Abstract: By acting as synthetic substitutes for imperfect natural prices, shadow prices can be used by LDCs interested in improving the performance of their economies. The necessity to use shadow prices arises from the presence of imperfections that affect all economies as well as imperfections that only affect LDCs such as market labor wages that exaggerate the real scarcity of labor, the influence of monopoly power over market prices, the existence of non-optimal income distribution and non-optimal distribution of purchasing power, the influence of government taxation, two-party contracts that neglect the interests of third parties, and inefficiency in the pricing of public goods. As a result of these influences, price distortions in LDCs tend to be gross and enduring. However, use of shadow prices provides little room for the likelihood of economic reform of a kind that would improve the operation of markets significantly and demonstrates excessive confidence in the usefulness of special pricing policies in the evaluation of new projects. Shadow prices that must be used should be based on social cost and benefit.

Canadian distribution is different

Abstract: In the summer of 1971, the United States announced a ten per cent import surcharge. Hit by a decline in orders from the United States, many exporters found they needed a replacement market for their lost sales. Canada would seem their natural choice. Although only one‐tenth of the population of the United States market, her purchasing power is far higher than any other country of equivalent size, and Canada appears similar to the United States in language, economic environment, culture and aspirations.

The balance of payment deficit and the problem of inflation in Iran, 1955–1962

Abstract: It is a commonly held view that development policies lead to domestic inflation together with balance of payments problems. The underlying mechanisms which in many developing countries have made this view come true are rather well-known. Increased investment outlays lead to increased purchasing power and imports; prices rise, and, to the extent that aggregate output and real income actually increase, this in itself will further contribute to the deterioration in the country's balance of payments. The time will soon come when the International Monetary Fund, as a precondition for extending short-term loans to support the country's depleted reserves of foreign exchange, will ask for deflationary measures in order to restore order to the country's finances. Development will slow down, and if the balance of payments has deteriorated significantly, devaluation will be required. After a

Economic Cooperation in West Africa

Abstract: HE PROGRESS made by the African continent since 1960 has been truly remarkable. After a long period of colonial rule Africa has emerged as an independent element on the political scene. Almost all of the African nations gained their political independence, and since about 1960 started to function as sovereign political entities. Regrettably, however, the progress that the African nations have accomplished in the 1960s has been largely limited to the area of politics. In the field of economics the past several years have witnessed, by and large, a conspicuous lack of advancement.' The 1960s, proclaimed by the United Nations Organization as a "Decade of Development," has passed without any substantial tangible economic development in Africa.2 The reasons for this failure are numerous and have been amply discussed in a voluminous body of literature dealing with this subject. This study attempts to concentrate on only one aspect of this problem; namely on the question of economic cooperation in West Africa, and the relation between cooperation and development. It is fully understood by outside economic experts and by the African leaders that African nations in order to accelerate the rate of their economic progress will have to integrate their economies gradually.3 At the moment, Africa is divided into more than thirty independent political units, each of them operating as a sovereign state with its own administration, armed forces, monetary system, etc. Unfortunately, most of these countries have rather small populations; only three African countries (U.A.R., Ethiopia and Nigeria) have populations in excess of 20 million each.4 Several countries in West Africa have populations of about 2 or 3 million each. Moreover, the average income per capita in these countries is exceedingly low: in many cases it is less than $100 a year. Small population combined with low per capita income results in a very limited purchasing power within each nation, and the small size of the national markets prevents effective development of natural resources which would require large investments of capital. It also prevents industrial development." It is generally agreed that most industries in order to be efficient have to operate on a relatively large scale. In the African context, it means that they have to operate on markets that are larger than one nation. In order to stimulate the process of economic development and to provide a basis for industrial progress, what is required in Africa today is a comprehensive program of economic coopera-