O - Economic Development, Innovation, Technological Change, and Growth
Economic Development, Innovation, Technological Change, and Growth
Despite the peg to the US dollar established in 1983, Hong Kong's annual rate of inflation during the 1985 to 1997 period was 4.6% higher than that of the US The Dutch disease was the main source of Hong Kong’s high long-term inflation. The contribution of the Balassa-Samuelson effect was small. The relocation of Hong Kong manufacturing to southern China generated strong demand for Hong Kong’s tradable services to support the industrial activity across the border and re-exports through Hong Kong ports, and subsequently raised the prices of tradable services.
We present an empirical evaluation of the growth effects of the brain drain for the source countries of migrants. Using recent US data on migration rates by education levels (Carrington and Detragiache, 1998), we find empirical support for the ”beneficial brain drain hypothesis” in a sample of 50 developing countries. At the country-level, we distinguish between winners and losers among source countries. While the number of winners is smaller, these include nearly 80% of the total population of developing countries.
In the 1990s Argentina embarked on one of the largest privatization campaigns in the world as part of a structural reform plan. The program included the privatization of local water companies covering approximately 30 percent of the country’s municipalities. Since clean water and sewage treatment are critical to controlling the spread of infectious and parasitic diseases; access expansions, quality improvements, and tariff changes associated to privatization may have affected health outcomes.
The paper, motivated by the extent of government involvement in the financial sectors of many countries, presents a model of a link between financial intermediation and economic growth. The model conceptualizes a financial leverage coefficient, a construct which is the outcome of aggravated moral hazard generated by a combination of government involvement in financial intermediation and the presence of institutional rigidities and distortions (like the absence of effective bankruptcy procedures).
In recent decades, many middle-income countries (MICs) have liberalized their financial markets. Financial liberalization has typically been followed by a lending boom, during which credit has grown unusually fast. Some of these booms have been punctuated by twin currency and banking crises that are followed by a protracted credit crunch. In this paper we document three credit-market imperfections prevalent in MICs that can explain these boom-bust cycles as well as other macroeconomic patterns observed at higher frequencies across MICs.
We develop a model of the interdependencies between migration, remittances and inequality, and investigate how migration and subsequent remittances affect inter-household inequality in the communities of origin. An important feature of our model is that we take into account the impact of migration on the local (rural) labor market. Migration is shown to decrease wealth inequality but may generate higher income inequality.
Cross-sectional and panel labor force survey data are used to study the impact of the 2002 Argentine financial crisis on household and individual incomes and the labor market response. Changes in nominal wages, entry and exit into the workforce, hours worked, household labor supply and work program participation are studied separately, and then a decomposition is provided to determine which factors impacted most on total household income.
Enhancing the legal system may hinder the development of some aspects of the financial sector in an economy characterized by financial repression. Using Chinese provincial data in the 1990s, we find that an enhanced legal system suppresses private investment, increases the private share of bank credit and bank competition, and has no effect on financial depth. We interpret those findings as evidence showing the existence of the leakage effect that moves financial resources from the privileged state sector to the rationed private sector.
International migration is costly and initially on the middle class of the wealth distribution may have both the means and incentives to migrate, increasing inequality in the ending community. However, the migration networks formed lower costs for future migrants, which can in turn lower inequality. This paper shows both theoretically and empirically that wealth has a nonlinear effect on migration, and then examines the empirical evidence for an inverse U-shaped relationship between emigration and inequality in rural sending communities in Mexico.
We analyze an oligopoly model in which differentiated criminal organizations globally compete on criminal activities and engage in local corruption to avoid punishment. When law enforcers are sufficiently well paid, difficult to bribe, and corruption detection highly probable, we show that increasing policing or sanctions effectively deters crime.