WHY ARE SOME COUNTRIES RICHER THAN OTHERS? A SKEPTICAL VIEW OF MANKIW–ROMER–WEIL's TEST OF THE NEOCLASSICAL GROWTH MODEL

This paper provides evidence of a problem with the influential testing and assessment of Solow's (1956) growth model proposed by Mankiw et al. (1992). It is shown that when the assumption of a common rate of technical progress is relaxed in the neoclassical model, the goodness of fit of Mankiw et al.’s equation improves dramatically. However, and more importantly, it is shown that this result, as well as the magnitude of estimates obtained, merely reflects a statistical artifact. This has serious implications for the possibility of actually testing Solow's growth model.     

The role of subsidiaries from emerging economies—A survey involving the largest Brazilian multinationals

Several research projects have been devoted to the study of the internationalization of Brazilian firms; however there is a lack of research related to the strategy and management of subsidiaries of Brazilian multinational corporations in other countries. This article seeks to contribute to filling this gap. An academic research study was conducted involving 30 Brazilian multinational corporations. Of the 93 subsidiaries involved, 66 foreign subsidiaries answered the questionnaires. The main results concern the identification of three factors and the proposition of a typology of Brazilian subsidiaries of multinational corporations: implementing subsidiaries; market‐exploiting subsidiaries, and aspirants to strategically relevant subsidiaries. © 2012 Wiley Periodicals, Inc.     

Exports,capabilities, and industrial policy in India

An extensive literature argues that India’s manufacturing sector has underperformed, and that the country has failed to industrialize; in particular, it has failed to take advantage of its labor–abundant comparative advantage. India’s manufacturing sector is smaller as a share of GDP than that of East Asian countries, even after controlling for GDP per capita. Hence, its contribution to overall GDP growth is modest. Without greater participation of the secondary sector, the argument goes, the country will not be able to develop and become a modern economy. Standard arguments blame the “license-permit raj”, the small-scale industrial policy, and the labor laws. All these were part of the industrial policy regime instituted after independence. This regime favored the heavy-machinery subsector. We argue that despite its shortcomings and misallocations, the bias towards machinery, metals, chemicals, and other capital- and skilled labor-intensive products allowed Indian manufacturing to accumulate a wide range of capabilities. We show that India’s manufacturing sector is more diversified and sophisticated than one would expect given the country’s income per capita. This positions India well to continue expanding its exports of other sophisticated products. India’s failure, however, lies in not being able to diversify into labor-intensive sectors and generate the type of structural transformation seen in China.     

New Products and Corruption: Evidence from Indian Firms

It has been shown that corruption has a negative effect on firm growth, but what about its impact on product innovation? I find that corruption, functioning as a bribe tax, diminishes the probability of new products being introduced. I use a World Bank Enterprise Survey conducted in India in 2005, with 1,600 firms answering both whether they introduced a new product to the firm, and whether and how much was paid in bribes. Controlling for innovation determinants and firm characteristics, sector‐state bribery averages have a negative and significant impact on product innovation.     

Strengthening the Leadership of Rites and Ceremonies for Reconciliation and Truth: The Case of Socorro Mosquera,Manager and Human Rights Defender in Colombia

This article proposes a tool to strengthen the leadership of rites and ceremonies for reconciliation and truth, using a multidisciplinary approach and bringing together political topics (reconciliation and truth), anthropological concepts (rites and ceremonies), and management sciences issues (leadership) in a special urban context that requires reconciliation and truth after a long, irregular war with multiple violations of human rights. After formulation of the research problem, we were able to relate reconciliation and truth with leadership, rites, and ceremonies. Once so related, we analyzed the historical evolution of rites and ceremonies, with special emphasis on the organizational context, to finally propose a tool to strengthen the leadership of rites and ceremonies for reconciliation and truth. The utility of this tool was confirmed in the case of Socorro Mosquera, a manager and human rights defender in Medellín, Colombia. The eclectic and integrative approach brings originality to the study, while the methodological application of mixed approaches increases its value.     

Entrepreneurship: skills and financing

This article analyzes an occupational choice model with risk-averse agents who are heterogeneous in terms of skills and wealth in a setting with financial frictions. We show that high- and middle-wealth individuals endowed with a balanced portfolio of skills upgrade their skills so that the resulting portfolio of skills is more balanced and choose entrepreneurship. In contrast, middle-wealth individuals endowed with an unbalanced portfolio of skills and low-wealth individuals specialize in the skill in which they have an absolute advantage and choose paid employment. Deeper financial development, a more balanced portfolio of skills, lower entrepreneurial risk, and a higher liquidation value for projects result in more entrepreneurship and higher welfare, while wealth redistributions and financial subsidies to entrepreneurs have an ambiguous effect on welfare.     

The competing risks of acquiring and being acquired: Evidence from Colombia's financial sector

This paper studies the determinants of the probability of participating in a process of merging or acquisition for financial institutions in Colombia. We use survival analysis techniques and competing risks models to estimate the probability of participating in such processes as an acquiring or acquired firm. Using an especially rich database containing financial information of Colombian banks for the period 1990–2007, we find that both macroeconomic and microeconomic variables are important determinants of this probability. However, there are differential effects for the acquiring firm and the acquired firm. Particularly, while firm size and solvency are significant determinants of the probability of being an acquiring firm, efficiency is an important determinant of the probability of being acquired. Also, the concentration index, which plays no role for acquiring firms, plays an important role in the probability of being acquired.     

Unconventional monetary policy,liquidity trap,and asset prices

This article offers a fundamental critique of monetary policy implemented in the United States following the 2007–8 global financial crisis. It aims to show that the misunderstanding of the mainstream theoretical thinking underlying monetary policy actions led to the ineffectiveness of the policy response to the 2007–8 global financial crisis. The conventional view that monetary policy is the stabilization tool has serious flaws and is ineffective for bringing about economic recovery. The Federal Reserve’s experiment with the so-called unconventional monetary policy exposed the weakness of the conventional belief in understanding how banks operate, how the monetary authority can influence the yield curve, and how the monetary transmission mechanism works, resulting in prescribing an ineffective treatment to boost economic activity. In this regard, it is argued that the Federal Reserve’s decision to let long-term interest rates be market determined represents a significant self-imposed constraint, which limits policy options regarding monetary policy actions and the effective control of long-term interest rates. By limiting the setting of policy rates only to the overnight interest rate, the ability of the monetary authority to influence long-term interest rates is both weak and indirect.