Development

Pedro Bento, Diego Restuccia, 22 October 2018

One way to adjudicate among existing productivity theories for why productivity varies across countries is to examine differences in average establishment size. Using new data covering firms in both manufacturing and services in 127 countries, this column shows that average establishment size increases with the level of development across countries, but the ratio of size between manufacturing and services does not vary systematically with income per capita. Misallocation is therefore an important driver of establishment size and aggregate productivity differences between rich and poor countries.

Felipe Valencia Caicedo, 20 October 2018

Though volumes have been written about Jesuit Missions in South America, very little is known about their long-term economic legacy. Using a novel dataset, this column argues that the 17th century Guarani Jesuit Missions had long-lasting positive effects on education and income. It also suggests cultural and occupational mechanisms that might be driving the persistent effects observed. 

Thorsten Beck, Emily Jones , Peter Knaack, 15 October 2018

In today’s world of globalised finance, regulators in developing countries have to weigh up the international ramifications of their decisions. This column presents the results of a research project which combines cross-country panel analysis and in-depth case studies of the political economy of the adoption of Basel II/III in the developing world. It finds that regulators in developing countries do not merely adopt Basel II/III because these standards provide the optimal technical solution to financial stability risks in their jurisdictions; concerns about reputation and competition are also important. 

Ralph De Haas, Alexander Popov, 05 October 2018

The environmental Kuznets hypothesis predicts that pollution will increase at early stages of development but then decline once a country surpasses a certain income level. This column examines how banks and stock markets affect the mechanisms behind this hypothesis. Industries which pollute relatively more for technological reasons generate relatively more carbon dioxide in countries with expanding credit markets, whereas stock markets have the exact opposite effect. For middle-income countries in particular, where carbon dioxide emissions may have increased linearly during the development process, stock markets could play an important role in making future growth greener.

Andrés Rodríguez-Pose, Callum Wilkie, 01 October 2018

Economically disadvantaged regions are, arguably by definition, less innovative than advantaged regions. But not all economically disadvantaged areas are the same. This column compares the innovative capacity of economically less-developed areas in North America and Europe, and reveals that less-developed regions in Canada and the US are far more innovative than their European counterparts. Key factors affecting innovation processes include the ability to absorb skilled young labour into the workforce and the types of knowledge flows that are capitalised upon. 

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