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The Developing Economies

Volume 36, Number 3 (September 1998)


The Developing Economies ■ The Developing Economies Volume 36, Number 3 (September 1998)
■ B5
■ 105pp.
■ Published in September 1998
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CONTENTS

Abstract

Takao Fukuchi , "A Simulation Analysis of Urban Informal Sector," pp. 225-56.

"Solow's residual" is a vague portmanteau concept, but it has greatly stimulated debate in the field of growth economics. A similar portmanteau concept in development economics is "Hart's residual," i.e., the informal sector, which is defined as the difference between the national economy and formal sector activity. The informal sector accounts for 20-60 per cent of economic activity in many developing economies, making the full understanding of its working mechanism indispensable for the analysis of developing countries. The author constructed a simulation model using 43 equations where the economy is divided into agricultural, urban formal, and two urban informal sectors. The results of 17 simulation cases show the influences of various shocks on sectoral development pattern, backwash effect, depolarization effect, and immiserizing trend. It is also shown that the direct support to informal workers and the dissemination of higher education do not necessarily improve the welfare of informal workers.

Md. Rezaul Karim and Mitsue Osada, "Dropping Out: An Emerging Factor in the Success of Microcredit-Based Poverty Alleviation Programs," pp. 257-88.

The wonderful success of Bangladesh's microcredit-based Grameen Bank, in both banking with the poor and poverty alleviation, has led to the use of the microcredit approach for poverty alleviation worldwide. However, the problem of dropouts has gone unnoticed, and this could affect the program as well as the participants adversely. This study found that about one-third of Grameen Bank members had already dropped out by their sixth year of membership. It seems that the dropouts neither rose out of poverty nor economically graduated leaving the ultimate objective of poverty alleviation in question. It was also found that dropouts are adversely affecting the program by decreasing the continuing membership and the profits of the program. It is suggested that the provision of child care, expansion of marketing facilities, managerial training, and the creation of full- or part-time jobs within the program may reduce the number of dropout.

Y. K. Tse, "Interest Rate Spread and the Prediction of Real Economic Activity: The Case of Singapore," pp. 289-304.

In this paper we compare the predictive power of a number of interest rate spreads for the changes in real GDP. These are the paper-bill spread, the fixed-deposit spread, and the bond-bill spread. The paper-bill spread is found to have significant predictive power for future economic growth. The bond-bill spread and the fixed-deposit spread, however, are found to be statistically insignificant. When the components of the total GDP are examined, the paper-bill spread is found to have significant predictive power for the real private consumption but not for the real investment. Outputs in the manufacturing sector and the commercial sector can also be usefully predicted by the paper-bill spread. For the post-sample prediction, the paper-bill spread provides very good results. These findings suggest that the models based on the paper-bill spread may emerge as a strong competitor for the short-term forecasting of the real GDP and some of its components.

Heather Smith, "The Determinants of Manufacturing Protection in Taiwan," pp. 305-31.

This paper addresses the debate of the role of industry policy interventions in Taiwan's industrialization. Cross-sectional regression analysis is used to test which (or if either) of the competing hypothesis associated with the interest group model and national interest model are statistically significant in the case of Taiwan. Various proxy variables are used to represent the industry structural characteristics associated with the interpretation presented by the competing models. Although not particularly robust, the results are suggestive that the determinant of incentives to Taiwan's manufacturing industry in the 1980s was not, as predicted by the structuralist literature, its potential for developing future international competitiveness. Rather, the incentive structure appeared to be designed to assist industries with a declining comparative advantage.

Ippei Yamazawa, "The Asian Economic Crisis and Japan," pp. 332-51.

The East Asian economies have been hit by a currency crisis and their miraculous growth has stopped abruptly. More than a year has passed since the crisis started, but the recovery of economic growth has been slow. Individual governments are struggling to overcome their severe economic difficulties, but they find themselves trapped and unable to recover on their own. Japan quickly contributed 37 billion dollars to these countries, but the Japanese economy itself has been stagnant. This paper tries to respond to the Asian request for help and seeks to explain how Japan is positioned in the current crisis and what scenario Japan can propose for overcoming it. The paper emphasizes closer cooperation to restore a stable currency regime, and calls for macroeconomic policy coordination, the strengthening of liberalization and facilitation, and greater economic and technical cooperation within the Asia Pacific Economic Cooperation