Table Of ContentInternationally written and refereed, Butterworths Advanced Economics
Texts seek to inform students and professional economists by providing
clarity and rigour in economic analysis.
General Editor
Bruce Herrick
Department of Economics,
Washington and Lee University, USA
Consulting Editors
John Enos Michael Roemer
Magdalen College Harvard Institute for International Development,
University of Oxford, UK Harvard University, USA
Gerald Helleiner Pan Yotopoulos
Department of Political Economy, Food Research Institute,
University of Toronto, Canada Stanford University, USA
Titles in preparation
Comparative Economic Development
Development Economics: Theories and Evidence
Other titles are under consideration
Butterworths Advanced Economies Texts
Cases in
Economic Development:
Projects, Policies
and Strategies
Michael Roemer and Joseph J. Stern
Harvard Institute for International Development
Butterworths
London Boston
Sydney Wellington Durban Toronto
All rights reserved. No part of this publication may be reproduced or
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This book is sold subject to the Standard Conditions of Sale of Net
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the Publishers in their current price list.
First published 1981
©Michael Roomer and Joseph J. Stern, 1981
British Library Cataloguing in Publication Data
Roemer, Michael
Cases in economic development. -
(Butterworths advanced economic texts)
1. Economic development - Case studies
I. Title II. Stern, Joseph J.
330.9 HD82
ISBN 0-408-10729-4
ISBN 0-408-10730-8 Pbk
Typeset by Scribe Design, Gillingham, Kent
Printed and bound by Robert Hartnoll Ltd, Bodmin, Cornwall
To our parents
Acknowledgment
Our experience in working with policymaking institutions in a number
of developing countries made us sensitive to the difficulties of applying
theoretical constructs to real life situations. While theoretical tools of
economics provide a sound and consistent framework within which to
analyze many development problems, in applying these tools one often
needs to modify them to fit available data and take account of missing
information. One also learns to temper conclusions to reflect uncertain
information and the constraints imposed on policymakers by non-
economic variables. In trying to convey this sense of complexity to our
students, we decided there was a need both to teach the theoretical tocls
of development analysis and to show how such tools could be applied in
a realistic setting. The material in this volume has grown out of a course
we taught at Harvard University which tried to meet these objectives.
The development of new teaching materials is a time-consuming
task. We were fortunate that Derek C. Bok, President of Harvard
University, was sufficiently intrigued by our idea of how economic
development might be taught to policymakers to give us a grant from
the Innovative Teaching Fund which allowed us to invent the economy
of Beracia in which all our cases are placed. A series of research
assistants and teaching assistants struggled with us to cook up data for
Beracia, then to make it conform to some standard of realism, and
finally to revise the data when time and events rendered the original
realism obsolete. David Ring first struggled with the task of making
Beracia not too much like any one country, but not too different either.
Subsequently, Jeffrey Lewis worked through a complex set of revisions
and learned, to his chagrin, that a change in any economic variable had
to be worked through virtually every piece of data in the manuscript. A
grant from the EXXON Education Foundation paid for these activities
and helped bring the project to fruition. Dani Kaufman helped to teach
much of this material in our graduate course, and gave us advice on how
vi to revise the material in light of students' reactions and comments.
Acknowledgment vii
Several colleagues at Harvard University and elsewhere helped us to
improve the product. Richard Mallon bravely took on several of these
cases for his own graduate course, worked through them carefully, and
offered us incisive suggestions for improvement. Malcolm Gillis,
Robinson Hollister, Jr, Malcolm McPherson, and Robert Klitgaard
read and commented upon parts of the manuscript. The fact that we
did not incorporate all suggestions for revision and change in no way
diminishes our debt. Bruce Herrick, who read the entire manuscript,
was instrumental in moving the project to publication and we are
grateful for his enthusiastic support.
Several secretaries suffered through innumerable drafts, revisions,
rearrangements, renumberings, and confusions, somehow keeping
enough order to make this book possible. Mary Lavallee and Pamela
Rowley bore the initial brunt of this effort; Audrey Cheong Sow Chang
and Ann MacGowan completed the task.
Both authors are Institute Fellows in the Harvard Institute for
International Development. We owe a special debt of gratitude to
Lester E. Gordon, until recently the Director of HI ID, who encouraged
us in this and other projects over the years, as both a colleague and a
friend.
Perhaps the greatest contribution to this project over the past five
years came from our students who not only had to work through the first
drafts of the cases and pay serious attention to them, but whose grades
depended in part on their forbearance. We have taken their suggestions
seriously but, more important, we would never have seen this project
through without their encouragement.
Michael Roemer
Joseph J. Stern
List of Tables
Report 1 Economic and political developments in Beracia, 1956—1977
Rl. 1 Growth rates for GDP and major sectors (percent per annum) 35
Rl .2 Distribution of Gross Domestic Product by major sectors (percent) 35
R1.3 Economic characteristics, 1956-1975 36
R1.4 Price indices ( 1970 = 100) 36
Rl .5 Gross Domestic Product by economic activity, 1956-1977 (factor cost, constant
1970 prices, lepta million) 37
Rl .6 Gross National Product by expenditure, 1956-1977 (current market prices;
lepta million) 39
Rl .7 Gross Domestic Product by expenditure, 1956-1977 (constant 1970 market
prices; lepta million) 41
Report 2 Income and employment
R2.1 Cumulative distribution of household income shares, 1975 44
R2.2 Distribution of income, rural and urban households, 1975 44
R2.3 Wage employment by sector (million) 45
R2.4 Wages and salaries by sector (lepta million) 45
R2.5 Wage trends 45
R2.6 Distribution of earnings of casual urban workers, July 1975 47
R2.7 Income tax rates, family of four 48
Report 3 Trade and payments of Beracia, 1956-1977
R3.1 Commodity exports by volume (thousand tons) 50
R3.2 Unit value indices (in U.S. dollars) for principal exports, 1956-1977
(1970= 100) 50
R3.3 Commodity exports by value (fob prices; lepta million) 51
R3.4 Structure of the value of commodity exports (percent) 52
R3.5 Export duties (lepta million) 53
R3.6 Exports under bonus voucher (fob, current prices, lepta million) 54
R3.7 Structure of commodity imports (current prices; lepta million) 55
R3.8 Structure of commodity imports (percent) 56
R3.9 Indicative nominal import duty rates (percent) 56
R3.10 Import duty collections by type of commodity (percent in cif value) 57
R3.11 Imports under bonus voucher (cif prices; lepta million) 58
χ R3.12 Commodity composition of bonus voucher imports (percent) 59
List of Tables xi
R3.13 Commodity imports and exports (current prices; lepta million) 60
R3.14 Beracia balance of payments (current prices; lepta million 61
R3.15 Beracia foreign exchange reserves (as of December 31) 65
Report 4 Fiscal and financial development, 1956-1977
R4.1 Consolidated government expenditures (current prices, lepta million) 67
R4.2 Consolidated government revenues (current prices; lepta million) 68
R4.3 Government expenditure by function (as a percent of GNP) 69
R4.4 Money supply (lepta million) 71
R4.5 Nominal interest rates on selected instruments (selected years; percent per
annum) 72
R4.6 Source of investment finance (selected years; lepta million) 73
Case 1 Torrence copper mine
1 Annual average of U.S. domestic producers' and London Metal Exchange
copper prices, 1947-1977 (U.S. cents per pound) 98
2 Operating costs—mine and concentration plant 100
Case 2 Horio rice project
1 Operating cost of project tractor (Lp/ha) 105
2 Operating costs of project combines (Lp/ha) 106
3 Operating cost of low-lift pump (Lp/ha) 106
4 Average on-farm costs: traditional practices 107
5 Average on-farm costs: improved practices 108
6 Capital outlay: rice mill (thousand Lp) 109
7 Paddy milling costs (Lp/bag) 110
8 Conversion of imported rice to an equivalent price for domestic rice and
paddy 111
9 Price forecast (in constant 1977 dollars; 1977 100) 112
Appendix to Case 2
1 Summary of the physical phasing of the project (first 15 years only) 114
Case 3 Limani cement plant
1 Apparent consumption of cement, 1967—1978 (1000 tonnes) 116
Case 4 Filopenia—Limani road project
1 Projected average daily traffic by type of vehicle (road segment: Filopenia—
Limani) 125
2 Vehicle operating cost (lepta per thousand km, 1975 prices) 126
3 Maintenance cost on paved road 1975 estimates (Lp/km/year) 126
4 Road construction costs by level of technology, 1975 prices 127
5 Vehicle operating costs new road segment: Filopenia—Limani, 1975 (Lp/
thousand km) 128
Case 5 Control of schistosmiasis at Kichele Farm
1 Life table for Beracian males 137
Case 6 Industrial strategy
1 Maximum potential growth in final demand, total output and value added,
1977-1990 161
2 Characteristics of manufacturing sectors 163
xii List of Tables
3 Production possibilities in manufacturing, 1977-1990 164
4 Proposed manufacturing investment program, 1977-1990 (by Ministry of
Industry) 165
Appendixes to Case 6
A. 1 Large-scale manufacturing output, value added and employment 166
A.2 Duties and premia on competing imports 167
A. 3 Comparison between domestic and foreign prices for selected commodities,
1977 168
B. 1 Beracia domestic coefficients matrix 170
B.2 Beracia inverse coefficients matrix 176
Case 7 Education planning
1 Public (state) school enrollment, 1975 184
2 Public (state) school teachers, 1975 184
3 Education budget, 1975/76 184
4 Average yearly cost per student by level of education, 1975/76 (Lp/
year) 185
5 Age income regressions by education level for employed persons, 1971 185
Appendix to Case 7
A. 1 Estimated population by age and sex: Beracia, mid-1970 (thousands) 187
A.2 Beracia: labor force participation rates, 1969 (percent) 188
A.3 Estimated unemployment rates in Beracia by age, sex and education
(percent) 188
A.4 Perspective plan targets 189
A.5 Estimated labor force requirements by educational level and sector (per unit of
labor) 190
A.6 University enrollment by Field, 1974 193
Part V Macroeconomic planning
1 Hypothetical income distribution data 228
2 Income distribution and growth 233
3 GNP by income recipients 236
Case 8 Macroeconomic forecasts for 1978 and 1979
1 Value added production index for agriculture 247
2 Value added production index for mining and quarrying 247
Case 9 Balance of payments crisis
1 Commodity exports—projections to 1979 254
2 Commodity imports—projections to 1979 255
3 Balance of payments—projections to 1979 254
4 Government accounts—projections to 1978/79 255
Case 10 Fiscal planning and reform
1 Central government expenditures 266
2 Central government revenues 267
3 Sales and excise tax revenues, 1970/71 and 1975/76 268
4 Direct tax revenues of central government 268
5 Income tax rates, family of four 269
6 Local government accounts 269
List of Tables xiii
Case 11 Income inequality and poverty
1 Population by location and ethnic grouping: 1970 270
2 Number of rural and urban households by income classes 271
3 Cost of minimum food budgets by ethnic groups (1975) 272
Appendix to Case 11
A. 1 Numbers of households, etc., by household income class, all ethnic
groups 276
A.2 Numbers of households, etc., by household income class, ethnic group
Blé 276
A.3 Numbers of households, etc., by household income class, ethnic group
Aspro 277
A.4 Number of households, etc., by household ethnic class, ethnic group
Kokkina 278
A.5 Distribution of monthly expenditure per rural household: 1977 279
A.6 Distribution of monthly expenditure per urban household: 1979 280
