Dirk Willem te Velde

FOREIGN DIRECT INVESTMENT, SKILLS AND WAGE INEQUALITY IN EAST ASIA

Foreign direct investment (FDI) can affect the levelanddispersion of wages, but there is a lack of empirical work in this area. This paper tests for the effects of FDI on wages and wage inequality in five East Asian countries. Wage inequality has been low and decreasing in some, but not all, East Asian countries. Using ILO data for wages and employment by occupation, we do not find strong evidence that FDI reduced wage inequality in five East Asian countries over the period 1985–98. Indeed, controlling for domestic influences (wage setting, supply of skills) we find that FDI has raised wage inequality in Thailand. Because we also find that FDI raises the wages for both skilled and low-skilled workers, our findings should help to move the debate from impact (does FDI contribute to growth and development?) to appropriate policies to utilize FDI (how can we make FDI work for all?). We suggest that the education system in Thailand has not been sufficiently oriented to maximize the benefits from FDI. Countries wanting to develop on the basis of FDI should invest sufficient resources in good quality and appropriate human resources, or otherwise face the possibility that growth coincides with rising wage inequality.

State Business Relations and Economic Growth in Sub-Saharan Africa

Abstract This paper contributes to the literature on the determinants of economic growth in sub-Saharan Africa by examining the effect of effective state-business relations on economic growth for a panel of 19 sub-Saharan African countries for the period 1970–2004. We propose a measure that we argue captures the various dimensions of effective state–business relations in sub-Saharan Africa. We then estimate standard growth regressions using dynamic panel data methods with this measure, along with the more conventionally used measures of institutional quality such as degree of executive constraints, the rule of law, the degree of corruption and the quality of the bureaucracy. Our results show that effective state–business relations contribute significantly to economic growth – countries which have shown improvements in state–business relations have witnessed higher economic growth, controlling for other determinants of economic growth and independent of other measures of institutional quality.This paper contributes to the literature on the determinants of economic growth in sub-Saharan Africa by examining the effect of effective state-business relations on economic growth for a panel of 19 sub-Saharan African countries for the period 1970-2004. We propose a measure that we argue captures the various dimensions of effective state-business relations in sub-Saharan Africa. We then estimate standard growth regressions using dynamic panel data methods with this measure, along with the more conventionally used measures of institutional quality such as degree of executive constraints, the rule of law, the degree of corruption and the quality of the bureaucracy. Our results show that effective state-business relations contribute significantly to economic growth - countries which have shown improvements in state-business relations have witnessed higher economic growth, controlling for other determinants of economic growth and independent of other measures of institutional quality.

Use of a Bayesian Belief Network to Predict the Impacts of Commercializing Non-timber Forest Products on Livelihoods

Commercialization of non-timber forest products (NTFPs) has been widely promoted as a means of sustainably developing tropical forest resources, in a way that promotes forest conservation while supporting rural livelihoods. However, in practice, NTFP commercialization has often failed to deliver the expected benefits. Progress in analyzing the causes of such failure has been hindered by the lack of a suitable framework for the analysis of NTFP case studies, and by the lack of predictive theory. We address these needs by developing a probabilistic model based on a livelihood framework, enabling the impact of NTFP commercialization on livelihoods to be predicted. The framework considers five types of capital asset needed to support livelihoods: natural, human, social, physical, and financial. Commercialization of NTFPs is represented in the model as the conversion of one form of capital asset into another, which is influenced by a variety of socio-economic, environmental, and political factors. Impacts on livelihoods are determined by the availability of the five types of assets following commercialization. The model, implemented as a Bayesian Belief Network, was tested using data from participatory research into 19 NTFP case studies undertaken in Mexico and Bolivia. The model provides a novel tool for diagnosing the causes of success and failure in NTFP commercialization, and can be used to explore the potential impacts of policy options and other interventions on livelihoods. The potential value of this approach for the development of NTFP theory is discussed.

Allocating AID to International Public Goods

Although discussion of international public goods (IPGs) and the need to finance them is of fairly recent vintage, donors have been granting aid, or official development assistance (ODA), in substantial quantities for many decades, and have always allocated some of this aid to financing public goods. IPGs have not suddenly appeared. International agricultural research and research on disease eradication, for example, have a long history and both have been financially supported by aid from donors.

Foreign Direct Investment, Services Trade Negotiations and Development: The Case of Tourism in the Caribbean

This article examines whether and how developing countries can use services trade negotiations to increase the amount of inward FDI conducive to development. It reviews how services trade rules can affect inward FDI, and employs panel data analysis with innovative use of instrumental variables in the tourism sectors of 9 Caribbean countries during 1997-2003. It argues that Caribbean countries may want to signal openness to inward FDI in GATS, while maintaining a degree of flexibility in the use of policy measures; in the current negotiations with the EU on Economic Partnership Agreements, the focus could be on emphasising the development dimension. Copyright 2006 Overseas Development Institute.

Towards a quantitative assessment of Aid for Trade

Aid for Trade (AfT) has moved up both the aid and trade agendas. Several studies have described the rationale for AfT, but it is now time to move beyond the descriptive stage and analyse the needs and design its implementation. A key motivation behind the research presented in this paper is that there is a lack of good quantitative evidence on (i) actual AfT flows in countries1 and (ii) the possible effects of AfT.

Foreign direct investment and factor prices in U.S. manufacturing

Foreign Direct Investment and Factor Prices in U.S. Manufacturing. —We investigate whether inward foreign direct investment (FDI) can explain part of the increase in relative wages of skilled workers in U.S. manufacturing over the period 1977–1994 by studying the sector bias of the effects of FDI on sector prices and technology. We follow the two-stage mandated-wage approach based on the StolperSamuelson theorem. We find that inward FDI affects the sum of sector prices and productivity depending on the absorptive capacity available in the sector. We also find some evidence that inward FDI has induced a sector bias towards using skilled workers over the period 1977–1994.

Defining International Public Goods

International public goods (IPGs) achieved prominence with the United Nations Development Programme’s publication Global Public Goods (Kaul, Grunberg, and Stern 1999). That study adopted a wide-ranging definition of IPGs that encompassed a broad range of development activities. Analytically, the definition has since been narrowed by, for example, Kanbur, Sandler, and Morrison (1999). Operationally, the World Bank (2001) has further distinguished between core and complementary activities associated with the provision of IPGs (see also chapter 1 in this volume). The essential point here is that IPGs provide widely available benefits, and providing these benefits is the core activity. However, helping people or countries to actually avail themselves of the public goods (to “consume” them) may also be necessary. Such enabling expenditures are complementary to the core activities.

Supporting Investment and Private Sector Development in Times of Crisis

Summary 1. Introduction 2. The Global Financial Crisis, Investment and Private Sector Development in Small States: Transmission Belts and Conceptual Issues 2.1 Transmission belts 2.2 Investment and private sector development 3. The Effects of the Global Financial Crisis on Small States 3.1 Foreign direct investment 3.2 Domestic credit in the private sector 3.3 Remittances 3.4 Trade 3.5 Aid 3.6 Summary 4. The Global Financial Crisis, Investment and Private Sector Development in Small States: Mauritius, St Lucia and Vanuatu 4.1 Mauritius 4.2 St Lucia 4.3 Vanuatu 4.4 Conclusions 5. Global Policies, the Global Financial Crisis and Private Sector Development in Small States 5.1 The G-20 and small states 5.2 The UN and small states 5.3 The IMF, World Bank, European Commission and small states 5.4 Why does this matter for investment and private sector development? 6. Conclusions and Implications References

Civil society and economic growth

This paper explores the possible links between civil society and support for science and technology in Africa. Civil society represents an exceptionally complex arena and the interests of civil society are not necessarily aligned with technological development. Donor assistance needs to support civil society development in Africa to maximise the growth of science and technology. This includes supporting viable producer organisations and qualified NGOs and investing in institutions such as markets and professional associations. Attention is also required for appropriate policies, including support to public-private partnerships, the development of responsive regulatory frameworks and attention to information provision.