What Do We Know About Economic Growth? Or,Why Don't We Know Very Much?

The last 10 years has seen an explosion in cross country econometric studies of growth, driven by two factors—new mathematical models of the growth process that lend themselves to econometric testing, and new data sets that make such testing possible. This paper looks at a selective review of these studies. It concludes that the results are disappointing in that no model has proven robust to trial by repeated regression. The paper suggests some reasons for this—including that the tested models tend to be ahistorical and over-simple in terms of their causal accounts. It concludes with possible lessons for econometric work in this area.     

Are Determinants of Rural and Urban Food Security and Nutritional Status Different? Some Insights from Mozambique

Undernutrition of children 0–60 months old in Mozambique is much higher in rural than in urban areas. Food security is about the same, although substantial regional differences exist. Given these outcomes, we hypothesized that the determinants of food security and nutritional status in rural and urban areas of Mozambique would differ as well. Yet we find that the determinants of food insecurity and malnutrition, and the magnitudes of their effects, are very nearly the same, although some differentiation in determinants of undernutrition does begin to appear among children 24–60 months old. The difference in observed outcomes appears primarily due to differences in the levels of critical determinants rather than in the nature of the determinants themselves.     

Commodity problem: What next?

Export commodity prices of developing countries are now at their lowest point since 1980–1981. International action to stem the decline in prices or provide sufficient compensatory finance has been limited, and no overall plan is under way to improve the situation. Under these circumstances the developing countries must fend for themselves, through expansion of their mutual trade with a minimum use of scarce convertible foreign exchange, and through improvement of their bargaining position in the world market, where feasible, through coordinated selling of their products. These actions call for: (1) an expansion of South-South compensable trade (“counter-trade”) and its better organization in order to reduce the excessive discounts and marketing margins which now prevail; (2) centralized selling in the world market at better prices of commodities for which the demand is price-inelastic (tropical beverages and to some degree metals); and (3) expansion of volume of sales at competitive prices of products which face substitution of synthetics or goods produced in developed countries, provided such expansion is profitable.This paper discusses these alternatives and the potential problems which may continue to interfere with progress. The author concludes that the need for international cooperative action will grow pari passu with the need to cooperate in money and finance, which are in as much trouble as commodities and international trade.     

Income inequality and happiness: Which inequalities matter in China?

The effect of inequality on happiness should intrigue social scientists. Of the many dimensions of income inequality, we explore four, analysing a rich data set for China. Does actual or perceived inequality have a greater effect on happiness? We find that perceptions of inequality are the more important. How broad is the reference group with which people compare themselves? They report that it is narrow; and indeed narrowly defined inequality has the greater effect on happiness. Do perceptions of the degree of fairness of inequality matter? They do, as they ameliorate the adverse effect of inequality on happiness, especially for the poorest. Is it self-centred or community-based inequality which affects happiness? Both measures have significant effects, but in opposite directions. The research and policy implications are discussed.     

Cohesion Policy in the eu: Going Beyond Fiscal Transfers?

Should cohesion policy in the EU be reformed? This question becomes pressing in light of the coming enlargement of the EU. Indeed, without reform enlargement will involve an increase in the budget for cohesion policies, as well as a reallocation of funds across regions. Furthermore, it is an appropriate occasion to rethink the various rules and criteria associated with cohesion policies. Recently, the European Commission published its Second Report on Economic and Social Cohesion (henceforth SRESC, (2001)). The report praises the effectiveness of current cohesion policies and suggests a mere continuation of current practices in the future. This paper challenges this conclusion and discusses some options for reform. The paper starts with a brief introduction to the current cohesion policy and the changes that will occur in light of EU enlargement. Subsequently, we address two questions. Is there a need for cohesion policy reform? And if so, how should it be reformed?     

Energy Dependence in Developing Countries: Does the Level of Income Matter?

This paper re-examines the causal relationship between energy consumption and economic growth in four developing countries. The four countries include two lower-middle income economies, Ghana and Cote d’Ivoire, and two upper-middle income economies, Brazil and Uruguay. The study attempts to answer one critical question: Is the causal relationship between energy consumption and economic growth sensitive to a country’s level of income? In order to account for the omission-of-variable bias, the study incorporates exports as an intermittent variable between energy consumption and economic growth—thereby creating a simple multivariate model. Using the auto-regressive distributed lag (ARDL)-bounds testing procedure, our results show that while energy consumption Granger-causes economic growth in upper-middle income countries, in lower-middle income countries it is economic growth that drives energy consumption.     

Productivity-Wage Gaps Among Age Groups: Does the ICT Environment Matter?

This paper disentangles the age-productivity-wage nexus by estimating productivity and wage equations with longitudinal employer-employee panel data for Belgium. Results indicate that workers above 49 years are significantly less productive than their younger colleagues. Moreover, while relative productivities across age groups are not found to differ significantly between ICT and non ICT firms, the upward sloping age-wage profile appears to be somewhat steeper in ICT firms. Yet, whatever the ICT environment, findings show that young workers are paid below and older workers above their marginal productivity. This pattern is in line with the deferred payment model developed by Lazear (J Polit Econ 87:1261–1284, 1979).     

Simple analytics of segmented markets: What case for liberalization?

Discussion about the liberalization of controlled markets in developing countries frequently assumes that the removal of price or quantity restrictions will lead rapidly to increased marketed output. However, when parallel markets exist, market controls may not depress marketed output and may actually increase it. Conversely, liberalization may not increase marketed output much, if at all. The benefits of liberalization will be greater where parallel markets are costly to enter, so that decontrol increases efficiency, and scarce resources such as entrepreneurial and administrative ability are diverted into the rent-seeking activity of gaining access to illegal parallel markets. This paper employs partial equilibrium techniques to analyze market controls and liberalization in the presence of parallel markets for foodgrains, credit, labor, and foreign exchange.