Growth In Poor Countries Research Articles

The Debt-growth Nexus: A Dynamic Panel Data Estimation

This paper investigates the relationship between external debt and economic growth in poor countries. The adverse effects of external debt on economic performance are due to the crowding out of public investment and to the disincentive effects, because of debt overhang and uncertainty. Notwithstanding a general agreement on theory, empirical evidence is not conclusive and lacks of robustness. This contribution aims to shed more light on the relationship between external debt and economic growth and to draw some policy implication for debt relief. This work highlights the critical role of econometric and methodological issues. The results for a panel of 152 developing countries over the period 1977-2002 support a negative linear relationship between external debt and economic growth, and between debt service and investment. These effects are found to be stronger in the Low-Income Countries than in the overall sample, raising concern about the dramatic effect that debt has on economic performance in the world's poorest countries. In LICs, a debt reduction from a debt-to-exports ratio of 300 to the HIPC threshold of 150 is estimated to add more than one percentage point to per capita GDP growth, and a debt service reduction is found to be more than two times more effective than an equal increase in foreign aid. Eventually, external debt impairs economic growth through the liquidity constraint, the creation of macroeconomic instability, the lower efficiency of investment, and its effect on macroeconomic policies and institutional development.

And Schumpeter Said, "This is How Thou Shalt Grow": Further Quest for Economic Growth in Poor Countries

"Volume 2004 (2004): Issue 040 (Mar 2004): And Schumpeter Said, "This is How Thou Shalt Grow": Further Quest for Economic Growth in Poor Countries" published on 01 Mar 2004 by International Monetary Fund.

And Schumpeter Said, "this is How Thou Shalt Grow": The Further Quest for Economic Growth in Poor Countries

The paper reviews the “stylized facts” on economic growth gathered by Easterly and Levine in their 2001 joint paper and illustrates some of the points made on the basis of data from the IMF’s World Economic Outlook on real growth and per capita GDP since 1970. The data show that the growth performance of many poor countries has been disappointing: most of the “developing” world, especially sub-Saharan Africa, has been getting poorer while the advanced economies have been getting richer. To reverse this trend requires finding ways to raise total factor productivity in poor countries; in turn, this implies letting entrepreneurs innovate—in the Schumpeterian sense—in order to bring about structural changes in the economy. The conclusion highlights several essential steps in creating a favorable environment for innovation and growth.

Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)

The extent to which growth reduces global poverty has been disputed for 30 years. Although there are better data than ever before, controversies are not resolved. A major problem is that consumption measured from household surveys, which is used to measure poverty, grows less rapidly than consumption measured in national accounts, in the world as a whole and in large countries, particularly India, China, and the United States. In consequence, measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries. One plausible cause is that richer households are less likely to participate in surveys. But growth in the national accounts is also upward biased, and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys. So it is possible for consumption of the poor to grow less rapidly than national consumption, without any increase in measured inequality. Current statistical procedures in poor ...

Inequality and Growth in a Panel of Countries

Evidence from a broad panel of countries shows little overall relation between income inequality and rates of growth and investment. For growth, higher inequality tends to retard growth in poor countries and encourage growth in richer places. The Kuznets curve—whereby inequality first increases and later decreases during the process of economic development—emerges as a clear empirical regularity. However, this relation does not explain the bulk of variations in inequality across countries or over time.

R&D Cooperation and Growth

If R&D produces nonrival inputs then firms have an incentive to cooperate, but free riding can make cooperation difficult. This paper builds a simple endogenous growth model allowing cooperative behavior among firms in their R&D game. Industry's first best cooperative investment is enforceable as an equilibrium only if technology is above a threshold level. This model allows for switching equilibria able to sustain slower growth in poorer countries. The model also admits sunspot equilibria. In a world where the production of ideas is important multiplicity and variability of economic performance can be relevant.Journal of Economic LiteratureClassification Numbers: O32, O40, D9, L16.

Population growth and agriculture in poor countries: A review of theoretical issues and empirical evidence

The paper contributes a critical survey of the very extensive literature dealing with various aspects of the economic and institutional responses of agriculture to population growth in poor countries, encompassing a discussion of the main underlying theoretical issues. Such responses are evaluated in the framework of the general population-development debate. The main conclusion is that, although population growth induces adjustments in agriculture, in terms of technical progress, intensification, and definition of property rights, optimism may not be justified in the context of very fast population growth and/or already high densities, especially when the environmental resource base is taken into account.

What Makes Democracies Endure?

What Makes Democracies Endure?* Adam Przeworski (bio), Michael Alvarez (bio), José Antonio Cheibub (bio), and Fernando Limongi (bio) If a country, any randomly selected country, is to have a democratic regime next year, what conditions should be present in that country and around the world this year? The answer is: democracy, affluence, growth with moderate inflation, declining inequality, a favorable international climate, and parliamentary institutions. This answer is based on counting instances of survival and death of political regimes in 135 countries observed annually between 1950 or the year of independence or the first year when economic data are available (“entry” year) and 1990 or the last year for which data are available (“exit” year), for a total of 4,318 country-years. 1 We found 224 regimes, of which 101 were democracies and 123 dictatorships, observing 40 transitions to dictatorship and 50 to democracy. Among democratic regimes, there were 50 parliamentary systems, 46 presidential systems, and 8 mixed systems. 2 Our definition of democracy is a minimalist one. We follow Robert A. Dahl’s 1971 classic Polyarchy in treating as democratic all regimes that hold elections in which the opposition has some chance of winning and taking office. When in doubt, we err in the direction of calling a regime dictatorial. Our classification is not idiosyncratic, but is closely related to several alternative scales of democracy. The rationale and the rules for classifying regimes are discussed in the Appendix below. [End Page 39] Democracy. It may seem tautological to say that a country should have a democratic regime this year in order to have a democracy next year. We do so in order to dispel the myth, prevalent in certain intellectual and political circles (particularly in the United States) since the late 1950s, that the route to democracy is a circuitous one. The claim is that 1) dictatorships are better at generating economic development in poor countries, and that 2) once countries have developed, their dictatorial regimes will give way to democracy. To get to democracy, then, one had to support, or at least tolerate, dictatorships. Both of the above propositions, however, are false: 1. While analyses of the impact of regimes on economic growth have generated divergent results, recent econometric evidence fails to uncover any clear regime effect. The average rate of investment is in fact slightly higher in poor democracies than in poor dictatorships; population growth is higher under dictatorships but labor productivity is lower; and investment is more efficiently allocated under democracies. Dictatorships are no more likely to generate economic growth than democracies. 3 Indeed, the 56 dictatorships with annual per-capita income of less than $1,000 when we first observed them simply failed to develop. 4 By the exit year, only 18 of them had made it (whether under democracy or continued dictatorship) to $1,000, only 6 to $2,000, and only 3 to more than $3,000. South Korea and Taiwan are exceptional: they are the only two dictatorships that started under $1,000 in 1950 and had annual per-capita income exceeding $5,000 by 1990. If we consider as “initially poor” those countries with less than $2,000, we find that among 98 dictatorships first observed below this level, by the exit year only 26 had made it to $2,000, 15 to $3,000, 7 to $4,000, and 4 to $5,000. These figures should be enough to dispel any notion that dictatorship somehow promotes economic growth in poor countries. 2. Democracies are not produced by the development of dictatorships. 5 If they were, the rate at which dictatorships make the transition to democracy would increase with the level of development: analyses of the survival prospects of dictatorships, however, indicate that this is not the case. Indeed, transitions to democracy are random with regard to the level of development: not a single transition to democracy can be predicted by the level of development alone. 6 Since poor dictatorships are no more likely to develop than poor democracies and since developed dictatorships are no more likely to become democracies than poor ones, dictatorships offer no advantage in attaining the dual goal of development and democracy. In order to strengthen...

Just Adjustment Protecting the Vulnerable and Promoting Growth

This paper is a follow up in the Pakistani context of the issues raised in UNICEFs classic contribution to the political economy of development, Adjustment With a Human Face [Cornia, Jolly and Stewart (1987), henceforth AWHF]. It tries to set out the issues involved in understanding why despite four decades of development has there not been a significant move towards meeting the basic needs of the population. Our argument is that reliance on the cultural norms of justice and humanness - particularly as regards vulnerable groups - as the basis of choosing priorities and designing policies, is a means and not an obstacle to systainable growth and structural adjustment. Structural adjustment, namely changes in a ~untry's production and consumption structure, becomes necessary when expenditures begin to exceed incomes systematically. However, orthodox adjustment programmes have often been criticised because they have tended to retard growth in poor countries, and to shift the burden onto vulnerable groups. In the tradition of this literature, we argue not against the necessity of structural adjustment, but against the adverse entailments of such adjustment. Hence the title, "Just Adjustment".

Does agricultural growth in poor countries harm agricultural-exporting rich countries?

The commonly held view that agricultural-exporting developed countries would lose from agricultural growth in less-developed countries (LCDs) is shown to be based on an incomplete argument. It considers only the effects on LDC agricultural supply, or at best only that and the first-round effects of increased farmer incomes on the demand for tradables. What also needs to be considered is the effect on the demand for nontradables and hence the second-round effects of increased spending by producers of nontradables. When all these effects are considered, the positive correlations obtained between agricultural output growth in LDCs and agricultural imports from developed countries is not surprising. It is then shown that selling or giving away agricultural research and management skills to developing countries can be beneficial to developed countries, including agricultural exporters: by setting out to do good, they may end up also doing well.

Does Agricultural Growth in Poor Countries Harm Agricultural‐Exporting Rich Countries?

AbstractThe commonly held view that agricultural‐exporting developed countries would lose from agricultural growth in less‐developed countries (LDCs) is shown to be based on an incomplete argument. It considers only the effects on LDC agricultural supply, or at best only that and the first‐round effects of increased farmer incomes on the demand for tradables. What also needs to be considered is the effect on the demand for nontradables and hence the second‐round effects of increased spending by producers of nontradables. When all these effects are considered, the positive correlations obtained between agricultural output growth in LDCs and agricultural imports from developed countries is not surprising. It is then shown that selling or giving away agricultural research and management skills to developing countries can be beneficial to developed countries, including agricultural exporters: by setting out to do good, they may end up also doing well.

The Effect of Population Growth upon the Quantity of Education Children Receive: A Comment

Malthusian theory asserts that high population growth in poor countries retards economic development. 2 authors Simon and Pilarski have recently challenged this theory on the basis of their own research; it is their contention that previous studies of population growth and education (1 of the principal modes by which the Malthusian mechanism is assumed to operate) have been flawed. The defect is felt to lie in the assumption of simple rather than partial associations of the 2 variables education and population growth. On the basis of their tightened specifications they have found demographic variables to be nonsignificant in explaining educational expenditures per child once other relevant regressors have been introduced. Similarly little effect of the demographic variable on primary and tertiary school enrollment rates were found although an effect for secondary school enrollment rates was found. On examination of the theoretical framework and the several explanatory variables however the author concludes that a crucial variable which is sure to have a vital bearing on the conclusions reached has been misspecified in the equations. Further the author asserts that a more thorough specification of the tests of the hypothesis (i.e. that high population growth retards educational investment) actually provides additional support for the Malthusian conclusion on educational expenditures despite unpromising initial indications.

EXPORTS AND ECONOMIC GROWTH IN WEST MALAYSIA

IN the late nineteenth and early twentieth centuries many countries experienced rapid rises in primary product exports.2 In most cases, these exports remain important to the present day in terms both of their absolute volume and value and of their contribution to national product. Some of the countries, such as Canada and Australia, now have high levels of per capita income. Others experienced much less economic growth and are still regarded as 'underdeveloped', although within the 'underdeveloped' group many differences exist in relative growth performance. It has been contended that rapid export growth in poor countries has led to the existence of export industry 'enclaves', which have not, and cannot, spread development into the rest of the domestic economy.3 Such a view has implications both for the interpretation of past experience and for the formulation of present policy. The relation between exports and economic growth in poor countries can be examined in aggregative terms using cross-sectional studies of a large number of countries. Another approach is the case study of individual exports in a particular country.4 What case studies lose in generality they gain in depth. This paper summarizes the results of a case study of West Malaysia, concentrating on the effects of tin and rubber exports. 1 This paper summarizes the results of a research project financed mainly by the Overseas Development Administration of the Foreign and Commonwealth Office, London, and submitted to the University of Alberta in Canada as a doctoral thesis in 1971. Of course, ODA is not responsible for any view expressed here. I am grateful for very helpful comments to Professor P. T. Bauer of the London School of Economics, to Mrs. F. Stewart and Mr. P. P. Streeten of Queen Elizabeth House, Oxford, and Professor H. F. Lydall of East Anglia. I should like also to thank my thesis supervisor Professor T. L. Powrie for his help and encouragement throughout the project and the Faculty of Economics and Administration in the University of Malaya, Kuala Lumpur, for its hospitality during my two visits to Malaysia in 1969 and 1970. An earlier version of this paper was circulated as a University of East Anglia Economics Discussion Paper (No. 1, Mar. 1972), and a later draft was presented at the East Anglia faculty seminar. 2 These countries are sometimes known as the 'periphery'. The contrast is with the countries of the 'centre', such as the United Kingdom, France, and Germany, which had already achieved a substantial degree of industrialization and growth. 3 The most influential statement of this view is Singer (1950). Singer suggests that for a number of economic, social, and institutional reasons the favourable multiplier-accelerator effects of export growth bypass the host economy. He opposes the development of primary product exports because he feels that industrial development offers more growth effects and because of the supposed secular deterioration in the terms of trade of primary products. Later work has concentrated on assessing the mechanisms through which trade can stimulate growth. For surveys of this literature see Watkins (1963), Meier (1968, pp. 214-54), and Thoburn (1972c). 4 For a cross-sectional study see Emery (1967). For case studies see Lim (1968) on Ceylon, Baldwin (1966) on Zambia, and Levin (1960) on Peru and Burma.