Claudio Bravo-Ortega

The Relative Richness of the Poor? Natural Resources, Human Capital, and Economic Growth

Are natural resources a blessing or a curse? The authors present a model in which natural resources have a positive effect on the level of income and a negative effect on its growth rate. The positive and permanent effect on income implies a welfare gain. There is a growth effect stemming from a composition effect. However, the authors show that this effect can be offset by having a large level of human capital. They test their model using panel data for the period 1970-90. They extend the usual specifications for economic growth regressions by incorporating an interaction term between human capital and natural resources, showing that high levels of human capital may outweigh the negative effects of the natural resource abundance on growth. The authors also review the historical experience of Scandinavian countries, which in contrast to Latin America, another region well-endowed with natural resources, shows how it is possible to grow fast based on natural resources.

Determinants of Export Diversification Around the World: 1962–2000

Using a large dataset of countries during the last forty years, this paper analyzes the main determinants of export diversification. We explore the role of several factors and we use three different indicators of export diversification. We find robust evidence across specifications and indicators that trade openness induces higher specialization and does not favor export diversification. In contrast, financial development helps countries to diversify their exports. Looking at the effects of exchange rates, our results suggest a negative effect of real exchange rate overvaluation, but not significant effects of exchange rate volatility. We also find evidence that capital accumulation contributes positively to diversity exports and that increasing remoteness tend to reduce export diversification. We explore also the role of terms of trade shocks. Some of our results suggest that there is an interesting interaction between this variable and human capital. We find that improvements in terms of trade tend to concentrate exports, but this effect is lower for those countries with higher levels of human capital. This evidence suggests that countries with higher education can take advantage of positive terms of trade shocks to increase export diversification.

Agriculture and National Welfare Around the World: Causality and International Heterogeneity Since 1960

Calculations of marginal welfare effects suggest that agricultural development has had important positive effects on national welfare, especially in developing countries. Latin American and Caribbean countries have also benefited from agricultural growth, but non-agricultural production has had marginal welfare effects that are greater in magnitude than those provided by agricultural activities. In contrast, the industrialized, high-income countries experienced marginal welfare gains from non-agricultural activities that are much greater than those derived from agriculture, whose impact is actually negative. These calculations of marginal welfare effects across regions depend on econometric estimates of elasticities linking agricultural and nonagricultural economic activities to four elements in a national welfare function: national GDP per capita, average income of the poorest households within countries, environmental outcomes concerning air and water pollution and deforestation, and macroeconomic volatility. The econometric analyses are motivated by theoretical treatments of key issues. The empirical models are estimated with various econometric techniques that deal with issues of causality and international heterogeneity.

The emergence of new successful export activities in Latin America: the case of Chile.

This paper surveys overall export growth in Chile and focuses on three case studies of the emergence of successful export activities in Chile: wine, pork and blueberries. Each case study discusses how companies, associations, and governments at various levels have addressed market failures and facilitated the provision of public goods necessary for each activity. The case studies additionally profile first movers in each activity and describe the positive externalities they provide to imitators, particularly diffusion of export knowledge. Also included are counterfactual cases of a less successful firm or activity (an unsuccessful wine exporter, other types of berries, and commodity pork production rather than custom cuts, respectively) and a discussion of policy implications.

Remoteness and Real Exchange Rate Volatility

This paper examines the impact of trade costs on real exchange rate volatility. The relationship is examined by constructing a two-country Ricardian model of trade, based on the work of Dornbusch, Fischer, and Samuelson (1977), which shows that higher trade costs result in a larger nontradables sector, in turn leading to higher real exchange rate volatility. We then construct a remoteness index to proxy for trade costs, and provide empirical evidence supporting the channel. Copyright 2006, International Monetary Fund

Innovation, R&D Investment and Productivity in Chile

This paper uses two sources of information and different methodologies to analyze the causal effect of product and process innovation on productivity in the Chilean manufacturing industry during the past decade. In general, the evidence suggests there is not a contemporaneous effect of product innovation on productivity, but there is a positive effect of process innovation. This notsignificant effect of product innovation contrasts with evidence of studies for other countries. However, the results show the presence of lagged effects product innovation on productivity two years after innovation. Compared with the case of developed countries, this evidence might be consistent with a very slow process of “learning by doing” on the part of Chilean firms with regard to mastering new technologies. These slow and frequently uncertain gains in productivity could help to explain the low levels of investment in research and development (R&D) activities by Chilean firms.

Innovation and Productivity in Services: Evidence from Chile

Abstract We analyze empirically the firm-level relationship between innovation and productivity in the Chilean service sector using the manufacturing sector as a benchmark. We find that manufacturing and service industries have similar determinants of the probability of introducing technological innovations. We also find a positive effect of technological and nontechnological innovation on labor productivity for both sectors. However, there are some differences in the quantitative importance of some determinants of innovation. Our findings help to characterize the different stages of the service industry’s innovative process and its effect on an emerging economy, providing useful information for policy design.

Intellectual Property Rights, Human Capital and the Incidence of R&D Expenditures

Numerous studies predict that developing countries with low human capital may not benefit from the strengthening of intellectual property rights. The authors extend an influential theoretical framework to highlight the role of intellectual property rights in the process of innovation and structural change. The resulting theory is consistent with a stylized fact that appears in the data, namely that countries with poor intellectual-property protection may accumulate human capital without a corresponding increase in research and development investment as a share of national income. The model predicts that without minimum intellectual-property protection, additional education may result in more imitation rather than innovation. The preponderance of the econometric evidence presented in this paper suggests that interactions between human capital and intellectual property rights determine global patterns of research and development effort, and intellectual property rights tend to raise the effect of education on the incidence of research and development.

Innovation in the Services Sector

An introduction is presented in which the guest editor discusses various reports within the issue on topics including innovation in the services sector, labor productivity, and the impact of innovation on employment in the services sector

Does Asymmetric Information Cause the Home Equity Bias

The home equity bias is one of the many puzzles existing in international finance. This puzzle is characterized by the concentration of domestic equity in any investors portfolio, which is in contradiction with the benchmark of full diversification in a world mutual fund. Based on Admatis (1985) and Gehrigs (1993) noisy rational expectation models, the author tries to explain the effect of asymmetric information in the home equity bias puzzle. While asymmetric information helps to explain the puzzle for the case of one domestic, and one foreign equity, this result relies on very restrictive assumptions. Using a model with one domestic asset and two foreign assets, the author illustrates that asymmetries of information are also consistent with home equity bias reversals. One proposition generalizes these results. Simulations corroborate the main theoretical predictions of the model presented by the author.