nep-dev New Economics Papers
on Development
Issue of 2006‒05‒27
eleven papers chosen by
Jeong-Joon Lee
Towson University

  1. Chicken or egg: financial development and economic growth in China, 1992-2004 By Fan, Xuejun; Jacobs, Jan; Lensink, Robert
  2. Foreign Direct Investment, Firm-Level Capabilities and Human Capital Development: Evidence from Kenyan Manufacturing Industry By Gachino, Geoffrey
  3. Structural Weakness in Nicaragua : Hindrances to Economic Growth and Poverty Reduction By Ruth Rios-Morales
  4. Child Work and Schooling Costs in Rural Northern India By Gautam Hazarika; Arjun S. Bedi
  5. Convergence, Human Capital and International Spillovers. By ERTUR, Cem; KOCH, Wilfried
  6. Mexico : two decades of the evolution of education and inequality By Lopez-Acevedo, Gladys
  7. Early childhood development through an integrated program : evidence from the Philippines By Lee, Nannette; King, Elizabeth M.; Gultiano, Socorro; Ghuman, Sharon; Duazo, Paulita; Behrman, Jere R.; Armecin, Graeme
  8. Public-private sector wage differentials and returns to education in Djibouti By Seshan, Ganesh; Anos Casero, Paloma
  9. On the Evolution of Wage Inequality in Acemoglu’s Model of Directed Technical Change By Matthias Weiss
  10. Why do the poor leave the safety net in Mexico? A study of the effects of conditionality on dropouts By Carola Álvarez; Florencia Devoto; Paul Winters
  11. Financial Liberalization and Household Financial Behaviour in India By Gauthier Lanot; Peter Lawrence

  1. By: Fan, Xuejun; Jacobs, Jan; Lensink, Robert (Groningen University)
    Abstract: This paper contributes to the empirical finance-growth literature by examining the relationship between financial depth, banking sector development, stock market development and economic growth in China. After an extensive survey on recent financial reforms in China, we apply Granger (non-)causality tests for non-stationary variables to examine long-run and short-run causality between economic growth and financial development. We find positive relationships between financial depth, banking sector development and growth. However, stock market development does not seem to have a positive effect on long-run economic growth.
    Date: 2005
  2. By: Gachino, Geoffrey (United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology)
    Abstract: This paper uses firm-level survey data of Kenyan manufacturing industry to examine the significance of FDI and firm-level capabilities in human capital development. It undertakes a detailed descriptive comparison of human capital and other firm-level capabilities generated by both foreign and locally owned firms. The analysis shows that foreign firms generally enjoyed high human capital development and firm-level capabilities than locally owned firms. Empirical evaluation of human capital determinants revealed a statistically significant role played by FDI in determining human capital development in all the firms. Other factors which demonstrated an equally significant role included specific firm level capabilities; process, product, marketing and export performance. Interestingly, basic infrastructure, systemic embeddedness, firm size, labour market conditions and the role of government were not statistically significant, implying their weak role in human capital stimulation. The choice of Kenyan manufacturing industry presents an ideal case to evaluate FDI, firm-level capabilities and human capital development for two main reasons. First, the Kenyan economy has continued to witness low levels of economic growth despite having literally lifted most industrial controls and protections since introduction of structural adjustment programme from mid 1980s. Second, although Kenya has low levels of FDI in general terms it has high levels of foreign presence in selected industries. The Kenyan case is therefore expected to offer important policy ramifications for other countries in the sub Saharan region.
    Keywords: FDI, human capital, human development, firm-level capabilities, systemic embeddedness, infrastructure, Kenya
    JEL: C24 F21 F23 L6 O3
    Date: 2006
  3. By: Ruth Rios-Morales
    Abstract: Despite generous debt reduction under the HIPC initiative, Nicaragua is not growing at the rate required to alleviate poverty. This paper outlines Nicaragua 's vulnerability to external changes and its inability to compete in the global market. Nicaragua suffers from severe structural problems; it has a very poorly diversified industrial structure, and its trading performance is correspondingly weak, relying on basic agricultural exports that have suffered stagnant or declining prices on international markets. Nicaragua is a clear example of an HIPC country that has achieved the criteria to enter into the HIPC initiative but is struggling to maintain sustainable economic development while trying to achieve poverty reduction.
    Date: 2006–05–25
  4. By: Gautam Hazarika (University of Texas at Brownsville and IZA Bonn); Arjun S. Bedi (Institute of Social Studies, The Hague)
    Abstract: It is widely held that work by children obstructs schooling, so that working children in impoverished families will find it difficult to escape poverty. If children’s school attendance and work were highly substitutable activities, it would be advisable to quell work in the interest of schooling and, if less child work were desirable for its own sake, to boost school attendance so as to reduce child work. Hence, this article examines the effects of schooling costs upon both children’s propensities to work and to attend school in rural northern India in a bid to assess the extent of trade-off between the activities. Analyses of data from Uttar Pradesh and Bihar, two Northern Indian states, reveal a positive relation between child work and schooling costs, a negative relation between school enrollment and schooling costs, and that the decrease in the probability of child work from a decrease in schooling costs is comparable in magnitude to the corresponding increase in the probability of school enrollment, implying children’s work and school attendance are strongly substitutable activities. Thus, unlike recent studies of child work in India’s South Asian neighbors of Bangladesh and Pakistan, this paper uncovers evidence of substantial trade-off between child work and school attendance.
    Keywords: child labor, schooling costs, India
    JEL: J22 O12
    Date: 2006–05
  5. By: ERTUR, Cem (LEG - CNRS UMR 5118 - Université de Bourgogne); KOCH, Wilfried (LEG - CNRS UMR 5118 - Université de Bourgogne)
    Abstract: This paper develops a growth model with physical and human capital externalities to- gether with technological interdependence between economies. It leads to a spatial autore- gressive reduced form for the convergence equation characterized by parameter heterogeneity. A locally linear spatial autoregressive speci¯cation is then estimated providing a di®erent convergence speed estimate for each country in a sample of 89 countries over the period 1960-1995. Finally, counterfactual density estimates show that our model better ¯ts the observed income distribution than the well known augmented neoclassical growth model.
    Keywords: Conditional convergence ; spatial externalities ; spatial autocorrelation ; bayesian estimation ; parameter heterogeneity ; locally linear estimation
    JEL: C14 C21 O41
    Date: 2006–03
  6. By: Lopez-Acevedo, Gladys
    Abstract: Mexico experienced a pronounced increase in the degree of inequality and earnings inequality over the 1980s and mid 1990s. Contrary to the trend in the distribution of total income inequality, there has been an improvement in the distribution of earnings inequality since 1996. This paper shows the following results. First, education has the highest gross contribution in explaining changes in earnings distribution. Second, both changes in the distribution of education and in the relative earnings among educational groups have always been in phase with the alterations in the earnings distribution. Specifically, when the income profile effect related to education became steeper and the inequality of education increased, the earnings distribution worsened (as in the 1988-96 period). Third, changes in the relative earnings among educational groups are always the leading force behind changes in inequality.
    Keywords: Inequality,Labor Markets,Economic Theory & Research,Access & Equity in Basic Education,Poverty Impact Evaluation
    Date: 2006–05–01
  7. By: Lee, Nannette; King, Elizabeth M.; Gultiano, Socorro; Ghuman, Sharon; Duazo, Paulita; Behrman, Jere R.; Armecin, Graeme
    Abstract: More attention and resources have been devoted in recent years to early childhood development (ECD) in low- and middle-income countries. Rigorous studies on the effectiveness of ECD-related programs for improving children ' s development in various dimensions in the developing world are scant. The authors evaluate an important ECD initiative of the Philippine government using longitudinal data collected over three years on a cohort of 6,693 children age 0-4 years at baseline in two " treatment " regions and a " control " region that did not receive the intervention. The initiative includes a wide range of health, nutrition, early education, and social services programs. The authors estimate its impact by using " intent-to-treat " difference-in-difference propensity score matching estimators to control for a variety of observed characteristics measured at the municipality, barangay, household, and child level and unobserved fixed characteristics, with differential impacts by age of children and duration of exposure to the program. There has been a significant improvement in the cognitive, social, motor, and language development, and in short-term nutritional status of children who reside in ECD program areas compared to those in non-program areas, particularly for those under age four at the end of the evaluation period. The proportions of children below age four with worms and diarrhea also have been lowered significantly in program compared to non-program areas, but there are effects in the opposite direction for older children so the overall impact on these two indicators is mixed.
    Keywords: Health Monitoring & Evaluation,Early Childhood Development,Youth and Governance,Primary Education,Educational Sciences
    Date: 2006–05–01
  8. By: Seshan, Ganesh; Anos Casero, Paloma
    Abstract: Do public sector workers earn a wage premium in Djibouti and are the returns to education different across the sectors? The authors estimate private and public sector wage earnings using 1996 household survey data, while controlling for selectivity using Heckman ' s two stage approach. They find that Djiboutian public sector employees earn a wage premium, independent of their personal attributes and human capital endowments, and are more likely to be males and have parents in the public sector. Workers in the public sector earn higher private rates of return to education than do private sector workers with post-secondary schooling. These results raise concerns about current government hiring and wage-setting practices that generate distortions in the labor market and are not efficiently allocating labor and public resources.
    Keywords: Labor Markets,Public Sector Economics & Finance,Public Sector Management and Reform,Education For All,Education and Digital Divide
    Date: 2006–05–01
  9. By: Matthias Weiss (Mannheim Research Institute for the Economics of Aging (MEA))
    JEL: J31 O33
    Date: 2005–09–14
  10. By: Carola Álvarez (Inter-American Development Bank); Florencia Devoto (Inter-American Development Bank); Paul Winters (Department of Economics, American University)
    Abstract: This paper analyzes the characteristics of beneficiaries that drop out of the Mexican conditional cash transfer program Oportunidades to determine if dropping out of the program is a result of selftargeting by the non-poor, the exclusion of the target poor population or a combination of both. The analysis, which uses a duration model, indicates that it is the wealthier beneficiaries that have greater odds of dropping out suggesting that conditionality acts as a screening device. Results also indicate that administrative factors and the particular provider of health services to beneficiaries have an important influence on dropouts.
    Keywords: Cash transfer programs, conditionality, Oportunidades, Latin America, Mexico, hazard models
    JEL: I30 O22
    Date: 2006–05
  11. By: Gauthier Lanot (Keele University, Department of Economics); Peter Lawrence (Keele University, Department of Economics)
    Abstract: Changes in financial policy are expected to result in the greater availability of credit as financial controls are relaxed and banking competition is increased. This ‘financial deepening’ should show up in ahigher consumption expenditure in areas where credit is often required, such as durable consumption, education and health. We use the household consumption data collected by India’s National Sample Survey Organisation for 11 rounds which straddle the period before and during financial liberalization (i.e. 1987-2000).We generate measures of the within-households shifts in distribution of consumption and see how far these are correlated with financial development variables. We find that at the macro level, financial depth did not increase from the beginning to the end of the period under study. However we did find some association between some of the financial development variables and expenditure on durables goods, although the changes in behaviour are very small.
    Keywords: Financial liberalization, financial depth, durables, household consumption, credit.
    JEL: D12 O12 O16 O23
    Date: 2005–12

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