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  • Author: Salvatore Capasso
  • Publication Date: 09-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Since the 1990s economists have devoted considerable attention to the study of the relationship between financial markets development and economic growth. In particular, the emergence of stock markets with economic development is an intriguing and interesting aspect of such a relationship, and yet relatively unexplored. This paper examines the most recent findings in the theoretical and empirical literature trying to determine the rationale behind the development of stock markets along the path of growth and the nature of the interrelationship between real and financial variables.
  • Topic: Development, Economics, Emerging Markets, Markets
  • Author: André Mach, Thomas David
  • Publication Date: 09-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This research paper discusses the role of institutions in the rapid growth and successful international integration of Switzerland during the late nineteenth and early twentieth century. In analysing the emergence and consolidation of the institutions whose existence was crucial, the paper looks both at the political institutions that managed conflicts and promoted cooperation between private and public actors and the economic institutions that, on the one hand, compensated the groups that fell behind in the developmental process (e.g., agricultural subsidies, high tolerance for domestic cartels, tariffs for some industries, institutions for labour representation) and, on the other hand, enhanced productivity. In addition, the absence of some institutions such as a patent law and an independent central bank was also crucial in the Swiss case, even though these two institutions are regarded as pre-requisites of development by today's economic orthodoxy. The paper concludes by drawing lessons for today's developing countries.
  • Topic: International Relations, Development, Economics
  • Political Geography: Europe, Switzerland
  • Author: Mina Baliamoune-Lutz
  • Publication Date: 09-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Using a vector error-correction model, I explore the short-run dynamics and long-run linkages between financial reform and the mobilization of domestic saving in Morocco. In the short run, financial depth (volume of intermediation) is shown to have a positive influence on private saving, while increases in real interest rates have a negative impact. The effectiveness of financial intermediation does not seem to have a direct effect on saving but has a significant influence on the volume of intermediation. In the long run, savings have a stable relationship with financial reform but the influence of interest rates remains negative, implying that the income effect dominates in the long run as well.
  • Topic: Development, Economics
  • Political Geography: Africa, Morocco
  • Author: Zhicheng Liang
  • Publication Date: 09-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Financial development can exert a significant influence on the distribution of income. In this paper, using Chinese provincial data over the period of 1991-2000 and applying the generalized method of moment (GMM) techniques, we investigate the relationship between finance and inequality in rural China by testing alternative existing theories concerning the finance-inequality nexus. A negative and linear relationship between finance and inequality is found in our estimations. The empirical results show that financial development significantly reduces income inequality in post-reform rural China.
  • Topic: Demographics, Development, Economics
  • Political Geography: China, Asia
  • Author: Xiaobo Zhang
  • Publication Date: 09-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: China's current fiscal system is largely decentralized while its governance structure is rather centralized with strong top-down mandates and a homogenous governance structure. Due to large differences in initial economic structures and revenue bases, the implicit tax rate and fiscal burdens to support the functioning of local government vary significantly across jurisdictions. Regions initially endowed with a broader nonfarm tax base do not need to rely heavily on preexisting or new firms to finance public goods provision, thereby creating a healthy investment environment for the nonfarm sector to grow. In contrast, regions with agriculture as the major economic activity have little resources left for public investment after paying the expenses of bureaucracy. Consequently, differences in economic structures and fiscal burdens may translate into a widening regional gap.
  • Topic: Development, Economics, Politics
  • Political Geography: China, Asia
  • Author: Prasanta K. Pattanaik, Craig Gundersen, Indranil Dutta
  • Publication Date: 08-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Food insecurity and hunger have traditionally been measured by aggregate food supplies or by variables correlated with food insecurity. Because these measures often poorly reflect individuals' true deprivation, economists have turned to surveys with direct questions about food insecurity. Using these surveys, households have then been classified into broad categories, a classification system which ignores the richness of the multiple questions. In this paper, we propose food insecurity measures, along the lines of the well established poverty measures, which incorporates this richness and allow us to reflect the depth and severity, in addition to the incidence, of food insecurity. Using these indices, we calculate the extent of food insecurity and hunger in the United States. Along with giving a richer picture of food insecurity in the US, these food insecurity measures demonstrates that the ordering of various demographic categories differs depends on the choice of measure.
  • Topic: Civil Society, Economics, Human Welfare, Poverty
  • Political Geography: United States
  • Author: Patrick Honohan
  • Publication Date: 08-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Systematic information on household financial asset holdings in developing countries is very sparse; we review some available data and current policy debates. Although financial asset holdings by households are highly concentrated, deeper financial systems are correlated with improved income distribution. For low-income countries, the relevant question for poor households is not how much financial assets they have, but whether they have any access to financial products at all. Building on and synthesizing disparate data collection efforts by others, we produce new estimates of access percentages for over 150 countries. Across countries, access is negatively correlated with poverty rates, but the correlation is not a robust one, thus the supposed anti-poverty potential of financial access remains econometrically elusive. Despite policy focus on the value of credit instruments, it is deposit products that tend to be the first to be used as prosperity increases, before more sophisticated savings products and borrowing.
  • Topic: Civil Society, Development, Economics, Poverty
  • Author: Zhicheng Liang
  • Publication Date: 08-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Deepening financial development and rapid economic growth in China have been accompanied by widening income disparity between the coastal and inland regions. In this paper, by employing panel dataset for 29 Chinese provinces over the period of 1990-2001 and applying the generalized method of moment (GMM) techniques, we examine the impacts of financial development on China's growth performance. Our empirical results show that financial development significantly promotes economic growth in coastal regions but not in the inland regions; the weak finance-growth nexus in inland provinces may aggravate China's regional disparities.
  • Topic: Conflict Resolution, Development, Economics
  • Political Geography: China, Asia
  • Author: Geoffrey J.D. Hewings, Dong Guo, Patricio Aroca
  • Publication Date: 08-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: The purpose of this paper is to examine the convergence process in China by taking into account the spatial interaction between factors. The paper shows that there has been a dramatic increase in the spatial dependence of China's per capita GDP in the last 20 years. The consequence of space plays an important role, which is reflected in the influence of a neighbour's condition on the mobility of a province's income distribution from one category to another. The dynamics of the process showed evidence that China's distribution has gone from one of convergence to stratification, and from stratification to polarization.
  • Topic: Demographics, Development, Economics
  • Political Geography: China, Asia
  • Author: Machiko Nissanke, Ernest Aryeetey
  • Publication Date: 08-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: The paper examines the source of financial market fragmentation in sub-Saharan Africa in the framework of institutional economics. Based on fieldwork data from Ghana, Malawi, Nigeria, and Tanzania, it analyses financial risk management, the transaction costs for loan screening and monitoring, and contract enforcement. It shows how, faced with various institutional constraints, the range of clientele selected by formal and informal lenders becomes both narrow and at the extreme market-ends. It evaluates the prevailing state of managing risks for market structure, and binding institutional constraints for market transformation and deepening in sub-Saharan Africa.
  • Topic: Development, Economics, Markets
  • Political Geography: Africa, Tanzania, Nigeria, Ghana, Malawi
  • Author: Robert Lensink, 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, International Trade and Finance
  • Political Geography: Vietnam, Southeast Asia
  • Author: Mingming Zhou, 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, International Trade and Finance
  • Political Geography: China, Asia
  • Author: Bassam A. Fattouh, 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, Markets
  • Political Geography: Asia, South Korea, Korea
  • Author: Nelson H. Barbosa-Filho, José A.P. de Souza, Leondardo Burlamaqui
  • Publication Date: 08-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper seeks to explain the dynamics of Brazilian industrial catch-up in the last 60 years by discussing its background institutional conditions as well as its main macroeconomic features. After a brief introduction, the second section describes how after the institutional innovations introduced during the Vargas' and Kubitschek's administrations, a Brazilian version of the Developmental State was created, releasing the growth potential of the economy during the 1950s. The third section analyses the inflationary crisis and institutional inertia of the mid-1960s, and its solution through the introduction of a new of wave of institutional innovations and conflict management devices, which lead to the Brazilian growth miracle, until the debt crisis of early 1980s signaled its end. The fourth section analyses why the financial crisis, coupled with ineffective institutional changes and unsuccessful macroeconomic stabilization plans lead growth to a halt. It also includes an analysis of the pro-market reforms from the early 1990s onwards. The fifth section concludes the paper offering a brief sketch on how the analytical narrative fits the conceptual framework within which it was performed.
  • Topic: Conflict Resolution, Development, Economics
  • Political Geography: Brazil, South America
  • Author: Sonia Bhalotra
  • Publication Date: 07-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper investigates the extent to which the decline in child mortality over the last three decades can be attributed to economic growth. In doing this, it exploits the considerable variation in growth over this period, across states and over time. The analysis is able to condition upon a number of economic and demographic variables. The estimates are used to produce a crude estimate of the rate of economic growth that would be necessary to achieve the Millennium Development Goal of reducing the under-5 mortality by two-thirds, from its level in 1990, by the year 2015. The main conclusion is that, while growth does have a significant impact on mortality risk, growth alone cannot be relied upon to achieve the goal.
  • Topic: Civil Society, Economics, Human Welfare
  • Political Geography: India
  • Author: Eric S. Reinert
  • Publication Date: 07-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper argues for an 'ancient' institutional school, predating Thorstein Veblen's 'old' institutionalism. In this view, going back as far as the thirteenth century, institutions tended to be seen as specific to a mode of production. Here both institutions and development itself are context-specific and activity-specific. Much clearer than today the arrows of causality of economic development go from the mode of production to the institutional setting, not vice versa. In order to understand development, institutions can also usefully be divided into Hayekian institutions that facilitate equilibrium and Schumpeterian institutions that enable the dynamics of development and structural change.
  • Topic: Development, Economics, Education
  • Author: Patrick Karl O'Brien
  • Publication Date: 07-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: New institutional economics lacks a theory of state formation which could help us to deal with the mega question of why some states became more efficient than others at establishing and and sustaining institutions. Some kind of middle range theory could be formulated based upon historical case studies. This paper considers the case of Britain and as its title suggests degrades the myth of the United Kingdom as the paradigmn example of liberalism and laisser faire. In making its precocious transition to and industrial market economy the kingom's history is best represented as a case of successful mercantilism.
  • Topic: Development, Economics, Sovereignty
  • Political Geography: Britain, United Kingdom, Europe
  • Author: Julius Kiiza
  • Publication Date: 07-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper examines the relationship between institution building and economic performance in Mauritius, Botswana and Uganda. The rationale for comparing these cases is simple. While the three have been super-economic stars in their own right, they have achieved substantially different outcomes. Mauritius has achieved Asia-type rapid growth, backed by the structural transformation of the economy from colonial commodity production (sugar) to postcolonial higher value-added industrial and information outcomes. Botswana has delivered rapid and sustained growth with no structural economic transformation. Uganda has attained rapid growth for a shorter postcolonial period (since 1992) and with no structural transformation. This paper contends that these cross-national differences largely arise from the presence of developmental nationalism plus Weberian bureaucracies in Mauritius and Botswana, and their absence in Uganda.
  • Topic: Development, Economics, Nationalism
  • Political Geography: Uganda, Africa, Mauritius, Botswana
  • Author: William Lazonick
  • Publication Date: 07-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: The notion that good corporate governance means maximizing shareholder value derives from the neoclassical theory of the market economy. I explain why this perspective is highly problematic for understanding the operation and performance of the business corporation and hence the institutions that, for the sake of economic development, should govern it. The main problem is that the market-economy perspective cannot comprehend the process of innovation, including the role of the business corporation. I construct a theory of the innovating firm that, when embedded in comparative-historical analysis, provides a basis for analyzing the relation between corporate governance institutions and economic development.
  • Topic: Development, Economics, Government, Markets
  • 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, International Trade and Finance
  • Political Geography: Australia/Pacific, Solomon Islands, Papua, Guinea, Cook Islands, Samoa, Tonga, Vanuatu, Fiji