nep-dev New Economics Papers
on Development
Issue of 2006‒02‒05
28 papers chosen by
Jeong-Joon Lee
Towson University

  2. Governance, Democracy and Poverty Reduction: Lessons drawn from household surveys in sub-Saharan Africa and Latin America By Javier Herrera; Mireille Razafindrakoto; Francois Roubaud
  3. Development, A question of Opportunity. A critique of the 2006 World Development Report, Equity and Development By Jean-Pierre Cling; Denis Cogneau; Jacques Loup; Jean-David Naudet; Mireille Razafindrakoto; Francois Roubaud
  4. Corruption and the Shadow Economy: An Empirical Analysis By Axel Dreher; Friedrich Schneider;
  5. Institutions and Economic Performance: Endogeneity and Parameter Heterogeneity By Eicher, Theo; Leukert, Andreas
  6. An Empirical Contribution to Knowledge Production and Economic Growth By Mosahid Khan; Kul B. Luintel
  7. Endogenous Mortality, Human Capital and Endogenous Growth By Osang, Thomas; Sarkar, Jayanta
  8. Access to financial services in Colombia : the " unbanked " in Bogota By Manroth, Astrid; Solo, Tova Maria
  9. Trade, inequality, and the political economy of institutions By Levchenko, Andrei A.; Do, Quy-Toan
  10. The impact of regional trade agreements and trade facilitation in the Middle East and North Africa region By Dennis, Allen
  11. Remittances and poverty in Ghana By Adams, Richard H. Jr.
  12. Estimating trade restrictiveness indices By Olarreaga, Marcelo; Nicita, Alessandro; Kee, Hiau Looi
  13. Export led growth, pro-poor or not? Evidence from Madagascar ' s textile and apparel industry By Nicita, Alessandro
  14. Does migration reshape expenditures in rural households? Evidence from Mexico By Mora, Jorge; Taylor, J. Edward
  15. Regional subsidies and industrial prospects of lagging regions By Timmins, Christopher; Lall, Somik V.; Carvalho, Alexandre
  16. Growth and Spatial Dependence - The Mankiw, Romer and Weil model revisited By Cem Ertur; Thiaw Kalidou
  17. Quality capital and economic growth By Fernando Barreiro-Pereira
  18. The Evolution of Gender Earnings Gaps and Discrimination in Urban China: 1988-1995 By Sylvie DEMURGER; Martin FOURNIER; CHEN Yi
  21. TECHNOLOGICAL PROGRESS AND DEPRECIATION By Raouf Boucekkine; Blanca Martínez; Fernando del Río
  22. SOVEREIGN RISK, FDI SPILLOVERS, AND ECONOMIC GROWTH By Fidel Pérez Sebastián; Lilia Maliar; Serguei Maliar
  26. Demographic Externalities from Poverty Programs in Developing Countries: Experimental Evidence from Latin America By Guy Stecklov; Paul Winters; Jessica Todd; Ferdinando Regalia
  27. Relative Prices and the Fallacy of Composition in Manufacturing-Based, Export-Led Growth: An Empirical Investigation By Robert A. Blecker; Arslan Razmi
  28. On the Impact of Private Capital Flows on Economic Growth and Development. By Laurent Gheeraert; Joffrey Malek Mansour

  1. By: Jairo Nuñez; Silvia Espinosa
    Abstract: This paper analyzes the relationship between growth, poverty and income distribution using household data for Colombia for the years 1996 to 2004. We study the relationship between growth, inequality and poverty by following the Poverty Equivalent Growth Rate (PEGR) methodology developed by Kakwani and Khandker, which considers both the magnitude of growth and the degree to which the poor benefit from the growth process. We also carry out a decomposition of the changes in poverty to better understand the effects of growth, distribution and migration on poverty. Once we have explored pro-poor growth, we move on to study the pro-poorness of Colombia’s main social programs using Kakwani and Son’s “Pro-Poor Policy” index. The results show that growth in Colombia has generally been anti-poor, a consequence of high inequality in the urban sector and of low growth rates in the rural sector. Moreover, more than half of Colombia’s social programs are also anti-poor, benefiting the non-poor to a larger extent than the poor
    Date: 2005–09–01
  2. By: Javier Herrera (DIAL, Paris); Mireille Razafindrakoto (DIAL, Paris); Francois Roubaud (DIAL, Paris)
    Abstract: Public statistics face quite a challenge when it comes to measuring new dimensions of development (institutions, governance, and social and political participation). To take up this challenge, modules on Governance, Democracy and Multiple Dimensions of Poverty have been appended to household surveys by National Statistics Institutes in twelve African and Latin-American developing countries. This paper presents the issues addressed and the methodological lessons learnt along with a selection of findings to illustrate this innovative approach and demonstrate its analytic potential. We investigate, for instance, the population’s support for democratic principles, the respect for civil and political rights and the trust in the political class; the “need for the State”, particularly of the poorest; the extent of petty corruption; the reliability of expert surveys on governance; the perception of decentralisation policies at local level; the level and vitality of social and political participation, etc. The conclusive appraisal made opens up prospects for the national statistical information systems in the developing countries. The measurement and tracking of this new set of objective and subjective public policy monitoring indicators would benefit from being made systematic.
    Keywords: Africa, Latin America, Democracy, Monitoring Mechanism, Household Surveys,
    JEL: I31 I32 I38 H11 D73 O54 O55
    Date: 2006–01–06
  3. By: Jean-Pierre Cling (DIAL, Paris); Denis Cogneau (IRD-Paris, DIAL); Jacques Loup (AFD); Jean-David Naudet (AFD); Mireille Razafindrakoto (IRD-Paris, DIAL); Francois Roubaud (IRD-Paris, DIAL)
    Abstract: The World Bank’s World Development Report 2006 addresses Equity and Development. It defines equity as respect for equal opportunities combined with the avoidance of absolute deprivation. Even though justice theories have long been interested in equity (given that equality of opportunity is one of the recognised values of Western society), it has hitherto remained a marginal issue in development economics. Our critique presents a detailed analysis of this report in the light of recent economic studies on this subject and endeavours to place it in the context of the evolution of World Bank thinking and policies. The first part illustrates the wealth of this concept, with its downside being that it is hard to accurately define. The second part demonstrates the gap between the prospects opened up by the enlargement of the development goals beyond poverty reduction and the report’s policy recommendations, which are generally an extension of the World Bank’s traditional analyses. The future of the equity concept for development policy-making could be closely dependent on the development community’s ability to take on board both all its complexity and wealth.
    Date: 2006–01–06
  4. By: Axel Dreher (Swiss Federal Institute of Technology, Zurich); Friedrich Schneider (University of Linz and IZA Bonn);
    Abstract: This paper analyzes the influence of the shadow economy on corruption and vice versa. We hypothesize that corruption and shadow economy are substitutes in high income countries while they are complements in low income countries. The hypotheses are tested for a crosssection of 120 countries and a panel of 70 countries for the period 1994-2002. Our results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. We also find that stricter regulations increase both corruption and the shadow economy.
    Keywords: corruption, shadow economy, regulation, tax burden
    JEL: D73 H26 O17 O5
    Date: 2006–01
  5. By: Eicher, Theo; Leukert, Andreas
    Abstract: The hallmark of the recent development and growth literature is a quest to identify institutions that explain a significant portion of the observed differences in living standards across countries. Empirical work in the area focuses almost exclusively on either the global sample or on developing nations. Certainly it is important to know which institutions are lacking in these developing countries, but the analysis provides little evidence for us to know to what extend a common set of institutions actually matters in advanced and developing countries. In this paper we examine parameter heterogeneity in prominent approaches to institutions and economic performance. We find that a new set of instruments is necessary to control for endogeneity, but that a common set of economically important institutions does indeed exist among advanced and developing nations. The impact of these institutions does vary substantially across samples; it is about three times as high in developing countries as compared to OECD countries.
    JEL: P0 O4 O1
    Date: 2006–01
  6. By: Mosahid Khan; Kul B. Luintel
    Abstract: We examine the dynamics of knowledge production for a panel of 19 OECD countries. A new and unique data set is used to proxy the domestic flows of “new-to-the-world” knowledge and ideas. We rigorously address the cross-country heterogeneity in the production of knowledge and the endogeneous nature of this process. The parameters of the knowledge production function point to large cross-country differences. Domestic and foreign stocks of knowledge and ideas have a net positive effect on the production (flows) of new ideas. Countries with a low domestic knowledge base appear to improve their TFP considerably through the accumulation of knowledge. This effect is very modest for countries that already have a sizeable domestic knowledge base. We find ample evidence of duplicate R&D but no support for endogenous growth. Given the heterogeneous nature of knowledge production across OECD countries, R&D policy will need to be adapted to the specific nature of each country; a one-size-fits-all approach will not be effective. <P>Production de connaissances et croissance économique Cet article examine la dynamique de la production de connaissances dans un échantillon de 19 pays de l’OCDE, au moyen d’un ensemble nouveau et original de données servant à représenter les flux intérieurs de connaissances et données « nouvelles pour le monde entier ». L’hétérogénéité entre pays de la production de connaissances et le caractère endogène du processus sont examinés à la loupe. Les paramètres de la fonction de production de connaissances font ressortir de grandes différences entre les pays. Les stocks intérieurs et étrangers de connaissances et d’idées ont un effet positif net sur la production (les flux) de nouvelles idées. Les pays dotés d’une base de connaissances nationale modeste semblent améliorer considérablement leur PTF par l’accumulation de connaissances. Cet effet est très limité pour les pays qui disposent déjà d’une base de connaissances nationale d’une certaine importance. Les auteurs observent de nombreux éléments montrant une duplication de la R-D, mais aucun signe de croissance endogène. Etant donné le caractère hétérogène de la production de connaissances parmi les pays de l’OCDE, la politique de R-D devra être adaptée aux spécificités de chaque pays ; Il n’existe de formule unique applicable à tous.
    Keywords: knowledge stocks, dynamic heterogeneity, methods of moments
    JEL: C15 F02 F12 O3 O4
    Date: 2005–12–14
  7. By: Osang, Thomas (Department of Economics, Southern Methodist University); Sarkar, Jayanta (Department of Economics, Southern Methodist University)
    Abstract: We consider growth and welfare effects of lifetime-uncertainty in an economy with human capital-led endogenous growth. We argue that lifetime uncertainty reduces private incentives to invest in both physical and human capital. Using an overlapping generations framework with finite-lived households we analyze the relevance of government expenditure on health and education to counter such growth-reducing forces. We focus on three different models that differ with respect to the mode of financing of education: (i) both private and public spending, (ii) only public spending, and (iii) only private spending. Results show that models (i) and (iii) outperform model (ii) with respect to long-term growth rates of per capita income, welfare levels and other important macroeconomic indicators. Theoretical predictions of model rankings for these macroeconomic indicators are also supported by observed stylized facts.
    Keywords: Health, Life Expectancy, Human Capital, Public Spending, Endogenous Growth
    JEL: I1 I2 O1 H5
    Date: 2005–09–01
  8. By: Manroth, Astrid; Solo, Tova Maria
    Abstract: The authors look at the depth of the financial sector in Bogota in terms of the " financial exclusion " of those, particularly poorer citizens, who operate without accounts in formal financial institutions-the unbanked. They begin with a review of the overall decline in financial intermediation from 1998 to 2003, which explains, in part, the high percentage of unbanked-61 percent in a recent household survey in Bogota. The authors next look at the banking system today, concluding that the present challenge is to increase financial intermediation overall, especially with the poor. Their analysis shows that Colombia ' s banks provide costly services mainly catered toward high-income clients. Existing fees and costs of checking, savings, and loan services average 5-10 percent of a monthly minimum wage, making them hard to afford for low-income clients. The authors also explore the characteristics and impacts of financial exclusion associated with lower and more uncertain incomes, lower education, and closer links to the informal sector. They cite the household survey conducted in Bogota, showing that 70 percent of the unbanked earn less than one minimum wage per month, are three times more likely to be unemployed than the banked, and have lower education levels. The unbanked save and borrow largely in the informal sector, at greater risk and greater cost. At the same time, however, high home ownership rates show that the unbanked have the capacity to build assets, demonstrating that they have " bankable " characteristics. The authors conclude with recommendations for government and for the financial sector to broaden access for the benefit of public and private sectors, and for the unbanked.
    Keywords: Banks & Banking Reform,Public Sector Economics & Finance,Economic Theory & Research,Financial Intermediation,Settlement of Investment Disputes
    Date: 2006–02–01
  9. By: Levchenko, Andrei A.; Do, Quy-Toan
    Abstract: The authors analyze the relationship between international trade and the quality of economic institutions such as contract enforcement, rule of law, or property rights. The literature on institutions has argued, both empirically and theoretically, that larger firms care less about good institutions and that higher inequality leads to worse institutions. Recent literature on international trade enables the authors to analyze economies with heterogeneous firms, and argue that trade opening leads to a reallocation of production in which large firms grow larger, while small firms become smaller or disappear. Combining these two strands of literature, the authors build a model that has two key features. First, preferences over institutional quality differ across firms and depend on firm size. Second, institutional quality is endogenously determined in a political economy framework. They show that trade opening can worsen institutions when it increases the political power of a small elite of large exporters that prefer to maintain bad institutions. The detrimental effect of trade on institutions is most likely to occur when a small country captures a sufficiently large share of world expor ts in sectors characterized by economic profits.
    Keywords: Economic Theory & Research,Free Trade,Trade Law,Trade Policy,Trade and Services
    Date: 2006–02–01
  10. By: Dennis, Allen
    Abstract: The Middle East and North Africa (MENA) region ' s trade performance over the past two decades has been disappointing. Efforts to boost trade through a plethora of regional trade agreements (RTAs) are underway. This study examines the potential contribution of regional trade agreements, as well as trade facilitation improvements, in enhancing the development prospects of the region. Using the Global Trade Analysis Project (GTAP) model and database, both intra-regional integration and integration with the European Union are observed to have a favorable impact on welfare in the MENA region. The welfare gains from integrating with the European Union are observed to be at least twice as much as intra-regional integration. Furthermore, these welfare gains are observed to at least triple when the implementation of the RTAs is complemented with trade facilitation improvements.
    Keywords: Free Trade,Trade Law,Trade Policy,Economic Theory & Research,Trade and Regional Integration
    Date: 2006–02–01
  11. By: Adams, Richard H. Jr.
    Abstract: The author uses a large, nationally representative household survey to analyze the impact of internal remittances (from Ghana) and international remittances (from African and other countries) on poverty in Ghana. With only one exception, he finds that both types of remittances reduce the level, depth, and severity of poverty in Ghana. But the size of the poverty reduction depends on how poverty is being measured. The author finds that poverty is reduced more when international, as opposed to internal, remittances are included in household income, and when poverty is measured by the more sensitive poverty measures-poverty gap and squared poverty gap. For example, the squared poverty gap measure shows that including international remittances in household expenditure (income) reduces the severity of poverty by 34.8 percent, while including internal remittances in such income reduces the severity of poverty by only 4.1 percent. International remittances reduce the severity of poverty more than internal remittances because of the differential impact of these two types of remittances on poor households. Households in the poorest decile group receive 22.7 percent of their total household expenditure (income) from international remittances, as opposed to only 13.8 percent of such income from internal remittances. When these " poorest of the poor " households receive international remittances, their income status changes dramatically and this in turn has a large effect on any poverty measure-like the squared poverty gap-that considers both the number and distance of poor households beneath the poverty line.
    Keywords: Remittances,Economic Conditions and Volatility,Gender and Development,Small Area Estimation Poverty Mapping,Poverty Lines
    Date: 2006–02–01
  12. By: Olarreaga, Marcelo; Nicita, Alessandro; Kee, Hiau Looi
    Abstract: The objective of this paper is to provide indicators of trade restrictiveness that include both measures of tariff and nontariff barriers for 91 develo ping and industrial countries. For each country, the authors estimate three trade restrictiveness indices. The first one summarizes the degree of trade distortions that each country imposes on itself through its own trade policies. The second one focuses on the trade distortions imposed by each country on its import bundle. The last index focuses on market access and summarizes the trade distortions imposed by the rest of the world on each country ' s export bundle. All indices are estimated for the broad aggregates of manufacturing and agriculture products. Results suggest that poor countries (and those with the highest poverty headcount) tend to be more restrictive, but they also face the highest trade barriers on their export bundle. This is partly explained by the fact that agriculture protection is generally larger than manufacturing protection. Nontariff barriers contribute more than 70 percent on average to world protection, underlying their importance for any study on trade protection.
    Keywords: Free Trade,Economic Theory & Research,Trade Policy,Consumption,Markets and Market Access
    Date: 2006–02–01
  13. By: Nicita, Alessandro
    Abstract: Madagascar ' s textile and apparel industry has been among the fastest growing in Sub-Saharan Africa. Fueled by low labor costs, a fairly productive labor force, and preferential access to industrial countries, Madagascar ' s exports of textile and apparel products grew from about US$45 million in 1990 to almost half a billion in 2001. The impact of this export surge has been large in terms of employment and wages, but less so in terms of poverty reduction. To address the concern of whether the poor benefit and to what extent, the author follows a new approach to identify the beneficiaries of globalization and to quantify the benefits at the household level, so as to understand which segments of the population benefit most and which, if any, are marginalized. The analysis focuses on the labor market channel which has been recognized as the main transmission between economic growth and poverty. The methodology uses household level data and combines the wage premium literature with matching methods. The results point to a strong variation in the distribution of the benefits from export growth with skilled workers and urban areas benefiting most. From a poverty perspective, export-led growth in the textile and apparel sector has only a small effect on overall poverty. This study points to two reasons for this. First, a large majority of the poor are unable to enjoy the new employment opportunities, given their lack of skills sought by the expanding textile and apparel export industry. Second, most of the poor reside in rural areas where the employment effect is small. The results indicate that the effects of an increase in exports of textiles for poverty reduction are felt only in urban areas, mostly through job creation. Some of the urban poor are good candidates for finding employment in the expanding sector. But the urban poor are likely to find employment only in unskilled jobs. Given that unskilled wages are kept low by a large reserve labor sector, the gains are limited, and the overall impact on poverty is small. More generally, the results of this study suggest that two factors are required if export-led economic growth is to significantly reduce poverty. First, growth and job creation must not be restricted to a few geographic areas but need to reach areas where the majority of the poor live. Second, poor people must be assisted in obtaining the skills sought by expanding industries.
    Keywords: Labor Markets,Pro-Poor Growth and Inequality,Water and Industry,Economic Theory & Research,Economic Conditions and Volatility
    Date: 2006–02–01
  14. By: Mora, Jorge; Taylor, J. Edward
    Abstract: Migration reshapes rural economies in ways that may go beyond the contribution of migrant remittances to household income. Consumption and investment expenditures by migrant-sending households may transmit some of the impacts of migration to others inside and outside the rural economy, and they also may shape the potential effects of migration within the source household. Numerous studies have attempted to quantify the impact of migrant remittances on expenditures in migrant-sending households following one of two approaches. The first asks how migrant remittances are spent. It has the advantage of being simple but the significant disadvantage of ignoring the fungibility of income from migrant and nonmigrant sources. Remittances almost certainly have indirect effects on expenditures by way of their contribution to households ' total budgets. The second uses a regression approach that considers remittances as an explanatory variable, in addition to total income and other controls, in a household expenditure demand system. It has the advantage of enabling one to test whether remittances affect expenditures in ways that are independent of their contribution to total income. But it does not take into account other ways, besides remittances, in which migration may influence expenditure patterns in households with migrants. It also may suffer from econometric bias resulting from the endogeneity of migration and remittance receipts. The same variables may simultaneously affect both remittances and household expenditures, and unless one controls for this, biased estimates may result.
    Keywords: Investment and Investment Climate,Economic Theory & Research,Housing & Human Habitats,Remittances,Consumption
    Date: 2006–02–01
  15. By: Timmins, Christopher; Lall, Somik V.; Carvalho, Alexandre
    Abstract: Large and sustained differences in economic performance across regions of developing countries have long provided motivation for fiscal incentives designed to encourage firm entry in lagging areas. But empirical evidence in support of these policies has been weak at best. The authors undertake a direct evaluation of the most prominent fiscal incentive policy in Brazil, the Fundos Constitucionais de Financiamento (Constitutional Funds). In doing so, they exploit valuable features of the Brazilian Ministry of Labor ' s RAIS data set to address two important elements of firm location decisions that have the potential to bias an assessment of the funds: (1) firm " family structure " (in particular, proximity to headquarters for vertically integrated firms), and (2) unobserved spatial heterogeneity (with the potential to confound the effects of the funds). The authors find that the pull of firm headquarters is very strong relative to the constitutional funds for vertically integrated firms, but that, with nonparametric controls for time invariant spatial heterogeneity, the funds provide significant incentives for firms in many of the targeted industries.
    Keywords: Economic Theory & Research,Scientific Research & Science Parks,Science Education,Technology Industry,Private Participation in Infrastructure
    Date: 2006–02–01
  16. By: Cem Ertur; Thiaw Kalidou
    Abstract: The aim of this paper is to analyze the theoretical and econometric implications of omitting spatial dependence in the Mankiw, Romer, and Weil model. Indeed, the international distribution of income levels and growth rates suggests the existence of large international disparities, and therefore the important role of location on economic performance. However, taking spatial dependence into account requires resorting to the methods of Spatial Econometrics, not only for a valid statistical inference, but also for revaluating the impact of the variables generally considered as crucial in the growth phenomenon and finding the processes underlying growth rates and income levels.
    Date: 2005–08
  17. By: Fernando Barreiro-Pereira
    Abstract: The productivity generated by capital goods is not uniform, specially over the time. The productivity obtained from phisical goods is minor than one generated by new capital goods, or quality capital goods. It seems that the difference between both kinds of capital stems from the fact that vintage capital is affected by an additional form of technical progress. When capital is affected by this kind of technical progress, it is so-called capital jelly from Solow (1960). There are hence two possible forms of understand technical progress: the classical one or, alternatively, this new class of technical progress tath affects only to capital. Both kinds of technical progress affect growth in two separate ways, and for this reason it is interesting to develop a special analysis on the investment in capital goods in order to identify what is the difference between the productivity derived from physical capital and from vintage capital. The main aim of this paper is to analyse how two types of technical progress affcet the real income growth rate in the countries belonging to three world areas: North America, the Euro zone, and some countries of the Pacific Rim, during the period 1960-2000. Precursory works of the present research have found in Hulten (1992), Greenwood, Hercowitz and Krusell (1997), Gordon (1999) and Hobijn (2000).
    Date: 2005–08
  18. By: Sylvie DEMURGER (HIEBS, the University of Hong Kong and CNRS (France)); Martin FOURNIER (CEFC (Hong Kong)); CHEN Yi (CERDI, Université d’Auvergne (France))
    Abstract: This paper analyzes the impact of market liberalization on gender earnings differentials and discrimination against women in urban China at the beginning of the 90s. The observed stability in the overall gender earnings gap between 1988 and 1995 is shown to result from a complex set of evolutions across enterprises, earnings distributions and time. Our results highlight the interplay of opposing forces, economic reforms contributing to changes in managers’ behaviors in different dimensions. On the one hand, by bringing more competition, liberalization favored a reduction in discriminating behaviors in both urban collectives and foreign-invested enterprises; on the other hand, by relaxing institutional rules, it led to a loosening of the government’s egalitarian wage setting policies, leaving more space for discrimination in state-owned enterprises.
    Keywords: gender earnings differentials, discrimination, enterprise ownership, urban China
    JEL: J16 J31 J71 O53 P23
  19. By: Christophe Muller (Universidad de Alicante); Christophe Nordman (DIAL, París)
    Abstract: From Tunisian matched worker-firm data in 1999, we study the returns to human capital for workers observed in two leading manufacturing sectors. Workers in the mechanical and electrical industries (IMMEE) benefit from higher returns to human capital than their counterparts in the Textile-clothing industry. In the IMMEE firms, low wage workers experience greater returns to labour market experience than high wage workers. The wage premium for on-the-job training is substantial for both sectors. However, taking into account whether formal training is still ongoing at the time of the survey, our results clearly indicate that workers bear heavy costs for their training. Our analysis shows that on-the-job training (OJT) and education can be efficient channels of policies aiming at raising earnings for low wages as well as high wages workers. However, careful consideration of the industrial sector should accompany these policies since specific impact of education, experience, OJT are found in the studied sectors.
    Keywords: wage, returns to human capital, matched worker-firm data, quantile regressions, Tunisia
    JEL: J24 J31 O12
    Date: 2005–02
  20. By: Christophe Muller (Universidad de Alicante)
    Abstract: It is not known to what extent welfare measures result from seasonal and geographical price differences rather than from differences in living standards across households. Using data from Rwanda in 1983, we show that the change in mean living standard indicators caused by local and seasonal price deflation is moderately significant at every quarter. By contrast, the differences in poverty measures caused by this deflation can be considerable, for chronic as well as transient or seasonal poverty indicators. Thus, poverty monitoring and anti-poverty targeting can be badly affected by inaccurate deflation of living standard data. Moreover, when measuring seasonal poverty, the deflation based on regional prices instead of local prices only partially corrects for spatial price dispersion. Using annual local prices instead of quarterly local prices only yields a partial deflation, which distorts the measure of poverty fluctuations across seasons and biases estimates of annual and chronic poverty.
    Keywords: Measurement and Analysis of Poverty, Income Distribution, Personal Income Distribution
    JEL: I32 O15 D31
    Date: 2005–03
  21. By: Raouf Boucekkine (IRES); Blanca Martínez (Universidad de Alicante); Fernando del Río (Universidade Santiago de Compostela)
    Abstract: We construct a vintage capital à la Whelan (2002) with both exogenous embodied and disembodied technical progress, and variable utilization of each vintage. The lifetime of capital goods is endogenous and it relies on the associated operation costs. Within this model, we identify the rate of age-related depreciation and the rate of scrapping. We study the properties of the balanced growth paths of the model. First, we show that the lifetime of capital is an increasing (resp. decreasing) function of the rate of disembodied (resp. embodied) technical progress. Second, we show that both the age-related depreciation rate and the scrapping rate increase when embodied technical progress accelerates. In contrast, the latter drops when disembodied technical progress accelerates while the former remains unaffected.
    Keywords: Vintage capital, operation costs, embodied technical progress, age-related depreciation, obsolescence
    JEL: E22 E32 O40
    Date: 2005–06
  22. By: Fidel Pérez Sebastián (Universidad de Alicante); Lilia Maliar (Universidad de Alicante); Serguei Maliar (Universidad de Alicante)
    Abstract: This paper studies the effect of sovereign risk on capital flows from rich to poor nations in the context of a two-country model where Foreign Direct Investment (FDI) creates positive externalities in domestic production. We show that if externalities are large, a developing country never expropriates foreign assets, and behaves as under perfect enforcement of foreigners' property rights, jumping to the steady state in one period. If externalities are absent, a developing country always expropriates foreign assets and, then, there are no capital flows in equilibrium, as occurs in autarky. If externalities are of a medium size, our model can account for scarce capital flows from rich to poor nations, as well as other key features of the data, such as rising-over-time patterns of foreign capital and FDI in developing countries. In addition, the model offers an economic rationale for the FDI restrictions observed across nations.
    Keywords: Sovereign risk, Foreign direct investment, Externalities, Incentive compatibility
    JEL: C63 D82 E22 F15 G32 O40
    Date: 2005–09
  23. By: Christophe Muller (Universidad de Alicante); Christophe Nordman (DIAL, París)
    Abstract: In this paper, we study the return to human capital variables for wages of workers observed in Tunisian matched worker-firm data in 1999. This reveals us how returns to human capital in a Less Developed Country like Tunisia may differ from the industrial countries usually studied with matched data. We develop a new method based on multivariate analysis of firm characteristics, which allows us most of the benefits obtained by introducing firm dummies in wage equations for studying the effect of education. It also provides a human capital interpretation of the effect of these dummy variables. Moreover, in the studied data, using three firm characteristics easily collectable yields results close to those obtained by using the matched structure of the data. The workers with low wages or low conditional wages experience greater returns to human capital than workers belonging to the middle of the wage distribution, while their return to schooling is significantly lower than that of high wage workers. The estimates support the hypothesis that human capital is associated with positive intra-firm externality on wages. Therefore, a given worker would be more productive and better paid in an environment strongly endowed in human capital. However, the low wage workers do not take advantage of the human capital in the firm. Conversely, the low wage workers benefit from working in the textile sector in terms of wages unlike the middle and high wage workers. Finally, the low wage workers and high wage workers benefit from an innovative environment, while the middle wage workers do not.
    Keywords: Wage, returns to human capital, matched worker-firm data, quantile regressions, factor analysis, Tunisia
    JEL: J24 J31 O12
    Date: 2005–11
  24. By: Chris Papageorgiou (Louisiana State University); Fidel Pérez Sebastián (Universidad de Alicante)
    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 suggests 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.
    Keywords: Convergence, R&D, human capital, asymptotic speed, transitional dynamics
    JEL: O33 O41 O47
    Date: 2005–11
  25. By: Inmaculada Martínez Zarzoso (Universitat Jaume I); Laura Márquez Ramos (Universitat Jaume I)
    Abstract: In this research, we estimate a gravity equation augmented with technological innovation and transport infrastructure variables in order to analyse the impact of these variables on international trade. According to our results, investing in transport infrastructure and technological innovation leads to the improvement and maintenance of the level of competitiveness. Moreover, our results support the hypothesis that countries tend to trade more when they are ¿closer¿ from a technological point of view and that the development of information technology has lowered the effect of geography on trade. En este trabajo, estimamos un modelo de gravedad ampliado con variables de innovación tecnológica y de infraestructura de transporte con el fin de analizar el impacto de estas variables sobre el comercio internacional. Según los resultados obtenidos, invertir en infraestructuras de transporte y en innovación tecnológica mejora y mantiene los niveles de competitividad alcanzados en los países. Nuestros resultados, también apoyan la hipótesis de que los países comercian más cuanto más similares son desde un punto de vista tecnológico y que el desarrollo de las tecnologías de la información ha reducido el efecto negativo de la distancia geográfica sobre el comercio internacional.
    Keywords: modelo de gravedad, tecnología, infraestructura, comercio internacional gravity model, technology, infrastructure, international trade
    Date: 2005–05
  26. By: Guy Stecklov (Department of Sociology and Anthropology, Hebrew University); Paul Winters; Jessica Todd; Ferdinando Regalia (Department of Economics, American University)
    Abstract: Conditional cash transfer programs have been shown to be effective development strategies for raising human capital investments in children in many LDCs. In this paper, we use experimental data from cash transfer programs in three Latin America countries to assess the potential, unintended impact of conditional cash transfers programs on childbearing. Because cash transfer programs both affect household resource levels as well as possibly shape parental preferences for quality versus quantity of children, they may prove to have unintended demographic externalities. Our findings show that the program in Honduras, which may have inadvertently been designed to create incentives to have children, may have in fact raised fertility by somewhere between 2-4 percentage points – a non-negligible impact in a country where fertility is relatively high. In the two other countries where the programs did not include the same unintentional incentives, Mexico and Nicaragua, we found no net impact of the programs on fertility. Our analysis also explored the potential mechanisms through which fertility in Honduras may have risen and we find that marriage rates may have increased. Furthermore, there is some indication in the other two countries that contraceptive use rose but this might be simply to counteract the impact of reduced spousal separation – another possible unintentional impact of the poverty programs.
    Keywords: fertility, cash transfers, poverty programs, impact evaluation
    JEL: J13 O22
    Date: 2006–01
  27. By: Robert A. Blecker (Department of Economics, American University); Arslan Razmi (University of Massachusetts)
    Abstract: This paper studies whether intra-developing country price competition has significant effects on the growth rates of developing countries that are specialized in manufactured exports. Panel regression estimates using data for 1983-2001 show that countries that export mainly lowtechnology manufactures face a double bind in that while they derive significant competitive gains from real depreciations relative to competing developing country exporters, they have contractionary real depreciations relative to the industrialized countries. However, countries that export mainly high-technology products do not face this dilemma. Results vary across different panels of countries and between the first and second halves of the sample period.
    Keywords: Export-led growth, fallacy of composition, terms of trade, manufactured exports, contractionary devaluations, competitive devaluations
    JEL: F43 O19 O14 F14
    Date: 2005–11
  28. By: Laurent Gheeraert (Centre Emile Bernheim, Solvay Business School, Université libre de Bruxelles, Brussels); Joffrey Malek Mansour (DULBEA, Université libre de Bruxelles, Brussels)
    Abstract: This paper raises two different, but related, questions: On the one hand, is there a link between international capital flows and economic growth? On the other hand, is there a link between international capital flows and development? We address the first question using a structural econometric model and we find a significantly positive relationship between capital flows and growth. This relationship is robust to various measures of capital flows. As to the second question, we perform a simple correlation analysis. We do not find any significant correlation between capital flows and development.
    Keywords: capital flows, economic growth, development.
    JEL: F21 F36 F43
    Date: 2005–04

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