This paper contains a numerical listing of working papers produced by the Policy, Planning, and External Affairs Complex. Each citation contains a brief abstract, and the contact point for the paper.
... See More +See Less -
The author surveys recent growth models that try to explain the diversity among countries in rates of economic growth. The author finds that these models can generate differences in growth rates only in the absence of international capital markets.
... See More + Under these models, if there were free international capital mobility, the growth rate of consumption and GNP would quickly be equalized all over the world. The author describes a simple modification of standard preferences that eliminates this implausible equalization of growth and is consistent with the fact that the savings rate is lower in poor countries than in rich countries.
See Less -
This paper is a brief history of financial regulation. The removal and relaxation of controls on credit and interest rates in the 1980s and the growing emphasis on prudential controls is highlighted.
... See More + Three criteria for evaluating financial regulation and structure are discussed: (1) stability, (2) efficiency, and (3) fairness. As a result of massive losses suffered by financial institutions, stability is a significant concern. It can be enhanced by increasing capital requirements and strengthening financial supervision. In developing countries there is growing concentration and a spread of universal banking, suggesting economies of both scale and scope. Available evidence suggests that concentrated banking systems tend to have lower margins and operating costs as well as higher profits. However, large banks tend to be inefficient. Their size is the result of controls and restrictions on competition and entry rather than superior efficiency. Protecting users of financial systems from abusive behavior by the financial institutions, creating equality in the competition between banking institutions, and tackling the problems caused by potential conflicts of interest is the "fairness" issue. There are tradeoffs between these three criteria for evaluating financial regulation and structure. The answers must be sought on a country-by-country basis.
See Less -
The two literatures on targeting and on intrahousehold inequality have developed rapidly over the past 15 years, but largely independent of each other.
... See More + The literature on targeting concerns itself with the design of tax and transfer programs for poverty alleviation in the presence of limited information on who the poor are. The literature on intrahousehold inequality arose out of a dissatisfaction with "unitary" models of the household, especially in explaining inequality in consumption and achievements of different household members, even after allowing for relevant differences among them. The authors begin to forge the link between the two literatures, so they can address issues policymakers face around the world. After a brief reprise of the key features of the two literatures, they indicate how the presence of intrahousehold inequality and allocation mechanisms could affect the standard analysis of targeting theory. They conclude with a list of policy questions for further research.
See Less -
This paper models a dynamic bargaining game between a highly indebted country and its commercial bank consortium, to analyze the determinants of the resulting re-scheduling agreements and the net transfer of resources over time.
... See More + The bargaining game is based on the simple paradigm that if no agreement is reached for a current payment, the banks would apply default sanctions. The author found that under general conditions settlements would be reached and default sanctions would not be applied in equilibrium. But the default sanctions would be a credible threat underlying the negotiations and determining the equilibrium payments. These equilibrium payments in turn would determine the credit ceiling and the later commercial discounts on the debt market. Unlike other bargaining games, this one explicitly models the debtor country's economic structure, featuring an import-dependent economy subject to foreign exchange and fiscal constraints. Moreover, the model is truly dynamic in the sense that the future negotiating environment is endogenously determined by current bargaining outcomes. Under plausible refinements and assumptions, the author obtains a closed-form solution for net transfers, dependent on various structural and policy parameters.
See Less -
Agriculture's share in an economy invariably declines as per capita income rises and as the economy develops. The literature on its causes has focused on the relative price effects arising from demand factors--especially Engel's Law (that the proportion of income spent on food declines as incomes rise)--rather than on such supply-side influences as changes in relative factor endowments and different rates of technical change.
... See More + Engel's Law is convincing at the global level but it does not explain why agriculture's share should decline sharply in small open economies that experience rapid economic growth. A simple structural model of the transformation of the Indonesian economy, applying the Error Correction Mechanism to capture the dynamics resulting from disequilibria and costs of adjustment is developed. The authors develop an econometric model of the economy's supply side so they can explain agriculture's decline by the three theoretical factors: relative price changes, technical change, and factor accumulation. Based on the model's results, the authors conclude that the decline in the relative price of agricultural output contributed relatively little to the decline in agriculture's share. Technical change actually had a positive effect on agriculture's share, retarding the pressures for a decline in its share over time. By far the most important influence appears to have been the rapid accumulation of capital relative to labor over the period studied (1960-87).
See Less -
Dumping accurs when a firm charges a price in the foreign market below its price in the domestic market when it supplies the indentical good to both markets.
... See More + Provisions within the GATT allow member countries to impose antidumping (AD) duties to counteract this behavior and return the price of the dumped goods to its "fair value". The increasing incidence of dumping allegations and imposition of AD duties indicate the dumping of exports in foreign markets is a growing concern in international trade and policy discussions. The other studies of this volume have presented in quite impressive detail the evolution and present ubiquity of AD investigations and duties in import-competing countries, and have also addressed the issue of whether these trends truly indicate a rise in dumping activity. In this paper the authors focus on a separate, more theoretical issue: what is the impact of widespread dumping and use of AD duties on the exporting and importing economies?
See Less -
Antidumping actions by importing countries do not protect their consumers. What protects domestic consumers is competition. It is Korean consumers who are paying for the development of the Korean electronics industry, not consumers in the countries that import Korean goods.
... See More + A key element of Korea's industrial development strategy has been to maintain stringent import restrictions while promoting the development of a few large domestic firms. The author strongly stresses the need to implement progressive import liberalization policies that will allow foreign competition in the Korean market. Import policy regimes in exporting countries have played a critical role in creating an environment that makes it possible for profit-maximizing firms to follow a price-discriminating marketing strategy. Progressive liberalization will eliminate the incentive for following such a marketing strategy as monopoly profits are slowly eroded.
See Less -
The optimal charge for road use is equal to variable costs for road maintenance, together with the costs road users impose on other road users and on the rest of society.
... See More + One persistent question raised about such charges is what impact they have on cost recovery. The theoretical literature argues that if there are constant returns to scale in road construction and in road use, the optimal user charge will recover the capital costs of the road network and the total expenditures on road maintenance. Empirical estimates for such a system of road user charges in Tunisia similarly suggest that they would generate twice the revenues currently spent on roads. The authors examine these issues from both theoretical and practical perspectives. They conclude that there are substantial economies of scale in both road construction and road use. Also, road maintenance costs include a number of fixed costs that do not vary with traffic. Moreover, since roads cannot be smoothly adjusted to traffic, marginal costs for the entire road network are significantly lower than average costs in most developing countries, unless capacity is artificially constrained by environmental or other constraints. Under these conditions, optimal user charges result in a substantial financial deficit. The authors also address the question of how this deficit should be financed.
See Less -
The Special Programme of Research, Development and Research Training in Human Reproduction is one of the few organizations engaged in contraceptive research and development that focusses on the needs of the developing world.
... See More + Its scope has widened since its inception to include broader issues of reproductive health, and it has recently increased attention to developing national capacity to identify and address country needs. The establishment of a worldwide network of centers collaborating in research, simultaneously contributing to fertility research and institutional development; documentation of the risks and benefits of developing country use of the most widely available contraceptives; and the introduction of two new contraceptive methods, have been its main achievements to date. This paper provides a brief overview of the factors which led the World Bank to begin providing financial support in FY1988, and of the program's accomplishments and present directions.
See Less -
Canada was the first country to enact comprehensive antitrust legislation (in 1889) and to institute an antidumping system (in 1904). Canada's original "unfair" trade legislation reflected a desire to prohibit predatory dumping.
... See More + But the result of Canada's recent enforcement of unfair trade laws has been high levels of protection for a few well-organized firms. Canada's recent overhaul of its unfair trade legislation was not followed by any dramatic change in enforcement practice. If anything, the protection bias of Canadian enforcement has increased. The bias against exports from developing countries has also increased significantly in the years following implementation of the revised antidumping and countervailing duty legislation (SIMA). Comparing cases involving developed and developing countries suggests a protectionist bias against the developing country bloc. This bias increased in the years following the implementation of SIMA. The author argues that an approach based on competition policy principles or on an economywide perspective, by focusing on the broader impact of policies, offers an economically more rational way to deal with issues currently addressed by unfair trade remedies. While unfair trade laws aim to protect domestic competitors, competition laws strive to protect the competitive process. Unfortunately, international standards weigh against Canada modifying its current standard.
See Less -
The authors develop a simple, formal framework for clarifying the tradeoffs involved in choosing between a fixed and flexible exchange rate system.
... See More + They apply this framework to the countries of Africa's CFA Zone, which have maintained fixed parity with the French franc since independence. Because a few agricultural products and natural resources dominate their exports, member countries of Africa's CFA Zone have suffered frequent shocks in terms of trade. A flexible exchange rate could possibly have alleviated the costs of these external shocks. On the other hand, CFA member countries have managed to maintain lower inflation levels than their neighbors. The fixed exchange rate of the CFA Zone acts as a credible committment. The government "ties its own hands" so that it will not be tempted to use the exchange rate, thereby eliciting lower wage and price increases from the private sector. Weighing this benefit against the costs of nonadjustment to external shocks, the authors conclude that fixed exchange rates have been a bad bargain for the CFA member countries. These countries would have been better off having the ability to adjust to external shocks.
See Less -
Most health professionals who have worked in rural areas have had the experience of being supervised badly: the flying visit by a superior who inspects the records, delivers a critical speech, and disappears without ever finding out what is really going on in the health center area.
... See More + Such visits seem designed more to demonstrate the supervisor's authority than to help the field worker to serve local people better. This manual is designed to help field supervisors supervise in a way that deepens insights into local situations, supports health workers, and focuses on improving the quality of service to the poor. The checklist of questions is not intended to be definitive or rigidly applied. Depending on the needs of a given program, some areas may need to be probed more deeply, and others shortened or omitted altogether. The author provides guidelines for: planning visits to a program area; visiting villages and talking with mothers; visiting health care workers; visiting nutrition workers; and using findings to make changes in program design or implementation, to reorient the way supervision is done, and to change worker behavior. He also provides a sample field visit report.
See Less -
The term "excess liquidity" may refer to the share of liquid assets in bank portfolios (the result of a retrenchment in bank lending, or a "credit crunch") or to money holdings of the nonbank public.
... See More + Excess liquidity may be voluntary or nonvoluntary. In response to excess liquidity, policymakers tend to take steps to drain off the excess so it will not lead to a surge in inflation. In this paper, the authors examine the appropriateness of conventional policy instruments for tightening money in two common cases: 1) when there is a voluntary credit crunch because of a rise in perceived risk of default, and 2) when individuals rationed in the goods market in reforming socialist economies accumulate savings involuntarily ("money overhang"). The authors conclude that neither excess liquidity in the banking systems of the developing world nor the money overhang of the reforming planned economies calls for a response of restrictive monetary policy. A more appropriate policy might be a prudent but not overly restrictive monetary policy and reservation of some part of credit for the emerging private sector.
See Less -
A significant domestic counterpart of Morocco's vigorous external adjustment in the eighties was a decline in fixed capital formation, of which the private sector bore a sizable share.
... See More + The authors focus on the causes of declining private investment and on the policies required to reverse this trend. Using an eclectic framework, they econometrically determine the main determinants of private investment in Morocco. They conclude that the main causes of the decline in the eighties were great uncertainty about policy (proxied by foreign debt), a rapid rise in the cost of capital, a more stringent credit policy, and reduced public capital. They further conclude that fiscal stabilization, a consistent foreign debt policy, more investment in public infrastructure, and a reform of investment codes would increase private investment and growth in Morocco. Moreover, reform of the financial sector could significantly improve the efficiency of financial intermediation and therefore the quality of investment in Morocco.
See Less -
The objective of this paper is to examine the role of fiscal policy in the management of Indonesia's environment. The aim is to develop a framework that will allow an examination of possible fiscal instruments and their relevance to Indonesia's context.
... See More + It is important to note that fiscal policy is one possible area of policy intervention. Regulatory policies would also continue to play a major role. A comprehensive environmental management strategy will need to be based on a balanced combination of regulatory and fiscal policy instruments. Furthermore, a critical element underlying the successful implementation of this strategy will be the availability of an appropriate institutional mechanism. The paper provides an overview of Indonesia's key environmental issues followed by the framework for fiscal policy instruments. The Indonesian Government's progress on environmental management policies is examined briefly to provide background for the discussion of possible fiscal policy options. Finally, the paper provides a summary and conclusions.
See Less -
Economic stability, sound macroeconomic policies, and appropriate microeconomic incentives hold down a country's external debt burden. Most of the Asian countries pursued prudent macroeconomic policies, paid attention to price stability, and minimized price distortions.
... See More + These countries avoided the overvalued exchange rates and uncompetitive interest rates that caused massive capital flight from Latin American and some African countries. The author contrasts Asian country debt crisis behavior with that of 12 highly indebted Latin American and African countries.
See Less -
In the early 1980s, the Polish chemical industry got caught up in a battle waged by the European Community's chemical industry to preserve the EC market for itself.
... See More + The Polish share of that market was very small, and the performance of the Polish companies did not depend on it, so they emerged from the battle unscathed. Perhaps the most striking finding of this study is what it tells us about the business ethics implicit in antidumping regulation. This ethic stresses collective behavior and the resolution of economic questions through political negotiation and compromise. The business behavior the antidumping rules attempt to impose on is in direct conflict with the antimonopoly laws - a basic part of the business ethics of a market system - but it fits well into the business ethics of a nonmarket economy. As an interface between the two systems, the antidumping rules teach the capitalists to behave like socialists, rather than teach the socialists how to behave as capitalists.
See Less -
Antidumping has about it the aura of a special measure to undo a special problem. Within this view, the explosion of antidumping actions in the 1980s was simply a good thing carried too far: the appropriate remedy to the current popularity of antidumping is to return it to its traditional and proper scope.
... See More + It is hard, however, to find the basis for this view in the history of antidumping regulation. There is little in that history to suggest that anitdumping ever had a scope more particular than protecting home producers from import competition, and there is much to suggest that such protection was its intended scope. The thesis of this paper, then, is that antidumping has been from its beginning, part of the rhetoric and part of the mechanics of ordinary protection. Antidumping is where the protectionist action is today because it has proved to be broad and flexible enough to handle all the action. This paper has three sections. The first looks into the origins of antidumping regulation, the second examines contemporary antidumping regulation -- antidumping under the GATT -- and the third summarizes the import of the first two.
See Less -
Analysis of decade-long growth rates in all countries shows a striking regularity: episodes of rapid growth are limited largely to a middle range of initial income; neither very poor nor very rich countries experienced rapid growth.
... See More + Episodes of negative growth are limited to low and middle-income countries. This paper develops a simple model that sheds light on this experience. The model has two familiar elements from the growth literature: (1) a Stone-Gearly utility function (saving is low at low income), and (2) fixed factors with the marginal product of capital bounded away from zero. The second property is derived by assuming an elasticity of substitution greater than one between an exogenous labor input and a broad concept of capital. The paper extends the model to consider multiple capital goods and public capital. It finds that stagnation is consistent with an array of statistical evidence because of fixed factors. Economic policies - not initial conditions - determine whether countries stagnate. Results confirm that initial income and policy variables have a different effect on whether a country stagnates than they do on the rate of growth once it starts growing, as expected from the distinction between steady-state and transitional effects. These results suggest that cross-section growth regressions may be misspecified because of the nonlinearity inherent in the possibility of steady-state stagnation.
See Less -