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April 2017

Can government subsidies spur science-industry collaboration and innovation?

Miriam Bruhn's picture

Efforts to foster collaboration between science and industry have long been a part of innovation policy in many countries. Firms stand to benefit from accessing the specialized infrastructure and expertise available in universities. Researchers gain access to practical problems that can provide greater relevance for their research, and to industrial capabilities for manufacture and assistance in commercializing their ideas to take them to market. Yet, there are barriers that inhibit collaboration, including financing constraints, information asymmetries, and transaction costs in negotiating collaboration agreements.

Nascent stock exchanges — tales of success and failure

Thorsten Beck's picture

Public equity markets are seen as a critical component of a developed financial system, with such markets going back to the 18th and 19th century in many advanced economies.  There have been therefore intensive efforts of donors and local government to establish such markets across the developing world, in the 1980s across Sub-Saharan Africa and in the 1990s across many transition economies.  These efforts, however, have been met with mixed success, illustrated by the statement by a local market practitioner that “an entire year’s worth of trading in the frontier African stock markets is done before lunch on the New York Stock Exchange.”1 On the other extreme are markets such as China, which have developed rapidly over the past two decades, with many listed companies, high trade volume and a broad investor basis.  What explains why some countries have well-developed public equity markets while others have shallow and illiquid markets?

Banking the unbanked: Measuring the success of JDY

Sumit Agarwal's picture

There is a big debate about the role of financial markets and products in shaping consumer welfare and real economic activity. In developed economies, there is an increasing discussion that financial sector may have become inefficiently large and products offered to households may have become excessively complex. In contrast, in many developing countries, like India, there has been a significant push to increase the usage of financial products — to “complete” the market.

This article is based on an extensive scientific study that evaluates the Pradhan Mantri Jan Dhan Yojna (“JDY”) launched in India on August 28, 2014. Our study has two modest objectives. First, we document the initial uptake and subsequent usage of banking services — that includes a savings account, overdraft facilities, and insurance benefits — by the unbanked targeted by the program. We compare the usage patterns of banking services of households who got access to banking under JDY with similar households who already had access to banking services before the program. Second, we exploit the regional variation in financial access to explore how expanding access to financial services is related to broader outcomes such as GDP growth, lending, consumption expenditure, retail commodity prices and house prices.

Is there a natural resource curse in finance?

Thorsten Beck's picture

The natural resource curse has featured prominently in discussions on why many developing countries fail to grow. This curse takes on many flavours — adverse exchange rate effects, underinvestment in human capital and institutions, political conflict and violence, to name just a few. What about the effect on the financial sector? The financial sector has been shown to have a critical role in intermediating domestic savings into domestic investment and in allocating scarce resources effectively, with positive repercussions for economic growth (Levine, 2005). The financial system should thus serve as an important absorption tool for windfall gains, such as arising from natural resource rents. Does it fulfill this role? Previous work has shown that financial systems are less developed in more resource-rich countries (Beck, 2011), but this could be driven by demand, rather than by a supply-side related curse.