Danny M. Leipziger

Achieving the Millennium Development Goals: The Role of Infrastructure

The authors provide an empirical analysis of the determinants of three child-health outcomes related to the Millennium Development Goals: the infant mortality rate, the child mortality rate, and the prevalence of malnutrition. Using data from Demographic and Health Surveys, they go beyond traditional cross-country regressions by exploiting the variability in outcomes and explanatory variables observed within countries between asset quintiles. The authors show the relationships existing between the prevalence of diseases (diarrhea and malnutrition) and mortality. Their findings suggest that apart from traditional variables (income, assets, education, and direct health interventions), better access to basic infrastructure services has an important role in improving child health outcomes. Their analysis of interaction effects between interventions also suggests the importance of combining interventions to meet the Millennium Development Goals.

Infrastructure project finance and capital flows : a new perspective

The success with which middle-income indebted developing countries have gained access to private international finance in the 1990s is a tribute to their own domestic economic performance, international policy in dealing with the debt crisis of the 1980s, and innovation in international financial markets. Emphasizing the role of private infrastructure investment as a vehicle for attracting foreign capital to developing countries in the 1990s, the authors develop an analysis model to examine what determines the credit-risk premium on infrastructure projects in the country-risk environment of developing countries. They also provide tentative quantitative evidence of the importance of macroeconomic and project-specific attributes of project risk. Their key finding is that the market seems to impose a high-risk premium on loans to countries with high inflation and to projects in the road sector.

The Lender of Last Resort Function Under a Currency Board: The Case of Argentina

No grand solution appears to exist for the problems that seem inevitable in the Argentine system, in which the Central Bank is both lender of last resort and currency board, providing full convertibility between pesos and U.S. dollars. Argentinas strategy therefore must turn on actively strengthening its banking systems to reduce solvency risks and on building its reserves. Within the current rules of the game, Argentinas central bank (BCRA) is charged with being the lender of last resort as well as providing full convertibility between pesos and U.S. dollars - two objectives with one instrument, namely, reserves. Within those rules, it may well be that the balance of responsibilities needs to shift. Complete dollarization can significantly reduce risks but not entirely eliminate them. If the BCRA can concentrate more on building up reserves and helping to ward off crises of confidence in the currency, perhaps the banking system can protect itself better from liquidity shocks. But this will require, among other things, consolidation of the sector (which could give it greater access to outside liquidity) and prudential strengthening of the system. Triage of weaker banks should continue and not await another crisis. More experience with the new liquidity policy is needed and so is reform of the settlement system, as it affects the functioning of the interbank market, which is essential for containing crises. Essentially, however, no grand solution seems to exist for the problems that seem inevitable in a system where the central bank is also the currency board. Argentinas strategy must therefore turn on actively strengthening its banking systems to reduce the risks of insolvency. This paper - a product of the Finance and Private Sector Development Division, Policy Research Department - is part of a larger effort in the department to advise member countries on financial sector policy.

Industrial restructuring in Korea

Abstract The paper explores some of the industrial restructuring cconcerns facing the Korean economy at a time when direct government intervention is rapidly being replaced by functional incentives. Restructuring issues are descending forcefully on Korea as the economy moves through a rapid industrial transition from labor-intensive to capital-and skill-intensive exports. Problems affecting sunset industries are complicated by stresses on the financial sector, the pervasive role of conglomerates in the economy, and the worldwide impediments to free trade. All these factors complicate strictly market solutions. Following a discussion of some conceptual and historical aspects, the paper identifies key problem areas affecting industrial policy decisions. surveys lessons from industrialized country experiences, and provides an agenda for future policy reform.

Mercosur: Integration and Industrial Policy

OMPRISING the majority of Latin Americas population, land and economic output, the Southern Cone Common Market (Mercosur) represents the deepest attempt to date at economic integration in that region. Initiated by the Treaty of Asuncion in 1991, Mercosur aims to eliminate all internal tariff and non- tariff barriers on the flow of goods and factors of production, implement a common external tariff, and harmonise numerous macroeconomic and sectoral policies among Argentina, Brazil, Paraguay and Uruguay. If it is successful, Mercosur members will gain from greater production rationalisation, more efficient resource allocation and expanded consumption opportunities. More broadly, Mercosur is evolving into a core unit with which other countries and regional trading blocs can negotiate trade arrangements. Already agreements have been signed admitting Chile and Bolivia as associate members, and negotiations are taking place with the Pacto Andino countries and the European Union. Thus, Mercosur is engaged in simultaneous efforts to widen its membership and to deepen integration among its members. The immensity and difficulty of this task is demonstrated by the fact that despite more than two dozen attempts at regional integration in the world over the past four decades, only the European Union has successfully forged the path from free trade area, to customs union, to common market, and now towards imminent monetary union. 1 The EUs experience has shown that the predicted welfare gains

Lending versus giving: The economics of foreign assistance

Historically, very little attention has been devoted to assessing the costs and benefits of concessional loans vs. grants as the means of transferring resources to developing countries. This paper argues that this omission is in part due to the lack of an acceptable analytic construct within which to measure the costs to donors and benefits to recipients of loans and grants. The paper proposes such a framework and explores some of the policy implications for development assistance policy, in particular the trade-off between the volume of assistance and the terms of that aid. The objective is to lay the groundwork for a more constructive dialogue between borrowers and lenders which, hopefully, could foster foreign assistance flows of greater value to developing countries.

Seabed mineral resources and the economic interests of developing countries

The book attempts to provide a reasonable comprehensive and systematic examination of the major economic issues related to allocation and production of the virtually untapped stock of seabed hydrocarbons and manganese nodules. It further attempts to contribute to the body of economic information for use by countries in their international negotiations on seabed resource issues. The eight chapters are: The Worldwide Distribution of Hydrocarbons; Aspects of Offshore Hydrocarbon Exploitation; The Economic Interaction Developing Economies with the Offshore Petroleum Sector; The Disposition of Benefits from Offshore Hydrocarbon Production; The Nature of deep Seabed Mineral Resources; Manganese Nodules; The Economics of Manganese Nodule Exploitation; The Nature of a Deep Seabed Mining Regime; and The Law of the Sea Negotiations. (MCW)

Social indicators, growth and distribution

Abstract The recent focus on a basic-needs approach to development has rekindled interest in the relationship between growth, income distribution and indicators of welfare. This paper provides some statistical evidence to support the view that for low-income LDCs, growth is necessary to bring about welfare improvements, as measured by aggregate social indicators. Historically for that group, growth rather than distribution is significantly correlated with indicators. For middle-income LDCs, the scope for improving welfare through redistribution is larger, as supported by correlation analysis results. The statistical evidence is consistent with economic theory and relevant for an effective integration of basic-needs objectives into a strategy of growth and equity.

The demand for protection: A look at antidumping cases

Using data taken directly from the ITCs dumping case studies, the paper uses standard logit techniques to empirically investigate a US industrys decision to initiate a dumping case against its foreign competitors. A major finding is that a domestic industry is more likely to initiate a dumping case if there has been a recent surge in imports from that country, and if that countrys imports represent a significant share of the US market. In addition, it is observed that depressed or declining industries tend to initiate cases with greater frequency. Support is found for the view that US manufacturers may initiate dumping cases in order to deter new entrants to US markets or to penalize such entry.

Editor's introduction: Korea's transition to maturity

Korea is currently undergoing a spectacular transformation as measured by any one of a number of yardsticks. Politically, this nation of 42 million people is approaching its destiny with democracy with increasing anticipation. Financially, it has the sole distinction among the highly indebted developing countries of actually turning the corner on external debt and reducing it in absolute terms. Structurally, it has managed to transform itself from an assembly economy to a high quality export producer. And socially, it now confronts a host of new but not completely unwelcome economic problems associated with rapidly rising living standards and even more rapidly rising expectations, as attested to by labor demands, commitments to universal health insurance, and recently enacted minimum wage and pension legislation. There can be no doubt, in any case, that Korea is on the brink of the final stage of development that will bring it to the ranks of the lower OECD economies before the end of the century. Despite this optimistic prognosis, Korea continues to face substantial hurdles. Some problems are perennial for developing countries, particularly those following an export orientation, such as protectionism in major markets, while others are new, such as dealing with the recently emerging current account surplus. Korean observers have every confidence that traditional pragmatism will dominate decisionmaking on these policy issues; however, there is equal concern that political events may short-circuit the economy’s remarkable performance of 1986 and 1987. Central to the economy’s performance in the postelection period will be the government’s ability to deal with economic and social demands from various segments of society and maintain effective management control. Korea has managed to post very respectable real growth in the last five years, with GNP increments averaging 8.7% since 1982, and to move its current account balance through successively smaller deficits and into surplus in 1986. Following spectacular performance in 1986 12.5% real growth and a