aid volatility policy and development summary we build on bulir and hamann s analysis of aid volatility bulir a hamann j 2003 aid volatility an empirical assessment imf staff papers 50 1 64 89 bulir a hamann j 2008 volatility of development aid from the frying pan into the fire washington dc imf paper submitted to this special section showing that the conclusions reached depend on the dataset used their argument that the poorest countries have the highest volatility appears not to be correct the impact of volatility on growth is negative overall but differs between positive and negative volatility the mix between responsive components of aid for example programme aid and proactive components for example technical assistance is important finally we conclude that measures which increase trust between donor and recipient and reductions in the degree of donor oligopoly reduce aid volatility without obviously reducing its effectiveness

how important is the capacity of local governments for improvements in welfare evidence from decentralised uganda abstract decentralisation is often claimed to be effective for improvements in welfare and hence the reduction of poverty but empirical evidence is scarce this paper seeks to gain further insights into the relationship between decentralisation and welfare by investigating the role of local governments capacity for household consumption and school enrolment in uganda using household survey data it finds suggestive evidence that both household consumption and school enrolment are positively related with the level of capacity of district governments

the imf s role in structural adjustment in the 1980s conditional lending for structural adjustment in developing countries moved the imf beyond its role of macroeconomic crisis management fund supported adjustment programmes have often been flawed by a lack of distributional analysis and by poor sequencing of reforms notably premature financial liberalisation as a result they have caused avoidable hardship in addition the attempt to taper out aid as part of the reform programme leads to avoidable reductions in post stabilisation growth an important role for the fund in poststabilisation environments is to provide credible signals to private investors as macroeconomic crises spread across latin america and africa during the 1980s the imf became much more involved in low income countries whereas following its interventions in developed countries the fund had rapidly withdrawn post crisis in the low income countries its involvement became continuous this was partly because stabilisation often took longer however additionally by the 1980s it was already evident that whereas those poor countries which had adopted market based development strategies were developing those which had adopted inward oriented high regulation strategies were in decline unlike the economic crisis of 1998 the crises of the 1980s were concentrated among the inward orientated hence a reasonable diagnosis was that the crises were not merely manifestations of fiscal imbalance but that many other policies needed reform the task thus went beyond the conventional one of rectifying a crisis to reorienting a development strategy the fund joined with the world bank in an attempt to induce these reforms through sustained conditional lending hence the imf moved beyond its traditional role of short run macroeconomic crisis management fund and bank conditions were linked through cross conditionality but with the fund as the lead agency on many areas of policy this gave the fund a critical role in structural adjustment the fund s instrument for concessional lending in low income countries is its extended structural adjustment facility esaf in 1997 the board of the fund commissioned an external review of its esaf programmes in which we participated the report of the evaluation botchwey et al 1998 suggested three lines of criticism of fund adjustment programmes and these form the basis of our analysis in this paper the first is that through flawed design the programmes have sometimes had adverse consequences for the poor either directly through reducing incomes or indirectly through reductions in social service provision our criticism is of the sequence sometimes adopted by fund

competition and corporate performance are people right to think that competition improves corporate performance my investigations indicate first that there are some theoretical reasons for believing this hypothesis to be correct but they are not overwhelming furthermore the existing empirical evidence on this question is weak however the results reported here based on an analysis of around 670 u k companies do provide some support for this view most important i present evidence that competition as measured by increased numbers of competitors or by lower levels of rents is associated with a significantly higher rate of total factor productivity growth

the economics of slash and burn a case study of the 1997 1998 indonesian forest fires abstract the slash and burn technique is used in many developing countries as a cheap means of clearing forest land for agriculture and involves cutting vegetation and setting it alight this paper takes up a case study of the slash and burn forest fires of 1997 1998 in indonesia and evaluates the social efficiency of this technique by means of a comparison of its economic costs with its economic benefits the economic costs include the welfare loss caused by the fires through damage to plantations and crop cultivations as well as the loss of direct indirect and non use value of environmental goods such as tropical rainforests damaged in the fires the corresponding economic benefits consist of cost saving to shifting cultivators and plantation companies because of the elimination of the need to employ the more expensive mechanical or non fire using methods of land clearing and because of the decreased requirement of fertilisers at the sites cleared for agriculture a comparison of these costs and benefits reveals an estimated loss of us 20 1 billion as a result of use of slash and burn in indonesia in 1997 1998 indicating that use of this technique is highly inefficient from a social perspective policy recommendations based on these findings include among others a proposal for imposition of a land clearing tax on plantation companies in indonesia in order to fund a state agency entrusted with the task of mechanically clearing forest land as per requirement and multilateral aid transfers directed towards providing alternative employment to shifting cultivators

calories conflict and correlates redistributive food security in post conflict iraq war torn iraq manifests itself as an ideal laboratory for food policy experimentation due to availability of unique data surrounding intra household calorie consumption and the presence of selected correlates including but not restricted to substantial disruptions to social infrastructure and fundamental public policy intervention among other findings expenditure elasticities are mostly positive and dramatically curvilinear with respect to wealth and lump sum redistribution of the iraqi public distribution system emerges as a feasible policy intervention extensions are discussed

growth deforestation and the efficiency of the redd mechanism this paper assesses the long term impacts of an international transfer called the reduced emissions from deforestation and degradation redd mechanism which aims at preserving tropical forests of the recipient economy this two sector economy faces a dilemma between economic growth and deforestation the rural sector can substitute reproducible capital for agricultural land whereas the manufacturing sector only requires capital the model shows that the redd mechanism has a non monotonic effect on steady state welfares for low transfer schemes the agricultural output increases with the transfer even though less land is under cultivation for high transfer schemes the increase in the transfer may not offset the decrease in the agricultural output the open loop symmetric nash equilibrium in a dynamic deforestation game predicts that redistributing the transfer among a finite number of producers is less efficient in reducing deforestation than in the social optimum

do external grants to district governments discourage own revenue generation a look at local public finance dynamics in ghana summary using rich panel data on all of ghana s districts local public finances over 11 years this paper investigates the way that intergovernmental and other transfers to local governments affect local governments incentives to collect internally generated revenues and funds igf we find that despite an incentive scheme built into one of the major intergovernmental grants the flow of all grants taken together discourages rather than encourages igf this is reflected both in the depressing effect of transfers on igf levels as well as on igf growth

does conditionality work a test for an innovative us aid scheme performance based aid has been proposed as an alternative to the failed traditional approach whereby donors make aid conditional on the reform promises of recipient countries however hardly any empirical evidence exists on whether ex post rewards are effective in inducing reforms we attempt to fill this gap by investigating whether the millennium challenge corporation mcc was successful in promoting better control of corruption we employ a difference in difference in differences ddd approach considering different ways of defining the treatment group as well as different time periods during which incentive effects could have materialized we find evidence of strong anticipation effects immediately after the announcement of the mcc while increasing uncertainty about the timing and amount of mcc aid appears to have weakened the incentive to fight corruption over time

food aid food prices and producer disincentives in ethiopia although the short term aims of food aid are well conceived strong concerns have been voiced regarding the long term impacts of such aid on incentives for agricultural producers in recipient countries this article examines the statistical link between food aid shipments and food prices in ethiopia over the period 1996 2006 monthly data from three markets and three commodities are used to estimate a system of seemingly unrelated regression models for food prices results indicate that previous year food aid shipments reduce prices in all producer and consumer markets these effects however appear to be limited to the set of internationally traded commodities that are domestically marketed a recursive regression procedure is used to identify the food aid threshold at which a negative aid effect emerges food aid shipments that constitute less than 10 of domestic production appear to be benign but shipments above this level show signs of being disruptive to local markets we use a simple policy simulation to argue that production sensitive targeting e g conditioning food aid on local food production would help to circumvent disincentive effects copyright 2009 oxford university press

relative prices and investment rates abstract we construct a panel for the price of aggregate investment over consumption and report the following observations 1 relative price differences across countries are large over the entire sample period and this conclusion is not affected by excluding non tradable consumption goods 2 relative price dispersion has decreased during the sample period 3 relative price changes are not persistent across periods while average price levels are moreover the persistence in relative price levels is higher for countries at low relative prices we show that the relative price of investment is negatively correlated with investment rates in a cross section of countries the standard one sector growth model is a natural framework to study quantitatively the effects of barriers to capital accumulation since there is a very simple mapping between barriers to investment and relative prices in this environment we simulate a calibrated version of the model in which barriers follow a stochastic process common to all countries and estimated using relative price data and obtain statistics for investment rates that closely resemble what we observe in the data in particular the model accounts for 90 of the 1985 gini index of relative investment rates and the decline in investment rate dispersion over time the model has two limitations as a theory of development first it cannot account for the income disparity in the data unless we assume unmeasured capital with barriers affecting the broad measure of capital second even under these extreme assumptions the model cannot account for the evolution of income disparity over time

ecological public functions and fiscal equalisation at the local level in germany abstract the concept of sustainability requires the acknowledgement and appropriate financing of ecological economic and social public functions at all levels of government whereas the significance of socio economic functions has a comparably long tradition in federal systems the respective consideration of ecological functions is still waiting to be fully realised the aim of this article is to analyse the roles fiscal federalism and fiscal instruments can play in addressing ecological public functions assigned to decentralised jurisdictions in federal systems for this purpose an investigation of intergovernmental fiscal relations and their significance for the local level is carried out by way of example for the federal republic of germany based on a status quo analysis of the various german fiscal equalisation laws at the local level the article presents options for systematically integrating neglected ecological functions and indicators into the existing legal framework the empirical analysis shows that end of the pipe and infrastructure related ecological functions are already strongly integrated by way of conditional grants however precautionary functions such as nature and resource conservation issues are still largely absent therefore a comprehensive consideration of ecological public functions in germany calls for the integration of nature conservation issues and respective indicators into the system of intergovernmental fiscal relations

intergovernmental fiscal transfers international lessons for developing countries abstract this paper reviews the central issues that arise in designing intergovernmental transfers and surveys the approaches adopted in a number of countries with special emphasis on developing countries since circumstances and objectives differ from country to country no simple uniform pattern of transfers is universally appropriate but experience around the world makes it clear that if services are to be efficiently provided transfers must be designed so that those receiving them have a clear mandate adequate resources sufficient flexibility to make decisions and are accountable for results

on the economic dividend of devolution rodriguez pose a and gill n 2005 on the economic dividend of devolution regional studies 39 405 420 recent political and academic discourse about devolution has tended to stress the economic advantages of the transfer of power from national to subnational institutions this economic dividend arises through devolved administrations ability to tailor policies to local needs generate innovation in service provision through inter territorial competition and stimulate participation and accountability by reducing the distance between those in power and their electorates this paper however outlines two related caveats first there are many forces that accompany devolution and work in an opposite direction devolved governmental systems may carry negative implications in terms of national economic efficiency and equity as well as through the imposition of significant institutional burdens second the economic gains as well as the downsides that devolution may engender are contingent to some

performance based conditionality a european perspective abstract the critique of conditionality has led to the recent emphasis on ownership by the recipient government to promote ownership it has been suggested that traditional ex ante conditionality based on promises of policy changes be replaced by ex post conditionality in which aid is based on performance in terms of ultimate objectives in this spirit the european commission has reformed its adjustment aid this article reviews early experience with the eu initiative in four countries benin burkina faso madagascar and uganda we find a shift toward intermediate indicators which are too distant from the final impact of the policies

synthesizing the malthusian and senian approaches on scarcity a realist account food entitlement decline fed and food availability decline fad are two approaches to explaining famines that have different policy implications one focuses on the systemic level whereas the other is concerned with the individual level they therefore analyse relatively distinct causal mechanisms thus an important question is whether these approaches can be reconciled another related question is how fad and fed based explanations relate to classical malthusian views about rapid food requirement increase fri this paper analyses these questions and argues that these three approaches can indeed be reconciled within a single framework by outlining the causal sources of fad fed and fri this task requires among other things the separation of ontological categories and empirical measures as a consequence of this argument the paper suggests that there are only seven possible ontological combinations of how a famine situation can arise as a direct cause simultaneously it maintains that there are virtually an infinite number of ways in which these combinations may act as indirect causes rooted in economic political and social conditions the analysis is exemplified by the bengal famine of 1943 because that famine is a well known case the wider research and policy applicability of this general account are discussed but have yet to be tested in relation to other scarcity cases water land fish this synthesis is made possible by the incorporation of critical realist interventions into economic theory

political losers as a barrier to economic development per capita income in many sub saharan african countries such as chad and niger is less than 1 30th of that of the united states most economists and social scientists suspect that this is in part due to institutional failures that stop these societies from adopting the best technologies a particularly interesting historical example comes from the diffusion of railways in the 19th century while railways are regarded as a key technology driving the industrial revolution there were large lags in their diffusion for example in 1850 the united states had 14 518 km of track britain 9 797 km and germany 5 856 km in the russian and hapsburg empires there were just 501 km and 1 357 kim respectively all data from brian r mitchell 1993 why do societies as in this example fail to adopt the best available technologies one answer is that existing powerful interest groups block the introduction of new technologies in order to protect their economic rents and societies are able to make technological advances only if they can defeat such groups economic monopolies may be one example a monopolist might wish to block the introduction of a new technology by a rival that will capture the market this idea which we call the economic losers hypothesis was discussed by simon kuznets 1968 developed at length by joel mokyr 1990 in the context of technology adoption and formalized by per krusell and jose victor rios rull 1996 and stephen l parente and edward c prescott 1997 related ideas are widely discussed in the literature on international trade policy with many formal models e g gene m grossman and elhanan helpman 1994 there are problems with this story however first despite the intuitive appeal of the idea there are relatively few instances where major economic change was blocked by economic losers mokyr 1990 emphasizes the attempts of many skilled artisans to block the introduction of new machines the most famous example is the luddites skilled weavers who were thrown out of work by mechanization interestingly however many of these groups including the luddites were ultimately unable to block economic progress equally important the economic losers hypothesis relies on the presumption that certain groups have the political power to block innovation but if so why not use this power to simply tax the gains generated by the introduction of the new technology this might be because there are limits on the nature of fiscal instruments though it seems plausible that groups with sufficient political power to block innovation would be able subsequently to lobby effectively for redistribution a more important reason however may be that the introduction of new technology and economic change more generally may simultaneously affect the distribution of political power we argue that the effect of economic change on political power is a key factor in determining whether technological advances and beneficial economic changes will be blocked in other words we propose a political loser hypothesis we argue that it is groups whose political power not economic rents is eroded who will block technological advances if agents are economic losers but have no political power they cannot impede technological progress if they have and maintain political power i e are not political losers then they have no incentive to block progress it is therefore agents who have t discussant gene grossman princeton university

ghost citizens using notches to identify manipulation of population based grants this paper analyzes how local governments misreport population figures to obtain higher per capita grant allocations in 1998 the allocation of a formula based grant in spain switched from using the centrally administered census to local population registers administered by municipalities the value of this per capita grant changes at fixed population thresholds for the entire local population we exploit these notches to analyze the size distribution of municipalities to detect deliberate manipulation of the grant assignment variable this allows us to causally identify the effect of grant generosity on population over reporting we document an excess mass of municipalities to the right of the notch threshold and a density hole to the left of it local registers included a proportion of ghost citizens that is people who presented no trace of actually residing in the municipalities which benefit the most from inflating population figures to pass the relevant threshold we document that manipulation rather than real population responses is the mechanism at work the main channel behind manipulation is the incorrect treatment of foreign residents to inflate total local population

trends in poverty and destitution in wollo ethiopia 1 abstract according to several studies poverty in rural ethiopia has fallen significantly since the early 1990s thanks to improved governance and economic liberalisation policies this paper presents several arguments that challenge this view the first questions the methodological foundations of the data from which these positive trends are derived we argue that the original sampling frame was too small and unrepresentative to provide a basis for extrapolating national poverty levels or trends the second argument questions the conceptual underpinnings of these studies poverty estimates based on levels of current consumption fail to allow for non income dimensions of wellbeing nor for confounding factors such as seasonality annual rainfall and food aid receipts the third strand considers alternative sources of data on changes in wellbeing in ethiopia recent qualitative studies report that the poor perceive themselves as poorer and more vulnerable than poverty headcount figures suggest finally we

which sectors make poor countries so unproductive which sectors are most responsible for the low total factor productivities of developing countries to answer this question we develop a new framework for sectoral development accounting applying this framework to the penn world table we find that in equipment construction and food the sectoral tfp differences between developing countries and the united states are much larger than in the aggregate however in manufactured consumption the sectoral tfp differences are about equal to the aggregate tfp differences and in services they are much smaller we show that our level of disaggregation allows us to reconcile the results of existing studies of sectoral productivity differences which have focused on noncomparable two sector decompositions of the aggregate data we also show that our results help shed light on existing theories of aggregate tfp differences

innovative sources of development finance global cooperation in the twenty first century this paper argues that in view of the resource crunch confronting many developing countries and the fall in overseas development aid flows to them new sources of development finance need to be found we consider international taxes fees and levies that

entry barriers competition and technology adoption i build a model of technology adoption to study the quantitative effect of entry barriers on total factor productivity tfp in my model incumbent firms choose technologies that are sufficiently productive to deter entry from a potential competitor i show that higher entry barriers help to deter entry and lead to the choice of less productive technologies a novelty of my work is that i use a direct measure of entry barriers i find that reducing entry barriers from their average level in the poorest 30 of countries to their u s level leads to a sizeable increase in aggregate tfp of 12 jel o11 o43

estimation of cross country differences in industry production functions abstract international trade economists typically assume that there are no cross country differences in industry total factor productivity tfp in contrast this paper finds large and persistent tfp differences across a group of industrialized countries in the 1980s the paper calculates tfp indices and statistically examines the sources of the observed large tfp differences across countries two hypotheses are examined to account for tfp differences constant returns to scale production with country specific technological differences and industry level scale economies with identical technology in each country the data support the constant returns different technology hypothesis over the increasing returns same technology hypothesis

the emergence of local capacity lessons from colombia abstract the paper analyzes the process of capacity development in a sample of colombian local governments which resulted from a strategy of state decentralization initiated in the mid 1980s the central message of the study is that competition for political office opened the door to responsible and innovative leadership that in turn became the driving force behind capacity building efforts more widespread community participation expanded the range of possibilities open to local governments and provided the basis to sustain capacity over time the experience of these municipios suggests that capacity can be enhanced through skillful innovations even under difficult circumstances

trade tropical deforestation and policy interventions trade interventions are increasingly advocated as a means for controlling timber related tropical deforestation this paper analyzes the impact on deforestation of such policy instruments in a dynamic framework the forest is modelled as a potentially renewable resource and timber is extracted for purposes of export and domestic consumption optimality conditions for a variety of model specifications are derived and the impacts of changes in the terms of trade and market structure on long run deforestation are analyzed the results of this analysis suggest that trade interventions that seek to affect the terms of trade against the export of tropical timber products are in the long run a second best policy option for influencing the deforestation process

homework in development economics household production and the wealth of nations we introduce home production into the neoclassical growth model and examine its consequences for development economics in particular we study the extent to which one can account for international income differences with differences in policies that distort capital accumulation in models with home production such policies not only reduce capital accumulation but also change the mix of market and nonmarket activity hence these models can generate larger differences in output than standard models for a given policy differential we also show how the welfare implications change when we incorporate home production

environment development and politics capital accumulation and the livestock sector in eastern amazonia summary deforestation and environmental degradation are increasingly common themes in the literature on humid tropical rural development this paper explores the frameworks used to analyze environmental questions in developing economies and how well these function in the particular case of livestock development in the eastern amazon basin the paper argues that due to the peculiarities of the state subsidies available for ranching activities that spurred a frenzy of land speculation the exchange rather than productive value of land became paramount in such a context cautious land management was irrelevant and serious environmental degradation was the result the paper suggests that models of environmental degradation that focus only on the question of production cannot capture the environmental dynamics of speculative economies

the biodiversity bargaining problem we employ cooperative bargaining theory and nash s rational threats idea to cast light on the biodiversity bargaining problem the problem of global environmental negotiations is argued to be of the nature of a bargaining problem in which bargainers must agree on the distribution of cooperative surplus in order to move to the bargaining frontier we discuss the importance of both efficiency bargaining frontier and fairness recognition of characteristics of bargainers in the choice of the appropriate contract we show that the incremental cost contract used to resolve the biodiversity bargaining problem is of the form of an extreme point contract that fails to recognise the contributions of the south to the production of cooperative surplus a rational response to such a contract is the use of threats of biodiversity destruction contracts must evince both efficiency and fairness in order to represent lasting solutions

entitlements availability and famine a revisionist view of wollo 1972 1974 abstract this article reviews two stylized theories of famine causation food availability decline fad and food entitlement decline fed as competing explanations of the famine of 1972 1974 in wollo province ethiopia a sen s market entitlement failure argument is challenged by j seaman and j holt s price ripple hypothesis a consideration of the role of transactions costs and wealth inequalities suggests a synthesized approach wollo 1972 1974 was a fad supply slump famine for the relatively wealthy and an entitlements collapse demand slump famine for the absolutely poor

friends with benefits patronage networks and distributive politics in china abstract existing research on distributive politics mainly focuses on the influence of electoral competition between political parties but less is known about non electoral mechanisms of resource allocation inside a dominant party this study examines how informal patron client networks within the ruling communist party shape the distribution of intergovernmental transfers in china a major one party regime using a new dataset on city level fiscal transfers and a novel method to infer informal political connections through past promotions we show that provincial leaders allocate significantly more transfers to localities governed by officials who are part of their networks this bias persists even when we use a specification that only exploits variations in connection caused by exogenous turnovers of higher level leadership we evaluate two plausible motivations behind this bias network based policy coordination and collective corruption and find evidence in stronger support of the former our findings suggest that private networks may function as an important albeit costly tool of mobilization in one party systems

foreign transfers and tropical deforestation what terms of conditionality the purpose of this paper is to propose a nonparametric interest rate term structure model and investigate its implications on term structure dynamics and prices of interest rate derivative securities the nonparametric spot interest rate process is estimated from the observed short term interest rates following a robust estimation procedure and the market price of interest rate risk is estimated as implied from the historical term structure data that is instead of imposing a priori restrictions on the model data are allowed to speak for themselves and at the same time the model retains a parsimonious structure and the computational tractability the model is implemented using historical canadian interest rate term structure data the parametric models with closed form solutions for bond and bond option prices namely the vasicek 1977 and cir 1985 models are also estimated for comparison purpose the empirical results not only provide strong evidence that the traditional spot interest rate models and market prices of interest rate risk are severely misspecified but also suggest that different model specifications have significant impact on term structure dynamics and prices of interest rate derivative securities

competition and the capital labor conflict abstract this paper analyzes the distributional effects of changes in the intensity of product market competition the focus is on the interaction between imperfect competition in product markets and bargaining in the labor market the main result is that while a uniform intensification of product market competition increases employment it may cause real wages to fall in the short run as well as in the long run this is especially likely if labor market regulations are favorable to workers therefore product market and labor market regulations tend to reinforce each other politically and compensatory fiscal transfers may be needed in order to enact employment enhancing deregulation policies

vested interests and technology adoption this paper incorporates asymmetric interest group formation into a political economy model of barriers to technology adoption with many small industries coalitions of workers skilled in incumbent technologies lobby government for a prohibition on the adoption of superior technologies the model naturally generates concentrated benefits to vested interests and diused costs of barriers to technology adoption for reasonable parameter values this smallness of industry lobbies leads to barriers to the adoption of technologies that would make all workers more productive higher government corruption can lead to lower levels of tfp and per capita output the

regulation and investment use newly assembled data on regulation in several sectors of many oecd countries to provide evidence that regulatory reform of product markets is associated with an increase in investment a component of reform that plays a very important role is entry liberalization but privatization also has a substantial effect on investment sensitivity analysis suggests that our results are robust jel e22 l5

explaining cross country productivity differences in retail trade many macroeconomists argue that productivity is low in developing countries because of frictions that impede the adoption of modern technologies i argue that in the retail trade sector developing countries rationally choose technologies with low measured labor productivity my theory is that the adoption of modern retail technologies is optimal only when household ownership of complementary durable goods such as cars is widespread because income is low in the developing world households own few such durables the theory implies that policies that increase measured retail productivity do not necessarily increase welfare

environmental entitlements dynamics and institutions in community based natural resource management abstract while community based natural resource management cbnrm now attracts widespread international attention its practical implementation frequently falls short of expectations this paper contributes to emerging critiques by focusing on the implications of intracommunity dynamics and ecological heterogeneity it builds a conceptual framework highlighting the central role of institutions regularized patterns of behavior between individuals and groups in society in mediating environment society relationships grounded in an extended form of entitlements analysis the framework explores how differently positioned social actors command environmental goods and services that are instrumental to their well being further insights are drawn from analyses of social difference new dynamic ecology new institutional economics structuration theory and landscape history the theoretical argument is illustrated with case material from india south africa and ghana

political determinants of intergovernmental transfers in a regionally decentralized authoritarian regime evidence from china this article examines the political determinants of the allocation of intergovernmental transfers in the context of china in a regionally decentralized authoritarian regime a government marked by political centralization and fiscal decentralization intergovernmental transfers are employed by politicians as instruments to achieve political goals using china s provincial data from 1994 to 2009 we find that the officials political power is an important factor in the distribution process a party secretary s replacement facilitates an increase in transfers especially if the replacement comes from the central government if a party secretary is a member of the central politburo the province receives more conditional transfers than others the central government allocates the transfers in such a way that the province with a high proportion of the minority population receives more transfers than others

what does the show case show evidence of and lessons from adjustment in uganda abstract uganda is often seen as an african show case for the beneficial effects of structural adjustment high growth rates have been combined with a high degree of ownership of the reforms at the same time critics have pointed to continued aid dependence and limited growth of the important agricultural export sector the contribution of this paper to this debate is three fold first ownership has not always been exemplary and is still fragile in some respects second although aid has indeed been important for bringing about high growth aid dependence has diminished over time third there have been real supply responses from the agricultural export sector

on international compensations for environmental stocks this paper sheds some light on the possible implications of compensations which are paid for the maintenance of an environmental stock it shows that serious complications can arise if the resource owner may influence the compensation price strategically if the incentive to raise the compensation price dominates the preservation incentive the steady state stock falls short from that which is voluntarily held whether compensation policies can neglect this feature depends crucially on the institutional setting which determines the compensation price

redesigning the aid contract donors use of performance indicators in uganda abstract the perceived failure of traditional ex ante conditionality has led to proposals for using performance indicators as a basis for aid allocations ex post conditionality in this article we assess the role of performance indicators and their impact on the aid contract between donors and the government of uganda in uganda the use of performance indicators has radically changed donor recipient relations by improving both program monitoring and donor coordination it has however not yet fundamentally changed the incentive structure in the aid contract to improve the incentive structure we propose a distinction between indicators used for monitoring and those designed to guide aid allocations

what determines productivity lessons from the dramatic recovery of the u s and canadian iron ore industries following their early 1980s crisis great lakes iron ore producers had faced no competition from foreign iron ore in the great lakes steel market for nearly a century as the 1970s closed in the early 1980s as a result of unprecedented developments in the world steel market brazilian producers were offering to deliver iron ore to chicago the heart of the great lakes market at prices substantially below prices of local iron ore the u s and canadian iron ore industries faced a major crisis that cast doubt on their future in response to the crisis these industries dramatically increased productivity labor productivity doubled in a few years whereas it had changed little in the preceding decade materials productivity increased by more than half capital productivity increased as well i show that most of the productivity gains were due to changes in work practices work practice changes reduced overstaffing and hence increased labor productivity by increasing the fraction of time equipment was in operating mode changes in work pra

human capital and the wealth of nations we reevaluate the role of human capital in determining the wealth of nations we use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary across countries our model can explain differences in schooling and earnings profiles and consequently estimates of mincerian rates of return across countries we find that effective human capital per worker varies substantially across countries cross country differences in total factor productivity tfp are significantly smaller than found in previous studies our model implies that output per worker is highly responsive to changes in tfp and demographic variables jel e23 i25 j24 j31 o47 no question has perhaps attracted as much attention in the economics literature as why are some countries richer than others much of the current work traces back to the classic work of solow 1956 solow s seminal paper suggested that differ ences in the rates at which capital is accumulated could account for differences in output per capita more recently following the work of lucas 1988 human capital disparities were given a central role in the analysis of growth and development however the best recent work on the topic reaches the opposite conclusion klenow and rodriguez clare 1997 hall and jones 1999 parente and prescott 2000 and bils and klenow 2000 argue that most of the cross country differences in output per worker are not driven by differences in human capital or physical capital rather they are due to differences in a residual total factor productivity tfp in this paper we revisit the development problem in line with the earlier view we find that factor accumulation is more important than tfp in accounting for relative incomes across countries the key difference between our work and previous analyses is in the measurement of human capital the standard approach largely inspired by the work of mincer 1974 takes estimates of the rate of return to schooling as building blocks to directly measure a country s stock of human capital implicitly this method assumes that the marginal contribution to output of one additional year

economic growth lessons from two centuries of american agriculture this paper reviews the growth experience of u s agriculture over the past two centuries in consonance with the view that growth is determined by the economic environment which consists of the available technology incentives constraints and institutions within this framework the implemented technology is determined jointly with the resource allocation the review covers the role played by resource endowment resource flow technical change and its factor bias and product demand it highlights the importance of the income elasticity of demand and the labor augmentation of the technical change the total factor productivity tfp was almost nil at the beginning of the nineteenth century increasing gradually to the point where it exhausted output growth in the latter part of the twentieth century this pattern is consistent with the postulate emerging from this framework where the tfp is endogenous and determined jointly with growth rather than determining it the more recent performance of u s agriculture is placed within a global perspective in order to generalize the discussion

how integrated is the indian wheat market abstract applying the momentum threshold autoregressive m tar model due to enders and granger enders w and granger c w j 1998 unit root tests and asymmetric adjustment with an example using the term structure of interest rates journal of business and economic statistics 16 3 pp 304 311 this article examines the relationship between the various prices of wheat quoted at different market centres in four indian states we find evidence of m tar asymmetric adjustments of wheat prices indicating that price signals within states are transmitted over time in an asymmetric manner this type of price adjusting behaviour is consistent as to how price differentials may respond to poor dissemination of knowledge regarding market conditions and high transactions costs the results offer important policy implications

taxation and deadweight loss in a system of intergovernmental transfers intergovernmental transfer programs in many federal systems including canada attempt to equalize differences in subnational jurisdictions tax capacities on the basis of the so called representative tax system rts it is shown that rts equalization grants effectively compensate subnational governments for a portion of the deadweight loss associated with taxes and consequently the grants may tend to increase the distortionary tax rates chosen by subnational governments this may be the case even when equalization is confined to tax bases that themselves are nondistortionary such as the taxation of pure economic rents

government production of investment goods and aggregate labor productivity abstract in this paper i estimate the impact on aggregate labor productivity of having government rather than private industry produce investment goods this policy was pursued to varying degrees by egypt india and turkey among others the policy has a large impact because there is both a direct effect it lowers productivity in the investment sector and a secondary effect it lowers the economy wide capital stock per worker i estimate that this policy alone reduced egypt s aggregate productivity by 30 and accounted for 20 of egypt s aggregate labor productivity gap with the united states during the 1960s

barriers to entry and development we ask whether barriers to entry are a quantitatively important reason for the income gap between developing countries and the united states we develop a tractable general equilibrium model that captures the effects of barriers to entry and the other main distortions typically considered in the development literature we carry our model to the data and ask it to match the main development facts from the penn world table we find that this requires large barriers to entry in developing countries which account for about half of the income gap with the united states

raising taxes through equalization a simple theory suggests that a common form of federal horizontal equalization grants should cause subnational governments to levy higher tax rates distorting local tax bases and so increasing federal transfers to test this i examine canadian provincial tax policies in the 1972 2002 period consistent with the theory provinces respond to expansions of equalization transfers by increasing their own tax rates i estimate that on average tax rates in grant receiving provinces were substantially and significantly higher as a consequence of the transfer formula jel classification h21 une theorie simple suggere qu une forme usuelle d octrois federaux de perequation horizontale devrait entrainer les gouvernements sub nationaux a imposer de plus hauts taux d imposition modifiant ainsi les bases de fiscalite locale et ce faisant accroissant les transferts federaux pour mettre au test cette hypothese on examine les politiques fiscales des provinces canadiennes pour la periode entre 1972 et 2002 d une maniere qui semble supporter l hypothese les provinces ont repondu a un accroissement des transferts de perequation en accroissant leur propre taux d imposition on estime que les taux moyens d imposition dans les provinces qui recoivent des transferts sont plus eleves de maniere substantielle et significative en raison de la formule de transferts

dual economic growth in poor tropical areas abstract we consider a two sector model a modern sector and an extensive one with the extensive sector being highly dependent on natural vegetation cover as a factor of production in the extensive sector land tenure is not well defined we show that taxing the extensive sector as a whole and land intensive crops relative to labor intensive crops increases real income consumption in the short run however necessarily falls the cost of the adjustment is paid mostly by the poor when the extensive sector as a whole is taxed the distributional consequences of taxing the land intensive outputs however are ambiguous

regulating global biodiversity what is the problem we distinguish between local problems of biodiversity loss and global ones where international cooperation is required global biodiversity regulation involves choosing the optimal stopping rule regarding global land conversions in order to ensure that some areas of unconverted natural reserves remain to support the production sector that exists on converted lands the basic difficulty with implementing a solution to this global problem lies in the asymmetry in endowments between those states that have previously converted and those that have not we demonstrate that the fundamental problem of global biodiversity regulation is similar to the bargaining problem analysed by nash rubinstein and others there are benefits from global land conversion and there must be agreement on their distribution before the conversion process can be halted since the institutions addressing global biodiversity problems are either highly ineffectual benefit sharing agreements prior informed consent clauses or very extreme incremental cost contracts the biodiversity bargaining problem remains unresolved for this reason we anticipate that suboptimal conversions will continue to occur as a way of protesting the ineffective and unfair approaches employed in addressing this problem to date

cooperation for sustainable forest management an empirical differential game approach we model the role of the world s forests as a major carbon sink and consider the impact that forest depletion has on the accumulation of co2 in the atmosphere two types of agents are considered forest owners who exploit the forest and draw economic revenues in the form of timber and agricultural use of deforested land and a non forest owner group who pollutes and suffers the negative externality of having a decreasing forest stock we retrieve the cooperative solution for this game and show the cases in which cooperation enables a partial reduction in the negative externality we analyze when it is jointly profitable to abate emissions when it is profitable to reduce net deforestation and when it is optimal to do both abate and reduce net deforestation assuming that the players adopt the nash bargaining solution to share the total dividend of cooperation we determine the total amount that the non forest owners have to transfer to forest owners next we define a time consistent payment schedule that allocates over time the total transfer

the causes of famine abstract this article argues that sen s theory of famine will lead to the wrong diagnosis and the wrong remedies for famine and will therefore worsen the situation his analysis of the bengal famine is a case in point it is based on unreliable and inaccurate statistics even the statistics he does use contradict his thesis his explanatory hypotheses are shown to be theoretically and factually wrong the actions of the bengal government of 1943 are looked at in the light of sen s recommendations

how much do distortions affect growth abstract this paper presents a simple endogenous growth model with two types of capital which can display sizeable long run growth effects of distortionary policies the model applies to many different types of distortions of relative prices common in developing countries such as differential taxes and tariffs black market exchange rates and price controls the model shows that a subsidy to one type of capital financed by a tax on another capital good lowers growth a measure of the variance of relative prices of investment goods across sectors has a negative and statistically significant effect on growth

how important is human capital for development evidence from immigrant earnings this paper offers new evidence on the sources of cross country income differences it exploits the idea that observing immigrant workers from different countries in the same labor market provides an opportunity to estimate their human capital endowments these estimates suggest that human and physical capital account for only a fraction of cross country income differences for countries below 40 of the us output per worker less than half of the output gap relative to the us is attributed to human and physical capital

financing sustainable development country undertakings and rights for environmental sustainability cures abstract we propose a global mechanism to finance sustainable development sd that offers a number of advantages over the current global environmental facility gef the mechanism would be multinational provide incentives for rich and poor countries to promote sd incorporate the principle of common but differentiated responsibilities and link incentives and funding for sd to structural benchmarks and performance targets it would operate as a large fund into which rich countries would pay based on their level of population per capita income and change in a measure of environmental sustainability receipts from the funds called country undertakings and rights for environmental sustainability cures would be made to poor countries based on their population per capita income and absolute level of environmental sustainability this approach differentiates payments and receipts on the basis of income while rewarding improvements in environmental performance in rich countries and making greater payments to countries with greater environmental problems to promote flexibility recipient countries would be able to trade bank or borrow their assigned cures provided that the trade resulted in a verifiable improvement in environmental sustainability in the purchasing country a reformed gef that adopted the desirable features of cures if widely adopted and funded at a sufficiently high level would offer a significant boost to global sd and would greatly assist poor countries to address the twin challenges of poverty and environmental degradation

vested interests in a positive theory of stagnation and growth we study a positive theory of stagnation and growth aimed at understanding the large variations in growth outcomes across actual economies the theory points to the fundamental role played by vested interests in determining policies which are key to the growth process some agents seek to prevent the adoption of new technologies we develop a model of technology adoption and show how technological innovation may sow the seeds of its own destruction in particular we find that the equilibrium is characterized by a long cycle of stagnation and growth over this cycle incumbents are phased out of the economy will new innovation occur in formalizing our theory we make a methodological contribution by characterizing dynamic voting equilibria when voters must forecast the effects of different current policies on future prices and policy outcomes

on finance as a theory of tfp cross industry productivity differences and economic rents we develop a theory of capital market imperfections to study how the ability to enforce contracts affects resource allocation across entrepreneurs of different productivities and across industries with different needs for external financing the theory implies that countries with a poor ability to enforce contracts are characterized by the use of inefficient technologies low aggregate tfp large differences in labor productivity across industries and large employment shares in industries with low productivity these implications are supported by the empirical evidence the theory also suggests that entrepreneurs have a vested interest in maintaining a status quo with low enforcement

do markets and trade help or hurt the global food system adapt to climate change rapidly expanding global trade in the past three decades has lifted millions out of people out of poverty trade has also reduced manufacturing wages in high income countries and made entire industries uncompetitive in some communities giving rise to nationalist politics that seek to stop or reverse further trade expansion in the united states and europe given complex and uncertain political support for trade how might changes in trade policy affect the global food system s ability to adapt to climate change here we argue that we can best understand food security in a changing climate as a double exposure the exposure of people and processes to both economic and climate related shocks and stressors trade can help us adapt to climate change or not if trade restrictions proliferate double exposure to both a rapidly changing climate and volatile markets will likely jeopardize the food security of millions a changing climate will present both opportunities and challenges for the global food system and adapting to its many impacts will affect food availability food access food utilization and food security stability for the poorest people across the world global trade can continue to play a central role in assuring that global food system adapts to a changing climate this potential will only be realized however if trade is managed in ways that maximize the benefits of broadened access to new markets while minimizing the risks of increased exposure to international competition and market volatility for regions like africa for example enhanced transportation networks combined with greater national reserves of cash and enhanced social safety nets could reduce the impact of double exposure on food security

deforestation and agricultural productivity in the cote d ivoire an optimal control model is used to determine the optimal steady state forest stock in the cote d ivoire this stock is shown to increase with increases in the forestry returns relative to those in agriculture technological progress in agriculture and increases in the social discount rate serve to lower the optimal steady state forest stock based on an estimated aggregate yield function the optimal forest stock is shown to be most sensitive to changes in the social rate of discount assuming current 1985 technology deforestation appears socially optimal only for values of the discount rate greater than 8

compensation for environmental services and intergovernmental fiscal transfers the case of india this paper studies mechanisms to compensate local government for the public provision of environmental services using the theory of optimal fiscal transfers in india especially we analyzed the role of intergovernmental fiscal transfers in achieving the environmental goal simply assigning the functions at appropriate levels does not ensure optimal provision of environmental services optimality in resource allocation could be achieved by combining the assignment system with an appropriate compensation mechanism intergovernmental fiscal transfers would be a suitable mechanism for compensating the local governments and help in internalizing the spillover effects of providing environmental public goods illustrations are also provided for india