Lodewijk Berlage

The classification of countries by cluster and by factor analysis

Abstract This paper aims at classifying countries on the basis of a multitude of country characteristics using cluster and factor analysis. The results of the analysis are in particular compared with the categories of least developed countries (LLDCs) and of newly industrialized countries (NICs) used by international agencies. The LLDCs clearly emerge as a seperate group from the analysis; but some countries presently included do not belong to this group, while some countries not included have LLDC characteristics. The NICs do not emerge as a separate homogeneous group. Clearly the criteria presently used for NICs are quite narrow.

Prospective aid and indebtedness relief: A proposal

Primary needs of human development are not met in poor development countries.Although ambitious goals have been set by the international community to meet specific human development targets by 2015, Official Development Aid is lagging and excessive external debt continues to drain much needed resources from poor countries despite the recent HIPC (Highly Indebted Poor Countries)Initiative. This paper outlines a 15-year program for implementing the 2015 Human Development targets while resolving fully the debt overhang problem for a set of 49 poor countries. The proposal requires additional contributions from 23rich countries amounting to 0.1 of 1% of their GDP over each of the 15y ears. Although only a small part of the effort would take the form of debt cancellation, the outstanding debt of the 49 poor countries would be totally extinct by year 2015. The program, to be implemented in a multilateral framework in which all interested parties have an effective voice, relies on several basic premises: a long term commitment by donors; a fair burden sharing among creditors; a fair distribution of newly available resources among poor countries, heavily indebted or not; a targeting of these resources to human development programs; a conditionality guaranteeing reasonable aid effectiveness.

Dictatorship in a single export crop economy

We provide an analysis of a power-maximising model for dictatorial behaviour. In the model, the dictator’s revenues depend on the exports of a single crop. Using export earnings the dictator buys loyalty from the producers of the export crop by setting the domestic producer price. Revenues resulting from the difference between the international and the domestic price of the crop are used to finance a repressive apparatus. We present a complete comparative statics analysis of the choice between repression and loyalty to obtain power, in response to changes in the international price of the single crop in the economy. The results allow for a novel classification of power-maximising behaviour into benevolent, tyrannical and totalitarian dictatorships. We argue that the model and the associated dictatorship typology can be embedded into Wintrobe’s more general specification of a dictator’s objective function, which combines aspirations for power with rent-seeking motives. We compare our analysis with empirical observations of the Habyarimana regime in Rwanda (1973–1994). JEL Classification Numbers: D72, H30, H56.

The Indian Economy: Progress, Obstacles, Challenges

It is well known that at the end of the last and during the present century the Indian economy performed much stronger than during the first decades after independence. In common discourse this improved performance is usually linked to the change in policy framework which was introduced in 1991 and thereafter continued by successive governments. As a result far reaching regulation of domestic private sector activities and protection against inflows of foreign goods, services and capital were gradually replaced by a more liberal policy framework. But the growth acceleration started even earlier. Whereas between 1960 and 1980 the average annual growth rate of per capita GDP was approximately one per cent, it rose to more than three per cent over the years 1980-2000 and to six per cent during the first decade of the present century. A specific feature of the Indian growth process was that the highest growth rates were realized in the services sector, especially by modern services. GDP growth was supported by increases in physical and in human capital formation, but the main contribution probably came from increasing total factor productivity. Flows of goods, services and financial capital to and from the rest of the world have increased, both in terms of world flows and of GDP. However the benefits of growth have been unequally distributed, geographically as well as over households. Growth has raised the income divergence between states. At the level of households the income distribution has become more uneven and growth has been associated with a weak increase in regular employment. India has ample opportunities for continued economic growth, but it also faces multiple obstacles. If growth is to be sustained these obstacles should be removed, some of them quite soon, others more gradually. We discuss problems of governance and of infrastructure, including roads, electricity supply and urbanization. We also observe a need to improve a number of components of human development for a large fraction of the population.