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This paper shows evidence of strong heterogeneity in the relationship between government size and growth, depending on the quality of public sector institutions. Focusing on a wide sample of developed and developing countries over the period 1981-2005, we find that government size reduces growth when bureaucracy quality is low, whereas no significant effect is observed for sufficiently high levels of bureaucracy quality. The results hold both in cross-section and panel data analyses and are robust to a large number of robustness checks. These findings have important implications for assessing the role of government size in economic growth. [ABSTRACT FROM AUTHOR]

SUMMARY This lecture on some problems araising from the international economic relations of developing countries, delivered in a developing country aims at giving a concise compendium of the principal propositions and findings of recent international trade theory. Particular emphasis is lied on the importance of pulling together commercial policy, foreign exchange policy and fiscal policy (internal taxes and subsidies) in a comprehensive scheme which was qualified by H arryH. B ell, Research Director of the UNCTAD, as a 'unified theory of protection'. In fact, the author, who is working in the praxis of international monetary and financial questions but likes personally to make 'excursions' to international trade theory and public finance, felt compelled to break down the artificial compartmentalization between the various sub-disciplines of political economy. A first attempt of this kind necessarily cannot go down into all details and necessarily rests to be completed. On this conceptual background the paper deals with the influence of inflation on development, fixed versus floating rates, tariff arguments, the attempt to construct a scientific tariff, the costs of selfsufficiency, the combined net effective rate of protection, quantitative restrictions and monetary trade biasing, the question whether import restriction or export promotion, invisibles in a unified theory of protection, capital movements and multiple exchange rates, the influence of the taxation system on relative prices and exchanges and last but not least the skeleton of a typical reform program. Admittedly, in praxis there will be as long difficulties concerning the application of the projected scientific system of protection as long as no one seems to have elaborated a satisfying empirical method in which tariffs, exchange rates and fiscal instruments are all expressed in terms of comparable units on a comparable scale. But does this matter? Praxis will follow theory. [ABSTRACT FROM AUTHOR]

Institutional quality has been increasingly identified as crucial for economic development. In line with previous work which has explored the determinants of good institutions, this paper examines the impact of economic and social inequalities between ethnic groups on government quality. I hypothesize that greater inequalities between groups will tend to undermine institutions both because they tend to legitimize corruption in the eyes of disadvantaged groups and because of the efforts of better-off groups to maintain their privileges. Based on a panel of 29 developing countries, I find that socio-economic ethnic group inequalities reduce government quality, something which suggests the convenience of policies that can level the playing field in ethnically heterogeneous societies. [ABSTRACT FROM AUTHOR]

Institutions, and more specifically private property rights, have come to be seen as a major determinant of long-run economic development. We evaluate the case for property rights as an explanatory factor of the Industrial Revolution and derive some lessons for the analysis of developing countries today. We pay particular attention to the role of property rights in the accumulation of physical capital and the production of new ideas. The evidence that we review from the economic history literature does not support the institutional thesis. [ABSTRACT FROM AUTHOR]

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The purpose of this paper is to study the structure of production in some underdeveloped economies. Recent literature on the problem of economic development has greatly emphasized the role of linkages in the planning of economic development. ALBERT HIRSCHMAN, for example, has advocated a policy of investing in the strategic sectors (those with strong backward and forward linkages) of an economy, which in interacting with the other sectors can help to initiate economic development. An autonomous investment can induce further investments through pressures of excess demand. This is the backward linkage effect -- output of the induced industries are the inputs of the autonomous industry. An autonomous investment can also induce further investment by providing an excess supply of its produce. This is the forward linkage -- the output of the autonomous industry is the input of the induced industries[1]. [ABSTRACT FROM AUTHOR]

Bilateral donors have recognized the need to improve the consistency of donors' policies towards developing countries. However, the impact of policy consistency on economic development has not been documented in the literature to date. Our contribution is twofold: firstly, we use the indices provided by the Center for Global Development (CGD) to construct indicators of overall donors' policies performance and donors' policies consistency at the recipient level. Secondly, we assume that the growth-consistency nexus is dynamic and our results suggest that an increase in consistency by one standard deviation increases growth on average by 1,1 percentage point. This result holds for different instrumentation strategies and robustness checks. We also highlight that the overall policy performance (OPP) increases growth above a sufficient level of donors' policies diversification and level of OPP. [ABSTRACT FROM AUTHOR]

Summary We exploit differences in the number and distribution of natural resources to estimate the presence of a curse of natural resources on economic growth. Building on a sample of 93 developing and developed countries covering the years 1980 to 2007, we show that, given the value of the resource endowment, the higher the number of resources is, the higher is a country's per-capita growth. This finding is robust to the addition of all usual controls and to the splitting of the dataset into subsamples such as non- OECD or non-African countries only. [ABSTRACT FROM AUTHOR]

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SUMMARY The main problem of underdeveloped countries consists in an inflexible productive structure which makes it difficult to adopt to changes in world markets. There are three important instruments to improve their flexibility. The first instrument are the investments - not investments in general (this is only of interest in the context of stabilization policies) but specific investment projects or programs. The author distinguishes directly and indirectly productive investments, which require separate investment criteria. For the latter especially the fact ought to be taken account of that they cause large future current expenditures, therefore absorbe future resources ahead of creating them. The second instrument is the budget. In underdeveloped countries its task is not only to finance the public services but also to accumulate savings. It becomes the link between the public and the private sectors as well as between directly and indirectly productive investments, and, by this, the main instrument for development. The third instrument is the balance of payment policy: avoidance of balance of payment crises and efficient use of export receipt. Its further tasks consist in creating public savings-a task that is very often underestimated compared to the infant industry argument or the directing of import and export. In the last part the author scrutinizes a special problem of planning a specific investment project: shadow or accounting prices (wages, interest rates, exchange rate). The theory implies that all investments are directly productive, which ist too simple. When shadow prices are adopted, the budgetary consequences are neglected. E.g. a project is chosen on grounds of low shadow wages, nevertheless market wages have to be paid. The difference is a charge on the budget. The possibilities of productive investment are reduced, the composition of directly and indirectly productive investments altered in favour of the latter, and economic growth diminished. The author therefore concludes that the adoption of shadow prices calculated from a static system might prove disastrous to future growth. The solution would consist in realizingall investment projects the rate of return of which would exceed the interest rate of, say, the World Bank (more or less opportunity cost of capital), and limiting investment in indirectly productive activities to what the budget can stand, in particular to an amount that does not foreclose future savings. [ABSTRACT FROM AUTHOR]