Domestic Economic Performance Research Articles

Financing entrepreneurial activity in Chile: scale and scope of public support programs

This paper overviews the sources currently financing entrepreneurship in Chile, with special emphasis on public instruments, and uses the information gathered by Global Entrepreneurship Monitor (GEM) Chile between 2003 and 2006 to test the hypothesis that, despite public efforts, there is still a finance gap, and that this may significantly influence domestic economic performance in the long term. After a thorough bibliographic review regarding financial alternatives in Chile and a descriptive analysis of GEM data, results show that while there is sufficient available public funding in Chile, it is not being channeled to a sufficiently wide range of entrepreneurs. Some of the factors that reduce the impact of Chilean public financing policies and that require further research include the lack of competitive high-tech clusters within the country; the lack of attention given to informal investment and to the training of entrepreneurs; and the existence of centrally designed programs that do not take into account the geographical organization of capital markets and the spatial differences and gaps in private financing.

Bringing the Military Back in: Military Expenditures and Economic Growth 1990 to 2003

After the “peace bonus” era, global military expenditures have escalated sharply despite some worldwide declines in military personnel. Theories on the economic impacts of the military institution and escalated military spending greatly differ and include arguments that they either improve domestic economic performance or crowd out growth-inducing processes. Empirical findings on this matter are inconclusive, in part due to a failure to disentangle the various dimensions of military expenditures. We further suggest that modern sociology's relative inattention to such issues has contributed to these shortcomings. We explore a new dimension of military spending that clarifies this issue—military expenditures per soldier —which captures the capital intensiveness of a country’s military organization. Our cross-national panel regression and causal analyses of developed and less developed countries from 1990 to 2003 show that military expenditures per soldier inhibit the growth of per capita GDP, net of control variables, with the most pronounced effects in least developed countries. These expenditures inhibit national development in part by slowing the expansion of the labor force. Labor-intensive militaries may provide a pathway for upward mobility, but comparatively capital-intensive military organizations limit entry opportunities for unskilled and under- or unemployed people. Deep investments in military hardware also reduce the investment capital available for more economically productive opportunities. We also find that arms imports have a positive effect on economic growth, but only in less developed countries.

The euro, economic interests and multi‐level governance: Examining support for the common currency

Abstract. Support for a common currency and the European Monetary Union signifies that European citizens are willing to transfer power from the nation‐state to the European Union (EU). Given the symbolic importance of national currencies, this willingness to give up sovereignty over currency has important implications for the further integration and development of the European Union. Drawing on a multi‐level governance perspective and past research into public support for European integration, we examine how economic factors such as the value of the national currency and individual factors such as diffuse support for the EU and education condition support for the euro. We hypothesize that citizens will be less likely to support a common currency when they lack diffuse support for the EU, when their own national currency is strong or when their country's domestic agenda is squeezed by austerity measures. Using pooled Euro Barometer data from 1992 to 2000, we find support for these hypotheses indicating that citizens take into account domestic economic performance when evaluating EU institutions, but we also find that individual attitudes toward the EU play a role in support for the euro.

Interdependence, Government Constraints, and Economic Voting

This article examines the role of global economic interdependence in constraining citizens' responses to domestic economic performance. While recent work in economic voting has made strides in accounting for the contextual mediators of support, analyses have not gone beyond domestic political structures. At the same time, students of globalization highlight the constraints governments face from the world economy but do not extend their analyses to examine the role of mass political behavior. This article brings these two research agendas together. Using cross-sectional individual-level data, it is found that accounting for exposure to the world economy dampens the strength of domestic economic bases of popular support. Additional analyses show that the susceptibility of different groups in society to the global economy's mediating influences is not uniform but contingent on occupational differences.

The dog that didn't bark: economic development and the postwar welfare state

This paper focuses on the linkages between postwar economic and social policy development. Examining the relationship between affluence and levels of welfare over the period as a whole reveals a tendency for social expenditure effort to be higher in moderately affluent then in extremely affluent nations. Turning to the question of how economic growth impacted on welfare expansion in the early postwar decades, the paper argues that growth was a necessary, rather than a sufficient, condition of welfare development. Finally, analysis of the era of welfare containment suggests that domestic economic performance has been the main factor conditioning expenditure change

Infrastructure project finance and capital flows: A new perspective

The success with which middle-income indebted developing countries have gained access to private international finance in the 1990s is a tribute to their own domestic economic performance, international policy in dealing with the debt crisis of the 1980s, and innovations in international financial markets. This paper emphasizes the role of private infrastructure investment as a vehicle for attracting foreign capital to developing countries in the 1990s. The paper examines the determination of credit risk premium on infrastructure projects in the country risk environment of developing countries, and provides tentative quantitative evidence of the importance of macroeconomic and project-specific attributes of project risk. The key finding is that the market seems to impose a high risk premium on loans to countries with high inflation, and to projects in the road sector.

Military Investments and Economic Growth in Developing Nations

In the 1980s much scholarly attention was paid to estimating the impact of Third World security sectors on domestic economic performance. Generally speaking, three branches of the pertinent literature can be identified. One branch consists of case studies of arms-producing less developed countries (LDC APs) to assess the level of sophistication and the volume of arms produced in LDCs as well as to explore the economic consequences of'indigenous arms production.' A second branch investigates the impact of LDC military spending on specific macroeconomic aspects, such as the impact on inflation, the impact on employment, budgetary trade-offs, military research and development (R & D) and technology transfer issues, and so on.2 The third branch, covering possibly the most prominent and most widely researched topic, directly relates military expenditures to rates of economic growth, sometimes as time-series for specific countries, more often as cross-sectional studies for a given year. The dominant finding is that increases in military expenditures are causally and negatively related to rates of economy-wide growth.3 A number of scholars report contrary findings, however. Some, for example, Chan, Hsiao, and Keng, Evans, as well as Biswas and Ram, find that defense spending and economic growth appear unrelated. Others, most prominently Frederiksen and Looney (summarized, e.g., in Looney), discover that the defense-growth relation differs across country groups of interest.4 Frederiksen and Looney's work in particular submits that the negative impact of military expenditures on economic growth is mitigated in the case of those LDCs that engage in some arms-production activities. But why does this effect occur? I suggest in this article that in the case of LDC APs some part of military expenditures must be invested in the domestic economy for

Foreign Direct Investment in U.S. Food and Tobacco Manufacturing and Domestic Economic Performance

Over the last two decades, the U.S. foodand tobacco-manufacturing sector has increasingly participated in the internationalization of the U.S. economy. Exports and imports have increased simultaneously for a number of U.S. food and tobacco products (Pagoulatos and Sorensen 1979). This growth, in contrast to raw agricultural commodities, has not been the most prevalent feature. Rather, the greater international involvement of the U.S. food sector has resulted from the rapid growth of U.S. direct investment abroad during the 1960s and the equally rapid growth of Canadian and European investment in the United States during the 1970s.' This paper concentrates on this trend of increased inflow of foreign direct investment (FDI) into U.S. foodand tobacco-processing industries. The determinants of FDI inflows and their domestic performance implications are issues that require increased attention by agricultural economists. Analyzing this topic presents a challenge because it requires bridging the gap between international trade theory and industrial organization. Understanding the issues surrounding FDI in the United States, however, is an essential step toward comprehending the longer-term adjustments facing the U.S. food system as it becomes more integrated in the world economy. In what follows, the evidence regarding the extent of FDI in the U.S. food-processing sector is provided, and the existing theories and empirical evidence regarding the determinants of FDI are evaluated in light of the experience of the U.S. food sector over the last decade. The implications of FDI inflows for the domestic economic performance of the food sector complete the paper.

Some Aspects of Formosa's Economic Growth

Fourteen years have elapsed since a shattered Nationalist Government fled to Formosa with the hope of reorganising and revitalising its forces and of building an effective base for a counter-attack against the Chinese Communists. At that time it appeared to have little chance of survival. However, because of changing international conditions and Formosa's impressive domestic economic performance, the Nationalist Government has been able to re-establish itself as an effective political force. Formosa's economic achievements have given the Government a certain international prestige and, combined with military assistance from the United States, have allowed it to maintain a large, well-equipped military establishment.