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on Development |
| By: | Leandro Prados de la Escosura |
| Abstract: | This paper explores the connections between independence from Spain and Portugal and economic backwardness in Latin America. The release of the fiscal burden was offset by higher costs of self-government, while opening up to the international economy represented a handmaiden of growth. Independence had a very different impact across regions and widened regional disparities. The commitment to the colonial mercantilism conditioned the new republics’ performance but, on the whole, GDP per head increased in the half a century after emancipation. It appears that inherited Iberian institutions cannot be blamed for Latin America’s poor performance relative to the US, especially if the scope is widened to include the post-independence performance of former European colonies in Africa and Asia. It is suggested that before jumping to the usual negative assessment of nineteenth century Latin America, a comparison of post-independence performance in other world regions will be required. |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cte:whrepe:wh046816&r=dev |
| By: | Mark Sanders |
| Keywords: | Skill-Bias, Endogenous Growth, Product-Lifecycle |
| JEL: | J23 J24 J31 O15 O31 O33 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:esi:egpdis:2005-03&r=dev |
| By: | Bengtsson, Mikael (Department of Economics); Berggren, Niclas (The Ratio Institute); Jordahl, Henrik (Department of Economics) |
| Abstract: | We conduct an extensive robustness analysis of the relationship between trust and growth for a later time period (the 1990s) and with a bigger sample (63 countries) than previous studies. In addition to robustness tests that focus on model uncertainty, we use Least Trimmed Squares, a robust estimation technique, to identify outliers and investigate how they affect the results. We find that the trust-growth relationship is less robust with respect to empirical specification and to countries in the sample than previously claimed, and that outliers affect the results. Nevertheless trust seems quite important compared with many other growth-regression variables. |
| Keywords: | trust; growth; robustness analysis; extreme bounds analysis; social capital; least trimmed squares; outliers |
| JEL: | O40 Z13 |
| Date: | 2005–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0060&r=dev |
| By: | Fleisher, Belton M. (Ohio State University); Li, Haizheng (Georgia Tech); Li, Shi (Chinese Academy of Social Sciences and IZA Bonn); Wang, Xiaojun (University of Hawaii at Manoa) |
| Abstract: | We estimate selection and sorting effects on the evolution of the private return to schooling for college graduates during China’s between 1988 and 2002. We pay special attention to the changing role of sorting by ability versus budget-constraint effects as China’s education policy has changed from one in which the bulk of direct costs are paid by government for students who pass a rigid set of test to one in which freedom of choice is increasingly the rule for those who can afford to pay for tuition and living expenses while acquiring higher education. We find evidence of substantial sorting gains under the traditional system but that gains have diminished and even become negative as schooling choices widened and participation has become subject to increasing direct private costs. We take this as evidence consistent with the influence of financial constraints on decisions to attend college. |
| Keywords: | return to schooling, sorting gains, heterogeneity, financial constraints, comparative advantage |
| JEL: | J31 J24 O15 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1446&r=dev |
| By: | Meng, Xin (Australian National University); Gong, Xiaodong (Australian National University and IZA Bonn); Wang, Youjuan (Chinese State Statistical Bureau) |
| Abstract: | Although urban China has experienced a rapid income growth over the last twenty years, nutrition intake for the low income group declined in the 1990s. Does this imply a zero or negative income elasticity for the low income group? This paper examines this issue using large representative sample of repeated cross-sectional data for the period 1986-2000. It is found that income elasticities of calorie consumption for urban households are far from zero, and the lower the income level the higher the income elasticity. The main reason for the reduction in calorie consumption for the low income group in the early 1990s was a sharp increase in food price. In addition, in the mid to late 1990s large scale social welfare reform increased households’ need to pay for education, medical, housing expenses and the need to save for future consumption and income uncertainty. These factors seem to have played an important role in suppressing nutrition consumption of the low income group during this period. |
| Keywords: | poverty, income growth, inequality, China |
| JEL: | I31 D31 O40 O15 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1448&r=dev |
| By: | Cervellati, Matteo (Universitat Pompeu Fabra and University of Bologna); Fortunato, Piergiuseppe (University of Bologna); Sunde, Uwe (IZA Bonn) |
| Abstract: | We analyze the endogenous evolution of economic and political institutions and the interdependencies with the process of economic development. Favorable economic institutions ensure the appropriability of rents in form of a state of law. We study the conditions under which a state of law can be implemented under oligarchy, and when democratization is necessary. Inequality in endowments and incomes prolongs the absence of good institutions and delays democratization. Conversely, institutions shape the income distribution. Simulations illustrate how inequality affects the development process and may lead to overtaking and divergence. The implications are in line with historical and empirical evidence. |
| Keywords: | inequality, democratization, institutions, state of law, long-term development |
| JEL: | H10 O20 N10 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1450&r=dev |
| By: | Meng, Xin (Australian National University); Gregory, Robert (Australian National University and IZA Bonn); Wang, Youjuan (Chinese State Statistical Bureau) |
| Abstract: | Although urban China has experienced spectacular income growth over the last two decades, increases in inequality, reduction in social welfare provision, deregulation of grain prices, and increases in income uncertainty in the 1990s have increased urban poverty. Using a large repeated cross-section household survey data from 1986 to 2000, this study maps out the change in income, inequality, and poverty over the 15 year period and investigates the determinants of poverty. It is found that the increase in the poverty rate in the 1990s is associated with the increase in the relative food price, and the need to spend on education, housing and medical care which were previously paid by the state. In addition, the increase in the saving rate of the poor due to an increase in income uncertainty contributes significantly to the increase in poverty measured in terms of expenditure. Even though income growth reduces poverty, the radical reform measures implemented in the 1990s have sufficiently offset this gain that urban poverty is higher in 2000 than in 1986. |
| Keywords: | poverty, income growth, inequality, China |
| JEL: | I31 D31 O40 O15 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1452&r=dev |
| By: | John Rand (Institute of Economics, University of Copenhagen) |
| Abstract: | This paper examines the extent to which borrowing constraints restrict firm access to credit and identifies individual, firm, and loan characteristics, which determine the cost of capital in Vietnamese manufacturing. Using direct information from a Vietnamese enterprise survey I show that 14 percent of the enterprises are credit constrained, and these enterprises would increase their debt holdings by 34 percent if borrowing constraints were relaxed. Moreover, it emerges that informal credit markets play an important role for fast growing firms. Enterprises do not appear to have the necessary time to go through the many administrative difficulties in the formal credit system if they want to "seize the day". Finally, collateralized loans face larger interest rates, explained by the significant influence of "policy lending" in Vietnamese credit markets. |
| Keywords: | financial markets; credit constraints; Vietnam |
| JEL: | O16 O53 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:0501&r=dev |
| By: | George Clarke (World Bank) |
| Abstract: | Previous work has shown that firms in low and middle-income countries in Eastern Europe and Central Asia that feel greater pressure to innovate from their competitors are more likely to introduce new products and services than firms that do not feel pressure (Carlin and others 2001; World Bank 2004). However, competition also appears to affect innovation in other ways. In particular, firms in these countries that face greater price competition appear to be less likely to innovate than other firms (Carlin and others 2001). Clarke assesses how competition and trade policy affect these different aspects of competition and, consequently, assesses their net impact on innovation. He finds that reducing tariffs and enacting and enforcing competition laws modestly increases both the pressure that firms feel regarding innovation and the level of price competition in the domestic economy. The net impact that lower tariffs have on new product and process development appears to be negative but small—for the most part the opposing effects cancel out. In contrast, stricter competition laws and better enforcement of those laws appear to increase the likelihood of new product and process development, especially when competition is treated as endogenous to innovation. This paper—a product of the Growth and Investment Team, Development Research Group—is part of a larger effort in the group to understand the determinants of competition. |
| Keywords: | Industry; International Economics; Private Sector Development |
| Date: | 2005–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3471&r=dev |
| By: | Philip Keefer (World Bank); Razvan Vlaicu |
| Abstract: | Keefer and Vlaicu demonstrate that sharply different policy choices across democracies can be explained as a consequence of differences in the ability of political competitors to make credible pre-electoral commitments to voters. Politicians can overcome their credibility deficit in two ways. First, they can build reputations. This requires that they fulfill preconditions that in practice are costly—informing voters of their promises, tracking those promises, and ensuring that voters turn out on election day. Alternatively, they can rely on intermediaries—patrons—who are already able to make credible commitments to their clients. Endogenizing credibility in this way, the authors find that targeted transfers and corruption are higher and public good provision lower than in democracies in which political competitors can make credible pre-electoral promises. They also argue that in the absence of political credibility, political reliance on patrons enhances welfare in the short run, in contrast to the traditional view that clientelism in politics is a source of significant policy distortion. However, in the long run reliance on patrons may undermine the emergence of credible political parties. The model helps to explain several puzzles. For example, public investment and corruption are higher in young democracies than old; and democratizing reforms succeeded remarkably in Victorian England, in contrast to the more difficult experiences of many democratizing countries, such as the Dominican Republic. This paper—a product of the Growth and Investment Team, Development Research Group—is part of a larger effort in the group to investigate the political economy of development. |
| Keywords: | Governance; Macroecon & Growth; Public Sector Management |
| Date: | 2005–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3472&r=dev |
| By: | Thomas F. Rutherford; David G. Tarr (World Bank); Oleksandr Shepotylo |
| Abstract: | Rutherford, Tarr, and Shepotylo use a computable general equilibrium comparative static model of the Russian economy to assess the impact of accession to the World Trade Organization (WTO) on income distribution and the poor. Their model is innovative in that they incorporate all 55,000 households from the Russian Household Budget Survey as “real” households in the model. This is accomplished because they develop a new algorithm for solving general equilibrium models with a large number of agents. In addition, they include foreign direct investment and Dixit-Stiglitz endogenous productivity effects in their trade and poverty analysis. In the medium term, the authors find that virtually all households gain from Russian WTO accession, with 99.9 percent of the estimated gains falling within a range between 2 and 25 percent increases in household income. They show that their estimates are decisively affected by liberalization of barriers against foreign direct investment in business services sectors and endogenous productivity effects in business services and goods. The authors use their integrated model to assess the error associated with a “top down” approach to micro-simulation. They find that approximation errors introduced by failing to account for income effects in the conventional sequential approach are very small. However, data reconciliation between the national accounts and the household budget survey is important to the results. Despite the estimated gains for virtually all households in the medium term, many households may lose in the short term because of the costs of transition. So, safety nets are crucial for the poorest members of society during the transition. This paper—a product of the Trade Team, Development Research Group—is part of a larger effort in the group to assess the impact of trade on poverty. |
| Keywords: | International Economics; Poverty |
| Date: | 2005–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3473&r=dev |
| By: | Paul Siegel |
| Abstract: | The asset-based approach considers links between households’ productive, social, and locational assets; the policy, institutional, and risk context; household behavior as expressed in livelihood strategies; and well-being outcomes. For sustainable poverty reducing growth, it is critical to examine household asset portfolios and understand how assets interact with the context to influence the selection of livelihood strategies, which in turn determine well-being. Policy reforms can change the context and income-generating potential of assets. Investments can add new assets or increase the efficiency of existing household assets, and also improve households’ risk management capacity to protect assets. After all is said and done, a household’s asset portfolio will determine whether growth and poverty reduction can be achieved and sustained over time. The asset-based framework is amendable to different analytical techniques. Siegel suggests combining quantitative and qualitative spatial and household level analyses (and linked spatial and household level analyses) to deepen understanding of the complex relationships between assets, context, livelihood strategies, and well-being outcomes. This paper—a joint product of the Environmentally and Socially Sustainable Development Vice Presidency and the Rural Development Family, Latin America and the Caribbean Region—is part of a larger effort in the Bank to strengthen analyses and strategies for rural development, and address policy issues and investment priorities. |
| Keywords: | Agriculture; Poverty; Rural Development; Social Development |
| Date: | 2005–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3475&r=dev |
| By: | Inessa Love; Maria Soledad Martinez Peria (World Bank) |
| Abstract: | Using balance sheet information for nearly 6,000 firms between 1994–2003, Love and Martinez Peria investigate recent firm financing patterns in India. They document the overall use of debt and, in particular, the role of bank financing (short-term and long-term), trade credit, intra-business group borrowing, and foreign financing. The authors examine financing patterns over time and explore differences across firms by sector, age, ownership type, export orientation, and, in particular, size. In terms of trends, they find that while debt to asset ratios have been relatively stable, nominal debt growth has slowed down in recent years. At the same time, firms’ repayment capacity, as measured by the interest coverage ratio, has exhibited a U-shaped pattern falling during 1997–99 and recovering in recent years. Throughout the period of study, bank financing as a share of total debt has increased, while borrowing from nonbank financial institutions fell sharply. In terms of differences across firms, the most robust finding is that debt levels increase with firm size. Smaller firms have especially less debt relative to larger firms if they are young (below 10 years since incorporation), if they are in the manufacturing sector, and if they are located in Southern India. Furthermore, while the ratio of debt to assets has been relatively stable for large firms, the authors observe a significant decline for smaller firms. Overall, the findings presented provide suggestive (but not definite) evidence of stronger credit constraints for smaller firms. This paper—a product of the Finance Team, Development Research Group—is part of a larger effort in the department to study access to finance. |
| Keywords: | Domestic Finance |
| Date: | 2005–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3476&r=dev |
| By: | Uwe Deichmann (World Bank); Kai Kaiser; Somik V. Lall (World Bank); Zmarak Shalizi (World Bank) |
| Abstract: | How effective are public interventions in addressing significant regional disparities in formal manufacturing concentration in a developing economy? Deichmann, Kaiser, Lall, and Shalizi examine the aggregate and sectoral geographic concentration of manufacturing industries for Indonesia, and estimate the impact of factors influencing location choice at the firm level. They distinguish between natural advantage, including infrastructure endowments, wage rates, and natural resource endowments, and production externalities, arising from the co-location of firms in the same or complementary industries. The methodology pays special attention to empirically distinguishing the impact of measured production externalities from unobserved local characteristics. Depending on the sector, the authors find that a mix of both forms of regional advantage explains the geographic distribution of firms. Based on the estimated location choice model, they illustrate the potential impacts of policy interventions on manufacturing distribution by simulating the effectiveness of transport improvements on relocation of firms. The findings suggest that improvements in transport infrastructure may only have limited effects in attracting industry to secondary industrial centers outside of Java, especially in sectors already established in leading regions. The findings underscore the challenges for addressing the industrial fortunes of lagging regions, either through local decentralized policy interventions or national policies focused on infrastructure development. This paper—a product of the Infrastructure and Environment Team, Development Research Group—is part of a larger effort in the group to examine the impacts of spatial policy interventions on the location and performance of economic activity. |
| Keywords: | Infrastructure; Industry; Urban Development |
| Date: | 2005–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3477&r=dev |
| By: | Dominique van de Walle (World Bank) |
| Abstract: | In the absence of household level data on participation in public programs, spending allocations and poverty measures across regions of Morocco are used to infer incidence across poor and non-poor groups and to decompose incidence within rural and urban areas separately, as well as to decompose improvements in enrollment rates across poor and non-poor children by gender. Programs appear to be well targeted to the rural poor but not to the urban poor. Substantial benefits accrue to the urban non-poor, while benefits largely bypass the urban poor. The analysis also uncovers evidence of impressive progress in primary and secondary school enrollments for the poor, as well as for poor girls since 1994. However, here too, the gains are concentrated on the rural poor. This paper—a product of the Public Services Team, Development Research Group—is part of a larger effort in the group to assess the incidence and targeting of public expenditures. |
| Keywords: | Poverty |
| Date: | 2005–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3478&r=dev |
| By: | Kathleen Beegle (World Bank); Rajeev H. Dehejia; Roberta Gatti (World Bank) |
| Abstract: | Although there is extensive literature on the determinants of child labor and many initiatives aimed at combating it, there is limited evidence on the consequences of child labor on socioeconomic outcomes such as education, wages, and health. Beegle, Dehejia, and Gatti evaluate the causal effect of child labor participation on these outcomes using panel data from Vietnam and an instrumental variables strategy. Five years subsequent to the child labor experience, they find significant negative effects on school participation and educational attainment, but also find substantially higher earnings for those (young) adults who worked as children. The authors find no significant effects on health. Over a longer horizon, they estimate that from age 30 onward the forgone earnings attributable to lost schooling exceed any earnings gain associated with child labor and that the net present discounted value of child labor is positive for discount rates of 11.5 percent or higher. The authors show that child labor is prevalent among households likely to have higher borrowing costs, that are farther from schools, and whose adult members experienced negative returns to their own education. This evidence suggests that reducing child labor will require facilitating access to credit and will also require households to be forward looking. This paper—a joint product of the Investment and Growth and Poverty Teams, Development Research Group—is part of a larger effort in the group to understand the causes of poverty and child labor. The study was funded by the Research Support Budget under the research project “Child Labor and Access to Credit.” |
| Keywords: | Education; Labor & Employment; Poverty; Rural Development |
| Date: | 2005–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3479&r=dev |
| By: | Jörg Lingens (Author-Workplace-Name: Department of Economics, University of Kassel) |
| Abstract: | In This paper we integrate union wage bargaining into a model in which agents endogenously choose wether they want to invest in education or not. With this we take up a serious drawback in the existing literature on growth an unionisation, namely the assumption that the level of high-skilled labour is exogenously given. The impact of unionisation is that on the one hand high-skilled supply decreases, because with a higher low-skilled wage, the incentive to invest in education decreases. On the other hand high-skilled demand decreases, since investing in R&D decreases with lower production and, hence with less low-skilled employment. The interesting point is that due to a capitalisation effect, the high-skilled supply curve is U-shaped. With this the economy is characterised by multiple equilibria and the net effect of union wage bargaining depends on the equilibrium the economy starts from. The rate of growth could decrease as well as it could increase. |
| Keywords: | Labour Unions, Unemployment, Growth, Skill Formation |
| JEL: | O4 J5 |
| Date: | 2003–02 |
| URL: | http://d.repec.org/n?u=RePEc:kas:wpaper:45/03&r=dev |
| By: | Lorenz Blume (Department of Economics, University of Kassel); Stefan Voigt (Department of Economics, University of Kassel and ICER, Torino) |
| Abstract: | Economists are often skeptical concerning the economic effects of various forms of human rights: it has been argued that basic human rights can make the legal system less efficient but also that extensive social rights are incompatible with market economies. It is argued here that basic human rights are a precondition for other kinds of rights such as property and civil rights and that they are thus efficiency-enhancing. Four different groups of rights are identified. It is asked what effects they have on welfare and growth. The transmission channels through which the different rights affect welfare and growth are identified by estimating their effects on investment in both physical and human capital and overall productivity. Basic human rights have indeed a positive effect on investment, but do not seem to contribute to productivity. Social or emancipatory rights, in turn, are not conducive to investment in physical capital but do contribute to productivity improvements. None of the four groups of rights ever has a significant negative effect on any of the economic variables here included. |
| JEL: | H41 H73 K10 O11 O57 P14 P51 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:kas:wpaper:66/04&r=dev |