Azam Chaudhry

DO GOVERNMENTS SUPPRESS GROWTH? INSTITUTIONS, RENT-SEEKING, AND INNOVATION BLOCKING IN A MODEL OF SCHUMPETERIAN GROWTH

This paper argues that some governments adopt growth-reducing policies due to the rational self-interest of the political elites. The model takes a rent-seeking government that can block innovation and incorporates it into a Schumpeterian growth model. The quality of a countrys institutions is reflected in the cost of innovation blocking. An increase in the level of innovation-blocking activity will reduce the rate of innovation and therefore reduce growth. The government also faces the possibility of losing power whenever an innovation occurs. We examine the conditions under which a government will choose to block innovation and suppress growth.

Organizational Barriers to Technology Adoption: Evidence from Soccer-Ball Producers in Pakistan

This paper studies technology adoption in a cluster of soccer-ball producers in Sialkot, Pakistan. We invented a new cutting technology that reduces waste of the primary raw material and gave the technology to a random subset of producers. Despite the arguably unambiguous net benefits of the technology for nearly all firms, after 15 months take-up remained puzzlingly low. We hypothesize that an important reason for the lack of adoption is a misalignment of incentives within firms: the key employees (cutters and printers) are typically paid piece rates, with no incentive to reduce waste, and the new technology slows them down, at least initially. Fearing reductions in their effective wage, employees resist adoption in various ways, including by misinforming owners about the value of the technology. To investigate this hypothesis, we implemented a second experiment among the firms that originally received the technology: we offered one cutter and one printer per firm a lump-sum payment, approximately equal to a monthly wage, conditional on them demonstrating competence in using the technology in the presence of the owner. This incentive payment, small from the point of view of the firm, had a significant positive effect on adoption. We interpret the results as supportive of the hypothesis that misalignment of incentives within firms is an important barrier to technology adoption in our setting.

A partial Hamiltonian approach for current value Hamiltonian systems

Abstract We develop a partial Hamiltonian framework to obtain reductions and closed-form solutions via first integrals of current value Hamiltonian systems of ordinary differential equations (ODEs). The approach is algorithmic and applies to many state and costate variables of the current value Hamiltonian. However, we apply the method to models with one control, one state and one costate variable to illustrate its effectiveness. The current value Hamiltonian systems arise in economic growth theory and other economic models. We explain our approach with the help of a simple illustrative example and then apply it to two widely used economic growth models: the Ramsey model with a constant relative risk aversion (CRRA) utility function and Cobb Douglas technology and a one-sector AK model of endogenous growth are considered. We show that our newly developed systematic approach can be used to deduce results given in the literature and also to find new solutions.

The International Finance Corporation's MBA Survey: How Developing Country Firms Rate Local Business School Training

Graduate education in business administration was developed in the U.S. around the turn of the twentieth century. MBA and similar graduate-level business programs took hold more slowly in other countries, but the number of such programs expanded more rapidly from the 1960s onward. In an effort to determine what firms from these countries require from business school graduates, the IFC used its extensive contacts with these firms to conduct a survey of the quality of business education in these countries. The survey results imply that the strengths and weaknesses of developing and transition country MBAs seem to overlap with those of MBAs from the U.S.: managers in the U.S. and in the developing countries find that the technical and analytical skills of MBAs are well developed while the practical training/skills and communication/language skills of MBAs are significantly lacking. On the whole, only the African and Middle Eastern firms were significantly dissatisfied with the quality of local MBA graduates. The survey results show that MBAs worldwide are not fully satisfying the needs of firms. Each of the other regions of the world has its own particular weaknesses, while at the same time some common weaknesses (such as work experience and communication skills) stand out. These results show that a cookie-cutter approach to training MBAs cannot work. Rather, MBA programs have to be tailored to suit the needs of the local business community while also teaching common business fundamentals.

Comparison of Closed-Form Solutions for the Lucas-Uzawa Model via the Partial Hamiltonian Approach and the Classical Approach

In this paper we derive the closed-form solutions for the Lucas-Uzawa growth model with the aid of the partial Hamiltonian approach and then compare our results with those derived by the classical approach \cite{chil}. The partial Hamiltonian approach provides two first integrals \cite{naz2016} in the case where there are no parameter restrictions and these two first integrals are utilized to construct three sets of closed form solutions for all the variables in the model. First two first integrals are used to find two closed form solutions, one of which is new to the literature. We then use only one of the first integrals to derive a third solution that is the same as that found in the previous literature. We also show that all three solutions converge to the same long run balance growth path.

A panel data analysis of electricity demand in the Pakistani industrial sector

ABSTRACT The analysis uses data taken from the World Bank Enterprise Surveys for Pakistan to construct a panel dataset for 402 firms over 4 years. This is used to determine the elasticity of electricity demand with respect to the price of electricity across Pakistani firms. The electricity demand analysis finds that the price elasticity of electricity demand across the sample of firms is −0.57.

The effects of external migration on enrolments, accumulated schooling and dropouts in Punjab

External migration in developing countries can relax household income constraints because of external remittances. This paper looks at whether the external migration of individuals in a household has a positive effect on schooling outcomes of children as measured by school enrolments, accumulated level of schooling, number of days spent in school and dropouts in Punjab. Historic migration rates were used to instrument for migration in an analysis of school outcomes for children of different ages to see which group has been most affected by external migration. The results show a significantly positive impact of external migration on the enrolments of younger children, whereas, the accumulated level of schooling for older children increases significantly if there is an external migrant in the household.

Growth with Income Comparisons and Status-Quo Biased Policies

The literature on income inequality has provided various explanations of how income inequality can affect growth, with the emphasis on ideas such as investments in human capital, issues of occupational choice, or the redistributive policies of governments. Inequality not only has a direct effect on the distribution of consumption in an economy, it also has a powerful effect on peoples subjective sense of well being. This paper takes a novel approach by focusing on the way in which a governments choice of economic policy can be influenced by how individuals perceive themselves relative to other individuals, both within the country and in foreign countries. The chosen policy affects economic growth, with the assumption being that policies that promote growth also tend to result in more switching of individuals between income groups. We show that the governments optimal policy depends on the importance of both inside country and outside country income comparisons, the fraction of national income earned by the different income groups, the potential magnitude of economic growth, the probability of switching between income groups in the presence of growth, and the relative importance (to the government) of the various income groups. The model predicts that a greater degree of inside country income comparison is bad for growth whereas more outside country comparison is good for growth. Various extensions of the model are also discussed.

Growth Spillovers: Separating the Impact of Cultural Distance from Geographic Distance

While recent advances in communications technology have effectively reduced the physical distance that knowledge and innovations have to travel between countries, cultural differences between countries still limit the ease with which innovations are transferred and adapted. So, countries with common cultural or linguistic characteristics can share technology and innovations more easily. This paper separates out the impact of cultural spillovers from geographic spillovers using the data on bilateral genetic distance used by Spolaore and Wacziarg (2009). We find that greater growth spillovers occur between countries that are geographically closer and also between countries that are culturally similar. We also find that there are greater growth spillovers between countries that have greater bilateral trust, even when one controls for the bilateral geographic distance.