AGRICULTURAL DEVELOPMENT, STATE EFFECTIVENESS AND LONG-RUN ECONOMIC DEVELOPMENT

This paper begins with the presumption that rapid economic development requires an effective state. An effective state is able to act independently of powerful interest groups with the aim of allocating resources so as to maximize long-term economic growth. It will be argued that such states are more likely to arise in situations within which the state must earn its income. That is, it must construct an institutional apparatus to extract the revenue that it needs and it is dependent upon the bulk of its agricultural producers to produce this revenue. The higher agricultural productivity within a region, the more dependent the state will be on revenues from the bulk of its agricultural producers. This dependency will lead, through a dialectical process, to a state whose activities will be constrained, a state which will be able to effectively commit itself to long-run development. This proposition is tested using time series/cross-sectional data for a sample of diverse countries from the 1960¡¯s through 1990¡¯s.Agricultural Productivity, State Effectiveness, Institutional Quality

Innovation and the Growth of Service Firms: The Polish Case

Differences in the growth of firms remain a major topic in economics and strategy research. In this paper we investigated the link between innovation performance and employment growth. First we discuss the problem from the theoretical point of view and then we analyze the relationship between innovation performance and the dynamics of employment in the Polish service firms in 2004-2009. Firms that introduced new services or marketing techniques experienced stronger growth. Process innovations contributed to employment reduction. Tellingly, this effect could only be observed in 2008-2009, a subperiod which saw the lowest levels of aggregate demand. This conclusion yields support to the presumption formulated by Pianta (2005) that the impact of innovation on employment growth depends on the macroeconomic situation

A Dynamic, Keynesian Model of Development

The Harrod-Domar growth model is extended in a way that introduces the possibility of persistent excess capacity as a potential source of slow growth. This extended model has five growth rates, which must be equal for there to be a full-employment, full-capacity dynamic equilibrium, instead of the three growth rates in the standard Harrod-Domar model. These growth rates will be called the justified, the actual, the warranted, the potential and the natural rate of growth. This model is held to provide a consistent framework for discussing many disparate view of economic development. Specifically, much of development theory can be divided in to three types of theories, which focus on different structural rigidities in the economy. First, there are theories that emphasize a lack of saving and thus propose mechanisms for augmenting saving. Second, theories emphasizing a shortage of investment and thus the existence of excess capacity. Third, there are theories emphasizing inadequate labor absorption and the need to develop or employ labor by using capital saving technology. It is argued that the essence of Keynesian development economics is the belief that the development process is served better by pursuing policies that enhance growth with existing obstacles than by simply trying to remove these obstacles in the hope that development will then occur.

Agriculture, Labor Intensive Growth, and Structural Change: East Asia, Southeast Asia, and Africa

In this paper, it is argued that physically abundant labor is not necessarily cheap labor. The latter depends upon the cost of food staples. Given the non tradability of the latter, rapid growth without rapid agricultural productivity growth will make labor increasingly costly. This will make the transition to labor intensive manufacturing and the exportation of such products very difficult. More importantly, it results in a structural change process in which the economy skips manufacturing and instead shifts in to capital intensive services. The experiences of Taiwan, Indonesia, and Uganda are used to illustrate these ideas

Deindustrialization in Africa

Economic growth in Sub-Saharan Africa has been characterized by deindustrialization. Conventional economists argue that this is due to a bad environment for business decision making. This paper provides a classical explanation for deindustrialization, the failure to solve the food problem. That is, food staple prices have risen rapidly resulting in labor becoming costly, although physically abundant. This has prevented the evolution of a comparative advantage in labor intensive manufacturing. Structural change is an important element of the process of economic development, especially in the early stages. Productivity grows by shifting labor out of agriculture where productivity is low, and into industry or manufacturing where labor productivity is high. However, there is not just a comparative static productivity gain from structural change. It also seems that there is a dynamic gain as well. Unconditional convergence in labor productivity does tend to occur in manufacturing. That is, once a manufacturing sector is established in a less developed region, labor productivity in that sector tends to converge to that found in that same sector in developed countries. Thus, aggregate (economy wide) convergence generally fails to occur in many low income countries because manufacturing remains much too small a share in the overall economy. There is a dynamic gain in labor productivity that results from successful structural change. Indeed the process described above seems to be a very good description of the development process in East and Southeast Asia. These countries managed to shift labor into labor intensive manufacturing and industry, a large part of which was produced for export. This led to dramatic increases in the rate of growth of per capita income as well as a dramatic reduction in overall levels of poverty

Factor Substitution and Unobserved Factor Quality in Nursing Homes

This paper studies factor substitution in one important sector: the nursing home industry. Specifically, we measure the extent to which nursing homes substitute materials for labor when labor becomes relatively more expensive. From a policy perspective, factor substitution in this market is important because materials-intensive methods of care are associated with greater risks of morbidity and mortality among nursing home residents. Studying longitudinal data from 1991-1998 on nearly every nursing home in the United States, we use the method of instrumental variables (IV) to address the potential endogeneity of nursing home wages. The results from the IV models are consistent with the theory of factor substitution: higher nursing home wages are associated with lower staffing, greater use of materials (specifically, physical restraints), and a higher proportion of residents with pressure ulcers. A comparison of OLS and IV results suggests that empirical studies of factor substitution should take into account unobserved heterogeneity in factor quality.

Economic Development and the Role of Agricultural Technology

In earlier debates on economic development, the agricultural sector’s role was somewhat controversial. While dualistic models highlighted the importance of agriculture, the mainstream literature placed a greater emphasis on the creation of a modern industrial sector. Soon agriculture disappeared from the mainstream development literature to re-emerge recently with a variety of multiple-sector growth models emphasizing the key role of agriculture and specifically technology in agriculture. This paper is an empirical cross-country analysis of agricultural technology’s role in economic development. Specifically, the hypothesis being tested is whether improvements in agricultural technology have a significant impact on long-run economic growth. The results indicate that agricultural modernization has a positive effect on both measures of economic growth and human development

Agricultural Development, State Effectiveness, and Long-Run Economic Development

This paper begins with the presumption that rapid economic development requires an effective state. An effective state is able to act independently of powerful interest groups with the aim of allocating resources so as to maximize long-term economic growth. It will be argued that such states are more likely to arise in situations within which the state must earn its income. That is, it must construct an institutional apparatus to extract the revenue that it needs and it is dependent upon the bulk of its agricultural producers to produce this revenue. The higher agricultural productivity within a region, the more dependent the state will be on revenues from the bulk of its agricultural producers. This dependency will lead, through a dialectical process, to a state whose activities will be constrained, a state which will be able to effectively commit itself to long-run development. This proposition is tested using time series/cross-sectional data for a sample of diverse countries from the 1960’s through 1990’s

Economic Development and Convergence Revisited: the Role of Agricultural Modernization

In earlier debates on economic development, the agricultural sector’s role was somewhat controversial. While dualistic models highlighted the importance of agriculture the mainstream literature placed a greater emphasis on the creation of a modern industrial sector. Soon agriculture disappeared from the mainstream development literature to re-emerge recently with a variety of multiple-sector growth models emphasizing the key role of agriculture. This paper is an empirical cross-country analysis of agriculture’s role in economic development. The focus is the importance of agricultural modernization as a precondition for convergence in postwar growth rates as well as an indicator for overall growth and wellbeing