IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/665.html
   My bibliography  Save this paper

Microeconomic distortions : static losses and their effect on the efficiency of investment

Author

Listed:
  • Lopez, Ramon

Abstract

In the past decade the developing countries have tried much harder to achieve macroeconomic stability than they have to eliminate inefficiencies from microeconomic distortions. The author has pursued a relatively new line of inquiry in examining measurement of the social income losses induced by the reduction of the investment efficiency caused by trade distortions. Empirical findings of the study suggest a strong negative effect of trade distortions on the social efficiency of investment. The social income losses caused by the reduced investment efficiency are considerable. Countries that have a moderate investment ratio (about 20 percent of GDP) can experience social income losses in excess of 18 percent in 30 years, if tariffs are about 50 percent. This study confirms earlier findings about the relatively modest efficiency losses caused by the independent effects of specific distortions. The author alsofound a significant synergistic effect when trade and wage distortions coexist and lead to larger efficiency losses. The key issue is the combination of price distortions favoring capital-intensive activity with wage distortions that cause unemployment and underemployment. This pattern is pervasive in developing countries.

Suggested Citation

  • Lopez, Ramon, 1991. "Microeconomic distortions : static losses and their effect on the efficiency of investment," Policy Research Working Paper Series 665, The World Bank.
    • Handle: RePEc:wbk:wbrwps:665
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1991/05/01/000009265_3961001092815/Rendered/PDF/multi0page.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nadiri, M Ishaq, 1972. "International Studies of Factor Inputs and Total Factor Productivity: A Brief Survey," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 18(2), pages 129-154, June.
    2. Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
    3. Bertrand, T. J. & Flatters, F., 1971. "Tariffs, capital accumulation and immiserizing growth," Journal of International Economics, Elsevier, vol. 1(4), pages 453-460, November.
    4. Rudiger Dornbusch, 1990. "From Stabilization to Growth," NBER Working Papers 3302, National Bureau of Economic Research, Inc.
    5. Lopez, Ramon & Riveros, Luis, 1990. "Do labor market distortions cause overvaluation and rigidity of the real exchange rate?," Policy Research Working Paper Series 485, The World Bank.
    6. Rodrik, D., 1989. "Liberalization, Substainability, And The Design Of Structural Adjustment Programs," Papers 177d, Harvard - J.F. Kennedy School of Government.
    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


    Cited by:

    1. Chambers, Robert G. & Lopez, Ramon, 1993. "Public investment and real-price supports," Journal of Public Economics, Elsevier, vol. 52(1), pages 73-82, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kim, Kwan S., 1997. "Income distribution and poverty: An interregional comparison," World Development, Elsevier, vol. 25(11), pages 1909-1924, November.
    2. Biswas, Rajit, 2014. "Metzler paradox and home market effects in presence of internationally mobile capital and non-traded goods," MPRA Paper 56335, University Library of Munich, Germany.
    3. Syed Tehseen Jawaid & Mariya Ahmad Qureshi & Samra Ali, 2021. "Does immiserizing growth exist? Evidence from world’s top trading nations," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing Limited, vol. 14(2), pages 124-148, January.
    4. Lopez, Ramon, 1995. "Synergy and investment efficiency effects of trade and labor market distortions," European Economic Review, Elsevier, vol. 39(7), pages 1321-1344, August.
    5. Jeffrey D. Sachs, 1989. "Introduction to "Developing Country Debt and the World Economy"," NBER Chapters, in: Developing Country Debt and the World Economy, pages 1-34, National Bureau of Economic Research, Inc.
    6. Steinherr, Alfred & Cisotta, Alessandro & Klar, Erik & Sehovic, Kenan, 2006. "Liberalizing Cross-Border Capital Flows: How Effective Are Institutional Arrangements against Crisis in Southeast Asia," Working Papers on Regional Economic Integration 6, Asian Development Bank.
    7. Bolling, H. Christine, 1992. "The European Community Presence in U.S. Agriculture," Foreign Agricultural Economic Report (FAER) 147998, United States Department of Agriculture, Economic Research Service.
    8. Jaime de Melo & David Tarr, 2015. "VERs under imperfect competition and foreign direct investment: A case study of the US–Japan auto VER," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 22, pages 461-483, World Scientific Publishing Co. Pte. Ltd..
    9. Culagovski, Jorge & Gabor, Victor & Germany, Maria Cristina & Humphreys, Charles P., 1991. "African financing needs in the 1990s," Policy Research Working Paper Series 764, The World Bank.
    10. Sebastian Edwards & Sweder van Wijnbergen, 1983. "The Welfare Effects of Trade and Capital Market Liberalization: Consequences of Different Sequencing Scenarios," NBER Working Papers 1245, National Bureau of Economic Research, Inc.
    11. Chaudhuri, Sarbajit & Mukherjee, Ujjaini, 2002. "Removal of protectionism, foreign investment and welfare in a model of informal sector," Japan and the World Economy, Elsevier, vol. 14(1), pages 101-116, January.
    12. Gabrielle Antille & Fabrizio Carlevaro & Nicolas Schmitt & Simon Fraser, 1990. "Europe 1992 and Beyond: Towards a Quantitative General Equilibrium Assessment for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 126(III), pages 193-213, September.
    13. Pi, Jiancai & Zhou, Yu & Yin, Jun, 2013. "International factor mobility, monopolistic competition, and wage inequality," Economic Modelling, Elsevier, vol. 33(C), pages 326-332.
    14. Ariane Tichit, 1998. "Reprise économique dans les pays post-communistes : application d'un modèle de durée," Économie et Prévision, Programme National Persée, vol. 136(5), pages 73-92.
    15. Adam Szirmai, 2011. "Manufacturing and Economic Development," WIDER Working Paper Series wp-2011-075, World Institute for Development Economic Research (UNU-WIDER).
    16. Bourguignon, F. & De Melo, J. & Suwa, A., 1990. "Distributional Effects of Adjustment Policies: Simulations for Two Archetype Economies," DELTA Working Papers 90-31, DELTA (Ecole normale supérieure).
    17. Argentino Pessoa, 2008. "Multinational Corporations, Foreign Investment, and Royalties and License Fees: Effects on Host-Country Total Factor Productivity," Notas Económicas, Faculty of Economics, University of Coimbra, issue 28, pages 6-31, December.
    18. Serven, Luis, 1997. "Uncertainty, instability, and irreversible investment : theory, evidence, and lessons for Africa," Policy Research Working Paper Series 1722, The World Bank.
    19. Grossman, Gene M., 1984. "The gains from international factor movements," Journal of International Economics, Elsevier, vol. 17(1-2), pages 73-83, August.
    20. Gene Grossman & Elhanan Helpman, 1994. "Foreign Investment with Endogenous Protection," NBER Working Papers 4876, National Bureau of Economic Research, Inc.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:665. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.