nep-dev New Economics Papers
on Development
Issue of 2005‒07‒11
twelve papers chosen by
Jeong-Joon Lee
Towson University

  1. Dual Economies and International Total Factor Productivity Differences By Areendam Chanda; Carl-Johan Dalgaard
  2. Ownership biases and FDI in China: two provinces By Huang, Yasheng
  3. Democracy and Economic Development: a Fuzzy Classification Approach By Ana Margarida Oliveira Brochado; Francisco Vitorino Martins
  4. Does Trade Openness Affect the Speed of Output Convergence? Some Empirical Evidence By David E. Giles; Chad N. Stroomer
  5. China’s Economic Growth 1978-2025: What We Know Today about China’s Economic Growth Tomorrow By Carsten A. Holz
  6. Child Labor, Fertility and Economic Growth By Moshe Hazan; Binyamin Berdugo
  7. Migration, Risk and Liquidity Constraints in El Salvador By Timothy Halliday
  8. Rural Financial Markets in Developing Countries By Jonathan Conning; Christopher Udry
  9. Human Development: Beyond the HDI By Gustav Ranis; Frances Stewart; Emma Samman
  10. Regulation and Growth Across Countries By John W. Dawson
  11. Regulation and the Macroeconomy: A Cointegration Approach By John W. Dawson
  12. Availability of Higher Education and Long-Term Economic Growth By Akiomi Kitagawa; Ryo Horii; Koichi Futagami

  1. By: Areendam Chanda; Carl-Johan Dalgaard
    Abstract: This paper shows that a significant part of measured total factor productivity (TFP) differences across countries is attributable not to technological factors that affect the entire economy neutrally, but rather, to variations in the structural composition of economies. In particular, the allocation of scarce inputs between agriculture and non-agriculture is important. We provide a framework which maps the composition of the economy to measured aggregate TFP. A decomposition analysis suggests that as much as 85 percent of the international variation in TFP can be attributed to the composition of output. Estimation exercises indicate that recent findings of the conduciveness of good institutions, and, to some extent trade, on levels of TFP, may be thus explained.
  2. By: Huang, Yasheng
    Abstract: Jiangsu and Zhejiang are of two of China most prosperous and dynamic provinces. This paper first presents a factual account of two empirical phenomena: 1) FDI has played a more substantial role in the economic development of Jiangsu than in Zhejiang, and 2) ownership biases against domestic private firms in Jiangsu were more substantial than in Zhejiang. The paper hypothesizes that there is a connection between these two empirical phenomena. Specifically, ownership biases against domestic private firms increase preferences for FDI because FDI provides a measure of relative property rights security. Thus a biased domestic private firm has an incentive to move its assets and/or future growth opportunities to the foreign sector. The paper uses two private-sector surveys - one conducted in 1993 and the other in 2002 - to provide an empirical test of this hypothesis. Our analysis shows, controlling for a variety of firm-level attributes and industry and regional characteristics, those private firms which perceive ownership biases to be more severe are more likely to form joint ventures with foreign firms.
    Keywords: Ownership Biases, FDI, China,
    Date: 2005–06–03
  3. By: Ana Margarida Oliveira Brochado (Faculdade de Economia, Universidade do Porto); Francisco Vitorino Martins (Faculdade de Economia, Universidade do Porto)
    Abstract: The aim of this work is to (1) analyse whether countries differ on political indicators (democracy, rule of law, government effectiveness and corruption) and (2) study whether countries with different political profiles are associated with different levels of economic, human development and gender-related development indicators. Using a fuzzy classification approach (fuzzy k-means algorithm), we propose a typology of 124 countries based on 10 political variables. Six segments are identified; these political groups implicate the access to different levels of economic and human development. In this study evidence of a positive but not perfect relationship between democracy and economic and human development is observed, thus presenting new insights for the understanding of the heterogeneity of behaviors relatively to political indicators.
    Keywords: Democracy, Economic Development, Fuzzy k-means
    JEL: C21 C61 O10 O57
    Date: 2005–07
  4. By: David E. Giles (Department of Economics, University of Victoria); Chad N. Stroomer (Department of Economics, University of Victoria)
    Abstract: In this paper we develop flexible techniques for measuring the speed of output convergence between countries when such convergence may be of an unknown non-linear form. We then calculate these convergence speeds for various countries, in terms of half-lives, using a time-series data-set for 88 countries. These calculations are based on both nonparametric kernel regression and ‘fuzzy’ regression, and the results are compared with more restrictive estimates based on the assumption of linear convergence. The calculated half-lives are regressed, again in various flexible ways, on cross-section data for the degree of openness to trade. We find evidence that favours the hypothesis that increased trade openness is associated with a faster rate of convergence in output between countries.
    Keywords: Trade openness, output convergence, fuzzy clustering, robust regression, Lyapunov coefficient
    JEL: C14 C21 C22 F15 F43 O4
    Date: 2005–07–04
  5. By: Carsten A. Holz (Hong Kong University of Science & Technology)
    Abstract: Views of the future China vary widely. While some believe that the collapse of China is inevitable, others see the emergence of a new superpower that increasingly poses a threat to the U.S. This paper examines the economic growth prospects of China over the next two decades. Extrapolating past real GDP growth rates into the future, the size of the Chinese economy surpasses that of the U.S. in purchasing power terms between 2012 and 2015; by 2025, China is likely to be the world's largest economic power by almost any measure. The extrapolations are supported by two types of considerations. First, China’s growth patterns of the past 25 years since the beginning of economic reforms match well those identified by standard economic development and trade theories (structural change, catching up, and factor price equalization). Second, decomposing China’s GDP growth into growth of labor and other variables, the near-certain information available today about the quantity and quality of Chinese laborers through 2015 and possibly several years after allows inferences about future GDP growth. Short of some cataclysmic event, and given a continuation of the generally sound economic policies of the past, demographics alone suggests China’s continued economic rise. If talent is randomly distributed in the world population and if agglomeration of talent is important, then the odds are strongly in China’s favor.
    Keywords: economic growth, growth accounting, growth forecasts, development theories, human capital formation, education (all: China)
    JEL: O1 O10 O11 O4 O40 O47 O53 J11 O3 I21
    Date: 2005–07–03
  6. By: Moshe Hazan (Hebrew University); Binyamin Berdugo (Ben Gurion University)
    Abstract: This paper explores the evolution of child labor, fertility, and human capital in the process of development. In early stages of development the economy is in a development trap where child labor is abundant, fertility is high and output per capita is low. Technological progress, however, increases gradually the wage differential between parental and child labor, thereby inducing parents to substitute child education for child labor and reduce fertility. The economy takes-off to a sustained growth steady-state equilibrium where child labor is abolished and fertility is low. Prohibition of child labor expedites the transition process and generates Pareto dominating outcome.
    JEL: J13 J20 O11 O40
    Date: 2005–07–04
  7. By: Timothy Halliday (Department of Economics, University of Hawaii at Manoa; John A. Burns School of Medicine, University of Hawaii at Manoa)
    Abstract: This paper utilizes panel data from El Salvador to investigate the use of trans-national migration as an ex post risk management strategy. We show that adverse agricultural conditions in El Salvador increase both migration to the US and remittances sent back to El Salvador. We show that, in the absence of any agricultural shocks, the probability that a household sent members to the US would have decreased by 24.26%, on average. We also show that the 2001 earthquakes reduced net migration to the US. A one standard deviation increase in earthquake damage reduced the average probability of northward migration by 37.11%. The evidence suggests that the effects of the earthquakes had more to do with households retaining labor at home to cope with the effects of the disaster rather than the earthquakes disrupting migration financing.
    Keywords: Migration, Insurance, Liquidity Constraints
    JEL: O1
    Date: 2005
  8. By: Jonathan Conning (Hunter College, City University of New York); Christopher Udry (Economic Growth Center, Yale University)
    Abstract: This review examines portions of the vast literature on rural financial markets and household behavior in the face of risk and uncertainty. We place particular emphasis on studying the important role of financial intermediaries, competition and regulation in shaping the changing structure and organization of rural markets, rather than on household strategies and bilateral contracting. Our goal is to provide a framework within which the evolution of financial intermediation in rural economies can be understood.
    Keywords: Rural Finance, Financial Intermediation, Agricultural Credit
    JEL: O16 Q14 O17 O12
  9. By: Gustav Ranis (Economic Growth Center, Yale University); Frances Stewart (Oxford University); Emma Samman (Oxford University)
    Abstract: This paper explores ways of enlarging the measurement and understanding of Human Development (HD) beyond the relatively reductionist Human Development Index. From the extensive literature on well-being, we derived eleven categories of HD. Within each category, we then identified a potential set of indicators which were measurable and reflect performance with respect to that category. In order to reduce the number of indicators representing each category, we included only one for any set highly rank order correlated with each other, as well as including indicators not correlated with any other indicator in that category. Our aim was to retain only indicators which are broadly independent of each other.
    Keywords: Human Development, Quality of Life, Comparative Country Performance
    JEL: I31 O15 O57
  10. By: John W. Dawson
    Abstract: This paper uses cross-country regulation data to estimate the relationship between regulation and long-run growth in a large sample of countries. The empirical results suggest that business regulations have a negative impact on growth even when the level of economic freedom is also included in the model. Credit market regulations, however, are found to have a positive impact on investment rates across countries. Volatility in the regulatory regime is found to be negatively related to growth, even when the level and volatility of economic freedom is included in the model. The results suggest interesting implications with respect to policy toward regulatory reform.
    Date: 2003
  11. By: John W. Dawson
    Abstract: This paper uses the number of pages in the Code of Federal Regulations to investigate the empirical relationship between federal regulation and macroeconomic performance in the U.S. The analysis extends the work of previous studies by using an aggregate production function framework and cointegration methodology. The results suggest that regulation generally is negatively related to aggregate economic performance in both the short run and the long run. Some specific areas of regulation are also found to have important long-run effects on economic activity, some positive and some negative.
    JEL: L50 O40
    Date: 2005
  12. By: Akiomi Kitagawa (Faculty of Economics and Business Administration, Yokohama City University); Ryo Horii (Graduate School of Economics, Osaka University); Koichi Futagami (Graduate School of Economics, Osaka University)
    Abstract: This paper examines the relationship between the availability of higher education and an economyfs long-term growth rate in a simple endogenous growth model with overlapping generations. Under certain conditions, an increased availability of higher education narrows the rate-of-return difference between human and physical capital investments. This reduces the share of income received by the younger generation, negatively affecting aggregate savings in subsequent periods, and thereby causing a substantial slowdown in the long-term growth rate. Such a paradoxical slowdown is endemic to developed economies, where higher education plays a central role in accumulating human capital. Although the recovery from such a slowdown entails a major restructuring of educational institutions, the authority may not take preventative measures against it, being dazzled by a temporary boom during its early stages.
    JEL: O41 I28
    Date: 2003–11

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