THE SPEED OF STRUCTURAL CONVERGENCE IN THE MANUFACTURING INDUSTRIES OF NEWLY INDUSTRIALISING ECONOMIES

We seek to identify the determinants of the speed of convergence in the structures of manufacturing to their steady-state levels as developing economies become fully industrialised. Applying a two-stage sequential estimation procedure to data on three-digit manufacturing industries for 45 mostly middle-income countries, we find empirical support for the hypothesis that production efficiency is a major determinant of inter-branch output share adjustment. This finding applies to many but not all industries. One implication for latecomers is that industrial policy must aim at rapid diffusion of core technologies to facilitate the acquisition of industrial capabilities in a diversified basket of exportables.     

STABILIZATION POLICY, LEARNING-BY-DOING, AND ECONOMIC GROWTH

This paper shows that fiscal policy, when used for stabilizationpurposes, can have a positive effect on the economy's growth,on human capital accumulation, and on welfare. We introducestochastic productivity shocks into a model in which productivityis augmented through learning-by-doing If future benefits oflearning-by-doing are not fully internalized by workers, thenrecessions are periods in which opportunities for acquiringexperience are foregone. We identify configurations of disturbancesand other parameters for which a countercyclical policy maximizesgrowth and welfare.     

INSTITUTIONS,BANKING DEVELOPMENT,AND ECONOMIC GROWTH

Does the institutional environment affect the causal relationship between banking development and economic growth? In the theoretical section of this paper, we develop an endogenous growth model where the institutional environment is captured through two indicators: judicial system efficiency and easiness of informal trade. We show that an improvement in the institutional environment has two effects. First, it intensifies the causality direction from banking to economic growth through a reduction in defaulting loans. Second, it reduces the interest rate spread. In the empirical section of the paper, we find bidirectional causality when analyzing 22 Middle Eastern and North African countries over the period 1984–2004. The first causality, which runs from banking development to economic growth, is more intense in countries with more developed institutional environment. The second causality runs from economic growth to banking and indicates that a more developed economy has a more developed banking system.     

AN ANALYSIS OF ECONOMIC INFRASTRUCTURE INVESTMENT IN SOUTH AFRICA

This paper analyses long‐term trends in the development of South Africa's economic infrastructure and discusses their relationship with the country's long‐term economic growth. A database covering national accounts data, railways, roads, ports, air travel, phone lines and electricity was established for this purpose, and may facilitate further quantitative research. PSS (Pesaran, Shin and Smith, 1996, 2001) F‐tests are used to identify directions of association between economic infrastructure and economic growth. These indicate long‐run forcing relationships from public‐sector economic infrastructure investment and fixed capital stock to gross domestic product (GDP), from roads to GDP, and from GDP to a range of other types of infrastructure. There is also evidence of potential simultaneity between specific types of infrastructure and GDP. The evidence suggests three main findings. Firstly, the relationship between economic infrastructure and economic growth appears to run in both directions. Inadequate investment in infrastructure could create bottlenecks, and opportunities for promoting economic growth could be missed. Secondly, South Africa's stock of economic infrastructure has developed in phases. Policymakers should focus on choosing or encouraging the right type of infrastructure at the right time. Thirdly, the need for investment in economic infrastructure never goes away. The maintenance and expansion of infrastructure are important dimensions of supporting economic activity in a growing economy, provided that individual projects are chosen on the basis of appropriate cost‐benefit analyses.     

ECONOMIC GROWTH, INCOME AND HAPPINESS: AN EXPLORATORY STUDY

The pursuit of high economic growth is considered desirable as it generates an increase in a nation's wealth, income, employment and output. The rising income should enable consumers to purchase more goods and services, which in turn should result in enhanced utility and subjective happiness. Empirical studies suggest that higher income resulting from high rates of economic growth contribute to poverty alleviation and life satisfaction in low income countries. Higher income raises the happiness of the poor. In developed countries, higher income does not seem to buy higher happiness, once a threshold level of income is reached. This exploratory study seeks to examine the quantitative and qualitative sources of happiness. A higher absolute level of income is found to be significantly related to subjective happiness. Among the non-income factors, family togetherness, a good working environment and a higher level of education can contribute to making people happier. Happiness thus involves more than just economic growth and income.     

ECONOMIC GROWTH, CONVERGENCE CLUBS, AND THE ROLE OF FINANCIAL DEVELOPMENT

This paper aims to show and test the existence of a povertytrap linked to the development of the banking sector. Our theoreticalmodel exhibits multiple steady state equilibria due to a reciprocalexternality between the banking sector and the real sector.Growth in the real sector causes the financial market to expand,thereby increasing banking competition and efficiency. In return,the development of the banking sector raises the net yield onsavings and enhances capital accumulation and growth. The aimof our econometric tests is to check the existence of multiplesteady states associated with financial and educational development.     

BUDGETARY POLICIES, FOREIGN INDEBTEDNESS, THE STOCK MARKET, AND ECONOMIC GROWTH

This paper analyses a small open economy with overlapping generations,endogenous growth, and a risk premium on foreign debt. A balanced-budgetincrease in public consumption or a rise in government debtraises the ratio of foreign debt to domestic income and theinterest rate, but depresses economic growth. Supply-side policiesaimed at internalising production externalities boost foreignindebtedness, the interest rate, and economic growth. A higherglobal interest rate leads, if initial foreign indebtednessis not too large, to a lower foreign debt and, if a countryis dragged down by large levels of foreign debt, lower economicgrowth.     

MICRO AND SMALL ENTERPRISE GROWTH IN TURKEY: UNDER THE SHADOW OF FINANCIAL CRISIS

The present study analyzes the impacts of selected factors on the growth of micro and small enterprises (MSE) in Turkey. Using unique national field survey data on urban MSE that engage 1–49 persons, we present the determinants of MSE growth for the period between the start‐up of enterprises and the year 2000. We evaluate the impact of the financial crisis experienced in Turkey in 2001 on MSE. Detrimental effects of the crisis on MSE are clearly detected in our estimations. Some of the factors contributing to the growth of MSE lose their influence almost immediately during the crisis; indeed, the impact of some factors is reversed. Overall results reveal that there is much scope to design supportive policies for MSE to enable them to withstand the negative impacts of future crises, especially in emerging economies.     

FINANCIAL DEVELOPMENT,ECONOMIC EFFICIENCY,AND PRODUCTIVITY GROWTH: EVIDENCE FROM CHINA

Financial development might lead to productivity improvement in developing countries. In the present study, based on the Data Envelopment Analysis approach, we use the Malmquist index to measure China's total factor productivity change and its two components (i.e., efficiency change and technical progress). We find that China has recorded an increase in total factor productivity from 1993 to 2001, and that productivity growth was mostly attributed to technical progress, rather than to improvement in efficiency. Moreover, using panel dataset covering 29 Chinese provinces over the period from 1993 to 2001 and applying the Generalized Method of Moment system estimation, we investigate the impact of financial development on productivity growth in China. Empirical results show that, during this period, financial development has significantly contributed to China's productivity growth, mainly through its favorable effect on efficiency.     

COMPARISON OF THE SOCIALIST ECONOMIES IN CHINA AND KOREA

The socialist economies of the Far East, Mainland China and North Korea, started their economic development from the condition of colonial agricultural countries, so that the initial social reforms, especially Land Reform, are of extremely great significance for their development. In the socialist economies the reconstruction of their economies comes earlier than socialist industrialization, and, in particular, the agricultural co-operatives precede mechanization and electrification. The organized use of labour power as one of the productive forces becomes important and this seems characteristic of the Asian pattern of socialism. From such a viewpoint as this, the present author tries to compare the two economies.     

INVESTMENT AND GROWTH: PART 1: THE MAIN CONCEPTS AND THEIR IMPLICATIONS

‘Change is not made without inconvenience, even from worseto better.’(Richard Hooker, quoted by Samuel Johnson inthe Preface to the English Dictionary.)