Demand for World Bank lending

This paper attempts to quantify the relevance of crisis lending in IBRD and IDA lending commitments. It finds that IBRD and IDA lending commitments are positively related to an increase in debt service payments and inversely related to the level of reserves of the borrowing country. These two variables explain a large part of the variation in IBRD and IDA lending commitments – adjustment lending as well as project lending – not only since the Asian crisis, but also during tranquil times over the last two decades. This finding implies that bridging the financing gap has been an important factor affecting developing countries’ decision to seek financial help from the Bank. While borrowing for servicing debt during a crisis is consistent with the World Bank's goal of poverty reduction and assisting countries without access to financial markets, such borrowing during tranquil times may conflict with these goals.     

Market attractiveness of developing countries

Companies operating in international markets must be able to evaluate the potential market attractiveness of developing countries with which they may wish to do business. To make decisions about where to go for business, they have access to much information from specialized sources and from statistical data supplied by international institutions. Such vast and diverse information is rarely used in a systematic way in the management decision processes. When it is used, the process is often inadequately formalized. The available information generally deals with economic factors, while in the present international arena, judgments about politics must also be taken into account. This paper investigates the applicability and advantages of the Analytical Hierarchy Process (AHP) to this decision process, using it to create maps of joint economic progress and political stability in a number of countries for two time periods, 1990–1991 and 1995–1997.     

Are regulations the answer for emerging stock markets? Evidence from the Czech Republic and Poland

Does the emergence of a stock market require a well-developed legal and/or regulatory system? Although historical work by Neal and Davis [Neal, L., & Davis, L. (2005). The evolution of the rules and regulations of the first emerging markets: The London, New York, and Paris stock exchanges, 1792–1914. Quarterly Review of Economics and Finance, 45, 296–311] and Stringham [Stringham, E. (2003). The extralegal development of securities trading in seventeenth century Amsterdam. Quarterly Review of Economics and Finance, 43, 321–344] suggests that securities markets have successfully developed with little government oversight, numerous authors [including Black, B. (2001). The legal and institutional preconditions for strong securities markets. University of California Law Angeles Law Review, 48, 781–855; Coffee, J. (1999). Privatization and corporate governance: The lessons from securities market failure. Journal of Corporation Law, 25, 1–39; Frye, T. (2000). Brokers and bureaucrats: Building market institutions in Russia. Ann Arbor: University of Michigan Press; Glaeser, E., Johnson, S., & Shleifer, A. (2001). Coase versus the Coasians. Quarterly Journal of Economics, 116, 853–899; Mlčoch, L. (2000). Restructuring of property rights: An institutional view. In L. Mlčoch et al. (Eds.), Economic and Social Changes in Czech Society After 1989. Prague: The Karolinum Press; Pistor, K. (2001). Law as a determinant for equity market development – the experience of transition economies. In Peter Murrell (Ed.), The Value of Law in Transition Economies (pp. 249–287). Ann Arbor: Michigan University Press; Stiglitz, J. (1999). Whither reform. Ten years of the transition. Keynote Address, Annual Bank Conference on Development Economics, Washington, DC, April 28–30, 1999; Zhang, X. (2006). Financial market governance in developing countries: Getting the political underpinnings right. Journal of Developing Societies, 2, 169–196] argue that the Czech Republic and other Eastern European governments need more regulation for their newly created stock markets. They maintain that the Warsaw Stock Exchange, which is seen as more regulated, has outperformed the Prague Stock Exchange which is seen as largely unregulated. Thus increased regulations are a key to increased performance. This article, however, maintains that the evidence from the Czech experience has been misinterpreted. This article provides an in depth case study of the Czech stock market and finds that (a) Czech capital markets have been hindered by government intervention from their beginning, (b) that the evidence on Poland's superior performance is not as strong as suggested, and (c) that Czech regulators seem to be unqualified, lack the proper incentives, and are unlikely to benefit the market. Under these circumstances it appears that Neal and Davis (2005:311) are correct that increased government involvement is unlikely to improve the situation.     

Knowledge as a public good: efficient sharing and incentives for development effort

We consider Research-Development joint ventures where adverse selection arises in knowledge sharing, while there is moral hazard involved in the choice of private development efforts aimed at translating privately acquired and/or shared knowledge into valuable marketable innovations. We extend earlier work by Bhattacharya et al. [Bhattacharya, S., Glazer, J., Sappington, D., 1992. Licensing and the Sharing of Knowledge in Research Joint Ventures, J. Econ. Theory, Vol. 56, pp. 43–69.] to situations where one cannot identify a ‘most knowledgeable' partner, by giving conditions under which there exist transfers implementing both efficient first best knowledge sharing and subsequent development efforts.     

Accounting Insights from the Healthcare Sector

Over the last decade, significant accounting reforms have been considered by a wide range of state and local governments throughout the world. Few countries have undertaken such extensive reform of their public sector, or of their public sector accounting practices as an integral part of those reforms, as New Zealand. While the central government accounting reforms are more well known, the reforms at local government have been equally dramatic, the most recent being the introduction in 1998 of a long-term financial planning regime under the Local Government Amendment (No. 3) Act 1996. This paper examines the factors leading up to the legislation, describes the requirements of the new regime, identifies the accounting and related issues which have arisen and concludes with some lessons which other countries may wish to consider in their own quest for transparency and accountability.     

Developing breakthrough products: challenges and options for market assessment

Competitive pressures and market forces are augmenting the importance of product innovation as a source of competitive advantage. Key drivers underpinning market success have the capacity to develop the “right” products for the “right” customers, using the “right” channels, with a shorter development cycle than competitors. But when breakthrough products (BTPs) are involved, how do we sort out what is “right”? How do we identify customers' future requirements when the technology platforms are still unfolding, products are still in development and customers lack experience with the product? Traditional product development market research techniques are problematic since they assume the customer has historical experience with products similar to those being created. The objective of this paper is to raise the awareness of the OM community with the strengths and weaknesses of existing methodologies for developing and introducing innovative products to market. Further, it suggests promising future directions for both practice and research when BTPs are involved. This is important because of the central role OM plays in managing the success of the BTP development process.     

Comments on ’Urban diversity and fiscal decentralization’

In a recent and interesting paper published in this journal (Vol. 21, 1991, pp. 491–509), Henderson and Abdel-Rahman (HAR in what follows) study the consequences of a taste for diversity in a system of specialized cities. They show that the equilibrium city size is too big at the unregulated market equilibrium. Moreover, the decentralization of the first-best according to HAR is more demanding than in standard Tiebout models (they argue that autonomous local governments able to levy lump-sum taxes are needed). I argue on the contrary that under local public ownership of the land, the first-best is reached when the firms are able to control their wages. With absentee landowners, equilibrium city size is too small at the unregulated market equilibrium.     

The Unemployment–Output Tradeoff in Transition Economies: Does Okun''s Law Apply?

This paper investigates whether an Okun-type relationship between output and unemployment is taking hold in formerly planned economies as they move towards the market. Using a first-differences variant of Okun's Law, we test for its presence in 25 transition countries divided into groups of ``reform leaders' and ``reform laggards.' For leaders, represented by the 10 European Union (EU) accession countries, Okun's Law is detected in both 1991–94 and 1995–2000 periods. For laggards, represented by the remaining group, it is present only for the later period and only when countries affected by wars are removed from the sample. A comparison of unemployment–output elasticities and unemployment levels in EU candidates and EU members themselves indicates that their labor markets might be converging.     

Bank of England: Servant or Master?

The developing discipline of the economics of politics examines the behaviour of bureaucrats and politicians as maximisers of self-interest like anybody else. The insights derived from this analysis can be applied to other forms of governmental activity, not least in the Bank of England. Rosalind Levačić assesses the extent to which the Bank's officials maximise their own well-being instead of implementing Government policy.     

Localized Innovation and Productivity Growth in Asia: An Intertemporal DEA Approach

Recent contributions to growth theory stress the importance of localized innovation for the performance of more backward countries. In earlier papers, analyses by means of DEA techniques confirmed this intuition. In this paper, we extend this type of analysis by relaxing the macroeconomic viewpoint adopted until now. New databases on output, labor and capital input in the agricultural and manufacturing sectors are developed for 40 countries. Using intertemporal DEA, it is found that changes in the global production frontier are localized at high levels of capital intensity. This result is stronger in agriculture than in manufacturing. Further, a decomposition of labor productivity growth in eight Asian countries for the period 1975–1992 into the effects of capital intensification, learning and innovation is made. The results suggest that there is a particular development path in which increases in capital intensity appear to be a prerequisite to benefit from international technology spillovers.JEL Classification: O14, O30, O40, O47     

Vertical externalities and control of politicians

A major role of (repeated) elections is to create incentives for politicians to act in the interests of voters. This paper considers the disciplining role of elections in countries with either one or two levels of government. Simple retrospective voting strategies which are based on cut-off levels with respect to expenditure and tax rates are considered. It is shown that the power of voters is weakened if a second independent level of government is added. However, voters can partially reinforce their power by making politicians not only liable for their own policy, but also for the policy carried out at each other level of government. Received: June 30, 2000 / Accepted: April 4, 2001     

Franz Oppenheimer's (1864–1943) Social Economic Approach to Health

The idea of scholarly synthesis was central to the founders of the American Journal of Economics and Sociology. Franz Oppenheimer (1864–1943) in fact impersonated the idea of scholarly synthesis. Being the son of a Reformist rabbi—these religious roots provided the impulse for his work—he started out as a physician in the industrial suburbs of Berlin; his diagnosis was that he faced social and not medical disease, which consequently brought him to the study of economics. But unlike many mainstream economists today, he insisted on the necessary cooperation between economists and sociologists, ideally in one person. His chair in Frankfurt, showing his own handwriting, was denominated for economic theory and sociology. In this article, I show his contributions with respect to economic aspects of health. These are not well known. Part of the reason is that the field of health economics as it is taught now is very narrow. Therefore, Oppenheimer's health economic contributions tend to be overlooked.     

The Uses of Authority in EconomicsShared Intellectual Frameworks as the Foundation of Personal Persuasion

Why do economists believe what they believe? Why do they not all believe the same things? Our answer to these questions revolves around the nature, variety, and uses of authority in economics. Our data are the various frameworks that economists, knowingly and unknowingly, employ to formulate their questions and organize their intellectual endeavors. We call these devices patristic traditions, or cultural and intellectual frameworks, or governing legacies, or several other phrases. They all connote authority systems, traceable to specific intellectual or cultural precursors, or authorities. Our central proposition is that the specific set of governing legacies that each individual economist possesses effectively guides his or her thinking. By recognizing these authorities we can more effectively understand others' minds, understand our own, and increase our ability to persuade. So our propositions concern the uses of authorities—how economists of the past have used them and how we ourselves use them, but especially how we might use them to productive ends.     

The Maastricht inflation criterion: How unpleasant is purgatory?

The Maastricht inflation criterion, designed in the early 1990s to bring “high-inflation” EU countries in line with “low-inflation” countries prior to the introduction of the euro, poses challenges for both new EU member countries and the European Central Bank. While the criterion has positively influenced the public stance toward low inflation, it has biased the choice of the disinflation strategy toward short-run, fiat measures – rather than adopting structural reforms with longer-term benefits – with unpleasant consequences for the efficiency of the eurozone transmission mechanism. The criterion is also unnecessarily tight for new member countries as it mainly reflects cyclical developments.     

Income redistribution versus accelerated economic growth: a comparison of demographic effects

An attempt is made to identify the effects on fertility and mean expectation of life of varying rates of growth in aggregate income and of changes in the income share of the poorer segments of the population. The extent to which these effects vary among developing countries with different levels of mean income is also considered. An econometric model is developed to estimate the direction and strength of the structural relationships among the key variables, and simulation methods are used to predict the final demographic effects of altering either the growth rate or the size distribution of income. The results suggest that there is no general justification for income redistribution as a means of slowing rates of population growth in a developing country. It may be relevant in the more advanced developing countries, but even in those, more direct means (such as family planning programs, education, and health services) may be more effective. This is a revised version of a paper originally presented at the 1983 Annual Meeting of the Population Association of America (see Population Index, Vol. 49, No. 3, Fall 1983, p. 356).     

The dynamics of regional inequalities

This paper analyses the link between regional inequalities and GDP per capita at the country-level. Our starting hypothesis is that the evolution of regional inequalities should follow a bell-shaped curve as national GDP per capita rises since growth by its very nature is unlikely to appear everywhere at the same time, as has been argued by a number of authors, from Kuznets [Kuznets, S., (1955), Economic growth and income inequality, American Economic Review 45(1), 1–28] to Lucas [Lucas, R.E., (2000), “Some macroeconomics for the 21st century”, Journal of Economic Perspectives 14 (1), 159–168]. We test this hypothesis econometrically using semi-parametric estimation techniques and regional data for a panel of European countries. Our results provide strong support for such a bell-shaped curve and are robust to changing the regional administrative units and the time period, as well as controlling for other possible determinants of regional inequalities. We also find support for this hypothesis when considering non-European countries.     

Testing the Stability of a Production Function with Urbanization as a Shift Factor

Urban economists have long sought to explain the relationship between urbanization levels and output. In this paper we revisit this question and test the long-run stability of a production function including urbanization using non-stationary panel data techniques. Our results show that a long-run relationship between urbanization, output per worker and capital per worker cannot be rejected for either our sample of 30 developing countries or our sample of 22 developed countries. We do find, however, that the sign and magnitude of the impact of urbanization varies considerably across the countries. In addition, we estimate the long-run average effects on GDPW of urbanization and capital. These results offer new insights and potential for dynamic urban models rather than the simple cross-section approach.     

Constructing optimal randomized response designs with consideration for the level of privacy protection

This paper considers the problem of procuring truthful responses to estimate the proportion of qualitative characteristics. In order to protect the respondent's privacy, various techniques of generating randomized response rather than direct response are available in the literature. But the theory concerning them is generally developed with no attention to the required level of privacy protection. Illustrating two randomization devices, we show how optimal randomized response designs may be achieved. The optimal designs of forced response procedure as well as BHARGAVA and SINGH [Statistica (2000) Vol. 6, pp 315–321] procedure are shown to be special cases. In addition, the equivalent designs of optimal WARNER [Journal of the American Statistical Association (1965) Vol. 60, pp. 63–69] procedure are considered as well. It is also shown that stratification with proportional allocation will be helpful for improving the estimation efficiency.     

Introducing benchmarking in the Czech Republic and Slovakia

Abstract

In many cases the introduction of performance evaluation, performance management and performance financing schemes do not produce the expected results and even create perverse effects. The risks connected with their improper implementation are much higher in developing and transition countries, where the public sector is over-politicized, policy and management capacities are inadequate and resources and experience are limited or often almost absent.

Our study provides basic selected data on the use of benchmarking in public administration bodies in the Czech Republic and Slovakia. The findings are clear. In spite of its high potential, benchmarking is not used regularly and properly either in Slovakia or in Czechia. Subjective barriers of its implementation, for example lack of accountability, the rent seeking attitudes of elected politicians and ineffective public services schemes might be most important limits. The situation is slowly improving, but the progress will be naturally limited by territorial fragmentation.