Date of Award

12-2002

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Dr. Eskander Alvi

Second Advisor

Dr. Matthew Higgins

Third Advisor

Dr. Jon Neill

Fourth Advisor

Dr. Ahmed Hussen

Abstract

This dissertation contains three essays on economic reform programs supported by the IMF and World Bank. Using appropriate theoretical and empirical models, we investigate the impact of reform on three aspects of economic development: (1) human development, (2) fertility, and (3) income shares of factors of production. In the first essay, we examine the long-run impact of reform on different measures o f human development and income. Empirical results show that reform has long-run positive impact on GDP per capita and measures of human development. However, worse initial macroeconomic conditions offset this impact. In the second essay, we examine the impact of reform on fertility in reforming countries relative to non-reforming countries. We argue that reform can reduce fertility by making capital more complementary to female labor, raising women’s relative wage, and hence raising the opportunity cost of child-rearing. The results validate the predictions of the theoretical model and show that capital per head has a significant negative impact on fertility after reform as female labor and physical capital become more complementary. In the third essay, we examine the distributional impact o f reform on labor and capital in reforming countries. Using a simple theoretical model and assuming that factors of production are paid less than their marginal products pre reform, we show that the impact of unemployment and capital accumulation on the functional distribution o f income is ambiguous and depends solely on the size of the elasticity of substitution between capital and labor. Empirical results show that the elasticity of substitution is greater than one but decreases after reform. With lower elasticity of substitution after reform, the increase in capital per head is expected to raise capital’s share relative to labor’s share. However, reform has a positive impact on the shares of both factors. It was also concluded that labor and capital are highly underpaid in terms of their marginal products before reform and that reform removes this distortion in factor markets.

Access Setting

Dissertation-Open Access

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