Economic forecasting: some lessons from recent research

This paper describes some recent advances and contributions to our understanding of economic forecasting. The framework we develop helps explain the findings of forecasting competitions and the prevalence of forecast failure. It constitutes a general theoretical background against which recent results can be judged. We compare this framework to a previous formulation, which was silent on the very issues of most concern to the forecaster. We describe a number of aspects which it illuminates, and draw out the implications for model selection. Finally, we discuss the areas where research remains needed to clarify empirical findings which lack theoretical explanations.

Privatisation, empowerment and accountability: What are the policy implications for establishing effective farmer organisations?

Weak institutional development and information flows have constrained the extent to which the small-holder farming sector in developing countries can significantly drive growth and poverty reduction. Thisis despite widely implemented economic liberalisation policies focussing on market efficiency. Farmerorganisations are viewed as a potential means of addressing public and private institutional failure but thishas frequently been limited by inequalities in access to power and information. This article investigatestwo issues that have received little research attention to date: what role downward accountability plays inenabling farmer organisations to improve services and markets, and what influences the extent to whichdownward accountability is achieved. Kenya Tea Development Agency (KTDA), one of the largest farmerorganisations in the world (>400,000 farmers) is examined alongside wider literature. Mixed methodswere used including key informant interviews, and eight months of participant observation followedby a questionnaire survey. The article concludes that without effective downward accountability farmerorganisations can become characterised by institutions and mechanisms that favour elites, restrictedweak coordination and regulation, and manipulated information flows. This in turn reduces individuals’incentives to invest. If farmer organisations are to realise their potential as a means of enabling the small-holder sector to significantly contribute to economic growth and poverty reduction, policy and researchneeds to address key factors which influence accountability including: how to ensure initial processes information of farmer organisations establish appropriate structures and rules; strong state regulation toenhance corporate accountability; transparent information provision regarding actions of farmer organi-sation leaders; and the role independent non-government organisations can play. Consequently attentionneeds to focus on developing means of legitimising rights, building poor people’s capacity to challengeexclusion, and moving from rights to obligations regarding information provision.

Avoiding a bad apple: insect pollination enhances fruit quality and economic value

Insect pollination is important for food production globally and apples are one of the major fruit crops which are reliant on this ecosystem service. It is fundamentally important that the full range of benefits of insect pollination to crop production are understood, if the costs of interventions aiming to enhance pollination are to be compared against the costs of the interventions themselves. Most previous studies have simply assessed the benefits of pollination to crop yield and ignored quality benefits and how these translate through to economic values. In the present study we examine the influence of insect pollination services on farmgate output of two important UK apple varieties; Gala and Cox. Using field experiments, we quantify the influence of insect pollination on yield and importantly quality and whether either may be limited by sub-optimal insect pollination. Using an expanded bioeconomic model we value insect pollination to UK apple production and establish the potential for improvement through pollination service management. We show that insects are essential in the production of both varieties of apple in the UK and contribute a total of £36.7 million per annum, over £6 million more than the value calculated using more conventional dependence ratio methods. Insect pollination not only affects the quantity of production but can also have marked impacts on the quality of apples, influencing size, shape and effecting their classification for market. These effects are variety specific however. Due to the influence of pollination on both yield and quality in Gala, there is potential for insect pollination services to improve UK output by up to £5.7 million per annum. Our research shows that continued pollinator decline could have serious financial implications for the apple industry but there is considerable scope through management of wild pollinators or using managed pollinator augmentation, to improve the quality of production. Furthermore, we show that it is critically important to consider all production parameters including quality, varietal differences and management costs when valuing the pollination service of any crop so investment in pollinator management can be proportional to its contribution.

Can British multinational enterprises finance economic development in South East Asia?

Purpose – The purpose of this paper is to shed new light on the debate about the role of foreign direct investment (FDI) and public policy in fostering economic development. Specifically, can the capital inflow of multinational enterprises (MNEs) and the ability of the subsidiaries to raise funds locally help promote development? This paper addresses this issue by examining the capital structure and financing sources of foreign subsidiaries of MNEs. Design/methodology/approach – This paper integrates the capital structure theories in finance with internalization theory in international business. It uses an original primary dataset collected by a survey of 101 foreign subsidiaries of British MNEs in six emerging economies in the ASEAN region. Findings – There are three significant findings. First, these subsidiaries rely heavily on internal funds generated within the MNEs and less on external debts raised in the host countries. Second, the foreign subsidiary's capital structure is influenced by the home country of origin of the parent firm and the parent firm's financing sources. Third, these subsidiaries have used the financial resources to develop business networks with local small and medium enterprises (SMEs) which contribute to economic development of the host countries. Originality/value – This paper examines the internal capital market within the MNE. It provides theoretical and empirical support for the capital structure theory of the hierarchy financing approach and also for internalization theory by addressing FDI inflows by MNEs and the raising of funds locally. These findings have important implications for public policy, namely the facilitation of MNE entry to encourage economic development.

Foreign direct investment through acquisitions and implications for technological upgrading: case evidence from Tanzania

Using a case study approach, this paper examines the role of privatisation on the industrial landscape of Tanzania. We examine the impact of foreign direct investment (FDI) through acquisitions on technology transfer within the acquired firm as well as the development of linkages to other firms based in the host country. Our results suggest that technological upgrading has occurred following FDI, the intensity of which reflects the type of firm-specific assets of the parent multinational enterprise (MNE), as well as the pre-acquisition state of these industrial activities. Improved backward linkages are also evident with local economic agents, but their type and extent – reflecting Tanzania's comparative advantage in the primary sector – confirm that capabilities both within the acquired firms and also in the industrial base of the host country greatly influence the magnitude and intensity of technological upgrading. 'Narrower' technology gaps between the MNE affiliate and the domestic sector are more likely to result in backward linkages and determine the type of technological content of inputs sourced locally rather than within the MNE.

Learning to lead for business growth – implications for supporting SMEs in Wales

The Welsh private and third sectors are heavily dependent on SMEs. Consequently the performance of SMEs is critical to the performance of the Welsh economy. Substantial public funds, particularly from European Structural Funds, have been allocated to support these since 2000. The majority of programmes thus funded have been led from within the Welsh Government. This paper reports interim evaluation findings from one intervention led by two Welsh higher education institutions (HEIs), namely the LEAD Wales programme. The programme is an extended intervention to support the leadership skills of owner-managers and incorporates a range of learning methods, including formal masterclasses, but emphasizes situated and experiential learning through action learning, coaching and peer-to-peer exchange exercises. The programme’s impact is assessed on the experiences of 325 participants, of whom 217 have completed the programme. The paper concludes that situated learning methods, through which participants are able to draw from shared history and experience over an extended period are critical to programme success. By contrast, short-term thematic teaching, based around more formal, hierarchical learning is less likely to yield significant and sustainable economic benefits. The implications of this for business support in Wales are discussed.