In this readily accessible book Bardhan examines the political and social constraints on Indian development. In the newly added epilogue Bardhan comments on the process of liberalization in the ...1990's and examines the feasibility of the exercise in the light of ground realities. This ambitious and controversial book is essential reading for students of economics, politics and the general interested reader.
The literature suggests that investment and economic growth respond very slowly to economic reform due to uncertainty about the permanence of reform. Despite clear theoretical underpinnings for the ...idea that policy reversal significantly impedes economic performance, there is limited empirical evidence on this topic. This paper derives empirical proxies for the probabilities of different types of policy reversal and investigates their impact on investment and growth in Sub-Saharan African countries. The results show that trade, fiscal, savings and financial policy reversals have been very damaging to investment and economic growth. The paper also finds that it is the prediction or expectation that reversal will occur that hurts performance. There is no evidence that exchange rate policy reversal has damaged performance.
A gravity model is fitted to 17 annual cross sections, 1980-1996, of bilateral trade data (imports and exports) between CARICOM member states and selected trading partners. Specifically, the paper ...investigates the effects of regional integration, colonial legacies and linguistic ties on CARICOM bilateral trade flows between member states and between member states and North American and European Union countries. The empirical results indicate that history and regionalism have had significant and strong effects on CARICOM trade. Additionally, two traditional explanatory variables in gravity models, income per capita and population, have significant and positive effects on CARICOM trade while the distance between trading partners exerts the expected negative effect.
We employ two nonparametric nonlinear testing methodologies, namely a nonparametric nonlinear cointegration approach and a nonlinear Granger causality approach, to test for a nonlinear relationship ...between macroeconomic fundamentals and exchange rates for two country-pairs, namely the Netherlands–Germany and France–Germany. The results suggest that there is nonlinear cointegration among money, output and exchange rates for Netherlands–Germany, which can be interpreted as evidence of a
long-run nonlinear relationship. For France–Germany, we fail to find evidence of nonlinear cointegration, but we find nonlinear Granger causality from French money to the FFr/DM exchange rate. These findings may be interpreted as evidence of a
dynamic nonlinear relationship and are consistent with the German dominance hypothesis. On the basis of estimated fractional ARIMA models, we rejected the hypothesis that these nonlinearities are due to bubbles.
The rapid growth of the Irish economy over the past decade and the simultaneous increase in (i) the number of foreign-owned plants in the high-tech sectors and (ii) the research and development (R&D) ...activities of foreign-owned plants have given rise to an increased interest in the relationship between foreign direct investment (FDI) and economic growth in Ireland. The central question explored in this paper is whether the tangible contribution of MNC plants which undertake R&D investment in Ireland is greater than the tangible contribution of MNC plants which undertake no R&D investment. We use a plant-level data set and conclude that the scale of R&D activity in a plant is an important determinant in (i) lengthening the duration over which that plant will remain in Ireland and (ii) improving the quality of employment created in that plant. Although it has long been recognised that the attraction of FDI to Ireland has been beneficial, the results of this paper support the idea that R&D-active firms generally provide greater benefit to the economy. On employment grounds alone, policy should favour R&D-active plants in high-tech sectors.
This paper examines the effects of stronger child support enforcement and declines in welfare benefits on changes in non-marital childbearing between 1980 and 1996. Economic theory suggests that ...stricter child support enforcement will increase the costs of children for unwed fathers, making them less likely to have a child outside marriage. Reductions in welfare benefits also are expected to increase the costs of non-marital childbearing for both mothers and fathers. We examine these hypotheses, using aggregate state-level data and fixed effects regression models to identify the effects of policies on non-marital birth rates. We find that both stricter child support enforcement and declines in welfare benefits deter non-marital births. However, the estimated effects of child support enforcement are more robust and larger than those of welfare. The estimates imply that in the 1980-1996 period, increases in child support enforcement led to a decline in non-marital birth rates in the range of 6% to 9%, whereas decreases in welfare benefits led to a decline in the range of 2% to 4%.
Many of the previous studies on contagion effects in the banking industry focused on the failure of a large bank to determine whether the adverse effects spread to other banks. Yet, little is known ...whether other publicized bank failures cause contagion effects, and why the effects may vary among bank failures. Given the changes in the banking environment over time, contagion effects could be conditioned on the characteristics of the failing bank and of the banking environment at that time. We assess 99 publicized bank failures over the 1980–1996 period, and find that contagion effects exist in general for the surviving rivals of the failed bank. The degree of contagion effects varies over time (among bank failures), and is stronger when the failed bank is a multibank holding company, when the failed bank is publicly held, when the failed bank is relatively large, when the rivals are relatively small, and when the rivals have relatively low capital levels. The contagion effects are less pronounced in the period following the passage of FIRREA. Furthermore, the total risk-shifts of surviving rival banks in response to the announcement of a failed bank are inversely related to their capital level, and total risk-shifts of rival banks are less pronounced for failures occurring just after the passage of FIRREA. The results suggest that a bank’s exposure to possible contagion effects due to a bank failure can be partially controlled by a bank’s managerial policies and by regulatory policies.
Theory predicts that workers in cities are more likely to engage in job search, ceteris paribus, due to market efficiencies associated with greater job density. However, if job search is more ...efficient in urban markets, then the quality of a given job match should also tend to be higher in cities, ceteris paribus. Employed workers living in cities might then be expected to search less than their nonurban counterparts. In this latter instance, it is not city residency itself that makes search less likely, but rather the positive correlation between city residency and job match quality. Using data from the National Longitudinal Survey of Youth 1979, this prediction is confirmed: The estimated coefficient on an indicator of urban residency is found to be near zero and statistically insignificant in models of employed search that omit proxies for job match quality. When job match proxies are included in the models, the estimated coefficient on urban residency becomes positive and highly significant. This result suggests that workers are not only more likely to engage in employed search in urban labor markets, but also tend to find more productive job matches in cities over time.
The technological structure of export matters for their growth: learning and path dependence mean that structures are difficult to change as technologies evolve. Trade liberalization
per se is ...insufficient. Countries need to upgrade domestic skill and technology and attract sophisticated foreign direct investment (FDI) to “dynamise” their export structures. A comparative analysis of Indian manufactured exports suggests that their structure and positioning are not suited to sustained growth. The base for rapid structural change—through FDI or domestic capabilities—is weak. The current export slowdown in India reflects external conditions and may end soon; however, this does not assure rapid future growth.
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