growing sub systems vertically hyper integrated sectors and the labour theory of value the author starts from piero sraffa s notion of subsystem and from his own notion of vertically integrated sector and goes on to a complete generalization to dynamic analysis a production system is partitioned into a set of self contained growing subsystems each of which compactly considered is characterized by one single unit of consumption good at one extreme and one single labor coefficient at the other extreme a vertically hyper integrated sector this logical construction is shown to possess remarkable analytical and normative properties particularly suitable for dynamic analysis among these properties a complete generalization is obtained of ada m smith s pure labor theory of value copyright 1988 by oxford university press

adjustment trade policy and investment slumps evidence from africa abstract this paper presents a model of investment in six african economies over the 1970s and 80s paying particular attention to the impact of the policy reforms which have accompanied structural adjustment programmes a priori the impact of trade reform on investment can be positive or negative in practise there is some evidence that it might be negative

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

african economic development in a comparative perspective conventional explanations of poor african economic performance generally fail to pay adequate attention to causal mechanisms of growth decline and stagnation many african countries experienced investment booms after independence but in contrast to east asian newly industrialising economies these were not sustained owing to failure to establish a virtuous growth circle involving complementary increases in savings and exports structural adjustment programmes dismantled stat mediated mechanisms of accumulation without putting viable alternatives in place and failed to tackle the structural constraints which impede productivity growth in agriculture a new policy approach drawing on the experience of both post colonial and adjustment periods is necessary copyright 2001 by oxford university press

capture and governance at local and national levels 135 despite the importance of this issue not much systematic research appears to have been devoted to assessing the relative susceptibility of national and local governments to interestgroup capture here we describe a model of two party electoral competition with probabilistic voting behavior and lobbying by specialinterest groups based on david baron 1994 and gene grossman and elhanan helpman 1996 that helps identify determinants of relative capture at different levels of government these include relative levels of voter awareness and interest group cohesiveness electoral uncertainty electoral competition heterogeneity of districts with respect to inequality and the electoral system while some of these uphold the traditional madisonian presumption others are likely to create a tendency for lower capture at the local level so the net effect is theoretically ambiguous this suggests that the extent of relative capture may be context specific and needs to be assessed empirically

structural adjustment and african industry over the years many analysts have despaired of the effects of structural adjustment on the economies of sub saharan africa the ability of these economies to respond positively to exposure to market liberalisation has been weak and faltering the weakness of the african supply response has been particularly marked in manufacturing industry and manufactured export performance even the world bank the main architect of adjustment programmes has at times shown disappointment with the failure of its recipes though it has remained doggedly optimistic however its latest report on adjustment in africa world bank 1994 comes to rather optimistic conclusions on the impact of adjustment especially on industry thus adjustment in africa starts as follows in the african countries that have undertaken and sustained major policy reform adjustment is working 2 it finds that the countries that had the most improvements in policies had the strongest increases in gdp growth and that the increase in their industrial and export growth rates was even more striking in view of the past debate on the effects of structural adjustment in africa3 following the established convention the discussion of africa covers sub saharan africa excluding south africa these findings are important and deserve scrutiny

agricultural diversification and export promotion in sub saharan africa abstract declines in world commodity prices have emphasized the need in africa for diversification away from a few agricultural exports market reforms are not enough high transfer costs and imperfect factor markets imply that many consumer goods frequently including food staples are non tradables raising the possibility of major demand constraints in agriculture commodity specific zone specific and sequenced production and marketing policies are necessary to speed supply response of agricultural exports to market reforms then supply responsiveness must be increased for non tradable wage goods especially in non export producing zones to cope with new domestic demand created by export growth

dynamic home made rations of commodities the application of pasinetti s vertical hyper integration to trade in capital goods commodities are not completely home made if their production requires imported capital goods directly or indirectly applying the concept of vertical hyper integration developed by pasinetti to the global economy this paper defines the dynamic home made ratio for each commodity which can explain the effects of home and overseas changes in technology and growth rates of consumption demand on the balance of payments the analysis deepens the understanding of the concept of home made ratios which is often referred to without exact definition and of nies which have repeatedly suffered unfavourable trade balances despite the strong performance of their exporting industries

investments in african agricultural research abstract over the past three decades africa s public agricultural research systems have changed in substantive ways the total number of researchers increased fourfold the dependency on expatriate researchers significantly declined while the education levels of national researchers improved initially the growth in research staff was matched by growth in expenditures but since the late 1970s real research spending has stagnated in addition loans and grants from donor agencies now account for a sizeable share of total funding for many african agricultural research systems many of the developments of the past decade in personnel expenditures and sources of support for public sector research and development r d in africa are not sustainable spending per scientist has declined continuously during the past 30 years most dramatically during the 1980s resources are spread increasingly thin over a growing group of researchers which has negative effects on the efficiency and effectiveness of agricultural research in africa

state corroding federalism competition among local governments in a decentralized political system is often thought to discipline lazy or corrupt officials improving public good provision and increasing welfare some scholars note possible distortions due to spillovers or a race to the bottom but suggest that central transfers or regulations can remedy these both arguments take for granted a framework of constitutional order in which the central government can collect taxes allocate transfers and enforce regulations autonomously but what if it can t we show that if central enforcement capacity is endogenous interjurisdictional competition may itself erode the center s ability to channel competition in welfare enhancing directions regional governments may compete for capital by shielding firms from central tax collectors bankruptcy courts or regulators the equilibrium result is weaker central law enforcement and usually lower welfare interjurisdictional competition corrodes the state we illustrate with three examples from russia china and the us of cases in which such competition apparently encouraged subnational politicians to help firms evade central taxes or regulations

privatization in africa an appraisal abstract in spite of spirited efforts over a decade only a few african countries can boast of any appreciable success in the privatization and or reform of state owned enterprises soes this paper argues that previous studies have not paid adequate attention to identifying and addressing the factors that affect the outcome of privatization and or soe reforms in africa after highlighting some flaws in these studies the paper focuses on the absence of the prerequisites for successful soe reform it then suggests policy issues that need to be addressed first and the role of interested parties including the multilateral and bilateral financial institutions in enhancing the success of soe reform efforts in africa

food marketing and pricing policy in eastern and southern africa a survey abstract this article surveys the empirical record of grain marketing and pricing policy in eastern and southern africa over 1930 1995 the paper addresses five key issues with major implications for food policy throughout africa a why the anticipated supply response to market liberalization has not yet occurred b why the common assumption of state taxation of farmers to support a cheap food policy does not apply in most of the countries in the region c why the temporary successes of the state led approach to stimulating smallholder grain production were unsustainable d why the elimination of government food subsidies associated with market reform has not adversely affected consumers and e why the fiscal cost of the marketing systems at least initially worsened rather than improved after the reforms were implemented in most countries the key future challenges for marketing policy are how to develop coordinated and financially sustainable input finance and commodity marketing systems for raising productivity growth in smallholder agriculture while overcoming inherited agricultural dualism and how to mitigate the effects of food price instability in a cost effective manner

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

open economies work better did africa s protectionist policies cause its marginalization in world trade in the mid 1950s sub saharan africa accounted for 3 1 percent of global exports by 1990 this share had fallen to 1 2 percent the authors of this report find that africa s extensive loss of competitiveness played a key role in its decline in world trade if africa had merely retained its 1962 64 oecd organization for economic cooperation and development market shares its exports now would be 75 percent higher africa s problem was two pronged 1 it experienced declining market shares for its major export products which in turn were of declining relative importance in world trade and 2 it was unable to diversify its export base empirical evidence developed by the authors shows that external protection has not played a major role in this decline in fact oecd trade preferences gave africa an advantage over many exporters trade restrictions and domestic policy interventions often create a bias against tradables especially exports that prevents the achievement of otherwise attainable growth rates import barriers in africa are far higher than in developing countries with faster export growth and appear to work against potential export products if the region is to reverse its unfavorable export trends it must adopt trade and structural adjustment policies that help make it competitive and help african exporters capitalize on foreign trade opportunities

tax competition and leviathan abstract attitudes towards downward pressure on tax rates from international tax competition depend on attitudes towards government this paper synthesises the two extremes which as in other areas of public finance have dominated the debate typically being presented as stark alternatives the view of government as a leviathan from which tax competition emerges as a useful constraint on policy makers and the view of government as a benevolent maximiser of their citizens welfare from which it emerges as a source of inefficiency conditions are derived under which when policy makers are neither entirely benevolent nor wholly self serving tax coordination benefits the representative citizen

agricultural tradables and economic recovery in uganda the limitations of structural adjustment in practice abstract uganda s economic reform program has been widely regarded as a success story for structural adjustment nevertheless a large trade deficit persists shored up by inflows of aid and private remittances the poor performance of the agricultural tradables sector is presented as the key explanation for this trade imbalance two main reasons for this poor performance are found to be the failure to liberalize producer prices quickly and the failure to overcome early institutional resistance to reforms of marketing arrangements uganda s recovery is therefore much less impressive than it appears and the sustainability of the now heavily aid dependent economy must remain in serious doubt

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

decentralisation as an incentive scheme recent changes have introduced more decentralization in a number of traditionally centralized countries 1 in the case of france it is sometimes claimed that the 1982 1983 reform of subcentral government is of historical importance although the principles of that reform are not contested any more by the new majority elected in 1986 opinions still differ on a number of policy issues some of the issues are presented in this introductory section but the main purpose of this paper is not to expose or discuss in detail the problems of decentralization in france as argued in the second part of the introductory section the theoretical framework in which the policy issues of decentralization are usually discussed by economists is somewhat unsatisfactory in particular when applied to unitary states such as britain or france the bulk of the paper is devoted to the exploration of a different approach to decentralization it is not purported however that this approach could completely replace the more traditional one consequently when in the concluding section we return briefly to the policy issues identified here this is to be read as a preliminary attempt to evaluate the relevance of the reasoning developed in the paper

the investment profits nexus in east asian industrialization abstract both orthodox and heterodox interpretations of east asian industrialization have concentrated on questions of resource allocation and neglected overall capital accumulation and the role of government in accelerating it this paper argues that corporate profits and other profit related incomes were the main source of investment in the most successful east asian economies government policies played a major role in promoting capital accumulation by creating rents and animating the dynamic interactions between profits and investment this was achieved through a broader set of measures than those usually identified as selective industrial policies

savings investment and the corporation in the east asian miracle abstract the east asian countries have achieved a spectacular average rate of economic growth over the last 30 to 40 years with very substantial diversification and economic development korea for example managed to transform itself from being a largely agricultural society in 1960 to the point where it became the third country after the us and japan to export 256 k memory chips developed by its own firms it is no exaggeration to say that the post wwii development of east asia including japan is the most successful story of sustained economic growth in the history of mankind how does one account for this extraordinary economic success

liberalization and food price distributions arch m evidence from madagascar abstract there is no well articulated theory of how stochastic food prices respond to economic liberalization measures a surprising oversight in the vast literature on market oriented reforms this paper presents reduced form estimates of the effects of liberalization measures on food commodity prices in madagascar using autoregressive conditional heteroskedastic in mean arch m methods the data indicate that the short term effects of liberalization on the mean and variance of food prices vary substantially by commodity region and season in the long term liberalization increases both the mean and the variance of food prices the abandonment of a quantity rationed state marketing system with administrative pricing also leads to smaller inter regional and interseasonal differences in mean food prices and a sharp increase in price autocorrelation real exchange rates have pronounced positive effects on mean food prices but these effects emerge indirectly rather than directly through induced changes to border parity prices

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

an optimal taxation approach to fiscal federalism in a federal system of government each unit of government decides independently how much of each type of public good to provide and what types of taxes and which tax rates to use in funding the public goods in this paper we explore what types of problems can arise from this decentralized form of decision making in particular we describe systematically the types of externalities that one unit of government can create for nonresidents through both its public goods decisions and its taxation decisions the paper also explores briefly what the central government might do to lessen the costs of decentralized decision making

taxes and bribery the role of wage incentives this paper presents a simple model to evaluate alternative payment schemes for tax inspectors in the presence of corruption we consider problems of both moral hazard which arises because taking bribes cannot be observed without costly monitoring and adverse selection since not all potential tax inspectors can be identified as being honest or dishonest we identify three wage regimes first one could pay the same wage that a tax inspector could earn elsewhere his reservation wage second one could pay a wage which solves the moral hazard problem i e deters bribery this we call an efficiency wage by analogy with recent models examined i n macro economics third the government could pay a wage below the reservation wage at which only the dishonest become tax inspectors the capitulation wage we make precise the conditions under which each yields the greatest amount o f tax revenues net o f administrative costs many countries in the developing world are undergoing structural adjustment programmes which require fundamental fiscal changes outside agencies advise restoration of budget balance a task which involves expenditure cuts and tax increases the treatment of public employee pay scales often poses a particular dilemma i n this process wages and salaries are a significant component of government expenditures and one important question concerns the extent to which wages rather than employment cuts should be used to save money there is sometimes a reluctance to advocate wage cuts stemming in part from a feeling that this might impair the performance of the public sector hence tanzi 1990 argues that a policy of wage cutting is likely to increase the inefficiency of public sector employees especially at a time when the public sector is expected to play a larger role in restructuring the economy p 16 in the context of tax collection the issue is particularly pressing given the need to raise more tax revenues a reduction in efficiency in this branch of the government i s likely t o mean that fewer returns are processed and when individuals living standards are squeezed their incentive to accept bribes in lieu o f collecting taxes i s increased o n this count i t i s even sometimes suggested that wages of tax inspectors should be increased to aid the effort to the comments of henry bienen john hey and two anonymous referees have been helpful in revising this paper the authors are also grateful t o the john m olin program for the study o f economic organization and public policy at princeton university and the pew charitable trusts for financial support mclaren also acknowledges support from the international finance section of princeton university none of the above should be implicated in any way see for example goode 1984 chapter 1 3 and gould and amaro reyes 1983

commodity prices and growth in africa a frican economies export primary commodities and most export little else policymakers as well as economists and historians of african economic development have seen these exports as both a hope and a curse the following parable tells the story once upon a time a servant of the ruler discovered a miraculous plant which grew readily in that country and whose seeds could be woven into fine cloth so desirable was this fabric that it became prized all over the world and fetched a high price after two score years the plant accounted for most of the country s trade with the world the ruler ordered the peasants to grow the plant paid them only a fraction of its price and he and his nobles became fabulously wealthy because the ruler wished to be remembered as a great ruler and as the father of his country he used his wealth to build a great army and brought machines from foreign countries to make the fine goods that previously could only be obtained from foreign merchants but the machines often broke down and the goods that they made were of poor quality and after the ruler died they were left to rust under the ruler s successor there was a war in a foreign land where the plant also grew so that there was a great shortage and its price increased threefold in only three seasons the new ruler spent his newfound riches on fantastic extravagance while immense sums were expended on public works after the manner of the east and on productive works carried out in the wrong way or too soon not even the threefold increase in prices could support these expenditures and the country soon found itself deeply in debt when the war ended and the price fell the country could no longer pay the interest on its debt or borrow more money even after it had sold its only useful public work to a foreign power so that power sent a mission to the country the publication of whose report from which the above

export adjustment to currency depreciation in the presence of parallel markets for foreign exchange the experience of selected sub saharan african countries in the 1980s the primary focus of this study is an empirical investigation of the implications of parallel exchange markets for export adjustment to official currency depreciation an econometric model incorporating the features of exchange control and credit constraint was estimated using pooled data from 13 sub saharan african countries a rise in the parallel currency premium was found to adversely affect official exports and the estimates suggest that official depreciations which are launched in the presence of large exchange rate misalignment and which succeed in reducing the latter are likely to exert greater favourable effects on export performance than otherwise equivalent depreciations

africa s economic performance limitations of the current consensus historical and micro survey evidence as well as the standard data from international organizations support less pessimistic conclusions on africa s development performance than those reached by many social scientists the changes that have benefited women over the last four decades are highlighted a discussion of growth in agricultural production follows however the complexity and the brutality of processes of social and economic change in sub saharan african economies are also stressed the theoretical implications of these complexities have not been adequately analyzed by world bank economists the bank s recent efforts to reassess its policies are therefore unlikely to achieve the results anticipated

new perspectives on east asian development conventional explanations of rapid growth in east asia have focused on the efficient allocation of resources resulting from market led outward oriented strategies this study challenges that approach east asian success has centred around the accumulation dynamic both because of its direct importance to the growth process and also because of its close and interdependent linkages with exports on this basis the study considers the institutions and policies which were used to manage economic rents in support of rapid growth and to ensure a more strategic and orderly integration into the world economy the study also examines the contribution of regional trade and investment flows to east asian industrialisation the potential for replicating similar strategies is considered

the making of a rentier class wealth accumulation and political control in senegal political and economic dynamics set in motion by efforts to consolidate post colonial regimes have contributed to the continuing weakness of indigenous bourgeoisies throughout much of post colonial africa this article suggests that state power has been used to foster private rent seeking rather than productive local private investment in order to promote and sustain the political cohesion of ruling classes the political consolidation of dominant rentier classes forged through state patronage and clientelist mechanisms of control creates obstacles to the emergence of local class strata interested in or capable of using state power to promote the expanded accumulation of capital be it local or foreign a study of senegal illustrates this point

fiscal competition and the pattern of public spending much attention has been given to the impact of fiscal competition on the level of public expenditure but relatively little to the impact on its composition using a broadly familiar and reasonably rich model of fiscal competition in the presence of mobile capital this paper establishes a systematic bias in public spending patterns starting from the non cooperative equilibrium and holding tax rates constant welfare would be improved by a coordinated reduction in the provision of local public inputs and a corresponding increase in the public provision of local public goods benefiting immobile consumers c 1997 elsevier science s a