developing country exports of manufactures moving up the ladder to escape the fallacy of composition this paper tests for a fallacy of composition by analysing the demand for exports of the 18 developing countries that are most specialised in manufactures in the markets of the 10 largest industrial countries estimated export equations both time series and panel data suggest that most developing countries compete with other developing country exporters rather than with industrialised country producers a smaller number of countries that export more high technology products compete with industrialised country producers and also have higher expenditure elasticities for their exports thus the fallacy of composition applies mainly to the larger group of countries exporting mostly low technology products

of networks and markets the rise and rise of a south indian town the example of tiruppur s cotton knitwear industry abstract tiruppur town is the center of a tightly clustered range of activities related to the cotton knitwear industry the successful and dramatic expansion which has taken place over the last 15 years has meant many more jobs limited technological improvement improved quality in yarn and fabric and an increasingly diverse range of garments for the larger firms in the industry access to export markets has been the driving force to improving their competitiveness wages remain low and working conditions poor however perhaps partly because capital concentration has not on the whole been accompanied by centralized vertically integrated production nevertheless clustering and dense interfirm networks provide advantages for firms of all sizes since process specialization is spatially divisible

industrial restructuring facilitating organizational change at the firm level in 1991 the dominican republic committed itself to an industrial strategy involving a transition from mass production and the widespread introduction of organizational change in individual firms in relationships between firms and in the linkages between firms and the institutional infrastructure supporting industrial activity the general statement of policy was not however reflected at the productive level consequently steps were taken to promote the diffusion of organizational change through training courses and a pilot plant program this paper describes the techniques utilized during the first phase of this policy intervention given the dominican republic s per capita income less than 700 and its low level of human resource development it is argued that this form of policy intervention is of widespread relevance to other less developed countries

india s industrial development an interpretative survey in recent years there has been a significant shift in indian industrial strategy from a heavily regulated and inward oriented structure toward significant liberalization in both domestic and trade policy at the same time indian industry has sustained its historically impressive growth performance the two waves of liberalization in the 1980s and after 1991 have been associated with significant structural change there is some question however as to whether this change in strategic orientation is consistent with rising per capita incomes this paper reviews these changing strategic perspectives and the economic performance of the industrial sector in the post independence period it concludes that most studies which have been undertaken of indian industrialization have been macroeconomic in nature and that there has been a poor tradition of microeconomic research into the determinants of industrial competitiveness

trading mechanisms and stock returns an empirical investigation this paper examines the effects of the mechanism by which securities are traded on their price behavior we compare the behavior of open to open and close to close returns on nyse stocks given the differences in execution methods applied in the opening and closing transactions opening returns are found to exhibit greater dispersion greater deviations from normality and a more negative and significant autocorrelation pattern than closing returns we study the effects of the bid ask spread and the price adjustment process on the estimated return variances and covariances and discuss the associated biases we conclude that the trading mechanism has a significant effect on stock price behavior

globalisation and unequalisation what can be learned from value chain analysis although many have gained from the process of globalisation there remains a stubbornly large number of people living in absolute poverty and a rise in inequality within and between countries the issue is thus not whether to participate in the global economy but how to do so in a manner which provides for sustainable and equitable income growth this study shows how value chain analysis can be used to chart the growing disjuncture between global economic activity and global income distribution and to provide causal explanations for this outcome in so doing value chain analysis provides valuable insights into policy formulation and implementation

development trajectories and new comparative advantages costa rica and the dominican republic under globalization summary this paper compares the experiences of costa rica and the dominican republic in creating new comparative advantages in manufacturing exports and its impact on economic development it makes three main arguments first the apparel sector is currently unlikely to act as an engine of economic development second high public spending in health and education and selective targeting of foreign investment have been fundamental in the creation of comparative advantages away from apparel into exports with higher technological content in costa rica third the new export sectors still lack sufficient linkages to the rest of the economy and most of their value added goes into profits for the transnational corporations

openness and wage inequality in developing countries the latin american challenge to east asian conventional wisdom the experience of east asia in the 1960s and 1970s supports the theory that greater openness to trade tends to narrow the wage gap between skilled and unskilled workers in developing countries in latin america since the mid 1980s however increased openness has widened wage differentials this conflict of evidence is probably not the result of differences between east asia and latin america instead the conflict is probably the result of differences between the 1960s and the 1980s specifically the entry of china into the world market and perhaps the advent of new technology biased against unskilled workers

an inquiry into the development process of village industries the case of a knitwear cluster in northern vietnam abstract while village industries are known to have high potential to grow their growth process has seldom been analysed this study explores the development process of a rapidly growing village based garment cluster in northern vietnam we found that both the human capital and social capital measured by the kinship ties with overseas vietnamese traders of the proprietors facilitated their innovative entry into new export markets furthermore general human capital acquired by schooling and specific human capital acquired by management experience are found to have contributed to the adoption of a vertically integrated production system which in turn contributed to enhanced enterprise performance

macroeconomic effects of asset price shocks in a globalized financial market in this paper i study a model in which shocks to asset prices affect the real sector of the economy through a credit channel as financial markets become internationally integrated the economy becomes less vulnerable to domestic asset price shocks but more vulnerable to foreign asset price shocks to the extent that monetary policy stabilization is feasible and desirable the globalization of financial markets shifts the focus of monetary policy from domestic asset prices to worldwide asset prices

the implications of increasing economic openness for real wages in developing countries 1973 1990 abstract our study shows that increasing economic openness is neither necessarily good nor necessarily bad for real wage growth in developing countries economic growth investment share growth and productivity growth not export share growth are the determinants of real wage growth we also find that the story of wage determination changed in the 1980s compared to the 1970s this change may be due to the implications of heightened competitive pressures in the world market or it may be the result of the debt crisis the main policy implication of our findings is that governments who want to promote growth and the living standards of their workers have to focus explicitly and primarily on increasing investment and productivity growth

the triple c approach to local industrial policy abstract in both developed and developing countries there is mounting evidence that clustering and networking help small and medium sized manufacturers to raise their competitiveness the role of public policy in this process is less clear the european experience suggests that local and regional government can play an important role equally if not more interesting experiences can be found in developing countries their analysis constitutes the core of this paper the lessons can be summarized as the triple c which stands for customer oriented collective and cumulative

welfare and macroeconomic interdependence we develop a baseline model of monetary and fiscal transmission in interdependent economies the welfare effects of expansionary policies are related to monopolistic supply in production and monopoly power of a country in trade an unanticipated exchange rate depreciation can be beggar thyself rather than beggar thy neighbor as gains in domestic output are offset by deteriorating terms of trade smaller and more open economies are more prone to suffer from inflationary shocks larger economies benefit from moderate demand led expansions but may be worse off if policy makers attempt to close the output gap fiscal shocks are generally beggar thy neighbor in the long run in the short run they raise domestic demand at given terms of trade thus reducing the welfare benefits from monetary expansions analytical tractability makes our model uniquely suitable as a starting point to approach the recent new open economy macroeconomic literature

the economic case for international labour standards this paper explores the economic case for international labour standards granting workers rights of free association and collective bargaining confers both static and dynamic economic efficiencies static efficiencies refer to one time gains from improvements in economic practice dynamic efficiencies refer to gains from improvements to the growth path resulting from a shift away from a low road development path to a high road path these efficiencies raise wages employment and output in developing countries and they can also benefit workers in developed countries labour standards are an institutional mechanism for raising the quality of growth in both developing and developed countries in this sense they are a win win institution

should central banks respond to movements in asset prices in recent decades asset booms and busts have been important factors in macroeconomic fluctuations in both industrial and developing countries in light of this experience how if at all should central bankers respond to asset price volatility we have addressed this issue in previous work bernanke and gertler 1999 the context of our earlier study was the relatively new but increasingly popular monetary policy framework known as inflation targeting see e g bernanke and frederic mishkin 1997 in an inflation targeting framework publicly announced medium term inflation targets provide a nominal anchor for monetary policy while allowing the central bank some flexibility to help stabilize the real economy in the short run the inflation targeting approach gives a specific answer to the question of how central bankers should respond to asset prices changes in asset prices should affect monetary policy only to the extent that they affect the central bank s forecast of inflation to a first approximation once the predictive content of asset prices for inflation has been accounted for there should be no additional response of monetary policy to assetprice fluctuations in use now for about a decade inflationtargeting has generally performed well in practice however so far this approach has not often been stress tested by large swings in asset prices our earlier research employed simulations of a small calibrated macroeconomic model to examine how an inflation targeting policy defined as one in which the central bank s instrument interest rate responds primarily to changes in expected inflation might fare in the face of a boom and bust cycle in asset prices we found that an aggressive inflationtargeting policy rule in our simulations one in which the coefficient relating the instrument interest rate to expected inflation is 2 0 substantially stabilizes both output and inflation in scenarios in which a bubble in stock prices develops and then collapses as well as in scenarios in which technology shocks drive stock prices intuitively inflation targeting central banks automatically accommodate productivity gains that lift stock prices while offsetting purely speculative increases or decreases in stock values whose primary effects are through aggregate demand conditional on a strong policy response to expected inflation we found little if any additional gains from allowing an independent response of central bank policy to the level of asset prices in our view there are good reasons outside of our formal model to worry about attempts by central banks to influence asset prices including the fact that as history has shown the effects of such attempts on market psychology are dangerously unpredictable hence we concluded that inflationtargeting central banks need not respond to asset prices except insofar as they affect the inflation forecast in the spirit of recent work on robust control the exercises in our earlier paper analyzed the performance of policy rules in worst case discussants robert shiller yale university glenn rudebusch federal reserve bank of san francisco kenneth rogoff harvard university

manufactured exports of developing countries and their terms of trade since 1965 abstract during the last 40 years since the prebisch singer terms of trade deterioration hypothesis was first proposed the commodity composition of exports of developing countries has undergone a major change in the direction of dominance of manufactures in their nonfuel exports with strong growth in the volume of their manufactured exports but this did not allow developing countries to escape unequal exchange relations with the industrial countries their barter terms of trade in manufactures showed signs of weakness rather than improvement and clearly failed to reflect the respective productivity trends leading to deterioration in factoral terms of trade

exports economic growth and the consolidation of peace in el salvador abstract the pillars of inclusive growth in el salvador have to be nontraditional export growth investment and government determination to reduce income inequality and poverty this article analyzes the key obstacles to the development of a competitive and dynamic export sector dutch disease driven by aid and remittances a significant decline in real wages and lack of productivity growth policies can and must focus on productivity growth rather than wage repression in the pursuit of peace consolidation and long term competitiveness

openness and wage inequality in developing countries the experience of east asia in the 1960s and 1970s supports the theory that greater openness to trade tends to narrow the wage gap between skilled and unskilled workers in developing countries in latin america since the mid 1980s however increased openness has widened wage differentials this conflict of evidence is probably not the result of differences between east asia and latin america instead the conflict is probably the result of differences between the 1960s and the 1980s specifically the entry of china into the world market and perhaps the advent of new technology biased against unskilled workers

collective efficiency growth path for small scale industry this study is concerned with the growth of small local industry in developing countries and explores one particular route for understanding and fostering such growth it focuses on the clustering of firms and the competitive advantage which they derive from local external economies and joint action captured in the concept of collective efficiency following a conceptual discussion the article explores the economic and institutional conditions which enhance or hinder collective efficiency this includes a case study which suggests that responding to opportunity and crisis requires shifting from mere reliance on external economies to joint action and from ascribed to earned trust

homeward bound interest identity and investor behavior in a third world export platform1 are indigenous investors in third world export platforms more stable than their allegedly footloose foreign rivals while mainstream economists hold that investor behavior is independent of investor identity and therefore call for the parallel treatment of domestic and foreign firms their critics hold that indigenous investors are more dedicated than their foreign counterparts and therefore call for industrial policies designed to cultivate and defend native entrepreneurs who is correct the author uses a unique combination of qualitative and quantitative data to document and account for the relative stability and dynamism of indigenous investors in the dominican republic s largest export processing zone and thereby brings economic sociology back from the margins of development theory and development theory back into the heartland of sociology

selective spatial closure and local economic development what do we learn from the argentine local currency systems summary this paper discusses local currency systems as an instrument of selective spatial closure to mitigate impacts of externally induced changes and to promote endogenous local economic development drawing on data collected in argentina it was found that local currency systems provided relatively protected economic spaces thus enabling poor households and especially women to launch micro enterprises and diversify income sources they also supported existing enterprises by offering an emergency market outlet and when combined with other measures by building local trading and production networks following recent theory on local economic development the argentine case represents an example of local economic regeneration

p e p b and the present value of future dividends 1994 p e p b and the present value of future dividends financial analysts journal vol 50 no 4 pp 23 31

export processing zones in the dominican republic transforming manufactures into commodities this paper examines the performance of export processing zones in the dominican republic it shows that in specializing in unskilled labor intensive export processing in the context of competitive devaluations between central american countries the dominican republic has experienced immiserizing employment growth in these circumstances the export of labor intensive manufactures is akin to that of primary commodities exporting countries which rely on unskilled labor and which fail to make the transition to higher value added production exports are thus likely to experience declining terms of trade the conclusions of this case study are considered to have wider relevance to world bank and international monetary fund inspired structural adjustment programs in the region

the role of large producers in industrial districts a case study of high technology systems houses in southern california scott a j 1992 the role of large producers in industrial districts a case study of high technology systems houses in southern california reg studies 26 265 275 a generalized concept of industrial districts is proposed the concept hinges on the intertwined notions of the social division of labour external economies and locational agglomeration it is argued that large production units often play an important part in sustaining the growth and development of industrial districts and that such districts need not be composed solely of small production units the argument is illustrated by means of a case study of the role of large systems houses within the high technology industrial districts of southern california it is concluded that neither large establishments nor the internationalization of the economy necessarily threaten the continued viability of industrial districts it is also suggested that industrial districts represent a very widely developed phenomenon in time and space scott a j

global implications of national unconventional policies abstract financial integration in the markets for banks assets and liabilities makes balance sheet constraints highly correlated across countries resulting in a high degree of financial and macroeconomic interdependence likewise under financial integration unconventional policies aimed at stabilizing domestic financial and credit conditions could entail large international spillovers therefore stabilization by one country will also benefit other countries reducing incentives to implement credit policies in a classic free riding problem especially when these policies entail domestic costs we show that this outcome can emerge in an open economy model featuring financial intermediaries that face endogenously determined balance sheet constraints

the globalization of product markets and immiserizing growth lessons from the south african furniture industry the central issue addressed in this paper is whether some developing countries will find it difficult to compete effectively in global product markets and will therefore be locked into processes of immiserizing growth it focuses on the role of south african producers in the global furniture value chain analyzing the factors affecting firm upgrading particularly the role of global buyers the paper observes a global industry characterized by increased competition and falling unit prices with local firms dependent on a falling exchange rate it concludes with implications for policy and future research including generalizing the findings to other sectors and countries

combining export processing zones and regional free trade agreements lessons from the mexican experience abstract export processing zones epzs and regional trade agreements are two common initiatives utilized by developing country governments in order to increase the wealth creation effects of today s international trade and investment system in this paper we argue that these two initiatives are driven by somewhat incompatible economic rationales based on the north american experiment in combining a major epz mexico s maquiladoras within the terms of a regional free trade agreement the north american free trade agreement we test to determine whether the logic of a regional integration initiative or that of the epz is dominate our results suggest that the competitive dynamics of mexico s epz industry have not been fundamentally altered by nafta s regional incentives we conclude with recommendations for policy makers in other developing countries that might be considering attempting to impose regional development schemes on the large and politically powerfully tncs that tend to dominate the global epz industry

search for the best financial performance measure basics are better economic value added eva is a well known and widely used measure of operating performance bacidore boquist milbourn and thakor 1997 claimed in a recent financial analysts journal article that a modified version of eva refined economic value added reva is theoretically superior to eva actually eva is theoretically superior to reva

can the east asian model of development be generalized abstract export led growth has become increasingly popular among analysts and some governments as a development strategy besides contrasting its virtues to the distortions of the import substitution model popular through the 1960s advocates of the model frequently illustrate its merits by pointing to the remarkable success of its most prominent practitioners the east asian gang of four hong kong korea singapore and taiwan this study explores a possible limitation of the model known as the fallacy of composition while the model may work well if pursued by a limited number of countries it may break down if a large majority of developing countries seeks to pursue it at the same time because the resulting outpouring of manufactured exports might be more than western markets could absorb protectionist response might be the result of attempts to generalize the east asian export model of growth

common currencies vs monetary independence we study the optimal monetary policy in a two country open economy model under two monetary arrangements a multiple currencies controlled by independent policy makers b common currencies with a centralized policy maker our findings suggest that i monetary policy competition leads to higher long term inflation and interest rates with large welfare losses ii the inflation bias and the consequent losses are larger when countries are unable to commit to future policies iii the welfare losses from higher long term inflation dominates the welfare costs of losing the ability to react optimally to shocks

export processing zones in the dominican republic schools or stopgaps summary the following paper explores the variable consequences of offshore manufacturing in the dominican republic while foreign transplants have been treated as tenants in most of the country and have thereby made transitory contributions to export and employment growth they have been treated as tutors in the cibao valley and have thereby made more lasting contributions of skill and technology what accounts for the variation i find that the agro commercial elites who have traditionally dominated the cibao valley are simultaneously more tolerant of foreign investment than the import competing industrialists found in the capital of santo domingo and more likely to diversify into manufacturing than the absentee landlords found elsewhere in the country

globalization and upgrading what can and cannot be learnt from international trade statistics in the wood furniture sector the measurement of innovation is a complex and ambiguous challenge two broad families of measures have been used those focusing on inputs and those focusing on outputs each has its strengths and weaknesses but neither is able to capture the growing importance of product innovation adequately in this paper we attempt to throw more light on the measurement of product innovation through the complementary use of data on unit price and market share the analysis is distinctive through its exclusive use of trade data these measures are applied to the global furniture industry through an analysis of imports into the eu between 1989 and 2001

the transition to flexible specialisation in the us film industry external economice the division of labour and the crossing of industrial divides there is increasing evidence that mass production methods are losing their dominance in the advanced industrial economies and that various forms of flexible production organization are on the rise the transition from mass production organization to flexible specialization is analyzed in detail through a case study of the film industry where it is shown that a system of production once based on product standardization high levels of vertical integration and stable oligopolistic market structures has after a period of vertical disintegration given way to a production system based on a deep division of labor between firms and high levels of flexibility in both product design and output levels the transition may be the result of increasing external economies of scale stemming from the development of the industry s social division of labor copyright 1989 by oxford university press

revisiting the revisited terms of trade will china make a difference in challenging the conventional wisdom at the time singer and prebisch posited a number of explanations for declining terms of trade of developing economies including both country and product specific factors over the past decade we have begun to witness a simultaneous process of price differentiation within commodities with the prices of some commodities increasing and within manufacturing with the price of many manufactures falling these price changes may reverse the decline in the terms of trade of commodity producers the entry of china into the global market has played an important role in this augmenting the demand for many hard commodities its role as an exporter of manufactures coupled with concentration in global buying may undermine the prices of many manufactures

small firms and their helpers lessons on demand abstract small enterprise se programs are currently the rage because of their potential to create employment they are typically supply driven providing standardized training technical assistance credit but most cases of se based growth have involved demand driven support provided by large customers firms traders government agencies state enterprises this article argues that such inherently customized support constitutes a better way to deliver services to ses and is more likely to stimulate sustained se growth with respect to se favoring procurement by government in particular we show that this can be done without running up against the problems of similar attempts in the past and in a way that also reduces the costs of running government we draw for illustration from a successful case of se favoring procurement in the brazilian state of ceara

from ascribed to earned trust in exporting clusters abstract this paper is concerned with the role of trust in export manufacturing it asks how trust has developed in two industrial clusters which are located in developing countries and export most of their output to north america and europe the main conclusion is that trust was based initially on socio cultural ties between clustered firms and later on conscious investments in inter firm relationships