The profits of foreign firms in a less developed country: Ghana

Using a proxy for the rate of profit, this study does not confirm for Ghana (1970) the hypothesis that foreign firms make excessive profits as compared with other ownership groups of firms. Instead, the general tendency of the data is to rank the rates of profit for mixed private local-foreign and private local firms higher than those of wholly foreign, mixed state-foreign, and wholly state owned firms. Explanations of these observations in terms of transfer pricing through imports and differential cost-reduction incentives available to the firms are attempted.     

Causality between income and emission: a country group-specific econometric analysis

Empirical studies of the Environmental Kuznets Curve (EKC) examine the presence or otherwise of an inverted U-shaped relationship between the level of pollution and the level of income. Customarily, in the diagram of EKC the level of income is shown on the horizontal axis and that of pollution on the vertical axis. Thus, it is presumed that the relationship between income and pollution is one of unidirectional causality with income causing environmental changes and not vice versa. The validity of this presumption is now being questioned. It is being asserted that the nature and direction of causality may vary from one country to the other. In this paper, we present the results of a study of income–CO₂ emission causality based on a Granger causality test to cross-country panel data on per capita income and the corresponding per capita CO₂ emission data. Briefly, our results indicate three different types of causality relationship holding for different country groups. For the developed country groups of North America and Western Europe (and also for Eastern Europe) the causality is found to run from emission to income. For the country groups of Central and South America, Oceania and Japan causality from income to emission is obtained. Finally, for the country groups of Asia and Africa the causality is found to be bi-directional. The regression equations estimated as part of the Granger causality test further suggest that for the country groups of North America and Western Europe the growth rate of emission has become stationary around a zero mean, and a shock in the growth rate of emission tends to generate a corresponding shock in the growth rate of income. In contrast, for the country groups of Central and South America, Oceania and Japan a shock in the income growth rate is likely to result in a corresponding shock in the growth rate of emission. Finally, causality being bi-directional for the country groups of Asia and Africa, the income and the emission growth rates seemed to reinforce each other.     

Export instability and concentration in the less developed countries: A cross-sectional analysis

A model to explain export instability in the less developed countries is formulated and tested on a sample of 48 less developed countries between 1957 and 1969. The explanatory variables suggested are commodity and geographic concentration and the importance of oil in the export sector. These variable are defined in a variety of ways to determine the sensitivity of the results to variable definitions. The results suggest that all three explanatory variables are significant in explaining export instability, although a considerable proportion of the variance in export instability remained unexplained.     

An empirical analysis of rural-urban migration in less developed economies

This paper presents maximum likelihood estimates on the impact of ‘Green Revolution’ technology, farm mechanization and tenurial change on rural-urban migration in less developed economies. Its principal substantive contribution lies in its emphasis on ‘push factors’ as formulated by ‘village-end’ variables.     

Determinants of wage and price changes in less developed countries: An intertemporal cross-country analysis

A theoretical hypothesis of wage determination, conveying the arguments of the dual economy model as well as some elements of ‘traditional’ theory, and three alternative theoretical approaches to price changes are built and statistically tested. Pooled data, with missing observations, of 36 LDCs from Asia, Africa and Latin America for 1960, 1965 and 1968 are used, while additive and multiplicative dummy variables test the behavior of regressions between alternative country groups. Price changes are found to be explained by both monetary and nonmonetary variables with relatively more weight on the latter. The empirical wage change determination conforms to the dual model, while the existence of an international Phillips curve is questionable.     

Children and savings in less developed countries

"A commonly cited motive for childbearing in LDCs is the support in old age provided by one's children. Alternative means of retirement support become available as a country develops. This paper presents a simple two period model in which financial institutions are allowed to substitute for children in the provision of this service. The 'quality' of financial institutions is given an operational definition and the hypotheses of the model are tested on a cross-section sample of countries."     

Agricultural innovation in less developed countries

We identify and elaborate some critical factors and mechanisms that foster the emergence of cooperative behavioral patterns. Through institutionalization, which solves social dilemmas through habituation, these factors and mechanisms provide the foundation of contingent cooperation and contextual trust in specific interaction ‘arenas’ and ‘meso’-sized ‘platforms’ (and related carrier groups) in these. This, then, may in turn support the emergence of general trust in the whole population, i.e., across all specific arenas and platforms. The emergence of institutions of cooperation may gain traction more easily in smaller arenas. This, and the transfer, spillover, or generalization to other arenas and platforms, is by no means determined, and the analytical foundation we offer permits to account for the different levels of cooperation, general trust, and socioeconomic performance observable in real-world economies (varieties of capitalisms). Directions of future research, as well as a policy focus, are provided as well.     

Political credibility and economic growth in less developed countries

While the mainstream of economic development theory focuses on the efficiency of policy measures, the role of the credibility of these measures is rarely analyzed. In this paper we argue that in less developed countries the problem of establishing the credibility of policy measures is at least as important as the problem of choosing the efficient policy solution. We claim that many of the difficulties less developed countries face can be understood in terms of lack of effective control on the discretionary power of governments, which ultimately leads to policies that are not credible. The private sector anticipates large swings in policies and reacts by withholding its resources. Symptoms of these credibility problems in less developed countries include the size of the informal sector, capital flight, and the reluctance of investors to commit capital. All of these reactions contribute to the slow economic growth in these countries. This paper concludes that establishing strategies for the control of state discretionary power is a crucial precondition for overcoming these problems and generating long term economic growth.     

Labor migration and risk aversion in less developed countries

"In this paper we question the pioneering work of Todaro, which states that rural-to-urban labor migration in less developed countries (LDCs) is an individual response to a higher urban expected income. We demonstrate that rural-to-urban labor migration is perfectly rational even if urban expected income is lower than rural income. We achieve this under a set of fairly stringent conditions: an individual decision-making entity, a one-period planning horizon, and global risk aversion. We obtain the result that a small chance of reaping a high reward is sufficient to trigger rural-to-urban labor migration."     

Banking as a basis for economic cooperation in less developed Europe

This article examines to what extent Russia's increasing reliance on foreign capital could potentially kick-start the economy and generate growth. The analysis highlights more fundamental issues of governance and institutional arrangements, for which the focus on foreign economic activities serves merely as an example to reflect on pathologies of the Russian economy as a whole. The article consists of a theoretical framework, discussing the change of institutional arrangements in the first section and analysing crucial issues of corporate governance and property rights in the last, while empirical information is compiled for Russia as a whole and its constituent regions in the second and third core sections. The article concludes that the Russian map of high foreign trade activities will be shaped only by patchy growth spots, located either where the domestic market is largest or opportunities for export exist, mainly in large urban agglomerations (economies of scale) and commercial hubs, resource-rich and gateway territories (gravitation to international trading blocs). Major investment disincentives will remain as long as the existing system of taxation has not been substantially changed, property rights are not protected, land and bankruptcy legislation is not properly enforced and local authorities are not prevented form rent-seeking activities.     

Macroeconomic consequences of increased productivity in less developed economies

This paper examines the impact of improvements in productivity on prices, output, the real wage rate and the balance of payments. Within the context of the model used in this paper, an improvement in productivity can take two alternative forms: (1) a cost saving for a given output and (2) an increase in production without a direct decrease in employment. The results presented are based on a simple model of a small open economy that includes some key features of less developed economies. It is shown that, in the presence of monetary and fiscal restraints, an improvement in productivity leads to increases in output, employment and the real wage and the effect on the balance of payments, in the short and the medium runs, is also positive. We find that whether or not improvement in productivity is import saving plays a crucial role in both comparative static and simulation exercises.     

Measuring performance in primary care: econometric analysis and DEA

We use data from the Health Service Indicators database to compare different methods of measuring the performance of English Family Health Services Authorities (FHSAs) in providing primary care. A variety of regression and data envelopment analysis methods are compared as summary efficiency measures of individual FHSA performance. The correlation of the rankings of FHSAs across DEA and regression methods, across two years of data and across three different specifications of the technology of primary care are examined. Efficiency scores are highly correlated within variants of the two methods, and across years for a given method. Inter method correlations are smaller and correlations across different specifications of the primary care production process are negligible and sometime negative.     

Technological choice in the less developed countries: An analytic hierarchy approach

A novel and practical approach is proposed for the assessment and selection of imported technology by the less developed countries. Technological choice is conceptualized as a multiobjective, multicriterion problem wherein subjective judgments and political processes play key roles. A new planning and evaluation technique known as the analytic hierarchy process (AHP) is introduced as a potent methodology for dealing with the economic, social, and political realities confronting technological change in the less developed countries.     

Residential location: A comparative econometric analysis

This paper deals with the interaction between procurement and production management. The production costs crucially depend on the materials, components and subassemblies purchased by the procurement department, and on the effort expended by the production department. An agency model is utilized based on the scanlon-Atkinson plans which share gains from production cost improvement after attaining pre-specified cost standard. The materials' quality is used to adjust the cost standards for the prodcution department. It is shown that in both the first-best and second-best cases, profit-sharing compensation is always preferred to fixed salary by the risk-averse principal. Comparing with the first-best case, the principal has to provide a greater sharing pool in order to induce the managers' efforts, and each manager, in fact, works less hard in the second-best case. The agents' compensations are tied to their positions as well as their risk attitudes when all principal lacks a costless benefits the most from such a circumstances. Agency cost is then considered as the expected value of getting a perfect monitoring mechanism. detailed comparative statics are provided to suggest the principal ways of modifying existing compensation plans due to the changes of structural parameters.     

Brain drain,illegal migration and capital exports from less developed economies: a neoclassical approach

This model shows that LDC's brain drain triggers emigration of unskilled labor and capital exports, skilled workers and agricultural capitalists gain, unskilled workers and industrial capitalists lose, and demodernization of the economy results. Demodernization of the economy occurs when labor force and output of the industrial sector decrease, and employment and production in agriculture increase. The problem analyzed in this model is what happens to the incomes of those who are left behind when some of the skilled workers migrate abroad. The results show that with the exodus of both skilled labor and capital, the marginal productivity of unskilled workers in industry also falls below the unskilled wage. Although one would expect a brain drain to result in gains for those skilled workers who remain in the source country, and for the capital owners who receive unskilled workers as a result of emigration, the losers are the unskilled workers and the capitalists in the sector where the migrants worked.     

Determinants of capacity utilization by firms in less developed countries

The factors which influenced the capacity utilization decision of two hundred firms in the light manufacturing sector in Thailand during the period 1962–1974 were analyzed. The profit-maximizing capacity utilization rate for each firm was calculated using the projected balance sheets and income statements the firms prepared at the time of their initial investment. This ‘optimal’ rate was roughly twice the rates chosen by the firms. The extent of nonoptimal capacity underutilization of a firm was a function of the nationality of the firm's owner, entry date, number of firms in the industry, projected profits, and the manager's perceived risk of multishift operations.     

Economies of scale in public education: an econometric analysis

This article investigates the sources of scale economies in the production of public education. The relationship between the average cost of producing educational output and school characteristics including school and district size is estimated using a neoclassical cost function. The empirical analysis used panel data from Utah school districts and estimates the function using the covariance and error component models after making necessary corrections for heteroskedasticity and autocorrelation. The uncorrected fixed effects model generates a significant negative coefficient on district size in both the cost and expenditure functions; the coefficient on number of students has the hypothesized sign but is not significant in either equation. After making various corrections for autocorrelation and heteroskedasticity, the coefficients have the correct signs and are significant in all equations. Thus, it is concluded that scale economies arise from both sources but that the evidence is stronger for district size.