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111. Why Have All Development Strategies Failed in Latin America?

Author:
Guillermo Rozenwurcel
Publication Date:
02-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
After the Great Depression and throughout the rest of the twentieth century, Latin American countries basically approached economic development following two successive and quite opposed strategies. The first one was import substitution industrialization. The second was the so-called Washington Consensus approach. While the two views were founded on quite opposite premises, neither the import substitution industrialization nor the Washington Consensus managed to deliver sustained economic development to Latin American countries. Two domestic elements are crucial to understand this outcome. One is the failure of the state. The second is the inability to achieve mature integration into the world economy.
Topic:
Development, Economics, and Government
Political Geography:
Washington, South America, and Latin America

112. Prolonged Use and Conditionality Failure: Investigating IMF Responsibility

Author:
Laura Sabani and Silvia Marchesi
Publication Date:
02-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Since the 1970s, prolonged use of resources by the IMF has consistently expanded, among both low- and middle-income countries. Overall, this phenomenon suggests a lack of effectiveness of Fund supported programmes. In the literature conditional lending failure has been explained by looking both at the characteristics of the borrowing countries (demand-side factors) and at the possible influence of IMF specific interests (supply-side factors). Among the latter it has been suggested that non- compliance with conditionality might be attributed to the lack of credibility of the IMF threat of interrupting financial assistance in case of policy slippages. In this paper we critically review this literature and we propose a novel explanation, according to which it is the repeated nature of the IMF involvement, together with the fact that the Fund acts simultaneously as a lender and as a monitor (and as an advisor) of economic reforms, that weakens the credibility of the IMF threat. Specifically, we argue that Since the 1970s, prolonged use of resources by the IMF has consistently expanded, among both low- and middle-income countries. Overall, this phenomenon suggests a lack of effectiveness of Fund supported programmes. In the literature conditional lending failure has been explained by looking both at the characteristics of the borrowing countries (demand-side factors) and at the possible influence of IMF specific interests (supply-side factors). Among the latter it has been suggested that non- compliance with conditionality might be attributed to the lack of credibility of the IMF threat of interrupting financial assistance in case of policy slippages. In this paper we critically review this literature and we propose a novel explanation, according to which it is the repeated nature of the IMF involvement, together with the fact that the Fund acts simultaneously as a lender and as a monitor (and as an advisor) of economic reforms, that weakens the credibility of the IMF threat. Specifically, we argue that the IMF desire to preserve its reputation as a good monitor/advisor may distort its lending decisions towards some laxity, which may be exacerbated by the length of the relationship between a country and the Fund. Therefore, we claim that prolonged use of IMF resources is not only a consequence of a lack of effectiveness of conditional lending but it might itself be a determinant of conditionality failure.
Topic:
Economics, International Organization, International Trade and Finance, and Markets

113. International Finance and the Developing World: The Next Twenty Years

Author:
Tony Addison
Publication Date:
02-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Much has changed in international finance in the twenty years since UNU-WIDER was founded. This paper identifies five broad contours of what we might expect in the next twenty years: the flow of capital from ageing societies to the more youthful economies of the South; the growth in the financial services industry in emerging economies and the consequences for their capital flows; the current strength in emerging market debt, and whether this represents a change in fundamentals or merely the effect of low global interest rates; the impact of globalization in goods markets in lowering inflation expectations, and therefore global bond yields; and the implications of the adjustment in global imbalances between Asia (in particular China) and the United States for emerging bond markets as a whole. The paper ends by noting the paradox that today we see ever larger amounts of capital flowing across the globe in search of superior investment returns, and yet the financing needs of the poorer countries are still largely unmet.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
United States, China, and Asia

114. Turning Points in Development Thinking and Practice

Author:
Louis Emmerij
Publication Date:
02-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Why and when do turning points occur? How are they prepared? What are the choices before us when it comes to economic and social development policies? What is the role of culture in development? Do ideas play a role? What are the interests behind the ideas? The present paper tries to answer these and other questions and compares the advantages and disadvantages of global development theories with regional and local development policies that put more emphasis on the role of culture in economic development.
Topic:
International Relations, Development, Economics, and United Nations

115. Aid Allocation and Aid Effectiveness: An Empirical Analysis

Author:
George Mavrotas and Alessia Isopi
Publication Date:
01-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper performs aid allocation analysis using OECD-DAC data covering 20 aid donors and 176 recipients over the period 1980-2003. We improve upon earlier work in this area by employing inter alia the variable 'past outcome' measuring aid effectiveness in order to link together aid allocation and aid effectiveness. In line with previous work, we also account for both altruistic and selfish donor motives in the empirical analysis. As expected, empirical results based on To bit estimates of aid allocation for individual donors vary quite significantly among donors. We also test the robustness of our results by estimating individual regressions for the major donors over the period 1990-2003 in view of major events in the aid arena during that time that could potentially have an impact on the aid allocation process. Our results seem to be similar to those derived over the 1980-2003 period, thus implying that this was not the case. Overall, both altruistic and selfish donor motives seem to motivate aid allocation for most donors over the two periods under examination. However, when we further restrict our time dimension to the 1999-2003 period, some important policy changes with regard to selectivity seem to emerge for a small group of donor countries.
Topic:
International Relations, Development, Economics, and Humanitarian Aid

116. Decentralizing Aid with Interested Parties

Author:
Ira N. Gang and Gil S. Epstein
Publication Date:
01-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper analyses the decentralization of decisionmaking in aid-giving in a theoretical rent-seeking framework. In this analysis the root donor establishes a necessary criterion for potential recipients: good governance. The potential recipients compete in hierarchal contests for funds. The paper investigates whether, under certain reasonable conditions, fashionable aid procedures will lead to the development of a poverty trap.
Topic:
Development, Economics, Humanitarian Aid, and Politics

117. On the Empirics of Aid and Growth: A Fresh Look

Author:
George Mavrotas and Jan-Erik Antipin
Publication Date:
01-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper contributes to the empirics of aid and growth by taking a fresh look at the aid-policies-growth nexus emanating from the very influential but also debatable paper on the subject by Burnside and Dollar: 'Aid, Policies and Growth'. We employ three different datasets (including the one used in the Burnside and Dollar paper) and Bayesian instrumental variable methods to test the robustness of the central finding of the Burnside and Dollar paper related to the aid and policy interaction coefficient. In doing so, we applied Bayesian instrumental variable technique s to find the most probable parameter values in the growth equation. We also test for the exogeneity of the instrumental variables used. We find that the marginal effect of the disputed (Aid/GDP) x Policy variable on real per capita GDP growth is substantially smaller than in Burnside and Dollar, thus casting serious doubts on the robustness of their findings, and most importantly, on the validity of the policy lessons emerged from the Burnside- Dollar study.
Topic:
Development, Economics, and Humanitarian Aid

118. Aid Project Proliferation and Absorptive Capacity

Author:
David Roodman
Publication Date:
01-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Much public discussion about foreign aid has focused on whether and how to increase its quantity. But recently aid quality has come to the fore, by which is meant the efficiency of the aid delivery process. This paper focuses on one process problem, the proliferation of aid projects and the associated administrative burden for recipients. It models aid delivery as a set of production activities (projects) with two inputs—the donor's aid and a recipient-side resource—and two outputs—development and 'throughput', which represents the private benefits of implementing projects, from kickback s to career rewards for disbursing. The donor's allocation of aid across projects is taken as exogenous while the recipient's allocation of its resource is modelled and subject to a budget constraint. Unless the recipient cares purely about development, an aid increase can reduce development in some circumstances. Sunk costs, representing for the recipient the administrative burden of donor meetings and reports, are introduced. Using data on the distribution of projects by size and country, simulations of aid increases are run in order to examine how the project distribution evolves, how the recipient's resource allocation responds, and how this affects development if the recipient is not a pure development optimizer. A threshold is revealed beyond which marginal aid effectiveness drops sharply. It occurs when development maximization calls for the recipient to withdraw from some donor-backed projects, but the recipient does not, for the sake of throughput. Donors can push back this threshold by moving to larger projects if there are scale economies in aid projects.
Topic:
International Relations, Debt, Economics, and Humanitarian Aid

119. Tax Policy Reforms in Nigeria

Author:
Ayodele Odusola
Publication Date:
01-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Nigeria is governed by a federal system, hence its fiscal operations also adhere to the same principle, a fact which has serious implications on how the tax system is managed. The country's tax system is lopsided, and dominated by oil revenue. It is also characterized by unnecessarily complex, distortionary and largely inequitable taxation laws that have limited application in the informal sector that dominates the economy. The primary objective of this paper is to prepare a case study on tax policy reforms in Nigeria, with the specific objectives of examining the main tax reforms in the country; highlighting tax revenue profile and composition; analysing possible distributional impacts on the poor; discussing major problems that could prevent effective tax implementation in the country; and offering suggestions for reforms.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Africa and Nigeria

120. 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