Advanced Search
MyIDEAS: Login to save this paper or follow this series

Inventories in developing countries : levels and determinants - a red flag for competitiveness and growth

Contents:

Author Info

  • Guasch, J. Luis
  • Kogan, Joseph
Registered author(s):

    Abstract

    Raw materials inventories in the manufacturing sector in the 1970s, 1980s, and 1990s were two to five times as high in developing countries as in the United States, despite the fact that in most developing countries real interest rates are at least twice as high. Given the high cost of capital in most developing countries, these high inventory levels have an enormous impact on the cost of doing business and on productivity and competitiveness. Poor infrastructure and ineffective regulation as well as deficiencies in market development - rather than the interest rates and uncertainty - are the main determinants of these differences. Cross-country estimates show that a one-standard-deviation improvement in infrastructure reduces raw materials inventories by 27-47 percent. Poorly functioning markets, as measured by the ratio of transfers and subsidies to GDP, are also an important factor, with a one-standard-deviation improvement leading to a 19-30 percent reduction in raw materials inventories. The authors show that these reductions in raw materials inventories are not offset by a reduction in finished goods inventories upstream. The policy implications are clear and strong. Improvements in infrastructure (roads, ports, and telecommunications) can help to significantly reduce inventory levels (and thus the cost of doing business), especially when accompanied by effective regulation and the development and deregulation of associated markets.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2001/03/26/000094946_01031305310524/Rendered/PDF/multi0page.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2552.

    as in new window
    Length:
    Date of creation: 28 Feb 2001
    Date of revision:
    Handle: RePEc:wbk:wbrwps:2552

    Contact details of provider:
    Postal: 1818 H Street, N.W., Washington, DC 20433
    Phone: (202) 477-1234
    Email:
    Web page: http://www.worldbank.org/
    More information through EDIRC

    Related research

    Keywords: Economic Theory&Research; Banks&Banking Reform; Environmental Economics&Policies; Transport and Trade Logistics; Common Carriers Industry;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Cuthbertson, Keith & Gasparro, David, 1993. "The Determinants of Manufacturing Inventories in the UK," Economic Journal, Royal Economic Society, vol. 103(421), pages 1479-92, November.
    2. Chikan, Attila, 1991. "Inventory structure in the manufacturing industry -- A cross-country comparison," International Journal of Production Economics, Elsevier, vol. 24(1-2), pages 19-27, November.
    3. Fukuda, Shin-ichi & Teruyama, Hiroshi, 1988. "Some international evidence on inventory fluctuations," Economics Letters, Elsevier, vol. 28(3), pages 225-230.
    4. Antonio Estache, 1994. "World Development Report: Infrastructure for Development," ULB Institutional Repository 2013/44144, ULB -- Universite Libre de Bruxelles.
    5. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
    6. Marcel Fafchamps Jan Willem Gunning & Remco Oostendorp, . "Inventories, Liquidity, and Contractual Risk in African Manufacturing," Working Papers 97020, Stanford University, Department of Economics.
    7. Alan S. Blinder & Louis J. Maccini, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 73-96, Winter.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Gutierrez, Pedro J. & Marroquin, Eduardo F., 2006. "A Characterization of the Argentinian production sector prior to the 1998 crisis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(4), pages 691-709, August.
    2. Luis A. Andrés & J. Luis Guasch & Thomas Haven & Vivien Foster, 2008. "The Impact of Private Sector Participation in Infrastructure : Lights, Shadows, and the Road Ahead," World Bank Publications, The World Bank, number 6545, October.
    3. Pablo Guerrero & Krista Lucenti & Sebastián Galarza S., 2009. "Trade Logistic and Regional Integration in Latin America & the Caribbean," IDB Publications 9331, Inter-American Development Bank.
    4. George Alessandria & Joseph Kaboski & Virgiliu Midrigan, 2008. "Inventories, lumpy trade, and large devaluations," Working Papers 08-3, Federal Reserve Bank of Philadelphia.
    5. Antonio Estache & B. Tovar & Lourdes Trujillo, 2004. "Sources of Efficiency Gains in Port Reform: A DEA Decomposition of a Malmquist TFP Index for Mexico," ULB Institutional Repository 2013/43973, ULB -- Universite Libre de Bruxelles.
    6. Li, Han & Li, Zhigang, 2013. "Road investments and inventory reduction: Firm level evidence from China," Journal of Urban Economics, Elsevier, vol. 76(C), pages 43-52.
    7. World Bank, 2005. "El Salvador : Investment Climate Assessment, Volume 2, Detailed Findings and Recommendations," World Bank Other Operational Studies 8670, The World Bank.
    8. J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications, The World Bank, number 15024, October.
    9. Jordan Schwartz & José Luis Guasch & Gordon Wilmsmeier, 2009. "Logistics, Transport and Food Prices in LAC: Policy Guidance for Improving Efficiency and Reducing Costs," IDB Publications 9324, Inter-American Development Bank.
    10. World Bank, 2005. "El Salvador : Investment Climate Assessment, Volume 1, Main Findings and Policy Recommendations," World Bank Other Operational Studies 8673, The World Bank.
    11. World Bank, 2010. "Logistics in Argentina : Analysis, Options and Strategies to Overcome Emerging Restrictions," World Bank Other Operational Studies 12553, The World Bank.
    12. Asian Development Bank & World Bank & Japan Bank for International Cooperation, 2005. "Connecting East Asia : A New Framework for Infrastructure," World Bank Publications, The World Bank, number 7267, October.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2552. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.