How does trade openness influence budget deficits in developing countries?

Abstract

This paper analyses the effects of trade openness on budget balances by distinguishing the effects of natural openness from those of trade policy. Revealed indicators of natural openness and trade policy are computed. Using GMM-system estimator, the econometric analysis focuses on 66 developing countries over 1974–98. The results show that trade openness increases a country's exposure to external shocks. This enforces the negative impact on budget balances of terms of trade instability. Additionally, trade openness influences budget balances through several other channels: corruption, income inequalities, etc. Then natural openness and trade policy have opposite effects: the former deteriorates budget balances whereas the latter enhances them.     

Income inequality and level of corruption in post-communist European countries between 1995 and 2014

This paper analyses the relationships between income inequality and corruption in Europe and looks specifically at post-communist European countries. The scientific community agrees that there is important relationship between income inequality and corruption and many authors believe that low income inequality is connected to low corruption. According to empirical papers, this is true not only on the European scale, but also on a global scale. In this paper, I test this claim by conducting a multilevel analysis on 39 European countries in the period of 1995–2014. This model ascertains that there are immense differences between post-communist countries and the rest of European countries. The effects of income inequality on the level of corruption are discussed.     

Cyberdemocracy or Potemkin E-Villages? Electronic Governments in OECD and Post-Communist Countries

Abstract

The dramatic increase in the use of the World Wide Web and the Internet in government may foreshadow important changes in the nature of governance. A number of theorists have posited that the adoption of networked information systems is accompanied by inevitable shifts toward democratic government. Others argue that technologies are secondary factors in changes in levels of democracy or types of governance. Our article examines the openness of cabinet-level websites in the Organisation for Economic Co-operation and Development (OECD) and post-communist countries as a measure of an important aspect of governance that has only recently been operationalized. It provides a brief review of other studies in this field and the directions in which they are heading. The article analyzes the effects of political, cultural, economic, and technical factors on openness of cabinet-level websites in OECD and post-communist countries. The question is whether the level of democracy and cultural legacies affect openness of electronic governments. The study employs statistical analysis of a comparative database of national-level public agency websites that is produced by the Cyberspace Policy Research Group (CyPRG). The dependent variable is based on transparency and interactivity scores and availability of cabinet-level websites. The independent variables include Freedom House and Polity indexes of democracy, historical legacy, religious tradition, and the GDP per capita and number of Internet users per 1,000 people. Regression analysis shows that democracy, historical legacies, level of economic development, and religious tradition affect openness of cabinet-level websites in OECD and post-communist countries. This study demonstrates need to distinguish between cyberdemocracy and “Potemkin e-villages,” that is, window-dressing, in electronic governments.     

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.     

Privatisation and economic growth in developing countries

This article re-examines the relation between privatisation and economic growth. Previous studies that have attempted to measure this relationship have concluded that privatisation has had a sizeable positive effect on economic growth. Our study uses data for 63 developing countries over the time period 1988–97. It uses the framework of an extreme-bounds analysis (EBA) to conduct a cross-country growth regression analysis. Our findings contradict earlier results, but reaffirm the view that effective competition and its regulation may need to accompany privatisation to make a positive impact on economic growth.     

Crime, organised crime and corruption in post-communist Europe and the CIS

This article examines the incomplete and sometimes contradictory evidence on the crime, organised crime and corruption situations in post-communist states, and then seeks to explain the apparent increase in all three in early post-communism. Among the factors considered are the impact of weak states and economies, neo-liberalism, globalisation, Schengen and Fortress Europe, the Communist legacy (the ‘ghost from the past’), and collusion. The article then examines the dynamics of criminality and malfeasance in the region, and provides evidence to suggest that the crime and corruption situation has stabilised or even improved in most post-communist countries in recent times. The factors considered for explaining this apparent improvement are the role of external agents (notably the EU), the move from transition to consolidation, and the role of political will.     

Preventing Corruption Risk in Legislation: Evidence from Russia,Moldova, and Kazakhstan

ABSTRACT

Corruption risk assessment of draft laws and other normative acts is a relatively new instrument in the anti-corruption strategies implemented by developed nations, countries in transition, and the developing world. In connection with this, any practical experience accumulated in this area presents obvious interest. The analysis of such experience may allow to identify what works and what does not work in introducing the practices of anti-corruption screening of draft laws and other normative acts in various environments and settings, as well as contribute to dissemination of best practices in the countries of the region and elsewhere.

This article seeks to analyze and demonstrate the extent of practical implementation of corruption risk assessment of draft and enacted legislation in three post-communist countries, the problems encountered and solutions identified. Proceeding from this analysis, certain recommendations for practitioners in this field are formulated.     

Multiple Winning Formulae? Far Right Voters and Parties in Eastern Europe

Abstract

Can theories explaining far right voting in Western Europe be extended to post-communist Eastern Europe? We address this question with a comparative demand-side analysis of far right parties and their voters in four post-communist countries: Bulgaria, Latvia, Lithuania, and Slovakia. Our findings indicate the emergence of two distinct types of far right party. While the Latvian and Lithuanian far right resemble the new radical right (NRR) model, the Bulgarian far right comes closer to the welfare chauvinist ideal type. The far right mobilised anti-Semitic voters in Latvia, Slovakia and Bulgaria. In all four cases, the far right was especially successful in capturing the votes of ethnic majority members who are the most opposed to their country’s formerly dominant ethnic group.     

Connectedness and SME Financing in Post-Communist Economies: Evidence from Uzbekistan

Abstract

This paper investigates effects of interpersonal links with bureaucrats on SME access to formal finance. A survey of 502 SMEs in post-communist Uzbekistan shows fewer SMEs with government connections express a need for external finance, but success rates of applications are higher than for SMEs without connections. Econometric models show government-connected SMEs receive more formal credit than their counterparts. The small share of SME credit available is thus distributed in favour of those capitalising on bureaucratic links, with consequent resource misallocation. Findings imply that greater SME credit flows need supplementing with capacity building that improves bank transparency and efficiency.     

Openness and Growth: Re-Examining Foreign Direct Investment,Trade and Output Linkages in Latin America

The openness–growth connection is still an open question in the empirical literature. Although some studies have found that openness has a positive impact on economic performance, others have seriously questioned the significance of this result. The main point that we try to emphasise in this paper is that openness involves more than just trade liberalisation. The increasing importance of international capital flows and especially foreign direct investment (FDI) seems to be another relevant component of outward oriented policies. Therefore, by using quarterly data from the late seventies to 2000, we investigate the effects of liberalisation in Mexico, Brazil and Argentina by taking into account trade and FDI growth links. The results suggest that it is important to consider both exports and FDI to ascertain the benefits associated to the outward oriented strategies followed by these countries.     

State Business Relations and Economic Growth in Sub-Saharan Africa

This paper contributes to the literature on the determinants of economic growth in sub-Saharan Africa by examining the effect of effective state-business relations on economic growth for a panel of 19 sub-Saharan African countries for the period 1970–2004. We propose a measure that we argue captures the various dimensions of effective state–business relations in sub-Saharan Africa. We then estimate standard growth regressions using dynamic panel data methods with this measure, along with the more conventionally used measures of institutional quality such as degree of executive constraints, the rule of law, the degree of corruption and the quality of the bureaucracy. Our results show that effective state–business relations contribute significantly to economic growth – countries which have shown improvements in state–business relations have witnessed higher economic growth, controlling for other determinants of economic growth and independent of other measures of institutional quality.     

Dependency,the state and class in the neoliberal transition of Taiwan

The remarkable economic growth in Taiwan has served as a model of the developmental state as well as a source of scepticism about neoliberal policy for many less developed countries. However, since the mid-1980s Taiwan has gravitated from its previous statist model to the universally embraced 'market-orientated' restructuring. This study seeks to explain this neoliberal transition. A disaggregated approach is employed to break neoliberalism down into three distinct dimensions: market openness, fiscal austerity, and privatisation of public sector enterprises. The analysis results confirm that: (1) Taiwan's trade dependency on the USA constituted a decisive factor in the state opening its domestic market; (2) distributional politics was forged in a new but weak democracy to incorporate more interest groups in the fiscal expansion of the post-authoritarian era; and (3) the slow but increasingly steady progress of privatisation plans was influenced not by a 'back-to-the-market' idea but by the statist legacy with which bureaucrats attempted to manage public sector enterprises even after they became de jure private firms. The theoretical implications of this transition are discussed in the conclusion.     

The global information infrastructure: Empowerment or imperialism?

The hope has arisen that the internet will ultimately evolve into a Global Information Infrastructure (GII). The GII will create a global information marketplace and in the process narrow the poverty gap and eliminate many of the geographic obstacles to prosperity and equality. However commerce-primarily US commerce-is driving the development of the internet. As a result investors will want a return on their money in the form of access to new markets. Many countries will have to accept privatisation and competition wholeheartedly. Also, sooner or later local resources will have to replace external funding and external technical expertise. Many countries lack the regional, social and economic integration found in the USA and in addition have deep political, linguistic and cultural divisions that do not exist in the USA. This article examines issues of connectivity, language and content and concludes that in reality the internet concentrates economic activity and power more narrowly in one group. As a result there is a real risk that we are moving towards a two-tier technology society that perpetuates the old distinctions between North and South.     

Linkages between Globalisation,Carbon Dioxide Emissions and Governance in Sub-Saharan Africa

ABSTRACT

This study investigates linkages between environmental degradation, globalisation and governance in 44 countries in Sub-Saharan Africa using data for the period 2000–2012. The Generalised Method of Moments is employed as empirical strategy. Environmental degradation is proxied by carbon dioxide emissions whereas globalisation is appreciated in terms of trade openness and net foreign direct investment inflows. Bundled and unbundled governance indicators are used, namely: political governance (consisting of political stability/no violence and “voice & accountability”), economic governance (encompassing government effectiveness and regulation quality), institutional governance (entailing corruption-control and the rule of law) and general governance (a composite measurement of political governance, economic governance and institutional governance). The following main finding is established. Trade openness modulates carbon dioxide emissions to have positive net effects on political stability, economic governance, the rule of law and general governance.     

Is cooperation cost reducing? An analysis of public–public partnerships and inter-municipal cooperation in Brazilian local government

ABSTRACT

In local government systems worldwide, financial pressures have obliged local authorities to focus on cost-efficient methods for providing local services, including inter-municipal agreements and public–public partnerships. However, in comparison with municipal mergers, privatisation and other approaches to the problem, the cost impact of the cooperative provision has not yet been thoroughly examined empirically. Moreover, available empirical research has largely concentrated on waste disposal in developed countries. The present paper seeks to contribute to the empirical literature on inter-municipal agreements and public–public partnerships by comparing their impact on costs with ‘stand-alone’ provision in a range of non-waste local services. In contrast to the bulk of existing studies, our analysis takes place in a developing country context by examining Brazilian local government over the period 2013/15. We found that – on the whole – cooperative provision is less expensive than the ‘stand-alone’ provision for the services studied. Our results can be explained by the size and composition of the population, together with the politics for cooperation.     

The Effects of Corruption on Satisfaction with Local and National Governments. Does Corruption ‘Grease the Wheels’?

Abstract

A causal association was found between higher levels of corruption and lower levels of satisfaction with local and national governments. However, interaction term analysis provides suggestive evidence that: first, as public service satisfaction increases, the effects of corruption change from negative values to positive values for both local and national governments; second, as political situations improve, the negative effects of corruption diminish for both local and national governments; and, third, as the economic situation improves, the negative effects of corruption diminish for local, but not for national governments.     

CENTRAL GOVERNMENT BUDGET PRACTICES AND TRANSPARENCY: AN INTERNATIONAL COMPARISON

From an international perspective, a relationship between public sector transparency and better economic and social outcomes is something that is increasingly acknowledged. In terms of lack of transparency in budget reports both bureaucratic model and fiscal illusion theory have been argued as explanations. To assess transparency in budget practices we analyse to what extent a sample of 41 countries are meeting OECD requirements according to its Best Practices for Budget Transparency document (OBP). We find an average OBP fulfilment of 56.4 per cent. Transparency is negatively correlated with corruption and positively correlated with economic development. Countries receiving external financial and technical support meet fewer OBP recommendations than countries not receiving it. Considering the political framework, both progressive and conservative governments reach similar transparency levels. OECD members do not significantly fulfil more OBP suggestions than non‐members. In respect of 4 variables: transparency, corruption, democracy and development, four clusters of countries arise: top‐performing, low transparency‐developed, low transparency‐developing and worst‐performing.     

Effectiveness of Ethics Codes in the Public Sphere: Are They Useful in Controlling Corruption?

This study aims at determining the real effect of the implementation of a code of ethics on the solution of ethical problems in the public sphere, considering corruption as the most important non-ethical behavior. With that aim, 154 national administrations whose information on ethical codes is available on the UN's website are analyzed.

Our findings stress the absence of any influence of codes on corruption problems in the public context, both in developed and developing countries. The level of education is the most important determining factor in the control of corruption, especially in developing countries.     

Why Civil Society Cannot Battle it All Alone: The Roles of Civil Society Environment,Transparent Laws and Quality of Public Administration in Political Corruption Mitigation

ABSTRACT

Utilizing a large-N data that covers about 20000 observations from about 200 countries from 1789 to 2018 from the Varieties of Democracy (V-Dem) project, and anchored on institutionalism as an overarching theory, and the nascent literature on civil-society corruption nexus, the paper looks at the predictive capacity of civil society environment, transparency of laws and predictability of enforcement, and rigorousness and impartiality of public administration in political corruption. Using a four-step hierarchical multiple regression, results show that while civil society and its structure is a significant determinant of the level of political corruption, the introduction of transparency of laws and predictability of enforcement, rigorousness, and impartiality of public administration, and civil society environment in the regression model accounted for additional variance in political corruption. Practical and theoretical implications, particularly on civil society-corruption nexus and the broader corruption-democracy linkage, are discussed.     

The Real Exchange Rate,Foreign Aid and Macroeconomic Transmission Mechanisms in Tanzania and Ghana

Abstract

A recent study of 36 sub-Saharan African countries found a positive impact of aid in the majority of these countries. However, for Tanzania and Ghana, two major aid recipients, aid did not seem to have been equally beneficial. This study singles out these two countries for a more detailed empirical investigation. The focus is on the effect of aid when allowing external and nominal factors to play a role in the macroeconomic transmission mechanism. We conclude that when monetary and external factors are properly accounted for, then aid has been pivotal to growth in both real GDP and investment.