After the debt crisis in 1981, Costa Rica shifted from an inward (IDS) to an outward oriented development strategy (ODS). "Neoliberal" economists have characterized this shift as being a result of free trade and liberalization policies and reduced government intervention. The neoliberal perspective has seen inward and outward development strategies as mutually exclusive and has evaluated their success mainly in terms of GDP and export growth. This dissertation first shows that IDS and ODS are in fact not mutually exclusive and that countries which have been successful in applying an ODS, such as Taiwan and Korea, have had strong government intervention, particularly in that they have implemented a selective trade policy. Second, in the case of Costa Rica, it illustrates that the shift towards a more ODS has been the result of previous development achievements, pursuit of macroeconomic balance with social stability, and strong institutional and financial support for export promotion. Additionally, using a computable general equilibrium model, the study also shows that a gradual and combined policy of tariffs and export subsidies may have better overall macroeconomic results, not only in terms of growth, but also in terms of distributional issues, as compared with the neoliberal shock policies, involving import liberalization and large devaluations. This gradual and combined approach is consistent with the policies adopted by Costa Rica in the transition to an ODS; it also helps illustrate the distributional concerns that governments face when choosing a trade policy and development strategy. However, in order for Costa Rica to go beyond an easy stage of export promotion to a deeper export development process and overcome similar problems encountered during the period of import substitution industrialization such as rent seeking, developing an industrial structure with small degrees of value added and increasing trade imbalances and fiscal deficits, it is necessary to transform the productive structure and develop strategic export and import substitution sectors that would give Costa Rica a competitive advantage. The dissertation concludes by proposing a greater role for the state to promote an ODS based on a selective trade strategy and a combined macroeconomic policy of maintaining a realistic exchange rate and gradual and selective fiscal policies.

This dissertation studies the role of the collective action sector for rural development. A combination of formal modeling, historical and institutional analysis, and econometric methods is used in this research. I develop microeconomic models to analyze the determinants of peasants' decisions to join cooperative institutions, and the corresponding equilibrium fraction of organized peasants. The models suggest multiple organizational equilibria at both local and wider levels. Multiple cooperative equilibria is explained in general by the interplay of two increasing functions: (i) the proportion of cooperators as a function of the expected gains from cooperation, and (ii) the expected gains from cooperation as a function of the proportion of cooperators. The models also study the mechanisms through which cooperation beyond the local level can be achieved. Empirically, I analyze the motivations behind peasants' decisions to organize themselves, and once organized, the ways inequality, gender differences, social capital, and external assistance affect local cooperation. The empirical component of this dissertation is based on fieldwork with peasant organizations in the Paraguayan departments of Concepcion, San Pedro, and Caaguazu carried out between 1995-1996. The results of the fieldwork include two surveys: one of the leadership of 104 peasant committees and the other of 374 peasant households. The most important results of the econometric analysis are that the likelihood of a peasant household joining a peasant organization is an inverse function of higher outside options, the security of her/his landholdings, and the subjective costs of cooperation, and is a positive function of the performance of the cooperative. Cooperative performance is not monotonically related to either the degree of inequality within the community or the level of external assistance; rather, it is of an inverted U-shape form. Cooperative performance increases as the level of women's participation and social capital increases. This dissertation also explores the relationship between democracy and economic development by analyzing the agrarian political economy of Paraguay for the 1954-1996 period. It argues that (i) peasants' organizations play a significant role in rural development and (ii) there is scope for positive synergy between peasants' organizations and the level of political democracy in an agrarian country.

This dissertation examines the consolidation and erosion of the economic and political institutions governing the economic growth process in a small, predominantly agrarian, open economy. In particular, it explains the economic crisis in Paraguay in the 1980s under the military regime (1954-1989). The dissertation asserts that the end of the boom and the later long stagnation was a result of the shift in not only external but also in the internal conditions affecting profitability and investment. The fiscal crisis of the state and the increase of both the Ricardian effect in agriculture and the product wage (as well as the fall of the world market prices of primary commodities and the slowdown of foreign direct investment), undermined the profitability and accumulation. These claims are substantiated by an institutional history, a simple two sectoral model, and econometric estimations.