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.

Small-scale mining, poverty and economic development in sub-Saharan Africa: An overview

Artisanal and small-scale mining (ASM)-low tech, labour intensive mineral processing and excavation activity-is an economic mainstay in rural sub-Saharan Africa, providing direct employment to over two million people. This paper introduces a special issue on 'Small-scale mining, poverty and development in sub-Saharan Africa'. It focuses on the core conceptual issues covered in the literature, and the policy implications of the findings reported in the papers in this special issue. (C) 2009 Elsevier Ltd. All rights reserved.

Entrepreneurship and economic development in cities

Policy makers have identified the relationship between entrepreneurship and economic development. Yet, little is known about how this relationship varies over time in cities with different market sizes. This study examines the link between entrepreneurship and economic development using a panel of 127 European cities between 1994 and 2009. We found that the immediate economic development impact of new firm start-ups is positive for both small-/medium-size cities and large cities. The relationship is U-shaped for large cities, with the indirect effect taking 7 years, but the indirect effect does not occur in small-/medium-size cities. We offer useful information for policy makers, practitioners, and scholars.

Creativity, entrepreneurship and economic development: city-level evidence on creativity spillover of entrepreneurship

We examine the black box of creativity, entrepreneurship and economic development by asking about the mechanisms through which creativity can influence economic development in cities. We propose that, like the knowledge spillover theory of entrepreneurship, creativity spillovers occur and can be slowed by a creativity filter. We examine how creativity and entrepreneurship, and creativity and a melting pot environment, interact to influence urban economic development. Using data on 187 cities in 15 European countries for the period 1999–2009, we advance the extant literature by providing evidence on the existence and dynamics of a creativity filter.

Exchange rate policies, patterns of specialization and economic development: theory and evidence in developing countries

The objectives of this paper are twofold. First, it intends to provide theoretical elements to analyze the relation between real exchange rates and economic development. Our main hypothesis is very much in line with the Dutch disease literature, and states that competitive currencies contribute to the existence and maintenance of the anufacturing sector in the economy. This, in turn, brings about higher growth rates in the long run, given the existence of increasing returns in the industrial sector, and its importance in generating echnological change and increasing productivity in the overall economy. The second objective of this paper is empirical. It intends to analyze examples of successful exchange rate policies, such as Chile and Indonesia in the eighties, as a benchmark for comparison with countries where currency overvaluation has taken place, such as Brazil. In the latter case, the local currency is being inflated by large capital inflows, due to high domestic interest rates and to a boom in demand and prices of commodities in the international markets. It will be argued that the industrial sector bears most of the burden when the currency appreciates, and that Brazil risks at deindustrialization if there are no changes in the exchange rate regime

Judicial system performance and economic development

The role of judicial systems in determining economic perfonnance has gained increasingly attention in recent years. Nonetheless, the literature lacks a clearly articulated framework to examine how judicial systems influence the investment and production decisions of economic agents. This paper tries to till in this gap. It examines what constitutes a well-functioning judiciary, analyzes how dysfunctional judicial systems compromise economic growth, and reviews the relevant empirical literature. It concludes with some remarks about why, despite the widespread perception that well-functioning legal and judicial systems are key to the success of market-oriented reforms in developing and transition countries, judicial refonn has lagged so much behind other reforms.

Knowledge generation and protection: intellectual property, innovation and economic development

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