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Book Reviews

The End of Poverty: Economic Possibilities for Our Time by Jeffrey D. Sachs / Shinji Asanuma

Rural Livelihoods and Poverty Reduction Policies edited by Frank Ellis and H. Ade Freeman / Emi Kojin

The Macroeconomics of HIV/AIDS edited by Markus Haacker/ Kenichiro Kono

Books Received for Review

Jikun Huang, Scott Rozelle, and Honglin Wang, "Fostering or Stripping Rural China: Modernizing Agriculture and Rural to Urban Capital Flows," pp. 1-26.

This paper focuses on the flow of fiscal and financial resources in China's rural economy during the first two decades of reform. Specifically, we seek to quantify the nature and direction of the capital flows between agriculture and the nonagricultural sectors and between the rural and non-rural sectors. We track identify the flows of three main sources of capital; fiscal flows, financial shifts through the formal banking system, and the implicit taxes that are moving through the grain system due to payment of in-kind (e.g., delivery quotas by farmers). Through this analysis, we provide policy makers with a set of measures that show that although in recent years the agriculture-to-industry and rural-to-urban flows have appeared to reverse themselves, as late as 2000 it does not appear as if the government is not directing enough resources into the rural economy; greater flows, however, are needed if rural China is to modernize.

Keywords:China; Fiscal flows; Financial flows; Agriculture-to-industry; Rural-to-urban

JEL classification:H20, O18, R51

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Sylviane Guillaumont Jeanneney, Ping Hua, and Zhicheng Liang, "Financial Development, Economic Efficiency, and Productivity Growth: Evidence from China," pp. 27-52.

Financial development may lead to productivity improvement in developing countries. In this paper, based on the Data Envelopment Analysis (DEA) approach, we use the Malmquist index to measure China's total factor productivity change and its two components (i.e., efficiency change and technical progress). We find that China has recorded an increase in total factor productivity from 1993 to 2001, and that productivity growth was mostly attributed to technical progress, rather than to improvement in efficiency. Moreover, using panel data set covering 29 Chinese provinces over the period of 1993-2001 and applying the Generalized-Method-of-Moment system estimation, we investigate the impact of financial development on productivity growth in China. Empirical results show that,during this period, financial development has significantly contributed to China's productivity growth, mainly through its favorable effect on efficiency.

Keywords:Financial development; Total factor productivity; Chinese economy

JEL classification:O16, O47, R11

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Chaoshin Chiao and Weifeng Hung, "The Stock Market Valuations of R&D and Electronics Firms during Taiwan's Recent Economic Transition," pp. 53-78.

The objective of this paper is to study the market valuation of R&D investments in the Taiwan stock market from July 1988 to June 2002. The motivation stems from Taiwan's recent economic transition from a labor-intensive, then to a capital-intensive, and currently to a technology-based economy. The results support not only the existence but also the persistence of R&D-associated mispricing. More importantly, it has become stronger as the electronics industry gradually dominates the economy. Firstly, R&D-intensive stocks tend to outperform stocks with little or no R&D. Secondly, the R&D-intensity effect cannot fully be attributed to firm size. Thirdly, the R&D-intensity effect is more pronounced for firms in the electronics industry after 1996.

Keywords:R&D; Stock returns;Taiwan's economic transition

JEL classification:G12, O33

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Patricia Alvarez-Plata and Mechthild Schrooten, "The Argentinean Currency Crisis: A Markov-Switching Model Estimation," pp. 79-91.

In 2002, the Argentinean currency board came to a sudden and dramatic end. Although the country had been suffering from weak economic fundamentals for years, the timing and severity of the currency crisis surprised most observers. This paper analyzes the role of fundamentals and self-fulfilling speculation in the Argentinean crisis. Arguing within a theoretical model of a fixed exchange rate system that allows for multiple equilibria, we show that the crisis, while associated with weak fundamentals, cannot be explained by these macroeconomic factors alone. Estimating a univariate Markov-switching model, this paper shows that shifts in agents' beliefs did indeed also play a crucial role.

Keywords:currency crises,; Self-fulfilling speculation; Markov-switching models

JEL classification:C22, F31, F36