nep-dev New Economics Papers
on Development
Issue of 2005‒07‒03
fifteen papers chosen by
Jeong-Joon Lee
Towson University

  1. An empirical investigation of the relationship between inequality and growth By Patrizio Pagano
  3. Road development, economic growth, and poverty reduction in China By Fan, Shenggen; Chan-Kang, Connie
  4. PROGRESA and its impacts on the welfare of rural households in Mexico By Skoufias, Emmanuel
  5. Estimating Euler Equations with Noisy Data: Two Exact GMM Estimators By Sule Alan; Orazio Attanasio; Martin Browning
  6. Is the Speed of Convergence a Good Proxy for the Transitional Growth Path? By Chris Papageorgiou; Fidel Perez-Sebastian
  7. Developing Country Superwomen: Impacts of Trade Liberalisation on Female Market and Domestic Work By Ismaël Fofana; John Cockburn; Bernard Decaluwé
  8. Managerial Skill Acquisition and the Theory of Economic Development By Paul Beaudry; Patrick Francois
  9. Accounting for the Effect of Health on Economic Growth By David N. Weil
  10. The Indian Ocean Tsunami: Economic Impact, Disaster Management and Lessons By Prema-chandra Athukorala; Budy P. Resosudarmo
  11. Hours Worked: Long-Run Trends By Jeremy Greenwood; Guillaume Vandenbroucke
  12. Endogenous Growth in the Presence of Informal Credit Markets: A Comparative Analysis Between Credit Rationing and Self-Revelation Regimes By Basab Dasupta
  13. Social Capital, Public Spending and the Quality of Economic Development By Fabio Sabatini
  14. New Estimates of Government Net Capital Stocks for 22 OECD Countries 1960-2001 By Christophe Kamps
  15. The Location Decisions of Foreign Logistics Firms in China: Does Transport Network Capacity Matter? By Anthony Chin; Hong Junjie

  1. By: Patrizio Pagano (Bank of Italy, Economic Research Department)
    Abstract: This paper studies the correlation between inequality, measured by the Gini coefficent of incomes, and the growth rate of per capita GDP in a panel of countries between the late 1950s and late 1990s. Inequality Granger causes growth with a negative coefficient, while growth Granger causes inequality with a positive sign. Quantitatively, the former effect appears much larger than the latter. Once I allow for the effect to differ between rich and poor countries interesting differences emerge. While lagged inequality appears positively correlated with growth in the subgroup of rich countries, in poor countries besides a negative and significant effect of lagged inequality on growth there is a negative and significant effect of lagged growth on inequality
    Keywords: growth; inequality; panel; GMM; Granger causality
    JEL: O11 O40 D3 C23
    Date: 2004–12
  2. By: Leandro Prados de la Escosura
    Abstract: How have growth and inequality affected poverty reduction in Latin America over the long run? On the basis of the available evidence on growth and inequality tentative answers and conjectures are proposed about the long run evolution of poverty in Latin America. Modern Latin America experienced sustained growth since mid nineteenth century only brought to a halt during the 1980s. Inequality, in turn, rose steadily until a high plateau in which it has stabilized over the last four decades of the twentieth century. A calibration exercise on the basis of López and Servén (2005) recent empirical research suggests that absolute poverty has experienced a long-run decline in Latin America since the late nineteenth century, interrupted in the 1890s and the 1930s, and only reversed in the 1980s. Growth emerges as the main element underlying the reduction in absolute poverty, and almost exclusively in the second half of the twentieth century.
    Date: 2005–06
  3. By: Fan, Shenggen; Chan-Kang, Connie
    Abstract: "Since 1985, the Chinese government has given high priority to building roads, particularly high-quality roads that connect industrial centers. This report evaluates the contribution roads have made to poverty reduction and economic growth in China over the last two decades. It disaggregates road infrastructure into different classes to account for differences in their quality, and then estimates the impact of road investments on overall economic growth, agricultural growth, urban growth, urban poverty reduction, and rural poverty reduction. The report makes the case for a greater focus on low-quality and rural roads in future infrastructure investment strategies in China. It does so by showing how investing in low-quality and rural roads will generate larger marginal returns, raise more people out of poverty per yuan invested, and reduce regional development disparity more sharply than investing in high-quality roads. The study's findings will have considerable implications for China's infrastructure policy." Authors' Abstract
    Keywords: Human capital ,
    Date: 2005
  4. By: Skoufias, Emmanuel
    Abstract: "This document synthesizes the findings contained in a series of reports prepared by IFPRI for PROGRESA between November 1998 and November 2000... PROGRESA is one of the major programs of the Mexican government aimed at developing the human capital of poor households. Targeting its benefits directly to the population in extreme poverty in rural areas, PROGRESA aims to alleviate current and future poverty levels through cash transfers to mothers in households.... One of the most important contributions of IFPRI's evaluation of PROGRESA has been the continuation of the program in spite of the historic change in the government of Mexico in the 2000 elections. The overwhelming (and unprecedented) evidence that a poverty alleviation program shows strong signs of having a significant impact on the welfare and human capital investment of poor rural families in Mexico has contributed to the decision of the Fox administration to continue with the program and to expand its coverage in the poor urban areas of the country after some improvements in the design of the program.... The majority of the improvements in the design of PROGRESA (renamed Oportunidades by the Fox administration) were based on findings of the evaluation of PROGRESA that revealed areas of needed improvements in some of the structural components and the operation of the program... Yet in spite of these improvements in the program, the evaluation findings suggest that some issues remain to be resolved." from Text
    Keywords: Rural poor Government policy Mexico ,Poverty Government policy Mexico ,Mexico Social policy ,
    Date: 2005
  5. By: Sule Alan (Department of Economics, York University, Toronto); Orazio Attanasio (Department of Economics, University College London); Martin Browning (Institute of Economics, University of Copenhagen)
    Abstract: In this paper we exploit the specific structure of the Euler equation and develop two alternative GMM estimators that deal explicitly with measurement error. The first estimator assumes that the measurement error is lognormally distributed. The second estimator drops the distributional assumption and solves out for the unknown, but constant, conditional mean. Our Monte Carlo results suggest that both proposed estimators perform much better than conventional alternatives based on the exact Euler equation or its log-linear approximation, especially with short panels.
    Keywords: nonlinear models; measurement error; Euler equation
    JEL: C13 E21
    Date: 2005–05
  6. By: Chris Papageorgiou; Fidel Perez-Sebastian
    Abstract: This paper compares transitional dynamics in two alternative R&D non-scale growth models, one includes endogenous human capital, whereas the other does not. We show that focusing on the speed of convergence to discriminate between the two models can be misleading. Our analysis suggest that a better alternative to discriminate between different growth theories is studying the whole adjustment path predicted by them. In addition, we find that the introduction of human capital makes the speed of convergence predicted by the model much less sensitive to exogenous shocks. This last result offers theoretical support to the similar convergence speeds estimated by the literature in different samples.
  7. By: Ismaël Fofana; John Cockburn; Bernard Decaluwé
    Abstract: This study analyses the effects of trade liberalisation on male and female work in Nepal. Our contribution is principally based upon the leisure activities modeling on one hand, and the effects of male participation in domestic work with trade policy analysis on the other hand. While previous studies explicitly incorporate leisure activities that required data about which little is known, we use a microeconomic model and alternative calibration procedures to avoid arbitrariness. The experiment conducted in this study shows that the complete elimination of tariffs on imported goods in Nepal benefits women more than men in terms of earnings as their wage increases relatively to men. Generally, female market work expands in rural households and contracts in urban households. It appears that the entrance into market production has not been met with an equivalent reduction in the time they spend in domestic work. Consequently the leisure time of women declines as they enter the labor market. Furthermore, the study indicates that leisure time consumed by men, which is already greater than that consumed by women, increases with trade reform. The extend of male participation in domestic work significantly conditions the impacts on male and female wage rates and household labor supply decisions. When male participation in domestic work activities is low, women generally devote less time to market labor. However, their contribution to household income strill increases following trade reform as their wage rates rise relative to male market wage rates. Women are more responsive to the market when there is greatest scope to substitute between female domestic and market work, as occurs when men are more involved in domestic work. However, even in these cases their domestic work does not necessarily decrease in the same proportion.
    Keywords: Nepal, trade, gender, leisure, home production, and computable general equilibrium
    JEL: C68 F14 F17 J16
    Date: 2005
  8. By: Paul Beaudry; Patrick Francois
    Abstract: Micro level studies in developing countries suggest managerial skills play a key role in the adoption of modern technologies. The human resources literature suggests that managerial skills are difficult to codify and learn formally, but instead tend to be learned on the job. In this paper we present a model of the interactive process between on-the-job managerial skill acquisition and the adoption of modern technology. The environment considered is one where all learning possibilities are internalized in the market, and where managers are complementary inputs to non-managerial workers. The paper illustrates why some countries may adopt modern technologies while others stay backwards. The paper also explains why managers may not want to migrate from rich countries to poor countries as would be needed to generate income convergence.
    JEL: O14 O33
    Date: 2005–07
  9. By: David N. Weil
    Abstract: I use microeconomic estimates of the effect of health on individual outcomes to construct macroeconomic estimates of the proximate effect of health on GDP per capita. I use a variety of methods to construct estimates of the return to health, which I combine with cross-country and historical data on several health indicators including height, adult survival, and age at menarche. My preferred estimate of the share of cross-country variance in log income per worker explained by variation in health is 22.6%, roughly the same as the share accounted for by human capital from education, and larger than the share accounted for by physical capital. I present alternative estimates ranging between 9.5% and 29.5%. My preferred estimate of the reduction in world income variance that would result from eliminating health variations among countries is 36.6%.
    JEL: I1 O1 O4
    Date: 2005–07
  10. By: Prema-chandra Athukorala; Budy P. Resosudarmo
    Abstract: The purpose of this paper is to document and analyze the immediate economic impact of the Indian Ocean tsunami generated by the Sumatra-Andaman earthquake of 26 December 2004 and the disaster management process in the immediate aftermath of the disaster with a focus on the two worst affected countries - Indonesia (Aceh province) and Sri Lanka. The 26 December Tsunami is unique among large disasters in recorded human history, not only because of the sheer number of causalities and massive displacement of people, but also because of the unprecedented international donor response and the logistic challenges faced by international organizations and aid agencies in organizing and coordinating relief efforts. Our preliminary findings points to the importance of educating the public about simple precautions in the event of a disaster and enforcement of coastal environmental regulations as disaster prevention policies. The findings also makes a strong case for designing policies and programs, as an integral part of national development strategy, for mitigating the impact of natural disasters on the poor and highlights the need for combining international aid commitments with innovative approaches to redressing problems of limited aid absorptive capacity in disaster affected countries.
    Keywords: tsunami, disaster management, Indonesia, Sri Lanka Length (pages): 56
    JEL: I32 O53 Q54
    Date: 2005–05
  11. By: Jeremy Greenwood (University of Rochester); Guillaume Vandenbroucke (University of Rochester)
    Abstract: For 200 years the average number of hours worked per worker declined, both in the market place and in the home. Technological progress is the engine of such transformation. Three mechanisms are stressed: (i) The rise in real wages and its corresponding wealth effect; (ii) The enhanced value of time off from work, due to the advent of time-using leisure goods; (iii) The reduced need for housework, due to the introduction of time-saving appliances. These mechanisms are incorporated into a model of household production. The notion of Edgeworth-Pareto complementarity/substitutability is key to the analysis. Numerical examples link theory and data.
    Keywords: Hours worked, leisure, housework, household production, Edgeworth-Pareto complementarity/substitutability, technological progress
    JEL: E24 J22 O11 O33
    Date: 2005–06
  12. By: Basab Dasupta (University of Connecticut)
    Abstract: This paper examines whether the presence of informal credit markets reduces the cost of credit rationing in terms of growth. In a dynamic general equilibrium framework, we assume that firms are heterogenous with different degrees of risk and households invest in human capital development. With the help of Indian household level data we show that the informal market reduces the cost of rationing by increasing the growth rate by 0.7 percent. This higher growth rate, in the presence of an informal sector, is due to the ability of the informal market to separate the high risk from the low risk firms thanks to better information. But even after such improvement we do not get the optimum outcome. The findings, based on our second question, suggest that the revelation of firms' type, based on incentive compatible pricing, can lead to almost 2 percent higher growth rate as compared to the credit rationing regime with informal sector.
    Keywords: credit rationing, informal credit markets, self revelation mechanism
    JEL: O16 O17
    Date: 2005–06
  13. By: Fabio Sabatini (University of Rome La Sapienza)
    Abstract: This paper carries out an empirical assessment of the relationship between social capital and the quality of economic development in Italy. The analysis draws on a dataset collected by the author including about two hundred variables representing different aspects of economic development and four “structural” dimensions of social capital. The quality of development is measured through human development and indicators of the state of health of urban ecosystems, public services, gender equality, and labour markets, while social capital is measured through synthetic indicators representing strong family ties, weak informal ties, voluntary organizations, and political participation. The quality of development exhibits a strong positive correlation with bridging weak ties and a negative correlation with strong family ties. Particularly, the analysis shows a strong correlation between informal ties and an indicator of “social well-being” (synthetizing gender equality, public services and labour markets) and between voluntary organizations and the state of health of urban ecosystems. Active political participation proves to be irrelevant in terms of development and well-being. Finally, the role of public spending for education, health care, welfare work, and the environment protection is analysed, revealing a scarce correlation both with social capital and development indicators.
    Keywords: Social capital, Social networks, Public spending, Economic development, Principal component analysis
    JEL: O15 O18 R11
    Date: 2005–06–29
  14. By: Christophe Kamps (Kiel Institute for World Economics)
    Abstract: The issue of whether government capital is productive has received a great deal of recent attention. Yet empirical analyses of public capital productivity have generally been limited to the official capital stock estimates available in a small sample of countries. Alternatively, many researchers have investigated the output effects of public investment- recognizing that investment may be a poor proxy for the corresponding capital stock. This paper attempts to overcome the data shortage by providing internationally comparable capital stock estimates for 22 Organization for Economic Cooperation and Development (OECD) countries.
    Keywords: Capital stock, capital goods, public capital, perpetual inventory method, OECD countries, public investment, productivity
    JEL: C82 E22 E62 H54
    Date: 2005–06–23
  15. By: Anthony Chin (Department of Economics, National University of Singapore); Hong Junjie (School of International Trade and Economics, University of International Business and Economics, Beijng, China)
    Abstract: In recent years the logistic needs have created tremendous pressure on the ‘hard’ transport infrastructure. Logistics and the harness of information technology are the key facilitators of mobility. The Chinese logistics market is still in its infancy and creates tremendous opportunities for investors. It recognized as one of important driving forces both for national economy and business. Beijing, Tianjin, Shanghai, Shenzhen and Guanzhou aspire to be regional or international logistics hubs and have adopted preferential policies in attracting FDIs in logistics. From 1996 to 2001, foreign capital invested in transportation, storage, post and telecommunications increased from USD6.96 billion to USD15.16 billion. This study looks at the location decisions of foreign logistics firms and identifies with the aid of a multinomial logit model factors that are crucial in attracting them to China. This is important as they have an important role to play in filling in the gap left by traditional Chinese firms, which largely concentrate, on warehousing and distribution. The results suggest that location of logistics firms depends on transport infrastructure, market size, labor quality and cost, agglomeration economies, communication cost, economic privatization degree, as well as government incentives. The importance of the above factors varies by source of region. European and North American firms favor higher population densities, lower labor cost, convenient airway transport and large cities while logistics firms from Hong Kong, Macao and Taiwan put more emphasis on communication infrastructure.

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