Here are summaries of articles from the latest (October-December 2003) edition of World Economics. The lead article explains how developing countries can enjoy a growth dividend as a result of demographic change.

The Demographic Dividend
How demographic change can bolster economic performance in developing countries
David E. Bloom & David Canning

Falling mortality rates spurred by medical, nutritional and lifestyle changes have spurred a ‘demographic transition’ in a majority of the world’s countries. As couples realize their children are more likely to survive, they need, and eventually have, fewer of them to attain their desired family size. In addition, desired fertility tends to decline as earnings opportunities improve since forgone income is such a large portion of the cost of childrearing.

In the lag between mortality and fertility declines, a ‘boom’ generation is created, which is larger than both preceding and successor cohorts. As this boom generation reaches working age, the combination of a greater supply of workers and fewer dependents to support gives countries the opportunity to collect a ‘demographic dividend’. If an appropriate policy environment is in place for making the most of this opportunity, the economic benefits can be, and in many cases have been, great.

Exchange Rate Regimes
Is there a third way?
Vijay Joshi

This paper argues that (a) for many developing countries, the optimal external payments regime would be a combination of an intermediate exchange rate with capital controls and (b) the policy stance and advice of the IMF should reflect this judgement. The paper uses India as a case study to illustrate its argument.

China’s Capital Market
Better than a casino
Stephen Green

Throughout the 1990s, China’s stock market was developed as a tool of industrial policy. It was used to supply capital to state-owned enterprises (SOEs) that remained controlled by the state and whose performance usually declined after listing. Secondary market trading was poorly regulated, again partly for political reasons. As a result, the market has become infamous for extreme volatility, price manipulation and grossly unreliable accounting.

This is a problem for the government since the stock market is ill-equipped to support the government’s other increasingly important economic priorities. The government now needs to improve the efficiency of industry in order to sustain employment creation, to raise capital to finance its own liabilities and to put into place a modern pension system.

As a result, China’s stock market is being slowly reformed. Listed companies are quietly being allowed to privatise. The regulatory framework has been rationalised. The empowered China Securities Regulatory Commission is pushing forward with a range of policies aimed at improving corporate governance. Shareholders have been allowed to pursue civil compensation claims against firms in the courts. Financial intermediaries are being privatised, the fund sector is being rapidly expanded and foreign investors are gradually being allowed in. These changes, although deeply unpopular among some important groups, will mature the market over the next decade.

Opening Up Trade in Higher Education
A role for GATS?
J. R. Shackleton

Internationalisation of higher education is too often treated as an issue for universities and national governments alone. The expansion of trade in HE services is part of a wider picture. The demand for liberalisation of world trade in all types of services has led to the creation of the General Agreement on Trade in Services (GATS). This article outlines the GATS processes, notes the scale of trade in higher education and considers the existence of barriers to its further expansion. The case for and against greater liberalisation is discussed, concluding that issues raised by GATS will not go away and are likely increasingly to affect the domestic HE agenda.

The Costs of Violent Crime
Giles Atkinson, Susana Mourato & Andrew Healey

This paper reviews a number of studies that have sought to estimate the economic costs of criminal offending and, more specifically, violent crime. Firstly, it discusses those approaches that have sought to describe the ‘big picture’ by calculating the aggregate burden of all crime. These studies yield useful overall summaries about the magnitude of the crime problem but also reveal how little is known about the value of the ‘intangible’ effects of violent crime (e.g. the anxiety suffered by potential victims or the pain and suffering imposed on actual victims).

Secondly, the authors review the growing number of contributions that have begun the process of filling this gap through novel applications of non-market valuation methods in a crime context. In particular, the findings of a recent attempt to estimate the costs of categories of violent crime (of varying levels of severity) in the United Kingdom using the contingent valuation method are discussed. Whilst valuing the intangible costs of violent crime is a challenging task, a more explicit assessment is needed not just to improve the transparency of public decision-making but also to ensure that policy benefits of crime prevention can be compared directly with the costs of implementation.

Back to the Future
Jeffrey Williamson on globalisation in history
An interview with introduction by Brian Snowdon

Jeffrey Williamson is a leading authority on the economic history of the international economy. His interests cover a wide area within the field of economic history and include research on international economic development, the industrial revolution, industrialisation and de-industrialisation, tariff policy, factor price convergence, demography and economic development, and international labour migration. Since the early 1960s he has been a major contributor to the ‘cliometric’ approach to economic history and his research illustrates how history is particularly relevant to the modern debate on ‘globalisation’. In this interview Brian Snowdon discusses with Professor Williamson his more recent research relating to the global economy in historical perspective.

Information Technology and the G7 Economies
Dale W. Jorgenson

A powerful surge in investment in information technology and equipment after 1995 characterizes all of the G7 economies. This accounts for a large portion of the resurgence in US economic growth, but contributes substantially to economic growth in the remaining G7 economies as well. Another significant source of the G7 growth resurgence after 1995 is a jump in productivity growth in IT-producing industries. These findings are based on new data and new methodology for analyzing the sources of economic growth. Internationally harmonized prices for information technology equipment and software are essential for capturing differences among the G7 nations.

Blueprint for Public Company Reform
A. Edward Gottesman

The crisis of confidence in corporate governance and the opacity of public company reporting are growing concerns. These flaws in the market system have been highlighted by the stock market bubble and pose a threat to orderly capital flows. Reform is needed, but legislation may have little effect and can carry unintended consequences. Better solutions can be found by examining the way in which private companies are directed and the type of financial and operational reports they use for budgeting and control. Institutional investors, bankers, professional advisers and Boards of Directors can implement the changes needed to provide more reliable information for valuation of public company securities and to counteract the casino mentality that infects capital markets.