Institutions, Social Capital, and Economic Development in Africa: An Empirical Study.

Using 1975-2000 panel data, this paper examines the effects of institutions and social capital, in the form of generalized trust (proxied by contract-intensive money), on economic development in 39 African countries. The results indicate that there is a robust positive influence of social capital on income. In addition, the interaction between social capital and institutional quality, and the interaction of social capital with human capital also have a positive influence on economic development. On the other hand, institutions do not seem to have an independent effect (or may even have a negative impact) on income. Overall, the empirical results suggest that social capital and institutions in Africa may be complements rather than substitutes.

Financial Development and Income in Developing Countries

This paper presents an empirical analysis of the controversial relationship between financial system development and economic development. Using cointegration and VAR estimations on annual data from Africa, we examine the nature of the relationship between financial development and income. We find mixed results on both the short and the long-run relationships between the two variables. We find finance causing income, income causing finance, and bi-directional causality. The results indicate that neither the short-run effects nor the long-run relationship seem to linearly depend on the level of financial development or the stage of development.

Gender Inequality and Growth in Sub-Saharan Africa and Arab Countries

This paper uses panel data from African and Arab countries and Arellano-Bond estimations to empirically assess the impact on growth of two primary indicators that are associated with MDG 3; namely the ratio of girls to boys in primary and secondary enrolment, and the ratio of 15-24 year-old literate females to males. Our findings indicate that gender inequalities in literacy have a statistically significant negative effect that is robust to changes in the specification. We show that higher gender inequality has an even stronger effect on income growth in Arab countries. In addition, in more open economies, gender inequality in literacy seems to have an additional effect, but this effect is positive; suggesting that trade-induced growth may be accompanied by greater inequalities. The results associated with the effects of gender inequality in primary and secondary enrolment are less robust.Growth, gender inequality, literacy, openness to trade, Arellano-Bond estimation

Growth by Destination (Where you Export Matters): Trade with China and Growth in African Countries

I perform Arellano-Bond GMM estimations using panel data over the period 1995-2008 and explore the growth effects of Africa’s trade with China, distinguishing between the effect of imports and the effect of exports, and controlling for the role of export concentration. Four important results are obtained from the empirical analysis. First, there is no empirical evidence that exports to China enhance growth unconditionally. Second, the results suggest that export concentration enhances the growth effects of exporting to China, implying that countries which export one major commodity to China benefit more (in terms of growth) than do countries that have more diversified exports. Third, contrary to the widely held view that increasing imports from China would have a negative effect, the empirical results show that the share of China in a country’s total imports has a robust positive effect on growth. Finally, the evidence suggests that there is an in verted-U relationship between exports to developed countries and growth in Africa. Overall, the results seem to provide support for the hypothesis of growth by destination (i.e., that where a country exports matters for the exporting country’s growth and development) in the sense that exports to more developed (OECD) countries has (at least up to a threshold) a positive impact on growth but no such effect is unambiguously (unconditionally) shown in the case of exports to China. I draw on these findings to outline some policy implications.

Institutions, Trade, and Social Cohesion in Fragile States

This paper examines the contribution of institutions, social cohesion, and trade to development (per-capita income) with emphasis on fragile states in Africa. Results from GMM estimations suggest that political institutions, openness to trade, and social cohesion affect growth in fragile states via direct and indirect mechanisms. The results indicate that, beyond a certain level, openness to trade may actually be harmful to economic performance in fragile states, particularly in countries with high export concentration. Improvements in institutional quality, or more specifically in democratization, also may be harmful in the short run. On the other hand, social cohesion has a positive effect once a threshold level is reached. The results associated with the effects of political institutions and openness to trade seem to suggest the possibility of a ‘catch-22’, at least in the short run. If a fragile state tries to improve its political institutions or its openness to trade it may wind up with lower per-capita income. According to the formula used to allocate World Bank-IDA funds get more money, such country would get more aid. However, while obtaining more aid may be a good outcome lower income implies more poverty (assuming no changes in income distribution). Thus, aid may not lead to significant poverty reduction.fragile states, aid effectiveness, institutions, social cohesion

Entrepreneurship, Reforms, and Development: Empirical Evidence

We examine how entrepreneurship and institutional and policy reforms affect development (proxied by the rate of growth in per–capita income). We do so by performing Arellano-Bond GMM estimations on annual data for a large group of developing and developed countries, and covering the period 1990-2002. We focus in particular on the interplay of trade and institutional reforms and entrepreneurship. The empirical results indicate that the interplay of entrepreneurship and institutions, and the interplay of entrepreneurship and policy reforms, influence the growth effects of entrepreneurship. However, the effects are strikingly different. The impact of institutional reform is positive when the level of entrepreneurship is low and negative when it is high. On the other hand, the effect of policy reform is negative when entrepreneurial activity is weak and positive when it is strong. These results are robust to the inclusion of other control variables.development, growth, entrepreneurship, institutions, policy reform

Tunisia's Development Experience: A Success Story?

Tunisia.s recent growth and development performance relative to countries in its region, and relative to countries at similar levels of development in other parts of the world, particularly in Sub-Saharan Africa, have been notable. An analysis of Tunisia.s path to development reveals that the country.s development strategy relied primarily on diversifying its production and trade and enhancing its human capital with emphasis on women.s empowerment. Family planning programmes that have caused fertility to decline significantly are a hallmark of Tunisia.s development strategy. This paper reviews Tunisia.s experience, identifies the major challenges and threats to the viability of its development strategy, and pinpoints lessonsDevelopment, politics of co-optation, trade openness, fertility, human capital, wonmen's empowerment, Tunisia

Entrepreneurship and Reforms in Developing Countries

We examine how institutional and policy reforms affect the relationship between entrepreneurship and growth. We perform Arellano-Bond GMM estimations on annual data (over the period 1990-2002) from a large group of developing countries and focus in particular on the interplay between policy and institutional reforms and entrepreneurship. We find that the joint effect of trade reform and entrepreneurship on growth is negative, suggesting that trade reform diminishes the positive effects of entrepreneurial ability on growth, while the joint effect of financial sector reform and entrepreneurship has a non-linear impact on growth. Financial sector reforms enhance the growth effect of entrepreneurship at initial levels and diminish it at high levels of reform. In addition, we find that the interplay of institutional reform and entrepreneurship does not seem to matter for the growth effects of entrepreneurship.growth, entrepreneurship, institutions, policy reform

On Growth and Development.

We examines how institutional and policy reforms affect the relationship between entreprene urship and growth. We perform Arellano-Bond GMM estimations on annual data (over the period 1990-2002) from a large group of developing countries and focus in particular on the interplay between policy and institutional reforms and entrepreneurship. We find that the joint effect of trade reform and entrepreneurship on growth is negative, suggesting that trade reform diminishes the positive effects of entrepreneurial ability on growth, while the joint effect of financial sector reform and entrepreneurship has a non- linear impact on growth. Financial sector reforms enhance the growth effects of entrepreneurship at initial levels and diminish it a high levels of reform. In addition, we find that the interplay of institutional reform and entrepreneurship does not seem to matter for the growth effects of entrepreneurship.growth, entrepreneurship, institutions, policy reform

Preemption, Predation, and Minimum Quality Standards

We present a model of vertical product differentiation and exit where a domestic and a foreign firm face fixed setup costs and quality-dependent costs of production and compete in quality and price in the domestic market. Quality-dependent costs are quadratic in qualities, but independent of the quantities produced. The domestic government may impose a minimum quality standard binding for both foreign and domestic firms. In the presence of an initial cost advantage of the domestic firm, a sufficiently high minimum quality standard set by the domestic government will enable the domestic firm to induce exit of the foreign firm, i.e. to engage in predation. However, the same standard would lead to predation by the foreign firm, if the foreign firm had the initial cost advantage!vertical product differentiation, oligopoly, trade, quality, country asymmetries