Content Type: Working Paper / Publishing Institution: United Nations University / Topic: International Trade and Finance

1. Measuring illicit financial flows: A gravity model approach to estimate international trade misinvoicing

Author:: Lourenço S. Paz
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Illicit financial flows have recently attracted the attention of academia, practitioners, and multilateral organizations who consider them harmful to economic development. Some observers suggest that many of these flows occur via the misinvoicing of international trade transactions. This study develops a novel methodology based on the gravity model of international trade to estimate illicit financial flows using publicly available product-level international trade data. It contributes to the literature by estimating product-level transportation and insurance costs and providing, for the first time, an estimation for all countries of an upper bound of the values of export and of import over- and under-misinvoicing separately, without resorting to assumptions about trade statistics reliability. Application of the methodology is illustrated using six-digit product-level UN Comtrade data for 2013–16. The results indicate that misinvoicing is not confined to a few products or countries but is a widespread phenomenon that deserves future research.
Topic:: International Trade and Finance, Transportation, Illicit Financial Flows, and Misinvoicing
Political Geography:: Global Focus

2. The Impact of Foreign Direct Investment on Developing Countries' Terms of Trade

Author:: Konstantin M. Wacker
Publication Date:: 01-2011
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper first shows that important economic arguments in favor of the Prebisch- Singer hypothesis of falling terms of trade of developing countries have implicitly relied on the role of multinational corporations and foreign direct investment. As of yet, the relationship between the latter and terms of trade has not been empirically investigated. In order to start closing this gap in research, data on 111 developing countries between 1980 and 2008 is analyzed using panel data methods. The empirical results suggest that there is no reason to believe multinationals' activities were responsible for a possible decrease of the developing countries' net barter terms of trade. On the contrary, foreign direct investment seems to play a positive role for developing countries' terms of trade.
Topic:: Development, Economics, International Trade and Finance, and Foreign Direct Investment

3. Growth and Recovery in a Time of Default: Lessons from the Role of the Urban Sector in Argentina

Author:: Michael Cohen
Publication Date:: 03-2011
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: International narratives on Argentina's recovery from the crisis of 2001-02 tend to emphasize the role of rising commodity prices and growing demand from China. Argentina is said to have been 'lucky', saved by global demand for its agricultural exports. The international narrative has also been used by local agricultural exporters to justify their objections against higher export taxes during periods of high commodity prices. These narratives are not correct. Data on the country's recovery show that it was not led by agricultural exports but was fuelled by urban demand and production. When the Convertibility period ended and the peso was devalued in 2002, price increases for imports stimulated the production of domestic goods and services for consumers. This production in turn generated multiplier effects which supported small and medium-sized firms and helped to create many new jobs. This later produced a revival of the construction and then the manufacturing sectors as well.
Topic:: Agriculture, Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:: China, Argentina, and Latin America

4. Exchange Rate Regimes and Trade: Is Africa Different?

Author:: Mahvash Saeed Qureshi and Charalambos G. Tsangarides
Publication Date:: 03-2011
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper revisits the link between exchange rate regimes and trade in the context of Africa's exchange rate arrangements. Applying an augmented gravity model that includes measures of currency unions and pegged regimes, the paper compares Africa's experience with that of the world. Our results suggest that both currency unions and direct pegs promote bilateral trade in Africa vis-à-vis more flexible exchange rate regimes,and that their effect is almost double for the region than that for an average country in the world sample. Further, we find evidence that the effect of conventional pegs is at least as large as that of currency unions in Africa, and that the benefits of fixed exchange rate regimes stem through channels in addition to reduced exchange rate volatility.
Topic:: Economics, International Trade and Finance, Bilateral Relations, and Monetary Policy
Political Geography:: Africa

5. Globalization Crises, Trade, and Development in Vietnam

Author:: Philip Abbott and Finn Tarp
Publication Date:: 03-2011
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Vietnam has been among the most successful East Asian economies, especially in weathering the external shocks of recent globalization crises—the 1997-98 Asian financial crisis and the 2008-09 great recession, financial crisis and collapse of global trade. Its success contradicts its characterization as an example of export-led growth and highlights the role of the state, particularly in maintaining and influencing investment. Examination of economic performance and policy responses shows rising dependence on foreign finance around each crisis, and actions by the government to counteract that dependence and bolster the domestic economy while continuing to restructure the economy toward greater emphasis on the private sector. Growth, employment and poverty alleviation have been maintained at the expense of renewed inflation, larger budget deficits, and currency depreciation. The 'stop-go' nature of present …
Topic:: Development, Economics, Globalization, and International Trade and Finance
Political Geography:: Asia

6. China and the Future of the Developing World: The Coming Global-Asian Era and its Consequences

Author:: Jeffrey Henderson
Publication Date:: 05-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The rise of China as an economic and political 'driver' of the global economy is likely to be one of the defining moments of world history. Its dynamism and international expansion are on the verge of creating a 'critical disruption' in the global order that has held sway for over 60 years. As such, China is beginning to reshape the world, presaging a new phase of globalization: a 'global-Asian era'. This new era is likely to be distinct from any of the earlier phases of globalization and China's global footprint, in terms of its business, economic and political actions and their geopolitical implications, is likely to be markedly different from what has gone before. This paper offers a framework by which we can begin to understand the coming global-Asian era (GAE) and some of its consequences, particularly as the latter are surfacing in the developing world. Having discussed the nature and dynamics of the GAE, the paper turns to sketch a series of vectors (trade, aid and energy security) along which the GAE is beginning to impact on developing countries. The paper argues that, at least for these vectors, the Chinese-driven GAE is providing opportunities as well as dangers for national development projects. It concludes by briefly speculating on the viability of the GAE.
Topic:: Development, Globalization, International Political Economy, International Trade and Finance, and Oil
Political Geography:: China and Asia

7. China in the World Economy: Dynamic Correlation Analysis of Business Cycles

Author:: Jarko Fidrmuc and Ivana Bátorová
Publication Date:: 01-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We analyse the business cycles in China and in selected OECD countries between 1992 and 2006. We show that, although negative correlation dominate s for nearly all countries, we can also see large differences for various frequencies of cyclical developments. On the one hand, nearly all OE CD countries show positive correlations of the very short-run developments that may correspond to intensive supplier linkages. On the other hand, business cycle frequencies (cycles with periods between 1.5 and 8 years) are typically negative. Nevertheless, countries facing a comparably longer history of intensive trading links tend to show also slightly higher correlations of business cycles with China.
Topic:: Economics and International Trade and Finance
Political Geography:: China and Asia

8. China's Exports in ICT and its Impact on Asian Countries

Author:: Yuqing Xing
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper analyses China's ICT exports grow thin its two major markets Japan and the US from 1992 to 2004. It focuses on ICT products classified in SITC 75, 76 and 77. The empirical results show that Chinese exports had maintained two-digit annual growth during the period. The growth was much higher than the corresponding growth of the overall markets. By 2004, Chinese ICT exports accounted for 26 per cent of the total Japanese imports and 19 per cent of the total imports of the US in ICT products. In addition, the paper investigates whether the rapid growth of Chinese ICT exports crowded out that of other Asian countries: Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand. The empirical analysis shows that the crowding out effect differs across countries and products. The exports of Singapore and Philippines have been negatively affected by the growth of Chinese exports, but no crowding effect existed at all with Indonesia's exports.
Topic:: International Trade and Finance and Markets
Political Geography:: United States, Japan, China, Indonesia, Malaysia, Asia, South Korea, Philippines, Singapore, and Thailand

9. Development Path of China and India and the Challenges for their Sustainable Growth

Author:: Yuefen Li and Bin Zhang
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The segmentation of global manufacturing and services provided China and subsequently India with a golden opportunity to make full use of their absolute advantage—low cost yet educated labour—to integrate into the world economy within a comparatively shorter period of time than some earlier industrialisers. Though international trade functioned as a vent of surplus in view of the narrowness of their domestic markets at the beginning of their economic catch-up, the label of export-led model may not reflect the real picture as imports underwent dramatic increases during their respective growth periods, in particular for China. Foreign direct investment has played a pivotal role in their economic growth and has major presence in international trade and investment in leading sectors of both countries, giving rise to certain special features and weak links for their economic expansion and sustainability of fast economic growth. To maintain more broad-based, fast and balanced growth, it seems that both countries have to redress sectoral imbalances, encourage technology upgrading and cope with future changes in demographic profiles which constituted a trigger to fast economic growth at the time of their respective economic reform.
Topic:: Development and International Trade and Finance
Political Geography:: China, India, and Asia

10. Export Productivity, Finance, and Economic Growth: Are the Southern Engines of Growth Different?

Author:: Alessandra Guariglia and Amelia U. Santos-Paulino
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Using a panel of 139 countries over the period 1992-2003, we analyse the links between export productivity, economic growth and financial development indicators. We then investigate whether the links observed in China, India and Brazil systematically differ from those observed in other countries in the sample. We find that both GDP per capita and investment generally exert a positive and significant effect on export productivity. Except for Brazil, financial development is not an important determinant of export productivity. Moreover, except for Brazil, export productivity plays a positive effect on growth, and so does financial development for both China and Brazil, but not for India. Finally, in both India and Brazil, FDI is negatively associated with growth.
Topic:: International Trade and Finance
Political Geography:: China, India, Asia, Brazil, and South America

11. Export Productivity and Specialization in China, Brazil, India and South Africa

Author:: Amelia U. Santos-Paulino
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper analyses the patterns of export productivity and trade specialization profiles in the China, Brazil, India and South Africa, and in other regional groupings. In doing so, the investigation calculates a time varying export productivity measure using highly disaggregated product categories. The findings indicate that export productivity is mainly determined by real income and human capital endowments. Importantly, the study reveals significant differences in the export productivity and specialization patterns of countries with comparable per capita income levels. For instance, China's export productivity and implied export sophistication is in line with that of countries with higher per capita incomes, including some OECD industrial economies.
Topic:: Economics and International Trade and Finance
Political Geography:: Africa, China, India, Asia, South Africa, Brazil, and South America

12. Foreign Aid, Infrastructure Development, and Welfare: An Intertemporal Analysis

Author:: Slobodan Djajić
Publication Date:: 06-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper examines the welfare implications of foreign aid within the framework of a two-period, two-country model of international trade. It is up to the donor country to decide what fraction of any given aid package is to be made available for the recipient's immediate, period-one consumption, and what part should be allocated for investment in infrastructure that expands the recipient's production possibilities in period two. The focus of the analysis is on the conditions under which both countries agree or disagree on the manner in which the aid funds should be divided between the two options.
Topic:: Economics and International Trade and Finance

13. Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis

Author:: Sumei Tang, E. A. Selvanathan, and S. Selvanathan
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In this paper, we investigate the causal link between foreign direct investment (FDI), domestic investment and economic growth in China for the period 1988-2003. Towards this purpose, a multivariate VAR system with error correction model (ECM) and the innovation accounting (variance decomposition and impulse response function analysis) techniques are used. The results show that while there is a bi-directional causality between domestic investment and economic growth, there is only a single-directional causality from FDI to domestic investment and to economic growth. Rather than crowding out domestic investment, FDI is found to be complementary with domestic investment. Thus, FDI has not only assisted in overcoming shortage of capital, it has also stimulated economic growth through complementing domestic investment in China.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: China

14. Foreign Direct Investment from China, India and South Africa in Sub-Saharan Africa: A New or Old Phenomenon?

Author:: John Henley, Stefan Kratzsch, Tamer Tandogan, and Mithat Külür
Publication Date:: 03-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The burgeoning literature on outward foreign direct investment from emerging markets has largely focused on analysing the motives of investors as reported by parent companies. This paper, instead, focuses on firm-level investments originating from China, India or South Africa in fifteen host countries in sub-Saharan Africa (SSA). The analysis is based on a sub-set of firms drawn from the overall sample of 1,216 foreign-owned firms participating in the UNIDO Africa Foreign Investor Survey, carried out in 2005. The sample of investments originating from China, India and South Africa is analysed in terms of firm characteristics, past and forecast performance in SSA over three years and management's perception of ongoing business conditions. Comparisons are made with foreign investors from the North. The paper concludes that while investors in SSA from the three countries are primarily using their investment to target specific markets, they are largely operating in different sub-sectors. While there appear to be specific features that firms from a given country of origin share, there are no obvious operating-level features they all share apart from market seeking.
Topic:: International Trade and Finance
Political Geography:: Africa, China, India, Asia, and South Africa

15. Globalization, Literacy Levels, and Economic Development

Author:: Alok Bhargava
Publication Date:: 01-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper estimated models for GDP growth rates, poverty levels, and inequality measures for the period 1990–2000 using data on 54 developing countries at five-yearly intervals. Issues of globalization were investigated by analysing the differential effects of the countries' exports and imports and by postulating trans-logarithmic models that allow for non-linear effects of literacy levels and measures of openness. The main findings were that literacy rates affected growth rates in a quadratic manner and countries with higher literacy were more likely to benefit from globalization. Second, the model for growth rates showed non-linear and differential effects of the export/GDP and import/GDP ratios. Third, the models indicated that population health indicators such as life expectancy were important predictors of GDP growth rates. Fourth, models for poverty measures showed that poverty was not directly affected by globalization indicators. Finally, the model for Gini coefficients indicated significant effects of 'medium' and 'high' skilled labour work force, with higher proportions of high-skilled labour implying greater inequality.
Topic:: Development, Education, International Trade and Finance, and Poverty

16. Globalization and Smallholders: The Adoption, Diffusion, and Welfare Impact of Non-traditional Export Crops in Guatemala

Author:: Benjamin Davis, Calogero Carletto, Angeli Kirk, and Paul Winters
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper uses a duration analysis based on adoption data spanning over 25 years from six communities in the Central Highlands of Guatemala to explore how household characteristics and external trends play into both the adoption and diffusion processes of non-traditional exports among smallholders. Adoption was initially widespread and rapid, which led NTX to be hailed as a pro-poor success, reaching all but the smallest landholders. However, over time more than two-thirds of the adopters eventually dropped out from NTX production. Based on the analysis, NTX production.
Topic:: Agriculture and International Trade and Finance
Political Geography:: South America, Yugoslavia, and Tunisia

17. Measuring the Competitive Threat from China

Author:: Rhys Jenkins
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In recent years there has been a growing literature that analyses the threat which Chinese exports pose to the exports of other developing countries. The paper provides a critique of the standard measures of export similarity which have been used to estimate the threat from China in these studies. Two alternative indices, the static and the dynamic index of competitive threat, are developed and estimated for 18 developing countries and compared with estimates for the standard measures. It is shown that the latter tend to underestimate the extent to which countries are threatened by China. They also distort both the rankings of countries according to the extent to which they face competition from China and the direction of change in the competitive threat over time.
Topic:: International Political Economy and International Trade and Finance
Political Geography:: China and Asia

18. The Optimal Distance to Port for Exporting Firms

Author:: Thomas Gries, Wim Naudé, and Marianne Matthee
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Success in international trade depends, amongst other things, on distance from markets. Most new economic geography models focus on the distance between countries. In contrast much less theorizing and empirical analysis have focused on how distances within a country—for instance due to the location behaviour of exporting firms—matter to international trade. In this paper we contribute to the literature on the latter by offering a theoretical model to explain the optimal distance that an export-oriented firm would locate from a port. We present empirical evidence from South Africa in support of the model.
Topic:: International Trade and Finance
Political Geography:: Africa and South Africa

19. Ownership Reform, Foreign Competition, and Efficiency of Chinese Commercial Banks: A Non-Parametric Approach

Author:: Shujie Yao, Zhongwei Han, and Genfu Feng
Publication Date:: 04-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Since China joined the WTO in 2001, the pressure for bank reforms has mounted as China ought to fully open up its financial market to foreign competition by 2006. Efficiency is key for domestic banks to survive in a liberalised environment, but it appears that the last hope for raising bank efficiency is through ownership reform. Whether ownership reform and foreign competition can solve China's banking problem remains to be tested. This paper aims to answer this question through using a non-parametric approach to analyse the efficiency changes of 15 large commercial banks during 1998-2005. We find that ownership reform and foreign competition have forced the Chinese commercial banks to improve performance, as their total factor productivity rose by 5.6 per cent per annum. This coincides with the recent bullish Chinese stock markets led by three listed state-owned commercial banks. Despite such encouraging results, we remain cautious about the future of the Chinese banks, as the good results may have been artificially created with massive government support and the fundamentals of the banks may be still weak.
Topic:: Economics and International Trade and Finance
Political Geography:: China and Asia

20. The Rise of the Southern Economies: Implications for the WTO-Multilateral Trading System

Author:: Silvia Nenci
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The rise of the emerging southern economies – China, India, Brazil, and South Africa (CIBS) – as both economic and political actors, is having significant and far-reaching impact on the world economy. Notwithstanding the increasing amount of study and research, there are still important knowledge-gaps with respect to a range of likely consequences of the dynamism of the Southern Economies. One of these gaps concerns the implications for the WTO-multilateral trading system. The present paper proposes a review of the southern participation in the multilateral integration process and suggests a methodology to assess the impact of CIBS' rise on the future of the WTO system. Through the analysis of the trajectories of 'impact' of the trade channel, the paper draws some suggestive remarks.
Topic:: International Organization and International Trade and Finance
Political Geography:: Africa, China, India, Asia, South Africa, Brazil, and South America

21. Trade Expansion of China and India: Threat or Opportunity

Author:: Guanghua Wan and Mahvash Saeed Qureshi
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: By exploring the export performances and specialization patterns of China and India, we assess their trade competitiveness and complementarity vis-à-vis each other as well as with the rest of the world. Our analysis indicates that (i) India faces tough competition from China in the third markets especially in clothing, textile and leather products; (ii) there is a moderate potential for expanding trade between the two countries; (iii) China poses a challenge for the East Asian economies, the US, and most of the European countries especially in medium-technology industries; (iv) India appears to be a competitor mainly for its neighbouring South Asian countries; and (v) complementarity exists between the imports of China and India, and the exports of the US, some European states and East Asian countries, especially Japan, Korea, Malaysia, Singapore and Thailand, implying opportunities for trade expansion; and finally (vi) the export structure of China is changing with the exports of skill intensive and high-technology products increasing and those of labour-intensive products decreasing gradually. This suggests that challenges created by China in traditional labour-intensive products might reduce in the long run.
Topic:: International Trade and Finance
Political Geography:: United States, Japan, China, Europe, South Asia, Malaysia, India, Asia, Korea, Singapore, and Thailand

22. Trade Liberalization and the Self-employed in Mexico

Author:: Gurleen K. Popli
Publication Date:: 01-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In this paper I examine the trend in income inequality and poverty among the selfemployed workers in Mexico over the last two decades (1984–2002). This is the period over which Mexico opened its economy to the global market through trade and investment liberalization. For the first decade following the liberalization, inequality and poverty among the self-employed increased; as the economy stabilized and the country saw economic growth inequality started to go down, but poverty kept increasing. To understand the changes in inequality and poverty I decompose the inequality and poverty indices into within and between group components. Rising returns to skilled labour, regional differences in impact of liberalization and sectoral shifts in employment are important factors in explaining the trends in both inequality and poverty.
Topic:: International Trade and Finance and Markets
Political Geography:: Mexico

23. Globalization and Smallholders: The Adoption, Diffusion, and Welfare Impact of Non-traditional Export Crops in Guatemala

Author:: Paul Winters, Angeli Kirk, Benjamim Davis, and Calogero Carletto
Publication Date:: 02-2008
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: As developing countries continue on the path of economic liberalization, there is a compelling need to ensure that the benefits of globalization reach poor rural communities. Increased commercialization of agriculture and diversification into nontraditional exports (NTXs) is one strategy that has often been advocated as a way for developing countries to use their comparative advantage in lower labor costs and to achieve growth in the agricultural sector. Given the predominantly rural nature of most developing countries and the preponderance of poor people in these areas, high-value agricultural production is considered the ideal mechanism to extend the benefits of globalization directly to the rural poor:1 Allowing poor farmers to shift into the export sector and take advantage of internationally demand driven prices that are higher relative to traditional crops may reduce inequality while fostering overall economic growth (Nissanke and Thorbecke 2007).
Topic:: Agriculture, Development, Globalization, International Trade and Finance, and Poverty
Political Geography:: Global Focus

24. Analysis of the Potential Impact of the Current WTO Agricultural Negotiations on Government Strategies in the SADC Region

Author:: A.J.E. Charman and J. Hodge
Publication Date:: 09-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This study aims to help identify how the Agreement on Agriculture (AoA) could potentially constrain government action to achieve food security in the Southern African Development Community (SADC). The paper considers the proposed tariff and subsidy reduction modalities of the current round of WTO negotiations. The main focus is on the potential direct effects of the AoA, in terms of proposed reductions to domestic subsidies and tariffs, on food security policy in SADC countries. The study examines the argument that subsidy reductions and further liberalizing market access may pose constraints on the food security policy options of governments within the region.
Topic:: International Trade and Finance, Markets, and Treaties and Agreements
Political Geography:: Africa

25. Regional Inequality, Industry Agglomeration and Foreign Trade: The Case of China

Author:: Yin Ge
Publication Date:: 09-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: How do foreign trade and foreign direct investment affect regional inequality? Foreign trade and investment may affect internal economic geography, and the resulting industry agglomeration may contribute to regional inequality. This paper provides empirical evidence supporting this linkage. The results indicate that the increasing regional inequality in China has been accompanied by an increase in the degree of regional specialization and industry agglomeration. Foreign trade and foreign investment are closely related to industry agglomeration in China. Industries dependent on foreign trade and FDI are more likely to locate in regions with easy access to foreign markets, and exporting industries have a higher degree of agglomeration.
Topic:: Economics, Industrial Policy, and International Trade and Finance
Political Geography:: China and Asia

26. The Determinants of Loan Contracts to Business Firms: Empirical Evidence from a Private Bank in Vietnam

Author:: Robert Lensink and Pham Thi Thu Trà
Publication Date:: 08-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper deals with loan contracting from a private bank in Vietnam. We focus on the main loan contract features that the bank uses in lending to business firms, namely loan maturity, collateral and loan interest rate. Based upon the simultaneous equation model of Dennis et al. (2000) and the bank's loan contracting policies, we examine the possible interdependency of the three different loan contract terms. Also, we try to determine which firm characteristics and exogenous factors are relevant for loan contracts. We find strong interdependencies between these contract terms with significant bi-directional relationships between collateral and loan maturity, loan rate and loan maturity, and a uni-directional relationship between loan rate and collateral. The conflicting signs within the collateral–loan maturity relationship and the loan interest rate–loan maturity relationship can be explained by our hypothesis that the choice for a certain loan maturity is primarily determined by borrowers' behaviors, whereas the loan rate and the collateral requirements are primarily determined by banks policies. In addition, our results support the relevance of firm quality, agency costs of debt and relationship lending in loan contract design.
Topic:: Economics and International Trade and Finance
Political Geography:: Vietnam and Southeast Asia

27. Financial Sector Development and Growth: The Chinese Experience

Author:: Mingming Zhou and Iftekhar Hasan
Publication Date:: 08-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper documents the financial and institutional developments of China during the past two decades, when China was successfully transformed from a rigid centralplanning economy to a dynamic market economy following its unique path. We empirically examine the relationship between financial development and economic growth in China by employing a panel sample covering 31 Chinese provinces during the important transition period 1986-2002. Our evidence suggests that the development of financial markets, institutions, and instruments have been robustly associated with economic growth in China.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: China and Asia

28. Excess Credit and the South Korean Crisis

Author:: Bassam A. Fattouh and Panicos O. Demetriades
Publication Date:: 08-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We provide a novel empirical analysis of the South Korean credit market that reveals large volumes of excess credit since the late 1970s, indicating that a sizeable proportion of total credit was being used to refinance unprofitable projects. Our findings are consistent with theoretical literature that suggests that soft budget constraints and overborrowing were significant factors behind the Korean financial crisis of 1997-98.
Topic:: Economics, International Trade and Finance, and Markets
Political Geography:: Asia, South Korea, and Korea

29. The Political Economy of Taxation and Tax Reform in Developing Countries

Author:: Jonathan Di John
Publication Date:: 07-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Taxation provides one of the principal lenses in measuring state capacity, state formation and power relations in a society. This paper critically examines three main approaches (economic, administrative and political economy) to understanding taxation. It also examines differences in tax composition across middle-income developing regions and finds that Latin American economies tax upper income groups much less than in East Asia and Eastern Europe, and explores the political economy and policy implications of these differences. The paper also examines issues of tax reform in low income/post-war economies and explores the problem that capital flight poses for less developed countries.
Topic:: Development, International Trade and Finance, Political Economy, and Third World
Political Geography:: Eastern Europe, East Asia, and Latin America

30. Food Security in the South Pacific Island Countries with Special Reference to the Fiji Islands

Author:: K.L. Sharma
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper analyses the status of food security in selected South Pacific Island countries, namely Cook Islands, Fiji Islands, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu at the national and household levels during the period 1991-2002. Due to narrow resource base and production conditions, Pacific Islands concentrate on a few primary commodities for production and exports. During recent years import dependency for food items has increased mainly due to a decline in per capita food production and a rapid rate of rural-urban migration. Currently, export earnings can finance food imports but earnings could fall short of the requirements needed after the expiry of some commodity preferential price agreements with importing countries. National food security is dependent on the continuation of subsistence farming and tapping ocean resources in conjunction with the on-going commercial farming of those crops in which Pacific Islands have a comparative advantage. Increased productivity is crucial for improving agricultural performance through government investment in rural infrastructure, agricultural research and extension, irrigation and appropriate price incentives. This would also help alleviate poverty for improvement in economic accessibility of food by households. There is also a need to design appropriate disaster risk management programmes to minimize any adverse effects on the food supply.
Topic:: Economics, Human Welfare, and International Trade and Finance
Political Geography:: Australia/Pacific, Solomon Islands, Papua, Guinea, Cook Islands, Samoa, Tonga, Vanuatu, and Fiji

31. The Gender Dimensions of Post-Conflict Reconstruction: The Challenges in Development Aid

Author:: Elaine Zuckerman and Marcia E. Greenberg
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Based on analysing World Bank and other donor post-conflict reconstruction (PCR) loans and grants from rights-based, macroeconomic and microeconomic perspectives, we conclude that few PCR projects identify or address gender discrimination issues. Bank PCR investments hardly reflect Bank research recognizing that gender inequality increases the likelihood of conflict and gender equality is central to development and peace. Our conceptual framework examining women's programmes, gender mainstreaming, and gender roles in transforming violent into peaceful societies, leads to recommending that PCR projects systematically address gender issues and promote gender equality to make peace work.
Topic:: Development, Gender Issues, Humanitarian Aid, and International Trade and Finance

32. Does the WTO Agreement on Agriculture Endanger Food Security in Sub-Saharan Africa?

Author:: Samuel K. Gayi
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper examines the state of food security in Sub-Saharan Africa (SSA), based on an analysis of a selection of indicators of food security and nutritional wellbeing during the period 1990-2002 within the context of the WTO Agreement on Agriculture. It argues that it may be advisable for those SSA countries with both static and dynamic comparative advantage in agriculture to pursue policies towards 'food self-sufficiency' as a means to attaining food security, considering their large rural farming population, at least until such time that international trade in agriculture is fully integrated into the WTO disciplines. This is particularly relevant in view of the fact that high agricultural protectionism in the north currently distorts price signals and thus the opportunity costs of allocating factors of production in these economies. The SSA countries that lack comparative advantage in agriculture may want to aim for a 'food self-reliance' strategy to attain food security.
Topic:: Agriculture, Human Welfare, and International Trade and Finance

33. Trade, Migration, and Poverty Reduction in the Globalizing Economy: The Case of the Philippines

Author:: Jonna P. Estudillo and Yasuyuki Sawada
Publication Date:: 06-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper investigates how the two types of globalization—i.e., integration of international trade and emigration—affected poverty reduction in the Philippines. Using the Family Income and Expenditure Surveys from 1985 to 2000, we found that both nontransfer and transfer incomes decreased poverty significantly but transfer income exerted greater impact. External openness reduced poverty significantly before the Asian currency crises but its impact had been reversed since. The effect of land reform in inducing transfer income from abroad was significant only in the 1990s. Yet, the ultra poor were bypassed in the land reform-credit-emigration-transfer nexus.
Topic:: Development, Globalization, International Trade and Finance, and Migration

34. Trade Liberalization, Environment and Poverty: A Developing Country Perspective

Author:: M.S. Quresh
Publication Date:: 04-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper revisits the pollution haven hypothesis in the context of Pakistan by offering a systematic analysis of its trade and production patterns. Using bilateral trade statistics from 1975-2003, we test the hypotheses that Pakistan's net exports of pollutionintensive products have increased to the OECD countries. We also investigate if the stringency of environmental governance in the importing countries plays a role in determining Pakistan's exports of pollution-intensive products. The results reveal that there has been a change in the composition of output and exports towards pollutionintensive manufacturing that parallels the opening of the economy. Overall, the findings appear to be in favour of the pollution haven hypothesis and call for effective environmental policy response for poverty alleviation and sustainable development.
Topic:: Development, International Trade and Finance, and Poverty
Political Geography:: Pakistan and Asia

35. Innovations, High-Tech Trade and Industrial Development: Theory, Evidence and Policy

Author:: Lakhwinder Singh
Publication Date:: 03-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Innovations spur science-based trade and industrial development in a fast changing pace of globalization. Knowledge accumulation and diffusion have been increasingly recognised as fundamental factors that play an important role in long-run economic growth. This paper focuses on the long-term innovation strategy of industrial and technological development in developing countries. Growth theory, empirical evidence and several indicators of innovation have been pressed into service to draw important lessons from historical experience of the developed and newly industrializing countries for the industrial development of the developing economies. Technology development and public technology policy experience of the East Asian countries have been examined to reinvent the role of public technology policy that can be adopted to develop national innovation system to nurture and build innovative capabilities in the developing economies in the dynamic global economy.
Topic:: Development, Economics, Industrial Policy, and International Trade and Finance
Political Geography:: East Asia

36. Institutions, Policies and Economic Development

Author:: Grzegorz W. Kolodko
Publication Date:: 02-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Institutions are not only created and built, but al so, and especially, need to be learnt. It is a process which takes place in all economies, but acquires a special importance in less advanced countries. Not only theoretical arguments, but also the practical experience over the past 15 years demonstrates that faster economic growth, and hence also more broadly, socioeconomic development, is attained by those countries which take greater care to foster the institutional reinforcement of market economy. However, progress in market-economy institution building is not in itself sufficient to ensure sustained growth. Another indispensable component is an appropriately designed and implemented economic policy which must not confuse the means with the aims.
Topic:: Development, Economics, Globalization, and International Trade and Finance

37. Violence in Peace: Understanding Increased Violence in Early Post-Conflict Transitions and Its Implications for Development

Author:: Marcia Byrom Hartwell
Publication Date:: 02-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: A key issue for development in the late twentieth and early twenty -first centuries has been an escalation of violence during post-conflict transitions. A long-term goal for international donor involvement is to assist in building legitimate and effective political, economic, and legal institutions. However, research and observation has revealed that increased violence is commonplace during peace processes and strongly influences the ways in which these institutions are formed. In turn post-conflict violence itself is strongly influenced and motivated by the way in which peace agreements have been negotiated. This study addresses some of the reasons for escalation of violence following peace agreements. It describes the underlying dynamics including the relationship between perceptions of justice as fairness, formation of post-conflict identity, political processes of forgiveness and revenge; and the policy implications for development particularly in relation to peace conditionality tied to aid.
Topic:: Conflict Prevention, Development, International Trade and Finance, and Peace Studies

38. Prolonged Use and Conditionality Failure: Investigating IMF Responsibility

Author:: Laura Sabani and Silvia Marchesi
Publication Date:: 02-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Since the 1970s, prolonged use of resources by the IMF has consistently expanded, among both low- and middle-income countries. Overall, this phenomenon suggests a lack of effectiveness of Fund supported programmes. In the literature conditional lending failure has been explained by looking both at the characteristics of the borrowing countries (demand-side factors) and at the possible influence of IMF specific interests (supply-side factors). Among the latter it has been suggested that non- compliance with conditionality might be attributed to the lack of credibility of the IMF threat of interrupting financial assistance in case of policy slippages. In this paper we critically review this literature and we propose a novel explanation, according to which it is the repeated nature of the IMF involvement, together with the fact that the Fund acts simultaneously as a lender and as a monitor (and as an advisor) of economic reforms, that weakens the credibility of the IMF threat. Specifically, we argue that Since the 1970s, prolonged use of resources by the IMF has consistently expanded, among both low- and middle-income countries. Overall, this phenomenon suggests a lack of effectiveness of Fund supported programmes. In the literature conditional lending failure has been explained by looking both at the characteristics of the borrowing countries (demand-side factors) and at the possible influence of IMF specific interests (supply-side factors). Among the latter it has been suggested that non- compliance with conditionality might be attributed to the lack of credibility of the IMF threat of interrupting financial assistance in case of policy slippages. In this paper we critically review this literature and we propose a novel explanation, according to which it is the repeated nature of the IMF involvement, together with the fact that the Fund acts simultaneously as a lender and as a monitor (and as an advisor) of economic reforms, that weakens the credibility of the IMF threat. Specifically, we argue that the IMF desire to preserve its reputation as a good monitor/advisor may distort its lending decisions towards some laxity, which may be exacerbated by the length of the relationship between a country and the Fund. Therefore, we claim that prolonged use of IMF resources is not only a consequence of a lack of effectiveness of conditional lending but it might itself be a determinant of conditionality failure.
Topic:: Economics, International Organization, International Trade and Finance, and Markets

39. International Finance and the Developing World: The Next Twenty Years

Author:: Tony Addison
Publication Date:: 02-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Much has changed in international finance in the twenty years since UNU-WIDER was founded. This paper identifies five broad contours of what we might expect in the next twenty years: the flow of capital from ageing societies to the more youthful economies of the South; the growth in the financial services industry in emerging economies and the consequences for their capital flows; the current strength in emerging market debt, and whether this represents a change in fundamentals or merely the effect of low global interest rates; the impact of globalization in goods markets in lowering inflation expectations, and therefore global bond yields; and the implications of the adjustment in global imbalances between Asia (in particular China) and the United States for emerging bond markets as a whole. The paper ends by noting the paradox that today we see ever larger amounts of capital flowing across the globe in search of superior investment returns, and yet the financing needs of the poorer countries are still largely unmet.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States, China, and Asia

40. Tax Policy Reforms in Nigeria

Author:: Ayodele Odusola
Publication Date:: 01-2006
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Nigeria is governed by a federal system, hence its fiscal operations also adhere to the same principle, a fact which has serious implications on how the tax system is managed. The country's tax system is lopsided, and dominated by oil revenue. It is also characterized by unnecessarily complex, distortionary and largely inequitable taxation laws that have limited application in the informal sector that dominates the economy. The primary objective of this paper is to prepare a case study on tax policy reforms in Nigeria, with the specific objectives of examining the main tax reforms in the country; highlighting tax revenue profile and composition; analysing possible distributional impacts on the poor; discussing major problems that could prevent effective tax implementation in the country; and offering suggestions for reforms.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: Africa and Nigeria

41. Does Financial Openness Promote Economic Integration? Some Evidence from Europe and the CIS

Author:: Fabrizio Carmignani and Abdur Chowdhury
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We study whether financial openness facilitates the economic integration of formerly centrally planned economies with the EU- 15. Two dimensions of economic integration are considered: cross-country convergence of per-capita incomes and bilateral trade in goods and services. We find that more financially open economies effectively catch-up faster and trade more with the EU-15. These integration-enhancing effects occur over and above any effect stemming from domestic financial deepening and other factors determining growth and trade.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: Europe

42. Does Financial Liberalization Influence Saving, Investment and Economic Growth? Evidence from 25 Emerging Market Economies, 1973-96

Author:: Robert Lensink and Niels Hermes
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper aims to investigate the relationship between financial liberalization on the one hand and saving, investment and economic growth on the other hand, using a new dataset for measuring financial liberalization for a sample of 25 developing economies over the period 1973-96. We find no evidence that financial liberalization affects domestic saving and total investment (although there are some signs to believe that liberalization may actually reduce rather than increase domestic saving), whereas it is positively associated with private investment, as well as with per capita GDP growth. We find a negative relationship between financial liberalization and public investment. These results suggest that financial liberalization leads to a substitution from public to private investment, which may contribute to higher economic growth.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance

43. Financial Sector Development and Productivity Growth

Author:: George Mavrotas and Subal C. Kumbhakar
Publication Date:: 12-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Recent years have witnessed important structural changes around the world as a result of the globalization process, the creation of new economic blocks and the liberalization of financial sector in many countries. Responding to these changes many sectors of the industrialized countries have gone through major deregulatory changes to acclimate themselves to new environments. At the same time, many countries have undertaken institutional reforms to build a market-orientated financial system in the hope that transition towards market economy will improve productivity. In the face of uncertainty resulting from changes in regulatory structure and the development of financial institutions to foster market economy, many countries may not be able to achieve their maximum growth potential. In other words, productivity growth is likely to depend on the development of financial institutions and the stage of economic development That is, a less developed country is likely to benefit more (in terms of output growth rate) from the development of financial institutions than a developed economy with well-developed financial system. In this paper we document this by using data covering 65 countries, varying substantially in term s of level of development and geographic location, and spanning the period 1960-1999. Empirical results obtained from the estimation of two different empirical models regarding the measurement of total factor productivity growth seem to confirm a priori expectations about the overall positive influence of financial systems on productivity in line with previous work on this front. Our results remain robust with respect to alternative definitions of financial sector development we tried.
Topic:: Development, Economics, Globalization, and International Trade and Finance

44. Diamonds, Foreign Aid, and the Uncertain Prospects for Post-Conflict Reconstruction in Sierra Leone

Author:: J. Andrew Grant
Publication Date:: 08-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This article examines the external and internal dimensions of post-conflict reconstruction in Sierra Leone. The United Nations, bilateral donors such as the United Kingdom, and transnational non-governmental organizations and aid agencies have been instrumental in providing much-needed external assistance to Sierra Leone during the latter stages of its civil war and in the immediate post-war period. Although foreign aid is a welcome source of external support for reconstruction efforts, it is finite like any other resource. Reconstruction must also address intangible issues such as corruption as well as the healing of society through the Truth and Reconciliation Commission and the Special Court for Sierra Leone. Diamond exports hold potential as an internal source to spur economic growth and reconstruction. However, as the article illustrates, many obstacles remain, ranging from governance weaknesses in terms of capacity and domestic regulatory schemes on diamonds to the existence of illicit mining and smuggling of diamonds to regional instability.
Topic:: Foreign Policy, Debt, and International Trade and Finance
Political Geography:: Africa and United Kingdom

45. Trade Openness and Vulnerability in Central and Eastern Europe

Author:: Pierluigi Montalbano, Alessandro Federici, Umberto Triulzi, and Carlo Pietrobelli
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper offers a substantive contribution to the debate on the role of international trade on the development of emerging countries. The aim is to detect empirically the phenomenon of vulnerability induced by trade openness. The methodology adopts a forward-looking approach and tries to fill a missing link in the theory between trade shocks, volatility, and the wellbeing of countries, distinguishing between 'normal' and 'extreme' volatility.
Topic:: Development, Economics, Globalization, and International Trade and Finance
Political Geography:: Eastern Europe

46. Financial Sector Structure and Financial Crisis Burden: A Model Based on the Russian Default of 1998

Author:: George Mavrotas and Dmitri Vinogradov
Publication Date:: 06-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We consider an overlapping generations model with two production factors and two types of agents in the presence of financial intermediation and its application to the Russian default of August 1998. The paper focuses on the analysis of the consequences of a sudden negative repayments shock on financial intermediation capacity and consequently on the economy as a whole. The model exhibits a 'chain reaction' property, when a single macroeconomic shock can lead to the exhaustion of credit resources and to the subsequent collapse of the whole banking system. To maintain the capability of the system to recover, regulatory intervention is needed even in the presence of the state guarantees on agents' deposits in the banks (workout incentives). We compare the results for an intermediated economy with those derived under the assumption of a market economy, and draw some broad conclusions on the consequences of the crises, which are contingent on the financial sector structure.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:: Russia

47. From Local to Global and Informal to Formal: Entering Mainstream Markets

Author:: Reema Nanavaty
Publication Date:: 02-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This is a brief sketch of the Self Employed Women's Association's (SEWA) three-decade-long journey from the local to global and informal to formal sector in search of finding work and income for now 720,000 women workers. Though SEWA remains a local and an informal economy workers' organization, its aim has always been to mainstream its issues, hopes, and achievements.
Topic:: International Relations, Economics, Emerging Markets, and International Trade and Finance

48. Unlocking Public Entrepreneurship and Public Economies

Author:: Elinor Ostrom
Publication Date:: 01-2005
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Unlocking human potential requires a rich network of institutional arrangements in both private and public spheres. Opening the private sphere to entrepreneurship and complex market organization is well understood as a key to increasing the level and quality of private goods available to consumers. Opening the public sphere to entrepreneurship and innovation at local, regional, and international levels is also a key to increasing the level and quality of public goods – e.g., peace, safety, and health – available to citizens. This paper reviews studies of urban service delivery that have repeatedly found communities of individuals who have self-organized to provide and co-produce surprisingly good local services. In addition to unlocking individual freedom, we need to unlock the public sector from rigid, top-down, hierarchical organization.
Topic:: International Relations, Economics, Emerging Markets, and International Trade and Finance

49. A Contract Perspective on the International Finance Facility

Author:: George Mavrotas and Tun Lin
Publication Date:: 09-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The present paper is a first attempt to develop a theoretical model using a short-term vis-á-vis long-term contract framework within which donor countries' endorsement or rejection decision towards the recently proposed International Finance Facility (IFF) is rationalized. The current foreign aid system is portrayed as being similar to a series of short-term contracts, where donor countries are able to adjust the aid amount to reflect environmental change (broadly defined to take into account changes in public opinion, domestic situation, etc.). The benefit of this system is in its flexibility. Frontloading aid, on the other hand, as proposed by the IFF proposal, has the benefit of smoothing out the flows over time. In the model presented in this paper, donor countries balance these two contract schemes to determine the endorsement or rejection of the IFF proposal. By using historical aid data covering the period 1990-2003 for all DAC donor countries, our empirical analysis shows the payoffs and relative advantages of these two contract schemes.
Topic:: Debt, Economics, International Political Economy, and International Trade and Finance

50. Output and Price Fluctuations in China's Reform Years: What Role did Money Play?

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 08-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The Chinese economy underwent cyclical fluctuations in growth and inflation in the reform period. Contrasting views exist on the role of money in such fluctuations. This paper assesses these views employing structural VEC models based on the exchange equation. It is found that in the long run money accommodates, rather than causes, changes in output and prices. In the short run, price fluctuations are mostly attributable to shocks that have permanent effects on prices and money but not on real output. These shocks also account for a large proportion of fluctuations in money, and strongly influence the movements of output.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: China and Asia

51. What Accounts for China's Trade Balance Dynamics?

Author:: Guanghua Wan and Yin Zhang
Publication Date:: 08-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper proposes a structural VAR model which extends the frameworks of Hoffmaister and Roldós (2001) and Prasad (1999). The model is then used to analyse the sources of China's trade balance fluctuations in the period of 1985–2000. Efforts are made to distinguish the forces which underlie the long-run trend in trade balance from those with transitory impacts. The effects of four types of shock are examined—the foreign supply shock, the domestic supply shock, the relative demand shock, and the nominal shock. Among other findings, two emerge as important. First, the movements in China's trade are largely the result of real shocks. Second, the Renminbi is undervalued, yet changes in the exchange rate bear little on the trade balance. Therefore, monetary measures would not suffice to redress China's trade 'imbalance'.
Topic:: Economics, Emerging Markets, and International Trade and Finance
Political Geography:: China and Asia

52. Multiactor Global Funds: New Tools to Address Urgent Global Problems

Author:: Jeremy Heimans
Publication Date:: 07-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Multiactor global funds (MGFs) are emerging as important new mechanisms for the financing of development and other global priorities. MGFs like the Global Fund for AIDS, Tuberculosis and Malaria are distinctive because they are administered and financed by multiactor coalitions of governments, international organizations, the private sector and civil society, they operate independently of any one institution and are tied to particular issue or policy areas. This paper considers the desirability of MGFs as instruments for international financial mobilization, resource allocation and as a form of experimentation in global governance. It is argued that MGFs hold considerable promise as focal points for generating additional public and private resources to address urgent global problems and to finance global public goods. They may be more operationally nimble than traditional mechanisms and capture some of the benefits of collaboration among different actors. However, MGFs may also result in a less coherent response to global problems, duplicate existing structures and be weakly democratically accountable.
Topic:: International Relations, Economics, International Trade and Finance, and Non-Governmental Organization

53. The Transition from Official Aid to Private Capital Flows: Implications for a Developing Country

Author:: Renu Kohli
Publication Date:: 07-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: India's capital account displays a sharp swing in external financing from official assistance to private capital transfers in the 1990s. This paper examines the implications of this transition for the country. An analysis of the private resource transfer reveals that unlike official flows, private capital flows are associated with real exchange rate appreciation, expansion in domestic money supply and stock market growth, liquidity and volatility. The paper concludes with a discussion on the implications of the transition for economic policy.
Topic:: Economics, International Trade and Finance, and Political Economy
Political Geography:: South Asia and India

54. The Characteristics of Macroeconomic Shocks in the CFA Franc Zone

Author:: David Fielding, Kevin Lee, and Kalvinder Shields
Publication Date:: 03-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In this paper we fit a VECM in output and prices to data from ten countries of the CFA Franc Zone. This model allows for various cross-country interactions in both the short run and the long run. The VECM parameters are used to estimate persistence profiles of different kinds, in order to identify the degree of homogeneity in the way in which the countries respond to macroeconomic shocks. In this way we can shed light on questions about the likely size of the costs incurred from these countries' membership of a monetary union.
Topic:: Economics, International Organization, International Political Economy, and International Trade and Finance
Political Geography:: Africa

55. Monetary Policy in the Franc Zone: Estimating Interest Rate Rules for the BCEAO

Author:: Anja Shortland and David Stasavage
Publication Date:: 02-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper examines to what extent the central bank for the West African Economic and Monetary Union (BCEAO) has used interest rate policy in response to domestic economic developments. We show that while in the long run the BCEAO matches changes in French (Eurozone) interest rates one for one, in the short run it retains freedom to react to domestic economic variables, such as inflation, the output gap, its foreign exchange position and government borrowing.
Topic:: Economics, International Organization, International Political Economy, and International Trade and Finance
Political Geography:: Africa, France, and West Africa

56. Poverty and Growth in the WAEMU after the 1994 Devaluation

Author:: Jean-Paul Azam
Publication Date:: 02-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper brings out that poverty increased massively in the wake of the 1994 devaluation of the CFA franc, despite a significant recovery of economic growth. Although this increase affected all the social groups, it fell mostly on the urban poor. An analytical model is presented, which explains this puzzle by the stratification of the labour market, assuming that the formal sector workers are at the same time the investors in the informal sector. Then, capital intensity in the latter increases as the former anticipate the cut in formal sector wages that the long-awaited devaluation brings about. Ex post, they run down their assets for consumption-smoothing purposes, thus de-capitalizing the informal sector firms, with a negative impact on incomes in the (urban) informal sector.
Topic:: Economics, International Organization, International Political Economy, and International Trade and Finance
Political Geography:: Africa

57. The Impact of Monetary Union on Macroeconomic Integration: Evidence from West Africa

Author:: David Fielding and Kalvinder Shields
Publication Date:: 02-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In this paper we use data from 17 African nations in order to investigate the hypothesis that monetary union – represented in this case by the CFA Franc Zone – augments the extent of macroeconomic integration. The paper covers a number of dimensions of integration including the volume of bilateral trade, real exchange rate volatility and the magnitude of cross-country business cycle correlation.
Topic:: Economics, International Organization, International Political Economy, and International Trade and Finance
Political Geography:: Africa

58. Monetary Policy in the CFA Zone: Country-level Credit Policy

Author:: Anja Shortland and David Stasavage
Publication Date:: 02-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper examines whether the BCEAO has made use of the various policy instruments at its disposal for steering credit in the individual CFA zone member countries to complement interest rate policy at the zone level. We estimate whether private sector credit has responded systematically to different monetary policy variables using iterated 3-stage least squares regressions for Burkina Faso, Côte d'Ivoire, Mali, Senegal and Togo. If we constrain the coefficient estimates there is some support for the hypothesis that the BCEAO has contracted private sector credit in response to a higher inflation differential with France. However, there seems to be no policy rule to restrict private sector credit in response to increasing government borrowing from the central bank or increased foreign borrowing. If the coefficient estimates are unconstrained, there does not appear to be any systematic policy to control credit expansion at the domestic level.
Topic:: Economics, International Organization, International Political Economy, and International Trade and Finance
Political Geography:: Africa and France

59. The Costs and Benefits Analysis of CFA Membership: The Choice of an Exchange Rate Regime for the CFA Countries Zone

Author:: Mireille Linjouom
Publication Date:: 02-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper determines an analytical framework defining the choice of an optimal exchange rate regime for a typical CFA country. The policymakers behave strategically to decide to adopt alternative exchange rate regime by minimizing their loss function under specific constraints like economic characteristics and political consideration. One concludes a CFA economy with less inflationary propensity and greater external shocks volatility will tend to select a flexible exchange rate regime. Moreover, the model suggests that a CFA country with a more unstable political system and a higher propensity to apply inflationary policies will prefer a flexible arrangement than a fixed one.
Topic:: Economics, International Organization, International Political Economy, and International Trade and Finance
Political Geography:: Africa

60. An Aggregate View of Macroeconomic Shocks in Sub-Saharan Africa: A Comparative Study Using Innovation Accounting

Author:: Simeon Coleman
Publication Date:: 02-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper investigates the impacts and responses of macroeconomic shocks in some domestic economies in Sub-Saharan Africa over the period 1961-99; more specifically, it seeks to answer the question of whether there are any systematic differences in the responses of the CFA franc zones and the non-CFA franc zone countries to macroeconomic shocks. Based on the Blanchard-Quah methodology, we identify shocks to the changes in real exchange rate and output using a structural VAR (SVAR) model for these small open economies. Our finding that the real exchange rate innovations in the CFA franc zones are largely independent of domestic variables suggests that external influence is more important in the CFA zones. There is also some evidence that money demand shocks are more significant in the non-CFA franc zone countries.
Topic:: Economics, International Political Economy, and International Trade and Finance
Political Geography:: Africa

61. Economic Growth, Income Distribution and Poverty: Time-series and Cross-country Evidence from the CFA-zone Countries of sub-Saharan Africa

Author:: Michael Bleaney and Akira Nishiyama
Publication Date:: 01-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The causes of the slow growth of CFA countries are investigated. There is little difference in this respect between the CFA and other sub-Saharan African countries. Since 1970, GDP growth in the CFA countries has shown no significant trend but one or two medium-term fluctuations (positive in 1979-83 and negative in 1989-93). Internationally, the income share of the poorest 20 per cent of the population of any country has improved most in poor countries, and there is no evidence that this does not apply to CFA countries also.
Topic:: Economics, Human Welfare, International Political Economy, and International Trade and Finance
Political Geography:: Africa

62. How Does Monetary Policy Affect the Poor? Evidence from the West African Economic and Monetary Union

Author:: David Fielding
Publication Date:: 01-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The West African Economic and Monetary Union (UEMOA) has a history of monetary stability and low inflation. Nevertheless, there is substantial variation in relative prices within some UEMOA countries, in particular in the price of food relative to other elements of the retail price index (IHPC). Using monthly time-series data for cities within the region, we analyze the impact of changes in monetary policy instruments on the relative prices of components of the IHPC. We are then able to explore how the burden of monetary policy innovations is likely to be shared between the rich and poor.
Topic:: Economics, Human Welfare, International Political Economy, and International Trade and Finance
Political Geography:: Africa

63. A Development-focused Allocation of the Special Drawing Rights

Author:: Ernest Aryeetey
Publication Date:: 03-2004
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Efforts to realize the issue of development-focused Special Drawing Rights (SDR) by the International Monetary Fund (IMF) have been on-going for many years. Recently, however, the campaign first gained a new momentum immediately after the Asian financial crises with the new liquidity problems of developing nations following the collapse of private capital markets. Currently the search for financing options towards the achievement of the Millennium Development Goals drives the interest in development-focused SDRs. Extending the uses to which SDR can be put is derived from the growing demands on the international financial system to respond to the development finance needs of poor nations. Apart from the need to provide emergency funds in times of crises and the whole area of crisis prevention, increasingly the facilitation of development in poor countries and assistance to make the best policy decisions is considered crucial.
Topic:: Development, Economics, International Political Economy, and International Trade and Finance
Political Geography:: Asia

64. Regional or National Poverty Lines? The Case of Uganda in the 1990s

Author:: Simon Appleton
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Absolute poverty lines are often derived from the cost of obtaining sufficient calories. Where staples vary across regions, such poverty lines may differ depending on whether they are set using national or regional food baskets. Regional poverty lines are open to the objection that they may be contaminated by income effects. This paper explores this issue by focussing on Uganda, a country where widening spatial inequalities in the 1990s have caused concern. Conflicting results from earlier studies have suggested that the spatial pattern of poverty in Uganda is very sensitive to whether national or regional food baskets are used in setting poverty lines. We confirm this suggestion by comparing the spatial profile of poverty in 1993 using national and regional poverty lines. However, since the regions consuming the more expensive staple sources of calories are also those with higher incomes, using simple regional poverty lines is problematic. Instead, a method of setting regional poverty lines is considered that adjusts for income differentials between regions. Even with this adjustment, the use of regional food baskets implies a markedly different.
Topic:: Development, International Trade and Finance, and Poverty
Political Geography:: Uganda and Africa

65. Remittances by Emigrants: Issues and Evidence

Author:: Andrés Solimano
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Remittances, after foreign direct investment, are currently the most important source of external finance to developing countries. Remittances surpass foreign aid, and tend to be more stable than such volatile capital flows as portfolio investment and international bank credit. Remittances are also an international redistribution from low-income migrants to their families in the home country.
Topic:: Development, Economics, International Trade and Finance, and Migration

66. Innovative Sources for Development Finance: Over-Arching Issues

Author:: Anthony B. Atkinson
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In analysing proposals for new sources of development funding, there are several issues that arise across the board. What is the role of new sources in relation to existing overseas development assistance? Should we be seeking new sources that generate a double dividend? Can the key elements of a proposal be achieved by another route? What should be the fiscal architecture? Is there a modern transfer problem? It is with these general concerns that the present paper deals. Its aim is to bring to bear on global public finance the accumulated knowledge in the field of national public finance, and more generally public economics.
Topic:: Development, Economics, and International Trade and Finance

67. National Taxation, Fiscal Federalism and Global Taxation

Author:: Robin Boadway
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper considers lessons from the practice of fiscal federalism for guidance on new approaches to development finance. Despite the fact that inter-regional redistribution in a federation relies on a central government with strong fiscal powers, the form of that redistribution can be used as a benchmark for international development assistance financing. In a federation, finance for less-developed regions takes the form of equalizing transfers to sub-national governments. The objective of these transfers is to enable sub-national governments to provide comparable levels of public services at comparable tax rates, called fiscal equity, leaving them discretion to implement interpersonal redistribution schemes within their jurisdictions. This same principle of assuming that national governments rather than donor nations are responsible for vertical equity within their borders leads to the view that the ideal form of development assistance is a system of equalizing inter-nation transfers intended to enhance fiscal equity.
Topic:: Development, Economics, Government, and International Trade and Finance

68. Environmental Taxation and Revenue for Development

Author:: Agnar Sandmo
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper considers the role of global environmental taxes both as instruments for improving the global environment and as a source of revenue for funding economic development. It reviews the general case for environmental taxes and the particular issues that arise for the adoption of such taxes in an international setting without a single jurisdiction. It also discusses the possibilities for political acceptance of such taxes when tax revenue is linked to the goal of economic development. The revenue potential of global environmental taxes is evaluated with special reference to a global carbon tax. It is found that this tax alone has the potential to raise sufficient revenue to finance the United Nations' Millennium Development Goals.
Topic:: Development, Economics, Environment, and International Trade and Finance

69. Which Types of Aid Have the Most Impact?

Author:: George Mavrotas
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper uses an aid disaggregation approach to examine the impact of different types of aid on the fiscal sector of the aid-recipient country. It uses time-series data on different types of aid (project aid, programme aid, technical assistance and food aid) for Uganda, an important aid recipient in recent years, to estimate a model of fiscal response in the presence of aid which combines aid disaggregation and endogenous aid. The empirical findings clearly suggest the importance of the above approach for delving deeper into aid effectiveness issues since different aid categories have different effects on key fiscal variables—an impact that could not be revealed if a single figure for aid was employed. More precisely, project aid and food aid appear to cause a reduction in public investment whereas programme aid and technical assistance are positively related to public investment. The same applies for government consumption. A negligible impact on government tax and non-tax revenues, and a strong displacement of government borrowing are also found.
Topic:: Economics, International Trade and Finance, and Poverty
Political Geography:: Uganda and Africa

70. Loan Processing Costs and Information Asymmetries - Implications for Financial Sector Development and Economic Growth

Author:: George Mavrotas and Salvatore Capasso
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper presents a model in which credit-constrained firms might delay the adoption of new and more productive technologies because of the very high external financing costs they face. Our point of departure is that the efficiency of the banking system can have a profound impact on real resource and investment allocation not only directly, by reducing the amount of resources channelled to the credit market, but also indirectly by affecting entrepreneurs' investment decisions. Along these lines of reasoning we develop a model of information asymmetries in the credit market in which high costs of processing bank loan applications might obstruct investments in high-tech projects and favour, instead, low-return, self-financed investments in mature sectors. The result is that these kinds of costs have a negative impact on the average capital productivity and on the rate of economic growth. In specific circumstances, the combination of these costs and the dynamics of capital accumulation can be such that the economy incurs in a 'technology trap', in which new technologies, even if readily available, will never be adopted because of high frictions and inefficiencies in the credit market, a situation that seems to be relevant to many developing countries.
Topic:: Development, Economics, and International Trade and Finance

71. The Revenue and Double Dividend Potential of Taxes on International Private Capital Flows and Securities Transactions

Author:: Ilene Grabel
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper explores two proposals to tax financial flows in developing economies—the package of policies implemented to various degrees by Chile and Colombia during the 1990s, widely referred to today as the Chilean model—and securities transactions taxes (STTs). I find that each provides a viable mechanism to raise revenue in some developing countries. Both can be introduced unilaterally (with the prospect of multilateral coordination in the future); both are progressive in their incidence, and in the case of the STT, represents an administratively manageable form of revenue collection. I also find that each entails double dividends that manifest in greater domestic and international macroeconomic stability.
Topic:: Development, Economics, and International Trade and Finance

72. Private Donations for International Development

Author:: John Micklewright and Anna Wright
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Charitable donations by private individuals and firms can help fund the Millennium Development Goals. What are the prospects for increasing donations for international development, whether from small-scale donors, the super-rich (as in the recent gifts by Bill Gates and Ted Turner), or the corporate sector? The paper starts by reviewing how large are the sums currently given in OECD countries (including gifts of time) and the problems development has in competing with domestic causes. It then looks at possibilities for the future, including tax deductions, the new 'global funds', corporate social responsibility and 'cause-related marketing', the use of the Internet, and long-term donor education.
Topic:: Development, International Cooperation, International Trade and Finance, and Third World

73. Revenue Potential of the Currency Transaction Tax for Development Finance: A Critical Appraisal

Author:: Machiko Nissanke
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper assesses the potential of currency transaction taxes (CTT, widely known as the Tobin tax), to raise revenue for global development. Though Tobin proposed and others assessed CTTs in terms of reducing exchange rate volatility and improving macroeconomic policy environments, this paper considers the CTT first and foremost from the standpoint of revenue. With a view of establishing a 'permissible' range of tax rates to obtain realistic estimates of revenue potential, it first reviews the debate over the effects of CTT on market liquidity and the efficiency of foreign exchange markets, and assesses the Spahn proposal for a two-tier currency tax. It then moves to a discussion of the technical and political feasibility of CTT, followed by an evaluation of several new proposals, such as those advanced by Schmidt and Mendez. The paper presents revenue estimates from CTT in light of recent changes in the composition and structure of foreign exchange markets.
Topic:: Development, Economics, Globalization, and International Trade and Finance

74. A Global Lottery and a Global Premium Bond

Author:: Tony Addison and Abdur R. Chowdhury
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The world lottery market now amounts to at least US$126 billion in sales. World market sales for all gaming products (public, charitable and commercial) total some US$1 trillion, of which Internet gambling accounts for US$32 billion. This paper assesses the prospects for harnessing this large and growing market for the purposes of development finance by means of a global lottery and a global premium bond (with the successful UK scheme providing a model for the latter). Each has different strengths: the global lottery can add to the supply of grant finance for development, while the global premium bond could be an attractive savings instrument for ethical investors. The paper concludes that global versions of both a lottery and a premium bond are viable and complementary in mobilizing more development finance.
Topic:: Development, Economics, International Cooperation, and International Trade and Finance
Political Geography:: United Kingdom

75. The International Finance Facility: The UK HM Treasury-DFID Proposal to Increase External Finance to Developing Countries

Author:: George Mavrotas
Publication Date:: 12-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper discusses the International Finance Facility (IFF), a joint HM Treasury-DFID proposal to increase development aid substantially for the Millennium Development Goals to be achieved by 2015. The main conclusion of the paper is that the proposed IFF is a promising, forward-looking and creative proposal for it implies a substantial increase in fresh, predictable and stable aid as well as a robust financial structure. However, there are a number of concerns about potential shortcomings of the proposal, namely its underlying assumptions about continuous commitment on behalf of the donor community towards the implementation of the IFF during the life of the Facility and most importantly its heavy reliance on political coordination among donor countries participating in the proposed scheme. Potential absorptive capacity constraints in IFF aid-recipient countries may be also relevant. Achieving its huge political task as well as alleviating the crucial constraints regarding its successful implementation seem to be the main challenges this innovative proposal needs to deal with in the near future.
Topic:: Development, International Cooperation, and International Trade and Finance
Political Geography:: United Kingdom and Europe

76. Some Welfare Implications of 'Who Goes First?' in WTO Negotiations

Author:: Basudeb Guha-Khasnobis
Publication Date:: 09-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: We envisage a logical framework to explain why some trade negotiations are delayed because parties differ on who should 'go first'. In our model, there are substantive welfare implications depending on which party sets tariff rates (or subsidies) first in a strategic optimization exercise. When knowledge about cost levels are incomplete or missing, and hence must be guessed with a probability, the chances of conflict regarding who goes first are extremely high in the situation modeled in this paper. As an institution with some power to set the rules of negotiations, the WTO should be able to anticipate such conflicts in upcoming negotiations. It can then set the rule (in this case, dictate who should go first) depending on whose interest it wants to protect. There is a wide range of choices for the WTO in this regard: OECD consumer's surplus, OECD producers' loss, net exports of developing countries, firm profits, or even, world welfare as the sum of all these components.
Topic:: Development, International Organization, International Political Economy, and International Trade and Finance

77. Who Gains from Tariff Escalation?

Author:: Basudeb Guha-Khasnobis
Publication Date:: 09-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: With the help of a simple model of production and trade, we examine the differential impact of tariff escalation on skilled and unskilled wages in an economy. Our findings provide a lobbying-based explanation of the prevalence of tariff escalation in developed countries. It also predicts the possible response of a developing country and shows how similar lobbying activity in that country can slow the pace of liberalization of service sector trade.
Topic:: Development, Economics, and International Trade and Finance

78. International Trade, Location and Wage Inequality in China

Author:: Songhua Lin
Publication Date:: 09-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Models of economic geography predict that transportation costs directly affect demand for goods and the supply of intermediate inputs. One of the reasons that international trade is concentrated in the coastal provinces of China is that they have lower transportation costs in transporting goods to other countries than do provinces in the interior. This paper examines the relationship between the provincial wage rate and each province's access to international markets, and to suppliers of intermediate inputs. A gravity equation is first estimated to construct these 'market access' and 'supplier access' variables. In the second stage, the effect of market access and supplier access on the wage rate is estimated. It is found that about one quarter of the provincial wage differences in the coastal provinces and 15 per cent of the wage differences in the interior provinces can be explained by these economic geography variables.
Topic:: Industrial Policy and International Trade and Finance
Political Geography:: China, Israel, and East Asia

79. Economic Polarization Through Trade: Trade Liberalization and Regional Growth in Mexico

Author:: Andrés Rodríguez-Pose and Javier Sánchez-Reaza
Publication Date:: 09-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper analyses the impact trade liberalization and economic integration have had on regional growth and regional disparities in Mexico over the last two decades. It is highlighted that the passage from an import substitution system to membership of the General Agreement on Tariffs and Trade (GATT) first, and to economic integration in the North American Free Trade Agreement (NAFTA) later, has been associated with greater concentration of economic activity and territorial polarization. The analysis also shows that these changes herald a period of transition between two growth models. Regional growth in the final stages of the import substitution period was mainly characterized by convergence and linked to the presence of oil and raw materials and proximity to Mexico City. Economic liberalization and regional integration in NAFTA has been related to regional divergence, a reduction of the importance of Mexico City as the main market and to the emergence of an economic system in which the endowment of skilled labour starts to play a more important role.
Topic:: Economics and International Trade and Finance
Political Geography:: North America and Mexico

80. Regional Output Differences in International Perspective

Author:: Alan Heston and Bettina Aten
Publication Date:: 08-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Accurate regional estimates of output are desired as an indicator of level of development and as a variable used to explain internal migration, demand patterns, fertility and other aspects of behaviour. This chapter explores one often neglected aspect of regional income differences, namely that due to price differences or regional purchasing power parities. When nominal regional income measures are adjusted for these price level differences they are termed real regional incomes. The preferred method of estimating regional purchasing power parities by detailed price comparisons is discussed for Brazil, the United States and the European Union. The empirical thrust of the chapter is an investigation of different methods for estimating regional real incomes based on PPP data for 167 countries and nominal regional incomes and other data for about 870 administrative areas at the subnational level. Even in their present form we believe the real income estimates provided for the geographical units present opportunities for understanding the world economic structure.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: United States, Europe, and Brazil

81. Impact of Trade Liberalization on Returns from Land: A Regional Study of Indian Agriculture

Author:: Ghosh Nilabja
Publication Date:: 06-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Trade liberalization, by aligning domestic prices with world prices, is envisaged to bring welfare gains to a country. In the case of Indian agriculture, owing to the vastness and diversity of the sector, the impact is likely to be profoundly unequal across regions especially when liberalization is double-edged, acting on both output and input sides. This paper views returns from land resource as a primary determinant of farmers' economic well-being and production incentive and considers paddy both as the dominant support for the rural population and as a product with comparative advantage, as most studies have demonstrated. Working with state and sub-state level data and taking account of the differences in technologies, productivities and transport costs, the paper finds that the gains vary regionally and may not be positive in all cases when both output and input prices are globally aligned.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: South Asia and India

82. The EU's Everything But Arms Initiative and the Least-developed Countries

Author:: Lucian Cernat, Sam Laird, Luca Monge-Roffarello, and Alessandro Turrini
Publication Date:: 06-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Using a computable general equilibrium simulation model and partial equilibrium simulations, based on the SMART model, the paper attempts to assess the aggregate worldwide distribution of gains and losses of the EU's Everything But Arms (EBA) initiative for both LDCs and third developing countries under different scenarios.
Topic:: Development and International Trade and Finance
Political Geography:: Europe

83. Developed Country Trade Barriers and the Least Developed Countries: The Economic Results of Freeing Trade

Author:: Jon D. Haveman and Howard J. Shatz
Publication Date:: 06-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The Doha Ministerial Declaration emphasized that priority should be given to improving market access for products originating in the Least Developed Countries (LDCs). In this paper, we analyze the importance of this proposition with respect to market access in the Triad economies. We first present a brief history of non-reciprocal preferences granted by the Triad. This covers Generalized System of Preference (GSP) programmes in each, and further preferences granted to African, Caribbean and Pacific countries by the EU and preferences granted to Caribbean Basin, Andean, and African countries by the US. This history is followed by an assessment of trade generated by these preferences in the year 2000, and of the extent to which LDC exports might be expected to increase should the preferences be made comprehensive. Preferences in 2000 are shown to have led to an increase of US$3.5 billion in LDC exports, while a complete duty-free treatment could expand LDC exports by as much as US$7.6 billion, 90 per cent of which will be absorbed by the US. As this represents a doubling of LDC exports to these countries, we interpret these results as an endorsement of this priority in the Doha Round of negotiations.
Topic:: Development, Economics, and International Trade and Finance
Political Geography:: Africa, United States, and Caribbean

84. The New Global Determinants of FDI Flows to Developing Countries: The Importance of ICT and Democratization

Author:: Tony Addison and Almas Heshmati
Publication Date:: 05-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Foreign direct investment (FDI) has increased dramatically in recent years. However, the distribution of FDI is highly unequal and very poor countries face major difficulties in attracting foreign investors. This paper investigates the determinants of FDI inflows to developing countries, with a particular emphasis on the impact of the 'third wave of democratization' that started in the early 1980s and the spread of information and communication technology (ICT) that began in the late 1980s. These two global developments must now be taken into account in any explanation of what determines FDI flows. Using a large sample of countries, together with panel data techniques, the paper explores the determinants of FDI. The causal relationship between FDI, GDP growth, trade openness and ICT is investigated. The main findings are that democratization and ICT increase FDI inflows to developing countries. The paper concludes that more assistance should be given to poorer countries to help them to adopt ICT and to break out of their present 'low ICT equilibrium' trap.
Topic:: Democratization, Development, Economics, and International Trade and Finance

85. Inflation, Output and Perfectly Enforceable Price Controls in Orthodox and Heterodox Stabilization Programmes

Author:: George Mavrotas and Mario Reyna-Cerecero
Publication Date:: 05-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper deals with the success of price controls in stabilizing high inflation rates and their effects on the real economy under an imperfect competition setting derived by optimal maximization. Our model builds on Helpman's work of price controls and imperfect competition, and incorporates inflation inertia through adaptive expectations. The model predicts that under these circumstances price controls can be an effective method of curving inflation when they accompany an orthodox monetary restriction programme; incomes policies alone cannot curve inflation substantially. Efforts where monetary growth is decreased gradually and price controls are implemented to achieve zero inflation result in the boom-recession cycle observed in many real life programmes. When monetary growth is curved immediately and price controls are implemented to achieve zero inflation, there follows a recession and not a boom. Orthodox money-based stabilization programmes implemented on their own need more time to control inflation and always produce a recession.
Topic:: Development, Economics, and International Trade and Finance

86. The 'Pull' and 'Push' Factors in North-South Private Capital: Conceptual Issues and Empirical Estimates

Author:: Matthew Odedokun
Publication Date:: 05-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper is an attempt to rectify some of the problems that characterize most earlier studies that seek to explain private capital flows to developing countries or, at least, to examine the subject from a different and complementary perspective. To accomplish this, we propose a model framework that approaches the issue from the perspective of a capital-exporting developed country and which also takes cognizance of developments in other industrialized countries that could be competing with developing countries for private capital flows. The model is operationalized and estimated with annual panel data over 1970-2000 for 19 capital-exporting developed countries. Specifically, we estimate equations for total private flows, FDI, total portfolio capital flows (PCF) and various categories of PCF. We also test for the effects of a number of factors, each of which has its own 'push' and 'pull' components. The specific explanatory factors are the level of per capita income, interest rate, economic growth, the prevailing phase of economic cycle, the degree of openness of the economy in the balance-of-payment capital account, macroeconomic imbalances, and external debt burden. The empirical findings confirm the posited effects of the 'push' and/or 'pull' component of each of the above factors.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance

87. Export Dynamism and Market Access

Author:: Jörg Mayer
Publication Date:: 04-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Market access liberalization has influenced product-specific growth of world exports and contributed to the shift in the structure of world exports of manufactures towards electrical and electronic goods (including parts and components), goods that require high R expenditures, and labour-intensive products such as clothing. Multilateral trade liberalization has strongly improved market access conditions for manufactures and partly explains why manufactures have experienced particularly strong growth in exports. The increased importance of vertical international production sharing and the associated preferential trading arrangements between geographically close countries with significantly different wage rates have been a key determinant of differences in export-value growth across individual manufactured products, as well as of the distribution of market shares for some of these products among developing countries. Projections based on a standard trade model suggest that moving to full trade liberalization would lead to an increase in the share of agricultural products in total world trade by almost two percentage points and give greater weight to the textile, clothing and automotive sectors within manufactured exports.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance

88. If People were Money: Estimating the Potential Gains from Increased International Migration

Author:: Jonathon Moses and Bjørn Letnes
Publication Date:: 04-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: In this paper we elaborate on the findings produced by an applied equilibrium model that is used to calculate the annual efficiency gains from free international migration. These findings suggest that we can expect significant gains from liberalizing international labour flows. In particular, we expand on two implicit aspects of the estimates: the actual number of migrants being generated by the various counter-factual scenarios, and the per-migrant cost/benefits associated with each. These estimates are then compared with contemporary migration flows and the findings of studies that analyse their economic impact. In light of these comparisons, we conclude that our original findings are not unreasonable.
Topic:: Development, Economics, International Trade and Finance, and Migration

89. E-business Model Innovation and Capability Building

Publication Date:: 04-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: A firm's business model describes the way in which it creates, delivers, and appropriates value. In the debate about the ongoing demise of several e-commerce ventures, only a few analysts have looked at the relative sanity of innovative e-business Models, relying mostly on static environmental variables and the inherent economic logic of each industry. Our study sheds new light on this debate by concentrating on a set of more complex factors, namely the relative difficulty to build new capabilities, whether by creating or acquiring them. We interviewed 60 e-commerce ventures between 2 and 3 years old, both independent and corporate ones, in order to measure their performance, the innovativeness of their e-business model, their obstacles to capability building, and their exploitable resource base. By performing cluster, discriminant, and regression analyses, we demonstrate that a number of typical obstacles to capability building can significantly affect the relative success or failure of innovative e-business models, but that a richer resource base may alleviate this relationship. We end with a discussion of the implications for the e-business model literature, and point out to some new directions to explain how various e-commerce firms, whether 'pure-play' or 'click-and-mortar', can successfully innovate despite rampant capability building difficulties.
Topic:: Economics, Emerging Markets, and International Trade and Finance

90. 'Looking at the Other Side of the Coin': The Relationship between Classical Growth and Early Development Theories

Author:: Maiju Perälä
Publication Date:: 04-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper extends the history of thought narrative on Allyn Young to recognize the close relationship that the classical growth theory has with the early development theory, as Young's externalities-fuelled, cumulative growth process influenced the theoretical thought of the early development theory pioneers, Paul Rosenstein-Rodan and Ragnar Nurkse. The conditions that prevent the development of underdeveloped regions, indivisibilities and inelasticities of supplies and demands, represent the breakdown of the conditions that Young highlights as necessary for self-sustaining growth to occur. Hence, Young's cumulative growth process underlies the view of these early development theorists, though their focus is on the malfunctioning and restarting of this process.
Topic:: Development, Economics, Emerging Markets, International Trade and Finance, and Poverty

91. Aid, Debt Burden and Government Fiscal Behaviour: A New Model Applied to Côte d'Ivoire

Author:: Mark McGillivray and Bazoumana Ouattara
Publication Date:: 04-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper examines the impact of foreign aid on public sector fiscal behaviour in Côte d'Ivoire. A special interest is the relationship between aid, debt servicing and debt, given that Côte d'Ivoire is a highly indebted country. The theoretical model employed differs from those of previous studies by highlighting the interaction between debt servicing and the other fiscal variables. This model is estimated using 1975–99 time series data. Key findings are that the bulk of aid is allocated to debt servicing and that aid is associated with increases in the level of public debt.
Topic:: Debt, Development, Economics, and International Trade and Finance
Political Geography:: Africa

92. OECD Domestic Support and Developing Countries

Author:: Betina Dimaranan, Thomas Hertel, and Roman Keeney
Publication Date:: 04-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: An AGE model with detailed farm supply and substitution relationships is used to analyze impacts of OECD domestic support reform on developing economy welfare. Stylized simulations indicate reforms best suited for reducing trade distortions with least impact on farm incomes. Comprehensive reforms result in welfare losses for LDCs and large declines in OECD farm incomes. Shifting from market price support to land-based payments designed to maintain farm incomes results in increased welfare for most developing countries. LDCs should focus on improved market access to OECD economies while permitting said economies to continue domestic support payments not linked to output/variable inputs.
Topic:: Agriculture, Development, Economics, and International Trade and Finance

93. Analysis of Deviations and Delays in Aid Disbursements

Author:: Matthew Odedokun
Publication Date:: 03-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The study seeks to identify donor-specific factors that cause donors to delay aid disbursement, and to apply a double standard in dealing with the non-compliance of a recipient with regard to aid conditionalities, a practice that promotes uncertainty in the receipt of aid. Annual panel data over 1970-2000 for the 22 members of OECD's DAC donor group are employed in the empirical study. Our findings suggest that the proportion of pledged aid being disbursed, which shows an increasing trend, is positively affected by the extent to which aid is procurement-tied and by the size of the donor government's expenditure in relation to GDP. On the other hand, the proportion of aid commitments being disbursed, which appears lower for the G7 countries, is negatively influenced by factors such as abundant donor generosity, the predominance of grants in total aid, the specific targeting of aid to lower-income recipients, high growth in donor economy, as well as high level of checks and balances, and polarization between the executive and legislative branches of government in the donor country.
Topic:: Development, Economics, Emerging Markets, International Trade and Finance, and Non-Governmental Organization

94. Trade Liberalization, Agriculture, and Poverty in Low-income Countries

Author:: Kym Anderson
Publication Date:: 03-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper offers an economic assessment of the opportunities and challenges provided by the WTO's Doha Development Agenda, particularly through agricultural trade liberalization, for low-income countries seeking to trade their way out of poverty. After discussing links between poverty, economic growth and trade, it reports modelling results showing that farm product markets remain the most costly of all goods market distortions in world trade. It focuses on what such reform might mean for countries of South Asia and sub-Saharan Africa in particular, both without and with their involvement in the MTN reform process. What becomes clear is that if those countries want to maximize their benefits from the Doha round, they need also to free up their own domestic product and factor markets so their farmers are better able to take advantage of new market-opening opportunities abroad. Other concerns of low-income countries about farm trade reform also are addressed: whether there would be losses associated with tariff preference erosion, whether food-importing countries would suffer from higher food prices in international markets, whether China's WTO accession will provide an example of trade reform aggravating poverty via cuts to prices received by Chinese farmers, and the impact on food security and poverty alleviation. The paper concludes with lessons of relevance for low-income countries for their own domestic and trade policies.
Topic:: Agriculture, Economics, Emerging Markets, International Trade and Finance, and Poverty
Political Geography:: Africa and China

95. The Theoretical, Conceptual and Empirical Impact of the Service Economy: A Critical Review

Author:: Birgitte Andersen and Marva Corley
Publication Date:: 03-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper offers a critical review of the conventional economic classification, measurement and valuation of output, and related performance indicators, for the service sector. The paper also explores and contrasts long-standing views on the service knowledge base and service innovations, as well as the global aspects of many services. A problem arises when historical industrial classification schemes treat services as being 'immaterial' (i.e. everything that is not manufacturing and agriculture), while ignoring that the activities of services in the economy, as well as the corporate structures of firms, transcend such classification schemes at any level of aggregation. Other problems arise when associated traditional analytical methods measure services input and output and related performance indicators using the same conceptual framework and indicators as those that are applied for problem solving for agriculture and manufacturing. Such entanglements have other and wider consequences for understanding the impact of the new economy and for designing appropriate policy.
Topic:: Development, Economics, International Trade and Finance, and Political Economy

96. Financial Sector Development â€” Futile or Fruitful? An Examination of the Determinants of Savings in Sri Lanka

Author:: George Mavrotas and Roger Kelly
Publication Date:: 02-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper documents the financial and institutional developments of China during the past two decades, when China was successfully transformed from a rigid centralplanning economy to a dynamic market economy following its unique path. We empirically examine the relationship between financial development and economic growth in China by employing a panel sample covering 31 Chinese provinces during the important transition period 1986-2002. Our evidence suggests that the development of financial markets, institutions, and instruments have been robustly associated with economic growth in China.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:: South Asia

97. Financial Sector Reforms and Savings Mobilization in Zambia

Author:: George Mavrotas and Samuel Manzele Maimbo
Publication Date:: 02-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The paper explores the relationship between financial sector reforms and savings mobilization in Zambia. Although there exists an extensive literature on financial sector development and savings levels in developing countries, there does not seem to exist satisfactory work on the above nexus for sub-Saharan African countries, particularly Zambia. Along these lines, the paper examines the linkages between the financial reforms of the early 1990s and savings mobilization. It considers the characteristics of banks and non-bank financial institutions, especially micro finance institutions, and savings levels and identifies problems associated with the relatively poor performance of savings in recent years and concludes with a set of policy guidelines for strengthening savings mobilization, highlighting the expected effect on povertyreducing growth.
Topic:: Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:: Africa and Nordic Nations

98. A Holistic Perception of Foreign Financing of Developing Countries' Private Sectors: Analysis and Description of Structure and Trends

Author:: Matthew Odedokun
Publication Date:: 03-2003
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The study seeks to identify donor-specific factors that cause donors to delay aid disbursement, and to apply a double standard in dealing with the non-compliance of a recipient with regard to aid conditionalities, a practice that promotes uncertainty in the receipt of aid. Annual panel data over 1970-2000 for the 22 members of OECD's DAC donor group are employed in the empirical study. Our findings suggest that the proportion of pledged aid being disbursed, which shows an increasing trend, is positively affected by the extent to which aid is procurement-tied and by the size of the donor government's expenditure in relation to GDP. On the other hand, the proportion of aid commitments being disbursed, which appears lower for the G7 countries, is negatively influenced by factors such as abundant donor generosity, the predominance of grants in total aid, the specific targeting of aid to lower-income recipients, high growth in donor economy, as well as high level of checks and balances, and polarization between the executive and legislative branches of government in the donor country.
Topic:: Development, Economics, Emerging Markets, International Trade and Finance, and Non-Governmental Organization

99. Globalization and Catching-up in Emerging Market Economies

Author:: Grzegorz W. Kolodko
Publication Date:: 05-2002
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: The study discusses conditions and prospects for fast and durable growth in emerging market economies. In the course of history less than 30 nations have become rich and still more than 80 per cent of the world population lives in the middle and low-income countries, some of them in extreme poverty. It is true not only for the majority of economies traditionally considered as 'developing countries', but also for the new, post-socialist emerging markets. Thus the questions arise: what is the influence of globalization process on economic growth and how real are the prospects for these emerging markets to catch up with more advanced countries? What factors may contribute to sustained and rapid growth over the long term? The paper examines strategies that can help taking the contemporary wave of globalization to the advantage of fast growth of less advanced countries and hence containing the existing development gaps.
Topic:: Economics, Emerging Markets, Globalization, and International Trade and Finance

100. The Benefits and Costs of Group Affiliation: Evidence from East Asia

Author:: Stijn Claessens, Joseph P.H. Fan, and Larry H.P. Lang
Publication Date:: 05-2002
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: This paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-6. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.
Topic:: Economics and International Trade and Finance
Political Geography:: Israel and East Asia

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