UNU-WIDER WIDER-HECER Seminar

Despite the recent turbulence in financial markets, its spill-over effects for developing countries, and large scale government interventions in many economies, financial flows and free trade remain important sources of economic growth for developing countries. A joint seminar organized by the Helsinki Center for Economic Research (HECER) and UNU-WIDER will focus on the continuing importance of finance and trade in development, and make recommendations for forwarding the development agenda.

According to Anni Heikkilä, Panu Kalmi, and Olli-Pekka Ruuskanen from the Helsinki School of Economics, access to finance is important for household welfare in developing countries, not only for starting up new firms, but for smoothing consumption – which is becoming even more important in the light of food and energy price rises. Using data from the FinScope survey on financial access of Ugandan individuals from 2006 they find that social capital is a significant predictor of financial access – even after controlling for wealth and other demographic characteristics of an individual. Moreover, as Heikkilä points out ‘social capital especially seems to influence the extent to which individuals join and get credit from informal financial institutions’.

Alisa DiCaprio from UNU-WIDER is concerned that the current round of negotiations between advanced and developing countries to establish preferential trade agreements (PTAs) constrains developing countries’ policy flexibility in a way that will negatively impact their development potential. According to DiCaprio, ‘PTAs lock in a given degree of policy flexibility in return for common standards and limited barriers to trade. While the growth potential is positive, the policy rigidity may limit the ability of the developing country partner to explore new industries and adjust to negative shocks'. DiCaprio’s paper aims to highlight the actual and potential policy limitations posed by PTAs and to offer policy advice to countries that are thinking about entering into such negotiations as a means of forwarding their development strategies.

Helsinki Center of Economic Research (HECER) is a joint initiative of the University of Helsinki, the Helsinki School of Economics, and the Swedish School of Economics. HECER is an independent research institute whose main purpose is to promote high-quality economic research, to develop and co-ordinate doctoral level economic education and to promote co-operation in economics among the universities in the Helsinki area. HECER was launched in 2004. www.hecer.fi