financial markets and growth the last five years have witnessed a resurgence of interest in the relationship between financial intermediation and economic growth this issue had been extensively studied nearly two decades earlier by goldsmith 1969 mckinnon 1973 shaw 1973 and others who produced considerable evidence that financial development correlates with growth but their work though insightful lacked analytical foundations in traditional growth theory financial intermediation could be related to the level of the capital stock per worker or to the level of productivity but not to their respective growth rates the latter were ascribed to exogenous technical progress the recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of endogenous growth models which have shown that there can be self sustaining growth without exogenous technical progress and that the growth rate can be related to preferences technology income distribution and institutional arrangements this provides the theoretical underpinning that early contributors lacked tinancial intermediation can be shown to have not only level effects but also growth effects the resulting models have offered important insights into the effect of financial development on growth and vice versa they have also provided new impetus to empirical research on these issues this paper reviews the ground covered so far on the theoretical and empirical front and points to some still unresolved issues

trade politics in the third world a case study of mexican gatt decision in 1980 mexico decided not to join the general agreement on tariffs and trade gatt certain objective conditions formed a positive environment for mexican adherence but president l6pez portillo postponed mexican entry indefinitely this critical decision is examined from two perspectives a left leaning foreign policy and domestic constraints in the mexican political system major foreign policy factors were a growing resentment of u s dominance combined with a preference for conducting relations with the u s on a bilateral basis internal political pressures reflected the continued reform of the mexican political system at the upper levels and the relative autonomy of some elite groups from the state l6pez portillo s decision did not constitute an outright rejection of trade liberalization however the decision could have international repercussions in politicizing u s mexican trade relations in slowing trends toward freer trade especially in latin america and in strengthening multilateral organizations like unctad in which third world countries exercise considerable power

the drivers of international migration to the uk a panel based bayesian model averaging approach a heterogeneous panel based bayesian model averaging approach is used to identify the robust economic and policy drivers of international migration to the uk from 14 different source regions over 1980 2007 around three quarters of the increase in net immigration over the last decade which is particularly pronounced for selected source regions is associated with structural change which may be attributed to uk and foreign immigration policy the remainder of the rise is largely explained by friends and family effects there are considerable uncertainties associated both with the effects of particular economic drivers of immigration and with forecasts of immigration

financial development and barriers to the cross border diffusion of financial innovation this paper explores the determinants of financial development by focusing on the role played by barriers to the diffusion of financial technology these barriers are measured using human genetic distance from the technology frontier the results based on cross sectional data for 123 countries suggest that genetic distance to the global frontier has an economically and statistically significant effect on financial development in that countries that are genetically far from the technology leader tend to have lower levels of financial development genetic distance is found to have the largest effect even after controlling for other determinants of financial development established in the literature these findings indicate that cultural barriers to the diffusion of financial technology across borders impact financial development by influencing the follower countries ability to adopt and adapt innovations from the frontier

the irish case of dependency an exception to the exceptions the dependency approach has recently been criticized by authors who quote the exceptional east asian cases the irish case is used to refute these new modernizationist arguments on two counts 1 countries such as ireland not the east asian countries have regimes with characteristics that tend to set dependency relations in motion these characteristics include radical free trade free enterprise andforeign industrial domination 2 because of these characteristics ireland has endured economic stagnation and tendencies toward higher inequality irish economic growth under foreign dominated industrialization was slowed by decapitalization and by the absence of linkages between foreign and domestic industry time series models show that foreign penetration and free trade are related to slower economic growth because of slower investment growth and other reasons inequality increased primarily because of rising unemployment although social welfare programs reduced the effects of direct income inequality their effects have been reduced by regressive taxation and austerity programs

the rule of law and economic growth where are we summary it is widely assumed that the rule of law is essential for economic growth however the rule of law is clearly a multidimensional concept encompassing a variety of discrete components from security of person and property rights to checks on government and control of corruption we review the theory underlying these different causal mechanisms linking the rule of law to economic growth and provide an introduction to some outstanding measurement issues we find that the correlation among different components of the rule of law concept are not tight among developing countries and that some inferences about the effects of property rights protection may not be warranted

brazilian development in long term perspective brazil is now the eighth largest market economy in the world its 1979 per capita income of over 1 500 in current dollars its sophisticated industrial structure and its recent dynamism combine to give it a prominent place among the advanced developing countries not surprisingly recent brazilian experience has been an important subject for the analysis of economic development not all of it uncritical such a focus on the brazilian miracle and its aftermath is too limited brazilian growth and industrialization have a long history as do the regional and personal income inequalities that today increasingly command attention understanding the origins of brazilian growth in the nineteenth century export economy and the subsequent patterns of import substitution will not yield better rules for short term debt management or monetary policy but the longer perspective makes clear that sustained economic development requires more than following the dictates of the international market and getting prices right indeed it may on occasion involve rejecting such signals i shall interpret four significant episodes

the origins and development of the northeast asian political economy industrial sectors product cycles and political consequences theories of the product cycle hegemony and the world system are used to analyze the creation and development of the northeast asian political economy in this century japan south korea and taiwan have each developed in a particular relationship with the others the three taken together form a hierarchical constantly interacting political economic unit during the period of colonial rule japan was unique in building an imperial economic unit marked by a strong role for the state whether in tokyo or taipei by a tight integral unking of all three nations into a communications and transport network running toward the metropole and by a strategy of both using the colonies for agricultural surpluses and then locating industries there after 1945 a diffuse american hegemony replaced japan s unilateral system but elements of the prewar model have survived strong states direct economic development in south korea and taiwan here termed bureaucratic authoritarian industrializing regimes both countries are receptacles for japan s declining industries and both countries develop in tandem if in competition with each other the most recent export led competition has seen taiwan succeed where south korea has temporarily failed leaving seoul in an export led trap burdened with rapidly increasing external debt taiwan furthermore has industrialized relatively free of social disruption whereas korean society resisted its transformation at japanese hands and remains more rebellious today there can be one japan and one taiwan but not two or many of either in the world economy

what type of finance matters for growth bayesian model averaging evidence this paper examines the effect of finance on long term economic growth using bayesian model averaging to address model uncertainty in cross country growth regressions the literature largely focuses on financial indicators that assess the financial depth of banks and stock markets these indicators are examined jointly with newly developed indicators that assess the stability and efficiency of financial markets once the finance growth regressions are subjected to model uncertainty the results suggest that commonly used indicators of financial development are not robustly related to long term growth however the findings from the global sample indicate that one newly developed indicator the efficiency of financial intermediaries is robustly related to long term growth

the political economy of income distribution in south korea the impact of the state s industrialization policies abstract a number of previous studies of economic growth and income distribution in south korea based largely on 1960s data concluded that south korea was an exception to kuznets inverse u pattern of income inequality also it was regarded as an exception to the usual negative consequences predicted by dependency theory for an economy so dependent on foreign capital and world markets this author presents more recent data for the 1970s and early 1980s in order to support his claim that the trend toward income equality that appeared in the 1960s was reversed in the 1970s the author develops a thesis that stresses the role of the state in shaping the korean political economy he argues that it has been the strong south korean developmentalist state in firm control of both domestic and foreign capital and its export oriented industrialization policies that have been the principal determinant of the pattern of income distribution he contests the usual explanation related to the level of economic development or external dependency per se

are any growth theories robust this article investigates the strength of empirical evidence for various growth theories when there is model uncertainty with respect to the correct growth model using model averaging methods we find little evidence that so called fundamental growth theories play an important role in explaining aggregate growth in contrast we find strong evidence for macroeconomic policy effects and a role for unexplained regional heterogeneity as well as some evidence of parameter heterogeneity in the aggregate production function we conclude that the ability of cross country growth regressions to adjudicate the relative importance of alternative growth theories is limited despite the vast amount of empirical research generated by new growth theories there is remarkably little consensus on which mechanisms are most salient in explaining cross country differences this article is designed to provide some evidence on this question by examining the robustness of empirical support for different growth the ories as determinants of both aggregate growth and its underlying components total factor productivity tfp growth and physical and human capital accumulation one reason for the lack of empirical consensus on growth determinants is that the main statistical tool in empirical studies cross country growth regressions provides very different answers depending on how the regression is specified which for this context typically amounts to the choice of control variables individual papers typically employ regressions that include modest subsets of the body of regressors that have been pro posed in the literature as a whole others employ a kitchen sink approach to evaluate the relative evidentiary support of competing growth theories in such an exercise a large number of variables are included in a regression and those variables that prove to be significant are then declared to be the important determinants of growth while the others are dismissed as unimportant rodrik et al 2002 sachs 2003

the finance growth nexus evidence from bank branch deregulation this paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the united states we find that the rates of real per capita growth in income and output increase significantly following intrastate branch reform we also argue that the observed changes in growth are the result of changes in the banking system improvements in the quality of bank lending not increased volume of bank lending appear to be responsible for faster growth

are modern financial systems shaped by state antiquity we demonstrate that existing differences in financial development between countries can be explained by the cumulative variations in their levels of state experience since 1 ad this dimension of early historical development has not been considered so far in studies that analyze the determinants of financial development the estimation allows for all major theories established in the literature as possible explanations for the disparity of financial development across the globe significance of state antiquity is robust to the use of alternative indicators of financial development the consideration of different lengths and periods of statehood and controlling for a range of variables or country characteristics our results highlight the important role of statehood in propelling financial system development and thus provide some support to the view that historically determined differences in the early start developmental advantage provide the basis for explaining the fundamental sources of variations in financial development between countries today

stock markets and development this paper asks if financial development especially stock market development affects the level and or the growth rate of economic activity it finds a substantial effect on both current wisdom suggests that the growth effects of financial intermediation could be either permanent or transitory for instance the greenwood jovanovic 1990 henceforth gj model has an ak stucture with no diminishing returns to the reproducible factor and a permanent exogenous improvement in financial structure would cause a permanent increase in the rate of growth on the other hand if the returns to the reproducible factor did diminish better intermediation could lead only to level effects since one should not a priori exclude either growth effects or level effects we shall look for both our search for growth effects will use the gj model our search for level effects will rely on an amended version of the mankiw romer and weil 1992 henceforth mrw structure

third world indebted industrialization international finance and state capitalism in mexico brazil algeria and south korea the past fifteen years have seen two important developments in the international economic system the rapid industrialization of many less developed countries ldcs and their increasing indebtedness to private financial institutions massive bank loans have been used to fund industrial growth in many ldcs international financial markets have replaced multinational corporations as the third world s most important source of private foreign capital in four major borrowing countries mexico brazil algeria and south korea the process of indebted industrialization has its roots in the internationalization of finance the increasing role of the state and the use of funds raised on the international capital markets to finance industrial development the results include rapid expansions of ldc industrial production and ldc exports of manufactured products as well as the formation of an implicit partnership between private financial institutions and state capitalist elites in the third world

the effect of asymmetries on optimal hedge ratios there is widespread evidence that the volatility of stock returns displays an asymmetric response to good and bad news this article considers the impact of asymmetry on time varying hedges for financial futures an asymmetric model that allows forecasts of cash and futures return volatility to respond differently to positive and negative return innovations gives superior in sample hedging performance however the simpler symmetric model is not inferior in a hold out sample a method for evaluating the models in a modern risk management framework is presented highlighting the importance of allowing optimal hedge ratios to be both time varying and asymmetric

the mouse that roared taiwan s management of trade relations with the united states this analysis seeks to contribute to the growing literature on the subject of the weak in the world of the strong it examines taiwan s attempts to cope with u s commerical pressure in view of its mounting bilateral trade surplus in the recent years 10 6 billion in 1985 and 6 2 billion in the first half of 1986 taiwan s past ability to achieve relatively favorable outcomes in its commerical dealings with the united states is explained at two levels at the more micro level of bargaining tactics used by the weak in managing the strong attention is directed to taiwan s resort to 1 problem redefinition 2 damage limitation 3 exploring loopholes 4 linkage politics and 5 transnational coalitions these measures are complemented by more long term and basic economic adaptation termed positive adjustment at the more macro level two prerequisites suggested by yoffie 1983 for successful adaptation in a protectionist and competitive economic environment are discussed 1 taiwan s policy

the price of wealth business and state in labor remittance and oil economies this article contrasts the effects of state controlled oil revenues and privately controlled labor remittances on institutional development state capacity and businessgovernment relations in saudi arabia and the yemen arab republic these two countries represent extreme cases of dependence on external capital in deeply divided societies presided over by fragile emerging bureaucracies by tracing the two cases through a pattern of economic boom 1973 83 and recession 1983 87 the study demonstrates that the type volume and control of capital inflows decisively influence the relative development of the bureaucracy s extractive distributive and regulatory capacities and affect the ability of the state to respond to economic crisis in both cases external capital inflows precipitated the decline of extractive institutions however oil revenues and labor remittances had divergent effects on businessgovernment relations and this circumscribed the state s ability to implement austerity programs during the recession during the crisis the saudi government s efforts to cut subsidies to the private sector and to implement extractive policies were blocked by the state sponsored merchant class in contrast the yemeni government instituted a thoroughgoing austerity package that targeted the independent merchant class in both cases external capital inflows did not augment the efficacy of those that controlled them these paradoxical outcomes are explained by tracing the different effects of oil revenues and labor remittances on the distribution of economic opportunity in the public and private sectors and the resulting effects on the regional tribal and sectarian composition of the bureaucracy and the commercial class

bivariate garch estimation of the optimal commodity futures hedge six different commodities are examined using daily data over two futures contract periods cash and futures prices for all six commodities are found to be well described as martingales with near integrated garch innovations bivariate garch models of cash and futures prices are estimated for the same six commodities the optimal hedge ratio ohr is then calculated as a ratio of the conditional covariance between cash and futures to the conditional variance of futures the estimated ohrs reveal that the standard assumption of a time invariant ohr is inappropriate for each commodity the estimated ohr path appears non stationary which has important implications for hedging strategies

the impact of 9 year compulsory education quasi experimental evidence from taiwan using a regression discontinuity design this article investigates the causal impacts of 9 year compulsory education on students educational attainment and dropout rate by taiwan population and ho

the state and foreign investment the cases of taiwan and singapore the influence of a host state on direct foreign investment attracts the attention of scholars much less than do the constraints of the latter on the former this study addresses the impact of state regulatory policies on the roles of inward foreign investment in taiwan and singapore s manufacturing sector the similarities between the two small asian open economies are first discussed the different roles played by the foreign investors in their economies are then compared a review of the literature in orthodox theories and radical points of view reveals several possible explanatory variables for such differences through the logic of the most similar systems design or method of difference some seemingly plausible factors are ruled out due to their similarities in the two chosen entities it is found that some pull factors such as geographic location colonial legacy external political environment and indigenous industrial capacity and conversion factors such as state policies toward foreign in

ideological guerrillas and the quest for technological autonomy brazil s domestic computer industry brazil s domestic computer industry developed during the past decade has excluded multinational giants such as ibm from brazil s growing micro and minicomputer markets changes in computer technology and in markets as well as in domestic economic and political conditions helped facilitate brazil s progress toward technological independence but primary support for the project came from technocratic and military elites who were determined for ideological reasons to reduce brazil s computer dependency and to challenge the dominance of multinationals ideologically motivated technocrats used their positions in state bureaucracies to convince policy makers of the industry s viability and to set up institutions that would defend the autonomy model and turn a sectoral policy into a national policy brazil still depends on foreign software and microelectronics however bargaining theory correctly asserts that even dependency in sophisticated technological sectors can be partially overcome bargaining theories must not overlook the importance of cognitive and institutional processes which can make the difference between taking action to reduce dependency or doing nothing

rough and lonely road to prosperity a reexamination of the sources of growth in africa using bayesian model averaging this paper takes a fresh look at africa s growth experience by using the bayesian model averaging bma methodology bma enables us to consider a large number of potential explanatory variables and sort out which of these variable can effectively explain africa s growth experience posterior coefficient estimates reveal that key engines of growth in africa are substantially different from those in the rest of the world more precisely it is shown that mining primary exports and initial primary education exerted differential effect on african growth these results are examined in relation to the existing literature copyright 2008 john wiley sons ltd

globalisation and corruption revisited this paper presents new empirical evidence on the determinants of corruption focussing on the role of globalization and inequality the estimates for a panel of 102 countries over the period 1995 2005 point to three main results i detection technologies reflected in a high level of development human capital and political rights reduce corruption whereas natural resource rents increase corruption ii globalization in terms of both trade and financial openness has a negative eect on corruption which is more pronounced in developing countries iii inequality increases corruption and once the role of inequality is accounted for the impact of globalization on corruption is halved in line with recent theory this suggests that globalization besides reducing corruption through enhanced competition aects corruption also by reducing inequality

trade creation and diversion revisited accounting for model uncertainty and natural trading partner effects summary the effect of preferential trade agreements ptas on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical pta literature the existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the correct set of explanatory variables that ought to be included in the analysis to account for the model uncertainty that surrounds the validity of the competing pta theories we introduce bayesian model averaging bma to the pta literature statistical theory shows that bma successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error and by generating predictive distributions with optimal predictive performance once model uncertainty is addressed as part of the empirical strategy we find strong evidence of trade creation trade diversion and open bloc effects our results are robust to a range of alternative empirical specifications proposed by the recent pta literature copyright 2010 john wiley sons ltd

dependency theory and taiwan analysis of a deviant case the case of taiwan represents a challenge to two predictions from dependency theory that foreign economic penetration leads to slow economic growth and also to heightened inequality since the early 1950s taiwan has received massive foreign aid and investment but it has also had one of the highest sustained rates of growth in the world while income inequality on the island has decreased substantially an examinatin of this deviant case is pursued by consideration of the various mechanisms dependency theorists claim are responsible for the linkage of foreign economic penetration to stagnation and inequality in the taiwan case none of these mechanisms work out as predicated instead a variety of factors including the nature of the japanese colonial experience the emphasis on labor intensive enterprise and the absence of an entrenched burgeoisie created a situation in which both rapid growth and increasing equality could occur consideration of taiwan draws attention to flaws in the arguments of most

the permanent effects of innovation on financial depth abstract this paper examines links between innovation in the us intermediating sector and financial deepening from 1872 1929 technical progress is modeled in a credit rationing framework with limited liability as an enhanced ability of intermediaries to monitor loan recipients this allows an innovating lender to earn temporary rents by lowering loan rates and inducing firms with higher repayment prospects to apply rents persist until others adopt the improvement and competition for loanable funds raises the deposit rate subsequent deposits ensure that more funds are channeled to projects of higher average quality the link between the loan deposit spread and financial deepening implied by the model is then examined in an unobservable components framework the finding that permanent reductions of 1 in the spread of new york banks are associated with increases in financial depth that range from 1 7 to nearly 4 is consistent with a role for efficiency improvements in the rapid financial deepening that characterized the pre 1930 us economy

the development of the electronics complex and government policies in brazil abstract this paper reports some of the results of research conducted at the instituto de economia industrial of the federal university of rio de janeiro on the pattern of development of two industries of the electronics complex electronic data processing equipment edpe and electronic semiconductor components scc the industries were selected because of their technological and economic importance and for their potential inter relatedness as well as for policy related reasons the research focused on the analysis of the international characteristics of the two industries based mainly on secondary sources and an empirical investigation of their pattern of competition in brazil following a brief characterization of the electronics complex the next section of this paper describes the evolution of imports local production and exports and the pattern of competition in the brazilian market the third section analyzes in more detail the inter relations between consumers international firms local producers and government policies focusing mainly on the edpe industry infant industry experience the last section focuses on the intended policy for the scc industry exploring the implications of industrial interdependence and drawing from the experience of the edpe industry the article concludes by presenting some requisite characteristics of policy for fostering an electronics complex which may be useful not only for brazil but for other ldcs as well

declining hegemony and assertive industrialization u s brazil conflicts in the computer industry alternative explanations for the formation of u s foreign economic policy are explored using the acrimonious but inconclusive conflict between the united states and its largest south american ally over brazil s restrictive policies toward the computer industry after comparing a post dependency bargaining perspective the theory of hegemonic stability and stephen krasner s structural conflict model the article argues that systemic perspectives on foreign economic policy must be complemented by an account of the interaction between the effects of international position and the dynamics of domestic politics the resulting politicized state centric approach which integrates interest based politics and ideologically defined state aims is proposed as a means of more fully understanding the dilemmas of a declining hegemon

defense burden and economic growth unraveling the taiwanese enigma indicate that all these models capture parts of the empirical reality but none can account for all the complexity of this reality indeed in some crucial respects each of the models based as they have been primarily on intercountry comparisons is contradicted by the taiwanese time series i conclude that taiwan has not so much been able to avoid entirely the trade offs between defense and growth as to relax these trade offs the reasons contributing to this relaxation tend to set the taiwanese experience apart from the experiences of most other countries

comments on jointness of growth determinants we consider the measures of jointness proposed by doppelhofer and weeks 2009 and strachan 2009 in the context of variable selection using the general criteria suggested in ley and steel 2007 we identify some shortcomings of these measures which are illustrated with empirically relevant example cases we argue that careful examination of the properties of any jointness measure is critical before using it to inform decisions and favour the use of the measures proposed in ley and steel 2007 copyright c 2009 john wiley sons ltd

employment income distribution and economic growth in seven small open economies resurgent interest has been manifested among development economists in trickle down i e the view that the more rapid the rate of economic growth the more rapid the improvement in employment and income distribution throughout this paper the term income distribution will refer to the location and dispersion of the pattern of incomes i e to absolute incomes and poverty and to relative income inequality empirical evidence supports trickle down in some cases but the evidence is contrary to trickle down in others the evidence from my own study of six countries experiences2 is summarised in tables i and 2

the techno bureaucratic elite and the entrepreneurial state in dependent industrialization a common characteristic of dependent industrializing countries is a substantial direct entrepreneurial role for the state one explanation for this is that in dependent industrializing countries the system of allocation and production has been captured by a key group the techno bureaucratic elite the argument is that this elite lends its political support to the state in return for the state substituting as entrepreneur in the industrialization process in this article we analyze the theoretical implications of this explanation of the entrepreneurial state a formal model is constructed of the relationship between state entrepreneurship material consequences for the techno bureaucratic elite and important domestic and international constraints we then use deductive methods to analyze the logic of state entrepreneurship among other things we show how cyclical fluctuations in the global economy are reflected in constantly changing levels of state entrepreneurship and we investigate the consequences of alternative kinds of dependency syndromes for histories of entrepreneurial substitution and for streams of benefits to the techno bureaucratic elite it is demonstrated that there is an inverse relationship between the tendencies to reach stable levels of state entrepreneurship and the long term potential for economic growth

financial development and economic growth evidence from panel unit root and cointegration tests abstract in this paper we investigate the long run relationship between financial depth and economic growth trying to utilize the data in the most efficient manner via panel unit root tests and panel cointegration analysis in addition we use threshold cointegration tests and dynamic panel data estimation for a panel based vector error correction model the long run relationship is estimated using fully modified ols for 10 developing countries the empirical results provide clear support for the hypothesis that there is a single equilibrium relation between financial depth growth and ancillary variables and that the only cointegrating relation implies unidirectional causality from financial depth to growth

comment on jointness of growth determinants by gernot doppelhofer and melvyn weeks doppelhofer and weeks 2009 present a statistic designed to indicate the probability that pairs of regressors appear together or individually in a bayesian model averaged linear regression this comment presents an alternative measure that is designed to overcome some of the limitations of doppelhofer and weeks statistic copyright 2009 john wiley sons ltd

growth econometrics for agnostics and true believers abstract the issue of model uncertainty is central to the empirical study of economic growth many recent papers use bayesian model averaging to address model uncertainty but ciccone and jarocinski 2010 have questioned the approach on theoretical and empirical grounds they argue that a standard agnostic approach is too sensitive to small changes in the dependent variable such as those associated with different vintages of the penn world table pwt this paper revisits their theoretical arguments and empirical illustration drawing on more recent vintages of the pwt and introducing an approach that limits the degree of agnosticism

financial development and economic growth abstract this paper examines the empirical relationship between long run growth and financial development proxied by the ratio between bank credit to the private sector and gdp we find that this proxy is positively correlated with growth in a large cross country sample but its impact changes across countries and is negative in a panel data for latin america we argue that the latter findings is the result of financial liberalization in a poor regulatory environment our findings also show that the main channel of transmission from financial development to growth is the efficiency rather than the volume of investment

financial and legal constraints to growth does firm size matter using a unique firm level survey database covering 54 countries we investigate the effect of financial legal and corruption problems on firms growth rates whether these factors constrain growth depends on firm size it is consistently the smallest firms that are most constrained financial and institutional development weakens the constraining effects of financial legal and corruption obstacles and it is again the small firms that benefit the most there is only a weak relation between firms perception of the quality of the courts in their country and firm growth we also provide evidence that the corruption of bank officials constrains firm growth

traders teachers and tyrants democracy globalization and public investment in education this article develops a model of the redistributive political economy of education spending focusing on the role of democracy and economic openness in determining the provision of education i argue that democratization should be associated with higher levels of public education spending lower private education spending and a shift from tertiary education spending toward primary education spending furthermore i argue that integration with the international economy should lead to higher public education spending conditioned on regime type and income and should push the balance between tertiary and primary education toward states particular comparative advantages these propositions are tested on a data set of more than one hundred states from 1960 to 2000 using a variety of panel data techniques including instruments for democracy the logic of the causal mechanism developed in the formal model is also tested on a number of case histories including the philippines which shows great variation in democracy and openness and india and malaysia which constitute unusual cases that lie off the diagonal of open democracies and autarkic autocracies the author would like to thank beth simmons torben iversen michael hiscox jeffry frieden jim alt teri caraway john freeman jane gingrich david samuels w phillips shively mark kayser john ahlquist and michael kellerman for highly useful comments and criticisms in addition i thank the current and past editors lou pauly emanuel adler david stasavage and lisa martin and three anonymous reviewers for their suggestions

japanese foreign economic policy formation explaining the reactive state the concept of the reactive state is useful in understanding the foreign economic policy behavior of japan and certain other middle range powers deeply integrated in the global political economy particularly during periods of economic turbulence when international regimes do not fully safeguard their economic interests the essential characteristics of the reactive state are two fold 1 it fails to undertake major independent foreign policy initiatives although it has the power and national incentives to do so 2 it responds to outside pressure for change albeit erratically unsystematically and often incompletely in the japanese case reactive state behavior flows from domestic institutional characteristics as well as from the structure of the international system domestic features such as bureaucratic fragmentation political factionalism powerful mass media and the lack of a strong central executive have played an especially important part in japanese financial energy trade and technology policy formation since 1971

trade strategy and the dependency hypothesis a comparison of policy foreign investment and economic growth in latin america and east asia the role of state policy in the industrialization of third world nations has become the subject of increasing interest in recent years in the past the debate over economic development has either focused on the traditional modernization approach or the dependency theory of underdevelopment 2 dependency theorists base their model of development on the belief that foreign investment from core countries is harmful to developing nations long term economic growth economic relationships between the core and the periphery are structurally detrimental for the latter because of the inherent dynamics of international capitalism yet despite the claims of dependency theory the recent experience of the east asian newly industrialized countries suggests a wider range of development possibilities which include government policies specifically designed to attract foreign investment these countries appear to have structured their domestic economies in order to mitigate the pernicious effects of dependent relationships with core countries this raises new questions about the development process and the role of policy and foreign investment in the economic transactions between core and peripheral countries dependency theory a neo marxist predecessor of world systems research claims that first world nations become wealthy by extracting surplus labor and resources from the third world capitalism perpetuates a global division of labor which causes the distortion of developing countries domestic economies declining growth and increased income inequality 3 those countries on the periphery cannot become fully modernized as long as they remain in the capitalist world

valuing new goods in a model with complementarity online newspapers many important economic questions hinge on the extent to which new goods either crowd out or complement consumption of existing products recent methods for studying new goods rule out complementarity by assumption so their applicability to these questions has been limited i develop a new model that relaxes this restriction and use it to study competition between print and online newspapers using new micro data from washington dc i estimate the relationship between the print and online papers in demand the welfare impact of the online paper s introduction and the expected impact of charging positive online prices

financial intermediation and growth some robustness results abstract we examine the relationship between financial intermediary development and economic growth using different instruments we find a strong positive effect when financial intermediation is measured as private domestic credit or liquid liabilities supporting earlier findings based on only one instrument

state capital and the transformation of dependence the brazilian computer case abstract brazil s policy of reserving the lower end of the computer market for indigenous firms has been controversial since its introduction 10 years ago this paper examines the implications of the brazilian computer case for the dependency approach and for current thinking on the role of the state in development the case is considered to demonstrate that dependence is a dynamic condition whose character is continually being transformed and that the state while it may play a crucial role in the initiation of new industries is limited in its ability to act autonomously once an industry is established

a markov regime switching approach for hedging energy commodities abstract this paper estimates constant and dynamic hedge ratios in the new york mercantile exchange oil futures markets and examines their hedging performance we also introduce a markov regime switching vector error correction model with garch error structure this specification links the concept of disequilibrium with that of uncertainty as measured by the conditional second moments across high and low volatility regimes overall in and out of sample tests indicate that state dependent hedge ratios are able to provide significant reduction in portfolio risk

unveiling covariate inclusion structures in economic growth regressions using latent class analysis we propose the use of latent class analysis methods to analyze the covariate inclusion patterns across specifications resulting from bayesian model averaging exercises using dirichlet process clustering we are able to identify and describe dependency structures among variables in terms of inclusion in the specifications that compose the model space we apply the method to two datasets of potential determinants of economic growth clustering the posterior covariate inclusion structure of the model space formed by linear regression models reveals interesting patterns of complementarity and substitutability across economic growth determinants

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

the newly industrializing countries in the international system explanations of the growth of the newly industrializing countries nics by neoclassical economists and dependency theorists neglect the role of politics in shaping development strategies different social configurations state structures and ideas about development help explain the divergent policy choices made by the export oriented east asian nics korea and taiwan and the more inward looking countries of latin america particularly mexico and brazil these different strategic choices in turn account for variations in the patterns of external dependency that characterize countries in the two regions

model averaging in economics an overview standard practice in empirical research is based on two steps first researchers select a model from the space of all possible models second they proceed as if the selected model had generated the data therefore uncertainty in the model selection step is typically ignored alternatively model averaging accounts for this model uncertainty in this paper i review the literature on model averaging with special emphasis on its applications to economics finally as an empirical illustration i consider model averaging to examine the deterrent effect of capital punishment across states in the usa

jointness of growth determinants reply to comments by rodney strachan eduardo ley and mark f j steel this comment contrasts the jointness statistics proposed by doppelhofer and weeks 2009 with alternatives proposed by strachan 2009 and ley and steel 2007 in contrast to the alternatives our jointness statistic constitutes a formal test for dependence over the joint posterior distribution the essential difference between our proposed measure and the alternatives is that our jointness measures uses the entire joint posterior distribution we discuss differences in jointness as well as inclusion and exclusion margins of the joint posterior distribution and the impact on economic significance using the numerical examples given by strachan 2009 and ley and steel 2009 copyright 2009 john wiley sons ltd

how international sanctions worked domestic and foreign political constraints on the brazilian informatics policy from 1985 to 1989 a trade conflict between the united states and brazil developed around brazil s protectionist information technology policy during that period and under the threat of trade sanctions some changes were made in the brazilian policy the effectiveness of sanctions in promoting policy changes in brazil resulted not only from economic losses but also from the shift provoked in the balance of political support for the policy within brazilian society moreover sanctions were effective not because they affected the interests of groups benefiting from the policy but because they pushed previously uncommitted groups to join the opposition to it

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

determinants of taiwan s trade liberalization the case of a newly industrialized country abstract this paper attempts to account for the success of policy reform in taiwan s trade liberalization through an investigation of the periods 1986 92 and 1992 95 the objective is to undertake an empirical examination of haggard et al s the political feasibility of adjustment in developing countries development centre of the oecd oecd paris 1995 strategies for minimizing the political costs involved in implementing policy reforms empirical evidence supports the haggard et al arguments that is indirect compensation is used to facilitate the implementation of trade liberalization for downstream industries while the speed of trade liberalization within certain specific industries is comparatively slow furthermore in a democratic regime the pressure brought to bear by well organized domestic interest groups along with the pressure from international interest groups can strongly influence the pattern of trade liberalization policies

how different is africa a comment on masanjala and papageorgiou masanjala and papageorgiou rough and lonely road to prosperity a reexamination of the sources of growth in africa using bayesian model averaging journal of applied econometrics 2008 23 5 671 682 use bayesian model averaging to evaluate the existence of parameter heterogeneity between african and non african countries in the framework of cross country growth regressions we show that their results are not robust to the use of a prior over the model space that respects the strong heredity principle put forward by chipman for models including interaction terms

the politics of adjustment lessons from the imf s extended fund facility the international debt crisis has forced painful economic adjustments on the developing world in the short run it has forced governments to seek to correct payments imbalances through stabilization programs usually undertaken with conditional assistance from the international monetary fund imf the crisis has also revealed deeper weaknesses in many third world economies weaknesses demanding more basic reforms in the structure of incentives prices and investment

sudden changes in variance and time varying hedge ratios abstract this paper analyzes the influence of sudden changes in the unconditional volatility on the estimation and forecast of volatility and its impact on futures hedging strategies we employ several multivariate garch models to estimate the optimal hedge ratios for the spanish stock market including in each one some well known patterns that may affect volatility forecasts asymmetry and sudden changes the main empirical results show that more complex models including sudden changes in volatility outperform the simpler models in hedging effectiveness both with in sample and out of sample analysis however the evidence is stronger when the loss distribution tail is used as a measure for the effectiveness value at risk var and expected shortfall es suggesting that traditional measures based on the variance of the hedged portfolio should be used with caution

growth effects of foreign and domestic investment over tha past few years numerous studies in sociology have concluded that foreign investment harms poor nations these studies have focused on the coefficient for foreign capital stock controlling for flow new investment and defying logic have inferred that a negative coefficient for stock reflects dependency effects that retard economic growth since capital stock is the denominator for investment rate the greater the stock the lower the investment rate for a given level of new investment hence the negative coefficient for capital stock found in dependency studies indicates a beneficial investment effect not a harmful effect this point is demonstrated by reanalysis of the data used in dependency studies in these data foreign investment spurs growth earlier analysts have concluded otherwise only because their conclusions have belied their findings

revisiting economic development in post war taiwan the dynamic process of geographical industrialization taiwan s post war economic growth has been spectacular and has attracted divergent even contrasting explanations from the students of economic development while neo classicists interpret taiwan s miracle as a model of a free market economy the statists put government policy as their main emphasis however neither the neo liberalists nor the statists take the phenomena of uneven development very seriously by ignoring the process of geographical industrialization both discourses are not able to reveal the dynamic rhythm and more importantly the diversity and possibility of capitalist development this paper tackles the issue by unraveling the divergent regional industrial trajectories and the resulting geographical and social embeddedness in post war taiwan au taiwan le developpement economique d apres guerre a ete mirobolant d ou des explications divergentes de la part des etudiants du developpement economique alors que les neoclassicistes considerent le miracle taiwanais comme un modele type

jointness of growth determinants this paper introduces a new measure of dependence or jointness among explanatory variables jointness is based on the joint posterior distribution of variables over the model space thereby taking model uncertainty into account by looking beyond marginal measures of variable importance jointness reveals generally unknown forms of dependence positive jointness implies that regressors are complements representing distinct but mutually reinforcing effects negative jointness implies that explanatory variables are substitutes and capture similar underlying effects in a cross country dataset we show that jointness among 67 determinants of growth is important affecting inference and informing economic policy copyright 2009 john wiley sons ltd

macropolitical consensus and lateral autonomy in industrial policy the nuclear sector in brazil and argentina levels of macropolitical consensus and sectoral institutional autonomy both influence industrial policy different combinations of high or low consensus and autonomy help anticipate the respective explanatory relevance of generic industrial models sectoral agencies trajectories and bureaucratic politics industrial policy choices thus are not always determined by international market opportunities relevant domestic endowments or the political strength of industrial entrepreneurs the nuclear sectors in brazil and argentina are examined in light of this argument a relatively strong consensus over the generic industrial model and a centralized decision making process explain state entrepreneurship and foreign technology in brazil in contrast argentina s emphasis on domestic private entrepreneurial and technical resources can be traced to an absence of macropolitical consensus and to sectoral institutional autonomy these differences had implications for the process of bargaining with foreign technology suppliers levels of consensus and autonomy influence the process of bargaining with foreign technology suppliers through their impact on the size of domestic win sets on risks of involuntary defection on credibility of commitments and on reduction of uncertainties

persistence in variance structural change and the garch model this article examines the persistence of the variance as measured by the generalized autoregressive conditional heteroskedasticity garch model in stock return data in particular we investigate the extent to which persistence in variance may be overstated because of the existence of and failure to take account of deterministic structural shifts in the model both an analysis of daily stock return data and a monte carlo simulation experiment confirm the hypothesis that garch measures of persistence in variance are sensitive to this type of model misspecification

market culture and authority a comparative analysis of management and organization in the far east three frameworks purport to explain industrial arrangements and practices a market approach that emphasizes economic characteristics a cultural approach that sees organization as the expression of patterned values and an authority approach that explains organization as a historically developed structure of domination the efficacy of each approach is tested in explaining the organizational structures of three rapidly growing east asian economies japan south korea and taiwan the paper argues through comparative analysis that organizational growth is best explained by market and cultural factors but that authority patterns and legitimation strategies best explain organizational structure

financial development and openness evidence from panel data abstract this paper addresses the empirical question of whether trade and financial openness can help explain the recent pace in financial development as well as its variation across countries in recent years utilising annual data from developing and industrialised countries and dynamic panel estimation techniques we provide evidence which suggests that both types of openness are statistically significant determinants of banking sector development our findings reveal that the marginal effects of trade financial openness are negatively related to the degree of financial trade openness indicating that relatively closed economies stand to benefit most from opening up their trade and or capital accounts although these economies may be able to accomplish more by taking steps to open both their trade and capital accounts opening up one without the other could still generate gains in terms of banking sector development thus our findings provide only partial support to the well known rajan and zingales hypothesis which stipulates that both types of openness are necessary for financial development to take place