nep-dev New Economics Papers
on Development
Issue of 2006‒06‒10
seventeen papers chosen by
Jeong-Joon Lee
Towson University

  1. Foreign Direct Investment and the Nature of the Imitation Process By Helene, LATZER
  2. Vintage Capital By Raouf, BOUCEKKINE; David, DE LA CROIX; Omar, LICANDRO
  3. Technological Progress, Obsolescence and Depreciation By Raouf, BOUCEKKINE; Fernando, DEL RIO; David, DE LA CROIX
  4. The Effects of Labor Market Policies in an Economy with an Informal Sector By James Albrecht; Lucas Navarro; Susan Vroman
  5. Total Factor Productivity equation and development accounting: New evidence. By KOCH, Wilfried
  6. Understanding the Persistent Low Performance of African Agriculture By Sylvain Dessy; Jacques Ewoudou; Isabelle Ouellet
  7. Trade Liberalization and the Dynamics of Poverty in Tunisia: a Layered CGE Microsimulation Analysis/Libéralisation des échanges et dynamique de la pauvreté en Tunisie: Analyse avec une micro-simulation séquentielle By Sami Bibi; Rim Chatti
  8. Agriculture-sector Policies and Poverty in the Philippines: a Computable General-Equilibrium (CGE) Analysis By Caesar B. Cororaton; Erwin L. Corong
  9. The Impact of Trade Reform in the 1990s on Welfare and Poverty in the Philippines By Caesar B. Cororaton
  10. A Quantitative Analysis of China’s Structural Transformation By Robert Dekle; Guillaume Vandenbroucke
  11. Cash transfers, conditions, school enrollment, and child work : evidence from a randomized experiment in Ecuador By Araujo, Maria Caridad; Schady, Norbert
  12. Did growth become less pro-poor in the 1990s ? By Lopez, Humberto
  13. Governance and private investment in the Middle East and North Africa By Veganzones-Varoudakis, Marie-Ange; Nabli, Mustapha Kamel; Aysan, Ahmet Faruk
  14. Empowering parents to improve education : evidence from rural Mexico By Rubio-Codina, Marta; Patrinos, Harry; Gertler, Paul
  15. Why Are Some Public Officials More Corrupt Than Others? By Jennifer Hunt; ;
  16. Bribery: Who Pays, Who Refuses, What Are The Payoffs? By Jennifer Hunt; Sonia Laszlo;
  17. A Comparison of Reform-Era Labor Force Participation Rates of China’s Ethnic Minorities and Han Majority By Margaret Maurer-Fazio,; James W. Hughes; Dandan Zhang

  1. By: Helene, LATZER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: We study the optimal imitation strategy of a developing country having access to both imitation through trade and imitation through Foreign Direct Investments (FDIs). We base ourselves on an extension of the Romer ‘variety model’ (1990) of technology-driven growth, and find that the two types of imitation are substitutes and not complements. We characterize a condition on the technology level transferred by multinational foreign firms for imitation through FDI to be optimal, and study the effect of a technological acceleration.
    JEL: F23 O33 O40
    Date: 2006–05–05
  2. By: Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); David, DE LA CROIX (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Omar, LICANDRO (EUI, Florence)
    Abstract: We highlight the salient characteristics and implications of the seminal contributions in the field of vintage capital growth theory (proposed entry for the new Palgrave dictionary of economics, 2nd edition)
    Keywords: Obsolescence; embodiment; technology diffusion; vintage human capital
    Date: 2006–03–16
  3. By: Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Fernando, DEL RIO; David, DE LA CROIX (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: We construct a vintage capital model 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 maintenance costs. We study the properties of the balanced growth paths. 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 use-related depreciation rate and the scrapping rate incease when embodied technical progress accelerates. However, the latter drops when disembodied technical progress accelerates while the former remains unaffected. A key feature of our model is that the age-related depreciation rate does depend on the obsolescence rate in sharp contrast to the neoclassical model.
    Keywords: Vintage capital; operation costs; embodied technical progress; age-related depreciation; obsolescence
    JEL: E22 E32 O40
    Date: 2006–03–16
  4. By: James Albrecht (Georgetown University and IZA Bonn); Lucas Navarro (Queen Mary, University of London); Susan Vroman (Georgetown University and IZA Bonn)
    Abstract: In many economies, there is substantial economic activity in the informal sector, beyond the reach of government policy. Labor market policies, which by definition apply only to the formal sector, can have important spillover effects on the informal sector. The relative sizes of the informal and formal sectors adjust, the skill composition of the workforce in the two sectors changes, etc. In this paper, we build an equilibrium search and matching model to analyze the effects of labor market policies in an economy with an informal sector. Our model extends Mortensen and Pissarides (1994) by allowing for ex ante worker heterogeneity with respect to formal-sector productivity. We analyze the effects of labor market policy on informal- and formal-sector output, on the division of the workforce into unemployment, informal-sector employment and formal-sector employment, and on wages. Finally, our model allows us to examine the distributional implications of labor market policy; specifically, we analyze how labor market policy affects the distributions of wages and productivities across formal-sector matches.
    Keywords: search, matching, informal sector
    JEL: E26 J64 J65 O17
    Date: 2006–05
  5. By: KOCH, Wilfried (LEG - CNRS UMR 5118 - Université de Bourgogne)
    Abstract: The aim of this paper is reconciliating spatial autocorrelation often observed in the world distribution of wealth and its effects on development gap. Neglecting spatial autocorrelation potentially biased our vision on the role of physical capital in development process. We therefore show that the total contribution of physical capital account almost 90% of differences between developing countries and the most richest countries.
    Keywords: Development accounting ; Total Factor Productivity ; Spatial Autocorrelation ; Technological interdependence.
    JEL: C21 O33 O40
    Date: 2006–04
  6. By: Sylvain Dessy; Jacques Ewoudou; Isabelle Ouellet
    Abstract: We explain the persistence of low performances in African agriculture by analyzing the determinants of farmers' decisions to modernize their farming practices. Owing to sociocultural factors specific to Sub-Saharan Africa, farmers' decisions on farming practices are strategic complements. We demonstrate that the modernization game these farmers play admits two pure-strategy, Pareto-ranked, symmetric Nash-equilibria. The equilibrium where all farmers choose to modernize their farming methods is preferred to the one where all of them choose to stick to a traditional method. We argue that scarcity and economic opportunities put forward by neo-Boserupian theories of induced-innovation as determinants of the onset agricultural innovations are, in the context of African countries, only necessary, but not sufficient to generate modernization of farming methods. Deliberate action to enhance aadoption of agricultural innovations must therefore take the African's sociocultural context into consideration, or risk failure.
    Keywords: Sub-Saharan Africa, Agricultural modernization, Fertilizer adoption, Supermodular games
    JEL: O14 C72 O13 Q12
    Date: 2006
  7. By: Sami Bibi; Rim Chatti
    Abstract: The effects of trade liberalization on poverty in Tunisia are examined, using a layered dynamic CGE-microsimulation approach. A dynamic CGE model endogenously generates the evolution of prices, as well as income paths under protection and freer trade assumptions for each household group. These results are then used to assess the change in real income of each household, using a sample from the 1995 household survey, and thus the effects of the simulated changes on poverty. Dominance tests are also used to avoid the arbitrariness of choosing line and a poverty measure. Simulation results show that trade openness slows down the poverty reduction in the short run, but enhances it in the long-run/Une analyse dynamique des effets de la libéralisation commerciale montre que celle-ci n'entraînera pas, contrairement aux cas précédents, une augmentation de la pauvreté en Tunisie. Néanmoins, l'ouverture commerciale freinera probablement la dynamique de la réduction de la pauvreté à court terme mais, l'accélèrera à long terme. La baisse de la pauvreté touchera aussi bien les ménages urbains que ruraux, avec une plus faible réduction de la pauvreté rurale à court et à long terme. Pour comprendre ce résultat, il faut d'abord noter que la Tunisie, comme dans la plupart des autres pays, impose des taux de protection plus élevés sur les produits agricoles que sur les produits industriels; pendant que les branches industrielles, notamment celle des services, contribuent davantage aux recettes d'exportation. Par conséquent, la libéralisation commerciale entraîne une expansion plus rapide du secteur des services par rapport aux autres branches industrielles et au secteur agricole. Cela engendre un taux de croissance du revenu nominal des ouvriers et des exploitants agricoles plus faible que celui des autres ménages urbains. Les prix à la consommation croient plus faiblement pour les ménages urbains, qui consomment davantage de produits industriels et des services, que pour les ménages ruraux, qui consomment plus de produits alimentaires. Tous ces résultats font que l'amélioration du revenu réel, qui touche toutes les catégories des ménages, est légèrement plus importante pour les ménages urbains.
    Keywords: Trade liberalization, poverty, dynamic CGE models, sequential microsimulation, Tunisia/Libéralisation des échanges, pauvreté, modèles d'EGC dynamiques, micro-simulation séquentielle, Tunisie
    JEL: C68 I32 O24
    Date: 2006
  8. By: Caesar B. Cororaton; Erwin L. Corong
    Abstract: The Philippines has undertaken substantial trade-policy reforms since the 1980s. However, the poverty impact is not very clear and has been the subject of intense debate, most crucial of which is the likely poverty effects of liberalizing the highly protected agricultural sector. A CGE micro-simulation model is employed to estimate and explain these impacts. Tariff reduction induces consumers to substitute cheaper imported agricultural products for domestic goods, thereby resulting in a contraction in agricultural output. In contrast, the prevalence of cheap, imported inputs reduces the domestic cost of production, benefiting the outward-oriented and import-dependent industrial sector as their output and export increases. The national poverty headcount decreases marginally as lower consumer prices outweigh the income reduction experienced by the majority of households. However, both the poverty gap and severity of poverty worsens, implying that the poorest of the poor become even poorer.
    Keywords: Agriculture, International trade, Poverty, Computable general equilibrium, Micro-simulation, Philippines
    JEL: D58 E27 F13 I32 O13 O15 O24 O53 Q10
    Date: 2006
  9. By: Caesar B. Cororaton
    Abstract: This paper analyzes the impact of trade reform on welfare and poverty in the Philippines in the 1990s using a CGE model. The results indicate that while welfare rises and poverty falls for all household groups except the poorest (those with rural unskilled private employees as household head), urban households gain more than rural households. Policy experiments involving full tariff reduction and uniform five percent tariff rate indicate generally the same pattern of effects, except that the magnitude of change is relatively larger in the former while all household groups, including the poorest, experience a reduction in poverty in the latter. Since poverty remains high and the disparity between rural and urban poverty is still wide, other poverty-reducing measures have to be designed and implemented to target those households that do not benefit much from this type of market reform.
    Keywords: Computable general equilibrium, International trade, Poverty, Philippines
    JEL: D33 D58 E27 F13 F14 I32 O15 O53
    Date: 2006
  10. By: Robert Dekle; Guillaume Vandenbroucke
    Abstract: Between 1978 and 2003 the Chinese economy experienced a remarkable 5.7 percent annual growth of GDP per labor. At the same time, there has been a noticeable transformation of the economy: the share of workers in agriculture decreased from over 70 percent to less than 50 percent. We distinguish three sectors: private agriculture and nonagriculture and public nonagriculture. A growth accounting exercise reveals that the main source of growth was TFP in the private nonagricultural sector. The reallocation of labor from agriculture to nonagriculture accounted for 1.9 percent out of the 5.7 percent growth in output per labor. The reallocation of labor from the public to the private sector also accounted for a significant part of growth in the 1996- 2003 period. We calibrate a general equilibrium model where the driving forces are public investment and employment, as well as sectorial TFP derived from our growth accounting exercise. The model tracks the historical employment share of agriculture and the labor productivities of all three sectors quite well.
    Keywords: China, structural transformation, growth
    JEL: O41 O53
    Date: 2006–05
  11. By: Araujo, Maria Caridad; Schady, Norbert
    Abstract: The impact of cash transfer programs on the accumulation of human capital is a topic of great policy importance. An attendant question is whether program effects are larger when transfers are " conditioned " on certain behaviors, such as a requirement that households enroll their children in school. This paper uses a randomized study design to analyze the impact of the Bono de Desarrollo Humano (BDH), a cash transfer program, on enrollment and child work among poor children in Ecuador. There are two main results. First, the BDH program had a large, positive impact on school enrollment, about 10 percentage points, and a large, negative impact on child work, about 17 percentage points. Second, the fact that some households believed that there was a school enrollment requirement attached to the transfers, even though such a requirement was never enforced or monitored in Ecuador, helps explain the magnitude of program effects.
    Keywords: Small Area Estimation Poverty Mapping,Primary Education,Land and Real Estate Development,Municipal Housing and Land,Real Estate Development
    Date: 2006–06–01
  12. By: Lopez, Humberto
    Abstract: The author analyzes the stability of the empirical relationship between growth and changes in inequality over time. He concludes that while during the 1970s and 1980s the growth process was not accompanied by increases in inequality, during the 1990s a positive and significant correlation appears in the data. For this decade, he estimates that a 1 percent growth rate would be associated with an increase in the gini coefficient of between .3 to .5 percent. This positive correlation is hidden when one estimates the model without allowing for changes in the relationship over the different decades. The finding is robust to a number of departures from the basic specification including: (1) the use of alternative specifications to isolate decadal shifts; (2) the use of robust estimation techniques that address the potential influence of outliers; (3) restricting the sample to a balanced panel for the 1980s and 1990s to control for changes in the composition of the sample related to the unbalanced nature of the panel; and (4) considering the possibility of fixed effects in the data. The author also explores the impact of this structural change in the rate of poverty reduction and concludes that it is far from negligible.
    Keywords: Pro-Poor Growth and Inequality,Inequality,Services & Transfers to Poor,Poverty Impact Evaluation,Economic Growth
    Date: 2006–06–01
  13. By: Veganzones-Varoudakis, Marie-Ange; Nabli, Mustapha Kamel; Aysan, Ahmet Faruk
    Abstract: This paper addresses the issue of the low level of private investment in the Middle East and North Africa (MENA) region, with special emphasis on the role of governance. Based on the existing literature, the authors categorize what types of governance institutions are more detrimental to entrepreneurial investments. They then estimate a simultaneous model of private investment and governance quality where economic policies concurrently explain both variables. The empirical results show that governance plays a significant role in private investment decisions. This result is particularly true in the case of " administrative quality " in the form of control of corruption, bureaucratic quality, investment-friendly profile of administration, and law and order, as well as for " political stability. " Evidence in favor of " public accountability " seems, however, less robust. The estimations also stress that structural reforms-such as financial development and trade openness-and human development affect private investment decisions directly, and/or through their positive impact on governance. These findings bring new empirical evidence on the subject of private investment in the developing world and in MENA countries in particular.
    Keywords: Governance Indicators,Investment and Investment Climate,Economic Theory & Research,National Governance,Trade and Regional Integration
    Date: 2006–06–01
  14. By: Rubio-Codina, Marta; Patrinos, Harry; Gertler, Paul
    Abstract: Mexico ' s compensatory education program provides extra resources to primary schools that enroll disadvantaged students in highly disadvantaged rural communities. One of the most important components of the program is the school-based management intervention known as AGEs. The impact of the AGEs is assessed on intermediate school quality indicators (failure, repetition and dropout), controlling for the presence of the conditional cash transfer program. Results prove that school-based management is an effective measure for improving outcomes, based on an over time difference-in-difference evaluation. Complementary qualitative evidence corroborates the veracity of such findings.
    Keywords: Education For All,Primary Education,Teaching and Learning,Secondary Education,Gender and Education
    Date: 2006–06–01
  15. By: Jennifer Hunt; ;
    Abstract: Using detailed Peruvian data measuring bribery, I assess which types of public official are most corrupt and why. I distinguish between the bribery rate and the size of bribes received, and seek to explain the variation in each across public institutions. The characteristics of officials’ clients explain most of the variation for bribery rates, but none for bribe amounts. A measure of the speed of honest service at the institution explains much of the remaining variation for both bribery rates and amounts. The results indicate that the bribery rate is higher at institutions with bribe-prone clients, and that bribery rates and bribe amounts are higher where clients are frustrated at slow service. Faster and better service would reduce corruption. Overall, the judiciary and the police are by far the most corrupt institutions.
    Keywords: Corruption, bribery, institutions, governance.
    JEL: H4 K4 O1
    Date: 2005–09–01
  16. By: Jennifer Hunt; Sonia Laszlo;
    Abstract: We provide a theoretical framework for understanding when an official angles for a bribe, when a client pays, and the payoffs to the client’s decision. We test this frame work using a new data set on bribery of Peruvian public officials by households. The theory predicts that bribery is more attractive to both parties when the client is richer, and we find empirically that both bribery incidence and value are increasing in household income. However, 65% of the relation between bribery incidence and income is explained by greater use of officials by high–income households, and by their use of more corrupt types of official. Compared to a client dealing with an honest official, a client who pays a bribe has a similar probability of concluding her business, while a client who refuses to bribe has a probability 16 percentage points lower. This indicates that service improvements in response to a bribe merely offset service reductions associated with angling for a bribe, and that clients refusing to bribe are punished. We use these and other results to argue that bribery is not a regressive tax.
    Keywords: Corruption, bribery, institutions, governance.
    JEL: H4 K4 O1
    Date: 2005–09–01
  17. By: Margaret Maurer-Fazio,; James W. Hughes; Dandan Zhang
    Abstract: Previous research suggests that minorities are not faring well in China’s transition—both income and occupational attainment gaps are widening. We are particularly interested in whether the differences in majority and minority economic outcomes are the result of ethnicity per se, or whether they are artifacts of local economic conditions. In this paper, we employ data from the three most recent population censuses of China to explore differences in the labor force participation rates of a number of China’s important ethnic groups. We estimate urban labor force participation rates using probit regressions controlling for sex, marital status, educational attainment, age, ethnicity, and location. We also account for the geographic concentration of particular ethnic minorities and compare the participation rates of different ethnic groups within geographic regions that represent the areas of principal residence for each minority. We concentrate on seven important minority groups: Hui, Koreans, Manchu, Mongolians, Uygurs, Yi and Zhuang. We find that location has limited explanatory power in explaining differences in the probability of labor force participation between these important Chinese ethnic minorities and the majority Han.
    Keywords: China, ethnic minorities, labor force participation, economic reform, population censuses
    JEL: J1 J2 J7 O1 O5 P2
    Date: 2005–11–01

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