IT adoption and spatial agglomeration - a model of cumulative adoption in a small open economy

I develop a model of cumulative ICT investments in a small open economy framework with differenciated inputs and imperfect competition borrowed to Ciccone and Matsuyama (1996). Within this framework, fixed adoption costs and pecuniary externalities based on strategic complementarities between users and producers of ICT-related inputs are what allow for agglomeration economies in ICT investments despite the abscence of transport costs. Moreover, expectations and the way alternative industrial structures allow them to be coordinated (monopolistic competition versus horizontally integrated monopoly) are key determinants of the likelyhood of an economic catching-up based on the intensive adoption of ICT inputs. Actually, three alternative growth paths with very different long-run outcome are allowed to emerge : 1) a “no-growth path” path in which the economy is trapped into primitive production processes; 2) a “transitory high growth path” in which the region underwents a process of adjustment to technological change and modernize its production processes by intensively adopting imported ICT-related inputs; 3) a “miracle growth path” where the regional economy find the adequate incentives not only to intensively adopt imported ICT inputs but also to develop and produce new ICT inputs.

Using agriculture for development: Supply- and demand-side approaches

For most poor countries of today, using agriculture for development is widely recognized as a promising strategy. Yet, in these countries, investment in agriculture has mostly been lagging relative to international norms and recommendations. Current wisdom on how to use agriculture for development is that it requires asset building for smallholder farmers, productivity growth in staple foods, an agricultural transformation (diversification of farming systems toward high value crops), and a rural transformation (value addition through rural non-farm activities linked to agriculture). This sequence has too often been hampered by extensive market and government failures. We outline a theory of change where the removal of market and government failures to use this Agriculture for Development strategy can be addressed through two contrasted and complementary approaches. One is from the “supply-side” where public and social agents (governments, international and bilateral development agencies, NGOs, donors) intervene to help farmers overcome the major constraints to adoption: liquidity, risk, information, and access to markets. The other is from the “demand-side” where private agents (entrepreneurs, producer organizations) create incentives for smallholder farmers to modernize through contracting and vertical coordination in value chains. We review the extensive literature that has explored ways of using Agriculture for Development through these two approaches. We conclude by noting that the supply-side approach has benefited from extensive research but met with limited success. The demand-side approach has promise, but received insufficient attention and is in need of additional rigorous research which we outline

Power Utility Re-regulation in East European and CIS Transformation Countries (1990-1999): An Institutional Interpretation

This paper analyzes the process of power utility re-regulation in Eastern Europe and the CIS during the decade of systemic transformation (1990-1999); in particular, it explores reasons why early attempts to introduce competition-oriented reform models have not succeeded. We discuss advantages and disadvantages of various reform models from an institutional economic perspective. The approaches to and results of power sector reform in Eastern Europe are assessed; quantitative indicators are wholesale and retail prices, cost coverage ratios, investment levels, and the degree of unbundling and privatization. The paper concludes that a gradual approach to reforms may have been appropriate for the first years of systemic transformation, but that today, ten years later, there is no reason to delay market-oriented reforms any longer.Power sector, institutions, transition, Eastern Europe

Privatization and State Capacity in Postcommunist Society

Economists have used cross-national regression analysis to argue that postcommunist economic failure is the result of inadequate adherence liberal economic policies. Sociologists have relied on case study data to show that postcommunist economic failure is the outcome of too close adherence to liberal policy recommendations, which has led to an erosion of state effectiveness, and thus produced poor economic performance. The present paper advances a version of this statist theory based on a quantitative analysis of mass privatization programs in the postcommunist world. We argue that rapid large-scale privatization creates severe supply and demand shocks for enterprises, thereby inducing firm failure. The resulting erosion of tax revenues leads to a fiscal crisis for the state, and severely weakens its capacity and bureaucratic character. This, in turn, reacts back on the enterprise sector, as the state can no longer support the institutions necessary for the effective functioning of a modern economy, thus resulting in deindustrialization. Using cross-national regression techniques we find that the implementation of mass privatization programs negatively impacts measures of economic growth, state capacity and the security of property rights.http://deepblue.lib.umich.edu/bitstream/2027.42/40192/3/wp806.pd

Global Food Price Shock and the Poor in Egypt and Ukraine

The global food price shock of 2006-2008 has particularly affected poorer strata of populations in several developing countries. In Egypt and some other countries it has put food subsidy schemes to the test. This paper develops two comparable computable general equilibrium models for Egypt and Ukraine which are used to simulate direct and indirect impacts of the food price surge and various policy options on the performance of the main macroeconomic indicators as well as on poverty outcomes. The results illustrate the limited ability of realistic policy responses to mitigate negative social consequences of an external price shock. Food import tariff cuts are a partial remedy faring better than other analysed options. Furthermore, the Egyptian system of food subsidies needs substantial reforms limiting the related fiscal burden and improving the targeting of the poor population.food subsidy, agriculture, price shock, poverty, Ukraine, Egypt