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

the microfinance promise in the past decade microfinance programs have demonstrated that it is possible to lend to low income households while maintaining high repayment rates even without requiring collateral the programs promise a revolution in approaches to alleviating poverty and spreading financial services and millions of poor households are served globally a growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success particularly the use of group lending contracts with joint liability for the most part however high repayment rates have not translated into profits and studies of impacts on poverty yield a mixed picture in describing emerging tensions the paper highlights the diversity of innovative mechanisms beyond group lending contracts the measurement of financial sustainability the estimation of economic and social impacts the costs and benefits of subsidization and the potential to reduce poverty through savings programs rather than just credit the promise of microfinance has pushed far ahead of the evidence and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion

how efficiently is capital allocated evidence from the knitted garment industry in tirupur this paper studies the effect of community identity on investment behaviour in the knitted garment industry in the south indian town of tirupur we document very large and systematic differences in both levels of capital stock and the capital intensity of production in firms owned by people from two different community groups we argue that the differences in investment cannot be explained by productivity differences alone we suggest that the most likely explanation is that the two communities differ in their access to capital

basic research and productivity increase in manufacturing additional evi dence in a recent paper in this review edwin mansfield illustrated empirically using a sample of ten petroleum and six chemical firms that firm rates of productivity change are related to the amount of companyfinanced basic research performed certeris paribus in this note additional evidence is presented which is supportive of mansfield s findings this analysis is based on a sample of fifty one major manufacturing firms active in r d it is unique in that the impacts of company financeda nd governmentfinancedb asic researche xpendituresa re consideredd eterminantso f productivityg rowth the following model was estimated

china s uneven progress against poverty while the incidence of extreme poverty in china fell dramatically over 1980 2001 progress was uneven over time and across provinces rural areas accounted for the bulk of the gains to the poor though migration to urban areas helped the pattern of growth mattered rural economic growth was far more important to national poverty reduction than urban economic growth agriculture played a far more important role than the secondary or tertiary sources of gross domestic product gdp rising inequality within the rural sector greatly slowed poverty reduction provinces starting with relatively high inequality saw slower progress against poverty due both to lower growth and a lower growth elasticity of poverty reduction taxation of farmers and inflation hurt the poor external trade had little short term impact

knowledge diffusion and modernization of rural industrial clusters a paper manufacturing village in northern vietnam summary this article tests the role of social learning in the modernization of a rural nonfarm industry using data from a paper manufacturing village that was transformed from a traditional handicraft industry into a modern industrial cluster knowledge diffusion through kinship networks is shown to have played a significant role in the dissemination of mechanized production by helping the followers to overcome subjective risk during the initial investment stage the financial support through kinship networks also had a demonstrably positive impact on the diffusion of the technology which removed financial constraints on the initial fixed investments

new evidence on the export led growth nexus a case study of malaysia this paper revisits the highly debated export led growth hypothesis in a number of different ways using malaysia as a case study first the hypothesis is tested in terms of labour and total factor productivity growth as a potential channel via which exports can affect or be affected by gdp growth considering the impact of imports on gdp and productivity growth serves a similar purpose in addition gdp is trade adjusted to avoid the double counting problem arising from the national income identity second the relationships are examined using the relatively recent toda and yamamoto 1995 causality tests these results have major implications and are necessary to reassess the effectiveness of trade policy as a strategy for economic development 2007 the author journal compilation

an inquiry into the rapid growth of the garment industry in bangladesh abstractthe export oriented garment industry in bangladesh has grown rapidly for the last 3 decades and now ranks among the largest garment exporters in the world while its early success is attributed to the initial technology transfer from south korea such a one time infusion of knowledge alone is insufficient to explain the sustained growth for 3 decades this article uses primary data collected from knitwear manufacturers and garment traders to explore the process of the continuous learning of advanced skills and know how it finds among other things that the high profitability of garment manufacturing due to the initial infusion of specific human capital attracted a number of highly educated entrepreneurs to the industry that the division of labor between manufacturers and traders has facilitated the expansion of the industry and that enterprise growth has lasted long because of the continuous learning from abroad by the highly educated entrepreneurs

the impact of r d investment on productivity new evidence using linked r d lrd data the impact of r d investment on productivity new evidence using linked r d lrd data this paper uses confidential census longitudinal microdata to examine the association between r d and productivity for the period 1972 1985 these data allow for significant improvements in measurement and model specification yielding more precise estimates of the returns to r d our results confirm the findings of existing studies 1 positive returns to r d investment 2 higher returns to company financed research 3 a productivity premium on basic research these results are robust to adjustments for influential outliers also our evidence suggests that the return to company financed r d is an increasing function of firm size i introduction robert solow s studies in the late 1950s dramatically changed perceptions of the sources of economic growth until this time the commonly held view was that improvements in economic welfare were achieved primarily through the use of more inputs in particular capital input however solow 1957 reported that only 10 percent of the twofold rise in u s per capita output during the years 1909 1949 was due to growth in the capital labor ratio the remainder was attributed to more efficient use of inputs or technological change solow also established a framework for estimating technological change a productivity residual or a measure of changes in output that could not be explained by changes in input use the solow residual in modified form has become virtually synonymous with the measurement of total factor productivity tfp growth jorgenson and griliches 1967 demonstrated that under the assumptions of constant returns to scale and competitive factor pricing changes in total factor productivity measure shifts in a production function rather than treat technological change as exogenous or manna from heaven many economists have explored its determinants r d investment is generally regarded as having a strong impact on productivity growth empirical analysis of the r d productivity connection has often been based on estimation of reduced form equations derived from the r d capital stock model griliches 1979 which extends the solow model to include the stock of technical knowledge or knowledge capital as a factor of production in addition to the standard factors of production physical capital labor intermediate materials and energy if the rate of depreciation of knowledge capital is assumed to be negligible tfp growth dtfp is a function of the intensity of r d investment rdint which is usually measured as the ratio of r d expenditure to sales 1 dtf p sub t alpha beta rdin t sub t u sub t where u sub t is a classical disturbance term the coefficient on r d intensity beta is interpreted as both the marginal product of knowledge capital and the rate of return to r d investment 1 estimates of beta at the company or line of business level are interpreted as measures of the private rate of return to r d or those that accrue to the firm or its investors due to incomplete appropriability or other factors this return may not equal the social return to this activity most empirical studies especially those based on aggregate and sectoral data have found evidence of a strong positive correlation between tfp growth and r d investment however results using firm level data have been mixed the finding that these two variables are uncorrelated is cause for concern because it implies that firms may not be able to earn significant returns on their investment in r d making them less likely to undertake this investment in the future even if it is socially desirable for them to do so we believe that it is important to reestimate this relationship because it is highly likely that existing firm level studies have been based on measures of tfp that are crude imprecise and unrepresentative

the private r d investment response to federal design and technical competitions it is the federal government s role to promote investment in research and development rd and 2 contracting with private firms and nonprofit organizations such as universities to perform rd the winning firm recovered its development costs in the form of profits on the sale of the airplanes and the losing firms did not recoup their r d investment mansfield 1971 p 122

virtual incubation in industrial clusters a case study in pakistan abstract in industrial clusters transaction costs are kept low and free riding is discouraged by a community mechanism developed through dense and repeated interactions among entrepreneurs in such environments new entrants without established reputations and connections are put at a distinct disadvantage this negative effect on new entry must be neutralised for an industrial cluster to expand using enterprise level data from pakistan this study finds that personal networks are indeed important for successful enterprise operation which works to the advantage of incumbents but that subcontracting plays the role of virtual incubation in nurturing new enterprises reinforcing the cluster s dynamism

infrastructure and cluster development a case study of handloom weavers in rural ethiopia abstract clustering is an important structure of production in the rural nonfarm sector based on a primary survey of rural handloom clusters in ethiopia this article examines the mechanism and performance of clustering given weak financial institutions clustered producers and traders use trade credits to ease working capital constraints moreover geographical clustering enables entrepreneurs with limited capital to enter the business through shared workspaces and fine division of labour an improvement in infrastructure can further enhance firm performance in a cluster in towns with electricity access producers work longer hours by sharing lit workspaces at lower rental cost

rates of return on physical and human capital in africa s manufacturing sector in this paper two sets of issues are addressed using panel data from the manufacturing sector of five african countries first how high are the returns to human relative to physical capital second what is the relative importance of technology and endowments of human and physical capital in determining differences in earnings and productivity across the countries evidence from earnings functions shows that the private returns to both experience and education rise with the level of education private returns rise from 3 per cent at the primary level to 10 per cent at the secondary level and 35 per cent for tertiary evidence from the production function gives lower returns on education than from the earnings function rates of return on physical capital exceed 20 per cent and greatly exceed the average return on human capital data is available on the stocks of human and physical capital across the countries productivity and earnings differentials are shown to be large between cameroon and ghana these differences are due almost entirely to differences in physical not human capital endowments this abstract was borrowed from another version of this item

institutions for financial development what are they and where do they come from abstract among the fundamental causes of long run economic performance differences in institutions have received considerable attention in recent years at the same time a large body of theoretical and empirical work shows that financial development can have a big effect on economic performance this raises the more fundamental question as to why some countries have developed financial markets while others do not this paper reviews the theoretical and empirical research on this issue and shows that one of the channels whereby better institutions may have an effect on economic development is through the consolidation of larger and better financial markets an issue that is left aside in this paper relates to what regulations and policies lead to better functioning capital markets at some level one can think of regulations and policies as particular types of institutions nonetheless institutional problems are deeper causes leading to poor economic performance bad policies might simply be part of the channels through which they influence performance thus addressing the question of what determines the emergence of good institutions i e institutions that promote financial development seems particularly important recent research providing some answers to this question is also reviewed

an analysis of the composition of r d spending research and development encompasses a myriad of activities generally research is the primary search for technical or scientific advancement and development is the translation of such advancement into product of process innovations the national science foundation has fostered an even finer breakdown basic research applied research and development in practice however r d is more heterogeneous than these labels imply the research fields associated with basic research include areas in both the physical and biological sciences applied research and development projects relate to product groups as diverse as all the activities in the industrial sector nevertheless most previous empirical studies of the microeconomic aspects of r d have treated r d spending as a single homogeneous activity consequently a generally acceptable set of variables has developed for explaining inter firm levels of r d spending but virtually nothing is known about the determinants of the inter firm composition of r d

federal funding and the level of private expenditure on basic research economists have long been interested in questions concerning the role of government in stimulating private sector innovation in the late 1950s blank and stigler 2 asked in particular whether government funded industrial research and development r d activity was likely to stimulate or substitute for private sector expenditure on r d a number of studies have since addressed this issue and most conclude in favor of the existence of a positive relationship between federal r d expenditures and the level of private r d investment leyden and link 8 have provided a theoretical rationale for this observed complementarity they suggest that federallyfunded industrial r d activity may generate knowledge spillovers and other infratechnology that may raise the productivity of inputs into private r d r d is a heterogeneous activity and a question which has received relatively little attention in the literature is the extent to which the apparent complementarity between federal and private industrial r d spending holds for the different components of firms r d budgets cross section evidence on this issue produced by link 13 suggests that

finance and cluster based industrial development in china abstract china s rapid industrialization over the past several decades which has occurred in the absence of well functioning financial markets seems to defy conventional wisdom on the causal role of finance on industrialization by conducting an in depth case study on a fast growing cashmere sweater cluster in china we show that through clustering an integrated production process can be divided into many incremental steps as a result there is a wide range of investment options in the cluster and in many types of production capital barriers to entry are modest within clusters enterprises can often acquire trade credits from upstream or downstream firms and obtain informal financing from friends and relatives which are used to mitigate working capital constraints local governments can play an active role in providing necessary public goods and promoting cluster growth

why are governmental r d and private r d complements it is well known that government r d and private r d have a complementary relationship however no previous study has provided an explanation for why that complementary relationship exists this paper argues that infratechnology is the critical link between governmental and private r d and that the observed complementarity is the result of technical complementarity at the production level between funding infratechnology and knowledge sharing a theoritical framework based on this argument is developed and examined empirically for supporting evidence evidence of technical complementary is found as well as evidence that governmental r d stimulates the sharing of knowledge

the effect of government funding on private industrial research and development a re assessment a number of previous studies have attempted to determine the effect of federal support of research and development r d performed in industry on the rate of private investment in r d by estimating regressions of private r d expenditure on federal industrial r d expenditure controlling for total demand sales and in some cases other variables this paper presents arguments and econometric evidence in support of the hypothesis that due to misspecification of the private r d equation i e failure to distinguish government sales from other sales previous estimates of the effect of federal industrial r d on private r d funding are seriously upwardly biased

adolescent alcohol use sociability and income as a young adult we use data from the national longitudinal survey of adolescent health add health to study how sociability and adolescent alcohol use impact personal income as a young adult we find that factors which enhance not only individual sociability but also social interaction at the community level are positively linked to future earnings of adolescents adolescents whose friends and friends of friends have greater sociability reap long term labour market rewards into adulthood after adjusting for individual and community sociability the effect of teenage alcohol consumption on labour market earnings as young adults is reduced our results suggest that earnings premiums associated with adolescent alcohol consumption may be partially explained by social network dynamics

the effects of mission oriented public r d spending on private industry this paper addresses the question of how government mission oriented r d spending affects private r d spending and thereby the total investment in technology the problem is approached within the context of the capital asset pricing model in which the firm views investment projects in terms of their risk and return characteristics the firm is assumed to produce jointly an established product and an r d intensive product where the latter generates an additional output of technology or spillover that is used as an input into the former by investing in r d the firm alters its risk and return characteristics in two ways through the expected profits from the sale of the r d intensive good and through the expected profits from the spillover in this model government mission oriented r d contracting affects the firm by enabling it to separate to some extent these two sources of risk and return the main implication of the analysis is that while some public crowding out of private r d is likely this is almost certain to be incomplete the empirical evidence from the u s transport industry supports the model and suggests that each dollar of government funding adds around 92 cents to total r d spending crowding out private investment by as little as eight percent private companies in the united states perform a great deal of publicly funded r d contract work notably in connection with defence space exploration energy and health this work is generally believed to make two contributions to society a direct effect of providing technology intensive public goods and an indirect or spillover effect into the technology content of the private goods produced by the firms which undertake the government contracts for example space technology has produced heart pacemakers alongside cryogenic insulation materials while automatic instrument landing systems benefit holidaymakers as well as air force pilots

estimating the impact of government r d abstract if we do not pay for an input it is important it is suggested that the r d literature by ignoring the fact that government r d is given away has confused zero value of marginal product with zero marginal physical product

the division of labor coordination costs and knowledge this paper considers specialization and the division of labor a more extensive division of labor raises productivity because returns to the time spent on tasks are usually greater to workers who concentrate on a narrower range of skills the traditional discussion of the division of labor emphasizes the limitations to specialization imposed by the extent of the market we claim that the degree of specialization is more often determined by other considerations especially emphasized are various costs of coordinating specialized workers who perform complementary tasks and the amount of general knowledge available