Howard Pack

Foreign Aid and the Question of Fungibility

This paper analyzes whether the foreign assistance provided for specific categories of expenditure is shifted among them, contrary to the wishes of donors. It also considers whether aid reduces the tax effort of recipient governments. Econometric results are presented for the Dominican Republic that show that the fungibility of aid has resulted in a thwarting of the intentions of donors. An attempt is made to account for the observed differences in behavior of individual countries in altering expenditures. Copyright 1993 by MIT Press.

Industrialization and trade

Publisher Summary This chapter presents a discussion on a few major recurring themes that have been prominent in the literature on industrialization. The chapter discusses the initial conditions at the beginning of the post-colonial period and their relation to subsequent industrial development. The chapter describes the determinants of the growing relative importance of the sector. Productivity growth and its relation to international trade orientation are discussed at the sectoral level. The chapter also discusses studies of the efficiency of individual firms. The employment effects of industrialization are examined and conclusions are presented. The Lewis–Fei–Ranis two-sector model provides a useful guide to the role of manufacturing in the development process of a country without an international trade sector. In the immediate post-war period, the potential for industrial development varied considerably among less developed countries (LDCs). In Brazil, Egypt, and India—for example, relatively large manufacturing firms had 60 or 70 years of industrial experience, primarily in food processing and textiles. Two countries, the Republic of Korea and Taiwan, which would later prove quite successful, possessed a considerable base of education and industrial experience. Among the major concerns of analysts of industrial sector, performance has been the failure to create jobs for the burgeoning labor force. The chapter also includes cross-country models, the Hirschman hypothesis, the choice of technology, and so on.

Is Foreign Aid Fungible? The Case of Indonesia

This paper considers whether foreign aid given for specific categories of expenditure is fungible among them and whether aid reduces tax effort by the recipient government. Models developed to analyze the fiscal relations among different levels of government in the United States are applied to analysis of the impact of foreign aid. Econometric analysis of data for Indonesia reveals that aid is largely spent as the donors intended, that aid does not lead to a reduction in tax effort, and that aid is not diverted to nondevelopment current expenditures. Copyright 1990 by Royal Economic Society.

Vertical technology transfer via international outsourcing

Abstract To analyze the effect of vertical technology transfer on industrial development in lesser developed countries (LDCs), we develop a model in which the technology transferred to an LDC supplier by a developed country (DC) importer can diffuse to other LDC firms. Surprisingly, even if such diffusion in the LDC market leads to entry into the DC market, it can benefit both the initial DC importer and its initial LDC supplier by reducing the double marginalization problem. This effect does not depend upon whether firms compete in prices or quantities and exists even when the number of entrants into each market is endogenously determined.

Inflows of Foreign Technology and Indigenous Technological Development

This paper explores the effects of inflows of foreign technology on technological development in developing countries. It evaluates the existing literature exploring this issue and indicates directions for further research. In particular, it is argued that the implications of the theory of foreign direct investment (the dominant channel of international technology transfer) for technological development have not been fully explored. Dynamic analyses of technology transfer that accommodate the salient features of developing countries have also begun to appear only recently. Further work along these lines is likely to yield rich dividends. Copyright 1997 by Blackwell Publishing Ltd

Accumulation, exports, and growth in the high-performing Asian economies

Abstract Potential sources of the very rapid growth in per capita income in a number of Asian countries are considered using cross-country regressions. While unusual investment ratios and initial levels of education both play a role, the superior performance is not totally explained by these variables. A growing body of microeconomic evidence suggests that the growth of manufactured exports may have allowed the industrial sector in these countries to increase its productivity. The cross-country regressions show that part of the rapid growth of per capita income in these countries is attributable to their unusual export performance. Even after incorporating this effect, their per capita income growth remains somewhat greater than predicted.

The case for industrial policy : a critical survey

What are the underlying rationales for industrial policy? Does empirical evidence support the use of industrial policy for correcting market failures that plague the process of industrialization? To address these questions, the authors provide a critical survey of the analytical literature on industrial policy. They also review some recent industry successes and argue that only a limited role was played by public interventions. Moreover, the recent ascendance of international industrial networks, which dominate the sectors in which less developed countries have in the past had considerable success, implies a further limitation on the potential role of industrial policies as traditionally understood. Overall, there appears to be little empirical support for an activist government policy even though market failures exist that can, in principle, justify the use of industrial policy.

Low Investment is Not the Constraint on African Development

While many analysts decry the lack of sufficient investment in Africa, we find no evidence that private and public investment are productive, either in Africa as a whole (unless Botswana is included in the sample), or in the manufacturing sector in Tanzania. In this restricted sense, inadequate investment is not the major obstacle to African economic development.

Productivity and industrial development in sub-Saharan Africa

Abstract This paper considers the current state and prospects for efficient development of the large-scale industrial sector in sub-Saharan Africa. It is argued that the liberalization of the international trade regime is unlikely to be sufficient for successful development unless the technological ability of firms is increased to allow an elastic supply response. Alternate modes for improving supply responsiveness are considered.

Reply to Alwyn Young

Abstract There are two different sets of questions raised by Youngs comments, one economic and the other includes econometric issues and the choice of variables. We consider each in turn.