ECONOMICS OF DEVELOPING COUNTRIES No part of this digital document may be reproduced, stored in a retrieval system or transmitted in any form or by any means The publisher has taken reasonable care in the preparation of this digital document, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions No liability is assumed for incidental or consequential damages in connection with or arising out of information contained herein This digital document is sold with the clear understanding that the publisher is not engaged in rendering legal, medical or any other professional services ECONOMICS OF DEVELOPING COUNTRIES TIAGO N CALDEIRA EDITOR Nova Science Publishers, Inc New York Copyright © 2009 by Nova Science Publishers, Inc All rights reserved No part of this book may be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, electrostatic, magnetic, tape, mechanical photocopying, recording or otherwise without the written permission of the Publisher For permission to use material from this book please contact us: Telephone 631-231-7269; Fax 631-231-8175 Web Site: http://www.novapublishers.com NOTICE TO THE READER The Publisher has taken reasonable care in the preparation of this book, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions No liability is assumed for incidental or consequential damages in connection with or arising out of information contained in this book The Publisher shall not be liable for any special, consequential, or exemplary damages resulting, in whole or in part, from the readers’ use of, or reliance upon, this material Any parts of this book based on government reports are so indicated and copyright is claimed for those parts to the extent applicable to compilations of such works Independent verification should be sought for any data, advice or recommendations contained in this book In addition, no responsibility is assumed by the publisher for any injury and/or damage to persons or property arising from any methods, products, instructions, ideas or otherwise contained in this publication This publication is designed to provide accurate and authoritative information with regard to the subject matter covered herein It is sold with the clear understanding that the Publisher is not engaged in rendering legal or any other professional services If legal or any other expert assistance is required, the services of a competent person should be sought FROM A DECLARATION OF PARTICIPANTS JOINTLY ADOPTED BY A COMMITTEE OF THE AMERICAN BAR ASSOCIATION AND A COMMITTEE OF PUBLISHERS LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA ISBN 978-1-61761-917-5 (Ebook) Published by Nova Science Publishers, Inc New York CONTENTS Preface vii SHORT COMMUNICATION Structural VAR Approach to the Sources of Exchange Rate Fluctuations in Sub-Saharan African Countries Shigeyuki Hamori and Hisashi Tanizaki RESEARCH AND REVIEW STUDIES 19 Chapter WTO Agriculture Negotiations and Developing Countries: An Overview Valeria Costantini 21 Chapter Volatility of Short-Term Capital Flows and Socio-Political Instability in Developing Countries: A Review Fırat Demir 53 Chapter Administrative Quality, Structural Reforms and Capital Accumulation in Developing Countries Ahmet Faruk Aysan and Mahmut Satuk Bugrahan Budak 79 Chapter Capital Accumulation in Less Developed Countries: Does Stock Market Matter? Prabirjit Sarkar 105 Chapter Determinants of Child Health in Developing Countries: The Experience of China and Vietnam Alberto Gabriele and Francesco Schettino 117 Chapter Adhering to the Principles of Knowledge The Only Game in Town Bhekuzulu Khumalo 157 Chapter Economic Development Experiences and Developing Countries Melike Bildirici and Nevin Coşar 185 vi Contents Chapter Balance Sheet Effect of Currency Crisis: Evidence from Indonesia Agustinus Prasetyantoko and Wahyoe Soedarmono 249 Chapter Jump Down, Turn Around, Pick a Bale of Poverty? U.S Cotton Policy and Household Income in Côte d’Ivoire Justin B May 273 Chapter 10 The Economics of Upgrading to Innovative Treatment Technologies in the Fight Against HIV/AIDS Patrick L Leoni 331 Chapter 11 Innovations and Economic Growth in the Fast Changing Global Economy: Comparative Experience of the Asian Countries Lakhwinder Singh 349 Chapter 12 On the Role of Communications Networks in REGIONAL Economic Development Toru Kikuchi and Chiharu Kobayashi 365 Chapter 13 Competition for FDI and the Demand for Information – Are Signalling Strategies useful Tools for Developing Countries? Sebastian Jaenichen and Torsten Steinrücken 377 Chapter 14 ‘Swing to the left’ and Its Impact on Investment Decisions in Latin America The Example of the Energy Sector in Bolivia and the Commercial Real Estate Market in Brazil Johannes Winter and André Scharmanski 399 Chapter 15 Winners and Losers post Democratic Reform in Nigeria: A Look at Economic and Labor market Outcomes Ruth Uwaifo Oyelere 417 Chapter 16 The Effect of Democratization on Growth of Developing Countries Ayla Oğuş and Sacit Hadi Akdede 443 Index 463 PREFACE There are many economic issues especially relevant to developing countries and the third world such as international aid, globalization, free trade, and labor issues In fact, the mix of them and other economic issues and conflicts over priorities and the urgency to transit to a Developed Country present an often overwhelming array of dilemmas This new book presents new research on some of these issues The Short Communication investigates the sources of fluctuations in real effective exchange rates in six sub-Saharan African countries, i.e., Burundi, Ghana, Lesotho, Malawi, Nigeria, and South Africa We constructed a structural vector autoregression (SVAR) model to analyze the sources that have driven the fluctuations in real effective exchange rates since the early 1990s Though much of the existing literature relies on bilateral exchange rates, this paper uses the effective exchange rate of each country The effective exchange rate reflects a country’s international competitiveness An analysis of the sources behind fluctuations in the real effective exchange rate can therefore help us understand the international competitiveness of a country in greater depth To the best of our knowledge, this study is the first to use this approach for the analysis of exchange rate fluctuations in sub-Saharan Africa Our empirical results show that real shocks play a dominant role in driving real exchange rate fluctuations This suggests that a flexible exchange rate may be preferable as the exchange rate regime in the countries studied The aim of Chapter is to give a broad overview of the main issues faced by developing countries in a context of trade liberalization as part of the multilateral agricultural trade negotiations in the WTO Doha Round The bargaining positions of developing countries in the Doha Round are described A comparison of empirical results on possible outcomes of a Doha Round agreement follows with a focus on impacts in terms of poverty reduction Results are then analysed using the main theoretical findings on trade-poverty links and the specific role of preference erosion in order to shed some light on potential failures of a trade reform in the absence of complementary policy actions Chapter reviews the theoretical and empirical evidence on the relationship between financial liberalization and socio-political risk by identifying the inter-dependent nature of socio-political and economic fault lines In particular, the research examines the dynamic relationship between the volatility of short-term capital flows and socio-political instability Accordingly, the socio-political risk is argued to be endogenously determined with the volatility of short term capital inflows such that increasing volatility by disrupting market activities, domestic investment and growth increases socio-political risk, which further feeds viii Tiago N Caldeira into the volatility of such flows Using evidence from three major developing countries that are Argentina, Mexico and Turkey and applying Granger causality tests and Impulse Response Functions, the paper finds support for the presence of an endogenous relationship between the volatility of short-term capital inflows and socio-political instability The results challenge the previous research regarding the use of political risk as a purely exogenous variable Chapter empirically investigates the importance of administrative quality as one of the key dimensions of governance institutions on structural reforms and capital formation in developing countries between 1985 and 2004 The empirical results show that administrative quality has considerable effects on structural reforms Furthermore, structural reforms and administrative quality have an effect on both on the aggregate and private investment decisions Empirical estimation especially reveals the positive effects of administrative quality on capital accumulation both directly and indirectly through enhancing the structural reforms Our estimations also stress the importance of human capital again both on structural reforms and capital accumulation Even after controlling for structural reforms, human capital and GNP per capita, macroeconomic indicators like neoclassical accelerator model and real interest rate are still crucial for the capital accumulation decision However, as compare advances in these macroeconomic indicators, the improvements in administrative quality, structural reforms and human capital yield much higher returns in developing countries In Chapter 4, our panel data analysis (1988-2002) of a sample of 31 less developed countries shows that the stock market capitalization as a percentage of GDP- an important indicator of stock market development- has no relationship with the growth rates of gross fixed capital formation Our time series analysis (1976-2005) of 15 countries shows that in at least 10 cases we observe no positive long-run relationship between the stock market turnover ratio and the growth of capital accumulation Interestingly the countries experiencing the developmental function of stock market are by and large civil law origin countries with alleged poor shareholder protection In the first section of Chapter 5, having identified the main clusters of food insecure households worldwide and their prevailing livelihood profiles, we discuss the interaction and relevance of key economic and social factors affecting child health in developing countries Using the World Bank WDI database, we carry out a cross-country econometric analysis on the impact of income and non-income factors on child health in developing countries Our main findings are threefold First, among income factors, each country’s overall level of economic development is paramount, but income distribution also plays an important role Second, each country's relative propensity to spend on basic services is significantly and negatively correlated with child malnutrition and mortality Third, women’s level of education and relative status play an important role In the second section, on the basis of this general framework of interpretation of child health and human development outcomes in the developing world, we focus specifically on the performance of China and Vietnam in reducing under-five child malnutrition and mortality Under the market socialist model, both countries achieved very high rates of GDP growth, and managed to decrease significantly the prevalence of malnutrition However, China’s progress in reducing child mortality was relatively slow in the 1980s and 1990s, before improving in the early 2000s Vietnam’s record was markedly better, notwithstanding the fact that Vietnam is still much poorer than its giant Northern neighbour We show that this apparent paradox is due mainly to the negative sideeffects of market-oriented reforms, which have reached a more advanced stage in China than Preface ix in Vietnam Our results also suggest that the relatively better status of women in Vietnam with respect to China is an additional factor This phenomenon appears to have been exacerbated by the perverse effects of China’s rigid population control policies, and by the increasingly, uncontrolled and quasi-privatized availability of advanced medical services In the policy conclusions, we criticize the market-oriented bias of social sectors reforms, and advocate in favour of recovering some essential features of the original socialist approach, which had been particularly effective in the crucial task of providing universally accessible basic public services Chapter deals with knowledge solely as an economic resource and a commodity, it deals with knowledge of the material and that part that can be used for economic progress, that part of knowledge that is a commodity, and the beginning of the chapter very clearly defines this concept This chapter deals with key components of the knowledge theory in regards to more specifically the need of understanding for the less developed countries The paper begins with why in terms of knowledge economics that developed countries are said to be behind, this leads to the discussion of the concept of time Time is analyzed both as an independent variable as well as a dependent variable Having analyzed the variable time, we need definitive prove of why less developed countries have less knowledge, this is done using the concept of point X and point U developed in the paper “Point X and the Economics of Knowledge.”, written by the author The paper then leads on to discuss the issue of systems potential and asks the questions why systems potential in less developed countries are lower than the more industrialized societies Finally the paper asks and answers the question what needs to be done in terms of knowledge for less developed countries to improve themselves and contribute more effectively to humanity, this needs a look at using the knowledge that is available to the best use, maximizing knowledge and reducing the opportunity costs of decisions The purpose of Chapter is to examine development experiences and to revise the growth paradigm from the beginning of the nineteenth century The characteristics of the economic development vary with respect to time and factors which determine the growth process from one country to another There is not one growth and/or development recipe Phsical and human capital, technological innovations and the structure of the population were common pillars for growth Although, the importance of these factors, they are not enough to reveal the development process Specialization, income distribution, the role of the goverment, foreign capital, borrowing ability, external trade and dependency, regional characteristics, political stability and/or instability, education and genetical factors are also have serious effects on the development process In this study, we propose that all these factors must be investigated altogether Studies in the framework of Beta-convergence, conditionally beta-convergence and sigma convergence shows the differences in income levels among the developed countries decreased, but between the developed countries and developing countries increased There was an absolute poverty trap, for example Zambia, Mozambic, Chad and Afghanistan became relatively poor in the twentieth century than before In this study, beside these points OECD countries, European Union, transition economies, Asian countries, Afrique countries and Middle-east countries will be analysed We hope to find answers of some questions, such as why Turkey, Brazil, Mexico and Argentina left behind in the development proccess, why former SSCB countries failed in transition countries.Why as an owner of petroleum Iran and Irak were lag behind in the ... examines the relationship between interregional trade in business services and international trade in goods In an environment of intense global competition the importance of information in the... national innovation systems Two distinct patterns of economic transformation and systems of innovations which have evolved over time are-one, based on building strong industrial sector as an engine... role in the process of evolving distinct national innovation systems of Asian type Chapter 11, while drawing lessons from public innovation policy of the successful innovators of East Asian countries,