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O - Economic Development, Innovation, Technological Change, and Growth

Economic Development, Innovation, Technological Change, and Growth

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Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises

Innovation is key to technology adoption and creation, and to explaining the vast differences in productivity across and within countries. Despite the central role of the entrepreneur in the innovation process, data limitations have restricted standard analysis of the determinants of innovation to consideration of the role of firm characteristics. We develop a model of innovation which incorporates the role of both owner and firm characteristics, and use this to determine how product, process, marketing and organizational innovations should vary with firm size and competition.

Sowing and Sewing Growth: The Political Economy of Rice and Garments in Cambodia

What explains Cambodia’s double digit growth in 2006, 2005, and 2004 of 11%, 13%, and 10%, respectively, despite relatively poor governance (162 out of 179 countries in the 2007 Corruption Perception Index, 151 out of 163 in 2006, 130 out of 158 in 2005 the year in which it was first ranked)? Why do some sectors thrive while others fail under such conditions?

Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation

We provide evidence that the robust association between cognitive skills and economic growth reflects a causal effect of cognitive skills and supports the economic benefits of effective school policy. We develop a new common metric that allows tracking student achievement across countries, over time, and along the within-country distribution. Extensive sensitivity analyses of cross-country growth regressions generate remarkably stable results across specifications, time periods, and country samples.

Firm-Specific Information and the Efficiency of Investment

In the three-year period following stock market liberalizations, the growth rate of the typical firm’s capital stock exceeds its pre-liberalization mean by an average of 4.1 percentage points. Cross-sectional changes in investment are significantly correlated with the signals about fundamentals embedded in the stock price changes that occur upon liberalization.

Why Aren't Savings Rates in Latin America Procyclical?

We document a striking empirical regularity: Latin American savings rates are as a rule substantially less procyclical than for OECD countries and in some cases are actually countercyclical. We build a non-representative agent intertemporal macroeconomic model that rationalizes this phenomenon as the equilibrium outcome of interaction between multiple groups that have common access to aggregate income. We conclude by suggesting that institutional reform may hold the key to improving the cyclical behavior of savings in Latin America.

Reform from Within

We present a model of endogenous institutional change that rationalizes reforms that have taken place in the context of economic crisis and drastic political change. Most of these reforms have been initiated by powerholders, even though they have ended worse-off relative to the status quo. The first point we make is that reform is the tool used by some powerful groups to limit the power of their political opponents. The second point is that groups with "common access" to the economy's resources find it individually rational to overappropriate resources.

The Peso Crash, the Banking Bailout, and Financial Market Performance in Mexico

This paper examines the development of financial markets in Mexico after 1994 and finds that there has been a reduction in the depth of the traditional financial markets. Lending from commercial banks to the non-financial private sector shrank from 10% of GDP in 1994 to 0.3% in 2000. However, gross domestic investment recovered quickly. Key questions are: where are firms getting financing; are these sources of finance sustainable, and will investment and monetary policies be affected? We find that contrary to the bank vs.

Why Have Banks Stopped Lending In Mexico Since the Peso Crisis in 1995

Lending from commercial banks to the non-financial private sector shrank from 10% to 0.3% of GDP in 1994 and 2000 respectively. There has been a general reduction in the depth of traditional financial markets since 1994. The purpose of this paper is to answer why banks have reduced lending so dramatically since the peso crisis? The paper will argue, that the two conventional explanations: (i) low capitalization/lack of access to capital and (ii) poor legislation to repossess collateral or “barzon” like debtor club behavior are inconsistent with the stylized facts.

Macroeconomic Instability, Migration, and the Option Value of Education

We explore the relation between variability in the rate of return to human capital and investment in education in the context of migration. Specifically, we show that if migration is a possibility, such variability in the rate of return to human capital can induce residents of developing countries to make greater investments in education. Moreover, providing that education is relatively costly, variability in the return to human capital may increase the average level of education in a developing economy even after expected migration is netted out.

Ethnic Discrimination and the Migration of Skilled Labor

We consider a small open developing economy, whose population is bifurcated into a majority and a minority group, the latter lacking political influence. Agents are heterogeneous in skills, and decide whether to invest in education when young and whether to migrate in their adulthood. Assuming a rent-extraction basis for discrimination, we first endogenize ethnic discrimination in the benchmark case of an economy closed to migration, and then explore how migration prospects affect ethnic inequality.


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