In this paper we suggest an improved methodology for comparing the intensity of trade across and within national and provincial boundaries. Earlier efforts to assess border effects for provinces or for countries without internal trade statistics made fairly arbitrary assumptions about average distances for internal trade flows. We improve on earlier efforts by taking more complete account of the distribution of population within each province or country. Internal distance is estimated as a population-weighted average of intra-city and intercity distances as well as distances to and within rural areas. We find higher estimates of internal distances, and hence border effects, than found in previous studies.A propos de la mesure des distances dans le commerce intérieur: une nouvelle méthodologie appliquée à l'évaluation des effets des frontières provinciales au Canada. Ce mémoire propose une méthodologie améliorée pour comparer l'intensité du commerce entre regions séparées par des frontières provinciales et nationales. Des travaux antérieurs ont calibré les effets de frontières provinciales et nationales en l'absence de statistiques précises sur le commerce intérieur à l'aide de postulats assez arbitraires quant aux distances moyennes pour les flux de commerce intérieur. Les auteurs améliorent ces calibrations en tenant davantage compte de la repartition de la population à l'intérieur de chaque province ou chaque pays. On mesure les distances intérieures en définissant des moyennes pondérées pour tenir compte de la population pour les distances à l'intérieur des villes, entre les villes, ainsi qu'à l'intérieur et entre les zones rurales. Il s'avère que les mesures de distances internes et donc des effets de frontières sont plus élevées que dans les études antérieures. This is a revised and renamed version of Helliwell and . We are grateful to an anonymous referee for several helpful suggestions, including, especially, the generalization from a square to rectangular form.

How do firm‐specific actions—in particular, innovation—affect firm productivity? What is the role of the financial sector in facilitating higher productivity? Using a rich firm‐level data set, we find that innovation is crucial for firm performance as it directly and measurably increases productivity. The impact of innovation on productivity is larger in less‐developed countries. Evidence of financial sector development influencing the innovation‐productivity link is weak, but the effect is difficult to identify due to correlation between indicators of a country's financial and nonfinancial development. Furthermore, we find evidence that the innovation effect on productivity is more significant for high‐tech firms than for low‐tech firms.

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Only a minority of countries have succeeded in establishing a developed financial system, despite widespread financial liberalization. Confronted with this finding, the "political institutions view" claims that sustained financial deepening is most likely to take place in institutional environments where governments effectively impose constraints on their own powers in order to create trust. This paper identifies over 200 post-1960 episodes of accelerations in financial development in a large cross-section of countries. We find that the likelihood of an acceleration leading to sustained financial development increases greatly in environments that have high-quality political institutions.

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This Working Paper should not be reported as representing the views of the IMFThe views expressed in this Working Paper are those of the authors and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the authors and are published to elicit comments and to further debate.Lucas (2004) asserts that "Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution... The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production." In this paper we evaluate this claim using an extended version of Lucas' (1987) welfare-evaluation framework. Surprisingly, we find that the welfare costs of inequality outweigh the benefits of growth in most cases. These calculations support the case for a research agenda that treats not only growth but also inequality as a priority. JEL Classification Numbers: E1, E2, D3