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Issues in Development Economics

Paper Session

Sunday, Jan. 8, 2023 1:00 PM - 3:00 PM (CST)

J.W. Marriott New Orleans, Orleans
Hosted By: Union for Radical Political Economics
  • Chair: Matías Vernengo, Bucknell University

The Great Divergence from a Middle Eastern Perspective: A Response to the Neo-Institutional Narrative

Ahmad Borazan
,
California State University-Fresno

Abstract

The paper reevaluates the Neo-institutional explanations of the Great Divergence with a focus on the Middle East. It criticizes the current institutional account of the Middle East's underperformance in contrast to the West in the early centuries of the modern era. It argues for a developmental state-based explanation for the Great divergence. It seeks the answer at the intersection of ideology, systemic vulnerability, and political economy. The explanation is sought in a historical examination of the path-dependent evolution of the relationship between the religious scholars/ulama and the political authority, and the role of systemic vulnerability manifested in fiscal and external constraints in shaping the changing attitudes of the political rulers toward managing the economy and the private economic interests. The paper has important insights for explaining the Great Divergence and the current Middle Eastern political and economic debacles. It refutes the essentialist and culturalist interpretations of the Great Divergence and qualifies Douglas North’s thesis on the importance of secure private property in capitalist development. Furthermore, the paper interrogates the primacy given to political authoritarianism in Acemoglu and Robinson (2019) and Kuru (2019).

A Note on Economic Growth and Technological Progress in Developing Countries: Okun and Kaldor-Verdoorn Effects in China and India (1991-2019)

Suranjana Nabar-Bhaduri
,
Frostburg State University

Abstract

The nature of the causal relationship between economic growth and technological progress has been open to debate. The mainstream view is that growth is supply-constrained and determined by technological progress. An alternative view is based on the Kaldor-Verdoorn Law (KVL), and emphasizes the importance of demand-side factors in determining technological progress measure by labor productivity. The literature on the estimates of the KVL is limited and does not separate the cyclical effects of changes in output on labor productivity (Okun’s Law) from the trend effects. This paper looks at the evidence for the KVL in China and India, two fast growing Asian countries that have been central in the process of globalization. The results appear to provide support for the KVL or the notion that technical change is the result, and not the fundamental cause of economic growth. In addition, the estimated Okun effects are small and insignificant in both countries, suggesting that cyclical influences on productivity growth may be less relevant in fast growing developing countries than in advanced economies. The results therefore provide some support for the importance of demand-led regimes in rapidly growing developing countries.

Trade and the Covid-19 Pandemic: What Happened to Women's Employment in Asian Developing Countries?

Chiara Piovani
,
University of Denver

Abstract

This paper aims to investigate the gendered employment effects of trade openness and how the Covid-19 intervenes in the context of selected Asian developing countries, based on a panel data analysis using comparable data from the ILO, WTO and the World Bank. Specifically, the study estimates the impact of trade openness measures (e.g., export intensity, import intensity) on both the distribution of female employment across broad economic sectors and female share of employment in each broad sector. The analysis also checks for the impact of the Covid-19 pandemic while controlling for other economic factors such as GDP per capita, population, and FDI. The empirical findings are interpreted based on the policy measures that governments adopted to respond to the health and economic crises generated by the Covid-19 pandemic.

Currency Substitution and Exchange Rate Determination in Argentina

Matías Vernengo
,
Bucknell University

Abstract

This paper intends to assess empirically the relationship between currency substitution and exchange rate determination. Mainstream views suggest that fundamentals, in particular fiscal stance and interest rate differentials play an important role in exchange rate determination. Heterodox approaches also accept that interest rates differentials play an important role in the exchange rate determination, but these approaches also point the importance of asymmetries in the financial and monetary system, distributional conflict, and the economic structure, in particular regarding the external accounts. However, another factor that may determine the exchange rate, which is barely considered, is currency substitution (CS). Particularly, according to the orthodox approach CS only fosters exchange rate volatility, but it does not affect the exchange rate trend. It is found that CS has a significant short-run positive effect on the exchange rate level. The results provide some evidence in favour of heterodox views, which consider that due to the characteristic of developing countries’ economic structure CS would cause a large pressure on the balance of payment leading to currency deprecation. Additionally, due to the important role that international reserves play in the exchange rate determination, the present work shows that post-Keynesian considerations on asymmetries in the international financial and monetary system may be relevant for the exchange rate determination, besides of being relevant for the exchange rate volatility.
JEL Classifications
  • O1 - Economic Development
  • B5 - Current Heterodox Approaches