The effects of transportation costs in low‐income agricultural economies

This paper examines the static consequences of transport costs in low‐income agricultural economies, and argues that many phenomena common to such economies may be largely due to the costs of transportation. It is argued below that the coexistence of ‘modern’, intensive capital‐using farms and others using primitive, extensive farming methods and very little capital can be a response to transport costs. It also seems possible that a sizeable fraction of the frequently observed urban‐rural wage gap may be a transport‐related index number phenomenon rather than a true gap in real wages.     

Urban bias in price risk: The geography of food price distributions in low‐income economies

The geography of agricultural marketing has important implications for the stochastic distribution of agricultural commodity prices. This article proposes that objective food price risk differs between rural and urban areas of infrastructure‐poor economies characterised by spatially concentrated patterns of foodgrains storage. This difference implies an urban bias having adverse welfare effects for peasants who seasonally switch between net food seller and net food buyer positions. Empirical analysis of rice price data from Madagascar suggests that price variability and skewness indeed differ between rural and urban areas in ways that adversely influence the relative welfare of rural peasants.     

Trust and inter‐firm relations in developing and transition economies

The role of trust in facilitating economic growth has been highlighted in previous contributions to this journal. In order to take this debate forward, this article argues (1) that more attention needs to be given to the relationship between sanctions and trust, and (2) that it is worth distinguishing between the minimal trust for making markets effective and the extended trust required for deeper kinds of inter‐firm co‐operation to work. The article goes on to ask why minimal trust is lacking and so hard to construct in the republics of the former Soviet Union. It then examines how extended trust grows or can be made to grow in industrial supply chains and clusters in developing countries.     

Gender wage inequality and export‐led growth in South Korea

This article investigates the relationship between gender, wage inequality, and export‐led growth in South Korea. The persistent gender wage gap in Korea's manufacturing sector is found to be linked to women's segregation in the country's major export industries where real wage growth has lagged productivity growth, despite favorable market conditions that might drive up women's wages relative to those of men. The interaction of state‐ and firm‐level hiring, training, and promotion practices that structure women's and men's employment opportunities differently appear to have resulted in a relatively weaker fall‐back position for women in labour markets. Econometric results are consistent with the hypothesis that women's weaker fall‐back position limits their ability to bargain for wage increases commensurate with productivity growth. Further, evidence is presented which links gender wage inequality to the growth of Korean exports.     

The determinants of earnings among low‐income workers in Bombay: An analysis of panel data

This article estimates the determinants of earnings among workers in low income settlements of Bombay. It uses panel data on workers in two homeless (pavement‐dwelling) communities and two slum communities. The estimated earnings functions, adjusted for community‐ and time‐specific fixed effects, show a good fit. Age and education are significant in all the regressions; however, some of the job‐related variables appear to be more important than the standard human capital variables in determining earnings. In conclusion, while a complex set of factors seem to determine earnings of workers in low‐income communities, institutional factors play an important role.     

Building ‘low‐intensity’ democracy in Haiti: the oas contribution

This article explores the phenomenon of democracy assistance by examining Organization of American States (oas) efforts to restore and promote democracy in Haiti between 1990 and 2000. The case study reveals that marked contradictions emerged as the organisation tried to promote a democratic outcome while both supporting and facilitating the workings of a profoundly undemocratic economic and trading system. Because the oas has proclaimed its commitment to advancing democracy as well as its support for economic and trade liberalisation, privatisation of national industries, and a deeper insertion of the region's economies into global markets, it provides an excellent vantage point from which to explore this form of political intervention. The article concludes by reflecting on the recent fall of the country's ill‐fated president, Jean‐Bertrand Aristide and, in keeping with the theme of this piece, it examines the role of the oas and other international actors in shaping events leading up to the collapse of his government.     

Second‐hand machinery in development,or how to recognize a bargain

In the literature on economic development and planning, much is made of the problem of ‘choice of technique'—choosing either capital or labour intensive techniques. In this paper the focus is on another aspect of this problem—the choice among capital inputs, the selection of new or second‐hand equipment. As much of the investment in the less developed countries depends on imported machinery, the problem becomes that of making the most efficient use of foreign exchange. The question is relevant as a number of developing countries have imposed prohibitions on the importation of used machinery.

First we examine the theoretical implications of the availability of both new and used machines for the production possibilities and the effects of various trade policies on the selection of production technique. Integrating this question of new versus used machines with investment criteria, we then examine situations in which used machinery might be preferable to new.     

“Institutions and Economic Performance: The Use and Abuse of Culture in New Institutional Economics”: A Response to Heydemann

Applications of institutional analysis to the explanation of economic performance come in many flavors. Some economists have made use of an economics-oriented flavor in treating culture as one component of that analysis. Steven Heydemann uses a more political flavor of institutional analysis to argue that two of these economists, Douglass North and Avner Greif, have overly simplified and homogenized the concept of culture and the way in which it affects economic performance. He goes on to identify several instances in both the economic history and contemporary experience of the Middle East where he claims that such over-simplification has led to shortcomings in the analysis. This paper suggests that while some of Heydemann’s claims have merit, several others are exaggerated.

Factors impeding credit use in small‐farm households in Bolivia

Sample survey data show few Bolivian small‐farm households using credit, but most would like to borrow from formal market institutions. A theoretical framework is developed to formulate testable hypotheses to identify factors that inhibit credit use. Major impediments to borrowing are scale of operations, as measured by amount of useable land, and borrower's transactions costs that arise from loan paperwork, use of Indian language, remoteness from market, little education and low degree of market integration. When farmers with these characteristics borrow they tend to use informal market sources because of the lower transactions costs compared to those of formal market lenders. The policy implication is if formal market lenders are to reach more farmers they must lower transactions costs.     

The Logic of the New Pay Systems Revisited–in the Light of Experimental and Behavioral Economics

The article questions the logic of the new pay systems introduced in the public sector in many countries. The pay systems and their goals are consistent when looked upon through the lens of standard economic theory. In addition, we find no contradictions between the goals of the pay systems. However, if findings of experimental economics and behavioral economics are included in the analysis of the pay systems, this is not necessarily the case. Experimental economics and behavioral economics contribute with knowledge which must be taken into account when pay systems are designed.     

Macro development planning in tropical Africa: Technocratic and non‐technocratic causes of failure

Based on the targets given in the development plans and the national income data of twenty‐two tropical Africa countries in the late 1960s, this paper finds a wide consensus among the planners on the structural determinants of the macro variables selected as plan targets, so that difference in targets can be explained largely by the different values assumed by these determinants in the sample countries. The implementation record was poor, and may be traced in part to a domino effect inherent in the recursive structure of target selection. The analysis of the causes of implementation failure shows that most of the causes lie outside of the competence of the planners. Alternative methods to calculate plan targets are not likely to meet with superior fulfilment results.     

Varieties of regional monetary cooperation: a tool for reducing volatility in developing economies?

Can regional monetary cooperation shield developing regions from global volatility? The article argues that the main contribution of regional monetary cooperation to enhancing the shock-buffering ability of its member countries is to provide short-term liquidity and to increase regional trade and financial links. In contrast, traditional optimum currency area (OCA) theories formulate the advantages of regional monetary cooperation in terms of allocative efficiency gains and aim at a full currency union as final stage. As such, traditional theory widely ignores the shock-buffering capacity of regional monetary cooperation as well as their varieties. In contrast, the article argues that intermediate stages of regional monetary cooperation have their own rationales related to such shock-buffering capacity. This paper systematically examines the variety of regional cooperation arrangements in the developing world that range from regional payments systems over the pooling of reserves to exchange rate coordination. We propose that the potential for shock buffering is dependent on the chosen form of cooperation. Furthermore, in contrast to full monetary integration, which is highly demanding in terms of policy coordination, the requirements for regional policy coordination are significantly lower, depending on the form and aim of the arrangement.     

Interpreting Polak: Monetary analysis in ‘dependent’ economies

The Polak model is ordinarily considered to be a quantity theory view of the world, in which the level of income is determined by changes in the stock of money. This interpretation is not warranted by close examination of the model, which can equally well be interpreted as a purely Keynesian framework for income determination, modified to reflect the particular characteristics of an open, developing economy. And because of these modifications, the Polak model leads to policy conclusions quite distinct from either of the standard macro theories.