Monday, 1 September 2008

Recommendations for a start-up economy's institutions

I'm polishing a research paper at the moment, and don't have too many new results to report. So I thought that it would be a good time to consolidate some earlier results, and produce some recommendations for the economic institutions of a newly established country or newly autonomous region within a country:

1. Technology transfers from rich countries have a huge effect on economic growth. Getting students into foreign countries is often associated with growth, as are some forms of imports of technological goods. Poor countries are probably going to benefit more from transfers of less advanced technologies than of cutting edge ones, so building domestic industries accordingly might be a good idea.

2. A recent paper on growth found that presidents are frequently good for their economies for a decade, but their performance drops off afterwards. A four and a half year term for the government, possibly with limits on presidential or prime ministerial office of two terms, would seem to allow for changes before the performance falls.

3. Oil producing states may wish to create strong competitive meritocracies in promotions to government and senior administrative positions. Output in their economies responds less to educational accumulation than output in non-oil producing economies, so educational achievement is likely to be rewarded relatively poorly in the market.

4. Transparency and education in government are important for avoiding foreign investors gaining excessive returns in a country.

5. In dealing with foreign countries interested in gaining control over a country's resources, it may be possible to play the foreigners off against each to achieve greater benefits.

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