Browsing by Author "Bigsten, Arne"

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Aid and Economic Development in Africa
(2006) Bigsten, Arne; Department of Economics
The question discussed in this in this paper is whether foreign aid can help accelerate growth in African countries. The paper reviews growth determinants and growth constraints in Africa and discusses how aid can help relieve the constraints. Issues covered are the choice of aid modalities, donor coordination, conditionality, and international integration. A key question addressed is how aid should be organised not to overburden the recipient system and to provide incentives for policy makers to perform. The paper also touches upon the need for international trade reforms and public goods investments.
Can Africa Reduce Poverty by Half by 2015?
(Blackwell Publishing, 2007) Bigsten, Arne; Shimeles, Abebe
This study uses simulations to explore the possibility of halving the percentage of people living in extreme poverty in Africa by 2015. It is shown that initial levels of inequality and per capita consumption determine the cumulative growth and inequality reductions required to achieve the target. The study finds that on average Africa only needs a relatively modest annual rate of growth in per capita household consumption to halve poverty by 2015 if inequality remains unchanged. The trade-off between growth and changes in inequality varies greatly among countries and their policy-choices are thus quite different. In some cases small changes in income-distribution can have a large effect on poverty, while in others a strong focus on growth is the only viable option.
Can Africa Reduce Poverty by Half by 2015? The Case for a Pro-Poor Growth Strategy
(2005) Shimeles, Abebe; Bigsten, Arne; Department of Economics
This study uses simulations to explore the possibility of halving the percentage of people living in extreme poverty in Africa by 2015. A pro-poor growth-scenario and a constant-inequality scenario are compared. It is shown that initial levels of inequality and mean per capita income determine the cumulative growth and inequalityreduction required to achieve the target. The trade-off between growth and inequality varies greatly among countries and their policy-choices are thus quite different. In some cases small changes in income-distribution can have a large effect on poverty, while in others a strong focus on growth is the only viable option.
Can Aid Generate Growth in Africa?
(1998) Bigsten, Arne; Department of Economics
The paper discusses the impact of foreign aid on economic growth in Africa. After brief discussion about growth determinants it goes on to review the available evidence about the impact of aid on African economic growth. Evidence from both cross-country regressions and country studies is considered, and issues relating to economic policy, governance, ownership, and sustainability are identified as particularly important. Given those insights, some general conclusions are drawn as to what type of aid should be given. However, the main focus is on a discussion about how to structure the aid relationship so that it encourages good governance, which is deemed essential for long-term growth. Donors should delegate more responsibility to the recipients, while at the same time creating an incentive structure for good performance. This would include among other things a shift towards ex post conditionality and aid allocation according to performance. Given the improvements in the economic policy environment in Africa, the prospects for effective aid look more promising than they have for a long time.
Can China’s Growth be Sustained? A Productivity Perspective
(2006) Hu, Angang; Bigsten, Arne; Zheng, Jinghai; Department of Economics
China’s unorthodox approach to economic transition has resulted in sustained high growth. However, in recent years Chinese economists have increasingly referred to the growth pattern as “extensive”, generated mainly through the expansion of inputs. Our investigation of the Chinese economy during the reform period finds that reform measures often resulted in one-time level effects on TFP. China now needs to adjust its reform program towards sustained increases in productivity. Market and ownership reforms, and open door policies have improved the situation under which Chinese firms operate, but further institutional reforms are required to consolidate China’s move to a modern market economy.
Can Japan Make a Comeback?
(2004) Bigsten, Arne; Department of Economics
Since the beginning of the 1990s Japan has experienced economic stagnation. This paper discusses its causes and the prospects for recovery. It considers both the macroeconomic problems and the viability of the Japanese economic model itself. The potential roles of fiscal, monetary, exchange rate, and structural policies are discussed.
Can Japan Make a Comeback?
(Blackwell, 2005) Bigsten, Arne
Clientelism and ethnic division
(2014-06) Isaksson, Ann-Sofie; Bigsten, Arne; Dept. of Economics, University of Gothenburg
Abstract: In light of the empirical evidence on clientelism and ethno-regional favouritism in African politics, the present paper examines the relationship between ethnic divisions and clientelism. Specifically, we ask whether – and what type of – ethnic divisions affect the experiences with, perceived prevalence of, and attitudes to clientelism. Empirical findings drawing on data for more than 20 000 respondents across 15 African countries challenge the dominant role of ethnic divisions for clientelist practices in Africa. Contextual measures of ethnic fragmentation and ethnic identification are found to have limited explanatory power for the concerned clientelism outcomes, and, considering possible subjects of ethno-regional favouritism, the empirical findings point more to the relevance of regional than ethnically based targeting of clientelist transfers.
Donor coordination and the uses of aid
(2006) Bigsten, Arne; Department of Economics
The paper discusses donor coordination and its implications for the uses of aid. The paper starts by specifying a simple framework for the discussion, and then reviews the theoretical literature. It then provides some data on donor proliferation and discusses how coordination modalities have evolved over time, in particular during the current phase with partnership and ownership. The following sections summarize the limited empirical evidence available on the impact of coordination on transaction costs and public-sector management and governance. A key issue with regard to the latter is how donor coordination affects the incentives of the recipient government. The paper concludes with a review of the policy debate and some policy conclusions.
Efficiency, Technical Progress, and Best Practice in Chinese State Enterprises (1980-1994)
(2000) Bigsten, Arne; Liu, Xiaxuan; Zheng, Jinghai; Department of Economics
In spite of rapid economic growth and swift structural change during the last two decades, China's industrial reform is far from complete, especially with regard to state enterprises (SOEs). Although troubled with huge financial losses, heavy debt, and substantial over-staffing, SOEs will continue to play a crucial part in the government policy to maintain social stability and economic growth in China. This study, based on samples of about 700 state enterprises during 1980-94, investigates productivity performance of the SOEs using Data Envelopment Analysis and Malmquist Index. Our empirical results show that average technical efficiency had been low among the sample SOEs. Considerable productivity growth was found, but it was mainly accomplished through technical progress rather than efficiency improvement. Regression analyses indicate that wage incentives and education had positive impacts on productivity growth, while large scale was an important determinant of whether an SOE was applying best practice technology. It is also shown that large SOEs were more likely to generate technical progress. These findings are consistent with the industrial structural adjustment program initiated by the government in 1994, which has focused on improving productive efficiency via redundancies and technology upgrading, and on building its best SOEs into conglomerates
Firm Productivity and Exports: Evidence from Ethiopian manufacturing
(2008-04-30T10:41:06Z) Bigsten, Arne; Gebreeyesus, Mulu
This paper examines the causal relationship between exporting and productivity using a ten years long plant-level panel data set from an annual census of Ethiopian manufacturing, rarely available in the sub-Saharan Africa. We exploited its length to trace the trajectory of TFP and other productivity measures of groups of firms classified by their export history. We then tested learning-by-exporting using a one-step system-GMM approach with the export-status included directly in the production function. We addressed potential endogeneity problems by using instrumental variables, and also applied a matching analysis to address potential selection bias. We found strong evidence of not only self-selection but also learning-by-exporting. Depending on the specification previous exporting appears to have shifted the production function by 15-32 %. Exporters had on average three times more employees, and paid 1.6 times higher average wage than those of non-exporters.
Fiscal Capacity and Government Accountability in Sub-Saharan Africa
(2011-06) Baskaran, Thushyanthan; Bigsten, Arne; University of Gothenburg, Dept of Economics
Historical evidence from the developed world suggests that the expansion of the mod- ern states’ fiscal capacity (i. e. its ability to tax citizens) eventually led to more democratic and less corrupt governments. Since sub-Saharan African countries are currently in a pro- cess of state building, we study whether a positive effect of fiscal capacity on government accountability prevails in contemporaneous sub-Saharan Africa, too. We conduct the em- pirical analysis with data covering 23 African countries over the 1960-2008 period. The results suggest that fiscal capacity increases government accountability in sub-Saharan Africa.
Globalisation and the Asia-Pacific Revival
(2003) Bigsten, Arne; Department of Economics
This paper reviews evidence on the evolution of international economic integration of Asia-Pacific countries, and discusses the extent to which this explains their recent growth success. It starts with a review of some theoretical arguments in the growth and globalisation debate, which is followed by a presentation of facts about Asia-Pacific international economic integration and growth relative to other regions of the world. Then we discuss the causes of the growth acceleration in the Asia-Pacific region and reflect on the relationships between policy reforms, openness, and per capita income growth. Finally, we draw some tentative conclusions about future growth in the region.
Gold mining and education: a long-run resource curse in Africa?
(2016-06) Ahlerup, Pelle; Baskaran, Thushyanthan; Bigsten, Arne; Dept. of Economics, University of Gothenburg
We provide micro-level evidence on an important channel through which mineral resources may adversely affect development in the long-run: lower educational attainment. Combining Afrobarometer survey data with geocoded data on the discovery and shutdown dates of of gold mines, we show that respondents who had a gold mine within their district when they were in adolescence have significantly lower educational attainment. These results are robust to the omission of individual countries, different definitions of adulthood, the use of alternative data from the Development and Health Surveys (DHS), and buffer-based approaches to define neighborhood. Regarding mechanisms, we conclude that the educational costs of mines are likely due to households making myopic educational decisions when employment in gold mining is an alternative. We explore and rule out competing mechanism such as endogenous migration, a lower provision of public goods by the government, and a higher propensity for violent conflicts in gold mining districts.
Growth and Poverty Reduction in Ethiopia: Evidence from Household Panel Surveys
(2002) Taddesse, Mekonnen; Shimeles, Abebe; Kebede, Bereket; Bigsten, Arne; Department of Economics
The paper investigates the poverty impact of growth in Ethiopia by analysing panel data covering the period 1994 to 1997, a period of economic recovery driven by good weather, peace, and much improved macro economic management. Unlike most developing countries, urban and rural poverty in Ethiopia are not significantly different from each other. The analysis of the structure of poverty shows asset ownership, education, type of crops planted, dependency ratios, and location to be important determinants. Decomposition of changes in poverty into the growth and redistribution components indicates that potential poverty-reduction due to the increase in real per capita income was to some extent counteracted by worsening income distribution. The implications of the results for a pro-poor policy are discussed.
Growth, Income Distribution, and Poverty: A Review
(2000) Levin, Jörgen; Bigsten, Arne; Department of Economics
This paper reviews the recent literature dealing with the relationships between economic growth, income distribution, and poverty. This generally fails to find any systematic pattern of change in income distribution during recent decades. Neither does it find any systematic link from fast growth to increasing inequality. Some recent empirical evidence has tended to confirm the negative impact of inequality on growth, on the other hand. Others have found that the level of initial income inequality is not a robust explanatory factor of growth, though high inequality in the distribution of assets, such as land, has a significantly negative effect on growth. Possible channels are credit rationing, reduced possibilities for participation in the political process, and social conflicts. Among the strategic elements that contributed to reduced poverty are: an outward-oriented strategy of export-led growth, based on labour-intensive manufacturing; agricultural and rural development, with encouragement of new technologies; investment in physical infrastructure and human capital; efficient institutions that provide the right set of incentives to farmers and entrepreneurs; and social policies to promote health, education, and social capital, as well as safety nets to protect the poor. Countries that have been successful in terms of economic growth are also very likely to be successful in reducing poverty. Poverty can be reduced if there is sufficient economic growth. Growth can be substantial if the policy and institutional environment is right.
Informality, Ethnicity and Productivity Evidence from Small Manufacturers in Kenya
(2000) Lundvall, Karl; Kimuyu, Peter; Bigsten, Arne; Department of Economics
A rapidly increasing share of firms in Kenya consists of not only small but also informal establishments. This paper investigates the role of ethnicity and other factors in the choice of formality status at start-up. Differences in productivity, investment and growth across the formality and ethnicity divide are also investigated. The results show that while African-owned firms are more likely to start informally, enterprises owned by either professionals or persons who are older are less likely to start informally. African informal firms are more efficient than African formal firms are, but both categories are less efficient than Asian-owned formal firms are. We conclude that ethnicity is important in explaining choice of formality status, while the network implications of ethnicity account for the differences in firm productivity, investment and growth prospects. It is possible to mainstream informal enterprises by reducing cost related to business registration. However, additional analysis is needed to unpack the ethnic variable en route to developing policy interventions for improving the performance of small scale manufacturing in Kenya.
Institution building with limited resources: Establishing a supreme audit institution in Rwanda
(2011-01) Isaksson, Ann-Sofie; Bigsten, Arne
This study is about institution building with limited resources. Through a case study of the establishment of a supreme audit institution (SAI) in Rwanda, we examine the tensions between institutional first-best benchmarks and local operational constraints in a developing country institution-building process. More specifically, our aim is to investigate the potential tradeoffs between the programmatic ideal of SAI independence and operational constraints in terms of staff capacity in the development of a supreme audit oversight function in Rwanda. Drawing on data from document studies and key informant interviews, the empirical results suggest that capacity constraints – within the institution as well as among its major stakeholders – negatively affect important aspects of SAI functional independence, but also that there are arguments for compromising the programmatic ideal of SAI independence in order to effectively tackle operational constraints in terms of staff capacity.
Is Globalisation Good for Africa?
(2002) Durevall, Dick; Bigsten, Arne; Department of Economics
Globalisation or market integration in Sub-Saharan Africa is closely linked to the structural adjustment programmes. In this paper we focus on their dependence on politics and institutional characteristics of the countries concerned. In particular, we argue that one important explanation for the dismal performance of many African countries, in spite of all the measures taken towards market liberalisation, is a lack of willingness or ability on the part of the politicians to respect the restrictions imposed on their behaviour and policy choices by the liberalised markets. The point we make in this paper is that market integration magnifies the effects of policies. We look specifically at the increased exposure to international prices and returns on assets make the economic equilibrium relations, the law of one price (LOP) and uncovered interest parity (UIP), relevant guidelines for economic policy. We illustrate the arguments by presenting the case of Zimbabwe. It is a good example where the lack of respect for the restrictions imposed by international markets has led to an economic crisis with negative growth rates and a process away from globalisation.
Kenya’s Development Path and Factor Prices 1964-2000
(2004) Durevall, Dick; Bigsten, Arne; Department of Economics
This study analyses how changes in factor abundance and trade policy have affected factor prices in Kenya since 1964. First there was a period of capital deepening, but this was reversed from 1982. As a result, there has been a shift of production towards the labour-intensive informal sector. The econometric analysis shows that in the long run factor proportions determined relative factor returns; for instance, an increase in the capital-labour ratio raised the wage-capital rental ratio. We did not find any significant impact of changes in goods prices, due to among other things changes in trade policy, on factor returns.