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41. Entrepreneurship and Structural Economic Transformation

Author:
Thomas Gries and Wim Naudé
Publication Date:
06-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
A stylized fact of economic development is the structural transformation of countries from traditional, mainly agricultural societies to modern economies dominated by manufacturing and services. In this paper we provide an endogenous growth model to illuminate the role of entrepreneurial start-up firms in structural economic transformation. We follow the Lewis-model's distinction between a traditional and modern sector, and underpin this with micro-foundations. We specify mature and start- up entrepreneurs and make a distinction between survivalist self-employment activities in the traditional sector, and opportunity-driven entrepreneurship in the modern sector. The model shows how opportunity-driven entrepreneurship can drive structural transformation through innovation, provision of intermediate inputs and services (which permits greater specialization in manufacturing), and by increasing employment and productivity in both the modern and traditional sectors.
Topic:
Development and Economics

42. Entrepreneurship in Economic Development

Author:
Wim Naudé
Publication Date:
03-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
What is the role of entrepreneurship in economic development? At a minimum the answer should be able to explain the role of entrepreneurs in the structural transformation of countries from low income, primary-sector based societies into high-income service and technology based societies. More broadly though, it should also be able to explain the role of entrepreneurs in the opposite pole of stagnating development (including conflict) and in high innovation-driven growth. Although economic development lacks a 'general theory' of entrepreneurship, which could encompass a variety of development experiences, much progress has been made in extending the understanding of entrepreneurship in the process of development. This paper surveys the progress with the purpose of distilling the outlines for a more general theory of entrepreneurship in economic development. Entrepreneurship in developing countries remains a relatively under-researched phenomenon, so by surveying the current state of research, and by discussing the role of entrepreneurship in dual economy models of structural transformation and growth, a secondary objective of this paper is to identify avenues for further research. Finally, the policy implications from the economic literature suggest that a case for government support exists, and that this should focus on the quantity, the quality, and the allocation of entrepreneurial ability. Many routinely adopted policies for entrepreneurship, such as provision of credit and education, are shown to have more subtle effects, not all of which are conducive to growth-enhancing entrepreneurship.
Topic:
Development and Economics

43. 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

44. 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

45. 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

46. Gender and Ethnicity in Post-Conflict Kosovo

Author:
Ira N. Gang, Sumon Kumar Bhaumik, and Myeong-Su Yun
Publication Date:
04-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper examines the comparative economic wellbeing of female- and male-headed households among Serbs and Albanians in post-conflict Kosovo. Evidence from the living standards measurement study (LSMS) household survey, 2001, shows that Serb households, both those headed by women and men, are worse off than Albanians households. We find that female-headed households do not generally suffer more than male-headed households, but there is substantial variation among ethnic groups. While Albanian female-headed households are marginally better-off than Albanian male-headed households, Serb female-headed households have the lowest standard of living.
Topic:
Demographics, Economics, and Gender Issues
Political Geography:
Kosovo, Balkans, and Albania

47. Gender and Informal Sector Analysis in India: Economy Wide Approaches

Author:
Anushree Sinha and Haider Khan
Publication Date:
06-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The main purpose of this paper is to look at the incorporation of gender and the informal sector within a general equilibrium framework for India. Moreover, we clarify some important links between a gender aware informal sector based social accounting matrix (SAM) and general equilibrium models such as the computable general equilibrium (CGE) models including as a special case the fixed price multiplier (FPM) models. In particular, economy wide modelling of gender and the informal sector is facilitated by the use of national level data and constructing the base data set as an SAM. Another important strategy is to conceptualize the economy within gender structures, entailing the recognition of gender relations as an intervening variable in all economic activities.
Topic:
Economics and Gender Issues
Political Geography:
India and Asia

48. Global Growth and Distribution: Are China and India Reshaping the World?

Author:
Dominique van der Mensbrugghe, Maurizio Bussolo, Rafael E. De Hoyos, and Denis Medvedev
Publication Date:
03-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Over the past 20 years, aggregate measures of global inequality have changed little even if significant structural changes have been observed. High growth rates of China and India lifted millions out of poverty, while the stagnation in many African countries caused them to fall behind. Using the World Bank's LINKAGE global general equilibrium model and the newly developed Global Income Distribution Dynamics (GIDD) tool, this paper assesses the distribution and poverty effects of a scenario where these trends continue in the future. Even by anticipating a deceleration, growth in China and India is a key force behind the expected convergence of per capita incomes at the global level. Millions of Chinese and Indian consumers will enter into a rapidly emerging global middle class—a group of people who can afford, and demand access to, the standards of living previously reserved mainly for the residents of developed countries. Notwithstanding these positive developments, fast growth is often characterized by high urbanization and growing demand for skills, both of which result in a widening of income distribution within countries. These opposing distributional effects highlight the importance of analysing global disparities by taking into account—as the GIDD does—income dynamics between and within countries.
Topic:
Development, Economics, and Poverty
Political Geography:
Africa, China, India, and Asia

49. Growth Oriented Macroeconomic Policies for Small Islands Economies: Lessons from Singapore

Author:
Anis Chowdhury
Publication Date:
04-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Most small island economies or 'microstates' have distinctly different characteristics from larger developing economies. They are more open and vulnerable to external and environmental shocks, resulting in high output volatility. Most of them also suffer from locational disadvantages. Although a few small island economies have succeeded in generating sustained rapid growth and reducing poverty, most have dismal growth performance, resulting in high unemployment and poverty. Although macroeconomic policies play an important role in growth and poverty reduction, there has been very little work on the issue for small island economies or microstates. Most work follows the conventional framework and finds no or very little effectiveness of macroeconomic policies in stabilization. They also concentrate on short-run macroeconomic management with a focus almost entirely on either price stability or external balance. The presumption is that price stability and external balance are prerequisite for sustained rapid growth. This paper aims to provide a critical survey of the extant literature on macroeconomic policies for small island economies in light of the available evidence on their growth performance. Given the high output volatility and its impact on poverty, this paper will argue for a balance between price and output stabilization goals of macroeconomic policy mix. Drawing on the highly successful experience of Singapore, it will also outline a framework for growth promoting, pro-poor macroeconomic policies for small island economies/microstates.
Topic:
Development, Economics, and Government
Political Geography:
Asia, Australia/Pacific, Caribbean, and Singapore

50. Identification of Regional Fundamental Economic Structure (FES) of India: An Input-Output and Field of Influence Approach

Author:
Sudhir K. Thakur
Publication Date:
05-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This study provides an understanding of the Indian regional economy utilizing the fundamental economic structure (FES) approach. The FES construct implies that selected characteristics of an economy will vary predictably with region size, as measured by net state domestic product, population, and total gross output. The big question addressed in this study is if identifiable patterns of relations between various macro aggregates and economic transactions can be revealed via regional input-output tables. Jensen et al. (1988) discuss the tiered, partitioned, and temporal approaches to the identification of FES using input-output tables. This research addresses the following four questions: (1) Does a regional FES exist for the Indian economy during the period 1965? (2) What proportions of the cells are predictable? (3) Can the 1965 regional FES predict 1983-84 table for Punjab economy? (4) Does regional FES manifest an enhanced understanding of the Indian regional structure? Regression analyses are used to identify the FES and non-FES cells for the Indian regional economy. The regional input-output tables for 21 States and Union Territories provide data for the analysis. Analysis reveals regional FES includes primary and secondary sectors as components of FES. This research has extended the notion of FES to include: weak, moderate and strong FES cells.
Topic:
Economics
Political Geography:
India, Asia, and Punjab

51. The Impact of Reform on Economic Growth in China: A Principal Component Analysis

Author:
Ligang Song and Yu Sheng
Publication Date:
02-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The study decomposes the sources of Chinese growth by first making a distinction between technological progress and technical efficiency in the growth accounting framework, and then identifying a series of reform programmes, such as urbanization, structural change, privatization, liberalization, banking and fiscal system reforms as the key components in institutional innovation which facilitate the improvement of technical efficiency and through which economic growth. These components are then incorporated into the model specification, which is estimated based on a panel dataset by applying the principal component analysis (PCA) to eliminate the multicollinearity problem. The results show that urbanization, liberalization and structural change in the form of industrialization are the most important components in contributing to the improvement of technical efficiency and hence growth, highlighting the importance of government policies aimed at enhancing further urbanization, openness to trade and industrial structural adjustments to sustain the growth momentum in China. The study also found that the potential for further enhancing growth through technical efficiency in China is considerable, which can be realized by deepening state-owned enterprises (SOEs) restructuring, and banking and fiscal system reform.
Topic:
Economics
Political Geography:
China and Asia

52. Inflation and Financial Development: Evidence from Brazil

Author:
Manoel Bittencourt
Publication Date:
02-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We examine the impact of inflation on financial development in Brazil and the data available permit us to cover the period between 1985 and 2002. The results – based initially on time-series and then on panel time-series data and analysis, and robust for different estimators and financial development measures – suggest that inflation presented deleterious effects on financial development at the time. The main implication of the results is that poor macroeconomic performance has detrimental effects to financial development, a variable that is important for affecting, for example, economic growth and income inequality. Therefore, low and stable inflation, and all that it encompasses, is a necessary first step to achieve a deeper and more active financial sector with all its attached benefits.
Topic:
Economics
Political Geography:
Brazil and South America

53. Measuring the Vulnerability of Subnational Regions

Author:
Mark McGillivray, Wim Naudé, and Stephanié Rossouw
Publication Date:
05-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
A small but growing literature has been concerned about the economic (and environmental) vulnerability on the level of countries. Less attention is paid to the economic vulnerability of different regions within countries. By focusing on the vulnerability of subnational regions, our paper contributes to the small literature on the 'vulnerability of place'. We see the vulnerability of place as being due to vulnerability in various domains, such as economic vulnerability, vulnerability of environment, and governance, demographic and health fragilities. We use a subnational dataset on 354 magisterial districts from South Africa, recognize the potential relevance of measuring vulnerability on a subnational level, and construct a local vulnerability index (LVI) for the various districts. We condition this index on district per capita income and term this a vulnerability intervention index (VII) interpreting this as an indicator of where higher income per capita, often seen in the literature as a measure of resilience, will in itself be unlikely to reduce vulnerability.
Topic:
Security, Demographics, Development, and Economics
Political Geography:
Africa and South Africa

54. Measuring Vulnerability and Poverty: Estimates for Rural India

Author:
Raghav Gaiha and Katsushi Imai
Publication Date:
04-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper measures the vulnerability of households in rural India, based upon the ICRISAT panel survey. We employ both ex ante and ex post measures of vulnerability. The latter are decomposed into aggregate and idiosyncratic risks and poverty components. Our decomposition shows that idiosyncratic risks account for the largest share, followed by poverty and aggregate risks. Despite some degree of risk-sharing, the landless or small farmers are vulnerable to idiosyncratic risks, forcing them to reduce consumption. Income-augmenting policies therefore must be combined with those that not only reduce aggregate and idiosyncratic risks but also build resilience against them.
Topic:
Demographics, Development, Economics, and Poverty
Political Geography:
India and Asia

55. 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

56. Vulnerability, Trust and Microcredit: The Case of China's Rural Poor

Author:
Calum G. Turvey and Rong Kong
Publication Date:
05-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper investigates the economic conditions of rural households in China. Historical survey data indicate that over 80 per cent of rural households earn less than 4,500 yuan in net disposable income each year, that for the vast majority of rural households disposable income is insufficient to meet food consumption needs, and that in terms of economic growth rural households are receiving an ever decreasing percentage of China's growing economy with rural household incomes being only 31 per cent of urban household income in 2004.
Topic:
Economics and Poverty
Political Geography:
China and Asia

57. Globalization and Formal Sector Migration in Brazil (Revised)

Author:
Marc-Andreas Muendler, Jennifer Pamela Poole, and Ernesto Aguayo-Tellez
Publication Date:
03-2008
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Comprehensive linked employer{employee data allow us to study the relationship between domestic formal sector migration in Brazil and globalization. Considerable worker flows in the formal labor market between 1997 and 2001 are directed toward lower income regions|the reverse flows of those often posited for informal labor markets. Estimation of the worker's multi-choice migration problem shows that previously unobserved employer covariates are significant predictors associated with migration flows. These results support the idea that globalization acts on internal migration through job stability at exporting establishments and employment opportunities at locations with a concentration of foreign owned establishments. A 1% increase in exporter employment predicts a 0.3% reduced probability of migration. A 1% increase in the concentration of foreign owned establishments at potential destinations is associated with a 0.2% increase in the migration rate.
Topic:
Economics, Globalization, Markets, Migration, and Labor Issues
Political Geography:
Latin America

58. Changes in the Distribution of Wealth in China, 1995-2002

Author:
Renwei Zhao and Shi Li
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper investigates some major changes in the wealth distribution in China using the data from two national household surveys conducted in 1995 and 2002. The surveys collected rich information on household wealth and its components, enabling a detailed analysis of changes in wealth distribution among Chinese households. Our analysis indicates that the wealth distribution in China as a whole became much more unequal in 2002 than it was in 1995. The housing reform, in which public apartments were sold to urban households at extremely low prices, has accelerated the accumulation of wealth among urban households on the one hand, and widened the wealth gap between urban and rural areas on the other.
Topic:
Demographics, Development, and Economics
Political Geography:
China and Asia

59. Regional Income Inequality in Rural China, 1985-2002: Trends, Causes and Policy Implications

Author:
Guanghua Wan
Publication Date:
01-2007
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper depicts the trend of regional inequality in rural China for the period 1985- 2002. The total inequality is decomposed into the so-called within- and between components when China is divided into three regional belts (east, central and west). A regression-based accounting framework is then used to explore root sources of the rising inequality. Policy implications are discussed.
Topic:
Demographics, Development, and Economics
Political Geography:
China and Asia

60. The Significance of Transport Costs in Africa

Author:
Wim Naudé and Marianne Matthee
Publication Date:
08-2007
Content Type:
Policy Brief
Institution:
United Nations University
Abstract:
The success of Africa's exports, as well as its spatial development, depends on lowering transport costs. In this Policy Brief, we address a number of pertinent questions on transport costs in Africa, such as 'what are transport costs?', 'do transport costs matter for trade?', 'how important are transport costs in practice?', and 'why are Africa's transport costs so high?' We present a case study of the firm location decisions of exporters in South Africa to illustrate the significance in particular of domestic transport costs for manufactured exports. The message from this Policy Brief is that Africa's international transport costs are significantly higher than that of other regions, and its domestic transport costs could be just as significant. Moreover we show how domestic transport costs influence the location, the quantity, and the diversity of manufactured exports. Various policy options to reduce transport costs in Africa are discussed.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
Africa