Thursday, February 14, 2008


In the development literature, information externalities represent the value of a good idea about what can be effectively produced in a certain region above and beyond what the person who thinks up this bright idea reaps.

Here's an excellent example, appropriate for today. Five years ago, the Ethiopian flower industry exported $159,000 of flowers. In 2008, the industry is projected to export $166,000,000 of flowers. Article here.

In what some will find repugnant, the government had a role to play:
The government offers incentives to both foreign and Ethiopian investors, including a five-year tax holiday, duty-free import of capital goods and a lease price of just $18 a hectare per year for land. The government also offers loans of up to 70 percent of start-up costs.

The free-trader in me thinks this is bad. The competition-lover part of me thinks there's nothing wrong with governments competing to land industrial clusters, especially relevant in light of new research on clusters and spillovers.

If anyone has any bright ideas about what rural Newfoundland could produce (my gut feeling is such products don't exist), feel free to comment.

1 comment:

Anonymous said...

Newfoundland should provide access to the internet and work from home technologies.

This will provide increased employment oppurtunity to those that have skills that can not be used in rural Newfoundland and Labrador for that matter.