PRODUCTION RISK AND ADVANTAGES OF MIXED FARMING IN THE PAKISTAN PUNJAB

This paper proposes an empirical model of profit variability at the individual farm level and applies it to Pakistan's agriculture. Results show that the addition of idiosyncratic yield shocks and adjustment for input costs lead to a much larger variability of net profits than implied by the variability of average gross revenues–Pakistan's irrigated agriculture is associated with higher profit variability compared with semiarid India. It is also demonstrated that the correlation between green fodder profit and milk profit at the farm level is substantially negative. This negative correlation implies that it is advantageous, in terms of risk diversification, to combine fodder and milk production in one enterprise, which is commonly observed in the mixed farming systems in Pakistan's Punjab.     

FINANCE AND GROWTH: NEW EVIDENCE ON THE ROLE OF INSURANCE

This paper provides new evidence that sheds light on the impact of insurance sector development on output growth, capital accumulation and productivity improvement, using data from 51 countries (developed and developing) during 1981‐2005. The dynamic panel data analysis results demonstrate that insurance sector development affects growth predominantly through productivity improvement in developed countries, while in developing countries it promotes capital accumulation.     

DETERMINANTS OF FOREIGN INSTITUTIONAL INVESTMENT IN INDIA: THE ROLE OF RETURN,RISK, AND INFLATION

The present study examines the determinants of foreign institutional investments (FII) in India, which by January 2003 almost exceeded U.S. $12 billion. Given the huge volume of these flows and their impact on the other domestic financial markets, understanding the behavior of the flows becomes very important, especially at a time of liberalizing the capital account. By using monthly data, we found that FII inflow depends on stock market returns, inflation rates (both domestic and foreign), and ex‐ante risk. In terms of magnitude, the impact of stock market returns and the ex‐ante risk turned out to be the major determinants of FII inflow. Unlike some of the other investigations of this topic, our study has not found any causative link running from FII inflow to stock returns. Stabilizing stock market volatility and minimizing the ex‐ante risk would help to attract more FII, an inflow of which has a positive impact on the real economy.     

DISGUISED UNEMPLOYMENT AND MARKETED SURPLUS OF FOODGRAINS IN A DEVELOPING ECONOMY

The thesis of Balanced Growth in the underdeveloped countries provided by Prof. Nurkse was strengthened by this essay throwing light on the problems which were not deeply treated in the original theoretical frame; and some critical comments were included in this paper against the criticism which has been brought against Nurkse's theory.     

THE ROLE OF THE EXCHANGE RATE IN A NEW KEYNESIAN DSGE MODEL FOR THE SOUTH AFRICAN ECONOMY

We build a small open economy New Keynesian dynamic stochastic general equilibrium model for South Africa similar to Steinbach et al. We abandon their assumption of complete risk sharing with the foreign economy, and introduce country risk shocks to allow deviations from uncovered interest rate parity. These changes allow us to include the exchange rate as an observable variable in the estimation of the model. Using forecast error variance decompositions and historical decompositions, we show that country risk shocks have sizable effects on the South African business cycle. We also explore the optimal monetary policy implications of our model within the context of Taylor rules.     

DETERMINANTS OF SECTORAL COMPOSITION IN A SMALL OPEN ECONOMY: THEORETICAL AND QUANTITATIVE INVESTIGATIONS OF THE PHILIPPINES

The Philippine economy since the 1980s has undergone shifts of production, employment, and consumption in the direction of the greater share of nontradable sectors, despite relatively stagnant economic growth. This paper examines sources of the sectoral shifts theoretically and quantitatively based on a dynamic model of a small open economy. The theoretical analysis identifies possible factors affecting the evolution of the sectoral composition: changes in sectoral total factor productivity (TFP), the tariff rate, and the terms of trade. Then, the relative importance of these factors is examined quantitatively by conducting simulations of the model calibrated to the Philippine economy.     

GENDER-BIAS IN INDIA: THE IMPORTANCE OF HOUSEHOLD FIXED-EFFECTS

This paper presents an analysis of gender patterns in intra-householdallocation of resources based on household-level consumptiondata. Invoking the assumption that households seek to equalizethe marginal utility of wealth when they allocate resourcesover the life-cycle, the paper provides a rationale for parentalbehaviour pertaining to the intertemporal allocation of goodsamong children. Estimation results based on panel data fromIndia show that controlling for the unobserved marginal utility(household-fixed) effect is crucial. Once allowance is madefor fixed effects, the results indicate that there is no longerany gender-differential in the allocation of resources.     

COLLECTIVE ACTION IN SMALLHOLDER ORGANIC FARMING: A STUDY OF THE EZEMVELO FARMERS' ORGANIZATION IN KWAZULU-NATAL

This study analyses the Ezemvelo Farmers' Organisation (EFO), a certified organic smallholder group in KwaZulu‐Natal province (South Africa), as an institution to improve smallholder access to a niche market by reducing unit production and transaction costs in the supply chain. Using a multinomial logit model, results suggest that EFO is more likely to survive if it continues to secure fully subsidised information, transport, fencing, and certification services for its members, and if it improves the benefits of participating by synchronising harvest and delivery dates, negotiating price discounts for organic inputs, and by maintaining an office with telephone, fax and postal services.     

FISCAL POLICY AND ENDOGENOUS GROWTH IN A BEQUEST-CONSTRAINED ECONOMY

Evidence suggests that the vast majority of planned altruistictransfers between generations are human capital investmentsin children (households are generally bequest-constrained).This paper demonstrates that empirically-based calibrationsof simple overlapping generations models with altruism generatebinding bequest constraints with realistic endogenous growthrates and returns to capital. We also show how intergenerationaland intragenerational redistributions of wealth affect long-rungrowth in bequest-constrained economies. Redistribution is afeature of fiscal policy abstracted away from by the standardinfinitely-lived representative agent models used to analyzeendogenous growth.     

FOREIGN DIRECT INVESTMENT IN ZIMBABWE: THE ROLE OF INSTITUTIONAL AND MACROECONOMIC FACTORS

The purpose of our research is to examine the impact of property rights on foreign direct investment (FDI) in Zimbabwe for the period 1964‐2005. While the macroeconomic determinants of FDI have been analysed to a considerable extent in past empirical work, the role of institutional factors such as the protection of property rights and the efficiency of the legal system has been underexplored. Using a multivariate cointegration framework, we use a newly constructed de jure property rights index for Zimbabwe to determine the impact of property rights on FDI. The empirical evidence shows that property rights are consistently an important explanatory variable of FDI in Zimbabwe, even after controlling for periods when there are no significant new foreign capital inflows. Other significant explanatory variables of FDI in Zimbabwe are the real gross domestic product (GDP), capital intensity, the external debt to GDP ratio, political instability as well as the educational levels.