Economics and Finance

In the development literature, some countries are cited more often than others as examples of development success. These countries are understood to have policies and institutions in place that could be transferred, at least in part, to less successful countries both within their own regions, and elsewhere in the world. As such, they may constitute ‘role models of development’. This scholarly volume contains historical accounts of a select set of successful countries in the developing world; successful by virtue of their growth and development path—albeit at times in an uneven, non-linear, and patchy manner. Each unique case describes the fundamental ‘causes’ of success: initial conditions and resources; local, regional, and international factors shaping the national state of affairs; and contributions to the development process by internal and external actors and institutions. Each country has a story to tell from which useful lessons can be drawn. While other similar works have presented cases of successful development strategies, they tend to be region-specific or constitute a relatively small number of cases. This book takes a more wide-ranging perspective involving a large number of country studies, spanning world regions and development levels.

In spite of recurrent criticism and an impressive production of alternative indicators by scholars and NGOs, GDP remains the central indicator of countries’ success. This book revisits the foundations of indicators of social welfare, and critically examines the four main alternatives to GDP that have been proposed: composite indicators, subjective well-being indexes, capabilities (the underlying philosophy of the Human Development Index), and equivalent incomes. Its provocative thesis is that the problem with GDP is not that it uses a monetary metric but that it focuses on a narrow set of aspects of individual lives. It is actually possible to build an alternative, more comprehensive, monetary indicator that takes income as its first benchmark and adds or subtracts corrections that represent the benefit or cost of non-market aspects of individual lives. Such a measure can respect the values and preferences of the people and give as much weight as they do to the non-market dimensions. A further provocative idea is that, in contrast, most of the currently available alternative indicators, including subjective well-being indexes, are not as respectful of people’s values because, like GDP, they are too narrow and give specific weights to the various dimensions of life in a more uniform way, without taking account of the diversity of views on life in the population. The popular attraction that such alternative indicators derive from being non-monetary is therefore based on equivocation. Moreover, it is argued in this book that “greening” GDP and relative indicators is not the proper way to incorporate sustainability concerns. Sustainability involves predicting possible future paths, therefore different indicators than those assessing the current situation. While various indicators have been popular (adjusted net savings, ecological footprint), none of them involves the necessary forecasting effort that a proper evaluation of possible futures requires.

China’s economic growth has transformed the country from one of the poorest in the world to its second largest economy. The drivers of growth remain elusive, as the country is affected by both its transition from central planning and the challenges of a developing country. This book examines the main themes of growth, offering micro-level evidence to shed light on the macro drivers of the economy. It also focuses on law and informal institutions of the economy to highlight the importance of entrepreneurship and the development of the private sector.

This book documents grassroots rebuilding efforts in New Orleans neighborhoods after hurricane Katrina and draws lessons on their contribution to the post-disaster recovery of cities. Two introductory chapters address Katrina’s impact and the planning and public-sector recovery policies that set the context for neighborhood recovery. Three chapters present and analyze rebuilding narratives for six New Orleans neighborhoods. In the heavily flooded Broadmoor and Village de L’Est neighborhoods, residents coalesced around communitywide initiatives, one through a neighborhood association and the second under church leadership, to help homeowners return and restore housing, get key public facilities and businesses rebuilt and create new civic capacity. Another chapter shows how differing socioeconomic conditions, geography, government policies and neighborhood capacity and responses combined to create varied recovery trajectories across four adjacent neighborhoods in the center of the city. A concluding chapter argues that grassroots and neighborhood scale initiatives can make important contributions to city recovery in four areas: repopulation, restoring “complete neighborhoods” with key services and amenities, rebuilding parts of the small business economy and enhancing recovery capacity. It also calls for more balanced investment and policies to rebuild rental housing, deliberate collaboration with community-based organizations to undertake and implement recovery plans, and changes to federal disaster recovery policies.

The book has a comprehensive coverage of issues relating to the role of ecological constraints in limiting the availability of natural resources and eco-services for economic development and resulting often in environmental degradation. It explains how the interactive relationship between the human economy and the natural environment as determined by the laws of entropy and material balances sets these ecological limits and also shows how the development of technology, policies and institutions can relax these constraints creating space for development ensuring equitable sharing of its benefit both within and across generations. Methodologically the book emphasizes the importance of integration of the concerned ecological factors into primarily economic models of development and points out how the framework and the methodological approach of neoclassical economics are amenable to appropriate modifications required for addressing such issues. It articulates the theoretical concept of sustainable economic development and elaborates its implications in the applied context of development of sustainable macroeconomic and resource accounting. Regarding the issues of concrete developmental challenges the book analyses in details the interactive dynamics of population, economic growth, distribution and use of the whole range of major natural resources – land and soil, water, forests, bio-diversity, energy, non-energy material resources, eco-capacity of waste absorption including the related problem of climate change - with special reference to the Indian situation. The comprehensive coverage of issues, the rich data base and information and the perspectives of its discussions make the book unique for understanding the prospect of sustainable or green economic development of India.

Part one: The book traces the evolution of executive compensation, its controversies and its resulting regulations, by comparing US and European CEOs. It shows that many features of current executive compensation practices reflect the often-unintended consequences of regulatory responses to perceived abuses in top-executive pay, often stemming from relatively isolated events or situations. Regulation always creates unintended (and usually costly) side effects and it is often inherently driven by politicians more interested in their political agendas rather than creating shareholder value. Improvements in executive compensation are more likely to emanate through stronger corporate governance, and not through direct government intervention. Part one: The compensation packages of a growing proportion of firms include pay schemes that are linked to employee or company performance, however little is known about the patterns of performance related pay both within and across countries. This study investigates the diffusion of incentive pay schemes on both sides of the Atlantic and finds a number of empirical regularities. Incentive pay is less common where the share of small firms is larger, or where product and labour markets are regulated. We show that government intervention in this area is not obvious and that extensive discussion with labour, management, and government decision-makers is important.

“Financial Asset Pricing Theory” offers a comprehensive overview of the classic and the current research in theoretical asset pricing. Asset pricing is developed around the concept of a state-price deflator which relates the price of any asset to its future (risky) dividends and thus incorporates how to adjust for both time and risk in asset valuation. The willingness of any utility-maximizing investor to shift consumption over time defines a state-price deflator which provides a link between optimal consumption and asset prices that leads to the Consumption-based Capital Asset Pricing Model (CCAPM). A simple version of the CCAPM cannot explain various stylized asset pricing facts, but these asset pricing “puzzles” can be resolved by a number of recent extensions involving habit formation, recursive utility, multiple consumption goods, and long-run consumption risks. Other valuation techniques and modelling approaches (such as factor models, term structure models, risk-neutral valuation, and option pricing models) are explained and related to state-price deflators. The book will serve as a textbook for an advanced course in theoretical financial economics in a PhD or a quantitative Master of Science program. It will also be a useful reference book for researchers and finance professionals. The presentation in the book balances formal mathematical modelling and economic intuition and understanding. Both discrete-time and continuous-time models are covered. The necessary concepts and techniques concerning stochastic processes are carefully explained in a separate chapter so that only limited previous exposure to dynamic finance models is required.

In recent years, economic development has brought a host of benefits to people around the globe: freedom from crushing poverty; educational and employment opportunity; and access to consumer goods once largely restricted to a handful of the most advanced economies. But development has downsides as well. The pollution and exploitation of natural resources that accompany industrialization are a harsh reminder that development also brings public health and ecological threats. Climate change is just one of many pressing issues that must be faced as economic growth spreads both prosperity and environmental risk. Balancing human demands for economic development and a clean environment has become an ever more pressing concern in every corner of the modern world. Formal cost-benefit analysis of environmental policy is typically associated with the United States, and to a lesser extent Europe, but there is a growing global movement to spread the practice. This edited volume examines how cost-benefit analysis can help developing and emerging countries confront the next generation of environmental and public health challenges. Case studies by practitioners working at the cutting edge of cost-benefit analysis in the Americas, Africa, Middle East, and Asia are accompanied by chapters from world-leading experts that examine conceptual and institutional issues. As cost-benefit analysis goes global, this book helps light the path toward productive use of this powerful tool.

In the aftermath of the financial crisis, the business model of international banks is under pressure. Regulators across the world are retrenching to national lines by applying restrictions on cross-border banking. Applying game theory, this book develops a model of the financial trilemma to understand the coordination failure among regulators. Regulators fail to provide the public good of financial stability. The model also provides solutions to overcome this coordination failure. The book provides a framework for the effective governance of global banks. The goal is to offer a long-term perspective on international banking for regulators and academics.

This collection of papers provides an authoritative introduction to the Great Depression as it affected the advanced countries in the 1930s. The contributions are by acknowledged experts in the field and cover in detail the experiences of Britain, Germany, and, of course, the United States while also seeing the depression as an international disaster. The crisis entailed the collapse of the international monetary system, sovereign default, and banking crises in many countries in the context of the most severe downturn in western economic history. The responses included protectionism, regulation, fiscal and monetary stimulus, and the New Deal. The relevance to current problems facing Europe and the United States is apparent. The essays are written at a level which will be comprehensible to advanced undergraduates in economics and history while also being a valuable source of reference for policy makers grappling with the current economic crisis. Knowing about the Great Depression should be part of every economist’s education. The book will be of interest to modern macroeconomists and students of interwar history alike and seeks to bring the results of modern research in economic history to a wide audience. The focus is not only on explaining how the Great Depression happened, but also on understanding what eventually led to the recovery from the crisis. A key feature is that every chapter has a full list of bibliographical references which can be a platform for further study.