Legal Institutions, Sectoral Heterogeneity, and Economic Development

Poor countries have lower PPP–adjusted investment rates and face higher relative prices of investment goods. It has been suggested that this happens either because these countries have a relatively lower TFP in industries producing capital goods, or because they are subject to greater investment distortions. This paper provides a micro–foundation for the cross–country dispersion in investment distortions. We first document that firms producing capital goods face a higher level of idiosyncratic risk than their counterparts producing consumption goods. In a model of capital accumulation where the protection of investors’ rights is incomplete, this difference in risk induces a wedge between the returns on investment in the two sectors. The wedge is bigger, the poorer the investor protection. In turn, this implies that countries endowed with weaker institutions face higher relative prices of investment goods, invest a lower fraction of their income, and end up being poorer. We find that our mechanism may be quantitatively important.

Balancing Economic Development with Environmental Conservation: Challenges Facing the North and South

This paper critically explores how development policies tend to ignore pressing environmental concerns. In the first section development in the North and South and the Bhopal disaster will be juxtaposed to show how development without environmental governance can be deadly. The article then turns to the way in which the Sri Lankan government’s Moragahakanda Development Project strives for economic development without concern for the environment. It will be contended in this article that governments and big companies in the North and South have tended to carelessly use scarce resources for development.

Industrialization and industrial policy in Colombia: a tale of economic development

This paper analyzes the main features and historical factors that played a central role for the industrialization process in Colombia during the twentieth century. The document surveys the legislation and policy instruments used in the programs of import substitution industrialization, nontraditional export promotion, and economic openness