Destructive decision-making in developing countries

In most developing countries strategic decision-making has been largely based on false premises that have led to destructive results. One set of false premises stems from the assumption that development can be dissociated from the destructively exponential growth in developed countries, from the limits on the planet's physical resources and from complex ecological linkages. Another set is grounded on the popular myths of entrenched development economics: particularly, the enshrining of GNP as the overall indicator of progress, and the concomitant withdrawal of attention from poverty and concentrated wealth, unemployment, and the injurious effects of many modern technologies. These destructive premises tend to reinforce the evolving institutions of new-style empire and oligarchy.More successful development requires standing present development policies on their head through development goals calling for (1) a recognition of redistributive and nonmaterial growth possibilities, (2) redistributive, material and nonmaterial growth in developing countries, (3) redistributive, nonmaterial growth in overdeveloped countries, with a major slowing down of material consumption, (4) large-scale employment projects in developing countries, and (5) the fostering and use of more constructive technologies. All such shifts, however, would require—and tend to lead toward—substantial, long-term changes in the sociopolitical structure of developing countries and the world society.This paper is based on and adapted from The Limits of Development Administration, the keynote paper presented in October 1972 at the U.N. Public Administration Division's conference on development administration in Kiev, USSR, and Unemployment: The Snag in Development, prepared at Kiev and published in The Nation, Dec. 11, 1972.     

Mobilizing local resources in developing countries

Many developing countries are putting increased pressure on local governments to mobilize resources, especially to meet the recurrent costs of operating and maintaining locally sited capital projects. Local taxes, user charges and voluntary contributions are all possible mechanisms to carry out these efforts. Yet several important issues arise whenever these mobilization instruments are contemplated and evaluated. Several, often competing, objectives must be considered when evaluating fiscal instruments including the ability of the mechanism to raise revenues, its effect on economic efficiency, its equity implications and its administrative feasibility. After discussing each of these objectives, we show how numerous constraints, including those imposed by the political/legal system, administrative structure, the economy and the culture of the country, must be recognized while searching for a workable set of reforms that will mobilize additional resources without doing great harm to the other objectives. The key to these reforms would seem to be incentives or disincentives inherent in the revenue structure. Without recognizing these incentives or attempting to alter them, resource mobilization efforts are likely to go astray.     

Rent-seeking and X-inefficiency

This paper discusses the social cost of monopoly with special attention given to the geometric representation of that social cost, notably rent-seeking and X-inefficiency. The possibility of an overlap between these two measures is examined. In particular the paper addresses a problem of measure identification which highlights the need to reconsider the normative microfoundations of rent-seeking.     

发展中国家的政府职能

发展中国家所面临的问题与西方发达国家不同 ,发展中国家没有建立制度化的政治秩序 ,迫在眉睫的是解决人民群众的基本生存问题 ,更没有建立起市场经济体制 ,也没有健全的法律制度。这些行政生态情况决定了发展中国家的政府职能要比西方发达国家的政府职能强。无论是经济 ,还是社会发展 ,政府主导都是发展中国家发展的必然之路。     

Rethinking economic openness and macro control in developing countries

The Chinese economy is at a critical point in both state-owned enterprises (SOEs) reform and WTO accession. Both events challenge the stability of Chinese economy. After the hit of Southeast Asian economic crisis, policies toward economic openness and macro control need be considered carefully. This paper provides a review of economic opening policies adopted in developing countries and a review of causes and consequences of the Southeast Asian economic crisis. Lessons for Chinese economy are summarized. A major conclusion of the paper is that although the Southeast Asian type of economic crisis due to the high foreign debt ratio may not happen in China, the internal debt and smoothness of transformation of the economic system to meet the demand of an open economy may be the major challenge. I thank Dr. Xiaobo Hu for his suggestion in restructuring the paper in early stage. Thanks also go to the two anonymous reviewers for their valuable comments. The remaining errors are mine. Early vision of the paper was presented at the Conference of Social Science Development for 21^st Century in China in June 1998 in Beijing. He received his Ph.D in Economics from Ohio State University in 1993. His research interests are in economic development in rural China, international trade policies in Asia, and urban economics. His recent articles are published in journals such asEconomic Development and Cultural Change, Quarterly Review of Economics and Finance, China Economic Review, andASEAN Economic Bulletin.     

Quality assessment and assurance in hospitals of developing countries

Quality assessment and assurance programmes - although widespread in many industrialized countries, particularly in the United States, and achieving their objectives of improving the quality of care - have not been introduced into hospitals of developing countries. The paper discusses the factors that might have impeded the introduction of such programmes into these hospitals. The structure, process and outcomes of health care in developing countries are compared with those of developed countries. The attitudes of government agencies are analysed. The difficulties in the applicability of the criteria, standards and techniques - designed in developed countries - to the conditions existing in the hospitals of developing areas, and the reluctance of governing agencies of these hospitals to provide initiative because of anticipation of consequently increased expenditure, are considered to be the two main impeding factors. The paper further argues the need to promote such programmes in these hospitals and suggests guidelines for their development and implementation in terms of general principles, criteria for the assessment of hospital care, and standards appropriate to local conditions.     

Rent-seeking and perestroika

The author gratefully acknowledges financial support from the German National Science Foundation, SFB 178.     

Elections and the structure of taxation in developing countries

This article analyses the impact of the electoral calendar on the composition of tax revenue (direct versus indirect taxes). It thus represents an extension of traditional political budget-cycle analyses assessing the impact of elections on overall revenue. We appeal to the opportunistic political budget model of Drazen and Eslava (2010) to predict the relationship between taxation structure and elections. Panel data from 56 developing countries over the 1980–2006 period reveals a clear pattern of electorally-related policy interventions. Taking the potential endogeneity of election timing into account, we find robust evidence of lower indirect taxes being applied by incumbent governments in the period just prior to an election. Indirect tax revenue in election years is estimated to be 0.3 GDP percentage points lower than in other years, corresponding to a fall of about 3.4% of the average figure in the sample countries, while there is no such relationship with direct tax revenue.     

Inequality in developing economies: the role of institutional development

This paper studies the distributive impact of institutional change in developing countries. In such economies, property rights systems may preserve the interests of an influential minority, who can control key-markets, access to assets and investment opportunities, especially if they enjoy disproportionate political power. We test this hypothesis using cross-section and panel data methods on a sample of low- and middle-income economies from Africa, Asia and Latin America. Results suggest that: (a) increasing property rights protection increases income inequality; (b) this effect is larger in low-democracy environments; (c) some countries have developed political institutions capable of counterbalancing this effect.     

Rent-seeking and pesticide legislation

This paper provides a test of the Appelbaum and Katz (1987) rent-seeking model, in which rents are endogenous. The Appelbaum-Katz model is theoretically modified to correspond to our empirical application, in which rent-seeking and rent-avoiding coalitions are attempting to influence legislators' votes on pesticide regulations. Probit estimations are used to analyze the legislators' votes on two bills to amend pesticide legislation (a proxy for rent). Empirical results generally support the rent-seeking determinants identified in the model. Tobit estimation is used to investigate campaign contributions by the coalitions to the legislators. These contributions are a proxy for rent-seeking activities. Again, the model is supported.     

FDI and the costs of contract enforcement in developing countries

This article examines the relationship between foreign direct investment and host countries’ contracting institutions, the rule systems which govern commercial transactions between private actors. Given their liability of foreignness and costly exit options, we suggest that multinational corporations have incentives to influence the formal contracting environment in host countries. Further, host governments are more likely to respond to multinationals’ wishes when they are more dependent on foreign capital markets. We draw on the World Bank’s Lex Mundi dataset (Djankov et al. 2003) on micro-level contracting environment for private actors. Our analysis of a cross section of 98 developing countries suggests that FDI is associated with lower contract enforcement costs, particularly when the host country is more indebted.     

Administrative reform in developing countries: A comparative perspective

This study investigates administrative reform in seven Arab states, delineates common problems and describes general tendencies via content analysis of official statements. The study deals with reform in three major phases: defining administrative problems and needs; developing strategies for reform; and developing instruments of action for implementation. Appraisal of reform efforts discloses mediocre results based on a poor implementation record attributable to incongruities of methods and objectives of reform. Among such incongruities are the conventional limitations of bureaucracy, the copying of Western administrative rationality in form if not in substance, and insufficient attention paid to traditional, cultural, religious, and political contexts of administration. Recognizing the difficulties involved in conceptualizing and implementing reform in any society, the analysis offers several recommendations to improve the outcome of reform efforts, among them: encouraging employee involvement in reform decisions; improving collected diagnostic data; providing special training for employees responsible for managing reform; soliciting unwavering political commitment; developing incentive systems; and replacing the piecemeal approach with reliance on a systems perspective.     

Voluntary environmental agreements in developing countries: the Colombian experience

Voluntary agreements (VAs) negotiated between environmental regulators and polluters are increasingly popular in developing countries. According to proponents, they can sidestep weak institutions and other pervasive barriers to conventional mandatory regulation in such countries. Yet little is known about the drivers of their use and their effectiveness in poor countries. The considerable literature on voluntary initiatives in industrialized countries, where both VAs and socioeconomic conditions differ, may not apply. Using a conceptual framework drawn from the economics literature, we examine four prominent VAs in Colombia, a global leader in the use of this policy. We find that the main motive for using VAs has been to build capacity needed for broader environmental regulatory reform and that partly as a result, VAs’ additional effect on environmental performance has been limited. These findings contrast with those from industrialized country studies, which typically conclude VAs are used as a low-cost substitute for impending mandatory regulation and have few benefits because of weak regulatory pressure. Our findings suggest that in developing countries, VAs may be best suited to capacity building, not environmental management per se.     

Cost-utility assessment: Planning with local decisionmakers in developing countries

In the past decade countries and donor agencies have endorsed health policies which (1) give a very broad definition of health, (2) see the pursuit of health as part of the development process, and (3) emphasize the local community's and local decision-maker's participation in the planning of health projects. Despite these broad principles, health delivery systems in developing countries have access to a very limited set of resources. Health planners are faced with the dilemma of creating cost-effective programmes while recognizing the need to take into account the broad definition of health and the importance of local participation in planning. This dilemma has led to a division between those planners who put greater emphasis on the use of cost analysis techniques in which the decision-making process rests more with professional planners (often outside consultants) vs those who emphasize greater local control of the decision-making process. The purpose of this paper is to present a study in which two alternative approaches to cost utility analysis were used. Consideration was given both to the actual cost analysis strategy and to the integration of the cost variable into the total decision-making process. Finally, major emphasis was placed on including local decision-makers in the planning process and providing them with feasible and understandable decision-making tools.     

Extending urban services in developing countries: Policy options and organizational choices

Governments in developing countries will face serious problems in extending basic social services, public facilities and infrastructure for their rapidly growing urban populations during the next decade. The steadily increasing concentration of the poor in cities will exacerbate already severe strains on urban services. Innovative solutions will be needed to meet the growing demands for urban services. In addition to expanding national and municipal efforts, governments in developing countries must also explore alternative policies and organizational arrangements for meeting the basic needs of their urban population. Among the potential alternatives are: using market surrogates to improve service delivery; lowering the costs of service provision through changes in regulations and controls on urban development; actively supporting self-help and service upgrading schemes by the poor; promoting public-private co-operation and private sector participation in service delivery; increasing effective demand for services by promoting employment and higher incomes; and enacting and implementing policies that attempt to redistribute migration to small and intermediate-sized cities. Each alternative has advantages and limitations that planners and policy-makers must take into consideration in forging effective urban development strategies.     

Rent-seeking in natural resource quota allocations

This paper examines the incentives for rent-seeking in the allocation of natural resource quotas to competing user groups by political bodies. The political body has discretion in making the allocation, and competing user groups rent-seek to influence the allocation. We investigate ways in which the governmental body can affect the behavior of the players by setting the ground rules for the competition. A political body can affect an allocatively (Pareto) efficient outcome by choosing an appropriate default (pre rent-seeking) policy. Surprisingly, an allocatively efficient default policy is unlikely to minimize social costs. However, winner-take-all default policies are likely to maximize, not minimize, rent-seeking. A competitive post-allocation market reduces rent-seeking, but is not, either itself or in combination with an efficient default policy, capable of minimizing social costs. However, forcing winners in political redistributions to fully compensate losers both lowers the rent-seeking levels relative to a potential compensation criterion and, when used together with an efficient default policy, is capable of obtaining the first-best solution of an allocatively efficient allocation with zero rent-seeking.