Evaluating technical assistance

Despite a quarter of a century of experience and billions of dollars invested, we have very little hard information as to what works and what does not in the field of technical assistance. After a brief review of the institutional factors that have prevented ex post project evaluation, case histories of a sample of 11 UNDP technical cooperation ventures are given. A methodology for quantifying costs and benefits is presented and applied to the sample. The mean benefit—cost ratio is modest, but the dispersion is high—suggesting that there are indeed valuable lessons to be learned from this type of research. The latter are set forth in the concluding section of the paper in the form of tentative hypotheses about choice of activity, project design and project management.     

Removing the “Hats of Poverty”: Effects of ending the national poverty county program on fiscal expenditures

This paper investigates the effect of the cancellation of China's program of “national poverty counties”—a place-based policy—on county-level fiscal expenditures. Our difference-in-differences results indicate that the cancellation reduces the county fiscal expenditure-to-GDP ratio by an average of 3.78%. To support a causal interpretation of these findings, we provide two plausible explanations, the reverse flypaper effect and the active/passive waste effect. Our findings survive the consideration of selection bias, omitted-variable bias, and spatial correlation. Policy implications of our findings are also discussed.     

The Impact of Corruption on Investment: Predictability Matters

This paper argues that it is not only level of corruption that affects investment but also the nature of corruption. Corruption regimes that are more predictable—in the sense that those seeking favors from government do obtain those favors—have less negative impact on investment than those that are less predictable. Using the data collected by World Bank in preparing the World Development Report of 1997, we provide empirical support for the conjecture.     

Development studies: Findings,frontiers and fights

Very low incomes and relatively low mobility in LDCs limit the scope for “lessons” for DCs. Three areas remain, however: analogues, interactions, and above all conceptual transfers. Development studies have moved away from adding up individual responses to change, towards examining interactions that produce systemic outcomes. Examples are analyzed from the evolving debates about (a) peasant response, as related to tenure and risk; (b) farm systems vs. village systems analysis; (c) impact of the “green revolution” on the poor; (d) unemployment. Development studies show analysts of developed countries—especially in case (d) above—that adding-up approaches, ignoring interactions and total systems, produce very misleading results.     

Patrilineality,fertility, and women's income: Evidence from family lineage in China

This study investigates how traditional patrilineal family institution influences women's income through fertility behavior by offering evidence from family lineage (zongzu) in China. We hypothesize that family with strong lineage—proxied by owning genealogy—has a negative effect on women's income through the son-targeting fertility behavior. Using a difference-in-differences strategy, this study confirms the hypothesis. Relative to the women whose first child is a son, the women marring into families owning genealogy indeed have more children and lower income, if their first child is a daughter. In contrast, such finding does not hold for the male sample. Preliminary evidence suggests that shorter work time can explain the findings.     

Inter-farm,inter-regional and farm-non-farm income distribution: The impact of the new cereal variaties

HYVs affect distinct aspects of income distribution. Among farmers, the technology on balance most readily benefits the small; but public policy - on prices, credit, irrigation, nutrients, mechanisation, crop-breeding - has skewed gains towards larger owners. Between landed and landless the latter gain, as HYVs — unless subverted by inappropriate mechanization — raise and smooth wages and employment. The evidence on rich and poor regions lightens the prevailing gloom; and agronomic features of newer HYVs fit them well for some long-neglected, ill-watered areas. As for city and country, urban price policies, etc., have diverted some gains from HYVs towards less-poor urban consumers (and their employers). However, natural scientists are sufficiently independent of policy-makers to produce — with proper socio-economic support - research that steers benefits from HYVs towards the natural gainers from more food, labour-intensively grown: the rural poor.     

Evaluating participation in African monetary unions: A statistical analysis of the CFA Zones

Thirteen African nations are engaged in two monetary unions with France, often referred to as the CFA Zone. Despite the acknowledged benefits of Zone membership — a convertible currency, pooled resources and greater monetary and fiscal “discipline” — several observers have questioned whether particular aspects of the Zone such as the lack of autonomy of the two Central Banks and the surrender of the exchange rate as a policy instrument have impeded its members' growth. This paper addresses that question by testing whether CFA Zone countries had different GNP growth rates from selected “comparator” countries during 1960–1982. Results show that CFA countries grew significantly faster than comparator Sub-Saharan African countries but usually slower, and often significantly so, than the whole sample of developing countries. When the comparison is made by subperiod (before and after 1973), CFA countries' performance vis-à-vis that of their comparators improved during the 1973–1982 period, casting further doubt on the claim that the monetary union is not functioning adequately.     

MNCs and Sustainable Business Practice: The Case of the Colombian and Peruvian Petroleum Industries

Multinational corporations (MNCs) play an increasingly important role in the economic development strategies of many less developed countries (LDCs). At the same time the sustainable development of LDCs requires economic growth to be accompanied by environmental protection and greater social equity. This paper contributes to the literature concerned with MNCs' contribution to the sustainable development of LDCs. The concept of sustainable business practice (SBP) is proposed as relevant to understanding MNCs' contribution, and an analytical framework incorporating the content, context, and process of SBP is used to examine what SBP might consist of, as well as those conditions important for its widespread adoption. Results from a study examining the Colombian and Peruvian petroleum industries show that despite important contributions by MNCs to sustainable development, SBP is not yet widespread. The study also shows the importance of external institutional pressures—principally in the form of local legislation—for MNCs' contribution to the sustainable development of LDCs. Finally the paper shows how the process of change toward more SBP is closely linked to the external context in which MNCs operate, the characteristics of their internal context, and the internal and external processes linking these contexts.     

U.S. Distribution Entry Strategy of Japanese Manufacturing Firms: The Role of Keiretsu

This article identifies the determinants of three modes of foreign market entry into distribution activities—arm's-length contracts, joint ventures, and wholly owned subsidiaries—and assesses the impact of unique institutional structures on the decision. We examine 310 Japanese manufacturers' entries into the U.S. market and find evidence that keirestu affiliation significantly increases the likelihood that contracts are chosen, suggesting common keiretsu membership by manufacturers and general trading companies mitigates agency problems in contractual delegation of foreign distribution activities. Regading the choice between joint ventures and wholly owned subsidiaries, relaxed capital and information constraints increase the likelihood that keiretsu firms establish wholly owned subsidiaries. J. Japan. Int. Econ., March 2000, 14(1), pp. 43–72. Anderson Graduate School of Management, University of California, 110 Westwood Plaza, Los Angeles, California 90095-1481; A. T. Kearney, 222 West Adams, Chicago, Illinois 60606 Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E23, L22, L14.     

Of markets,might and mullahs: a case for equity,pluralism and tolerance in development

This paper tries to confront the ‘puzzlement’ of the development profession regarding the ‘best’ alternative strategies aimed at increasing employment, reducing poverty and promoting equity at the same time as fostering economic growth — and the ‘advocacy’ role that should or should not be played by that profession. The author argues that the issue lies in achieving a workable ‘meaning’ of development and then moving on to the moral ‘questions’ of value judgments and to the specific ‘problems’ that can be dealt with by science and social science. He suggests that a possible meaning of development is ‘to create more options for more people’ — ‘to achieve that the greatest number of people have the greatest number of options.’ He discusses the need for improving ‘life chances’ and considers the development policies which may or may not assist in this process. He tries to tie together conceptually the ideas of power and social change, consensus and conflict. Also in this context, the roles of participation, organization and mobilization are explored, especially their impact on different political systems. The analysis concludes with a plea for social, cultural and political pluralism — and thus, a commitment to tolerance. The author argues that these goals should be addressed by the development community without the hesitation sometimes attached to ‘protection of expertise’.     

Cross-Country Private Saving Heterogeneity and Culture

Motivated by the dominant role of cross-country heterogeneity in private saving in the creation of Eurozone imbalances over the past decade, we empirically investigate the determinants of private saving for a sample of 30 OECD countries over the period 1990–2010. In addition to standard macroeconomic variables, we include three country-specific cultural indicators, derived from the World and European Value Surveys. We find these three variables—thrift, trust and religiosity—to significantly contribute to the explanation of cross country saving heterogeneity both for the OECD group at large and for the Eurozone countries separately.     

Microeconomic adjustments in Chile during 1977–1981: The importance of being a grupo

This paper uses the financial statements of industrial firms to provide an integrated firm level view of the changes in the Chilean economy during 1977–1981. Both real side and financial shocks had major effects on the performance of some types of firms. Exportable goods producers did relatively poorly in ‘real’ activities, for reasons probably tied to Chile's real prolonged exchange rate appreciation. Import-competing firms that began the period with high protection did even worse, apparently reflecting the larger change in their output prices as protection was dismantled. The reforms thus shifted demand away from industries least in line with the country's comparative advantage, but they also hurt exportables — the very sector authorities intended to promote.On the financial side, the highly positive real cost of peso borrowing reduced industrial profits considerably. A handful of powerful conglomerates (grupos) generated large (but presumably unrealized) capital gains by investing in the securities of related enterprises. Such activities allowed them to offset relatively poor returns on real operations; and their ownership of the country's major banks allowed them to consolidate control of a large volume of assets with debt finance. These two results explain why the grupos were suddenly in considerable financial difficulty when the Chilean boom ended in 1982.     

A note on poverty and gender in Spain

This article focuses on the gender distribution of poverty in Spain. Our basic objective is determining if poverty is equally shared between men and women. The source of the data is the Encuesta Básica de Presupuestos Familiares 1990–1991. Having analyzed three poverty rates—the head count ratio, the income gap ratio and the normalized income gap ratio, with three poverty lines (25%, 40%, and 50% of the mean) and two income variables (OECD equivalent household income and per capita household income)—it cannot be said that the women are “over-represented” amongst the poor in Spain in 1991.     

Intergovernmental competition for donations: The case of the Furusato Nozei program in Japan

This paper shows that municipalities compete excessively for donations under a unique program called Furusato Nozei (Tax payment to hometown) in Japan. Under the program, people make donations to their favorite municipalities and municipalities that have received donations give reciprocal gifts in return. This causes governments to compete for donations by setting “return rates” — the value of a gift as a percentage of the donation received. Our estimates show that, in the most likely case, this competition reduces net revenue by at least 7.5% compared to when the municipalities do not compete for donations.     

Population dynamics and economic growth in China

This paper focuses on two major elements of China's population dynamics—the rising proportion of workers in the population and the shift of rural workers from agriculture into industry and services—in a provincial-level analysis of per capita income and productivity growth during the last three decades. We measure the ‘mechanical’ contributions of these dynamics to per capita income as revealed by growth decompositions, before assessing the determinants of per capita income and productivity growth in a series of regressions that include the growth of the working-age to total population (WAP) ratio and a measure of sectoral employment change. Our results indicate that sectoral change has made a significant positive contribution to both per capita income growth and aggregate productivity growth, stemming from its positive impact on agricultural productivity growth—as predicted by the Lewisian dual economy model. However, the negative impact of sectoral change on productivity growth in the industrial and service sectors, combined with the negative impact of growth of the WAP ratio on both per capita income and aggregate productivity growth, suggests that the benefits of China's population dynamics during the last three decades have been overstated.     

Analyzing and managing exchange-rate crises

This paper reviews theoretical work on exchange-rate crises and discusses recent attempts to reduce the risk of crises and manage them more effectively. Models usually used to explain crises—those in which they are due to bad policies and those in which they are due to self-fulfilling speculative attacks—do not often explain the timing of crises. Bad policies often play a role, but the onset of a crisis is frequently due to a political shock that leads market participants to revise their views about a government's ability to improve its policies. For this reason, efforts of the IMF to promote the publication of more economic data may not be very helpful in preventing crises. Turning to crisis management, the paper criticizes plans like those of Jeffrey Sachs, which would give soveregn debtors protection resembling that afforded by bankruptcy law. It favors instead the pragmatic approach developed in the report recently endorsed by the major industrial countries.     

Dependence is dead,long live dependence and the class struggle: An answer to critics

The philosophers have only interpreted the world in various ways; the point, however, is to change it. —Karl Marx, Theses on Feurbach.The mark of an important contribution, whether in the hard or the social sciences, is not that it reveals some eternal truth. It is, rather, that existing knowledge and analysis are put together in new ways, raising questions and offering conclusions which allow and force friends and enemies alike to push their own research and analysis into different areas. —Doug Dowd, refering to C. Wright Mills.For social scientist it is a sobering and useful exercise in self-understanding to attempt to see clearly how the direction of our scientific exertions, particularly in economics, is conditioned by the society in which we live, and most directly by the political climate (which, in turn, is related to all other changes in society). Rarely if ever, has the development of economics by its own force blazed the way to new perspectives. The cue to the continual reorientation of our work has normally come from the sphere of politics. Responding to the cue, students turn to research on issues that have attained political importance … So it has always been. The major recasting of economic thought .... were all responses to changing political conditions and opportunities. —Gunnar Myrdal, in Asian Drama.     

An Austrian Foundation for Microeconomic Principles

Teaching Microeconomic Principles well, a blend of good pedagogy and good economics, is the professional obligation of many economists. Since such courses are conventionally grounded in neoclassical theory, professors who embrace the theoretical perspective of the Austrian School may seem to confront a dilemma unfamiliar to other teachers: Teach the course well, or teach good economics? The thesis of this paper is, simply, that there is no such conflict. Incorporating properly chosen attributes of Austrian theory makes one’s Microeconomic Principles course better. This conclusion would be rejected by those who identify Austrian economics as adding complex disequilibrium propositions to an equilibrium analysis indistinguishable from that of neoclassical theory, or who think it dismisses equilibrium entirely, but both positions misunderstand the School’s nature. Among Austrian theoretical attributes that enrich a Microeconomic Principles course are methodological individualism, ordinal subjective utility and cost, future orientation, entrepreneurship, a process view of competition, and consideration for market participants’ knowledge. In this paper these characteristics—many ostensibly shared, but not consistently respected, by neoclassical theory—are applied by developing conventional smooth supply and demand curves, and their interaction in markets, from individuals’ value comparisons of discrete units. The paper concludes that an Austrian foundation is simultaneously more theoretically accurate and closer to the student’s everyday life, a combination that means a better Principles course.     

Real Interest Rate and Labor Market Performance around the World

This article studies the effects of the real interest rate on labor market performance. Using a much larger sample of countries and more indicators of labor market performance than have been used in previous articles, it finds that a rise in the real interest rate increases the unemployment rate, raises the share of long‐term unemployed, and reduces the employment rate. The magnitude of these effects is very small in the short run but much more pronounced—though still fairly small—in the long run. Young people are disproportionately affected. The results are robust to variations in specification.     

The political economy of income distribution in South Korea: The impact of the state's industrialization policies

A number of previous studies of economic growth and income distribution in South Korea, based largely on 1960s data, concluded that South Korea was an exception to Kuznets' ‘inverse U-pattern’ of income inequality. Also, it was regarded as an exception to the usual negative consequences predicted by dependency theory for an economy so dependent on foreign capital and world markets. This author presents more recent data — for the 1970s and early 1980s — in order to support his claim that the trend toward income equality that appeared in the 1960s was reversed in the 1970s. The author develops a thesis that stresses the role of the state in shaping the Korean political economy. He argues that it has been the strong South Korean developmentalist state in firm control of both domestic and foreign capital and its export-oriented industrialization policies that have been the principal determinant of the pattern of income distribution. He contests the usual explanation related to the level of economic development or external dependency per se.