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NEW BOOKS AND WORKING PAPERS World Bank Publications To receive ordering and price information for World Bank publications contact the World Bank, P.O. Box 960, Herndon, VA 20172, United States; tel.: 703-661-1580, fax.: 703-661-1501, email: books@worldbank.org, URL: http://www.worldbank.org/publications, or visit the World Bank InfoShop at 701 18th Street, N.W. Washington, D.C., tel.: 202-458-5454. Working Papers http://econ.worldbank.org/ Thilak Ranaweera Rather than embracing the shock therapy favored by the so-called Washington Consensus that has been tried in several transition countries, Uzbekistan has adopted a gradual, state-controlled strategy. Policymakers are pursing this goal by subsidizing employment, controlling the prices of essential items, privatizing large enterprises gradually, and attempting to attain self-sufficiency in energy and food supplies. This policy dictates a slow pace of foreign exchange liberalization and defers convertibility to some future year. This study focuses on the major imbalances of the economy in evaluating some of the policy choices facing Uzbekistan. It also attempts to quantify the relative importance of external financing and the sustainability of the balance of payments under alternative structural adjustment paths. The three-gap approach emphasizes domestic savings and investment constraints, foreign savings and capital inflows, and fiscal constraints to growth and structural adjustment. As presented here, the three-gap framework is intended as a first step toward a more comprehensive qualitative and quantitative assessment of the adjustment alternatives facing Uzbekistan. The paper argues that an aggressive adjustment policy, that is, the unification of exchange rates and the implementation of current account convertibility, would improve most performance and welfare indicators. Thilak Ranaweera Lev M. Freinkman, Raj M. Desai, and
Itzhak Goldberg In the Russian Federation, fiscally autonomous regions have often resisted market-oriented reforms, the enactment of rules protecting private property, and the dismantling of price controls and barriers to trade. The authors argue that the presence of unearned income streams—particularly in the form of revenues from natural resource production or from budgetary transfers from the central government—has turned regions dependent on these income sources into "rentier" regions. As such, governments in these regions have used local control over revenues and expenditures to shelter certain firms from market forces. Quy-Toan Do and Lakshmi Iyer Land reform in Vietnam gives households the power to exchange, transfer, lease, inherit, and mortgage their land use rights. The authors expect this change to increase households’ incentives and ability to undertake long-term investments. Their findings indicate that the additional land rights led to significant increases in the share of total area devoted to multiyear crops as well as to some increase in irrigation investment. These effects are stronger in areas that felt the impact of the land reform earlier. Beata Smarzynska and Mariana
Spatareanu A survey of Romanian firms from 1998 to 2000 shows positive intrasectoral spillovers from fully-owned foreign affiliates, but not from projects with joint domestic and foreign ownership. This finding suggests that foreign investors tend to put more resources into technology transfer to their wholly-owned projects than to those they own only partially. However, foreign investors entering a host country through greenfield projects are less likely to source locally than those engaged in joint ventures or partial acquisitions, partly because fully-owned foreign subsidiaries tend to use newer or more sophisticated technologies than jointly-owned investment projects, and thus may have higher requirements that only a few, if any, domestic suppliers are able to meet. Robert Buckley, Kim Cartwright,
Raymond Struyk, and Edward Szymanoski Russia’s elderly have often been among those least able to cope with all the changes that have taken place during the transition. Unlike the situation prior to reform when pensions were stable, they now face considerable uncertainty, but they have also been the beneficiaries of a large transfer of wealth, because housing was privatized under giveaway terms. Unfortunately, in the absence of a developed financial system, using this wealth without selling the housing is difficult. Hence there is a good opportunity to provide what might be termed "housing safety net insurance" at low public cost. Such a scheme could allow also many of the elderly to move out of poverty and into middle-income status. The situation is similar in many other countries of the former Soviet Union where elderly populations also own a great deal of unencumbered housing wealth. Giovanni Majnoni, Rashmi Shankar,
and Eva Varhegyi Elena Ianchovichina, and Terrie
Walmsley China’s WTO accession will have major implications for China and present both opportunities and challenges for East Asia. China is the biggest beneficiary of accession, followed by the industrial and newly industrializing economies (NIEs) of East Asia. By contrast, developing countries in East Asia are expected to incur small declines in real GDP and welfare as a result of China’s accession, mainly because with the elimination of quotas on Chinese textile and apparel exports to industrial countries, China will become a formidable competitor in areas in which these countries have a comparative advantage. China will increase its demand for petrochemicals, electronics, machinery, and equipment from Japan and the NIEs and for farm, timber, and energy products and for other manufactures from the developing countries of East Asia. New foreign investment is likely to flow into these expanding sectors. The overall impact on foreign investment is likely to be positive in the NIEs, but negative for the less developed East Asian countries as a result of the contraction of these economies’ textile and apparel sectors. China’s comparative advantage will shift into higher-end products. This is good news for the poor developing economies in East Asia, but means heightened competition in global markets for the NIEs. Bartlomiej Kaminski and Manuel de la
Rocha The stabilization and association process launched by the EU in the aftermath of the war in Kosovo in 1999 has created a new policy environment for five South East European countries. In exchange for EU assistance, the prospect of EU accession, and the continuation of preferential access to EU markets, the five countries’ governments have to upgrade their institutions and governance to European standards and engage in mutual regional cooperation, including becoming Stability Pact member countries. The paper argues that the process of regional trade liberalization should be extended to multilateral liberalization and that priority be given to structural reforms and regional cooperation aimed at trade facilitation. Jan Rutkowski Employment protection legislation in Croatia is among the strictect in Europe. Firing people is difficult and costly and flexible forms of employment are limited. The paper shows that job and worker turnover is low, hiring is limited, and average job tenure is long. While job destruction is low, job creation is even lower. The result is accumulating unemployment. New labor market entrants are unable to find jobs. The high degree of job protection seems to strengthen insiders’ bargaining position and result in relatively high wages. Thus wages are higher in Croatia than in its competitor countries, even after adjusting for productivity. These high labor costs are contributing to limited job creation in existing firms and are also discouraging job creation in new firms. Liberalizing the labor market would foster job creation and employment. F. Desmond McCarthy, William Bader,
and Boris Pleskovic The World Bank has successfully participated in developing a number of institutions specializing in economics education. The paper discuses the experience of countries that introduced Western-style programs using partnerships that combine the different needs of private donors with those of the World Bank on the supply side. Much of the success was due to adapting each effort to the individual country’s situation at a relatively low cost. The Bank has been involved in the development of nine institutions, of which five were institutions of higher education offering economics training at the graduate or postgraduate level and four were research networks or centers funding research projects and building links between individual researchers and research institutions. The training institutions are the Economics Department of the Central European University in Budapest, the Center for Economic Education and Graduate Research—Economic Institute in Prague, the China Center for Economic Research in Beijing, the Economic Education and Research Consortium’s MA program at the Mohyla Academy in Kyiv, and the New Economic School in Moscow. The research networks and centers include the Economic Education and Research Consortium in Moscow.
Other World Bank Publications François Bourguignon and Luiz A.
Pereira da Silva, editors This book reviews techniques and tools that can be used to evaluate the poverty and distributional impact of economic policy choices. It describes the most robust techniques and tools now available—from the simplest to the most complex—and identifies best practices. The tools reviewed here help quantify the trade-offs and consequences of economic policies that affect countries through various channels. Each chapter addresses a specific evaluation technique and its applications, and household survey data are used to describe economic welfare distribution. The focus is on the micro level in the first part of the book, and links between macro modeling and the microeconomic distribution of economic welfare are the focus of the last five chapters. World Development Report 2004:
Making Services Work for Poor People Too often services fail poor people in terms of access, quality, and affordability. Service providers are often trapped in a system where incentives are weak, corruption is rife, and political patronage is a way of life. Even when poor people have access, the quality of services can be distressingly low. In some cases, however, basic services such as water, sanitation, health, education, and electricity do work for poor people. A program in Mexico, for example, gives cash to poor households if they visit a clinic regularly and their children attend school. As a result, illness among children has been reduced and secondary enrollment has increased for both boys and girls. Services can be improved by putting poor people at the center of service provision by • Enabling the poor to participate, make choices (for example, through a school voucher system), and monitor and discipline service providers • Amplifying their voice in policymaking through the ballot box and by making information widely available • Strengthening providers’ incentives by rewarding the effective and penalizing the ineffective delivery of services to poor people. While problems with public services arise frequently, concluding that governments should give up and leave everything to the private sector would be wrong. No country has achieved significant improvements in child mortality and primary education without government involvement. Private sector participation in health, education, and infrastructure is not without problems, especially in reaching poor people. China: Country Economic Memorandum—Promoting
Growth with Equity This report assesses possible patterns of inequality in China in the future and outlines policy options that could help accomplish China’s objective of growth with equity. Growth and inequality projections suggest that if recent trends in widening rural-urban inequality and the disparate growth of per capita incomes across provinces continue, income inequality would rise sharply, bringing the Gini coefficient up to 47.4 by 2020 (compared with 43.7 in 1999), with essentially equal contributions to national inequality from rural-urban and interprovincial disparities. The report identifies the following problems: • Local government protectionism, which arises from local governments’ dependence on own enterprises, and local government control of market regulations, enterprise management, and the courts which fragments China’s, domestic market for goods and services • Shortage of low-income housing in urban areas, weak execution of land use rights in rural areas, and direct and indirect discrimination against migrants, all of which inhibit migration • Government control over resource allocation and inadequate information about enterprise performance that inhibit the efficient allocation of capital. The cost of market fragmentation and rigidities is high. Although exports are likely to continue to grow rapidly, by 2007 more than 70 percent of China’s output will still be intended for the domestic market. Obstacles to the efficient allocation of labor and capital and to competition reduce the speed of technological upgrading and China’s competitiveness in the global economy. Market integration and flexibility can ease the pain of restructuring. The report proposes a package of policy actions aiming at creating new job opportunities and raising returns to farm labor and land. It suggests facilitating migration, commercializing the banking sector, and extending the social security system in both urban and rural areas. Olusoji Adeyi, Enis Baris, Sarbani
Chakraborty, Thomas Novotny, and Ross Pavis The Eastern Europe and Central Asia region is experiencing the world’s fastest-growing HIV/AIDS epidemic and a large burden of tuberculosis. Controlling HIV/AIDS and tuberculosis is a corporate priority for the World Bank Group. The regional support strategy translates the Bank’s commitment into an agenda for action in the region. It seeks to • Provide a unifying framework for the Bank’s work as part of international support for country-led responses to HIV/AIDS and tuberculosis • Clarify options for integrating effective interventions against HIV/AIDS and tuberculosis into the broader agenda of poverty reduction and economic development • Identify the main barriers limiting the effectiveness of HIV/AIDS and tuberculosis control efforts and actions to eliminate these diseases • Define the short- to medium-term priorities for the World Bank’s work in the region, with an emphasis on the Bank’s comparative advantages and high-impact partnerships. Private Participation in
Infrastructure: Trends in Developing Countries in 1990-2001 Drawing on data from the World Bank’s private participation in infrastructure database, this new book provides an overview of the nearly 2,500 private infrastructure projects that were implemented between 1990 and 2001 in 132 developing countries and mobilized investment of some $754 billion. It covers projects in the transport, energy (electricity and gas), telecommunications, and water and sewerage sectors that received private investment through management and lease contracts, concessions, greenfield projects, and divestitures. Governments around the world turned to the private sector for innovative and cost-effective solutions to increasing coverage, raising quality standards, and achieving cost recovery and sustainability in infrastructure service provision. Because of the economic crises of the late 1990s, a few (but high-profile) cases of canceled projects, visible corporate governance and accounting problems, and a general global economic slowdown, investment declined, so that 2001 levels paralleled those of the mid-1990s. Gary S. Fields and Guy Pfeffermann,
editors How private firms contribute to economic mobility and poverty reduction and what governments can do to enhance their contribution is the theme of this book. In developing countries, private enterprise is far and away the largest source of employment and investment and a significant source of government revenue. Also private enterprise is an important source of less tangible, but critically important, factors such as openness to ideas, innovation, and opportunity. Drawing on the rich materials of the World Bank’s worldwide business environment survey, the book identifies key policy factors. It pays special attention to obstacles facing small and medium enterprises. The concluding chapters focus on practical ways in which governments of developing and transition countries can encourage the capacity of poor people to move up the economic ladder. A Guide to the World Bank The World Bank Group is one of the world’s largest sources of development assistance. In 2002 the institution provided $19.5 billion in loans to its client countries. It works in more than 100 developing economies with a primary focus of helping the poorest people and the poorest countries. This book serves as a general overview of the World Bank’s history, organization, mission, and purpose. It describes the World Bank’s operations, giving a brief overview of policies, projects, and procedures. An introduction to the wealth of information resources produced by the World Bank will help readers understand and navigate the types of documents, statistics, and reports that are available from the World Bank on its web site and in print publications. The publication is a good introduction for anyone interested in understanding what the World Bank does and how it does it. Jean Francois Arvis and Ronald E.
Berenbeim This book, based on research conducted by the World Bank and the Conference Board, describes the efforts of Western and Asian companies to develop good standards of business conduct in their East Asian operations. Case studies from a wide range of corporate settings offer concrete examples of best practices in program creation, implementation, and effectiveness. The book also provides examples of the dissemination of those practices that underscore the importance of business partnerships with the public sector and civil society organizations.
BOFIT Publications To order: BOFIT, P.O. Box 160, FIN-00101 Helsinki, Finland; tel.: 3589-1831, fax: 3589-183 2294, email: Liisa.Mannila@bof.fi, URL: http://www.bof.fi/bofit/eng/index.stm. Juha Antila and Pekka Ylöstalo According to the survey known as the working life barometer in the Baltic countries 2002, negative expectations about employment trends in the next twelve months outweighed positive ones. The proportion of those with strongly negative expectations was especially large in Lithuania. Many expected the employment situation to be worse in a year’s time, while a few thought it would be much better. Only 15 percent of Estonians expected that employment would improve during the coming year, while 50 percent believed it would deteriorate and just 1 percent expected the situation to be much better in a year’s time. People were much more optimistic about development in their own workplace during the coming year than about the general employment situation. Men in all three nations were somewhat more optimistic than women about the outlook at their own workplace. The complete survey results are posted at http://www.mol.fi/julkaisut/baltiabarometer.pdf. Natalia V. Smirnova During transition, less educated single individuals, women, and young people are more likely to be unemployed than others. Furthermore, these groups—except young people—tend to stay unemployed for longer than others. Married women are worse off in terms of job loss and length of unemployment than single women. A positive feature is that returns to education have increased while the gender gap in education premiums has narrowed; however, returns to experience have declined. Transition apparently does not decrease regional asymmetries in employment. A peculiarity of the Russian labor market has been the accumulation of wage arrears, which allow wages rather than employment to adjust downward. In contrast, it was employment that adjusted in CEE countries, which in turn contributed to faster structural change.
Institute for Economic Research, Ljubljana To order: IER, Kardeljeva ploscad 17, 1000 Ljubljana, Slovenia, tel.: 3861-4328-151 or 5345-787, fax.: 3861-5342-760, email: recnikm@ier.si, URL: http://www.ier.si. Vladimir Lavrač There are reasons to believe that the exchange rate mechanism (ERM) 2 is dangerous, so it would be wise to stay in this mechanism for as short a time as possible (for a prescribed minimum of two years). Staying for too long in this mechanism may cause problems in meeting the Maastricht convergence criteria and may lead to delaying entry into the European Monetary Union for the indefinite future. The ERM 2 is potentially an unstable exchange rate mechanism, because it is a soft peg system, which may become vulnerable to financial crises, particularly in the case of free capital mobility and expected large capital flows before EU and European Monetary Union entry. There should be more transparency, equal rules treatment, and less discretion in the hands of the EU in the process of the monetary integration of accession countries, which could make the formulation of their optimal ERM 2 and euro area entry strategies much easier. Jože P. Damijan and Črt Kostevc Jože P. Damijan, Mark Knell, Boris
Majcen, and Matija Rojec Vladimir Lavrač, Tina Žumer Andreas Freytag WIDER To order: Katajanokanlaituri 6 B FIN-00160, Helsinki, Finland; tel. 358-9-6159911, fax: 3589-61599333, email: wider@wider.unu.edu, URL: http://www.wider.unu.edu. Robert J. McIntyre and Bruno Dallago,
editors Even though the new small and medium enterprise sector is emerging as one of the driving forces in transition economies, little is known about the conditions behind its successful development or about policies that could facilitate its expansion. This volume explores the complex relationship between the growth of this sector and the current policies and institutional, historical, and cultural forces that shape its fate. Vladimir Mikhalev, editor Contributors compare emerging social structures in transition societies and discuss the life of most workers and of socially deprived and marginalized people. They look into causes of high inequality and poverty in Russia and other CIS countries, as well as more the equal income distribution and higher levels of social welfare in Central Europe. Marjan Svetlicic and Matija Rojec,
editors Foreign direct investment has proved to be the most dynamic defensive and offensive response to globalization. This book provides an in-depth evaluation of the rationale, as well as theoretical and empirical explanations of the outward internationalization of firms from the Czech Republic, Estonia, Hungary, Poland, and Slovenia. The authors evaluate the role of transnational companies from transition economies and the development implications of outward internationalization for their economies. Edward Elgar Publishing To order; 136 West Street, Suite 202, Northampton, MA 01060-3711, U.S.A.; URL: http://www.e-elgar.co.uk/. James Laurenceson and Joseph C. H.
Chai Covering not only the banking sector, but also nonbank financial institutions, stock market development, and external financial liberalization, the authors examine the impact of financial reform on economic development in China during the reform period. Jorge Martinez-Vazquez and James Alm,
editors Martin Myant Other Publications L. Jerome Gallagher and Raymond
J.Struyk Dani Rodrik, editor |
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