On the design of international environmental agreements for identical and heterogeneous developing countries

I analyze the problem faced by an imperfectly informed supra-nationalgovernmental authority (SNGA) that wishes to design an InternationalEnvironmental Agreement (IEA). The SNGA cannot contract directlywith polluting firms in the developing countries (DCs), andit must deal with such firms through their governments. I findthat the transfers necessary to induce optimal behavior by governmentsand firms are sensitive to the timing of the underlying gameand to the existence of collusion. This analysis suggests thatIEAs are not doomed due to a monitoring and enforcement problemarising from national sovereignty. However, the success of IEAsis contingent on the funds available for environmental protection.     

Unlocking Productive Entrepreneurship in Africa's Least Developed Countries*

Abstract: In Africa's least developed countries (LDCs), escape from poverty and convergence to living standards of more advanced economies depends critically on structural transformation and the emergence of productive entrepreneurship that would accelerate growth and job creation. So far, however, subsistence agriculture has been the main source of employment in these countries, while a dynamic private sector in industry or high value‐added services has remained elusive. Utilizing the flow approach to labor markets, this paper complements the empirical literature and numerous surveys on small and medium enterprise (SME) constraints and develops a theoretical framework that examines the main obstacles to entrepreneurship in Africa's LDCs. The paper posits that given the persistent frictions in product and labor markets as well as skill shortages that characterize these economies, development of productive entrepreneurship cannot be left to markets alone. The policy analysis suggests that the state has an important role to play. Well‐targeted government interventions including training of potential entrepreneurs and workers can help to establish more modern and highly productive SME clusters that Africa's LDCs need.     

Does global value chain participation improve firm productivity? A study of selected ASEAN developing countries

This paper examines the impact of local firms’ participation in global value chains (GVCs) on productivity by considering three different patterns of GVC participation. We conducted a DID-PSM estimation involving three countries, Indonesia, the Philippines, and Vietnam, and 17 manufacturing sectors in 2009 and 2015 in a panel framework. We found an endogenous relationship between firm productivity and GVC participation: firms that enter GVCs have high productivity before participating in the GVCs (selection effect), and only Indonesian firms that entered GVCs had high productivity growth after joining GVCs (learning effect). These two effects were only found for firms that both import intermediate goods and export output and not for firms that only either import or export. We also found that indirect exporting does not improve a local firm's productivity. Several recommendations are made to help firms and governments facilitate the participation of firms in GVCs.     

Brick manufacturing in Columbia: A case study of alternative technologies

There is systematic variation in size and capital-intensity across firms in LDC manufacturing industries, variation which is greater than that observed in advanced countries (DCs). This paper examines the hypothesis that the pattern results from diffusion of superior modern technology which is proceeding at a slower rate in LDCs than in DCs. Evidence from the Columbian brick industry is presented which suggests that slow diffusion is not a sufficient explanation.     

How integrated is the world economy?

This paper develops a methodology to measure the degree of economic integration between nations that are members of an integrated area. We show that a fully integrated economic area (IEA) is characterized by three properties regarding the distribution of member shares of total IEA output and total IEA stocks of physical and human capital. We then show that the expected distribution of member shares within a fully IEA is a harmonic series, with the share distribution depending only on the number of IEA members. This property is then used to develop a composite indicator of the degree of economic integration within an IEA that indicates the distance between the theoretical and actual distribution of shares: the closer is the actual distribution to the expected distribution, the greater the degree of integration. We empirically compute our degree of integration for US states, and alternative regional trading agreements (e.g., EU countries, MERCOSUR, Bangkok Agreement, etc.) and a “world” comprising 64 countries.     

Unit root tests of capital mobility in the less developed countries

Conclusions This article contributes to the ongoing debate on international capital mobility in the LDCs. The extent of capital mobility has been assessed in a time-series context, performing unit root tests on the adjusted current account for thirty-seven developing countries. The results show that the hypothesis of capital mobility cannot be rejected in a large number of countries.     

Third world manufactures and their access to U.S. markets

Conclusion The question of LDC-manufactured goods cannot be treated independently of the overall development of the LDCs. The United States and other DCs have a powerful obligation as well as considerable self-interest in listening carefully to what the LDCs are saying about the NIEO, and in being responsive to the issues raised. Part I of this article was published in the Spring 1977 (vol. 7, no. 3) issue ofRBPE.     

Fostering the capital-goods sector in LDCs

The conventional arguments in favour of the production of capital goods by LDCs are based on comparative advantage, the possibility of designs appropriate to indigenous factor proportions, and the externalities conferred on other sectors. These and other arguments are inducing the governments of many middle-income countries to more intensively foster the development of the machinery sector. This paper examines the analytic and empirical bases of the conventional arguments and finds a considerably more complex picture than that contained in earlier studies.     

Are Asian least developed countries sidelined in advanced manufacturing production networks?

The production of parts for high‐technology final products can play an important role in advancing economic development. This appears a particularly attractive outcome for least developed countries (LDCs). But due to data constraints, analysis has been based largely on middle‐income economies. We seek to address this gap by using proxy data to explore the position of Asian LDCs in electronics and automotive production. Our analysis shows that there has been a surprising amount of LDC trade activity in these sectors over the past decade. In addition, a group of LDCs has succeeded in what appears to be successful engagement with these production networks. We discuss the forms of participation we observe and ask whether they might enable countries to attain development outcomes that might otherwise be out of reach.     

Implementation of socially optimal outcomes in the liquidation of public enterprises in China

The authors study an optimal cost-sharing scheme between the central and local governments in China's current process of dissolving public firms through mergers and bankruptcies. They first define the social choice rule that minimizes social costs, then design a mechanism that both implements this rule truthfully under imperfect information and minimizes the central government's payment. Collusion between the local government and local firms as well as competition among local firms are explored. The findings show that writing off the bad loans and hardening the budget constraint are two necessary conditions to provide right incentives for truthful revelation. This result is consistent with the predictions of other theories and some recent proposals of revitalizing the banking system and the state sector in China.     

How Did Heavily Indebted Poor Countries Become Heavily Indebted? Reviewing Two Decades of Debt Relief

The paradox of debt is that heavily indebted poor countries (HIPCs) became heavily indebted after two decades of debt relief efforts. Average policies in HIPCs 1980–97 were worse than other less-developed countries (LDCs), controlling for income. Terms of trade and wars do not show a different trend in HIPCs than in non-HIPC LDCs. Financing HIPCs shifted away from private and bilateral nonconcessional sources toward International Development Assistance and other multilateral concessional financing––but this implicit form of debt relief also failed to reduce net present value debt. The record is not encouraging for the success of current debt relief efforts.     

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.     

Non-multinational firms and transfer of technology to less developed countries

Importing technology from multinational corporations (MNCs) has certain disadvantages for the less developed countries (LDCs) and there is a need for such countries to seek alternative sources of technology. One such source might be non-multinational firms but little is known of the relative merits of non-multinationals. This paper describes a comparison of non-multinational with multinationals in 47 transfers of technology from the UK to India.For a number of important factors, we found little difference between the roles of MNCs and non-MNCs. It is suggested that this lack of difference may be due to the non-MNCs in the sample having some of the same advantages in negotiation as the MNCs — namely a high prestige in the Indian market and possession of some specialist technological expertise. In other words, the multinationality of MNCs may not be as important as is sometimes suggested. Other factors, such as prestige, may be of greater importance. This makes the search for alternative suppliers of technology more difficult since non-MNCs with no prestige are, almost by definition, not known to the LDC.     

Conflicting Transfer Pricing Incentives and the Role of Coordination

Our study evaluates the role of coordination, at both the government and the firm level, on the transfer prices set by U.S. multinational corporations (MNCs) when income taxes and duties cannot be jointly minimized with a single transfer price. We find that either the presence of a coordinated income tax and customs enforcement regime or coordination between the income tax and customs functions alters transfer prices for these firms. Our analyses have implications for both firms and taxing authorities. Specifically, our findings suggest that MNCs might decrease their aggregate tax burdens by increasing coordination within the firm or that governments might increase their aggregate revenues by improving coordinating enforcement across taxing authorities. Our study is novel in that we document, in a specific setting, how coordination influences MNCs’ tax reporting behavior.     

Can Import Tariffs Deter Outward FDI?

In this paper we analyze a country's optimal trade policy when its labor market is unionized and firms are footloose. We show that an important objective for governments to use import protection is to prevent their domestic multinationals to go to a non-unionized location abroad and to serve their country from a distance. A domestic government will set a positive tariff to dissuade its multinational from engaging in outward FDI when the additional profits it repatriates, do not compensate for the loss of domestic union rent. To put it differently, we show that when the domestic labor market is unionized, trade liberalisation between countries with similar wage levels is likely to result in domestic welfare losses as a result of outward FDI. Only when wage differences between countries are large enough, can outward FDI improve domestic welfare and optimal tariffs will be zero. JEL Classification Numbers: L13, F23     

Testing Conflicting Political Economy Theories: Full‐Fledged versus Partial‐Scope Regional Trade Agreements

We apply a duration analysis to test the conflicting predictions of the median voter model and the lobbying model using panel data on regional trade agreement (RTA) formation. Our results show that the pro‐labor prediction of the median voter model is supported by the full‐fledged free trade areas and customs unions (FTAs/CUs), while the pro‐capital prediction of the lobbying model is supported by the partial‐scope preferential trade arrangements among developing countries. This finding holds better for the country pairs with more different capital‐labor ratios as a result of the stronger distributional effects of RTAs. The support for the median voter model (lobbying model) is stronger when the two countries in a pair have left‐oriented (right‐oriented) governments. I also find stronger support for the median voter model for the subset of FTAs/CUs with service coverage and stronger support for the lobbying model for countries that place higher weight on political contribution.     

Industrial processing and location: A study of tin

This paper finds no economic case for greater processing to be carried out in the tin-producing less developed countries (LDCs). First, tin constitutes a necessary but insignificant part in the production of most of the tin-using intermediate products so that the domestic availability of tin per se does not confer an important advantage to the tin-producing LDCs in the production of the intermediate goods. Second, the demand for the final products, which use the tin-using intermediate goods, is strongly related to the level of economic development so that this demand, and so the demand for tin, is not likely to be high in the tin-producing LDCs.     

The training and spread of managerial know-how,a comparative analysis of multinational and other firms in Kenya

This article investigates an area of multinational corporate activity in less developed countries (LDCs) that has hithero gone unexplored, namely their training of indigenous managers and the spread of this transferred know-how throughout the host country economy. The significance of management training for the successful transfer of technology is discussed in the introduction, followed by a presentation of the methodology employed; data regarding the extent and composition of management training offered to local managers is analyzed, and conclusions regarding the extent and significance of management training by multinationals in LDCs are drawn.     

International Technology Diffusion: Effects of Trade and FDI

There has been little analysis of the effect of inward FDI on international R&D diffusion, especially in LDCs, although FDI has become the core of international production and LDCs have been receiving an increasing share of world FDI over the past few decades. Using data from 57 countries from 1988 to 2001, we find that both FDI and trade serve as important channels of international technology diffusion. However, there exist heterogeneous effects of FDI in DCs and LDCs. For inward FDI to promote technology diffusion in LDCs, a certain threshold of human capital has to be reached.     

An Ecological Footprint Approach to External Debt Relief

This paper applies Martinez-Alier’s [Environ. Values 2 (1993) 97] “ecological debt” concept to the problem of debt relief, exploring the possibility of compensatory transfers from rich to poor countries based on existing ecological balances. I employ recent estimates on ecological footprints and ecosystem values to estimate the ecological debt to be distributed among eligible transfer recipients––all less-developed countries (LDCs). The results provide a policy criterion for transfers in the event that future circumstances make large-scale international debt relief compulsory. The study probably underestimates the appropriate transfer amounts because of conservative assumptions regarding the environmental values and the size of the north’s ecological debt in physical terms.