Introduction. Gestational Diabetes Mellitus (Gdm)By...

Introduction Gestational Diabetes Mellitus (GDM) by definition is a carbohydrate intolerance that is developed or recognized for the first time during pregnancy (Chen, Chuang, Fang, Kuo, Lee, Li, Lin, NIen,Wu, 2017). With a drastic increase of GDM in recent years, attention and concern has been brought to the topic. GDM is linked to poor pregnancy outcomes including but not limited to; hypertension, macrosomia, maternal depression, neonatal hypoglycemia and stillbirth (Jagiello Chertok, 2015). With these negative pregnancy outcomes, there is a much greater chance of NICU (Neonatal Intensive Care Unit) admission and that comes with the potential for further issues. To avoid these issues, proper detection of GDM is necessary for all age†¦show more content†¦Overall, the main focus of the study was to examine the experiences of these women with breastfeeding in the three month postpartum period (Jagiello Chertok, 2015). The women who participated in this study were asked to do so by medi cal professionals upon diagnosis of GDM. In order for their interviews to be used in the final data analysis, they had to have delivered a child within the last year, delivered a healthy term infant, and had to be older than eighteen years old (Jagiello Chertok, 2015). If they did not fit this criteria, they were not asked to be apart of the study. Once the twenty seven participants were chosen, they completed a series of focus groups and individual interviews. The transcripts from the interviews and focus groups were analyzed and three large themes emerged in the study (Jagiello Chertok, 2015). These themes included breastfeeding challenges and support, milk supply challenges, and concern for their infant’s health. The majority of the women interviewed expressed that they were encouraged to solely breastfeed upon delivery of their child. Although most attempted to breastfeed initially, many had difficulties doing so and it was concluded this may have been because of their GDM (Jagiello Chertok, 2015). Neonatal hypoglycemia, jaundice, and cesarean births led to a decrease in skin to skin contact following delivery and in result led to difficulty with feedings. Many of these women also experienced delayed breast milkShow MoreRelatedPre- Pregnancy Body Mass Index and Weight Gain During Pregnancy1992 Words   |  8 Pageswith Gestational Diabetes and Hypertension, and Birth Outcomes’ theorized in their introduction that â€Å"maternal obesity at conception increases the risk of maternal and or/ fetal complications in pregnancy, and labor and birth† (Heude , et al., 2012). In addition, they also confer that â€Å"the fetal complications that may result in the fetus will adversely affect the fetus after birth† (Heude, et al., 2012). The operational definitions of medical terminology used in this study are that Gestational DiabetesRead MoreFactors That Influences Blood Glucose Control2932 Words   |  12 PagesAbstract Background: Diabetes is the most dangerous and common life long-health condition which affects mankind irrespective of age. Diabetes is a boon for the health care provider as it is a very demanding and complex disease. It is very essential that this killer disease must be identified early and significant treatment must be entitled to the patient as soon as it is detected. By creating a good awareness of this disease and its manifestations, the increasing number of mortality and morbidity

Major Challenges to Piagets Theory of Cognitive Development

What are the major challenges to Piagets theory of cognitive development and what aspects still have value? To answer this question, Piagets theory of development should be explained along with Vygotskys theory and the connectionist theory of development, and then each should be compared with the others. Once this has been achieved the main similarities and differences will be summarized, and finally the areas of Piagets theory that have not been undermined by other theories will be reiterated. In Piagets opinion, Intelligence is not how we would class it today, he believed that intelligence covered all mental thought. He did believe however that the development of intelligence was an evolutionary matter not something that†¦show more content†¦During this stage the child starts to use symbolism so the development of language is very fast during this period, but they can not see other points of view, it is all from their own perception. Piaget believed that the child in this stage was not capable of logical thought (Lee and Gupta). In the concrete operational stage between the ages of seven and twelve, children become capable of logical thought, they also start to be able to think abstractly. However they are best suited to visible or concrete objects and things they can see (Lee and Gupta). Once the child has reached the formal operations stage from twelve years onwards it becomes more practiced at abstract processing, carrying out problem solving systematically and methodically thus completing the cognitive development process. Once a new stage is reached the learning from the previous stages is not discarded, it is used as a base for the new learning, like a scaffold to build from. It has been found that some children pass through the stages at different rates (Crain 1992), but all the stages are believed to be passed through in the same order and unless there is a medical problem to prevent the progression all the stages will be passed through before the adult brain is formed. Piaget believed that there were three processes involved in moving from one stage to the next these were assimilation accommodation and equilibrium. Assimilation is the process of converting new information soShow MoreRelatedJean Piaget s Theory Of Cognitive Development943 Words   |  4 PagesJean Piaget’s theories of cognitive development broke new ground in the field of Psychology leading to the extension of further research into the area of developmental psychology. In this essay I seek to examine these theories whilst considering their current relevance to modern psychology and society. A major part of Piaget’s theory focuses around the idea of schemas; a set of linked mental representations used to make sense of the world. According to Piaget (1952), we are born with a small setRead MoreThe Critique of Piagets Theories Essay1620 Words   |  7 PagesCritique of Piagets Theories Jean Piaget (1896 – 1980) was a constructivist theorist. He saw children as constructing their own world, playing an active part in their own development. Piaget’s insight opened up a new window into the inner working of the mind and as a result he carried out some remarkable studies on children that had a powerful influence on theories of child thought. This essay is going to explain the main features and principles of the Piagetian theory andRead MorePiagets Theory of Cognitive Development Essays1715 Words   |  7 Pagesa lifelong interest in how individuals, especially children, use cognitive development to adapt to the world around them. Piaget published his first paper by the age of 10, completed his bachelor’s degree by the age of 18, and at the age of 22 received his PhD from the University of Neuchatel. Piaget spent many years of his life researching the developmental and cognitive knowledge of children. The Theory of Cognitive Development places focus on human intelligence and developmental thinking. â€Å"InfluencedRead MoreJean Piaget s Theory Of Knowing921 Words   |  4 Pageswas a developmental psychologist and philosopher from Switzerland. He is known for his epistemological studies with children. He was the first to make a systematic study of cognitive development. Piaget was also the Director of the International Bureau of Education. He was â€Å"the great pioneer of the constructivist theory of knowing.† He was known as the second best psychologist after Skinner by the end of the 20th century. Throughout his career, Jean Piaget declared that â€Å"only education is capableRead MorePiagets and Vygotskys Theories in the Classroom Essays1371 Words   |  6 PagesSince the early 1900’s psychologists have developed theories about how the human brain develops and how humans learn. Cognitive development is the construction of thought processes, including remembering, problem solving, and decision-making, from childhood through adolescence to adulthood (Wells, 2011). There are many factors that play vital roles in how we learn, some of which are intelligence, reasoning and memory. There are different theories as to how children learn. Some believe that babiesRead MoreEssay on Psychology1023 Words   |  5 Pagesbehaviour in an objective way. †¢social learning theory/cognitive behaviourism †¢attachment theory †¢evolutionary theory †¢behavioural genetics †¢Piaget’s theory of cognitive development †¢Erikson’s theory †¢developmental systems Define and describe the following research methods †¢correlational study †¢experimental study †¢cross sectional study †¢longitudinal study Study Questions 1. Define cohort and briefly summarize at least one major difference in how different cohorts, past andRead MoreConstructivism1400 Words   |  6 PagesConstructivism Learning Theory Constructivism learning theory is a philosophy which enhances students logical and conceptual growth. The underlying concept within the constructivism learning theory is the role which experiences-or connections with the adjoining atmosphere-play in student education. The constructivism learning theory argues that people produce knowledge and form meaning based upon their experiences. Two of the key concepts within the constructivism learning theory which create the constructionRead MoreVygotsky And Vygotsky s Theory Of Choice908 Words   |  4 PagesSingleton, 2010). Jean Piaget and Lev Vygotsky are two well-known cognitive psychologist who each had theories regarding language development and cognition. Both Piaget and Vygotsky had similarities in their theories as well as differences between them. While they were both conveyed great contributions into the development of current psychology, Vygotsky’s ideas are notably the theory of choice in development. Jean Piaget’s theory suggested that children progressed through stages while they wereRead MorePiaget vs. Vygotsky1120 Words   |  5 PagesThe theory of cognitive development is defined as the development of the ability to think and reason. There are many theorists who have studied cognitive theories and the most famous is Jean Piaget. Cognitive development covers the physical and emotional stages of a child. The basic premise for cognitive development is to show the different stages of the development of a child so you can understand where the child might be in their development. Understanding cognitive development will betterRead MoreThe Development Of The Cognition1013 Words   |  5 PagesThe development of the cognition in the early years of life (2-6 year olds) is the assembly of the thought processes. The thought processes are comprised of memory, problem solving, and decision-making (Encyclopedia of Children’s Health). Universally all children’s thought processes consist of these three abilities; however, there are cases where the child doesn’t have the ability or can be impaired in one or more of these abilities. Several theories of how a child in the early years thinks have

Chile Economic History Free Essays

This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Reform, Recovery, and Growth: Latin America and the Middle East Volume Author/Editor: Rudiger Dornbusch and Sebastian Edwards, eds. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-15745-4 Volume URL: http://www. nber. We will write a custom essay sample on Chile Economic History or any similar topic only for you Order Now org/books/dorn95-1 Conference Date: December 17-18, 1992 Publication Date: January 1995 Chapter Title: Trade Policy, Exchange Rates, and Growth Chapter Author: Sebastian Edwards Chapter URL: http://www. nber. rg/chapters/c7649 Chapter pages in book: (p. 13 – 52) 1 Trade Policy, Exchange Rates, and Growth Sebastian Edwards 1. 1 Introduction After decades of protectionist policies, most of Latin America began to open up to the rest of the world in the late 1980s. This process, pioneered by Chile, is perhaps the most impressive achievement of the structural adjustment programs of the last decade. It has effectively put an end to more than four decades of generalized import substitution policies aimed at encouraging an industrial sector, that turned out to be largely inefficient. The process leading to these trade reforms has not been easy. As recently as in the mid-1980s the protectionist view was still dominant in many parts of Latin America. In fact, the debt crisis of 1982 pr ovided a new impetus to the protectionist paradigm. Initially, many analysts interpreted the crisis as a failure of â€Å"the world economic order† and argued that the only way for Latin America to avoid the recurrence of this type of shocks was to further isolate itself from the rest of the world, through selective protectionism and government intervention. This sentiment was compounded by the fact that a number of observers considered the experiences of the Southern Cone countries-Argentina, Chile, and Uruguay-with liberalization reforms during the 1970s as Sebastian Edwards is chief economist for Latin America and the Caribbean at the World Bank. He is also the Henry Ford I1 Professor of International Business Economics at the Anderson Graduate School of Management, University of California, Los Angeles, and a research associate of the National Bureau of Economic Research. The author is grateful to discussants at the conference for helpful comments and to participants at a seminar at the Instituto Tecnologico Autonorno de Mexico (ITAM), Mexico City, for helpful discussions. He thanks Fernando Losada for excellent research assistance. 1. Even though the experiences of the individual Latin American countries varied during 195080, in the majority of them some variant of inward-looking development was the dominant policy. Since the early 1960s a number of trade liberalization attempts have taken place in the region. Almost every one of them has ended in frustration. In fact, until the late 1970s-1980s very little progress was made in this area. 13 14 Sebastian Edwards a failure. This view has been clearly synthesized by Lance Taylor (1991, 119), who has argued that the â€Å"trade liberalization strategy is intellectually moribund† and that there are â€Å"no great benefits (plus some costs) in following open trade and capital market strategies† (141). From here he goes on to say that â€Å"development strategies oriented internally may be a wise choice towards the century’s end† (141). Immediately following the eruption of the debt crisis, it seemed that increased protectionism was indeed the path that Latin American countries had chosen as a possible way out of their problems. Even Chile, the strongest supporter of free trade, tripled its import tariffs. * As a result of this, in the mid1980s Latin America had one of the most distorted external sectors in the world, with extremely high import tariffs and, in some cases, quantitative restrictions that covered every single import item (see table 1. 1). However, by 1987-88 it became increasingly apparent that a permanent solution to the region’s conomic problems would require a fundamental change in its development strategy. In particular, policymakers began to realize that the long-standing protectionist trade policy was central to the region’s problems. The poor performance of the Latin American countries offered a dramatic contrast to the rapidly growing East Asian countries that had aggressively imp lemented outward-oriented strategies. With the help of the multilateral institutions, a larger and larger number of countries began to reduce their levels of protection during the late 1980s and early 1990s. This trade reform process has been supplemented with broad deregulation and privatization, and is proceeding at an increasingly rapid pace. Tariffs have been drastically slashed, in many cases import licenses and prohibitions have been completely eliminated, and a number of countries are actively trying to sign free trade agreements with the United States. Latin America’s long tradition with protectionist policies molded the region’s economic structure in a fundamental way, creating a largely inefficient manufacturing sector. Tariffs and prohibitions also generated a severe antiexport bias that discouraged both growth and diversification of exports4 This process took place through two main channels. First, tariffs and other forms of protection increased the cost of imported intermediate materials and capital goods used in the production of exportable goods, reducing their effective rate of protection. Second, and perhaps more important, the maze of protectionist policie s resulted in massive real exchange rate â€Å"overvaluation† that reduced 2. However, as I argued in Edwards (1988a), in many countries this increase in protectionism was dictated by necessity. 3. There has long been a literature documenting the consequences of protectionism in the Latin American economies. For recent studies, see the Latin American cases covered in the Michaely, Choski, and Papageorgiou (1991) project. 4. In the 1960s some countries decided to implement export promotion schemes based on government support and adjustable exchange rates. To some extent this was partially successful in Brazil. However, as Fishlow (1991) has pointed out, this development did little to reduce Brazil’s vulnerability to foreign shocks. 15 Trade Policy, Exchange Rates, and Growth Import Protection in the Developing World, 1985 (%) Total Tariff Protection= South America Central America Caribbean North Africa Other Africa West Asia Other Asia 51 Table 1. 1 Non-tariff Barriers Coverageb 60 100 23 85 86 I1 21 66 17 39 36 5 25 Source; Erzan et al. (1989). Note; The data on both tariffs and NTBs reported here are weighted averages. ‘Includes tariffs and paratariffs. bMeasures as a percentage of import lines covered by NTBs. the degree of competitiveness of exports. s Paradoxically, the policies that were supposed to reduce Latin America’s dependency on the worldwide business cycle ended up creating a highly vulnerable economic structure, where the sources of foreign exchange were concentrated on a few products intensive in natural resources (Fishlow 1985). The trade liberalization programs implemented during the last decade have two basic policy objectives. First, these reforms have sought to reduce the antiexport bias of commercial policies. It is expected that, once negative effective rates of protection and overvalued exchange rates are eliminated, exports will not only grow rapidly but will also become more diversified. The second fundamental objective of trade reforms is to transform international trade into â€Å"the engine of growth. † The new literature on â€Å"endogenous† growth has stressed the role of openness in explaining cross-country growth differentials over the long run. For example, Romer (1989) has argued that more open economics can take advantage of larger markets, increasing their degree of efficiency and their rate of growth. Other authors, including Grossman and Helpman (1991a, 1991b) and Edwards (1992b), have recently argued that openness affects the speed and efficiency with which small countries can absorb technological innovations developed in the industrial world. This idea, based on an insigh t first proposed by John Stuart Mill, implies that countries 5. Krueger (1978) documents these developments for a large number of countries. DiazAlejandro (1975, 1978) argues that real exchange rate overvaluation was one of the most negative economic developments in Argentina. For an analysis of a large number of Latin countries, see Bianchi (1988). For an early discussion on the Chilean case, see Behrman (1976). Since 1967 Colombia pursued a crawling-peg exchange rate policy explicitly aimed at avoiding overvaluation. The overall degree of protection, however, remained high (Garcia-Garcia 1991). 6. Traditional neoclassical growth models concentrated on the effect of national economic policies on the level of income per capita. The new generation of endogenous growth models have shifted attention to the relationship between different policies and the rate of growth of the economy. See Lucas (1988). 16 Sebastian Edwards with a lower level of trade distortions will experience faster total factor productivity growth and thus will grow faster than countries that inhibit international competition. ’ The purpose of this paper is to explore, from different perspectives, the relationship between trade liberalization and growth. The analysis deals with both long-mn and transitional issues. I first concentrate (section 1. 2) on the longrun relation between trade regimes and productivity growth. I use a broad fiftyfour-country data set to investigate the way in which trade distortions have affected productivity growth in the 1971-82 period. The results obtained support the view that more open economies tend to have faster rates of productivity growth than countries that have distorted international trade. In sections 1. 3 and 1. 4, I discuss some of the most important problems faced during the transition by ountries engaged in trade liberalization programs. While in section 1. 3 I focus on general transitional issues at an analytical level, in section 1. 4 I deal with the recent Latin American trade reforms. I first document the extent of trade liberalization. Second, I investigate whether, as predicted by some authors, these reforms have been associated with faster productivity growth. In section 1. 5 I discuss the recent behavior of real exchange rates in Latin America , emphasizing the way in which they are likely to affect the sustainability of the trade reforms. Finally, in section 1. 6 I present a summary of the paper, and I discuss some of the unresolved issues related to Latin American trade policy. 1. 2 Openness and Growth: Cross-Country Evidence 1. 2. 1 A Simple Model A number of researchers have found that factor accumulation explains between one-half and two-thirds of long-run growth (Fischer 1988). The large unexplained residual in growth accounting exercises has been attributed to â€Å"technological progress† or â€Å"productivity gains. From a policy perspective a key question is what determines these productivity improvements. In particular, it is important to understand whether national domestic policies-including financial and trade policies-can affect the pace of productivity growth. If this is the case, policymakers will have additional degrees of freedom to pursue those avenues that will enhance long-run performance. The recent interest on â€Å"endogenous† growth models has generated a revival in applied rese arch on the determinants of growth. Some authors have empha- 7. In chapter 17 of his Principles ofPolitical Economy (1848) Mill said that â€Å"a country that produces for a larger market than its own can introduce a more extended division of labor, can make greater use of machinery, and is more likely to make inventions and improvements in the process of production. † Arthur Lewis makes a similar proposition in his 1955 classic book on economic growth. See Tybout (1992) for a survey on the early empirical work in this area. 17 Trade Policy, Exchange Rates, and Growth sized the role of openness in determining the pace at which countries can absorb technological progress originating in the rest of the world. Edwards (1992), for example, has recently assumed that there are two sources of total factor productivity (TFP) growth: (1) a purely domestic source stemming from local technological improvements (innovation); and (2) a foreign source related to the absorption of inventions generated in other nations (imitation). More specifically, assu me that the country’s ability to appropriate world technical innovations (or to imitate) depends on two factors: positively on the degree of openness of the economy and, also positively, on the gap between the country’s level of TFP and â€Å"the world’s’’stock of TFP. The first channel is the â€Å"openness effect† discussed by Lewis (1955): more open countries have an advantage in absorbing new ideas generated in the rest of the world. In this context â€Å"more open† should be interpreted as refemng to a less distorted foreign trade sector. The second channel is a â€Å"catch-up† effect, common to growth models based on â€Å"convergence† notions. If the aggregate production function is defined as y , = Af(K,,L,),then TFP is A, = yj’. ), and total productivity growth is (AIA). The role of the two sources of technical progress discussed above-innovation and immitation-can be captured by the following simple expression: A = (Y + [pw + ? A ) , ( T ] where and y are positive parameters, A* is the level of world’s (appropriable) TFP, and w is the rate of growth of world’s TFP (that is, A(* = Aie†Ã¢â‚¬Ëœ). P is a parameter between zero and one that measures the country’s ability to absorb productivity improvements originating from the rest of the world, and is assumed to be a negative function of the level of trade distortions in the economy (6). where 6 is an index of trade distortions that takes a higher value when international trade, both in imports and/or exports, becomes more distorted. Parameter a is the basic rate of domestic productivity growth or innovation, which for simplicity is assumed to be exogenous. On the other hand, (y(A* – A)/A) is the â€Å"catch-up† term that says that domestic productivity growth will be faster in nations whose stock of knowledge lags further behind the world’s accumulated stock of appropriable k n ~ w l e d g e . ~ In this setting the path through time of domestic TFP will be given byâ€Å"’ 8. Grossman and Helpman (1991a) provide a series of elegant models along these lines. 9. I assume that not all inventions generated in the world can be freely appropriated. In that sense, A* could be interpreted as the accumulated stock of innovations in the more advanced countries that have spilled over to the rest of the world. 10. This, of course, is the solution to differential equation (1). 18 Sebastian Edwards (3) It follows from equation (3) that the long-run rate of growth of domestic TFP will depend on whether (y – a – pw) 5 0. If (y – a – pw) 0, in the steady-state TFP will grow at the rate of worlds productivity w. This means that the level of domestic TFP (and of GDP) will be a function of the degree of trade intervention, with higher trade distortions resulting in a lower level of real income. A key implication of this result is that countries that engage in trade liberalization programs will be characterized, during the transition between two steady states, by higher rates of productivity growth and thus by faster rates of GDP growth. A second case appears when (y – a – pw) 0. Long-run TFP growth (AIA)will depend on how large the world’s rate of growth of TFP (w) is relative to the domestic rate of productivity improvement. If w (a-S)/(l – p), domestic TFP will grow in the steady state at the world rate w. If w ( a – y ) / (1 – p), and (y – LY – Po) 0, however, the long-run equilibrium rate of TFP growth will be equal to ( a + p w – S)ll and will depend negatively on 6, the country’s level of trade distortions. That is, in this case more open countries (those with low 6) will grow faster during steady-state equilibrium. This is because in this case the domestic source of technological inventions is strong enough to drive, even in the steady state, the aggregate rate of technological innovations. 2 The model developed above suggests that TFP growth will depend on the degree of trade distortions in the economy, and on a catch-up term that measures the gap between the country’s and â€Å"the world’s’’ level of productivity. I constructed a cross-country data set to test these implications of the model. More specifically, I esti mated equations of the following type: (4) P = b, + bl6, , + b2g, + C a , xzn + Pâ€Å", where p, is the average rate of growth of TFP in country n; 6,, is, as before, an index of trade distortions; g, is the catch-up term; the x, are other possible determinants of TFP growth; and JA is an error term. Recently, Barro (1991), Edwards (1992), and Roubini and Sala-i-Martin (1992), among others, have suggested that, in addition to the degree of openness, productivity growth will also be affected by the following factors: (1) human capital, usually measured by schooling attainment; (2) the importance of government in the economy measured by schooling attainment; (2) the im11. Of course, in this case, (a + Po – 6 ) w. 12. In Grossman and Helpman’s (1991a) micromodel of technological progress, it is also possible that, under some circumstances, more open economics will exhibit higher long-run growth. 9 Trade Policy, Exchange Rates, and Growth portance of government in the economy measured by the ratio of government expenditure to GDP; (3) the degree of political instability; and (4) the inflation rate. 13 In the estimation of equation (4) reported below, I have incorporated these variables as possible determinants of productivity growth. 1. 2. 2 Data Definitions and Source s TFP growth. A problem faced in the estimation of equations of the type of (4) refers to the measurement of TFP growth. In particular, it is difficult to obtain long time series of capital stocks for a large number of countries. In this paper I deal with this problem by constmcting three measures of TFP growth from the residuals of country-specific GDP growth regressions. These indices are denoted TFP1, TFT2, and TFP3. The specific methodology used in constructing each of these indices is presented in appendix A. I4 Trade distortions. Traditionally, studies that have investigated the relationship between trade policy and economic performance have had difficulties measuring the extent of trade distortions. In this paper I tackle this problem by using two variables. In most of the basic estimates I use the ratio of total revenue from taxes on foreign trade-import tariffs plus export taxes-over total trade as a proxy for trade distortions. This variable is measured as an average for 1971-82. Since this variable, denoted TRADETAX, measures the â€Å"true† extent of trade distortions with error, in the estimation of the TFP growth equation I also use an instrumental variable technique that tries to correct for rneasurement error. The second proxy I use is the 1971-82 average trade dependency ratio-imports plus exports as a percentage of GDP. These two indices of trade distortions were constructed with raw data obtained from the International Monetary Fund (IMF). Catch-up term. Following the recent literature on endogenous growth (Barro 1991; Edwards 1992), I use initial GDP per capita-for year 1971 in this case-as a measure of the gap between a particular country’s level of productivity and that of the world. This variable is denoted as GDP71; the data were obtained from Summers and Heston (1988). The coefficient of this variable is expected to be negative, indicating that countries with a lower initial per capita GDP have more â€Å"catching up† to do and thus will grow aster. Human capital. I use two indices. The first one is the attainment of secondary education in 1981. The second one is the increase in secondary education coverage between 1961 and 1981. When alternative indices, such as secondary and higher education, were used, the results obtained were not altered. The 13. See, for example, Barro (19 91). 14. Naturally, these indices are at best proxies for TFF’ growth. formally, we can think that they measure TFP growth with error. To the extent that this measurement error term is additive, it can be collapsed into disturbance p in equation (4). 20 Sebastian Edwards data were obtained from the World Bank’s World Development Report. The coefficient of this variable is expected to be positive. Role of government. This index is defined as the share of government over GDP and is taken from Summers and Heston ( 1 988). Barro (1991) has argued that this coefficient should be negative, capturing the effect that greater government activities tend, in general, to crowd out the private sector. Political instability. This variable is defined as the average perceived probability of government change and is obtained from Cukierman, Edwards, and Tabellini ( 1992). 5 Its coefficient in the TFP growth equations is expected to be negative, reflecting the fact that in politically unstable situations economic agents do not devote their full energies to pursue economic objectives. Injation tax. This variable is defined as the average collection of inflation tax for 1971-82 and is computed as Tm, where T is the rate of inflation and m is the ratio of MI to GDP. The coefficient of this variable is expected to be negative, reflecting the effects of higher inflation on uncertainty and economic activity. . 2. 3 Econometric Results Tables 1. 2 and 1. 3 summarize the results obtained from the estimation of several versions of equation (4). Table 1. 2 contains weighted least squares estimates-with population in 1971 as weight-for all three measures of TFP growth;lb table 1. 3 presents instrumental variables regressions for the TFPl definition of productivity growth. (When the other two indices were used, the results were not altered significantly. ) As can be seen from these tables, the results are highly satisfactory. Almost every coefficient has the expected sign and is significant at conventional levels. Particularly important for the discussion pursued in this paper is that in every regression the proxies for trade distortions and openness are highly significant. Moreover, the computation of standardized beta coefficients indicate that trade impediments are the second most important explanatory variable of TFP growth, after the catch-up term. † As pointed out above, both the TRADETAX coefficient and the trade dependency ratio are imperfect proxies of trade distortions. In particular, they do not capture directly the role of quantitative restrictions on trade. In order to deal with this measurement error problem I estimated instrumental-variables ver15. These authors computed this index from a probit analysis on government change using pooled data for 1948-8 1. 16. In simple ordinary estimates, least squares heteroskedasticity was detected. Barro (1911) and Edwards (1992). among others, also used weighted least squares in equations of this type. 17. In equation (4. 1) the standardized beta coefficient of TRADETAX is -0. 5; that of GDWl is -0. 78. 21 Trade Policy, Exchange Rates, and Growth Table 1. 2 Total Factor Productivity Growth Regressions: Cross-Country Results (weighted least squares) Eq. 4. 1 Eq. 4. 2 Eq. 4. 3 Eq. 4. 4 Eq. 4. 5 Eq. 4. 6 Definition of TFP growth† Constant GDP7 1 TRADETAX Trade dependency Government Education TFP 1 -0. 013 (- 1. 041) – 1. 9E-06 (-3. 433) -0. 076 (-3,033) TFP 1 -0. 012 (- 1. 326) -7. 3E-07 (- 1. 92 9) – TFP2 -0. 018 (-1,418) -1. 8E-06 (-2. 960) -0. 074 (-2. 620) – TFP2 -0. 005 (-0. 439) -1. lE-06 (-2. 451) – TFP3 0. 074 (6. 163) -3. E-06 ( – 3. 673) -0. 199 (-4. 902) TFP3 0. 030 (1. 772) -1. 5E-06 ( -2. 187) – -6. lE-04 ( – 2. 429) I . 19E-04 (1. 536) 0. 017 (3. 147) -4. 2E-04 (- 1. 708) 1 S6E-07 (2. 130) – -6. 5E-04 (-2. 292) 5. 90E-05 (0. 675) – 0. 025 (3. 9 10) -4. 1E-04 (- 1. 433) 1. 30E-04 (1. 560) – – 2. OE-03 (-5. 157) – 0. 025 (2. 480) -2. OE-03 (-4. 827) 1. 20E-04 (0. 895) A Education Political instability Inflation tax – 1. 60E-04 (1. 453) -0. 014 ( – 1. 607) – – -0. 017 ( -2. 1 17) 0. 400 54 R’ N -0. 017 (-2. 480) 8. 3E-05 (0. 540) 0. 35 1 52 -0. 026 (-2. 846) 0. 492 54 – -0. 43 (-5. 253) 8. 8E-05 (0. 487) 0. 487 52 -0. 023 ( – 1. 802) 0. 598 52 -2. 7E-05 (-0. 921) 0. 416 52 Notes: t-statistics in parentheses. N is the number of observations; R2 is the coefficient of determination. See appendix B for a list of the countries considered in this regression. â€Å"or exact explanations on how TFPI, TFP2, and TFP3 were constructed, see appendix A. sions of some of these equations. In reestimating equation (4) I used the trade penetration ratio of imports to GDP as instruments for TRADETAX. I8 The results obtained are presented in table 1. 3. As can be seen, they confirm those discussed previously and provide additional support to the view that, after controlling for other factors, countries with more open and less distorted foreign trade sectors have tended to exhibit a faster rate of growth of TFP, over the long run, than those nations with a more distorted external sector. The results presented in tables 1. 2 and 1. 3, however, provide no information on the transition from a closed economy to one that is more open and integrated to the rest of the world. I turn to those issues in sections 1. 3-1. 5. 18. The instruments themselves don’t have to be measured free of error. Of course, the use of instrumental variables is not the only way of dealing with measurement error. In Edwards (1992) I use reversed regressions to construct intervals for a different proxy of openness in standard growth equations for a group of thirty countries. 22 Sebastian Edwards Table 1. 3 Total Factor Productivity Growth Regressions: Instrumental Variables (dependent variable TFPl) Eq. 4. 7 Constant GDF’7 1 Eq. 4. 8 TRADETAX Government Education Political instability Inflation tax R 2 N 0. 036 (1. 689) -3. 4E- 06 (-2. 766) -0. 171 (-2. 32) -4. 9E-04 (- 1. 708) 3. 00E -05 (2. 130) -0. 029 (-2. 333) -8. 1E- 05 (-0. 776) 0. 248 52 0. 050 (2. 037) -3. 7E-06 (-2. 677) -0. 185 (-2. 314) -5. 5E-04 (-2. 292) 4. 808-05 (0. 675) -0. 040 (-2. 823) -2. 58-05 (-0. 939) 0. 392 52 Notes: t-statistics in parentheses. N is the number of observations; RZis the coefficient of determination. The following instruments were used a constant, GDP71, government, education, trade dependency, imports/GDP ratio, political instability, and inflation tax. These equations were weighted by population in 1971. 1. 3 Policy Issues during a Trade Liberalization Transition The analysis presented in section 1. 2 provides support for the hypothesis that in the long run more open economies have experienced faster productivity growth than countries that distort international trade. However, as the former communist countries have recently found out, designing a strategy for moving from a controlled to a liberalized economy is not an easy task. Two fundamental problems have to be addressed in the transition toward freer trade. First, it is important to determine what is the adequate speed of reform. For a long time analysts argued for gradual iberalization programs (Little, Scitovsky, and Scott 1970; Michaely 1985). According to these authors gradual reforms would give firms time for restructuring their productive processes and thus would result in low dislocation costs in the form of unemployment and bankruptcies. These reduced adjustment costs would, in turn, provide the needed political support for the liberalization program. Recently, however, the gradua list position has been under attack. There is increasing agreement that slower reforms tend to lack credibility, inhibiting firms from actually engaging in serious restructuring. Moreover, the experience of Argentina in the 1970s has shown that a gradual (and preannounced) reform allows those firms negatively affected by it to (successfully) lobby against the reduction in tariffs. According to this line of reasoning, faster reforms are more credible and thus tend to be sustained through time (Stockman 1982). 23 Trade Policy, Exchange Rates, and Growth The thinking on the speed of reform has also been influenced by recent empirical work on the short-run unemployment consequences of trade liberalization. Contrary to traditional conventional wisdom, a study directed by Michaely, Choski, and Papageorgiou (1991) on liberalization episodes in nineteen countries strongly suggests that, even in the short run, the costs of reform can be small. Although contracting industries will release workers, those expanding sectors positively affected by the reform process will tend to create a large number of employment positions. The Michaely, Choski and Papageorgiou study shows that in sustainable and successful reforms the net effectthat is, the effect that nets out contracting and expanding sectors-on shortrun employment has been negligible. A key question, then, is what determines a successful reform? Most historical studies on the subject have shown that maintaining a â€Å"competitive† real exchange rate during the transition is one of the most, if not the most, important determinants of successful trade reforms. A competitive, that is depreciated, real exchange rate encourages exports, and helps maintain external equilibrium at the time the reduction in tariffs has made imports cheaper. The second problem that has to be addressed when designing a liberalization strategy refers to the sequencing of reform (Edwards 1984). This issue was first addressed in the 1980s in discussions dealing with the Southern Cone experiences, and emphasized the macroeconomic consequences of alternative sequences. It was generally agreed that resolving the fiscal imbalance and attaining some degree of macroeconomic reform should constitute the first stage of a structural reform. On subsequent steps, most agreed that the trade liberalization reform should precede the liberalization of the capital account, and that financial reform should be implemented simultaneously with trade reform. The behavior of the real exchange rate is at the heart of this policy prescription. The central issue is that liberalizing the capital account would, under most conditions, result in large capital inflows and in an appreciation of the real exchange rate (McKinnon 1982; Edwards 1984; Harberger 1985). The problem with an appreciation of the real exchange rate is that it will send the â€Å"wrong† signal to the real sector, frustrating the reallocation of resources called for by the trade reform. The effects of this real exchange rate appreciation will be particularly serious if, as argued by Edwards (1984), the transitional period is characterized by â€Å"abnormally† high capital inflows, and the economy is characterized by high adjustment costs. If the opening of the capital account is postponed, however, the real sector will be able to adjust, and the new allocation of resources will be consolidated. According to this view, only at this time should the capital account be liberalized. More recent discussions on the sequencing of reform have expanded the analysis and have included other markets. An increasing number of authors have argued that reform of the labor market-particularly removal of distortions that discourage labor mobility-should precede trade reform, as well as relaxation of capital controls. It is even possible that liberalization of trade 24 Sebastian Edwards in the presence of highly distorted labor markets will be counterproductive, generating overall welfare losses in the country in question (Edwards 1992b). As the preceding discussion has suggested, there is little doubt that the behavior of the real exchange rate is a key element during a trade liberalization transition. According to traditional manuals on â€Å"how to liberalize,† a large devaluation should constitute the first step in a trade reform profess. Bhagwati (1978) and Krueger (1978) have pointed out that in the presence of quotas and import licenses a (real) exchange rate depreciation will reduce the rents received by importers, shifting relative prices in favor of export-oriented activities and thus reducing the extent of the antiexport bias. † Maintaining a depreciated and competitive real exchange rate during a trade liberalization process is also important in order to avoid an explosion in imports growth and a balance-of-payments crisis. Under most circumstances a reduction in the extent of protection will tend to generate a rapid and immediate surge in imports. On the other hand, the expansion of exports usually takes some time. Consequently, there is a danger that a trade liberalization reform will generate a large trade balance disequilibrium in the short run. This will not happen, however, if there is a depreciated real exchange rate that encourages exports and helps maintain imports in check. However, many countries have historically failed to sustain a depreciated real exchange rate during the transition. This failure has mainly been the result of expansionary macroeconomic policies, and has resulted in speculation, international reserves losses, and, in many cases, the reversal of the reform effort. In the conclusions to the massive World Bank project on trade reform, Michaely, Choski, and Papageorgiou (1991) succinctly summarize the key role of the real exchange rate in determining the success of liberalization programs: â€Å"The long term performance of the real exchange rate clearly differentiates ‘liberalizers’ from ‘nonliberalizers†Ã¢â‚¬â„¢ (1 19). Edwards (1989) used data on thirty-nine exchange rate crises and found that in almost every case real exchange rate overvaluation gave rise to drastic increases in the degree of protectionism. 1. 4 Recent Trade Liberalization Reforms in Latin America During the last few years trade liberalization reforms have swept through Latin America; every country in the region has today a significantly more open trade sector than in the early and mid-1980s. The pioneer in the iberalization process was Chile, which between 1975 and 1979 unilaterally eliminated quantitative restrictions and reduced import tariffs to a uniform level of 10%. After a brief interlude with higher tariffs (at the uniform level of 30%) Chile currently has a uniform tariff of l l % and no licenses or other forms of quantitative controls. Uruguay implemented a reform in 1978 and, after a brief reversal, pushed forward once again in 1986. Bolivia and Mexico embarked on their 19. See Krueger (1978, 1981) and Michaely, Choski , and Papageorgiou (1991). 25 Trade Policy, Exchange Rates, and Growth eforms in 1985-86, followed by a series of countries in the late 1980s. At the current time a number of countries, including Brazil, are proceeding steadily with scheduled rounds of tariff reduction and the dismantling of quantitative restrictions. However, it is still unclear whether all these reforms will be sustained, becoming a permanent feature of the Latin economies, or whether some of them will be reversed. Developments in Argentina in October 1992 indeed suggest that in some countries higher tariffs may be implemented, once again, in the near future. The Latin American trade reforms have been characterized by four basic elements: (1) the reduction of the coverage of nontariff barriers (NTBs), including quotas and prohibitions; (2) the reduction of the average level of import tariffs; (3) the reduction of the degree of dispersion of the tariff structure; and (4) the reduction or elimination of export taxes. In this section I document the extent of the recent liberalization programs, and I provide a preliminary evaluation of the effects of these reforms on productivity growth and exports expansion. 1. 4. 1 The Policies Nontariy Barriers A fundamental component of the trade reform programs has been the elimination, or at least the severe reduction, of NTBs coverage. During the early and mid-1980s in some countries, such as Colombia and Peru, more than 50% of import positions were subject to licenses or outright prohibitions. In Mexico NTBs coverage reached almost 100% of import categories in 1984, as was the case in most of Central America in 1984 (table 1. 1). Table 1. 4 contains data on protectionism in 1985-87 and 1991-92, and shows that in almost every country the coverage of NTBs has been dramatically reduced. † In a number of cases NTBs have been fully eliminated. The process through which NTBs have been eased has varied from country to country. In some cases, such as Honduras, they were initially replaced by (quasi) equivalent import tariffs and then slowly phased out. In other countries, like Chile, NTBs were rapidly eliminated without a compensating hike in tariffs. As table 1. 4 shows, in spite of the progress experienced in the last few years, significant NTBs coverage remains in a number of countries. In most cases these NTBs correspond to agricultural products. For example, in Mexico approximately 60%of the agriculture’s sector tariff positions were subject to im20. These are unweighted averages and thus are not comparable to those presented in table 1. 1. There has been a long discussion in applied international trade theory on whether tariffs and NTBs should be measured as weighted or unweighted averages. Both views have some merits and some limitations. An obvious problem of the weighted average approach (where the weights are the import shares) is that more restrictive distortions will tend to have a very small weight. In the extreme case, prohibitive tariffs that effectively ban the importation of a particular item will have a zero weight! Corden (1969)provides an early and still highly relevant discussion on these issues. Table 1. 4 The Opening of Latin America: Selected Countries Tariff Protection (tariffs plus paratariffs, unweighted averages) Coverage of Nontariff Barriers (unweighted averages) Range of Import Tariffs 1980s Min. Max. (%o) Current Min. Year 1991 1991 1992 1992 1991 1992 1991 1992 1992 1990 1991 1992 1992 1991 Max. (%) Country Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador Guatemala Mexico Nicaragua Paraguay Peru Uruguay Venezuela 1985 28. 0 20. 0 80. 0 36. 0 83. 0 92. 0 50. 0 50. 0 34. 0 54. 0 71. 7 64. 0 32. 0 30. 0 1991-92 15. 0 8. 0 21. 1 11. 0 6. 7 16. 0 18. 0 19. 0 4. 0 n. a. 16. 0 15. 0 12. 0 17. 0 1985-87 31. 9 25. 0 35. 3 10. 1 73. 2 0. 8 59. 3 7. 4 12. 7 27. 8 9. 9 53. 4 14. 1 44. 1 1991-92 8. 0 0. 0 10. 0 0. 0 1. o 0. 0 n. a. 6. 0 20. 0 n. a. 0. 0 0. 0 Year 1987 1985 1987 1987 1986 1986 1986 1986 1985 1986 I984 1987 1986 1987 (%I 0. 0 (%I 0. 0 5. 0 0. 0 0. 0 0. 0 0. 0 1. o 0. 0 1 . o 0. 1. O 0. 0 0. 0 10. 0 0. 0 5. 0 0. 0 ~ 55. 0 20. 0 105. O 20. 0 200. 0 100. 0 290. 0 100. 0 100. 0 100. 0 44. 0 120. 0 45. 0 135. 0 0. 0 11. 0 0. 0 5. 0 2. 0 5. O 0. 0 0. 0 3. 0 5. 0 10. 0 0. 0 22. 0 10. 0 65. 0 11. 0 15. 0 20. 0 40. 0 20. 0 20. 0 10. 0 86. 0 15. 0 30. 0 50. 0 Source: World Bank, International Economics Department database; UNCTAD (1987); Erzan et al. (1989). 27 Trade Policy, E xchange Rates, and Growth port licenses in mid-1992. In fact, an important feature of the region’s liberalization programs is that they have proceeded much more slowly in agriculture than in industry. This has largely been the result of the authorities’ desire to isolate agriculture from fluctuations in world prices and of unfair trade practices by foreign countries. 2‘However, as a recent study by Valdes has shown (1992), this approach based on NTBs entails serious efficiency costs. Slowly, however, more and more countries are addressing these concerns by replacing these quantitative restrictions by variable levies (see Valdes 1992). TarifSDispersion The import substitution development strategy pursued for decades in Latin America created highly dispersed protective structures. According to the World Development Report (1987), Brazil, Chile, and Colombia had some of the broadest ranges of effective rates of protection in the world during the 1960s. Also, Heitger (1987) shows that during the 1960s Chile had the highest rate of tariff dispersion in the world-with a standard deviation of 634%closely followed by Colombia and Uruguay. Cardoso and Helwege (1992) have pointed out that highly dispersed protective structures generate high welfare costs, by increasing uncertainty and negatively affecting the investment process. These highly dispersed tariffs and NTBs were the result of decades of lobbying by different sectors to obtain preferential treatment. As the relative power of the different lobbies changed, so did their tariff concessions and the protective landscape. An important goal of the Latin trade reforms has been the reduction of the degree of dispersion of import tariffs. Table 1. 4 contains data on the tariff range for a group of countries for two points in time-mid-1980s (1985-87) and 1991-92-and clearly documents the fact that the reforms have indeed reduced the degree of tariff dispersion. In many cases reducing tariff dispersion has meant increasing tariffs on goods that were originally exempted from import duties. In fact, table 1. 4 shows that in many countries the minimum tariff was 0% in the mid-1980s. Generally, zero tariffs have been applied to intermediate inputs used in the manufacturing process. 22 From a political economy perspective the process of raising some tariffs, while maintaining a proliberalization rhetoric, has not al21. The issue of protecting local producers from dumping is important in the design of the new liberalized trade regimes. The crucial problem is to enact legislation that is able to distinguish true cases of unfair trade practices from simple cases of increased foreign competition stemming from more efficient productive processes. At this time the approval of a dynamic and flexible antidumping legislation should be high in the region’s agenda for legal and institutional reform. 22. This system with very low (or zero) tariffs on intermediate inputs and high tariffs on final goods generated very high rates of effective protection or protection to domestic value added. In recent years a number of authors have argued that the use of effective protection is misleading. The reason for this is that effective rates of protection (ERPs) are unable to provide much information on the general equilibrium consequences of tariff changes (Dixit 1986). In spite of this, ERP measures are still useful, since they provide an indication on the degree of â€Å"inefficiency† a country is willing to accept for a particular sector. 28 Sebastian Edwards ways been easy. Those sectors that had traditionally benefited from the exemptions suddenly saw their privileged situation come to an end and tried to oppose them strongly. An important question addressed by policymakers throughout the region is, by how much should tariff dispersion be reduced? Should the reforms implement a uniform tariff, or is some (small) degree of dispersion desirable? From a strict welfare perspective uniform tariffs are only advisable under very special cases. However, they have a political economy appeal. More specifically, a uniform tariff system is very transparent, making it difficult for the authorities to grant special treatments to particular firms or sectors (Harberger 1990). Average Tariffs Reducing the average degree of protections is, perhaps, the fundamental policy goal of trade liberalization reforms. Traditional policy manuals on the subject suggest that once the exchange rate has been devalued and quantitative restrictions have been reduced or eliminated, tariffs should be slashed in a way such that both their range and average is reduced. 23Table 1. 4 contains data on average total tariffs (tariffs plus paratariffs) in 1985 and 1991-92. As can be seen, the extent of tariff reduction has been significant in almost every country. Even those nations that have acted somewhat cautiously in the reform front, such as Brazil and Ecuador, have experienced important cuts in import tariffs, allowing a more competitive environment and reducing the degree of antiexport bias of the trade regime. Countries that have embarked on trade liberalization in recent years have moved much faster than those nations that decided to open up earlier. There has been a clear change in what is perceived to be our abrupt and rapid removal of imports impediments. What only fifteen years ago were seen as brutally fast reforms are now looked at as mild and gradual liberalizations. When Chile initiated the trade reform in 1975, most analysts thought that the announced tariff reduction from an average of 52% to 10% in four and a half years was an extremely aggressive move that would cause major dislocations, including large increases in unemployment. The view on the speed of reform has become very different in the early 1990s, when an increasing number of countries have been opening up their external sectors very rapidly. For instance, Colombia slashed (total) import tariffs by 65% in one yea reducing them from 34% in 1990 to 12% in 1991. This fast approach to liberalization has also been followed by Argentina and Nicaragua, who eliminated quantitative restrictions in one bold move and slashed import tariffs from an average of 110% in 1990 to 15% in March of 1992. As suggested previously, the speed of trade reforms has been directly related to the belief that faster reforms are more credible and thus more likely to be sustained through time. 23. However, â€Å"tariffs† is sometimes a misleading term, since many countries have traditionally relied on both import duties (that is, tariffs proper) and import duty surcharges, or paratariffs. 9 Trade Policy, Exchange Rates, and Growth Exchange Rate Policy In the vast majority of the countries the first step in the trade reform process was the implementation of large (nominal) devaluations. In many cases this measure represented a unification of the exchange rate market. Most countries implemented large exchange rate adjustments as early as 1982 in order to face the u rgencies of the adjustment process. The purpose of these policies was to generate real exchange rate devaluations, as a way to reduce the degree of antiexport bias of incentives systems. Many countries adopted crawling-peg regimes to protect the real exchange rate from the effects of inflation. Although these systems helped avoid the erosion of competitiveness, they also added fuel to the inflationary process. They introduced a certain degree of inflationary inertia, and have contributed in many countries to the slow reduction of the rate of inflation. More recently, a number of countries have begun to use the exchange rate as an anchor in order to bring down inflation. This has resulted in the slowing down of the rate of crawl below inflation differentials or, in some cases, in the fixing of the exchange rate, as in Argentina. Table 1. 5 contains data on real exchange rates for a group of Latin American countries for 1970, 1980, 1987, and 1991. As is customary in Latin America, an increase in the index represents a real exchange rate depreciation and thus an improvement in the degree of competitiveness. As can be seen between 1980 and 1987 almost every country in the sample experienced very large real depreciations. In many cases, however, these have been partially reversed in the last few years. This has been the consequence of a combination of factors, including the inflow of large volumes of foreign capital into these countries since 1990, and the use of the exchange rate as the cornerstone of the disinflation policies. This issue is addressed in greater detail in section 1. 5. Table 1. 5 Real Exchange Rates in Selected Latin American Countries (1985 = 100) Country Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador Mexico Paraguay Peru Uruguay Venezuela 1970 78. 98. 3 51. 9 29. 4 86. 1 58. 4 118. 6 86. 1 104. 6 59. 3 73. 0 80. 3 1980 35. 8 88. 1 70. 7 55. 3 79. 2 65. 8 105. 6 83. 3 74. 4 77. 1 49. 7 84. 2 1987 80. 7 107. 9 78. 0 94. 8 115. 9 94. 9 153. 3 123. 9 111. 4 46. I 77. 2 134. 8 1991 44. 0 112. 1 51. 4 83. 0 126. 3 97. 2 173. 7 77. 0 114. 3 23. 1 62. 0 132. 8 Source: International Financial Statistics, International Monetary Fund. 30 Sebastian Edwards 1. 4. 2 Adjustment and Pr oductivity The relaxation of trade impediments has had a fundamental impact on the region’s economies. Suddenly, Latin America’s industry, which to a large extent had developed and grown behind protective walls, was forced to compete. Many firms have not been able to survive this shock and have become bankrupt. Others, however, have faced the challenge of lower protection by embarking on major restructuring and by increasing their level of productivity. The ability (and willingness) of firms to implement significant adjustment depends on two main factors: the degree of credibility of the reform, and the level of distortions in the labor market. If entrepreneurs believe that the reform will not persist through time, there will be no incentives to incur the costs of adjusting the product mix and of increasing the degree of productive efficiency. In fact, if the reform is perceived as temporary, the optimal behavior is not to adjust; instead it is profitable to speculate through the accumulation of imported durable goods. This was, as Rodriguez (1982) has documented, the case in Argentina during the failed Martinez de Hoz reforms. 24 Labor market conditions affect the adjustment process in several ways. First, in order to survive, firms facing stiffer foreign competition have to increase labor productivity, which in many cases means reducing the number of workers. This reduction in employment will tend to be offset by new hires in expanding firms in the sectors with comparative advantage. Many times, however, existing labor market regulations are extremely cumbersome, inhibiting the adjustment process and forcing out of business firms that are structurally viable in the long run. Additionally, labor market distortions negatively affect the investment process, including direct foreign investment (see CoxEdwards 1992). In their studies on the interaction between labor markets and structural reforms, Krueger (1980) and Michaely, Choski, and Papageorgiou (1991) found that most successful trade reforms have indeed resulted in major increases in labor productivity. This has been the case in some of the early Latin American reforms for which there are data. For example, according to Edwards and CoxEdwards (1991) labor productivity in the Chilean manufacturing sector increased at an average annual rate of 13. 4% between 1978 and 1981. On the other hand, the available evidence suggests that the increases in labor productivity in the Mexican manufacturing sector in the postreform period have been moderate. According to World Bank (1992) data, labor productivity in Mexico barely increased between 1988 and 1991-the index went from 92. 7 to 105. 1. In a recent study Ibarra (1992) has calculated that labor productivity in the Mexican manufacturing sector-excluding the maquiladora sector-has increased at an average rate of 2. 3% per annum. 24. See Corbo, Condon, and de Melo (1985) for a detailed microeconomic account of the process of adjustment in a large group of Chilean manufacturing firms. 31 Trade Policy, Exchange Rates, and Growth As discussed in section 1. 2, recent models of growth have suggested that countries that are more open to the rest of the world will exhibit a faster rate of technological improvement. From an empirical point of view this means that countries that open up their external sectors and engage in trade liberalization reforms, will experience an increase in TFP growth relative to the prereform period. Table 1. 6 contains data on the change in TFP growth in the period following the implementation of trade liberalization reform in six Latin countries. 25 As can be seen, Chile and Costa Rica, two of the earlier reformers, experienced very large increases in T I T growth in the postreform period. The results for Chile coincide with those obtained by Edwards (1983, who found that in the late 1970s, after the trade reforms had been completed, TFP growth was approximately three times higher than the historical average. 2hAlthough the outcome has been less spectacular, Argentina and Uruguay still exhibit substantial improvements in productivity growth in the period following the opening up. Bolivia, on the other hand, presents a flat profile of TFP growth. Sturzenegger (1992) argues that the very slow improvement in Bolivian productivity growth has been, to a large extent, the result of negative terms of trade shocks and, in particular of the collapse of the tin market. Perhaps the most interesting and puzzling result in table 1. 6 is the slight decline in aggregate TFP growth in Mexico after the reforms. Martin (1992) shows that this finding is robust to alternative methods of measuring TFP growth, including different procedures for correcting for capacity utilization. Also, Harberger (1992) finds a slowing down of TFP growth in Mexico in 1986-90 relative to 1975-82. However, the aggregate nature of the TFP growth data in table 1. 6 tends to obscure the actual sectoral response to the trade reform. According to new theories on endogenous growth, faster productivity will be observed in those sectors where protectionism has been reduced, and not in those still subject to trade bamers or other forms of regulations. A distinctive characteristic of the Mexican reform is that, contrary to the Chilean case, it has been uneven. In particular, while most of the manufacturing sector-with the exception of automobiles-has experienced a significant reduction in protection, agriculture continues to be subject to relatively high tariffs and substantial NTBs. Moreover, until very recently the Mexican land tenure system was subject to substantial distortions that, among other things, 25. The original TFP growth data comes from Martin’s (1992) study on sources of growth in Latin America. The countries in table 1. 6 are those that initiated the reform before 1988. In order to compute series on TFP growth, Martin (1992) analyzed the contributions of capital and labor and explicitly incorporated the role of changes in the degree of capital utilization. The countries considered in this study are Argentina, Bolivia, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru, Uruguay, and Venezuela. Harberger (1992) presents data on TFP growth before and after a series of historical trade reform episodes. He finds that in the majority of the cases productivity growth increased after the liberalization process. 26. It may be argued, however, that the major increase in TFP growth in Chile has been the result of the complete structural reform package implemented in that country. 32 Sebastian Edwards Changes in Total Factor Productivity Growth ~ Table 1. 6 Argentina Bolivia Chile I 91 0 11 496 Costa Rica Mexico UNgUaY 3 25 -0 32 2 02 Source: Martin (1992). Note: For all countries but Chile, computed as the difference of TFP growth for 1987-91 and 1978-82. For Chile the prereform period is 1972-78. everely restricted the market for land-the ejido system. Additionally, during much of the post-debt crisis period large fragments of services sector-including telecommunications and financial services- were under direct government control and subject to distortions. Table 1. 7 contains data on TFP growth in Mexico’s manufacturing sector for 1 940-89. 27 Interestingly enough, these figures indicate that in the post-trade reform period the rate of productivity growth in the Mexican manufacturing sector has exceeded every subperiod since 1940 for which there are data. This provides some evidence in favor of the view that, once the sectors actually subject to increased competition are considered, Mexican productivity growth has indeed improved after the trade reform. It should be noted, however, that recent TFP growth in manufacturing in Mexico (see table 1. 8 for disaggregated data) has not been as large as in Chile’s postreform period, where some sectors experienced growth in TFP of the order of 15% in 1978-82 (Fuentes 1992). There are a number of possible explanations for this marked difference in behavior, including the uncertainties about North American Free Trade Agreement approval, which resulted in the postponement of investment in some of the key manufacturing sectors subject to increased foreign exposure. By and large, however, the data analyzed in this subsection provides broad support to the position that TFP growth has tended to increase in the period following major trade reforms in Latin America. 1. 4. Trade Reforms and Exports An important goal of the reforms has been to reduce the traditional degree of antiexport bias of Latin American trade regimes, and to generate a surge in exports. This reduction of the bias is expected to take place through three channels: a more competitive-that is more devalued-real exchange rate; a reduction in the cost of imported capital goods and intermediate inputs used in the production of exportable goods; and a direct shift in relative prices in favor of expo rts. The volume of international trade in Latin America, and in particular of 27. Since these figures come from two different sources, they may not be fully comparable and thus should be interpreted with care. 33 Trade Policy, Exchange Rates, and Growth Table 1. 7 Total Factor Productivity Growth in Manufacturing in Mexico, 1940-90 (%) ~~~~ 1940-SO 1950-60 1960-70 1970-80 1985-89 0. 46 0. 53 3. 00 N. A. 3. 40 Sources: The data for 1940-80 are from Elias (1992). The figure for 1985-89 is from Ibarra (1992). Table 1. 8 Division DisaggregatedProductivity Growth, in Mexico’s Manufacturing Sector, 1985-90 (%) Labor Productivity Total Factor Productivity Food, beverages, and tobacco Textiles and apparel Wood products Paper and printing Chemicals, rubber, and plastics Nonmetallic products Metal products Machinery Other manufacturing Total manufacturing Source: Ibarra (1992). 1. 7 0. 7 0. 2 2. 3 2. 3 1. 1 7. 5 4. 4 –4. 8 2. 3 3. 4 0. 4 3. 4 4. 8 2. 3 3. 5 3. 5 4. 1 N. A 3. 4 exports, increased significantly after the reforms were initiated. z8For example, while for the region as a whole the volume of exports grew at an annual rate of only 2. 0% between 1970 and 1980, it grew at a rate of 5. 5% between 1980 and 1985, and at a rate of 6. % between 1986 and 1990. 29 Although, strictly speaking, it is not possible to fully attribute this export surge to the opening-up reforms, there is significant country-specific evidence suggesting that a more open economy, and in particular a more depreciated real exchange rate, has positively affected exports growth. 3oSome countries, especially Costa Rica, have accompanied the opening-up proces s with the implementation of a bat28. Trade liberalization aims at increasing a country’s total volume of trade. Under textbook conditions it is expected that at the end of the reform trade will be balanced. However, there are a number of circumstances, including the need to pay the country’s foreign debt, under which trade will not grow in a balanced way after a reform. This has been the case in the majority of the Latin American countries. 29. The real value of exports, however, has evolved at a somewhat slower pace. The reason for this is that terms of trade have experienced, in every subgroup of countries, a significant deterioration during 1980-91 (see CEPAL 1991). These data are from CEPAL (1991). 30. See, for example, Nogues and Gulati (1992). 34 Sebastian Edwards ery of export promotion schemes, including tax credits-through the Certificad0 de Abono Tributario-duty-free imports, and income tax exemptions. However, some authors, including Nogues and Gulati (1992), have argued that these systems have not been an effective way of encouraging exports. Table 1. 9 presents detailed country-level data on the rate of growth of the total value of exports (in constant dollars) for t hree periods. Table 1. 10, on the other hand, contains information on the evolution of exports volume throughout the period. A number of facts emerge from these tables. First, while there has been a rapid growth in exports for the region as a whole, there are nontrivial variations across countries; in some cases there has even been a decline in the real value of exports-this is the case, for example, of Peru. Second, exports performance during two of the subperiods (1982-87 and 1987-91) has not been homogeneous. In the majority of the countries exports performed significantly better during 1987-9 1, than in the previous five years, reflecting, among other things, the fact that it takes some time for exports to actually respond to greater incentives. An interesting fact that emerges from these tables is that in the country that has lagged behind in terms of trade reform-Ecuador-the performance of exports volume has been in recent years below the 1970-80 historical average. On the other hand, in two of the early reformers-Bolivia and Chile-exports had a very strong behavior in the 1987-91 subperiod. The case of Chile is particularly interesting. Since most of its liberalization effort was undertaken prior to 1980, there are enough data points to provide a Table 1. 9 Value of Exports of Goods and Nonfactor Services: Annual Growth Rates (%) Country Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador Mexico Paraguay Peru Uruguay Venezuela 1972-80 7. 1 -1. 8 8. 8 15. 2 4. 9 4. 3 6. 7 7. 9 6. 7 2. 6 10. 0 -7. 3 1982-87 2. 6 0. 6 9. 7 6. 5 10. 2 3. 8†² 3. 3 6. 0 4. 8 -3. 7 4. 2 3. 6 1987-9 I 10. 3 11. 4 3. 4 10. 5 6. 6 9. 1 9. 2 5. 1 20. 2 0. 9 7. 1 5. 6 Sources: World Bank, International Economics Department database; ECLAC, Sfarisrical Yeur- book for Latin America, several issues. Note: Based on constant 1990 prices (U. S. dollars).

Marbury V. Madison Essay Example For Students

Marbury V. Madison Essay Constitutional LawMarbury v. MadisonMarbury v. Madison, one of the first Supreme Court cases asserting thepower of judicial review, is an effective argument for this power;however, it lacks direct textual basis for the decision. Marshallmanaged to get away with this deficiency because of the silence on manyissues and the vague wording of the Constitution. During the earlytesting period when few precedents existed, there was much debate aboutfundamental issues concerning what was intended by the words of theConstitution and which part of government should have the final word indefining the meaning of these words. Marshall used the Marbury case toestablish the Supreme Courts place as the final judge. Marshall identified three major questions that needed to be answeredbefore the Court could rule on the Marbury v. Madison case. The first ofthese was, Has the applicant a right to the commission he demands? TheConstitution allows that the Congress may by Law vest the Appointmentof such inferior Officers, as they think proper, in the Presidentalone, . . . (Art. II, ? 2). The Judiciary Act of 1793 had given thePresident the right to appoint federal judges and justices of thepeace; there is no dispute that such an appointment was within the scopeof the presidents powers. Debate arises because the Constitution issilent on the exact time at which the appointment is consideredcomplete. The Supreme Court ruled that when a commission has beensigned by the president, the appointment is made; and that thecommission is complete, when the seal of the United States has beenaffixed to it by the . This ruling does not havedirect constitutional support, but it is not an unreasonable decision. The second question which Marshall addressed was, If has aright, and that right has been violated, do the laws of this countryafford him a remedy? The answer is logically yes although there are nospecific words in the Constitution to support such an answer. Based onthe type of government intended by the Constitution, the government isexpected to protect individual liberty. As Marshall says, will certainly cease to deserve if the laws furnish no remedy for the violationof a vested right. However, with this assertion Marshall establishedthe power of the Supreme Court to review actions of the executive branch a power that does not stem directly from the Constitution. The third and final question which Marshall addressed was whetherMarbury is entitled to the remedy for which he applies. Marshallfurther divides this question into two parts: the nature of the writ andthe power of the Supreme Court. In examining the nature of the writ,Marshall solidifies further the Supreme Court authority over members ofthe executive branch. Marshall admits that the officer to whom is to be directed, must be one to whom, on legal principles, suchwrit may be directed . . . and that the Supreme Court cannot enquirehow the executive, or executive officers, perform duties in which theyhave discretion. Yet Marshall insists that the Supreme Court can issuea mandamus is directed by law to do acertain act affecting the absolute rights of individuals. Thisassertion does not have Constitutional basis. The Constitution does notexpressly grant the Supreme Court power over either of the otherbranches of government. Finally Marshall gets to the question based on which he decid es thecase the Supreme Courts jurisdiction over this case. For the firsttime in this case, Marshall uses direct constitutional basis to make hisruling. He argues that, If it had been intended to leave it in the discretion of thelegislature to apportion the judicial power between the supreme andinferior courts according to the will of that body, it would certainlyhave been useless to have proceeded further than to have defined thejudicial power . . . The plain import of the words seems to be, thatin one class of cases its jurisdiction is original and not appellate; inthe other it is appellate, and not original. He bases this ruling on Art. III ? 2, which enumerates the cases inwhich the Supreme Court shall have original jurisdiction. Marshallfurther maintains that the Constitution is the supreme law of the land. .ue67603c49f23e9d80962e901bea66f32 , .ue67603c49f23e9d80962e901bea66f32 .postImageUrl , .ue67603c49f23e9d80962e901bea66f32 .centered-text-area { min-height: 80px; position: relative; } .ue67603c49f23e9d80962e901bea66f32 , .ue67603c49f23e9d80962e901bea66f32:hover , .ue67603c49f23e9d80962e901bea66f32:visited , .ue67603c49f23e9d80962e901bea66f32:active { border:0!important; } .ue67603c49f23e9d80962e901bea66f32 .clearfix:after { content: ""; display: table; clear: both; } .ue67603c49f23e9d80962e901bea66f32 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .ue67603c49f23e9d80962e901bea66f32:active , .ue67603c49f23e9d80962e901bea66f32:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .ue67603c49f23e9d80962e901bea66f32 .centered-text-area { width: 100%; position: relative ; } .ue67603c49f23e9d80962e901bea66f32 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .ue67603c49f23e9d80962e901bea66f32 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .ue67603c49f23e9d80962e901bea66f32 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .ue67603c49f23e9d80962e901bea66f32:hover .ctaButton { background-color: #34495E!important; } .ue67603c49f23e9d80962e901bea66f32 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .ue67603c49f23e9d80962e901bea66f32 .ue67603c49f23e9d80962e901bea66f32-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .ue67603c49f23e9d80962e901bea66f32:after { content: ""; display: block; clear: both; } READ: Relationship Between Ecstasy And Memory EssayIn this contention as well Marshall has constitutional basis in Art. VI,which states, This constitution, and the Laws of the United Stateswhich shall be made in Pursuance thereof; shall be the supreme Lawof the Land. In his typical style, Marshall follows this constitutionally basedstatement with one of the most controversial rulings, which has noconstitutional basis. He asserts, It is emphatically the province andduty of the judicial department to say what the law is. There isnothing in the Constitution that assigns the duty of review solely tothe judicial department. Although his decision loosely construes and even stretches the meaningof the Constitution, Marshalls ruling on this case overall is notdetrimental to the well-being of the American people. The Supreme Courtis the only branch of government that could act to strengthen thenational government during the early history of the Constitution. Clearly, Congress could not take on the states rights advocates and thestate legislatures. If an early Congress had passed a law which a stategovernment objected to, the state legislature might have simplynullified the law, thus forcing the national government into aprecarious situation. Congress would have to risk causing the state toleave the Union to force them to comply with the new law. Furthermore,the president also was not in a position to allow the federal governmentmore leeway in interpreting their powers. He does not make any laws ofhis own and has no power to settle any questions of the states. Clearly,the Supreme Court was the branch that could most easily facilitate thestrengthening of the national government into an effective and unifiednation rather than thirteen independent countries as the states hadseemed under the Articles of Confederation. Critics will protest that the people do not elect the Supreme CourtJustices and therefore the Supreme Court should not have the power ofjudicial review. As McCloskey points out, No institution in ademocratic society could become and remain potent unless it could counton a solid block of public opinion that would rally to its side in apinch. Clearly, the Supreme Court is ultimately responsible to the willof the people. By maintaining independence from politics, the Justicesavoid the major problems of political parties and party platforms. Furthermore, the Supreme Courts small size allows the Constitution tospeak with a unified voice throughout the country.

Revolutions Positive Effects

ECONOMIC INTEREST GROUP THEORY Essays

ECONOMIC INTEREST GROUP THEORY Essays ECONOMIC INTEREST GROUP THEORY Essay ECONOMIC INTEREST GROUP THEORY Essay Throughout the universe in recent old ages a figure of industries have been deregulated, for illustration, the banking industry, the telecommunications industry, and the air hose industry. There have been legion similar calls for a decrease in accounting ordinances ( utilizing such nomenclature as accounting standard overload ) but what would be some of the deductions if fiscal accounting were to be deregulated ( Craig Deegan-2000 ) . Major inquiries that may originate here are: Why those houses have been deregulated? And even if there was a demand of deregulating, why so, were they even regulated antecedently? What are the statements that are used in support of their determination? If the accounting ordinance is reduced, what is the mechanism that will coerce the houses to bring forth an optimum sum of information? ( Deegan, C. 2000 ) What is really called an optimum sum of information? Why after so many old ages the guru s of accounting have non been able to develop by and large acceptable principals for Financial Accounting? What are the grounds, why concerns find it hard to accept standardized regulations for the publication of their fiscal statements? Whilst being opposed on different evidences by different professionals, there are legion accounting ordinances throughout the universe that are extremely imposed in many states necessitating different regulations and rules in regard of their ( state s ) Torahs and statute laws. Therefore, the inquiry that comes in head is ; why fiscal accounting is so to a great extent regulated? The straightforward reply to this inquiry is to coerce the directors to bring forth an optimum sum of information about the operations of the administration. An optimum sum of information is the degree of information that reflects true position of the value of an administration. More inquiries that arise here are why, and under what fortunes houses do non desire to bring forth true and just accounting information about their operations? What are the statements that oppositions of this accounting ordinance provide in support of their position? And how they assure the production of the optimum sum of information about the houses in the absence of ordinance? To analyze both ( pro-regulation and anti-regulation ) views we need to hold a expression into different attacks for and against the ordinances that are used for puting criterions in accounting, and besides the statements provided by their advocators, every bit good as the unfavorable judgment to those statements. Free Market Perspective: Harmonizing to the free market position to accounting ordinance the accounting information should be treated like other goods. And the forces of demand and supply will guarantee the coevals of best possible sum of information ( Deegan, 2000 ) . Harmonizing to many writers, it is in the best involvement of the administration to supply information about its operations to the parties outside the administration. If any administration fails to bring forth this information so it will faced with increased cost of operations ( Agency Theory ) . Furthermore there is a idea based on economic principal of reason , which implies that each person operates for their ego involvement, unless they are forced to make so. Each party ( stockholders and debitors ) will anticipate that the others will run for the ain ego involvement, so this deficiency of trust will necessitate directors to acquire into contract with stockholders and debitors to protect their involvements and increase their assurance. There were many illustrations of catching directors and stockholders referred to as monitoring and bonding understandings to cut down bureau costs even before the nineteenth century when the fiscal statements were required by jurisprudence to be published. One of the most of import illustrations is the compact that restricts the payment of dividends. In the 1620 a corporate charter ( New River Company ) included a restriction that dividends would merely be paid from the net incomes. Some company charters after that day of the month did non include dividend compact ( Kehal, 1941 ) . This infers that even before the legislative demands houses were concerned about their stakeholders. In add-on directors should besides be given wagess in order to work for increasing the value of the administration. An illustration would be sharing the net income. In 1887 the Leeds Estate Building and Investment Company s articles had a proviso whereby the directors and managers were entitled to a fillip based on the sum of net income available for dividends. ( Edwards, 1968 ) The stockholders and the debt holders will necessitate to be provided with the indispensable information about the administration which so will increase their assurance. For this intent directors are required to be audited by an external hearer, sing their fiscal histories. From 1844 to 1900 the UK company Torahs did non necessitate the companies to print audited fiscal statements, yet they presented these to their stockholders at the one-year general meetings. In 1890 British hearers came to the US to scrutinize US houses, raising capital in London, because their house s reputes were of import to the success of those issues ( Watts and Zimmerman, 1983, DeMond, 1951 ) . Even there were demands by the stock exchanges of the US for the presentation of audited fiscal statements, non because of authorities ordinance, but because of self involvement ( Benston, 1969 ) . When there are a little figure of parties the statement of acquiring into contracts to diminish the cost seems to be valid but when there are a big figure of stakeholders present, the cost of contracts itself will be really high and here this statement does non work. Another statement is that extremely ranked best executing administrations will take over the administrations that are executing low. The geting house may replace all the bing staff. This menace will coerce the directors to work to increase the value of the administration. Another statement in the favor of free market position is reflected in the Market for Lemons position given by Akerlof, G.A. in August 1970. An administration is referred to be a lemon if it is foremost assumed of a good quality, but after erstwhile it turns into a deficient one ( Craig Deegan ) . Akerlof claims that even without enforcing accounting ordinance the house will be unwraping true information about its operations whether good or bad. If the administration is non unfastened about its public presentation, the market will comprehend this as negative and presume that the house has something bad to hide. Stated above are some claims given by the protagonists of the free market position of accounting ordinance. All these statements focus on the point that the houses can expeditiously bring forth information about their operations even in the absence of ordinance. Now we will see some statements in the favor of ordinance. THE PRO-REGULATION Approach: The advocators of free market theory of accounting ordinance based their statements on the two basic positions. First of these position says that if anybody truly needs to acquire information about the administration he will be willing to pay for it ( For illustration if an administration is working truly good, the hazard of loss on the investing will be decreased and therefore if there is low hazard the return demanded will besides acquire to a lower degree ) . The demand and supply forces will guarantee the production of best possible sum of information. The 2nd position provinces that if the administration fails to bring forth sensible information, so there will be great uncertainty about the operational efficiency of the administration. This state of affairs will ensue in an increased operational cost. The protagonists of pro-regulation attack claim that this statement is non valid for the goods that are free or public goods. Accounting information is known as public goods ( Deegan, C. 2000 ) , this is a good that can be available to the populace for usage without even paying for it. The people who use this information without even paying for it are referred to as free riders. Free riders predominating in the market will minimize the true demand for the good and this will do an underproduction of it. Harmonizing to Cooper and Keim ( 1983 ) and Demski and Feltham ( 1976 ) , when the users of a public good who are paying for it can non be excluded from those who are non paying, the monetary value system does non work expeditiously and it consequences into market failure. Therefore ordinance is necessary to be imposed. There comes another statement to this instance where the presence of accounting ordinance can ensue in an over production of the good. Furthermore, as investing analysts are one of the major users of the information. They may buttonhole for any new ordinance for the revelation of a certain sort of information to have more benefit. This lobbying may take to accounting standard overload, and this will be hard for the standard compositors to equilibrate between the both state of affairss stated above. The regulators frequently province that ordinance is necessary to guarantee that every one has entree to the same information by forbiding insider trading. And this is in the best involvement of the populace. Crisiss have a long history in warranting legislative actions which affect corporations. For illustration: the South Sea Bubble, which was blamed on speculators, led to an act of UK parliament in 1720 s which prohibited the formation of joint stock companies ; the failure of the City of Glasgow Bank under conditions of fraud , led to UK Companies Act 1879. ( Watts, R.L.1977 ) . Public INTEREST Theory: Harmonizing to public involvement theory, ordinance is imposed to protect the rights of the populace from unjust operations of the market. The basic construct here is that the ordinance is imposed for involvement of the populace instead than for the involvement of any act uponing party. If this theory is applied in a capitalist economic system, the public needs to be assured that their resources are used in profitable mode. Harmonizing to this theory, ordinance creates such trust and assurance. Many celebrated accounting professionals criticise this attack, but Posner ( 1974 ) rejects their claims by stating that the markets are really unstable and can non run decently without ordinance and that the ordinance procedure by authorities is truly really costless. However the protagonists of the free- market attack province that ordinances will be imposed merely for the well being of the regulator. Even if it seems that the statute law is functioning the involvement of general public, with the purpose of winning trust of populace, which will assist him step up to be re-elected. Capture Theory: Capture theory provinces that if accounting ordinance is imposed, it might be ab initio put in topographic point to function the involvement of general public, but with the transition of clip the regulated party will seek to capture the regulative party. It is hard for the regulator to stay indifferent and out of influence of the regulated parties. It has been a large issue all over the universe that the big accounting houses have got control of standard puting procedure. Walker ( 1987 ) explains this construct with the aid of an illustration of ASRB, which was deemed as extremely controlled by the accounting organisations. When ASRB was traveling to be established, authoritiess received suggestions the accounting criterion should be developed by other than the accounting professionals and the ASRB should be allowed to hold a research manager. But before the constitution of the board many accounting houses united together to act upon this determination that ASRB will hold an independent research manager. In 1986 about all the members of the board had a strong and professional accounting background, and in merely two old ages the ASRB were taken in control by the accounting houses. Economic Interest GROUP THEORY: Economic involvement group theory is besides known as private involvement group theory. This theory is related to the attempts of private groups for procuring their involvements. It assumes that in a concern market different entities have similar involvement. These will fall in together into groups to coerce the authorities to enforce certain statute law in order for them to have economic benefits. In an economic competitory market there are struggles between different groups therefore the benefit of one group can perchance be the disbursal of the other. For illustration Donald Stokes, Richard Morris, and Craig Deegan ( 1990 ) have investigated the involvements of audit houses to buttonhole on proposed revelation demands. Their survey generated consequences that the higher expected costs of non-conformity with legislative revelation demands is the major ground behind their lobbying in favor of increased professional revelation demands. ( Morris, Deegan, Stokes, 1990 ) Craig Deegan ( 2000 ) explained how the different houses form groups to accept or reject some ordinances, imposed by authorities which, they think, are non in their involvement. Harmonizing to one of these illustrations, in Australia, authorities passed a ordinance to be imposed in 1990, which was related to the general insurance companies. That demand stated that the investings will be valued at their cyberspace market value. If there are any alterations, these will be charged to gain and loss history. But this created a important instability in the net incomes of many houses. Therefore the insurance houses form groups to oppose this ordinance. ( Craig Deegan ) . The protagonists of this position consider that even the regulators have their ain involvements sing a peculiar ordinance. For illustration if the regulators put in topographic point a ordinance to procure or protect the rights of the general populace, the purpose behind this action could be to win the trust of the general populace and acquire re-elected. Therefore, they can besides be seen as an involvement group under this theory. If we conclude this treatment we can state that ordinances are being imposed to profit some specific parties that have the power to buttonhole against the determination of regulators. Another noticeable point is that the little houses which have no power to consequence the determinations of regulators can non be able to protect their different involvements. REGULATION AS AN OUTUP OF A POLITICAL Procedure: This position is an of import position sing ordinance in fiscal accounting, because it challenges the basic constructs of accounting. However, if we follow the conceptual model of accounting, it emphasizes that the fiscal statements of the house should be true and just position of a company s operations, and these should non be biased ( should non be good for merely a certain group of people ) . The conceptual model besides states that the standard compositors should maintain in head all the positive or negative effects of the accounting criterions on the economic system every bit good as society. It is clear perceptible from the history that in US standard scene procedure is controlled by political forces. Congress concerns with criterions have played a critical function in the permutation of ABP with FASB. Latest examples of its intercession include: SFAS 133 ( accounting for derived functions and hedges, FASB, 1998 ) ; SFAS 141 ( riddance of pooling, 2001a ) and SFAS142 ( damage of good will, FASB, 2001b ) . ( Watts, 2003 ; Ramanna, 2005 ) It is besides stated that before the execution of certain new steps, the standard scene organic structure should name for treatment and different parties that can be affected by it and take into consideration, the suggestions given by that party. If the organic structure does non adhere to the above statement, its whole being can be challenged. However if above statement is accepted so the neutrality and objectiveness of accounting criterions will be questionable. Embracing the consideration of economic effects standard compositors will hold to give the equity and truthfulness of accounting information. As there can be certain information about a house, if disclosed, that can hold a negative impact on the value of the house. Therefore, that peculiar criterion will necessitate to be amended. For illustration, there is a demand in the Australian conceptual model that standard compositors will hold to see the economic effects of their determinations, specifically in relation to the possibility that equity and truthfulness might hold to be sacrificed. ( Collett, P 1995 ) A inquiry that comes into head is that public or users of fiscal studies by and large know that there is political force per unit area involved in the development of the fiscal studies. While holding this type of outlook, will they be able to accept that the information provided in the studies is accurate and just? Decision: We have considered all the major attacks to standard scene in fiscal accounting. Each of these attacks carry solid statements, nevertheless under certain fortunes they become challengeable. After analyzing all the facts provided by different attacks we are now in a better place to understand how hard it can be for the standard compositor to equilibrate between all these positions and put such generalized accounting criterions that can be internationally acceptable.