On factor proportions as a guide to the future composition of developing country exports

A previously widely quoted study by Hal Lary (Imports of Manufactures from: Less Developed Countries) concluded that labour intensity should, under the postulates of the factor-proportions model, be useful for anticipating the future composition of LDC exports. In this paper, we empirically evaluate the utility of labour intensity as such a guide. As a first test recent changes in developing countries' market shares for Lary's labour intensive products are compared with those for other items. With few exceptions, the export performance for labour intensive goods was superior. Overall, the LDCs increased their market share for these products in spite of a generally declining competitive position in world trade. Separate (correlation) tests indicate that a direct relation exists between the degree of labour intensity of individual products and changes in developing countries' market shares. That is, the LDCs made the greatest gains in the most labour intensive products.Since labour intensity was shown to provide a guide to changes in developing country exports, we examined its implications for the future. Specifically, the National Bureau's indices of value added per employee were updated to gain insights into the probable composition of LDC trade in the 1980s. The results suggest that many of the products previously identified as being labour intensive, and therefore suitable for production and export by developing countries, would also be classified as likely LDC export items on the basis of 1976 production data. In fact, textiles, footwear, and furniture became relatively more labour intensive which suggests that the LDCs will put increased competitive pressure on developed country producers of these products over the next decade. However, our statistics also show that some miscellaneous manufactures and processed foods became more capital intensive. This indicates that LDCs may be losing their competitive edge in these products and are less likely to make sizeable market share gains in the future.     

Appreciating depreciation: physical capital depreciation in a developing country

Little is known about the nature of physical capital in the less-developed countries. This article addresses the lack of empirical study related to depreciation rates, which are a neglected but important ingredient of both micro and macro models and empirical analyses. Based on rich establishment-level survey data, and using a straightforward econometric approach, I estimate depreciation rates of physical capital invested in manufacturing enterprises in Indonesia. I estimate the depreciation rate to be between 8 and 14 %. These numbers compare roughly to published estimates for the U.S. I then investigate hypotheses related to heterogeneity of depreciation rates across different types of firms. Finally, I test the hypothesis that financially constrained firms use less durable investment goods.     

Capital-labor substitution in a developing country: The case of Greece

The present paper reports an attempt to estimate the elasticity of capital-labor substitution, and the rate of technical change in the manufacturing sector of the Greek economy. It is found that the elasticity of substitution exceeds unity, and the annual rate of neutral technical change is e^0.05 = 1.05. It is concluded that because of the case of capital-labor substitution the existing labor shortages should not impair the further development of the economy.     

论城市的城市化

我国城市化中的问题不仅表现为城市总体数量相对不足,而且表现为现有城市发展质量不高,因此,中国的城市化发展战略应该包括“农村城市化”和“城市城市化”两个内容,以“农村城市化”替代“城市城市化”,并排斥农民进入大中城市的做法,从理论上说缺乏充足的依据,在实践中则隐含基众多的矛盾和问题,在经济全球化背景下,中国城市应积极参与世界城市体系建设,同时要转变城市政府职能,并更多地运用市场经济手段管理城市。     

Income tax incidence in a developing country: The case of Greece

The objective of this study is to throw some light on the question of direct tax incidence in a developing country like Greece. A two-sector model is built up which emphasises a number of duality aspects. In that respect the model deviates from the standard Harberger type models. Appropriate shifting formulas are then constructed. Making use of a set of plausible parameter values our findings suggest that the taxed input may avoid some portion of the tax burden even under a perfectly competitive environment.     

Trade facilitation and country size

It is argued that compared with large countries, small countries rely more on trade and therefore are more likely to adopt liberal trading policies. The present paper extends this idea beyond the conventional trade openness measures by analyzing the relationship between country size and the number of documents required to export and import, a measure of trade facilitation. Three important results follow. First, trade facilitation does improve as country size becomes smaller; that is, small countries perform better than large countries in terms of trade facilitation. Second, the relationship between country size and trade facilitation is nonlinear, much stronger for the relatively small than the large countries. Third, contrary to what existing studies might suggest, the relationship between country size and trade facilitation does not appear to be driven by the fact that small countries trade more as a proportion of their gross domestic product than the large countries.     

Technological forecasting: Applicability,relevance and future crisis analysis in a developing country

The relevance of technological forecasting for a developing country with examples from the Indian scene is discussed. The applicability of some of the techniques of technological forecasting under Indian conditions is examined. It is shown that certain parameters in India follow systematic semilogarithmic and substitution trends, as in the case of developed countries, and these trends may be extrapolated into the future with some confidence.Using mainly extrapolation technique, a future crisis analysis for the Indian situation up to the year 2000 is presented. Steps have been suggested to avert the impending crisis. These include (1) determination of future supply and demand positions of various basic materials; (2) conducting Delphi exercises; (3) selection of the best alternatives in view of resource constraints using economic analysis; (4) wide dissemination of the results to make the decisionmakers and scientists aware of these possible solutions; (5) framing suitable policies and executing them, starting now, so that the desired future becomes a reality.     

Openness,country size,and government size: Additional evidence from a large cross-country panel

A body of influential research has suggested that there is a negative association between country size and government size and between country size and openness, and these may account for the positive association between openness and government size. Estimation of several models from 41-year panel data for over 150 countries indicates that while pooled OLS estimates support the foregoing scenario, when cross-country heterogeneity is taken into consideration through the fixed-effects format, there is little evidence of a negative association of country size with either government size or openness. Therefore, it does not seem likely that positive association between openness and government size arises due to the mediating role of country size.     

Capital-labor substitution in a developing country: the case of Greece: A note

Estimates of the elasticity of substitution between capital and labor in the manufacturing sector of the Greek economy are obtained by using a cost-function approach and are compared with the results of previous research. Such previous results show the elasticity of substitution to be significantly higher than one, while our results, using the same time-series data for 17 two-digit manufacturing sectors for the period 1958–1973, give much lower estimates.     

Corporate tax policy and heterogeneous firm innovation: Evidence from a developing country

This paper adds to the literature by identifying the causality of corporate tax policy on firm innovation in a developing country. We exploit the China’s 2006 corporate income tax base reform to integrate the tax system between foreign-invested and state/collective-controlled firms as a natural experiment. The difference-in-differences strategy documents a positive effect of corporate tax deduction on firm patenting. The effect is particularly significant if a firm is of larger size or locates in eastern provinces. We also examine possible channels behind the findings, including changes in R&D and capital investment, intangible assets, financial constraints, and new product sales.     

Quantifying the impact of services liberalization in a developing country

We compare goods versus services liberalization in terms of welfare, outputs, and factor prices in Tunisia using a CGE model with multiple products, services and trading partners. Restraints on services trade involve both cross-border supply (tariff-equivalent price wedges) and on foreign ownership (monopoly-rent distortions and inefficiency costs). Goods-trade liberalization yields a modest gain in aggregate welfare. Reducing service barriers generate relatively large welfare gains and low adjustment costs. Services liberalization increases economic activity in all sectors and raise the real returns to both capital and labor. The results point to the potential importance of deregulating services provision for economic development.     

Capturing the pharmaceutical value of biodiversity in a developing country

The conservation of biodiversity is increasingly being defined as a process made up of three components—saving, studying and sustainably using biodiversity. If the conservation of process is expanded to incorporate the need for both the protection of biodiversity—either in situ or ex situ—and the generation of valuable information about biodiversity, an important issue is the correct balance of investment in these two types of activities. This paper explores this issue by focusing on efforts in a developing country to capture the pharmaceutical potential of biodiversity and species information. A model of biodiversity investment choice is developed, and an analysis of royalty returns to effort in biodiversity protection, taxonomic information and the collection of biotic samples is conducted based on data from Costa Rica. The results suggest that although a country can be adequately compensated for its investment in the generation of taxonomic information, it is unlikely that pharmaceutical prospecting alone will cover the high opportunity costs of biodiversity protection.     

Dynamic gravity: endogenous country size and asset accumulation

Abstract Numerous gravity applications have resorted to panel data econometric techniques over the past decade. However, with the theory of gravity being so far only static, these estimations lack solid structural dynamic foundations. As a consequence, a consensus on a unified dynamic gravity estimation approach is yet to be reached. In this paper, (i) we build the theoretical foundations for a dynamic gravity model, (ii) we provide guidance for gravity‐type estimations with panel data and we consider applications, and (iii) we calibrate and simulate our model to compare its properties with those of the standard, static gravity setup.     

When does a developing country use new technologies?

We develop a model of optimal pattern of economic development that is first rooted in physical capital accumulation and then in technical progress. We study an economy where capital accumulation and innovative activity take place within a two sector model. The first sector produces a consumption good using physical capital and non skilled labor. Technological progress in the consumption sector is driven by the research activity that takes place in the second sector. Research activity which produces new technologies requires technological capital and skilled labor. New technologies induce an endogenous increase of the total factor productivity of the consumption sector. Physical and technological capital are not substitutable while skilled and non skilled labor may be substitutable. We show that under conditions about the adoption process of new technologies, the optimal strategy for a developing country consists in accumulating physical capital first; postponing the importation of technological capital to the second stage of development. This result is due to a threshold effect from which new technologies begin to have an impact on the productivity of the consumption sector. However, we show that once a certain level of wealth is reached, it becomes optimal for the economy to import technological capital to produce new technologies. The authors would like to thank the participants to the seminar of GREDEG, especially Richard Arena, Flora Bellone, Jean-Luc Gaffard and Jacques Ravix, and also the participants to a seminar at European University Institute. We are also grateful to the referees for their very thoughtful remarks and criticisms. Cuong Le Van started writing this joint paper with Olivier Bruno and Benoit Masquin in 2005, in GREDEG.     

Exchange rates,market structure and price-cost margins: evidence from a developing country

This paper analyses the sensitivity of firm performance to exchange rate fluctuations. In a two-country world, consisting of a developing domestic country and a developed foreign country, we show that this sensitivity is closely related with market structure and the share of imported inputs in total cost. When the share of imported inputs is low, depreciation leads to an increase in price cost margin. This increase intensifies in more competitive industries. When the imported input share is high, the price cost margin may decrease as a result of depreciation, and this effect becomes pronounced in more competitive industries. The empirical test where we used 3-digit Turkish Manufacturing industry data support most of the findings of our model.     

Capital-intensity biases in developing country technology choice

Under-employment in developing economies has been attributed to technological determinism or factor-price distortion. The present paper proposes a third view: biases towards capital- intensive techniques which stem from non-economic preferences on the part of engineers, designers, managers, and policy-makers. A fourth possible bias, consumer choice, is discussed and considered less significant. The paper emphasizes engineering biases based on the designers' maximization of ‘technical efficiency’ which is defined in a manner distinct from factor efficiency. Policy implications are that direct action to change attitudinal biases and stimulate development of labour-intensive techniques can contribute considerably to the optimal choice stimulus of corrected factor prices.     

Determinants of child mortality,health, and nutrition in a developing country

The authors investigate the determinants of child mortality and health and nutrition status in Nicaragua using economic models of household behavior. In particular, they examine regional differences by degree of urbanization. Various factors affecting child mortality are considered. The results indicate that "income is not an important factor, there is an inverse relation with number of siblings, and there are positive associations with calorie intake, schooling (except in the relatively low-income areas), the availability of refrigeration, and the quality of sewage systems."