Mustapha K. Nabli

The New Institutional Economics and its applicability to development

Abstract The several remarkable developments in the social sciences which have come to be known as the New Institutional Economics (NIE) have not yet been fully exploited for analyzing the determinants and effects of institutional change in the context of development. This paper identifies two important components of the NIE and illustrates both (a) potential complementarities between them and (b) their applicability to various problems and policies in the long-term development of developing countries.

Development of financial markets and the size distribution of manufacturing establishments: International comparisons

Abstract Institutional determinants have largely been neglected in explaining international differences in the size distribution of manufacturing establishments. This paper draws on recent developments in institutional analysis to derive certain hypotheses concerning the way in which the size distribution within manufacturing is affected by the degree of development of the markets for debt and equity. These hypotheses are tested on the basis of an international cross- section of 54 countries. The results are generally supportive of the hypotheses, especially in the case of developing countries.

Money stock control in the EEC countries

ZusammenfassungKontrolle der GeldbestÄnde in den EWG-LÄndern. — Der Aufsatz behandelt das allgemeine Problem, wie die Zuwachsrate der GeldbestÄnde vorausgeschÄtzt und kontrolliert werden kann unter der Annahme, da\ nur der Multiplikator eine stochastische Variable ist. Relativ einfache statistische Verfahren, bei denen die VerÄnderungen der Multiplikatoren in der Vergangenheit sowie die VerÄnderungen der Geldbasis in der Gegenwart und in der Vergangenheit als erklÄrende Variable verwandt werden, deuten darauf hin, da\ die europÄischen Zentralbanken ihre monetÄren Ziele nur mit betrÄchtlichen Fehlermargen erreicht haben. Diese Fehler können aber bis auf ein Drittel oder ein Viertel vermindert werden, wenn man statt eines vierteljÄhrlichen ein jÄhrliches Kontrollverfahren benutzt. Au\erdem sind die Fehler für die Zuwachsraten von M2 kleiner als für die von M1.Drei Aspekte der Arbeit erfordern eine weitere Untersuchung: der drastische Anstieg in der VariabilitÄt des Multiplikators seit 1969, der betrÄchtliche Unterschied in den Ergebnissen von Land zu Land sowie die Frage, ob die Geldbasis eine kontrollierte Variable ist oder nicht. Ein Strukturmodell oder Transferfunktionen mit mehreren Input-Variablen können bei der Lösung der ersten beiden Probleme hilfreich sein; eine bessere Kenntnis der Institutionen bei der Lösung des ersten Aspekts.RésuméLe contrÔle de stock de monnaie dans les pays de CEE. -Cet article s’occupe avec le problème de prévoir et de contrÔler le taux de croissance du stock de monnaie sous la supposition que seulement le multiplicateur est une variable stochastique. Des procédures statistiques relativement simples, qui utilisent les changements passés des multiplicateurs et les changements courants et passés de la base monétaire comme ressources, suggèrent que les banques centrales européennes devraient accepter les marges significatives d’erreur pour réaliser leurs buts monétaires. Ces erreurs, cependant, peuvent Être réduites jusqu’a deux ou trois fois si on se dirige d’une procédure trimestrielle à une procédure annuelle. Additionellement, les erreurs sont plus petites pour les taux de croissance de M2 que pour ceux de M1.Trois aspects de l’étude exigent des investigations additionelles: l’augmentation expressive de la variabilité du multiplicateur depuis 1969, la différence substantielle inter-pays des résultats et la question si la base monétaire est une variable contrÔlée ou non pas. Un modèle structurel ou des fonctions de transfert avec plusieurs inputs peuvent Être adéquats pour la solution des deux premiers problèmes, une connaissance plus profonde des institutions pour la solution du dernier.ResumenControl de la cantidad de dinero en los países del MCE. —Este trabajo trata el problema de la predictión y el control de la tasa de crecimiento de la cantidad de dinero bajo el supuesto que solamente el multiplicador es una variable estocástica. Procedimientos estadísticos simples que usan como inputs los cambios pasados en los multiplicadores y cambios corrientes y pasados en la base monetaria sugieren que los bancos centrales europeos tendrán que aceptar márgenes de error significativos para alcanzar sus objetivos monetarios. Estos errores, sin embargo, se pueden reducir hasta dos o tres veces en la medida que uno se mueva de un procedimiento de control trimestral a uno anual. Adicionalmente los errores sou menores para las tasas de crecimiento de M2 que M1.Tres aspectos del estudio requieren de investigación adicional: el drástico aumento en la variabilidad del multiplicador desde 1969, la diferencia sustancial de los resultados entre países y el tema de si la base monetaria es una variable controlada o no. Un modelo estructural fonciones de transferencia de inputs pueden sev apropiados para la resoluciön de los dos primeros problemas; un conocimiento institutional más profundo para el Último.

Collective Action, Institutions and Development

Publisher Summary This chapter reviews the diverse principles relevant to the analysis of collective actions and examines their usefulness in the theory and policy of economic development. The importance of the theory of collective action lies in the fact that collective action is generally required for the production and maintenance of public goods. The theory of public goods and the theory of collective action address the same issues relating to the provision of public goods, in particular the free-rider problem. The chapter presents the definition of public goods and the identification of the free-rider problem that plagues attempts at collective action. It also explains the numerous factors hypothesized to affect the likelihood of success in collective action in general. These include the type of public goods, group characteristics, environmental considerations, expectations, and other dynamic factors. The relationships between collective action and the state on the one hand and collective action and development on the other are examined in the chapter.

The New Institutional Economics and Economic Development: An Introduction

Publisher Summary This chapter focuses on two principal components: transaction costs and the theory of collective action. The chapter describes the domain and scope of each component and explores the interrelationships between them. The institutions and their determinants that are the subject matter of the New Institutional Economics (NIE) have long served as a battleground among the alternative leading paradigms, namely, Marxian, neoclassical, and sociobiological. NIE represents the culminating intersection of a number of different lines of investigation, including the analysis of behavioral norms, the integration of persons with different tastes and preferences into voting coalitions, interest group formation, the problems of and prerequisites for collective action, transaction costs, organization theory, limitations on the rationality of human behavior, the emergence of rules of thumb for firm decision-making, the determinants of firm structure, coordination problems, rent-seeking behavior, technological change and its relationship to institutional change, and the determinants and effects of property rights. NIE explanations of existing institutional arrangements and their functions may yield rather different policy implications than those derived from traditional approaches; therefore, the application of the NIE to development policy could lead to significant new policy initiatives in less-developed countries.

The political economy of trade liberalization in developing countries

The paper addresses the issue of trade liberalization in developing countries from a political economy perspective using the theory of collective action. The role of collective action and interest group behavior is analysed critically both with respect to the initiation of attemps at liberalization and its outcome in terms of success or failure. A probit model is then used to test empirically the various hypotheses as to the determinants of likelihood of success of liberalization attempts. A sample of 51 liberalization episodes relating to 24 countries and spanning the period 1950–80 is used. Five factors are found to be critical in the process of liberalization: the strength of exporters groups as represented by the diversification and importance of manufactures and traditional exports, the strength of import-competing sectors opposition as measured by the share of manufacturing in GDP, the time elapsed since the beginning of import substitution, the size of country and the leadership committment and role.

Chapter 7 - The Size Distribution and Ownership Type of Firms in Tunisian Manufacturing*

Publisher Summary This chapter explores the applicability of transaction cost economics to the determination of size of establishment and ownership type in Tunisian manufacturing. In view of the objective of an application to a developing country, it would seem appropriate to consider opportunistic behavior on the part of the different agents within the firm not only as usual with respect to each other but also with respect to parties external to the firm. The chapter presents a link between the economics of transaction costs and that of rent-seeking and discusses the choice of ownership type. The chapter discusses the effects of institutional constraints on size and ownership through their differential effects among economic activities. The manufacturing sector is disaggregated into 65 different activities that have, in most cases, relatively homogeneous products.

Chapter 16 - The New Institutional Economics and Development: Concluding Remarks

Publisher Summary This chapter discusses the applications of the economics of transaction and information costs and the applications of the theory of collective action. The chapter discusses the interactions between the two approaches, their common shortcomings, and presents suggestions for the future research. When transaction costs are defined to include the costs of information, negotiation, monitoring, and enforcement with respect to all the relevant inputs in the production and distribution processes, including the bearing of the relevant risks, the transaction cost framework can serve as a unifying one for analyzing contractual choices. This framework offers the potential for explaining the choices among different types of contracts and organizational forms and formulating empirical tests of the relative importance of the various factors relevant to and underlying these choices. The transaction cost framework would seem capable of identifying the factors responsible for the switch from wage and rent contracts in the agricultural sector of Tunisias Medjez-el-Bab region. These include the outmigration of family supervisors, the increase in irrigation, and the rise in the relative cost of labor.

Inflation and output with rational expectations in open economies

ZusammenfassungInflation und Produktion bei rationalen Erwartungen in offenen Volkswirtschaften. - Der Aufsatz entwickelt ein Modell für den Gütersektor einer kleinen offenen Volkswirtschaft, die Fertigwaren exportiert und sowohl Fertigwaren als auch Rohstoffe, die im ProduktionsprozeΒ verwendet werden, importiert. Die Löhne sind in unterschiedlichem MaΒe indexiert, und die Wirtschaftssubjekte verhalten sich rational im Sinne von Muth. Das Modell wird getestet mit Hilfe von Jahresdaten aus fünf EG-LÄndern für den Zeitraum von 1957 bis 1980. Die Hauptergebnisse zeigen, daΒ ein relativ groΒer Teil der Inflationsrate nicht antizipiert wird und daΒ die Lucas’sche Fehlwahrnehmung des Preisniveaus für das Produktionsverhalten eine geringere Rolle spielt als die relativen PreisÄnderungen.RésuméInflation et production aux expectatives rationnelles en économies ouvertes. — Dans cet article les auteurs développent un modéle du secteur réel d’une petite économie ouverte qui exporte des biens manufacturiers et importe des biens manufacturiers ainsi que des matiéres premiéres utilisées dans la production. Les salariés au marché du travail jouissent des plusieurs degrés de l’indexation au niveau de prix et les agents économiques se comportent rationnellement au sens de Muth. Le modéle est testé avec des données annuelles de cinq pays membres de la CEE pour la période 1957–1980. Les résultats principaux démontrent qu’une relativement grande part du taux d’inflation n’était pas anticipée et que la mésperception du niveau de prix á la Lucas jouait un róle peu important pour la production en relation aux changements de prix relatif.ResumenInflación y producciön con expectativas racionales en economias abiertas. — En este trabajo se construye un modelo del sector real de una pequena economfa abierta que exporta bienes manufacturados e importa manufacturas y materias primas, estas ultimas siendo insumos para la producciön. En el mercado laboral los trabajadores gozan de un sistema diferenciado de indexation y los agentes económicos se comportan racionalmente en el sentido de Muth. El modelo es utilizado en un test empirico con datos de cinco pafses miembros de la CEE para el periodo 1957–1980. Los resultados demuestran que una parte relativamente importante de la tasa de inflación no fué anticipada y que la perception sesgada del nivel de precios en el sentido de Lucas jugé un papel menor en el comportamiento de la producciön que el que jugaron las variaciones de los precios relativos.

Interest Rate Parity and Imperfect Substitutability

This chapter is intended to motivate and justify the strategy adopted in Part II; namely, modelling exchange rates within a portfolio-balance framework rather than relying on a monetary approach. The latter, by taking domestic and foreign assets as perfect substitutes, emphasises only one asset, money. In contrast, by removing the perfect substitutability assumption, the portfolio-balance approach allows current-account imbalances to affect the exchange rate via changes in the world distribution of assets denominated in different monies. The structure and implications of this view of the world are discussed in detail in Chapter 5. We leave to this chapter the presentation of evidential material supporting our choice of models.