Journal Issue: World Bank Economic Review, Volume 19, Issue 1

No Thumbnail Available
Issue Date
Journal Title
Journal ISSN
Journal Volume
Measuring and Explaining the Impact of Productive Efficiency on Economic Development
(Published by Oxford University Press on behalf of the World Bank, 2005-01) Jayasuriya, Ruwan ; Wodon, Quentin
A limitation of most empirical cross-country studies that focus on determinants of gross domestic product (GDP) is that they fail to distinguish explicitly between inputs used in production and conditions that facilitate production. For example, physical capital, human capital, and labor are production inputs, whereas the quality of institutions, macroeconomic stability, and market quality are conditions that facilitate production. This article takes this distinction seriously and uses a stochastic frontier approach to study factors affecting economic performance. A panel data set of 71 countries for the 1980-98 periods is used to estimate a production frontier with physical capital, human capital, and labor as inputs. The article also analyzes what drives productive efficiency, using the institutional framework, macroeconomic stability, market quality, and urbanization as possible explanatory factors. Urbanization turns out to be an important determinant, with the rule of law, inflation rate, and market quality also affecting productive efficiency.
Financing Pharmaceutical Innovation : How Much Should Poor Countries Contribute?
(Published by Oxford University Press on behalf of the World Bank, 2005-01) Jack, William ; Lanjouw, Jean O.
A public economics framework is used to consider how pharmaceuticals should be priced when at least some of the research and development incentive comes from sales revenues. Familiar techniques of public finance are used to relax some of the restrictions implied in the standard use of Ramsey pricing. Under the more general model, poor countries should not necessarily cover even their own marginal costs, and the pricing structure is not related to that which will be chosen by a monopolist in a simple way. This framework is then used to examine ongoing debates regarding the international patent system as embodied in the world trade organization's agreement on trade-related aspects of intellectual property rights.
Top Indian Incomes, 1922-2000
(Published by Oxford University Press on behalf of the World Bank, 2005-01) Banerjee, Abhijit ; Piketty, Thomas
This article presents data on the evolution of top incomes and wages for 1922-2000 in India using individual tax return data. The data show that the shares of the top 0.01 percent, 0.1 percent, and 1 percent in total income shrank substantially from the 1950s to the early to mid-1980s but then rose again, so that today these shares are only slightly below what they were in the 1920s and 1930s. This U-shaped pattern is broadly consistent with the evolution of economic policy in India: from the 1950s to the early to mid-1980s was a period of ''socialist'' policies in India, whereas the subsequent period, starting with the rise of Rajiv Gandhi, saw a gradual shift toward more pro-business policies. Although the initial share of the top income group was small, the fact that the rich were getting richer had a nontrivial impact on the overall income distribution. Although the impact is not large enough to fully explain the gap observed during the 1990s between average consumption growths shown in National Sample Survey based data and the national accounts based data, it is sufficiently large to explain a non-negligible part of it.
Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys
(Published by Oxford University Press on behalf of the World Bank, 2005-01) Milanovic, Branko
New data derived directly from household surveys are used to examine the effects of globalization on income distribution in poor and rich countries. The article looks at the impact of openness and of direct foreign investment on relative income shares across the entire income distribution. It finds strong evidence that at low average income levels, the income share of the poor is smaller in countries that are more open to trade. As national income levels rise, the incomes of the poor and the middle class rise relative to the income of the rich. The article explains why using the trade to gross domestic product (GDP) ratio in purchasing power parity terms, as favored by some analysts, is inappropriate in studies of the effect of trade on income distribution.
Prices and Unit Values in Poverty Measurement and Tax Reform Analysis
(Published by Oxford University Press on behalf of the World Bank, 2005-01) Gibson, John ; Rozelle, Scott
Researchers often use unit values (household expenditures on a commodity divided by the quantity purchased) as proxies for market prices when calculating poverty lines and estimating consumer demand equations. Such proxies are often needed because community price surveys in developing economies are either absent or suffer quality problems. However, using unit values may result in biases due to measurement error and quality effects. In a household survey experiment, information on prices was obtained in three ways: from unit values, from a market price survey, and from the opinions of householders who were shown pictures of items and asked to report the local price. The three sets of price data are used to calculate poverty lines, estimate price elasticities, and analyze marginal tax reforms. There are substantial biases when unit values are used as a proxy for market price, even when sophisticated correction methods are applied. Performance was better for the price opinions of household members. The results highlight the importance of price collection methods and the need to consider the wider costs of having potentially unreliable community-level price data.
Has Distance Died? : Evidence from a Panel Gravity Model
(Published by Oxford University Press on behalf of the World Bank, 2005-01) Brun, Jean-Francois ; Carrere, Celine ; Guillaumont, Patrick ; de Melo, Jaime
The estimated coefficient of distance on the volume of trade is generally found to increase rather than decrease through time using the traditional gravity model of trade. This distance puzzle proved robust to several ad hoc versions of the model using data for 1962-96 for a large sample of 130 countries. The introduction of an augmented barrier to trade function removes the paradox, yielding a decline in the estimate of the elasticity of trade to distance of about 11 percent over the 35-year period for the whole sample. However, the death of distance is shown to be largely confined to bilateral trade between rich countries, with poor countries becoming marginalized.