Enrichment with growth

This essay first sets out the"business model"problems entailed by corruption and their effects as well as implications for economic growth. Key issues are the need for secrecy and co-operation with partners in crime. Dealing with these leads to behavior which is ostensibly bizarre and undermines economic efficiency, but is in fact a rational way of managing corrupt practices. However, different economic policies can be pursued that are compatible with corruption. Some are more pro-growth than others. Pro-growth corrupt policies hold the promise of enriching the corrupt elite more in absolute terms even though the share of national wealth diverted may be smaller. The most effective pro-growth polices that help enrich an elite resemble fairly orthodox economic policy prescriptions. Eventually the abolition of corruption holds the greatest promise to enhance growth and with it the wealth of elites. The expectation of such growth may explain why more and more political elites pursue"sound"economic policy and may embrace anti-corruption efforts, while securing legal ways of enrichment for themselves. Country examples illustrate policy approaches with different combinations of enrichment and growth properties.Public Sector Corruption&Anticorruption Measures,Access to Finance,Labor Policies,Technology Industry,Debt Markets

Managing guarantee programs in support of infrastructure investment

The author discusses the risks of infrastructure projects and the costs of capital, rationales for government support of private infrastructure ventures, and approaches to managing government guarantees of private infrastructure investments. Among his recommendations: 1) the decision to grant a guarantee for debts associated with infrastructure projects should be based on an explicit cost-benefit analysis for the project to be guaranteed, including an assessment of the likely cost to taxpayers and the impact of alternative forms of government support. 2) In principle, when the rationale for government support arises from the difference between effective willingness to pay and social benefits, the support should take the form of subsidies supplementing the price customers are willing to pay for a service. Such subsidies are contingent on the effective provision of the subsidized service. They allow the private provider to be guided by the full benefits of the project without reducing the incentives to perform (as would occur with risk sharing through cofinancing or guarantee). 3) Guarantees of policy risks should support a credible reform program but not substitute for it. In the medium term, policy reform should obviate the need for a guarantee. Beneficiaries of guarantees should bear a part of the risk, as with a deductible. In structuring guarantees, governments need to take care that performance incentives for private investors are nor undermined. Essentially, this means not covering normal business risk, including exchange rate and interest rate movements. 4) Governments should consider sharing normal business risks only as a last resort, if at all. To prevent excessive government exposure, decisions should be transparent and based on explicit cost-benefit analysis. Monetary limits should be placed on total government exposure, and there should be an exit strategy for the government wherever possible. 5) Governments should consider creating acentral office charged with managing guarantee exposure, to limit taxpayer exposure and to strengthen private performance incentives. 6) Governments should establish a system to update the valuation of its guarantee exposure periodically as well as mechanisms to adjust guarantees or to seize collateral when fees are not paid. The use to which guarantees can be put should be clearly limited, and policies for appropriate guarantee fees and coinsurance requirements should be established.Banks&Banking Reform,Payment Systems&Infrastructure,Environmental Economics&Policies,International Terrorism&Counterterrorism,Economic Theory&Research,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies,Public Sector Economics&Finance,Housing Finance

Competition in network industries

A wave of privatization is sweeping the globe, affecting about 100 countries and adding up to an average of more than $60 billion a year in business in the past decade. The challenge is to ensure that privatization yields clear benefits. Empirical studies suggest that ownership change by itself will often yield results, especially when it reduces government interference. But the regulation required in areas of natural monopoly can become overly intrusive and undermine progress. Real competition is required to generate sizable and lasting welfare improvements. But in infrastructure sectors, the introduction of competition is complicated by the existence of complex transport and communications networks. Debate about whether and how to introduce competition in network industries is sometimes heated. Certain questions recur: Will continuing regulation be needed? Whether and at what terms will private finance be forthcoming? The author argues that policymakers need to understand how competitive forces can be brought to bear in network industries. He explains the following: 1) common principles that are often lost in"technical"debates about specific sectors; 2) various methods for introducing competition in network industries; 3) competition for the market, and bidding for franchises; 4) options for competition for existing networks; 5) options for expanding competitive systems by decentralizing investment in new network capacity; 6) the option of allowing competition among multiple networks; and 7) the implications of these options for the sectors and for financing industry expansion. In case of doubt, he contends, policymakers should not restrict the entry of competitive firms in such networks. If they do, entry restrictions should be subject to an automatic test after a set period, and reviewed for costs and benefits.Economic Theory&Research,Decentralization,Markets and Market Access,Environmental Economics&Policies,Labor Policies,Education for the Knowledge Economy,Economic Theory&Research,Access to Markets,Markets and Market Access,Environmental Economics&Policies

Money, politics and a future for the international financial system

In developing the architecture for a financial system, the challenge is to combine deregulation and safety nets against systemic failure with effective prudential regulation and oversight. The author analyzes three approaches to choosing an adequate regulatory framework for a financial system. a) Those most worried about panic and herd behavior tend to favor relatively extensive controls on financial institutions'activities, including controls on interest rates and on the volume and direction of lending. b) Those most concerned about moral hazard advocate abolishing controls and safety nets, seeing the solution is stronger market discipline and reduced powers and discretion for regulators. c) Mainstream opinion advocates a mix of measures, to both strengthen market discipline and improve regulatory oversight. The approach a county opts for depends on 1) which monetary and exchange rate regime it chooses, 2) whether it is more concerned about moral hazard or about panic and herd behavior, and 3) how the politics of reform shape its solutions. The author suggests a scenario for development of the global financial system over the next two or three decades that assumes that the final outcome will resemble the market solution - not because that is the optimal policy choice but because of how political weakness will interact with advances in settlement technology. In the author's scenario, the world moves toward a monetary system in which fixed exchange rate systems or de facto currency competition limit the power of central banks. This limits options for discretionary and open-ended liquidity support to help deal with systemic financial crises. The costs of inflexible exchange rates are moderated by new types of wage contracts, using units of account that are correlated with the shocks a particular industry or kind of contract faces -- thus maintaining the positive aspects of monetary systems with flexible nominal exchange rates. Mistrust in monetary authorities and the emergence of private settlements lead to a return of asset-backed money as the means of payment. The disciplines on financial systems come to resemble somewhat those of historical"free banking"systems, with financial institutions requiring high levels of equity and payments systems protected only by limited, fully funded safety nets.Banks&Banking Reform,Fiscal&Monetary Policy,Financial Intermediation,Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Economic Theory&Research,Macroeconomic Management,Financial Intermediation,Financial Economics

Bidding for concessions

Privatization of infrastructure ventures in sectors such as energy, telecommunication, transport, and water has become popular over the last decade. Often- for good or bad reasons - private firms are given monopoly franchises under some type of long-term concession agreement, for example"Build-Operate-Transfer"schemes. The article surveys the issues arising in designing specifications as well as incentive and risk-sharing parameters comprehensively and consistently both to achieve efficient performance by the concessionaire and to minimize post-award renegotiations. Concession award should as a rule be made competitively, unless special requirements of speed, innovation, or excessive transaction cost argue otherwise. Typically, competitive concession award is made by first price sealed bids. There are strong arguments, however, to consider open auctions more seriously in a number of cases. Auctions may also be re-awarded by way of auction. However, somewhat arbitrary bid preferences may have to be set. Auctioneers for complex concession contracts should operate at arms-length from all interested parties, including politicians. It may be sensible to let independent agencies that regulate the concession scheme run the auction.Decentralization,Environmental Economics&Policies,Markets and Market Access,International Terrorism&Counterterrorism,Economic Theory&Research,International Terrorism&Counterterrorism,Environmental Economics&Policies,Access to Markets,Markets and Market Access,Economic Theory&Research

\u3ci\u3eTiphia Vernalis\u3c/i\u3e (Hymenoptera: Tiphiidae) Parasitizing Oriental Beetle, \u3ci\u3eAnomala Orientalis\u3c/i\u3e (Coleoptera: Scarabaeidae) in a Nursery

(excerpt) Tiphia vernalis Rohwer is native to China, Japan, and Korea where it is an external parasite of Popillia spp. (King 1931). It was released into the United States from China and Korea during the mid-1920s through early 30s (Fleming 1968). After it became established in the United States, releases were made from domestic sources beginning in 1931 (King et al. 1951). Tiphia vernalis was released into Ohio sporadically during 1936-1953 (King et al.1951). Tiphia vernalis has been reported parasitizing Popillia spp. (P. quadriguttata (Fabricius) in Korea; P. chinensis (Frivaldsky) and P. formosana (Arrow) in China; and P. japonica Newman in Japan) exclusively in the field (Balock 1934, Fleming 1968). It accepted Anomala (=Exomala) orientalis Waterhouse (oriental beetle) as a host in the laboratory and cocoons were obtained (King et al.1927, Balock 1934), but there are no previously published reports of T. vernalis parasitizing A. orientalis in the field

Enrichment with growth

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Capital Account Openness and the Varieties of Growth Experience

The effects of capital account openness on economic growth may vary across countries. Some countries may not have in place the constellation of institutions required to fully benefit from open capital accounts. Other countries may realize only small marginal improvements in the wake of capital account liberalization. This paper presents evidence of an inverted-U shaped relationship between the responsiveness of growth to capital account openness and income per capita. Middle-income countries benefit significantly from capital account openness. However, neither rich nor poor countries exhibit statistically significant positive effects. A similar inverted-U shaped relationship is found between the responsiveness of growth to capital account openness and various indicators of government quality.

The implicit deposit rate concept : issues and applications

An abstract for this article is not availableBanks and banking