Abstract not found

Abstract not found

Abstract Many oil, mineral, and plantation crop-based economies experienced a substantial deceleration of growth since the commodity boom and bust of the 1970s and early 1980s. Rodrik (1999) has demonstrated that the magnitude of a country's growth deceleration since the 1970s is a function of both the magnitude of the shocks and a country's "social capability" for adapting to shocks. In this paper we demonstrate that, in this respect, countries with what we term "point source" natural resource exports are doubly disadvantaged. Not only are countries with these types of exports exposed to terms of trade shocks, but also the institutional capability for responding to shocks is itself endogenous and negatively related to export composition. Using two different sources of export data and classifications of export composition, we show that "point source" and "coffee/cocoa exporting" countries do worse across an array of governance indicators (controlling for a wide array of other potential determinants of governance). This is not just a function of being a "natural resource" exporter, as countries with natural resource exports that are "diffuse" do not show the same strong differences-and have had more robust growth recoveries. * It matters whether a state relies on taxes from extractive industries, agricultural production, foreign aid, remittances, or international borrowing because these different sources of revenues, whatever their relative economic merits or social import, have powerful (and quite different) impact on the state's institutional development and its abilities to employ personnel, subsidize social and economic programs, create new organizations, and direct the activities of private interests. Simply stated, the revenues a state collects, how it collects them, and the uses to which it puts them define its nature. Terry Karl, The Paradox of Plenty 2 [I]t is useful to contrast the conduct of governments in resource-rich nations with that of governments in nations less favorably endowed. In both, governments search for revenues; but they do so in different ways. Those in resource-rich economies tend to secure revenues by extracting them; those in resource-poor nations, by promoting the creation of wealth. Differences in natural endowments thus appear to shape the behavior of governments.

Life used to be relatively simple for the peddlers of policy advice in the tropics. Observing the endless list of policy follies to which poor nations had succumbed, any welltrained and well-intentioned economist could feel justified in uttering the obvious truths of the profession: get your macro balances in order, take the state out of business, give markets free

Using a new data set on annual deaths from disasters in 57 nations from 1980 to 2002, this paper tests several hypotheses concerning natural disaster mitigation. While richer nations do not experience fewer natural disaster events than poorer nations, richer nations do suffer less death from disaster. Economic development provides implicit insurance against nature’s shocks. Democracies and nations with higher quality institutions suffer less death from natural disaster. The results are relevant for judging the incidence of a Global Warming induced increase in the count of natural disaster shocks.

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper explores the causes of India’s productivity surge around 1980, more than a decade before serious economic reforms were initiated. Trade liberalization, expansionary demand, a favorable external environment, or improved agricultural performance did not play a role. We find evidence that the trigger may have been an attitudinal shift by the government in the early 1980s, which, unlike the reforms of the 1990s, was pro-business rather than pro-market in character, favoring the interests of existing business rather than new entrants or consumers. A relatively small shift elicited a large productivity response because India was far away from its income possibility frontier. Registered manufacturing, which had been built up in previous decades, played an important role in determining which states took advantage of the changed environment.

Institutions — quality of contract enforcement, property rights, shareholder protec-tion, and the like — have received a great deal of attention in recent years. Yet trade theory has not considered the implications of institutional differences, beyond treating them simply as different technologies or taxes. The purpose of this paper is twofold. First, we propose a simple model of international trade in which institutional differ-ences are modeled within the framework of incomplete contracts. We show that doing so reverses many of the conclusions obtained by equating institutions with productiv-ity. Institutional differences as a source of comparative advantage imply, among other things, that the less developed country may not gain from trade, and factor prices may actually diverge as a result of trade. Second, we test empirically whether institutions act as a source of trade, using data on US imports disaggregated by country and industry. The empirical results provide evidence of “institutional content of trade: ” institutional differences are an important determinant of trade flows.

This paper surveys the literature on the effects of capital account openness and stock market liberalization on economic growth and provides a synthesis in which we reconcile some of the different results presented in the literature. Various empirical measures used to gauge the presence of controls on capital account transactions and the liberalization of equity markets are discussed. We compare detailed measures of capital account controls that attempt to capture the intensity of enforcement with other indicators that simply capture whether controls are present. A detailed review of the literature is followed by an empirical section in which we trace the divergence in published results to differences in country coverage, sample periods, indicators of liberalization, and control variables across studies. Specifically, we show that when an institutional variable such as government reputation is added to the specification, the significance of capital account openness vanishes. Also, we demonstrate that enriching the specification by allowing for nonlinearities helps explain why different studies that ignore the nonlinear nature of the relationship find different results. [JEL F32, F33, F36] Economic theory suggests that unfettered international capital flows can foster a more efficient allocation of resources, provide opportunities for risk diver-

I investigate the determinants of business cycles synchronization, across regions and over time. I use both international and intranational data to evaluate the linkages between trade in goods, trade in financial assets, specialization and business cycles synchronization in the context of a system of simultaneous equations. In all specifications, the results are as follows. (i) Simultaneity is important, as both trade and financial openness have a direct and an indirect effect on cycles synchronization. (ii) Countries with liberalized capital accounts (and States with high degree of risk sharing) are significantly more synchronized, even though they are also more specialized. (iii) Specialization patterns have a sizeable effect on business cycles, above and beyond their reflection of intra-industry trade and of openness to goods and assets trade. (iv) The role of trade, in turn, is in line with existing models once intra-industry trade is controlled for. Furthermore, trade-induced specialization has virtually no effect on cycles synchronization. The results obtain in a variety of cross-sections and panels. They relate to a recent strand of International Business Cycles models with incomplete markets and transport costs, and on the empirical side, point to an important omission in the list of criteria defining an Optimal Currency Area, namely specialization patterns.

This paper exploits the division of Germany after the Second World War and the re-unification of East and West Germany in 1990 as a natural experiment to provide evidence of the importance of market access for economic development. In line with a standard new economic geography model, we find that following division cities in West Germany that were close to the new border between East and West Germany experienced a substantial decline in population growth relative to other West German cities. We provide several pieces of evidence that the decline of the border cities can be entirely accounted for by their loss in market access and is neither driven by differences in industrial structure nor differences in the degree of war-related disruption. Finally, we also find some first evidence of a recovery of the border cities after the re-unification of East and West Germany.