Economic growth and the return to capital in developing economies

An important stylized fact of economic growth is that the rateof return to capital is relatively constant across countriesand over time. This paper provides an explanation using a modelof growth for a developing economy that has a dualistic structure.Three conditions are derived, each of which may account forthe observed stability of the return to capital. The resultsaddress Lucas' criticism of conventional growth models and supportrecent growth accounting studies of East Asian economies, whichemphasize the role of increased factor inputs.     

Stock prices and volume

We undertake a comprehensive investigation of price and volumeco-movement using daily New York Stock Exchange data from 1928to 1987. We adjust the data to take into account well-knowncalendar effects and long-run trends. To describe the process,we use a seminonparametric estimate of the joint density ofcurrent price change and volume conditional on past price changesand volume. Four empirical regularities are found: (i) positivecorrelation between conditional volatility and volume; (ii)large price movements are followed by high volume; (iii) conditioningon lagged volume substantially attenuates the 'leverage' effect;.and (iv) after conditioning on lagged volume, there is a positiverisk-return relation.     

Taxation and Income Distribution Dynamics in a Neoclassical Growth Model

We examine how changes in tax policies affect the dynamics of the distributions of wealth and income in a Ramsey model in which agents differ in their initial capital endowments. The endogeneity of the labor supply plays a crucial role, as tax changes that affect hours of work will affect the distribution of wealth and income, reinforcing or offsetting the direct redistributive impact of taxes. We consider different ways of financing government expenditure and find that policies that reduce the labor supply are associated with lower output but also with a more equal distribution of after‐tax income. We illustrate these effects by examining the impact of recent tax changes observed in the United States and in European economies.     

A system for rural regional development planning

The official South African systems for rural regional development planning do not allow democratic representation, are not effective and need reorganisation. The National Regional Development Programme acknowledges the dynamic nature of development planning, but the system is still trammelled by earlier misconceptions. Similarly, in rural regions the demand for regional services does not warrant regional services councils. In a new structure proposed for rural regional development planning each municipality provides all services and its boundaries are extended to include its rural hinterland. Regional services councils become regional development councils with the sole purpose of promoting social and economic development. Nongovernmental organisations and interest groups form standing committees to liaise with regional development councils. Implementation of development proposals will rest with local and higher levels of government.