sequential labor decisions under uncertainty an estimable household model of west african farmers this paper reports estimates of the structural parameters of a stochastic control model that describcs the labor decisions of small farmers in burkina faso west africa the focus of the estimation is on measuring flexibility in production and intertemporal substitutability in consumption full information maximum likelihood estimates of the primitive parameters of the model are computed even though optimal labor decision rules cannot be derived analytically vuong s non nested model specification test shows that this method yields parameter estimates that are superior to those derived by assuming that farmers solve a deterministic control problem the low levels of agricultural labor effort commonly observed in the survey area are shown to be a consequence both of the low productivity of labor in archaic rainfed agriculture and of farmers awareness that in the absence of a labor market overly ambitious production plans lead to seasonal manpower constraints to meet rainfed farmers concerns agricultural research institutes and extension services should factor flexibility into their research agendas

an econometric analysis of u s foreign direct investment this paper constructs a theoretical model of foreign direct investment and examines the extent to which the model can explain the level of outward direct investment by u s companies over the last two decades the authors find that market size and factor costs both labor and capital are important factors in the investment decision instrumental variable estimation is used to demonstrate that the expectation of short run fluctuations in the dollar also influences the timing of investment copyright 1996 by mit press

occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

on the determinants of direct foreign investment evidence from east and southeast asia abstract a model of derived demand for foreign capital by a multiple product monopolist is estimated for seven asian countries direct foreign investment dfi inflows are estimated to be less elastic with respect to the costs of capital including taxes than to wages and to be more elastic with respect to aggregate demand in export markets than domestic demand the output deterrent effect of higher wages is estimated to outweigh any substitution toward greater capital intensity the estimates also suggest that dfi rises with greater costs within the investors home countries no similar effect occurs with respect to costs in rival host countries and concerns for political stability have overlain economic determinants

the role of local nonfarm activities and migration in reducing poverty evidence from ethiopia kenya and uganda by using cross sectional data from ethiopia kenya and uganda this article estimates the determinants of the participation in local nonfarm activities and migration at the individual level and then estimates the determinants of farm and nonfarm income the results indicate that schooling and local language ability increase participation in local nonfarm activities and migration schooling also is found to increase nonfarm income at the household level but not farm income we also find that farm household members from low potential agricultural areas are more likely to participate in local nonfarm activities and migration than those from high potential agricultural areas thus the results suggest that local nonfarm activities and migration offer employment opportunities for workers from low potential agricultural areas indeed the nonfarm activities and migration is likely to provide an important pathway to reduce poverty in low potential agricultural areas in east africa

economic mobility and poverty dynamics in developing countries this study provides an introduction to this special issue of the journal of development studies on economic mobility and poverty dynamics in developing countries in addition to providing a conceptual framework it outlines how the contributions fit into the extant literature a series of regularities emerge across these studies the poor consist of those who are always poor poor at all dates and those who move in and out of poverty with the latter group tending to be strikingly large such movements in and out of poverty are apparent when looking at poverty in either absolute or relative terms changes in returns to endowments can be a potent source of increased incomes finally seemingly transitory shocks can have long term consequences the study concludes by drawing out the policy implications of these regularities

rural income dynamics and poverty reduction in thai villages from 1987 to 2004 this article aims to examine the factors contributing to the increase in household income and the corresponding reduction in poverty in rural thai villages from 1987 to 2004 by employing household panel data it is found that there has been a significant structural shift of household income away from farm to nonfarm income sources as well as a reduction in the income gap and the difference in poverty incidence between favorable and unfavorable regions such decreases in poverty and its regional gap have been associated with the declining importance of income accrued to farm land measured by farm size and the availability of irrigation and with the increasing importance of human capital measured by the proportion of working members who have graduated from post lower secondary schools such findings indicate that the success in rural poverty reduction in thailand has resulted from the development of the rural nonfarm sector coupled with the improvement of the schooling levels of the rural population

measuring lifetime poverty abstract this paper presents an axiomatic framework for measuring lifetime poverty over multiple periods for an individual we argue that lifetime poverty is influenced by both the snapshot poverty of each period and the poverty level of the permanent lifetime consumption it is also influenced by how poverty spells are distributed over the lifetime we axiomatically characterize classes of lifetime poverty indices and derive dominance conditions of poverty orderings for both individual and societal lifetime poverty measurements

green revolution land reform and household income distribution in the philippines income of agricultural households consists of returns to labor capital and land from farming supplemented mainly by labor earnings from nonfarm sources agricultural technology affects farmers income through its effect on factor demands and factor prices which in turn induce changes in the allocation of farmers own resources to different uses income from farming is also affected by village institutions such as land tenure which governs the distribution of income between landlords and tenants as well as resource allocations

effects of family background on earnings and returns to schooling evidence from brazil we investigate whether omitted family background variables are responsible for high returns to schooling estimated in brazil returns to schooling fall by about one third when parental schooling is added to wage equations surprisingly the schooling of fathers in law has larger effects on wages than the schooling of fathers on the basis of a model of assortative mating we interpret this as evidence that parental characteristics represent unobservable worker attributes rather than nepotism in the labor market we conclude that the family background bias in returns to schooling is modest and need not imply returns to family connections

tastes and technology in a two country model of the business cycle explaining international trade on international financial markets allows people to insure country specific risk and smooth consumption intertemporally equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment the authors incorporate nontraded goods in the model and find that the implications for aggregate consumption investment and the trade balance are consistent with business cycle properties of industrialized countries however the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level taste shocks produce price quantity relationships more consistent with the data copyright 1995 by american economic association

persistent expected and innate poverty estimates for semi arid rural south india 1975 1984 this paper uses nine years of panel data on 170 rural households in southern india to calculate intertemporal measures of poverty these include measures of 1 expected poverty that identify households likely to remain poor on average during any year 2 innate poverty that identify households that are poor owning to deep rooted characteristics that cannot easily be changed in the short run and 3 persistent poverty that identify households whose incomes fall below a fixed poverty line over a number of years the poverty rates estimated for the sample with the three measures are 61 percent 48 percent and 22 percent respectively c 1993 academic press inc copyright 1993 by oxford university press

the effect of outward investment to china on domestic r d a two hurdle model with endogenous odi outward direct investment odi and domestic r d are interrelated but empirical evidence is affected by the nature of a firm s data which are heavily censored firm data contain a firm s yes no decision to invest in china yes no decision of r d and the decision of r d intensity we thus adopt a two hurdle model and allow the china investment decision to be endogenous in an r d model in order to examine the effect of odi in china on domestic r d investment in taiwan s electronics industry in the model a two equation simultaneous subsystem is formed in which three regression equations are specified a decision of r d intensity and a yes no decision of location to conduct r d together with a yes no decision to invest in china our results indicate that china investment and r d intensity are positively related such that odi in china helps to raise significantly a firm s r d intensity as compared to the estimate if the endogeneity of china investment and the nature of data were not properly accounted

investment and the current account in the short run and the long run theoretical models of the relationship between investment and the current account impose restrictions on the joint dynamic behavior of these variables these restrictions come in two forms one imposes causal orderings on investment and the current account the other restriction concerns the permanent responses of these variables to different shocks we use these restrictions to identify empirically structural shocks from vector autoregressions of investment and the current account for canada under certain identifications our results support the implications of the intertemporal small open economy model however these results are sensitive to perturbations of the identifications

financial markets financial dependence and the allocation of capital abstract we explore one specific channel through which finance promotes growth the allocation of capital using international industrial data we find that countries with developed financial markets invest more in growing industries and pull out more funds of declining ones most interestingly this pattern is more eminent for those industries more dependent on external financing various robustness checks show that the results are not driven by reverse causality omitted variables specific countries or industries

home sweet home home bias and international diversification among individual investors abstract a striking feature of international portfolio investment is the extent to which equity portfolios are concentrated in the domestic market of the investor we investigate differences in home bias on an individual level by studying portfolios formed as a part of the new defined contribution pension plan in sweden we estimate the likelihood of home bias and use individuals demographic and socioeconomic features as explanatory variables our findings indicate that the likelihood of home bias is caused by both rational and irrational factors moreover we relate home bias to investors desire to hedge against inflation sophistication and overconfidence

are some groups more vulnerable to macroeconomic shocks than others hypothesis tests based on panel data from peru abstract which socio economic groups are most vulnerable to welfare declines during a macroeconomic shock after clarifying the difference between poverty and vulnerability this paper presents an analytical framework and applies it to panel data from peru major findings are 1 households with better educated heads are less vulnerable 2 female headed households are no more vulnerable than male headed households 3 households with more children are more vulnerable 4 transfer networks that assist the poor in relatively stable periods do not protect them during a major shock unless they originate from outside peru and 5 peru s social security program is targeted neither to vulnerable nor to poor households but other transfer programs are better targeted

patterns of internationalisation of corporate technology location vs home country advantages given the trends towards increasing globalisation of markets and of production the globalisation of technology remains a subject of considerable interest to analysts and policy makers in the 1990s this paper provides some new empirical observations for debate and discussion on the patterns of technological activities of large firms outside their home countries it is based on a systematic analysis of the us patenting activities of 220 of the most internationalised firms in terms of their technology in the 1990s although firms are active outside their home countries in the high technology fields such as computers pharmaceuticals telecommunications image and sound and materials quite a sizeable proportion of their foreign activities are concerned with process and machinery technologies moreover a comparison of the technological advantage of the company at home and the advantage of the location shows that in a large majority of cases firms tend to locate their technology abroad in their core areas where they are strong at home these results suggest that adapting products and processes and materials to suit foreign markets and providing technical support to off shore manufacturing plants remain major factors underlying the internationalisation of technology they are also consistent with the notion that firms are increasingly engaging in small scale activities to monitor and scan new technological developments in centres of excellence in foreign countries within their areas of existing strength however there is little evidence to suggest that even these most internationalised firms routinely go abroad to compensate for their weakness at home

slipping into and out of poverty the dynamics of spells this paper examines the dynamics of poverty previous analyses have examined either fluctuations in the male heads earnings or the frequency of poverty periods over a fixed time frame our approach depends on a definition of spells of poverty using this methodology we find that the majority of poor persons at any time are in the midst of a rather long spell of poverty the methodology also allows us to estimate that less than 40 percent of poverty spells begin because of a drop in the heads earnings while 60 percent of the spells end when the heads earnings increase thus researchers must focus on household formation decisions and on the behavior of secondary family members there has been a dramatic resurgence recently of discussion of the underclass the discussion is reminiscent of debates about poverty during the 1960s when the notions of a culture of poverty particularly as popularized by michael harrington s other america 1962 dominated both intellectual and policy thinking the idea of an underclass seems inconsistent however with much of the research on the dynamics of poverty during the 1970s that research using new longitudinal data seemed to show that the bulk of the poor were poor for only a few years the research also showed that the poor were a very heterogeneous group including a small minority of persistently poor the persistence of poverty is of interest both for understanding the phenomenon and for developing policy claims about dependency and separate life styles among the poor rest on assumptions about the long term nature of poverty questions

poverty in palanpur the meaning and identification of poverty are examined using three indicators of standard of living in the north indian village of palanpur the first is intended as a measure of apparent prosperity based on the personal assessments of investigators after intensive field work in the village over the full agricultural year 1983 84 the other two are income in 1983 84 and a measure of permanent income obtained by averaging incomes from four surveys conducted over a twenty six year interval a comparison of these three indicators shows that income measured in any one year may give a misleading impression of the incidence of poverty the risk of poverty for households is calculated vulnerability is high among low caste households and those which are involved in agricultural labor categories however are not homogeneous for example whereas the landless and widows are more likely to be poor some of such households are quite well off it is argued that poverty in a good agricultural year is a better indicator of sustained poverty than poverty in a bad year occupational mobility out of agricultural labor is low and changes in the distribution of land are largely accounted for by demographic processes such as household splits

prices credit markets and child growth in low income rural areas in this paper it is argued that fluctuations in child growth in rural areas of bangladesh during and after severe floods in i988 can provide insight into the structure of credit markets a model of intertemporal resource allocation is developed and euler equations relating growth patterns of children to the cost of borrowing by household are then derived from the model the evidence indicates that although some of the variation in growth patterns over the relevant period may be attributed to variation in illness and the price of rice growth patterns for children in landless households were influenced by credit market imperfections this paper links two prominent strands of research in economic development the first strand examines the extent to which households in poor rural economies are able to protect themselves from the adverse weather and other shocks that importantly influence earnings in underdeveloped areas while it has long been thought that credit market imperfections and other forms of market failure make it difficult for poor individuals in these economies to smooth consumption both within and across years there remains some question about the magnitude and pervasiveness of these imperfections while there is evidence that fluctuations in economic conditions result in inefficient allocation of resources e g morduch 1990 rosenzweig and wolpin i993 some recent papers have emphasised the fact that consumption patterns of households in the same village comove in a manner consistent with the idea that a substantial fraction of idiosyncratic variation in income is effectively

international capital mobility amongst the major industrialised countries too little or too much this paper examines capital flows among the major industrialized countries with a view to assessing m feldstein and c horioka s 1980 claim that international capital mobility is limited it argues that saving investment correlation tests are inherently flawed and proposes an alternative methodology for testing the degree of international capital mobility it finds that capital flows have been excessive in the sense that they are driven by speculative forces rather than by economic fundamentals copyright 1995 by royal economic society

how much income mobility is there in britain using the first four waves of the british household panel survey 1991 4 and a variety of methods we show that there is much mobility in household net income from one year to the next in britain however most income changes from one year to the next are not very large and when incomes are longitudinally averaged so that transitory variations are smoothed out substantial permanent income differences are revealed there is some evidence of greater mobility for those in the tails of the income distribution relative to the middle and for elderly persons compared to non elderly persons

income mobility in rural india this paper offers a detailed analysis of income mobility in rural india during 1968 1969 to 1970 1971 it focuses on 1 the pattern of upward income mobility among a section of the cultivating poor and 2 some of the key factors that enabled them to overcome poverty the analysis is based on a panel survey of 4118 rural households from the additional rural income survey the author assumes that 16 rupees per person per month at 1960 1961 prices constitutes an upper limit for a minimum daily calorie requirement in rural areas the analysis shows that out of those poor in 1968 over 1 2 ceased to be poor over 12 became poorer and about 36 remained poor without becoming poorer in 1970 out of the not poor in 1968 over 3 4 remained not poor while the remaining became poor in 1970 with the exception of the cultivating not poor who remained not poor all other categories reported substantial income changes in their average incomes during the period in question while the absolutely impoverished earned much lower incomes there were others particularly the poor ceased to be poor who registered impressive income gains comparison of the base year income levels of the 3 subsets of the cultivating poor suggested that on average the poorest of the poor fared better than the moderately poor this conclusion was further supported by an analysis of income mobility within a subset comprising the cultivating poor who ceased to be poor the bulk of these were relatively low income households that earned substantially higher incomes

the interdependence between fdi and r d an application of an endogenous switching model to taiwan s electronics industry foreign direct investment fdi and research development r d are mutually dependent and should be treated as endogenous variables in empirical studies an endogenous switching regression model is used to examine the mutual effect of fdi and r d in taiwan s electronics industry the empirical results show that fdi and r d are positively related and do reinforce each other unbiased coefficients are obtained as they are compared to those estimates if fdi and r d are treated as exogenous variables the results have a strong public policy implication for taiwan s foreign direct investment and can be further used to estimate the difference in r d expenditures between fdi and non fdi firms

the associations of soil fertility and market access with household income evidence from rural uganda abstract this study attempts to identify the major factors affecting farm and nonfarm income by using panel data of 894 rural households interviewed in 2003 and 2005 in rural uganda we supplement the panel data with household level soil fertility data and road distance data to the nearest urban center on three road types tarmac loose surface and dirt roads the results suggest that soil fertility measured by the soil organic matter som content is positively associated with crop income but not with livestock and nonfarm income we also find that the total road distance to the nearest urban center and the road quality have strong negative associations with the crop income

transformation of the rural economy in the philippines 1988 2006 abstract this research explores the changing structure of the rural economy in the philippines from 1988 to 2006 we found that the expansion and upgrade of infrastructure such as electricity and roads and investment in secondary and tertiary education are important factors that induced the economic transformation of the rural economy the importance of higher education as an entry requirement to the nonfarm labor market has declined over time indicating that the rural nonfarm sector has been increasingly providing employment opportunities to the unskilled and the uneducated who form the bulk of the rural poor

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

the globalisation of technology what remains of the product cycle model this paper reexamines two hypotheses associated with earlier versions of the product cycle model the first hypothesis that innovations are almost always located in the home country of the parent company is rejected on the basis of evidence drawn from one hundred years of u s patent office data the second hypothesis that the international dispersion of activity is led by technology leaders is historically valid however over the last twenty years technology leaders have been ahead instead in the globalization of technology that is in developing internal international networks to exploit the locationally differentiated potential of foreign centers of excellence c 1995 academic press inc copyright 1995 by oxford university press

consumption insurance an evaluation of risk bearing systems in low income economies the hypothesis of full risk sharing can be taken to data from low income countries and evaluate formal and informal financial systems in many contexts idiosyncratic risks are high so credit insurance arrangements could be beneficial statistical tests reveal that households in southern india take advantage of these possibilities villages in cote d ivoire and countries in thailand do not do as well the paper includes an empirical description of the devices used to smooth consumption and a theoretical discussion of private information and incentives on ideal operating systems the full information and mechanism design frameworks provide benchmarks for policy analysis

cash crop choice and income dynamics in rural areas evidence for post crisis indonesia in this article we investigate the factors affecting levels and growth of incomes in rural indonesia following the crisis of 1997 1998 in particular we investigate the relative roles of nonfarm incomes and productivity improvements achieved via changes in crops versus improvements on the same crops on income dynamics framing the article in the context of an optimal labor allocation model relying on unique household panel data from central sulawesi and using advanced panel econometric methods we find that local innovations related to the adoption and intensification of new cash crop varieties more specifically the shift from coffee to cocoa production can explain a substantial part of the observed post crisis developments causal estimates of the effect of growing cocoa suggest that households were on average able to achieve about 14 higher income levels during the post crisis period compared to the planting of other crops most notably coffee also our results demonstrate the importance of engagement in nonfarm activities for household income growth comparative analyses using a nationally representative survey suggest that similar processes are at play in other parts of indonesia

incomplete intertemporal consumption smoothing and incomplete risk sharing this paper develops a method to estimate jointly the degree of intertemporal consumption smoothing and the degree of inter regional risk sharing the empirical results for the u s states and oecd and eu countries suggest that i regardless of the assumption on the degree of intertemporal consumption smoothing the degree of risk sharing within a country is larger than across countries ii the degree of intertemporal consumption smoothing within a country is also larger than across countries and iii the difference between the degree of intertemporal consumption smoothing within u s states and across oecd and eu countries is as large as the difference between the degree of risk sharing contrary to the findings of some past studies

international risk sharing and european monetary unification abstract we explore income and consumption smoothing patterns among european community ec countries and among oecd countries during the period 1966 90 we find that for oecd as well as for ec countries about 40 percent of shocks to gdp are smoothed at the one year frequency with about half the smoothing achieved through national government budget deficits and half by corporate saving at the three year differencing frequency only 25 percent of shocks to gdp are smoothed mainly via government lending and borrowing in the absence of alternative income and consumption smoothing mechanisms the restrictions on budget deficits imposed by the maastricht treaty should be relaxed to allow governments to run large temporary deficits in response to output shocks

welfare gains from international risksharing abstract this paper uses consumption data to compute yet unexploited welfare gains that can be achieved through risksharing among twenty oecd countries there is both aggregate national consumption risk and nondiversifiable individual specific risk countries engage in an optimal risksharing arrangement to pool risk associated with the aggregate consumption endowment streams welfare gains are associated with reduced consumption variability and with the international pricing of the consumption streams of individual countries the paper considers the standard vnm time additive preferences as well as nonexpected utility and habit formation preferences large unexploited gains are found under all sets of preferences leading to an international risksharing puzzle

the rural non farm sector issues and evidence from developing countries abstract the rural non farm sector has traditionally been viewed as a low productivity sector which produces low quality goods it is often expected to wither away as a country develops recent years have seen a shift away from this position towards recognition that the rural non farm sector can and often does contribute to economic growth rural employment poverty reduction and a more spatially balanced population distribution this paper reviews the literature on the conceptual and empirical underpinnings of this more recent perspective focussing on the experience in developing countries the paper documents the size and heterogeneity of the sector pointing to evidence that in many countries the sector is expanding rather than declining the issues associated with measuring the sector s economic contribution are discussed followed by empirical assessments for several countries and regions the distributional impact of non farm earnings is examined and it is found that a pro poor impact while by no means inevitable can be considerable the sector s trajectory over time in different settings is reviewed and the scope for and experience of various policy interventions is discussed

common and country specific fluctuations in productivity investment and the current account abstract dynamic factor analysis and kalman filtering are used to construct a measure of common economic activity for the g7 countries we find that the common fluctuations are strongly associated with movements in us investment common fluctuations have substantial impact on fluctuations in both productivity and investment in these countries but very little impact on the current account country specific investment fluctuations have a significant negative impact on the current account while country specific productivity movements have little independent effect these findings are shown to be generally consistent with the predictions of a multi country dynamic model calibrated to the empirical decomposition of productivity shocks

new concepts and trends in international r d organization abstract the globalization of markets the regionalization of technical and scientific expertise and the rapid change in technologies are forcing technology based companies to continuously adjust their r d organization our study of 33 companies reveals five different types of r d organization in multinational companies mnc we classified r d organizations according to the dispersion of r d activities and the degree of cooperation between individual r d units and identified the ethnocentric centralized the geocentric centralized the polycentric decentralized the r d hub and the integrated r d network organization five trends of organizational change among these forms of international r d organization were identified 1 stronger orientation of r d activities towards international markets and knowledge centers 2 establishment of tightly coordinated listening posts 3 strengthening and reinforcement of foreign r d sites 4 increased integration of decentralized r d units and 5 tighter coordination and recentralization of r d activities at fewer know how centers the search for the optimal balance between coordination and control is reflected by hybrid structures and intermediary configurations detected in some of the investigated companies since effective changes in behavioral orientation require considerable time successful quantum leaps in multinational r d organization are next to impossible

technology sourcing versus technology exploitation an analysis of us foreign direct investment flows the traditional paradigm of foreign direct investment fdi suggests that fdi is undertaken principally to exploit some firm specific advantage in a foreign country which provides a locational advantage to the investor however recent theoretical work suggests a model of fdi in which the motivation is not to exploit existing technological advantages in a foreign country but to access such technology and transfer it from the host economy to the investing multinational corporation via spillover effects this paper tests the technology sourcing versus technology exploiting hypotheses for a panel of sectoral fdi flows between the united states and major oecd nations over a 15 year period the research makes use of patel and vega s research policy 28 145 55 1999 taxonomy of sectors which are likely a priori to exhibit technology sourcing and exploiting behaviour respectively while there is evidence that fdi flows into the united states are attracted to r and d intensive sectors very little support is found for the technology sourcing hypothesis either for inward or outward fdi flows the results suggest that in aggregate firm specific ownership effects remain powerful determinants of fdi flows

consumption smoothing channels in open economies abstract many intertemporal open economy macro models imply a theory of consumption smoothing channels thus we build an empirical model to analyze the intertemporal smoothing role of saving components fixed investments inventories and trade balance through the use of var impulse responses to different types of shocks we find that for the oecd countries the bulk of intertemporal smoothing has been carried out domestically via gross fixed investments and inventories but the trade balance has also played a relevant albeit volatile smoothing role we also characterize the dynamic behavior of each component the trade balance and inventories are mostly used as short run smoothing tools while fixed investment provides more and more smoothing over time we can also address some empirical puzzles such as the excess sensitivity of investment anomaly glick r rogoff k 1995 global versus country specific productivity shocks and the current account journal of monetary economics 35 159 192 and the saving investment correlation puzzle feldstein m horioka c 1980 domestic saving and international capital flows economic journal 90 314 329

dynamic risksharing in the united states and europe abstract we use a panel var model to improve upon the existing methodologies to analyze interregional risksharing and consumption smoothing channels first we endogenize the output process within a more general multi equation framework capturing the dynamic feedback between output and various smoothing channels second in line with dynamic general equilibrium open economy models of risksharing we exploit impulse response functions to trace the role of each smoothing channel over time in the presence of different structural shocks temporary vs permanent and output vs smoothing channels in the application to the us and oecd countries we find different dynamic properties of different smoothing channels we compare our results with the predictions of standard risksharing and consumption theories and tackle some of the puzzles in the literature such as the international risksharing puzzle and the consumption output correlation puzzle we are also able to address such policy issues as whether fiscal stabilizers have been substitutes or complements for financial market diversification activities and whether further financial market integration is likely to provide countries with more shock absorption tools a key result is the strong substitutability between capital and credit smoothing in the us and between fiscal and credit smoothing in the oecd

foreign direct investment in industrial research in the pharmaceutical and electronics industries results from a survey of multinational firms abstract this paper examines motives location characteristics inter temporal characteristics and modes of entry for foreign direct investment fdi in research and development r d the paper is based on a detailed empirical survey of laboratory sites established by 32 large multinational companies domiciled in 5 countries findings indicate that fdi in r d has risen considerably over the last 40 years and that firms invest in r d sites abroad in order to augment their knowledge base or in order to exploit it the former motive leads to establishment of facilities primarily close to universities while the latter type leads to establishment of facilities close to existing manufacturing facilities and markets the paper also finds that greenfield investments are the dominant mode of entry and that firms establish multiple r d sites in their home countries before investing in such sites abroad

introduction to the special issue on the role of nonfarm income in poverty reduction evidence from asia and east africa in this special issue we present seven studies that collectively attempt to investigate the role of non farm income in long term and short term poverty reduction in asia and africa the first four studies out of the seven use long term panel data over two decades in the philippines thailand bangladesh and india these studies show drastic increases in non farm income shares and corresponding declines in poverty levels over time especially in the philippines and thailand education levels of household members and returns to education also increased significantly in these countries the remaining three studies use cross sectional and short term panel data from ethiopia kenya and uganda these african studies show high proportions of poor households and low shares of non farm income that are somewhat comparable to the situation in the 1980s described in the asian studies without the green revolution that provided stable farm income and potential financial resources to invest in children education in asia it is not clear if african farm households can follow the asian examples

linking fdi motivation and host economy productivity effects conceptual and empirical analysis we develop a taxonomy that relates foreign direct investment fdi motivation technology and cost based to its anticipated effects on host countries domestic productivity we then empirically examine the effects of fdi into the united kingdom on domestic productivity and find that different types of fdi have markedly different productivity spillover effects which are consistent with the conceptual analysis the uk gains substantially only from inward fdi motivated by a strong technology based ownership advantage as theory predicts inward fdi motivated by technology sourcing considerations leads to no productivity spillovers

network linkages and location choice in foreign direct investment this paper shows that network linkage is an important determinant of location choice in foreign direct investment fdi network linkages are divided into internal intra firm and external inter firm linkages external linkages are further separated into strategic and relational linkages we found that taiwanese firms are keen on making external linkages but are indifferent to or incapable of making internal linkages through fdi strategic linkages motivate taiwanese fdi in the united states while relational linkages facilitate taiwanese fdi in southeast asia and china small firms are more sensitive to relational linkages than large firms in their choice of fdi location

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

european market integration through technology driven m as merger and acquisitions m as have been an important tool for reorganizing the european market since the establishment of european economic and monetary union this article suggests that european integration helped and encouraged european firms to source technology across national borders in europe establishing european innovative firms the figures confirm that once barriers impeding the free movement of capital goods and labour had fallen european firms used m as intensively to enter foreign european markets enhancing technology competencies is found to be one of the main motives for cross border acquisitions in the 1990s but is not a factor in domestic acquisitions over the same period

smoothing consumption by smoothing income hours of work responses to idiosyncratic agricultural shocks in rural india while research has demonstrated that farm households in developing economies are able to protect consumption from idiosyncratic crop shocks little evidence shows how this is achieved this paper examines the extent to which labor markets allow households to shift labor from farm to off farm employment and the extent to which such a shift explains the observed lack of correlation between consumption and idiosyncratic crop shocks the empirical analysis uses a novel measure of the idiosyncratic crop income shock which utilizes information on start of season cropping choices to more accurately estimate household expectations of weather

the lucky few amidst economic decline distributional change in cote d ivoire as seen through panel data sets 1985 88 this article is an exploratory exercise in using panel data sets to investigate distributional change in cote d ivoire during the second half of the 1980s the panels made it possible to highlight and quantify mobility of the same households across poverty classes over time we found that there were a lucky few who improved their standard of living amid general decline detailed investigations revealed that the lucky few were fairly numerous and the probability of escaping poverty was quite high even for the very poorest these lucky few were widespread regionally although in some socio economic groupings the poor had higher chances of escaping poverty

livelihood strategies and dynamics in rural cambodia summary this paper addresses one of the major challenges in rural livelihood analysis to quantitatively examine the dynamics of household livelihood strategies it investigates the interactions between livelihood assets activities and outcomes and captures the dynamics of long term changes and their underlying factors the study aims to identify the classification of rural livelihood strategies their transitions and factors influencing these processes and changes we employ the dynamic livelihood strategy framework and use panel data for 2008 and 2012 covering 464 households in 15 villages in cambodia for latent class cluster analysis and regression estimation in this paper livelihood strategies are quantified based on allocation of available resources which overcomes the limitations of income based analysis our study identifies five household livelihood strategies pursued in the study areas and the results show that over 70 of households change livelihood strategies over time in response to evolving pressures incentives and opportunities the study identifies covariates that shape the choices of livelihood strategies and affects the households access to more remunerative strategies such as education ownership of physical assets and access to infrastructure these findings suggest policy implications for improving the range of livelihood choices available to lower income groups to move out of poverty trap

investigating geography and institutions as determinants of foreign direct investment in africa using panel data this article uses a cross country econometric approach to identify the determinants for foreign direct investment fdi in africa the contribution is 3 fold firstly we recognize that the estimation techniques used elsewhere such as ordinary least squares may be flawed we therefore use a dynamic one step generalized method of moments gmm estimator due to arellano and bond 1991 the gmm estimates identified a number of robust determinants of fdi namely government consumption inflation rate investment governance political stability accountability regulatory burden rule of law and initial literacy it is concluded that geography does not seem to have a direct influence on fdi flows to africa neither market seeking nor re exporting motives of fdi seem to dominate with different policy instruments being significant in the different specifications this does not discount the importance of good policies but probably indicates the importance of good policies made by good institutions institu

poverty transition and persistence in ethiopia 1994 2004 summary this study analyzes the persistence of poverty in both rural and urban areas in ethiopia during 1994 2004 the key finding is that households move frequently in and out of poverty but the difficulty of exiting from poverty like the chance of avoiding slipping back increases with the time spent in that state and varies considerably between male and female headed households our results imply that it is important to design anti poverty policies both to hinder households from slipping into extreme poverty and to minimize the length of the poverty spell for households once they have fallen into it

risk financial markets and human capital in a developing country this paper explores the link between financial market incompleteness and human capital accumulation we examine how child school attendance responds to seasonal fluctuations in the income of agrarian households using panel data from rural india to pinpoint market imperfections we study responses to aggregate and idiosyncratic as well as to anticipated and unanticipated income shocks our main finding is that seasonal fluctuations in school attendance are a form of self insurance but one which does not result in a substantial loss of human capital on average

one kind of freedom poverty dynamics in post apartheid south africa abstract a 1993 south african living standards survey documented the legacy of apartheid in the form high levels of inequality and human insecurity drawing on a 1998 re survey of households in the 1993 study this paper explores whether this legacy has been superseded or whether apartheid s end has been only one kind of freedom that has left households in a poverty trap from which they cannot escape after proposing a theoretically grounded dynamic poverty typology that distinguishes stochastic from structural poverty transitions the paper goes on to estimate that significant numbers of the south african poor are potentially trapped in a structural poverty trap and lack the means to escape poverty over time

ex ante actions and ex post public responses to drought shocks evidence and simulations from zimbabwe abstract the study examines the consequences of alternative public responses to drought shocks it does so by drawing on household data from resettlement areas of rural zimbabwe from 1992 93 to 1995 96 and the estimation of four behavioral relations the determinants of crop income the determinants of investment in livestock the determinants of investment in agricultural capital stock and the determinants of private transfers this information is used to construct a series of simulations in which drought relief received in the aftermath of the 1994 95 the ex post response is made available to households in the form of agricultural capital stock and extension advice an ex ante action doing so is found to raise household welfare in nondrought years but provides only limited protection in the aftermath of drought

the dynamics of welfare gains and losses an african case study this article uses panel survey data for cote d ivoire to investigate the determinants of welfare gains and losses of households over time a first difference model is estimated which takes account of initial conditions for urban areas it was found that human capital is not only a key explanatory factor for levels of welfare but also the most important endowment to explain welfare changes over time in rural areas physical capital especially land and farm equipment mattered most household size and composition and socioeconomic characteristics of the household also affected welfare changes policy implications are discussed

nonfarm employment agricultural shocks and poverty dynamics evidence from rural uganda this article examines the role of off farm employment in poverty reduction over a short period of time by using panel data from 894 rural ugandan households in 2003 and 2005 taking advantage of the unique off farm labor supply and income data we analyzed how households respond to negative agricultural shocks especially through off farm labor supply and income to mitigate crop income loss our analysis indicates that the flexibility of labor time allocation varies across off farm jobs and that only low skilled and low wage jobs tend to be used to mitigate negative shocks especially among the asset poor

jobs off the farm wealth human capital and social group in rural eastern india abstractthis study examines the effects of wealth human capital and social group on the occupational choice and income of farm households to gain an understanding of the mechanism underlying the

why growth is not enough household poverty dynamics in northeast gujarat india despite high growth rates in gujarat exceeding 9 per cent per year over the decade of the 1990s poverty in 36 villages located in the northeastern part of this state has changed hardly at all in these villages 9 5 per cent of households escaped from poverty over the past 25 years but 6 3 per cent of households became poor at the same time escape and descent are not symmetric different reasons account for escaping poverty than those for declining into poverty growth alone is hardly sufficient to achieve poverty reduction on any significant scale public policies will be needed to address directly the separate causes for descent into poverty

saving in developing countries theory and review in the literature on economic development much of the interest in saving has been focused on the relation between saving and growth but saving is not only about accumulation it is about smoothing consumption in the face of volatile and unpredictable income and helping to ensure the living standards of poor people whose lives are difficult and uncertain this paper develops a model of households which cannot borrow but which accumulate assets as a buffer stock to protect consumption when incomes are low such households dissave as often as they save do not accumulate assets over the long term and have on average very small asset holdings but their consumption is markedly smoother than their income much of the evidence is as consistent with this view of saving as it is incosistent with standard views of smoothing over the life cycle and with explanations of the link between saving and growth in terms of life cycle saving behavior consumption smoothing is also a useful way of thinking about government policy where volatility in the world prices of taxed commodities can generate sharp fluctuations in government revenues as well as reallocations of revenue between the private and public sectors many important policy issues in developing countries hinge on issues of consumption and smoothing and research on these issues is currently likely to be more productive than work on the relation between saving and growth

the impact of technological innovation on international trade patterns the evidence reconsidered abstract this paper presents some new evidence in relation to the role of technical change in particular industrial innovation on the international competitiveness of the various oecd countries its originality consists primarily of a using a technology output indicator to measure technological performance b presenting and comparing various measures of trade and technological performance for each individual oecd country with the exception of iceland c analysing at a relatively high level of product industry disaggregation the relationship between export performance and technological performance at the same time the very limited scope of the paper has to be emphasized a the analysis is purely static all the evidence presented relates to one year 1977 b most of the results obtained are preliminary and should be further substantiated by more detailed empirical and theoretical research c as a consequence little attention has been paid to policy implications which it was felt could only be discussed properly in a later stage the paper consists of four sections a brief review of the state of the art section 1 a discussion on definitions of technology intensity section 2 the development of the best technology output indicator section 3 and the empirical analysis itself section 4 the following most important results emerge from these various sections a there are serious shortcomings in using average technology intensity as bench mark for classifying products or industries in technology intensive or nontechnology intensive categories b there is a substantial difference between technology intensity as measured on the basis of a technology input proxy rd c yet as between countries the most traditional output and input indicators the number of patents granted and the amount spent on rd d foreign patenting in particular foreign patenting in the united states figs 1 and 2 section 3 is a more reliable technology output proxy than domestic patenting e in terms of technological comparative advantage as opposed to technology intensity it is the small oecd countries as opposed to the large ones which seem to base their trade comparative advantage on technological comparative performance table 7 section 4 1 f at the individual industry level it is found that i for most technology intensive industries defined however in a less restrictive way than us r d intensities a close relation exists between technological performance and export performance and ii that as compared to other country specific resource variables technological performance is the most important trade explanatory variable its elasticity increasing with the technology intensity of industries tables 11 and 12 section 4 2 space constraints prevented us from presenting the data in relation to the inter industry and inter country analysis these can however be obtained from the author

non farm activity household expenditure and poverty reduction in rural vietnam 2002 2008 summary diversifying into non farm activities has been suggested as an effective way out of poverty for rural households in developing countries using the vietnamese household living standards surveys of 2002 2004 2006 and 2008 we test this claim and investigate the effect of non farm sector involvement on poverty and expenditure growth our endogeneity corrected estimates show that an additional household member involved with non farm activity reduces the probability of poverty by 7 12 and increases the household expenditure by 14 over a two year period our findings also indicate that non farm involvement reduces the hours worked on farm but not the household agricultural income

the drivers of foreign direct investment into research and development an empirical investigation this paper examines the determinants of foreign direct investment fdi in research and development laboratories by 32 multinational enterprises in the pharmaceutical and electronics industries the paper applies a dichotomous set of motives for fdi results from an econometric analysis of 136 laboratory investments show that relative market size and relative strength of a country s science base determine whether fdi in research and development is carried out in order to exploit existing firm specific advantages or in order to build up new firm specific advantages this holds true in similar form for japanese european and u s firms and across the two industries

on the measurement of poverty official statistics in the united states and the united kingdom show a rise in poverty between the 1970 s and the 1980 s but scepticism has been expressed with regard to these findings in particular the methods employed in the measurement of poverty have been the subject of criticism this paper re examines three basic issues in measuring poverty the choice of the poverty line the index of poverty and the relation between poverty and inequality one general theme running through the paper is that there is a diversity of judgments which enter the measurement of poverty and that it is necessary to recognize these explicitly in the procedures adopted there is likely to be disagreement about the choice of poverty line affecting both its level and its structure in this situation we may only be able to make comparisons and not to measure differences and the comparisons may lead only to a partial rather than a complete ordering the first section of the paper discusses the stochastic dominance conditions which allow such comparisons illustrating their application by reference to data for the united states the choice of poverty measure has been the subject of an extensive literature and a variety of measures have been proposed in the second section of the paper a different approach is suggested considering a class of measures satisfying certain general properties and seeking conditions under which all members of the class which includes many of those proposed give the same ranking those sceptical about measures of poverty often assert that poverty and inequality are being confounded the third section of the paper distinguishes four different viewpoints and relates them to theories of justice and views of social welfare

savings investment and international capital flows abstract the high correlation between national savings and domestic investment rateshas been interpreted as evidence that capital is not internationally mobile this paper surveys the theory and evidence on the relationship between savings and investment in a sample of 23 oecd countries a positive correlation between savings and investment rates is found in both the short and long runs however a wide variety of models generate such co movements in savings and investment in response to exogenous disturbances even under conditions of complete financial markets thus the savings investment correlation provides little evidence on the question of international capital mobility

decentralised r d and strategic competitiveness globalised approaches to generation and use of technology in multinational enterprises mnes abstract using material from surveys of multinational enterprise mne production subsidiaries and laboratories operating in the uk the paper seeks to discern vital changes in the roles of such r d facilities from the primarily tactical and technologically dependent role of adapting established group products for the local market these labs now take more committed positions in support of their group s strategic competitiveness this can involve a much more profound involvement in original product development or inputs into programmes of pre competitive basic or applied research to support the longer term evolution of the core technology of the mne group it is suggested that this evolution of decentralised labs positioning in mne knowledge strategies implies i an increasing involvement in product development rather than adaptation ii an interdependent rather than dependent position in group technology programmes iii increased relevance of supply side influences host country technology competencies capacities and heritage iv decline of centralising forces on r d e g economies of scale communication and co ordination problems concerns of knowledge security

household strategies and rural livelihood diversification this article reviews the recent literature on diversification as a livelihood strategy of rural households in developing countries with particular reference to sub saharan africa livelihood diversification is defined as the process by which rural families construct a diverse portfolio of activities and social support capabilities in order to survive and to improve their standards of living the determinants and effects of diversification in the areas of poverty income distribution farm output and gender are examined some policy inferences are summarised the conclusion is reached that removal of constraints to and expansion of opportunities for diversification are desirable policy objectives because they give individuals and households more capabilities to improve livelihood security and to raise living standards

present value tests of an intertemporal model of the current account abstract this paper first demonstrates that in a simple intertemporal open economy model the current account is equal to the expected decline of the present discounted value of net output of a country net output is defined as gross domestic product less the sum of investment plus government spending it then uses econometric methods for present value models to analyze the current account for four countries in two of these countries the model does a satisfactory job of explaining the current account

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

analysing the determinants of us direct investment in mexico in this paper a simple model of foreign direct investment is developed and tested on investment flows from the usa to mexico between 1967 and 1994 using cointegration analysis domestic demand and relative factor costs are found to influence direct investment flows suggesting support for both the cheap labour and market size hypotheses the short run dynamics of the model indicate that exchange rate movements have an effect on the timing of the investment decision