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111. The Political Economy of Taxation and Tax Reform in Developing Countries

Author:
Jonathan Di John
Publication Date:
07-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Taxation provides one of the principal lenses in measuring state capacity, state formation and power relations in a society. This paper critically examines three main approaches (economic, administrative and political economy) to understanding taxation. It also examines differences in tax composition across middle-income developing regions and finds that Latin American economies tax upper income groups much less than in East Asia and Eastern Europe, and explores the political economy and policy implications of these differences. The paper also examines issues of tax reform in low income/post-war economies and explores the problem that capital flight poses for less developed countries.
Topic:
Development, International Trade and Finance, Political Economy, and Third World
Political Geography:
Eastern Europe, East Asia, and Latin America

112. Manufacturing, Services and Premature Deindustrialization in Developing Countries: A Kaldorian Analysis

Author:
Ajit Singh and Sukti Dasgupta
Publication Date:
05-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper uses a Kaldorian framework to examine the evidence of deindustrialization in developing countries at low levels of income, the jobless growth in these economies and the fast expansion of the informal sector. The questions are specifically examined for the Indian economy, using state level data but the analysis has a wider application for economic policy in developing countries.
Topic:
Development, Economics, Industrial Policy, and Third World
Political Geography:
India

113. Absorptive Capacity and Achieving the MDGs

Author:
Mark Sundberg and Franois Bourguignon
Publication Date:
05-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The ability of low-income countries to productively absorb large amounts of external assistance is a central issue for efforts to scale-up aid. This paper examines absorptive capacity in the context of MDG-based development programmes in low-income countries. It first defines absorptive capacity, and proposes a framework for measuring it. Applying a dynamic computable general equilibrium model to link the macro framework to sector results, the paper simulates MDG scenarios for Ethiopia and examines the role of infrastructure, skilled labour, macroeconomic, and other constraints on absorptive capacity. The main policy conclusions are that careful sequencing of public investment across sectors is key to minimizing the costs of reaching the MDGs; the macro impact of large aid flows on the tradeables sector can potentially be serious in the short run; large-scale frontloading of aid disbursements can be costly as it pushes against absorptive constraints; and that improvement of governance and institutional structures can significantly reduce the cost of achieving the MDGs.
Topic:
International Relations, Development, Humanitarian Aid, and Third World

114. International Risk Tolerance, Capital Market Failure and Capital Flows to Emerging Markets

Author:
Valpy FitzGerald
Publication Date:
04-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The level, tenor and instability of capital flows from global financial markets towards developing countries are a major source of concern for macroeconomic managers, while their causes remain largely unexplained by economic theory. Country 'fundamentals' (such as economic growth, monetary stability and institutional capacity) as sources of default risk have been the main focus of economic research and policy prescriptions. However, recent empirical research on the determinants of capital flows and the roots of market failure indicate that much of the explanation lies in the nature of the home (that is, the developed country) demand for emerging market assets. In this paper, the microeconomic roots of home bias and demand instability are explained in terms of investor risk perception and credit rationing, exacerbated by traders' behaviour. The consequences for host country macroeconomic balances and income distribution of varying investor risk tolerance are then demonstrated. Although the net impact also depends upon the host policy response, this transmission mechanism means that host 'fundamentals' are themselves strongly affected by capital flows and thus cannot be considered as to be independent of home asset demand. The paper concludes by examining the implications of these findings for the future of development economics in general and for policy response in particular.
Topic:
Development, Emerging Markets, Markets, and Third World

115. Credit Co-operatives in Locally Financed Economic Development: Using Energy Efficiency as a Lever

Author:
Robert J. McIntyre
Publication Date:
02-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In most transitional and many developing countries institutions capable of supporting economic development with localized saving-investment cycles have not developed. This crucial gap is in no way addressed by either country-level macro programmes dealing with 'development finance' or by donor-driven 'micro credit' schemes of Grameen and other types operating at a lower (local) level. The latter seldom evolve into financial institutions able to sustain themselves on the basis of local resources, do not operate on a sufficient scale to trigger dynamic local-level economic growth, and are ultimately artificial manifestations of concessional or charitable aid. The advantages of credit co-operatives in mobilizing and financing local economic development a contrasted with the disadvantages of both conventional micro credit and the most recent neoliberal fashion of so-called 'new wave financial institutions'. Both precedent and the structural logic suggest that this is a promising space for the development of a localized financial system based on credit co-operatives, which elsewhere have overcome the SME credit famine and stimulated local saving-investment cycles. Recent Russian developments are placed in the context of earlier experience in structurally similar conditions. These lessons apply to all other former Soviet Union states, as well as other countries.
Topic:
Development, Economics, Humanitarian Aid, and Third World
Political Geography:
Russia

116. Patterns of Rent-Extraction and Deployment in Developing Countries: Implications for Governance, Economic Policy and Performance

Author:
Richard M. Auty
Publication Date:
02-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Rents tend to be relatively high in developing countries and also very fungible, so that differences in the scale of the rent and in its distribution among economic agents profoundly affect the nature of the political state and the development trajectory. This paper identifies two basic trajectories to a high-income democracy linked to the scale and deployment of rents. Low-rent countries tend to engender developmental political states that competitively diversify the economy and sustain rapid per capita GDP (PCGDP) growth, which strengthens three key sanctions against anti-social governance (political accountability, social capital and the rule of law) to achieve endogenous democratization that is incremental. In contrast, rent-rich countries are likely to experience a slower and more erratic transition. This is because high rents tend to nurture non-developmental (predatory) politic al states whose deployment of the rent locks the economy into a staple trap, which carries a high risk of a growth collapse. The events presaging a growth collapse weaken sanctions against anti-social governance. However, a growth collapse may abruptly trigger democracy if exogenous factors are favourable, although such a change is likely to prove unstable and prone to regression. Very preliminary tests of the link between PCGDP growth and sanctions against anti- social governance suggest that social capital and law strengthen as predicted by the models for low-rent countries, but political accountability lags. Rent-rich countries exhibit the expected weaker link between PCGDP growth and democratization, an outcome consistent with a more erratic transition towards a high-income democracy.
Topic:
Development, Economics, Politics, and Third World

117. Development Questions for 25 Years

Author:
Lance Taylor
Publication Date:
02-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Recent growth experience in developing countries is reviewed, with an emphasis on structural change and sources of effective demand. Ho w policy influences such outcomes is analyzed in light of historical experience. Options are discussed for macro and industrial/commercial policy, and how they may influence the growth process. The recent 'institutional turn' in development theory may obfuscate serious policy analysis.
Topic:
International Relations, Foreign Policy, Development, and Third World

118. Taxation in Developing Countries: Case Study of Cameroon

Author:
Samuel Fambon
Publication Date:
01-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In the beginning of the 1980s, Cameroon witnessed a sustained rate of growth, associated essentially with the boom in the oil sector. Increased budgetary and extra-budgetary resources generated by this sector helped to raise the investment rate in the economy, and to maintain a reasonable level of external indebtedness. But after this period of expansion, the country experienced unfavourable economic development caused by a successive decline in the terms of trade, leading to profound imbalances, notably in public finance and the external account. The government subsequently initiated a series of measures to reform its tax system and to adapt it to national economic realities. An efficient and equitable taxation encourages production and the accumulation of national wealth stimulates saving and investments and hence job creation. Such a tax system could, therefore, ensure sustainable growth and development in Cameroon.
Topic:
Development, Economics, Political Economy, and Third World

119. Hydrogen Fuel Cells and Transport Alternatives: Issues for Developing Countries

Author:
Grant Boyle and Lynn Mytelka
Publication Date:
05-2006
Content Type:
Policy Brief
Institution:
United Nations University
Abstract:
Recent technological advances in the application of hydrogen fuel cells in the transport sector have drawn considerable attention and increased funding from both public and private sources over the past ten years. The International Energy Agency estimates that about US$1billion per year is currently being invested in public hydrogen and fuel cell research, development, test vehicles, prototype refuelling stations and demonstration projects, as compared to the total annual public budget for energy research, development and demonstration of around US$8billion. While still in the early stages of development and costly in comparison to conventional vehicle propulsion and fuel technologies, fuel cells and hydrogen offer a promising solution to address growing concerns over the transport sector's dependence on oil and its impact on climate change.
Topic:
Development, Energy Policy, Science and Technology, and Third World
Political Geography:
United States and Europe

120. Open Source and Open Standards: A New Frontier for Economic Development?

Author:
Philip Schmidt and Rishab Aiyer Ghosh
Publication Date:
03-2006
Content Type:
Policy Brief
Institution:
United Nations University
Abstract:
Free software (also called open source software or libre software) has become one of the most talked about phenomena in the ICT world in recent years. This is remarkable, not only for the usual reasons—that open source has been around for many years as a volunteer driven success story before being discovered by big business and now government— but also because it has largely developed quietly on its own without the headline coverage and glare of international attention that it now receives.
Topic:
Development, Economics, Science and Technology, and Third World
Political Geography:
United States