Inventories in Developing Countries : Levels and Determinants--A Red Flag for Competitiveness and Growth
Raw materials inventories in the manufacturing sector in the 1970s, 1980s, and 1990s were two to five times as high in developing countries as in the United States, despite the fact that in most developing countries real interest rates are at least...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/02/1003163/inventories-developing-countries-levels-determinants-red-flag-competitiveness-growth http://hdl.handle.net/10986/19711 |
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okr-10986-197112021-04-23T14:03:44Z Inventories in Developing Countries : Levels and Determinants--A Red Flag for Competitiveness and Growth Guasch, J. Luis Kogan, Joseph ACTUAL COSTS AFFILIATES AGGREGATE DEMAND AGGREGATE INVENTORY CD COMMODITY COMPETITIVENESS COST OF CAPITAL CURRENT EXPENDITURES DEFICITS DELIVERIES DELIVERY TIMES DEREGULATION DEVELOPED COUNTRIES DEVELOPMENT ECONOMICS ECONOMICS LITERATURE ECONOMIES OF SCALE ECONOMISTS EMPLOYMENT EQUILIBRIUM FIXED COSTS FREIGHT GDP GDP DEFLATOR GDP PER CAPITA GROWTH RATE HANDLING IMPORTS INCOME INEFFICIENCY INFLATION INFLATION RATE INFLATION RATES INSURANCE INTEREST RATE INTEREST RATES INTERMEDIATE GOODS INVENTORIES INVENTORY INVENTORY HOLDING COSTS INVENTORY MANAGEMENT INVENTORY MODELS INVENTORY SYSTEMS MANUFACTURING MARGINAL COST MARKET PRICES MATHEMATICAL MODELS NOMINAL INTEREST RATES OPTIMIZATION ORDERING PRODUCTION COSTS PRODUCTION TECHNOLOGY PRODUCTIVITY PUBLIC ENTERPRISES QUALITY ASSESSMENT QUALITY CONTROL SAFETY STOCK SAVINGS SHIPMENTS STOCKS TELECOMMUNICATIONS THIRD PARTY LOGISTICS TIME SERIES TRANSACTION COSTS TRANSIT TRANSPORT WORKING CAPITAL Raw materials inventories in the manufacturing sector in the 1970s, 1980s, and 1990s were two to five times as high in developing countries as in the United States, despite the fact that in most developing countries real interest rates are at least twice as high. Given the high cost of capital in most developing countries, these high inventory levels have an enormous impact on the cost of doing business and on productivity and competitiveness. Poor infrastructure and ineffective regulation as well as deficiencies in market development - rather than the interest rates and uncertainty - are the main determinants of these differences. Cross-country estimates show that a one-standard-deviation improvement in infrastructure reduces raw materials inventories by 27-47 percent. Poorly functioning markets, as measured by the ratio of transfers and subsidies to GDP, are also an important factor, with a one-standard-deviation improvement leading to a 19-30 percent reduction in raw materials inventories. The authors show that these reductions in raw materials inventories are not offset by a reduction in finished goods inventories upstream. The policy implications are clear and strong. Improvements in infrastructure (roads, ports, and telecommunications) can help to significantly reduce inventory levels (and thus the cost of doing business), especially when accompanied by effective regulation and the development and deregulation of associated markets. 2014-08-26T19:55:24Z 2014-08-26T19:55:24Z 2001-02 http://documents.worldbank.org/curated/en/2001/02/1003163/inventories-developing-countries-levels-determinants-red-flag-competitiveness-growth http://hdl.handle.net/10986/19711 English en_US Policy Research Working Paper;No. 2552 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACTUAL COSTS AFFILIATES AGGREGATE DEMAND AGGREGATE INVENTORY CD COMMODITY COMPETITIVENESS COST OF CAPITAL CURRENT EXPENDITURES DEFICITS DELIVERIES DELIVERY TIMES DEREGULATION DEVELOPED COUNTRIES DEVELOPMENT ECONOMICS ECONOMICS LITERATURE ECONOMIES OF SCALE ECONOMISTS EMPLOYMENT EQUILIBRIUM FIXED COSTS FREIGHT GDP GDP DEFLATOR GDP PER CAPITA GROWTH RATE HANDLING IMPORTS INCOME INEFFICIENCY INFLATION INFLATION RATE INFLATION RATES INSURANCE INTEREST RATE INTEREST RATES INTERMEDIATE GOODS INVENTORIES INVENTORY INVENTORY HOLDING COSTS INVENTORY MANAGEMENT INVENTORY MODELS INVENTORY SYSTEMS MANUFACTURING MARGINAL COST MARKET PRICES MATHEMATICAL MODELS NOMINAL INTEREST RATES OPTIMIZATION ORDERING PRODUCTION COSTS PRODUCTION TECHNOLOGY PRODUCTIVITY PUBLIC ENTERPRISES QUALITY ASSESSMENT QUALITY CONTROL SAFETY STOCK SAVINGS SHIPMENTS STOCKS TELECOMMUNICATIONS THIRD PARTY LOGISTICS TIME SERIES TRANSACTION COSTS TRANSIT TRANSPORT WORKING CAPITAL |
| spellingShingle |
ACTUAL COSTS AFFILIATES AGGREGATE DEMAND AGGREGATE INVENTORY CD COMMODITY COMPETITIVENESS COST OF CAPITAL CURRENT EXPENDITURES DEFICITS DELIVERIES DELIVERY TIMES DEREGULATION DEVELOPED COUNTRIES DEVELOPMENT ECONOMICS ECONOMICS LITERATURE ECONOMIES OF SCALE ECONOMISTS EMPLOYMENT EQUILIBRIUM FIXED COSTS FREIGHT GDP GDP DEFLATOR GDP PER CAPITA GROWTH RATE HANDLING IMPORTS INCOME INEFFICIENCY INFLATION INFLATION RATE INFLATION RATES INSURANCE INTEREST RATE INTEREST RATES INTERMEDIATE GOODS INVENTORIES INVENTORY INVENTORY HOLDING COSTS INVENTORY MANAGEMENT INVENTORY MODELS INVENTORY SYSTEMS MANUFACTURING MARGINAL COST MARKET PRICES MATHEMATICAL MODELS NOMINAL INTEREST RATES OPTIMIZATION ORDERING PRODUCTION COSTS PRODUCTION TECHNOLOGY PRODUCTIVITY PUBLIC ENTERPRISES QUALITY ASSESSMENT QUALITY CONTROL SAFETY STOCK SAVINGS SHIPMENTS STOCKS TELECOMMUNICATIONS THIRD PARTY LOGISTICS TIME SERIES TRANSACTION COSTS TRANSIT TRANSPORT WORKING CAPITAL Guasch, J. Luis Kogan, Joseph Inventories in Developing Countries : Levels and Determinants--A Red Flag for Competitiveness and Growth |
| relation |
Policy Research Working Paper;No. 2552 |
| description |
Raw materials inventories in the
manufacturing sector in the 1970s, 1980s, and 1990s were two
to five times as high in developing countries as in the
United States, despite the fact that in most developing
countries real interest rates are at least twice as high.
Given the high cost of capital in most developing countries,
these high inventory levels have an enormous impact on the
cost of doing business and on productivity and
competitiveness. Poor infrastructure and ineffective
regulation as well as deficiencies in market development -
rather than the interest rates and uncertainty - are the
main determinants of these differences. Cross-country
estimates show that a one-standard-deviation improvement in
infrastructure reduces raw materials inventories by 27-47
percent. Poorly functioning markets, as measured by the
ratio of transfers and subsidies to GDP, are also an
important factor, with a one-standard-deviation improvement
leading to a 19-30 percent reduction in raw materials
inventories. The authors show that these reductions in raw
materials inventories are not offset by a reduction in
finished goods inventories upstream. The policy implications
are clear and strong. Improvements in infrastructure (roads,
ports, and telecommunications) can help to significantly
reduce inventory levels (and thus the cost of doing
business), especially when accompanied by effective
regulation and the development and deregulation of
associated markets. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Guasch, J. Luis Kogan, Joseph |
| author_facet |
Guasch, J. Luis Kogan, Joseph |
| author_sort |
Guasch, J. Luis |
| title |
Inventories in Developing Countries : Levels and Determinants--A Red Flag for Competitiveness and Growth |
| title_short |
Inventories in Developing Countries : Levels and Determinants--A Red Flag for Competitiveness and Growth |
| title_full |
Inventories in Developing Countries : Levels and Determinants--A Red Flag for Competitiveness and Growth |
| title_fullStr |
Inventories in Developing Countries : Levels and Determinants--A Red Flag for Competitiveness and Growth |
| title_full_unstemmed |
Inventories in Developing Countries : Levels and Determinants--A Red Flag for Competitiveness and Growth |
| title_sort |
inventories in developing countries : levels and determinants--a red flag for competitiveness and growth |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2001/02/1003163/inventories-developing-countries-levels-determinants-red-flag-competitiveness-growth http://hdl.handle.net/10986/19711 |
| _version_ |
1764440423813611520 |