Financial development and economic growth: Additional evidence

This note suggests that, contrary to the conclusions reached in several recent studies, the empirical evidence does not support the view that financial development promotes economic growth. It is first noted that the predominant pattern in the data for 95 individual countries is that of a negligible or weakly negative covariation between financial development and growth of real GDP per capita. Second, the individual‐country correlational picture is a sharp contrast to the correlations based on crosscountry data that have been used in most research on the subject. Third, individual‐country estimates of a basic multiple‐regression growth model also do not indicate a positive association between financial development and growth. Fourth, in cross‐country data and models of the kind that have been used in most studies, when the regression structure is permitted to vary across three subgroups, a huge parametric heterogeneity is observed, and the overall indication is that of a negligible or negative association between financial development and growth.     

Exports,growth and threshold effects in Africa

Abstract

The relationship between openness and growth remains a controversial issue in development economics with many studies focusing on the export–growth relationship. This paper examines whether the relationship between exports and growth found in large cross-section studies also holds in the context of African economies. The paper employs threshold regression techniques to examine whether African countries benefit more from exports when they reach a certain level of development or openness. Our results suggest that there is indeed a positive relationship between exports and growth in Africa. The threshold regression analysis also suggests that it is not necessary for a country to reach a certain level of development or to have an existing export base for this relationship to hold, though it is found that the relationship is stronger for countries that experience higher rates of export growth.     

Financial Factors and Manufacturing Exports: Firm-Level Evidence From Egypt

This paper focuses on the effects of financial factors on manufacturing firms’ export participation in a panel of Egyptian manufacturing firms over the 2003–2008 period. Our main results show that financial constraints reduce export participation of Egyptian firms, while financial liquidity improves it. Moreover, financial constraints have a negative impact on alternative measures of export activity, namely, export intensity and the time the firm takes before starting to export. Consequently, adding to the scarce literature on developing countries, our results support an important impact of financial factors on Egyptian firms’ participation in international trade.     

Economic rights and government in developing countries: Cross-national evidence on growth and development

Most analysts assume that economic rights (especially to property and to contracts) help foster economic development, but the relationship is rarely studied empirically. Using three recently developed indexes of economic freedom, this article explores this issue for the mid-1980s to the mid-1990s. It finds that developing countries that score better in protecting economic rights also tend to grow, faster and to score higher in human development. In addition, economic rights are associated with democratic government and with higher levels of average national income. Arthur A. Goldsmith is professor of management at the University of Massachusetts, Boston. During the 1998 academic year he is a Visiting Scholar at the Harvard Institute for International Development. Professor Goldsmith has published widely on global economic and management issues, and has consulted for several international development agencies. His most recent articles have appeared inInternational Review of Administrative Sciences, World Development, Journal of Development Studies, andDevelopment and Change. Professor Goldsmith's latest bookBusiness, Government, Society: The Global Political Economy was published in 1996.     

Foreign aid and the economic growth of developing countries (LDCs): Further evidence

The objectives of this article are to revisit the critical role that foreign aid presently plays in the economic growth of the LDCs and to examine the nature of its utilization in those countries which heavily rely on foreign aid. Other sources of economic growth such as capital (physical and human capital), raw labor, technological changes, and the degree of political and civil liberties will also be considered. Using average cross-sectional data for eighty countries over the 1971–1990 period, the study shows that foreign aid has a statistically positive effect on economic growth in developing countries. Lack of political and civil liberties is found to have a negative, but statistically marginal impact on economic growth. A policy implication which may be drawn from the study is that foreign capital inflow can have a beneficial effect by supplementing domestic savings rather than replacing them. Bichaka Fayissa, Ph.D., is Professor of Economics at Middle Tennessee State University, Murfreesboro, TN. He has published in theInternational Journal of Social Economics, World Development, Keil World Economics, Quarterly Review of Economics and Finance, Applied Economics, Economia Internazionale, Journal of Economics and Finance, Journal of Legal Economics, and several other journals.     

Exports,Outward FDI and Technology Upgrading: Firm Level Evidence from India

This paper evaluates the individual and combined effects of exporting and outward foreign direct investments (OFDI) on firms’ technology investments at home using firm-level data from the pharmaceutical industry in India. The analysis accounts for unobserved firm heterogeneity and the endogeneity of the choice of foreign market participation, and shows that exporting has been an important channel through which Indian multinational expansion has encouraged greater domestic technological activity. However, all else constant, higher levels of OFDI have rather acted as substitutes for such technological efforts.     

Developing Technological Capabilities in Agro-Industry: Ghana's Experience with Fresh Pineapple Exports

This article examines the emergence and trajectory of a new agro-industry in Ghana, the pineapple export industry, using the technological capabilities approach. It explains the limited expansion of the industry and its declining competitiveness in the face of new competition by looking at how Ghanaian exporters developed technological capabilities initially and the incentives and disincentives to building on those capabilities. The article argues that at the heart of the industry's crisis was an inability to further develop technological capabilities. The crisis had systemic features that have broader implications for developing new agro-industries in Ghana as well as other African countries.     

Skills,Investment and Exports from Manufacturing Firms in Africa

It has been argued that Africa will not be able to export manufactures as it lacks the necessary skills. This study uses panel data from Ghana to ask how skills have impacted on manufacturing investment and exports in the 1990s. Two dimensions of skills are defined and measure. The first is that observable in the education and experience of the workforce. The second is the underlying efficiency with which the firm operates. The latter is shown to be a significant determinant of both investment and exports. These exports are relatively capital intensive; unskilled labour-intensive exports remain negligible. Possible reasons for these outcomes are discussed.     

FDI,AGOA and Manufactured Exports by a Landlocked,Least Developed African Economy: Lesotho

Lesotho, a resource-poor country located inside South Africa, is now Africa's largest exporter of apparel to the US. Its performance, very unusual for Africa, relies heavily on Asian investors and trade privileges. This article traces the origins of FDI in Lesotho and the determinants of its export competitiveness, showing that apparel production suffers from low productivity, poor skills and weak local links. Its prospects after AGOA (the African Growth and Opportunities Act) remain uncertain unless the government addresses these structural problems. Lesotho holds important lessons for industrial development in Africa, going beyond creating a good investment environment.     

MNE Affiliation,Firm Size and Exports Revisited: A Study of Information Technology Firms in India

In this study we argue that the export performance of affiliates of multinational enterprises (MNEs) in developing countries is determined differently from that of licensees of foreign firms or of domestic firms. Our empirical results for the information technology sector in India show that exports of MNE affiliates are greater when they have larger foreign equity stakes that bring more tacit knowledge transfer and complementary FDI advantages and when they import more explicit technology from the purchase of licences. Standard export determinants such as firm size and capital intensity do not matter for MNE affiliates, but they do for licensees and domestic firms.     

Policy and Non-Policy Barriers to Trade and Implicit Taxation of Exports in Uganda

Uganda has made significant progress in reducing policy-induced anti-export bias in its trade policy in the 1990s. Taxes on exports have been abolished, and import protection has been reduced considerably. Such trade barriers are only a component of thee transaction costs associated with trade. Poor infrastructure, notably by increasing transport costs, and institutional inefficiencies can significantly increase trade costs. The effective protection of imports, and implicit tax on exports, due to transport costs is calculated and compared to effective protection due to trade policy barriers for Uganda. The results reveal that transport costs are often very high, in many cases representing a greater cost (tax) to exporters than trade policy.     

Some Scenarios for Russian Oil Exports up to 2020

This article analyses the potential for Russian oil export growth through the next decade. It concludes that supply for exports will continue to grow, albeit moderately. The greater or lesser intensity of that growth will depend on the evolution of both production and internal consumption, and especially on the reaction by investors to sector changes promoted by government energy policy. From this analysis, we find three likely scenarios for Russian oil exports. The most positive envisages it will be possible to diversify exports while the most negative suggests that Russia will have scant opportunity to develop an export diversification strategy.     

The Role of FDI,Exports and Spillover Effects in the Regional Development of China

The objective of this analysis is to assess the impacts of export expansion, inward FDI, domestic investment and labour on the growth of China's Eastern, Central and Western regions using panel data over the period 1984 to 1998. A major contribution of the study is its tests for the presence of interregional spillover effects. The study indicates that both inward FDI and domestic investment stimulate growth in all three regions and for the PRC as a whole and that export expansion stimulates the growth of the PRC, Eastern and Central China, but not the West. Labour enhances the growth of the more traditional Western region, but not the more capital intensive Eastern seaboard or the PRC in its entirety. Finally, output growth spills over from the East to Western and Central China and from the Central area to Western China. These results are fully explained in the text.     

Cultural and economic prerequisites of democracy: Reassessing recent evidence

The purpose of this article is to reassess two influential theories of democratic development: the theory of democratic culture and the theory of economic development. The leading predecessors in each domain—Ronald Inglehart and Adam Przeworski—are the prime targets of analysis. We take issue with recent evidence presented by these authors on three grounds: the evidence (1) confuses “basic” criteria of democracy with possible “quality” criteria (Inglehart); (2) conceptualizes democracy in dichotomous rather than continuous terms (Przeworski); and (3) fails to account for endogeneity and contingent effects (Inglehart). In correcting for these shortcomings, we present striking results. In the case of democratic culture, the theory lacks support; neither overt support for democracy nor “self-expression values” affect democratic development. In the case of economic development, earlier findings must be refined. Although the largest impact of modernization is found among more democratized countries, we also find an effect among “semi-democracies.” Axel Hadenius is professor of political science at Uppsala University in Sweden. He is the author ofDemocracy and Development (Cambridge University Press, 1992) andInstitutions and Democratic Citizenship (Oxford University Press, 2001). Jan Teorell is associated professor of political science at Uppsala University. His articles on intra-party democracy, social capital, and political participation appear in international journals.     

Labour demand and Agroindustrial development: The evidence from Mexico

Agroindustrialisation, in contrast to assertions by Mexican policy‐makers, has had a negative employment‐generating effect in agriculture in the region known as El Bajío. The impact of widespread crop substitution and the wholesale transfer of technology promoted by transnational processing plants have both reduced the total labour employed and increased the instability of employment through heightened seasonality of labour demand. A decomposition analysis assesses the role played by various determinants of labour demand in the alteration of regional agricultural employment which has resulted from agro‐industrialisation.     

Industrial Restructuring in Romania from a Bilateral Trade Perspective: Manufacturing Exports to the EU from 1995 to 2006

The article presents an analysis of changes in the volume, structure and quality of Romanian manufacturing exports to the EU since 1995 in order to determine the nature and extent of industrial restructuring in Romania. We argue that the observed five-fold increase in the volume of manufactured exports from Romania to the EU over more than a decade-long period, although it is a positive development, still hides a persistent reliance upon labour-intensive and low value-added products. Only towards the end of the examined period have Romania's export patterns begun to resemble those of the more advanced Central and East European countries, reflecting the more important role played by intra-industry exports of differentiated products, the gradual transition from labour intensive, low valued-added exports to more technology-intensive ones and the improvement in product quality.     

Exports as a Determinant of Long-Run Growth in Paraguay, 1966-96

During the 1970s and early 1980s Paraguay experienced relatively high rates of economic growth as well as a boom in primary goods production destined for export. The question which this research addresses concerns the relationship between these events and the applicability of the so-called export-led growth (ELG) hypothesis. The hypothesis is investigated via the use of modern time series methods including Granger causality tests, error correction modeling, and vector autoregression. The basic conclusion reached is that the ELG does not have much relevance to the Paraguayan case.