DOCSLIB.ORG

How Important Are Dual Economy Effects for Aggregate Productivity?

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
How Important Are Dual Economy Effects for Aggregate Productivity? How Important are Dual Economy Effects for Aggregate Productivity? Dietrich Vollratha University of Houston Abstract: This paper brings together development accounting techniques and the dual economy model to address the role that factor markets have in creating variation in aggregate total factor productivity (TFP).Developmentaccountingresearchhasshownthatmuchofthevariationinincomeacrosscountries can be attributed to differences in TFP. The dual economy model suggests that aggregate productivity is depressed by having too many factors to low productivity work in agriculture. Data show large differences in marginal products of similar factors within many developing countries, offering prima facie evidence of this misallocation. Using a simple two-sector decomposition of the economy, this article estimates the role of these misallocations in accounting for the cross-country income distribution. A key contribution is the ability to bring sector specific data on human and physical capital stocks to the analysis. Variation across countries in the degree of misallocation is shown to account for 30 — 40% of the variation in income per capita, and up to 80% of the variation in aggregate TFP. JEL Codes: O1, O4, Q1 Keywords: Resource allocation; Labor allocation; Dual economy; Income distribution; Factor markets; TFP a) I’d like to thank Francesco Caselli, Areendam Chanda, Carl-Johan Dalgaard, Jim Feyrer, Oded Galor, Doug Gollin, Vernon Henderson, Peter Howitt, Mike Jerzmanowksi, Omer Moav, Malhar Nabar, Jonathan Temple, David Weil, and an anonymous referee for helpful comments and advice. In addition, the participants at the Brown Macroeconomics Seminar, Northeast Universities Development Conference and Brown Macro Lunches were very helpful. All errors are, of course, my own. Department of Economics, 201C McElhinney Hall, Houston, TX 77204 [email protected] 1 1Introduction One of the most persistent relationships in economic development is the inverse one between income and agriculture, seen here in figure 1. In the cross-section as well as over time, increases in income are associated with decreases in the relative size of the agricultural sector. The strength of this relationship is such that the decline of agriculture is often seen as a major hallmark of economic development. 12 JPN DNKNOR USANLDSWEFRAAUTFIN 10 GBRCANAUSITA NZL GRCPRT KOR ARG URY TTO ZAF VEN CHL CRI 8 MUS POL TUR JAMCOL TUN PER DOM IRN SLV MAR GTM PHL EGY IDN SYR HND ZWE Log of GDP per capita per Log of GDP LKA PAK 6 IND KEN TZA MWI 4 0 .2 .4 .6 .8 Percent of Labor in Agriculture Figure 1: Income per capita and Percent of Labor Force in Agriculture Note: GDP Data is from PWT 5.0 and agricultural labor share is from FAO. The development accounting literature, typified by Hall & Jones (1999) and Klenow & Rodriguez- Clare (1997), has focused on the cross-country variation in income observed in figure 1. It is generally found that differences in total factor productivity (TFP) are the primary source of in- come variation. This literature, though, has not concentrated on the role of agriculture until very recently. In contrast, the field of development economics since the contributions of Lewis (1954), Jorgenson (1961), and Ranis & Fei (1961) has been intimately concerned with agriculture and its connection 2 y Rich R* yR ()lA | AA,R , AI ,R Log Income per Capita P* y Poor yP ()lA | AA,P , AI ,P 0 l Rich l Poor 1 A Percent of Labor in Agriculture A Figure 2: Explanations for the Inverse Relationship of Income and Agric. to income levels. The dual economy theory suggests that, prima facie, factor market inefficiencies exist within the economy. This lowers overall productivity and income by allocating too many factors of production to the low productivity sector, typically agriculture. This paper brings the dual economy model into the development accounting framework and quantifies the effect that factor market inefficiency has on income levels and TFP variation across countries. Simply put, how important are dual economy effects for aggregate productivity? The answer to this question is intimately related to the inverse relationship of agriculture and income in figure 1. This can be seen more clearly in figure 2. In this diagram, points R∗ and P ∗ represent the observations of a rich, low-agriculture country (R) and a poor, high-agriculture country (P ).Each country is characterized by a two-sector economy (agriculture and industry) and their production functions are of the same form. For simplicity ignore any differences in capital endowments. One possible answer is characterized by the neoclassical growth model, in which the operation 3 of factor markets is bypassed completely by assuming there is only one sector.1 Accordingtothis model, countries differ in the relative productivity of agriculture and industry. Thus R∗ is the maximum point on yR (lA AA,R,AI,R) and P ∗ is the maximum point on yP (lA AA,P ,AI,P ).In | | country R, AI,R must be large relative AA,R and in P theoppositemustbetrue:AI,P is small relative to AA,P . This would account for the difference in labor shares in agriculture. To account for theincomedifference, though, it must also bethecasethatAI,R is large relative to AI,P . Variation in income and the inverse relationship with agriculture is driven primarily by differences in sectoral productivity levels. The dual economy, if it exists, exerts a negligible effect on productivity and income differences, as the poor economy does equate marginal products between sectors. The other possibility is that the inefficient factor markets in the dual economy have real, mea- surable effects.2 In figure 2 this is would be the case if both countries R and P are operating on yR (lA AA,R,AI,R), and again AI,R is large relative to AA,R. What separates countries R and P , | now, is that the rich country is maximizing income by equating marginal products between sectors, while P is poor because most of its people are in the low productivity agricultural sector. The differences in aggregate productivity and income between R and P are the result of factor market inefficiency, not differences in sector level productivity. This dual economy effect drives the inverse relationship of income and agriculture in this case. In this paper I use development accounting techniques to demonstrate that the macroeconomic evidence overwhelmingly supports the second possibility, that factor market inefficiency is a source of variation in aggregate TFP.3 Using data covering the period 1970 — 1990 that includes sector- 1 Included here as well are multi-sector growth models which explicitly incorporate factor markets, but generally do so under the assumption that these markets operate perfectly to equate marginal products across sectors. Reviewing only relatively recent work, papers by Matsuyama (1992), Laitner (2000), and Kongasmut, Rebelo & Xie (2001) all explore economic ramifications of the movement of labor between sectors, but do so assuming that wage rates are equalized across sectors. Unified growth models in Goodfriend & McDermott (1995) and Hansen & Prescott (2002) make use of the same assumptions, and Echevarria (1997) bypasses the issue by assuming a single optimizing agent in the economy. Kogel & Prskawetz (2001) construct a growth model in which agricultural workers are paid their average product, not their marginal, but do not explore the ramifications of this assumption. 2 There is a variety of evidence suggesting real inefficiencies in factor markets within countries. Banerjee & Duflo (2005) review a host of studies indicating that rates of return to the same factor vary widely within countries. From a macroeconomic perspective, the structural transformation research exemplified by Chenery & Syrquin (1975) and Chenery, Robinson & Syrquin (1986) as well as recent work by Caselli & Coleman (2001) and Temple & Woessmann (2004) examines how the reallocation of factors within an economy contributes to income growth. None of these studies, though, show how important these effects are in creating variation in income between countries. 3 There are, of course, other sources of inefficiency within economies. This paper does not deal with those sources explicity, and their effect will be captured within the residual TFP measures calculated by sector. 4 specific measures of physical capital and human capital I find that 30 — 40% of the variation in income per capita across countries is due to variation in the efficiency of their factor markets. These dual economy effects also explain up to 80% of the variation in aggregate TFP in my sample. Differences in sector level TFP are negligible in creating income differences between countries. This holds despite the fact that agricultural TFP levels vary greatly by country. The relatively small size of agriculture in total output, though, keeps this variation from being very meaningful. This paper is part of a growing literature examining the role of agriculture in the cross-country income distribution.4 Work by Gollin, Parente & Rogerson (2002) and Restuccia, Yang & Zhu (2003) explores the possibility that the combination of subsistence constraints and differences in agricultural TFP drive the income distribution. Restuccia (2004) and Graham & Temple (2003) create models in which the allocation of resources between sectors influences total factor productivity (TFP), and hence income. Their simulations show that these allocations can determine up to 50% of the variation in TFP between countries. Chanda & Dalgaard (2003) address the question more directly by doing a decomposition of aggregate TFP across countries. Their evidence suggests that up to 85% of the variation in aggregate TFP can be attributed to differences in the allocation of resources across sectors. These papers, though, do not deal explicitly with the question of the efficiency of factor markets within countries. The work of Cordoba & Ripoll (2004) does examine the wage gap between sectors specifically as a determinant of aggregate TFP differences. They find, as does this paper, that conventional measures of human capital by sector cannot account for the wide gaps in marginal product between sectors.
Load more

Recommended publications
  • CHAPTER 2 Patterns of Growth in Dual Economies: Challenges of Development in the 21St Century
    CHAPTER 2 Patterns of Growth in Dual Economies: Challenges of Development in the 21st Century Literature regarding the basics of classical development emphasizes on the relationship between economic growth and changes in production struc- ture. It also allocates special properties to industry, and more specifically to the ability of industrialization to create and combine a series of comple- mentarities, scale properties, and external economies to generate a sustain- able cycle of resource mobilization, increasing productivity, rising demand, income, and economic growth. Changes in the global economy have contributed to the renewed discussions on the role of structural transformation in achieving sustained economic growth and development. The catch-up failure of many devel- oping regions, which are often associated with “traps” and downturns (i.e., low-development traps, middle-income traps, and premature deindustrial- ization); the end of windfall export gains led by the commodity price boom in 2000s; and the continued vulnerability of many developing regions to external shocks have also added to this discussion (UNCTAD, 2016). The dual relationship between climate change and development serves as yet another important factor. On one hand, the effects of climate change create serious challenges to development; however, on the other hand, pri- oritization of economic growth and development has had major conse- quences on climate change and vulnerability. In its basic form, emission control and effective mitigation require not only the transformation of production systems but also the transformation of energy systems, includ- ing moving away from traditional high-carbon energy sources (a phase-out of coal-fueled power plants), increasing fuel efficiency, deploying advanced renewable technologies, and implementing measures to increase energy efficiency IEA,( 2008).
    [Show full text]
  • Cubanonomics: Mixed Economy in Cuba During the Special Period BRENDAN C. DOLAN
    Cubanonomics: Mixed Economy in Cuba during the Special Period BRENDAN C. DOLAN Fidel Castro is a man of many words. No other political figure in modern history has spoken more on the public record, varying the scope of his oration from short interviews to twelve hour lectures on the state of Cuban society. Starting in 1959, his ideas flooded Cuban society and provided a code of social expectations for all to obey. Cubans listened patiently, and over time enjoyed the fruits of an egalitarian socialist system: food, shelter, education and medicine for all. By the early 1980s, Castro had constructed a centrally planned economy and an economically favorable partnership with the Soviet Union. In 1989, however, the dissolution of the Soviet Union crippled the Cuban economy and forced millions of Cubans into poverty, resulting in widespread hunger and unemployment. Faced with the threat of an economic meltdown that could end his regime, Castro looked inward for ways to revive the Cuban economy. Though previously condemning and imprisoning Cubans illegally possessing black market dollars, Castro suddenly regarded these dollar holders as the key to his regime’s survival. This hard currency was crucial to restoring the national economy, and though its legalization would undermine his socialist, anti-American ideology, Castro saw no other option. In 1993, he decriminalized the possession of U.S. dollars and established state-run dollar stores to channel dollars to the government. Castro legalized self-employment, decentralized the agricultural sector and boosted Cuba’s tourist industry. Though they aided in reviving the national economy, these policy changes transformed the socioeconomic structure of Cuban society, creating a mixed economy that required Cubans to embrace certain market principles outside of socialist doctrine.
    [Show full text]
  • Labor Productivity and Energy Use in a Three Sector Model: an Application to Egypt
    DEPARTMENT OF ECONOMICS WORKING PAPER SERIES Labor productivity and energy use in a three sector model: An application to Egypt Rudiger von Arnim and Codrina Rada Working Paper No: 2011-06 University of Utah Department of Economics 260 S. Central Campus Dr., Rm. 343 Tel: (801) 581-7481 Fax: (801) 585-5649 http://www.econ.utah.edu Labor productivity and energy use in a three sector model: An application to Egypt ∗ Rudiger von Arnim Codrina Rada Assistant Professor Assistant Professor Department of Economics, University of Utah Department of Economics, University of Utah [email protected] [email protected] Abstract This paper presents a model of a developing economy with three sectors---a modern sector producing manufactures and services, a traditional sector producing agricultural goods, and a third sector providing energy. Modern and energy sector are assumed to be demand--constrained; the agricultural sector is supply--constrained. Simulation exercises confirm insights of existing theory on structural heterogeneity: A price--clearing agricultural sector can impose an inflationary barrier on growth. Further, emphasis is placed on the sources of productivity growth. Specifically, higher energy intensity rather than increases in energy productivity enable labor productivity growth, with the attendant complications for 'green growth.' Keywords: Structural heterogeneity, Multi-sector model, Energy use JEL Classification: O41, Q43, C63 ∗ Corresponding author. Labor productivity and energy use in a three sector model: An application to Egypt Rudiger von Arnim∗ Codrina Rada† February 14, 2011 Abstract This paper presents a model of a developing economy with three sectors—a modern sector producing manufactures and services, a traditional sector producing agricultural goods, and a third sector providing energy.
    [Show full text]
  • (C) 1995 Boston University International Law Journal Boston University International Law Journal
    Copyright (c) 1995 Boston University International Law Journal Boston University International Law Journal Fall, 1995 13 B.U. Int'l L.J. 295 ARTICLE: Symposium: A Recipe for Effecting Institutional Changes to Achieve Privatization: FOREWORD Tamar Frankel * * Professor of Law, Boston University School of Law. I am indebted to Professor Ingo Vogelsang, Boston University, for his guidance and ideas concerning this Foreward and to my research assistant Elizabeth L. Heick for her thorough research and dedicated help. SUMMARY: ... Both of us have been involved in attempts of developing countries to move from a government, centrally-planned economy to a private-sector, market economy. Of course, neither the division between government and private sector, nor the division between centrally-planned economy and market economy is clear cut, but rather is a matter of degree. ... In contrast, the performance of actors in the private sector, can be measured by profitability to the equity owners (the shareholders). ... Second, as compared to the private sector, the government operates under political and bureaucratic pressures. ... When traumatic experiences occur that shakeup large organizations, both "rejuvenated" government and the private sector can work well. ... In a few limited situations a government may be in a better position to operate a firm than the private sector. ... The private sector includes large, especially multinational, corporations, that are centrally managed. ... Most of us realize that the private sector cannot do it all. ... When people become disillusioned with private sector and market solutions they will turn to the government. ... In those public-sector dominated economies, taxation is far less important than in economies in which the private sector owns the enterprises.
    [Show full text]
  • Socio-Economic Dualism in South Eastern Europe
    Blue Bird Project Agenda for Civil Society in South East Europe SOCIO-ECONOMIC DUALISM IN SOUTH EASTERN EUROPE. EXPLORATORY NOTES ON DUALISM AND ITS REPERCUSSIONS FOR THE STATES OF THE REGION Paul Dragos Aligica Academy of Economic Studies Bucharest and Hudson Institute United Nations Development Program Split, 2001 1 SOCIO-ECONOMIC DUALISM IN SOUTH EASTERN EUROPE EXPLORATORY NOTES ON DUALISM AND ITS REPERCUSSIONS FOR THE STATES OF THE REGION 1. Introduction 2. Conceptual and theoretical background 3. Dualism, development and the state 4. Dualism and South East European countries 5. Dualism in the South East European countries: questions on meaning and implications 6. Exploratory overview of some implications of dualism INTRODUCTION The basic conjecture of this paper is the idea that the political societies, the civil societies and their impact on the structure and functioning of the states in South Eastern Europe are strongly determined by a long lasting specific feature of the economies of the region: their dualism. This feature has its origins in the modernization process, it is contemporary with it and has shaped in a distinctive way both the structure of the societies and of the states in these countries. The dualism of their economies is thus a key explanatory factor in any attempt to understand the nature, structure and functioning of the states of the region. Thus my contribution to this workshop is not laying the emphasis on ethnicity, nationalism or religion as the mainstream approaches to the states and problems of the region usually do, but on the regional political economies and on what I consider to be their key structural problem.
    [Show full text]
  • India's Economic Rise in the 21St Century and the Dual Economy
    Article Another great power in the room? India’s economic rise in the 21st century and the dual economy challenge DOI: http://dx.doi.org/10.1590/0034-7329202100105 Revista Brasileira de Rev. Bras. Polít. Int., 64(1): e005, 2021 Política Internacional ISSN 1983-3121 Abstract http://www.scielo.br/rbpi This article’s main objective is to examine the political economy of the economic reforms implemented in the 1990s and examine the main factors 1 Rafael Henrique Dias Manzi which explain India’s economic rise in the 21st century. We argue that the 1Centro Universitário Alves Faria, Regional Development, Goiânia, GO, Brazil productive investments and the country’s opening to the global economy have ([email protected]) contributed to economic growth, but that this rise leads to the formation of ORCID ID: a “dual economy.” Continuing reforms thereby become necessary for India orcid.org/0000-0001-8518-8329 in order to achieve inclusive growth and structural transformation, overcome Jean Santos Lima2 the dual economy challenge and gain strength in the international system. 2Universidade Católica de Brasília, International Relations, Taguatinga, DF, Brazil Keywords: International Economy; India; Economic Internationalization; ([email protected]) Emerging Countries; Economic Development. ORCID ID: orcid.org/0000-0003-4758-2389 Received: August 15th, 2020 Accepted: May 12th, 2021 Introduction hen it gained independence in 1947, India was still a Wpredominantly rural country. The working-age population employed in its manufacturing sector
    [Show full text]
  • Informal Economy in Latin America and the Caribbean: Implications for Competition Policy
    Organisation for Economic Co-operation and Development DAF/COMP/LACF(2018)4 Unclassified English - Or. English 1 April 2019 DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS COMPETITION COMMITTEE Cancels & replaces the same document of 10 September 2018 LATIN AMERICAN AND CARIBBEAN COMPETITION FORUM - Session I: Informal Economy in Latin America and the Caribbean: Implications for Competition Policy - Background Note - 18-19 September 2018, Buenos Aires, Argentina This document was prepared by the OECD Secretariat to serve as a background note for the discussion during the session The Informal Economy in Latin America and the Caribbean: Implications for Competition Policy that will take place at the Latin American and Caribbean Competition Forum on 18-19 September 2018 in Argentina. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. More documentation related to this discussion can be found at: www.oecd.org/competition/latinamerica/programme/ Please contact Ms. Iraxte Gurpegui if you have any questions about this document [E-mail: [email protected]]. JT03445590 This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 2 DAF/COMP/LACF(2018)4 Latin American and Caribbean Competition Forum Session I: The Informal Economy in Latin America and the Caribbean: Implications for Competition Policy – Background Note by the Secretariat* – There is a consensus amongst many researchers about the negative effects of informality in the competitive process.
    [Show full text]
  • The Wealth and Well-Being of Nations
    The Wealth and Well-Being of Nations Well-Being and Wealth The • Dani Rodrik Dani Contributors The Annual Proceedings of Dani Rodrik Ted Liu Sharun Mukand Jennifer Esperanza Rachel Ellett XI Volume 2018-2019 • Diep Phan Pablo Toral Darlington Sabasi Johnson Gwatipedza Xinshen Diao The Wealth and Well-Being of Nations Margaret McMillan Beatrice McKenzie Jonathan Mason Ivan Gradjansky 2018-2019 Department of Economics Volume XI: Globalization and the Wealth and Well-Being of Nations Dani Rodrik Diep Phan, Editor The Miller Upton Program at Beloit College he Wealth and Well-Being of Nations was Testablished to honor Miller Upton, Beloit College’s sixth president. This annual forum provides our students and the wider community the opportunity to engage with some of the leading intellectual figures of our time. The forum is complemented by a suite of programs that enhance student and faculty engagement in the ideas and institutions that lay at the foundation of free and prosperous societies. Cover Photo © Amanda Reseburg, Type A Images Senior Seminar on The Wealth and Well-Being of Nations: ach year, seniors in the Department of Economics participate in a semester- Elong course that is built around the ideas and influence of that year’s Upton Scholar. By the time the Upton Scholar arrives in October, students will have read several of his or her books and research by other scholars that has been influenced by these writings. This advanced preparation provides students the rare opportunity to engage with a leading intellectual figure on a substantive and scholarly level. Endowed Student Internship Awards: portion of the Miller Upton Memorial Endowments supports exceptional A students pursuing high-impact internship experiences.
    [Show full text]
  • How Important Are Dual Economy Effects for Aggregate Productivity?
    Journal of Development Economics 88 (2009) 325–334 Contents lists available at ScienceDirect Journal of Development Economics journal homepage: www.elsevier.com/locate/econbase How important are dual economy effects for aggregate productivity? Dietrich Vollrath 1 Department of Economics, University of Houston, 201C McElhinney Hall, Houston, TX 77204, United States ARTICLE INFO ABSTRACT Article history: This paper brings together development accounting techniques and the dual economy model to address the Received 7 June 2006 role that factor markets have in creating variation in aggregate total factor productivity (TFP). Development Received in revised form 25 March 2008 accounting research has shown that much of the variation in income across countries can be attributed to Accepted 27 March 2008 differences in TFP. The dual economy model suggests that aggregate productivity is depressed by having too many factors allocated to low productivity work in agriculture. Data show large differences in marginal JEL classifications: O1 products of similar factors within many developing countries, offering prima facie evidence of this O4 misallocation. Using a simple two-sector decomposition of the economy, this article estimates the role of Q1 these misallocations in accounting for the cross-country income distribution. A key contribution is the ability to bring sector-specific data on human and physical capital stocks to the analysis. Variation across countries Keywords: in the degree of misallocation is shown to account for 30–40% of the variation in income per capita, and up to Resource allocation 80% of the variation in aggregate TFP. Labor allocation © 2008 Elsevier B.V. All rights reserved. Dual economy Income distribution Factor markets TFP 1.
    [Show full text]
  • The American Dual Economy. Race, Globalization, and the Politics Of
    International Journal of Political Economy, 45: 85–123, 2016 Copyright #Taylor & Francis Group, LLC ISSN: 0891-1916 print/1558-0970 online DOI: 10.1080/08911916.2016.1185311 The American Dual Economy Race, Globalization, and the Politics of Exclusion Peter Temin Department of Economics, Massachusetts Institute of Technology (MIT), Cambridge, Massachusetts, USA Abstract: I describe the American economy in the twenty-first century as a dual economy in the spirit of W. Arthur Lewis. Similar to the subsistence and capitalist economies characterized by Lewis, I distinguish a low-wage sector and a finance, technology, and electronics (FTE) sector. The transition from the low-wage to the FTE sector is through education, which is becoming increasingly difficult for members of the low-wage sector because the FTE sector has largely aban- doned the American tradition of quality public schools and universities. Policy debates about public education and other policies that serve the low-wage sector often characterize members of the low- wage sector as black even though the low-wage sector is largely white. This model of a modern dual economy explains difficulties in many current policy debates, including education, health care, criminal justice, infrastructure, and household debts. Keywords criminal justice; dual economy; education; inequality; Nixon; Reagan; political economy; race The U.S. economy has come apart, with the rich getting richer and workers not advancing at all. As a politician said a decade ago, “We shouldn’t have two different economies in America: one for people who are set for life, they know their kids and their grand-kids are going to be just fine; and then one for most Americans, people who live paycheck to paycheck” (Edwards 2004).
    [Show full text]
  • Explaining and Tackling the Informal Economy: a Dual Informal Labour Market Approach
    This is a repository copy of Explaining and tackling the informal economy: a dual informal labour market approach. White Rose Research Online URL for this paper: http://eprints.whiterose.ac.uk/127143/ Version: Accepted Version Article: Williams, C.C. orcid.org/0000-0002-3610-1933 and Bezeredi, S. (2018) Explaining and tackling the informal economy: a dual informal labour market approach. Employee Relations, 40 (5). pp. 889-902. ISSN 0142-5455 https://doi.org/10.1108/ER-04-2017-0085 © 2018 Emerald Publishing Limited. This is an author produced version of a paper subsequently published in Employee Relations. This version is distributed under the terms of the Creative Commons Attribution-NonCommercial Licence (http://creativecommons.org/licenses/by-nc/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. You may not use the material for commercial purposes. Reuse This article is distributed under the terms of the Creative Commons Attribution-NonCommercial (CC BY-NC) licence. This licence allows you to remix, tweak, and build upon this work non-commercially, and any new works must also acknowledge the authors and be non-commercial. You don’t have to license any derivative works on the same terms. More information and the full terms of the licence here: https://creativecommons.org/licenses/ Takedown If you consider content in White Rose Research Online to be in breach of UK law, please notify us by emailing [email protected] including the URL of the record and
    [Show full text]
  • A Generic Macroeconomic Computable General Equilibrium Model for South Asia
    ADB Institute Discussion Paper No. 22 Assessing Poverty Impact of Trade Liberalization Policies: A Generic Macroeconomic Computable General Equilibrium Model for South Asia Haider A. Khan January 2005 Haider A. Khan is Visiting Fellow, Asian Development Bank Institute Tokyo, Japan and Professor of Economics, GSIS, University of Denver, USA. The views expressed in this paper are those of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute. Table of Contents 1. Introduction 2. Some General Considerations: Trade Liberalization and Poverty Reduction in the Post-Washington Consensus Environment 3. Measurement of Poverty: some fundamental issues 4. Macroeconomic Models for Developing Economies: Some Characteristics Related to Dualism in South Asia 5. An Example of Economic Reform in South Asia: India 1991-2004 6. A Generic Model for Trade Liberalization and Poverty Analysis for South Asia 7. Results from the Generic CGE Model and the Interpretation 8. Conclusions 2 Abstract The paper uses a dualistic, compact and “generic” (macroeconomic) computable general equilibrium (CGE) model specially constructed for the purpose of investigating the implications of trade liberalization for poverty reduction in South Asia. The model is a stylized representation of economies with large populations including large numbers of both urban and rural poor as in India, Pakistan or Bangladesh. The current “generic” model uses CES production functions and Harris-Todaro type migration model together with representative data to generate economy wide results. It is found that a dualistic production structure with sufficient details on the labor markets and household side can capture some of the effects of trade liberalization on poverty reduction.
    [Show full text]