Topics in Policy Appraisal

For some years Nottingham University has provided a course in Development Economics with emphasis on contrasting development theory with practice. A feature of the course is the guest lectures delivered by experts in various aspects of development theory and practice. These lectures, funded by a generous contribution from Maxwell Stamp Associates, were instituted in 1987. Each lecturer was asked to discuss a policy oriented issue in his or her field of expertise.

This paper describes the principles of applied computable general equilibrium modelling and the application of a two sector model to the Cameroon economy. An overview is given of the economic situation and performance of Cameroon together with a background summary of the application by Maxwell Stamp of computable general equilibrium models (CGEMs) to policy analysis in industrialising countries. A brief description is made, with reference to the Cameroon multisector equilibrium model, of the theoretical basis, typical structure and key assumptions of a CGEM. A critical explanation of the modelling methodology is then given. The structure and rationale for a two sector model is presented with detailed model equations and the associated data requirements. The model is then used, with national accounts data, to conduct comparative static experiments of the impact of different policy interventions on economic activity and the real exchange rate in Cameroon.

Manpower policy was little known in Ethiopia before the downfall of Emperor Haile Selassie in 1974 and his feudalist regime. Since then the ideological commitment of the authorities to Marxism has resulted in the extensive use of ‘teleological’ planning as an economic mechanism for the allocation and growth of physical and human resources. With respect to human resources, teleological planning means that once production targets have been set by various official bodies and have been approved by the appropriate authorities, the education and training systems are asked to produce the appropriate manpower, in volume and skills, required to achieve those targets.

All developing countries are open economies, in the sense of being integrated in the world economy. With one possible exception, Hong Kong, all developing countries make some use of commercial policy interventions to alter relative prices within the traded goods sector (for instance as between importables and exportables), or between the traded and non-traded goods sectors. Since independence in 1960 the Ivory Coast has made use of a wide range of commercial policy interventions. This case study is concerned with an approach to the evaluation of protection which has recently evolved, namely incidence analysis, in the context of the Ivory Coast. The chapter is organised as follows. Section 2 provides some background information on the economy of the Ivory Coast. Section 3 briefly comments on economic aspects of commercial policy in developing countries. This provides a context for the discussion of the incidence model which takes place in section 4. Section 5 reports the results of estimating the incidence model, and section 6 offers some concluding comments.

The need for humans to have access to potable, conveniently situated water supplies and adequate sanitation are widely recognised as prerequisites for improvement in living standards. These needs are usually explained in terms of consequences for health, quality of life, effects on productivity and development and, not least, as components in programmes designed to alleviate poverty. Recognition of the contribution that water and sanitation could make in securing these benefits led the United Nations to declare 1981 to 1991 the International Drinking Water and Sanitation Decade. By 1985 some 77 per cent of urban dwellers of the developing world have received improved, potable water supplies whilst the figure for rural dwellers was only 38 per cent. The figures for adequate sanitation were 60 per cent and 16 per cent respectively.

The phenomenon of ‘brain drain’ refers to the migration of skilled people from the developing to the developed countries. It has stimulated a vast literature and economists are sharply divided on the costs and benefits of such migration to developing countries. They have also come up with ingenious and novel policy prescriptions, such as the imposition of a tax on the incomes of skilled immigrants, designed to benefit the developing countries. This paper reviews the debate on the ‘brain drain’ in the context of India’s experience, and analyses the justification for and viability of a tax on the incomes of skilled immigrants resident in the developed countries.

Background material for this paper was obtained whilst the author was adviser to Maxwell Stamp Associates on a World Bank funded study of commercial and industrial policies in Burundi. The views expressed in this paper are however those of the author alone.

This paper discusses economic liberalisation with reference to Chilean experience with trade and financial liberalisation. There are several reasons why the Chilean case is of interest. First, the Chilean economy pursued two distinctly different development strategies. From the 1930s to the early 1970s the economy followed inward-looking strategies and from late 1973 onwards, outward-looking strategies with stabilisation. Secondly, the process of liberalisation after 1973 was considered to be a ‘pure monetarist strategy’ as the economy was following free market oriented policies under the guidance of the military government and Chicago-trained economists. Thirdly, given that trade and financial liberalisation in Chile followed the sequence suggested by economic theory, namely trade liberalisation followed by financial reforms, it is of interest to see whether the results were consistent with the predictions of the theory. Finally, the performance of the Chilean economy both during and after the liberalisation period contained some dramatic changes. The inflation rate reached 500 per cent during 1973 but fell to 10 per cent by 1981. After the liberalisation process changes in interest rates, real exchange rates and the demand for credit remained of great concern. Real GDP growth experienced dramatic changes: for many years it averaged 8 per cent but there were decreases of over 12 per cent in two separate years.

Services have traditionally been viewed by academics and policy makers as a residual group of economic activities which lack dynamism and make little contribution to the growth process. In this chapter, we aim to emphasise the changing nature of the services sector with the growth of a new category of service activities loosely called producer services, by discussing the important contribution of producer services in the development of the Singapore economy.

The recent economic development of Saudi Arabia has been rapid by any standards. Given the Kingdom’s position in the world economy today it is easy to overlook the fact that economic development did not really begin until the late 1960s, although social and political development has its roots in the early eighteenth century.