growth miracles and failures in a markov switching classification model of growth abstract in this paper economic growth is interpreted as a sequence of transitions between distinct growth regimes that countries visit with different frequencies countries featuring similar growth dynamics are endogenously grouped into three different clusters the first cluster comprises successful countries that are characterized by lengthy periods of high or very high growth moderately successful countries in the second cluster experience both periods of reasonable growth and periods of stagnation whereas failing countries in the third cluster suffer from highly volatile growth rates with frequent episodes of crisis successful countries are characterized by better initial conditions policies and institutions compared to the other countries neither initial conditions nor institutions distinguish moderately successful from failing countries what makes them different is policy in the form of investments into infrastructure and human capital trade liberalization and limited policy volatility

banking development socioeconomic structure and income inequality abstract using rich unique data from the italian local credit markets provinces this paper investigates the impact of local banking development on income inequality and the role of the socioeconomic structure in this link exploiting the italian historical banking regulation to instrument for the local presence of bank branches we find that local banking development mitigates income inequality however the finance inequality nexus manifests itself only in relatively advanced areas when we study the structural channels of influence we uncover evidence that banking development can reduce inequality by affecting geographical mobility and urbanization while it has modest effects through the development of material infrastructures and human capital

a moral hazard trap to growth this paper studies the consequences of asymmetric information in the investment sector upon economic growth in this paper the information asymmetry generates a moral hazard problem this moral hazard problem restricts financial arrangements it is shown that these restrictions make even the long run competitive equilibrium income dependent upon history this result also holds in case there is perfect capital mobility however when there is capital mobility the government may be able to intervene in a pareto improving way copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

generating and sustaining backward linkages between maquiladoras and local suppliers in northern mexico abstract despite 25 years of growth mexico s in bond assembly or maquila operations use very little material inputs that are made in mexico mexican content is less than 2 of value added and those coming from the northern border region are even more miniscule some of the reasons for the paucity of local sourcing are reviewed with particular emphasis on corporate and plant purchasing arrangements mexican policies designed to support national suppliers are reviewed and the authors offer suggestions that stress the need for a regional focus that concentrates on fostering local technological capacities the study relies in part on surveys of plant managers and corporate purchasing officers

cheap children and the persistence of poverty this paper develops a theory of fertility that offers an explanation for the persistence of poverty within and across countries if educated individuals have a comparative advantage in raising educated children then parental fertility choice is shown to give rise to a poverty trap in which the poor choose high fertility rates with low investment in child quality moreover the impact of child quality choice on economic performance is amplified by the diluting effect of higher fertility on physical capital accumulation the theory proposes insights regarding the effects of inequality globalisation and life expectancy on economic growth and demographic transitions this paper develops a theory of fertility and child educational choice that offers an explanation for the persistence of poverty within and across countries the joint determination of the quality education and quantity of children in a household is studied under the key assumption that individuals productivity as teachers increases with their own human capital in contrast the minimum time cost associated with raising a child regardless of the child s quality the quantity cost is not affected by parental education as a result the price of child quantity relative to the price of child quality increases with individuals wages in particular for low wage individuals for whom the opportunity cost of time is low children of minimal quality are cheap this assumption therefore generates a comparative advantage for the poor in child quantity whereas high wage educated individuals have a comparative advantage in raising quality children consistent with the well known evidence poor households thus choose relatively high fertility rates with relatively low investment in their offspring s education and therefore their offspring are poor as well in contrast high income families choose low fertility rates with high investment in education and therefore high income persists in the dynasty evidence from the us provided by hanushek 1992 suggests that a trade off between quantity and quality of children does indeed exist hanushek argues that movements in family size could explain over half the variance in some test scores and that the elasticity of achievements with respect to the number of children in the family is 0 03 implying that the annual achievement growth of each child in a family will fall about 2 when a second child is added and about 0 5 when a sixth child is added 1

wealth inequality and collective action abstract we study the effect of inequality in the distribution of endowments of private inputs e g land wealth that are complementary in production with collective inputs e g contribution to public goods such as irrigation and extraction from common property resources on efficiency in a class of collective action problems we focus on characterizing the joint surplus maximizing level of inequality making due distinction between contributors and non contributors in a framework that allows us to consider a wide variety of collective action problems ranging from pure public goods to impure public goods to commons we show that while efficiency increases with greater equality within the groups of contributors and non contributors so long the externalities positive or negative are significant there is an optimal degree of inequality between these groups

the robustness of the causal and economic relationship between construction flows and economic growth evidence from western europe our main objective is to analyse whether we have a problem of parameter heterogeneity across countries and over time in the estimation of the relationship between infrastructure investments and eco

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

financial frictions occupational choice and economic inequality we develop a quantitative theory of entrepreneurship income inequality and nancial frictions disciplined with household data from brazil the theory extends lucas 1978 by modeling heterogeneity in two skills working and managerial skills consistently with the evidence the theory implies three occupational categories workers employers and self employed entrepreneurs we nd that the correlation between working and managerial skills matters importantly for the distribution of earnings across occupations and for the quantitative implications of nancial frictions we also nd

land reforms poverty reduction and economic growth evidence from india recognition of the importance of institutions that provide security of property rights and relatively equal access to economic resources to a broad cross section of society has renewed interest in the potential of asset redistribution including land reforms empirical analysis of the impact of such policies is however scant and often contradictory this paper uses panel household data from india together with state level variation in the implementation of land reform to address some of the deficiencies of earlier studies the results suggest that land reform had a significant and positive impact on income growth and accumulation of human and physical capital the paper draws policy implications especially from the fact that the observed impact of land reform seems to have declined over time

institutions and economic performance endogeneity and parameter heterogeneity the hallmark of the recent development and growth literature is a quest to identify institutions that explain a significant portion of the observed differences in living standards across countries empirical work in the area focuses almost exclusively on either the global sample or on developing nations certainly it is important to know which institutions are lacking in these developing countries but the analysis provides little evidence for us to know to what extend a common set of institutions actually matters in advanced and developing countries in this paper we examine parameter heterogeneity in prominent approaches to institutions and economic performance we find that a new set of instruments is necessary to control for endogeneity but that a common set of economically important institutions does indeed exist among advanced and developing nations the impact of these institutions does vary substantially across samples it is about three times as high in developing countries as compared to oecd countries

corporate strategies for fdi in the context of latin america s new economic model abstract the nem in latin america radically altered foreign direct investment inflows to the region previously restrictive national policies became ones that facilitated foreign direct investment fdi in the context of new business opportunities transnational corporations tncs took a new look at the region in the context of their evolving corporate strategies examples being efficiency seeking corporate strategies in the automotive mexico and the apparel industry caribbean basin and the market access strategy for services in the telecommunications and electrical energy industries brazil two interrelated problems arose a tnc objectives were often attained but those linked to national development goals often were not and b national policies did not channel fdi to priority development activities

initial conditions and economic growth in the us states abstract this paper uses regression trees to examine the role of initial conditions in the economic development of the us states since 1950 we seek to ascertain whether existing differences in state per capita incomes reflect temporary deviations from a common stochastic steady state or the permanent effects of differences in initial conditions we assume that the states share a common set of economic fundamentals so that absent differences in initial conditions they ought to share a common steady state we allow the members of a large set of potentially important initial conditions to define convergence clubs among the states

social capital barriers to production and capital shares implications for the importance of parameter heterogeneity from a nonstationary panel approach recent advances in the growth literature have proposed that difficult to quantify concepts such as social capital may play an important role in explaining the degree of persistent income disparity that is observed among countries other recently explored possibilities include institutional mechanisms which generate barriers to aggregate production an important limitation for empirical work in this area stems from the fact that it is difficult to distinguish sources of heterogeneity when direct observations are not available in this study we show how developments in the analysis of nonstationary panels can aid in this endeavor in contrast to traditional dynamic panel data analysis this approach focuses explicitly on low frequency behavior under relatively mild assumptions the approach can be used to infer properties of aggregate production which are robust to the presence of large classes of unobserved features in this framework we are able to estimate and test the distribution of production function parameters that would be required in order to generate conditional forecast convergence of per capita incomes even when some of the key factors required to explain growth are unobserved the results indicate that in order to fully explain the observed persistence in the disparity of per capita incomes the manner in which unobserved mechanisms influence production must go beyond merely accounting for differences in the trending behavior of aggregate productivity specifically if such mechanisms are to be successful empirically they must also be able to account for cross country heterogeneity in steady state capital shares this adds to a growing literature that provides support for models with multiple production regimes copyright 2007 john wiley sons ltd

the incidence and persistence of corruption in economic development abstract economic development and bureaucratic corruption are determined jointly in a dynamic general equilibrium model of growth bribery and tax evasion corruption arises from the incentives of public and private agents to conspire in the concealment of information from the government these incentives depend on aggregate economic activity which in turn depends on the incidence of corruption the model produces multiple development regimes transition between which may or may not occur in accordance with recent empirical evidence the relationship between corruption and development is predicted to be negative

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

does everyone lose through a short term trough in oil prices abstract the recent collapse in oil prices is predicted to have rapid and disastrous effects on the world economy

workers machines and economic growth this paper models technology adoption as replacing workers by machines which perform the same job in the production process the paper shows that such modelling of technology adoption affects significantly the analysis of economic growth this model can explain large and persistent international differences in output levels and growth rates caused by small differences in underlying parameters

fragmentation and east asia s information technology trade this article studies the growth and determinants of information technology it trade in the asia pacific region we argue that the rise of it trade must be understood within the context of increasing vertical fragmentation of production processes that has occurred over the past two decades to evaluate this empirically we estimate a set of pooled bilateral it export equations for eight asian countries the usa and the eu where foreign direct investment fdi inflows are introduced as a proxy for fragmentation we apply a panel cointegration approach that allows for heterogeneity in short run dynamics and in fixed effects consistent with production fragmentation we find that the evolution of it trade can be explained in part by traditional income and relative price effects but also by fdi inflows

the normalized ces production function theory and empirics abstract the elasticity of substitution between capital and labor and in turn the direction of technical change are critical parameters in many fields of economics until recently though the application of production functions with specifically non unitary substitution elasticities i e non cobb douglas was hampered by empirical and theoretical uncertainties as recently revealed normalization of production technology systems holds out the promise of resolving many of those uncertainties we survey and assess the intrinsic links between production as conceptualized in a production function factor substitution as made most explicit in constant elasticity of substitution functions and normalization defined by the fixing of baseline values for relevant variables first we recall how the normalized constant elasticity of substitution function came into existence and what normalization implies for its formal properties then we deal with the key role of normalization in recent advances in the theory of business cycles and of economic growth next we discuss the benefits normalization brings for empirical estimation and empirical growth research finally we identify promising areas of future research

political equilibrium income distribution and growth this paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy the model has three main features first very different patterns of income distribution are conducive to high growth at different levels of per capita income second growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups thus potentially enabling them to invest in human capital third the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted in which case growth is enhanced or prevented in which case growth is stopped using a non overlapping generations model with voting i derive several empirical implications in particular the model implies an inverted u relation between levels of inequality and levels of income in cross sections but not necessarily in time series a result that seems consistent with a number of empirical studies

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

trade as a threshold variable for multiple regimes abstract this paper employs the data sorting method developed by hansen econometrica 68 2000 575 which allows the data to endogenously select regimes using different variables it is shown that openness as measured by the trade share to gdp is a threshold variable that can cluster middle income countries into two distinct regimes that obey different statistical models our result suggests that openness may not be as crucial in the growth process of low and high income countries but it is instrumental in identifying middle income countries into high and low growth groups

workers rights in open economies global production and domestic institutions in the developing world previous large n research suggests that globalization could have either positive or negative consequences for labor rights in developing nations this article examines the ways in which domestic political institutions and interests conditions the effects of economic globalization it develops several hypotheses regarding the impact of domestic factors on labor rights outcomes and uses the case of costa rica to assess these hypotheses the result is that although segments of the costa rican economy and labor force have benefited from industrial upgrading in recent years the enclave nature of the export oriented economy and the historical repression of organized labor render difficult the achievement of some internationally recognized core labor rights the article concludes by discussing some of the issues for future research that are highlighted by the costa rican case

economic growth and the elasticity of substitution two theorems and some suggestions at the beginning of the twentieth century the work of the swedish economist knut wicksell 1901 marked an important advance in our understanding of the relationship between the structure of production functions and income distribution wicksell had asked the following question among many others suppose that the marginal productivities are equal to the remuneration rates of each factor what then should be the form of the corresponding production function he pointed out p 125 that the general integral of the partial differential equation implied by this relationship was of the form y lf kil which meant in turn that the product y was necessarily a homogeneous of degree one function of capital k and labor l as an example he gave a function where the shares of k and l in y were constant and wrote down the function which would be rediscovered decades later by charles w cobb and paul h douglas 1928 however it is only half a century later in robert m solow s nobel prize winning 1956 essay that implications between the structure of the production function and long run equilibrium or disequilibrium of the economy were drawn in his classic article a contribution to the theory of economic growth solow had considered three cases analytically other cases were also discussed geometrically using a phase diagram he had labeled the two first cases 1hlarrod domar and cobb douglas respectively and he referred to the third type of production function as offering a bit of variety it was y ak 2 l 2 2 a particular case of y akp lp 1p in those early days solow had not pointed out to the reader that his cases could have been numbered 0 1 and 2 following the elasticity of substitution of the corresponding production function it would be only five years later in 1961 that with his coauthors kenneth j arrow et al he would find the general form of the two factor constant elasticity of substitution ces production function by integrating the differential equation corresponding to the observed relationship between output per capita and the wage rate solow s third case was indeed highly interesting since it allowed the possibility of everincreasing income per head even without any technical progress indeed solow showed that due to the efficiency of the system entailed by the particular production function he had chosen there existed a threshold for the savings rates s to generate investment per head large enough for income per head to grow forever that threshold was s nla2 where n is the growth rate of the population it was then natural to ask whether one could express that threshold in terms of the elasticity of substitution a the value of that threshold was determined by de la grandville 1989 to be equal to s no3 or where a is k s coefficient in a normalized ces function equal to a in solow s third case where u 2 for any s and n values this relationship gives also the threshold value in implicit form by the solution of ao1 1 log 3q or ilog nls by totally differentiating the last relationship one could observe that the threshold for the elasticity of substitution to entail ever sustained growth was an in klump faculty of mathematics and economics university of ulm helmholtzstrasse 20 d 89081 ulm germany de la grandville department of economics university of geneva 102 boulevard carl vogt ch 1211 geneva 4 switzerland we gratefully acknowledge the comments of seminar participants at stanford university and at the universities of stuttgart hohenheim and munich where parts of the paper were presented also we would like to thank without implicating in any way robert solow for his insightful remarks and an anonymous referee for very helnfuil supgestions wicksell cobb and douglas would no doubt burst with pride if they knew that one of our first year students wrote in a paper of his of course we recognize here a kirk douglas production function

latin america s new economic model micro responses and economic restructuring abstract this paper introduces a special issue on the microeconomics of latin america under the new economic model nem the paper reviews the rationale and policies of the nem and analyzes the impact of the reforms at the macroeconomic sectoral and microeconomic levels at the firm level the contributions to this issue demonstrate that a considerable adjustment process is taking place as sectoral structural change indices demonstrate however this has not resulted in widespread shifts of resources between sectors nor has it resulted in significant improvement in overall employment productivity and growth the authors analyze the reasons for this disjuncture and suggest policy alternatives

price and prospects for oil carrying the burden of excess capacity in the 1980s and beyond abstract the continuing decline in world oil prices will not be halted in the short term and prospects for the long run are not encouraging there is a problem of unprecedented gravity in the surplus capacity of the oil industry a glut of 10 million bbl day of crude oil remains unsold the cohesion of the opec cartel is becoming more strained and a sizeable proportion of refinery plant has been taken off stream the basic difficulty is that high interest rates have curbed international capital formation and depressed demand upward pressures on the us dollar have been created by the deficit on us domestic and external accounts and have retarded the recovery of the global economy today the cost of money exceeds the factor price of oil and the market is highly unstable the devastating costs of carrying surplus capacity are likely to survive through the 1980s

the local solow growth model abstract this paper generalizes the empirical analysis of the solow growth model to account for country specific heterogeneity this generalization relaxes the assumption made in bulk of empirical growth studies that all countries possess identical aggregate production functions our empirical results indicate that there is substantial country specific heterogeneity in the solow parameters heterogeneity that is associated with differences in initial income we therefore conclude that the explanatory value of the solow growth model is substantially enhanced by allowing for country specific i e local production functions

bringing the firm back in local decision making and human capital development in mexico s maquiladora sector summary the recent decline in mexico s maquiladora sector provides an opportunity to reassess the sustainability of basing national economic competitiveness on low wages 1 focusing on human capital as an important component of equitable growth the authors argue that models of its development which consider market factors alone are inadequate combining their own case study with a review of other studies over the past 20 years the authors propose a management centered as opposed to a market centered model of human capital development as a basis for discussing the relative merits of in bond industrial programs and considering measures to improve levels of human capital

parameter heterogeneity in growth regressions abstract this paper explores the appropriateness of pooling many diverse countries together in growth regressions it is shown that estimates are sensitive to small changes in the sample and separating oecd and non oecd countries can result in drastic differences

non linearity in the inflation growth relationship in developing economies evidence from a semiparametric panel model using data on developing economies we estimate a flexible semiparametric panel data model that incorporates potentially nonlinear effects of inflation on economic growth we find that inflation is associated with significantly lower growth only after it reaches about 12 percent which is notably lower than the comparable estimate obtained from a threshold model our results also suggest that models with restrictive functional form assumptions tend to underestimate marginal effects of inflation on economic growth we also document significant variation in the effect of inflation on growth across countries and over time

outlook for the international oil market and options for opec abstract a fundamental misinterpretation of post 1970 events in the international oil market has severely curbed oil demand and led to conditions in which much of the world s lowest cost reserves of energy are in danger of remaining unexploited there is instead an increasing use of inherently higher cost sources of energy so undermining world economic growth prospects a return to the preferential use of low cost oil and gas without further exacerbating already strained north south relationships can now only be achieved in the context of a difficult to negotiate opec oecd agreement on a long term development strategy

intergenerational persistence of earnings the role of early and college education recent empirical evidence from the united states indicates a high degree of persistence in earnings across generations designing effective public policies to increase social mobility requires identifying and measuring the major sources of persistence and inequality in earnings we provide a quantitative model of intergenerational human capital transmission that focuses on three sources innate ability early education and college education we find that approximately one half of the intergenerational correlation in earnings is accounted for by parental investment in education in particular early education we show that these results have important implications for education policy

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

landownership concentration and the expansion of education we study the relationship between large landownership concentration and the expansion of mass education in nineteenth century prussia cross sectional estimates show a negative association between landownership concentration and enrollment rates fixed effects panel estimates indicate that regions with an initially stronger landownership concentration exhibit increasing enrollment rates this relationship is not driven by differences in the supply of schooling we argue that the implementation of agricultural reforms including the stepwise abolition of serfdom is an important driver of the change in enrollment the results are consistent with the interpretation that emancipation from labor coercion increased the private demand for education

the solow model with ces technology nonlinearities and parameter heterogeneity this paper examines whether nonlinearities in the aggregate production function can explain parameter heterogeneity in the solow growth regressions nonlinearities in the production technology are introduced by replacing the commonly used cobb douglas cd aggregated production specification with the more general constant elasticity of substitution ces specification we first justify our choice of production function by showing that cross country regressions favour the ces over the cd technology then by using an endogenous threshold methodology we show that the solow model with ces technology is consistent with the existence of multiple regimes copyright 2004 john wiley sons ltd

foreign investment and the global geography of production why the mexican consumer electronics industry failed abstract explanations of industrial development in late developing countries have become narrowly focused on the capability of governments to promote pressure or punish nationally owned firms often overlooked is the contribution of firms both national and multinational in propelling coordinating and determining the path and location of such development this paper examines the conditions that led to the decline of mexico s consumer electronics industry and presents new evidence to support a more complex account of the role of both industrial and state actors within this process in contrast to the traditional market or state based theories we argue that the decline of mexico s consumer electronics industry largely resulted from its foreign investment regime particularly the timing of investment and the geographical locations of local and foreign manufacturers and the subsequent depth and quality of the relationships between these firms the differences between mexico s regime and that of taiwan during the same period provide further evidence of the important role that foreign firms play in inserting local suppliers into the global production chain we argue that mexico s foreign investment regime and the resulting weak local foreign ties rather than inadequate state policy sealed the fate of mexico s once thriving domestic electronics industry

openness in services trade and economic growth abstract we examine the relationship between openness in services trade both telecommunication and financial and economic growth via the threshold regression model to test for a differential impact between low and high income countries results confirm the existence of a two regime split

maquila economic reform and corporate strategies abstract corporate strategies in maquila have changed over time while they were originally geared only to the exploitation of low paid low skilled labor nowadays firms are upgrading human capital and increasing the scope and technological complexity of production processes the adoption of the new economic model in host countries aimed precisely at this type of strategy change but cannot solely be credited for it in addition policies regarding maquila under the nem did not achieve all the stated goals regarding corporate strategy change trends in local procurement and technology transfer are still unsatisfactory strengthening of local supply and absorption capabilities is required

endogenous aggregate elasticity of substitution abstract in the literature studying aggregate economies the aggregate elasticity of substitution aes between capital and labor is often treated as a constant or deep parameter this view contrasts with the conjecture put forward by arrow et al 1961 capital labor substitution and economic efficiency review of economics and statistics 43 225 250 that aes evolves over time and changes with the process of economic development this paper evaluates this conjecture in a simple dynamic multi sector growth model in which aes is endogenously determined our findings support the conjecture and in particular demonstrate that aes tends to be positively related to the state of economic development a result consistent with recent empirical findings

formation of foreign direct investment clustering a new path to local economic development the case of qingdao jun yeup kim and le yin zhang formation of foreign direct investment clustering a new path to local economic development the case of qingdao regional studies this paper investigates the clustering of chinese electronics manufacturers large and small alongside established foreign producers in qingdao north china it examines how the supplier buyer linkages between foreign invested enterprises fies and local firms have driven the development of a successful electronic industry cluster around development zones established by the local authority underpinning the success of the large domestic firms both at home and abroad it also analyses how fies collaboration with local firms fosters local economic development in qingdao by integrating the theoretical perspectives of the hub and spoke model from economic geography and flagship and five partner s model in the science of strategic management it develops its own theoretical lens to investigate the inter firm network between the fies and local fir

distribution and development in a model of misgovernance abstract this paper presents an analysis of bureaucratic corruption income inequality and economic development the analysis is based on a dynamic general equilibrium model in which bureaucrats are appointed by the government to implement a redistributive programme of taxes and subsidies designed to benefit the poor corruption is reflected in bribery and tax evasion as bureaucrats conspire with the rich in providing false information to the government in accordance with empirical evidence the model predicts a positive relationship between corruption and inequality and a negative relationship between corruption and development

determinants of income growth in metropolitan and nonmetropolitan labor markets this article analyzes determinants of growth across labor markets in the united states using a production function approach based on four inputs labor manufacturing investment human capital investment and public capital investment we find little role for public capital investment in growth but that manufacturing investment spurred growth in nonmetropolitan areas in contrast to metropolitan areas we also find that human capital investment mattered more for metropolitan areas than for nonmetropolitan areas further the presence of more colleges and universities more household amenities and lower tax rates are all found to have encouraged human capital accumulation in u s labor markets copyright 2008 oxford university press

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

do all countries grow alike abstract this paper investigates the driving forces of output change in 77 countries during the period 1970 2000 a flexible modeling strategy is adopted that accounts for i the inefficient use of resources and ii different production technologies across countries the proposed model can identify technical efficiency and input change for each of three endogenously determined regimes membership in these regimes is estimated rather than determined ex ante this framework enables explorations into the determinants of output growth and convergence issues in each regime

what determines the elasticity of substitution between capital and labor a literature review this paper provides the first comprehensive review of the empirical and theoretical literature on the determinants of the elasticity of substitution between capital and labor our focus is on the two input constant elasticity of substitution ces production function we start by presenting four concise observations that summarize the empirical literature on the estimation of motivated by these observations the main part of this survey then focuses on potential determinants of capital labor substitution we first review several approaches to the microfoundation of production functions where the elasticity of substitution eos is treated as a purely technological parameter second we outline the construction of an aggregate elasticity of substitution aes in a multi sectoral framework and investigate its dependence on underlying intra and inter sectoral substitution third we discuss the influence of the institutional framework on the extent of factor substitution overall this survey highlights that the effective elasticity of substitution ees which is typically estimated in empirical studies is generally not an immutable deep parameter but depends on a multitude of technological non technological and institutional determinants based on these insights the final section identifies a number of potential empirical and theoretical avenues for future research

testing for country heterogeneity in growth models using a finite mixture approach we define a bivariate mixture model to test whether economic growth can be considered exogenous in the solovian sense for this purpose the multivariate mixture approach proposed by alfo and trovato is applied to the bernanke and gurkaynak extension of the solow model we find that the explanatory power of the solow growth model is enhanced since growth rates are not statistically significantly associated with investment rates when cross country heterogeneity is considered moreover no sign of convergence to a single equilibrium is found copyright 2008 john wiley sons ltd

on the output effects of barriers to trade we study the macroeconomic effects of international trade policy by integrating a hecksher ohlin trade model into an optimal growth framework the model predicts that a more open economy will have higher factor productivity furthermore there is a selective development trap to which countries may or may not converge depending on policy income at the development trap falls as trade barriers increase hence cross country differences in barriers to trade may help explain the dispersion of per capita income observed across countries the effects are quantified and we show that protectionism can explain a relevant fraction of tfp and long run income differentials across countries we study the effects of international trade policy on output to do so we analyze a standard neoclassical growth model where countries can trade intermediate goods the markets of these goods are structured as in the also standard hecksher ohlin trade model thus trade happens owing to comparative advantage which emerges from differences in factor endowments across countries 2 we focus on the case of a small price taking economy one can solve for equilibrium sequentially first each period s output and trade can be treated as a static problem and its solution can be summarized by a mapping from capital and labor to the output of the final good then using that endogenous mapping as if it were an exogenous production function one can solve the intertemporal decisions of agents in the economy in that way a potentially complex dynamic trade problem is avoided it turns out that the equilibrium mapping linking inputs and final output is affected by tariffs as the gains from trade impact not only welfare but also the availability and price of intermediate inputs and hence productivity

macroeconomic stability and the distribution of growth rates it is often argued that macroeconomic instability can form a binding constraint on economic growth drawing on a new index of stability threshold estimation is used to divide developing economies into two growth regimes depending on a threshold level of stability for the more stable group of countries the output benefits of investment are greater conditional convergence is faster and measures of institutional quality have more explanatory power suggesting that instability forms a binding constraint for the less stable group macroeconomic stability is also shown to dominate several other candidates for identifying distinct growth regimes

flexible production in the auto sector industrial reorganization at ford mexico abstract ford mexico is pursuing a single philosophy of flexible production in its mexican plants but with markedly different results an analysis of three plants one a new assembly plant in the north another an established manufacturing plant in central mexico and the third a labor intensive maquiladora plant in the northern border region shows how the factors of labor relations local labor markets complexity of production and whether the plants are new or established affect the implantation of flexible production the resulting systems implanted do not correspond to the ideal lean production model

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

biases in approximating log production most empirical work in economic growth assumes either a cobb douglas production function expressed in logs or a log approximated constant elasticity of substitution specification estimates from each are likely biased due to logging the model and the latter can also suffer from approximation bias we illustrate this with a successful replication of masanjala and papagerogiou the solow model with ces technology nonlinearities and parameter heterogeneity journal of applied econometrics 2004 19 171 201 and then estimate both models in levels to avoid these biases our estimation in levels gives results in line with conventional wisdom

risk bearing and the theory of income distribution this paper develops the stochastic theory of distribution with a dynamic model which focuses on the role of incomplete insurance in generating inequality unlike previous work our approach takes explicit account of the reason for market incompleteness in modeling agents behaviour in particular the amount of risk borne is endogenous using a model of growth with altruism in which agents are risk averse and there is moral hazard we show that lineage wealth follows a markov process which converges globally to an ergodic distribution this also represents the long run population distribution of wealth we discuss the role of particular assumptions such as availability of production loans and unboundedness of utility in yielding the qualitative properties of the distribution of wealth the choice of occupation and the prevention of poverty traps

petroleum exploration in the non opec ldcs the effects of recent world developments abstract the recent decline in world petroleum prices and the uncertainty with respect to future oil prices is having an adverse effect on exploration in non opec ldcs particularly in the oil importing developing countries the fiscal regimes of ldcs as applied to petroleum investment have tended to limit incentives for foreign investment especially in countries without high reserve potential recent developments have exacerbated these fiscal deterrents to petroleum investment particularly in countries where there is little likelihood of discovering large oil fields in addition the external debt crisis in a number of ldcs where petroleum operations are largely in the hands of government oil enterprises is likely to reduce the availability of external financing for oil exploration and development