nep-dev New Economics Papers
on Development
Issue of 2006‒08‒05
38 papers chosen by
Jeong-Joon Lee
Towson University

  1. Ageing and Growth in the Small Open Economy By Ben J. Heijdra; Ward E. Romp
  2. World Growth and International Capital Flows in the XXIth Century By Michel Aglietta; Vladimir Borgy; Jean Chateau; Michel Juillard; Jacques le Cacheux; Gilles le Garrec; Vincent Touze
  3. Focused Targeting against Poverty Evidence from Tunisia By Christophe Muller; Sami Bibi;
  4. IMF Data Standards Initiatives--A Consultative Approach to Enhancing Global Data Transparency By Anne Y. Kester
  5. Mind the Gap - Is Economic Growth in India Leaving Some States Behind? By Catriona Purfield
  6. Reflections on Quantitative Fiscal Conditionality in African PRGF-Supported Programs By Daria Zakharova; Annalisa Fedelino
  7. HIV/AIDS: The Impact on Poverty and Inequality By Gonzalo Salinas; Markus Haacker
  8. Did Botswana Escape from the Resource Curse? By Atsushi Iimi
  9. Inflation, Inequality, and Social Conflict By Christopher Crowe
  10. Sovereign Borrowing Cost and the IMF's Data Standards Initiatives By John Cady; Anthony J. Pellechio
  11. The Tax System in India: Could Reform Spur Growth? By Hélène Poirson
  12. Government Debt in Emerging Market Countries: A New Data Set By Anastasia Guscina; Olivier Jeanne
  13. Corruption and the shadow economy: An empirical analysis By Axel Dreher; Friedrich G. Schneider
  14. Nonparametric and Semiparametric Evidence on the Long-Run Effects of Inflation on Growth By Andrea Vaona; Stefano Schiavo
  15. Aid and Development: The Mozambican Case By Channing Arndt; Sam Jones; Finn Tarp
  16. China's Embrace of Globalization By Lee Bransetter; Nicholas Lardy
  17. Conditional cash transfers, adult work incentives, and poverty By Skoufias, Emmanuel; di Maro, Vincenzo
  18. Financing firms in India By Allen, Franklin; Chakrabarti, Rajesh; De, Sankar; Qian, Jun; Qian, Meijun
  19. Quantifying the value of U.S. tariff preferences for developing countries By Dean, Judith M.; Wainio, John
  20. Health Service Delivery in China: A Literature Review By Eggleston, Karen; Ling, Li; Qingyue, Meng; Lindelow, Magnus; Wagstaff, Adam
  21. Trade reforms, farm productivity, and poverty in Bangladesh By Klytchnikova, Irina; Diop, Ndiame
  22. Openness, inequality, and poverty : endowments matter By Gourdon, Julien; Maystre, Nicolas; de Melo, Jaime
  23. Micro-credit, risk coping and the incidence of rural-to-urban migration By Ahsan, Quamrul
  24. The Political Economy of Corruption and and the Role of Financial Institutions By Boerner, Kira; Hainz, Christa
  25. Coping Strategies in Post-War Rural Mozambique By Brück, Tilman
  26. IMF and Economic Growth: The Effects of Programs, Loans, and Compliance with Conditionality By Dreher, Axel
  27. Aid, Policies and Growth: A Non-Canonical Alternative for solving This Puzzle. By Fuentes, Raúl
  28. Distribution and Development in a Model of Misgovernance By Blackburn, Keith; Forgues-Puccio, Gonzalo F.
  29. Does Imported Skill-Biased Technological Change Originate None, One or Many Kuznets Curves? By Grimalda, Gianluca; Vivarelli, Marco
  30. Inflation Inequity and the Measurement of Pro-Poor Growth By Grimm, Michael; Günther, Isabel
  31. Human capital, growth and convergence traps: Implications from a cross-country analysis By Stamatakis, D.; Petrakis, P.E.
  32. How to prioritise policies for poverty reduction: Applying Bayesian Model Averaging to Vietnam By Klump, Rainer; Prüfer, Patricia
  33. Modeling Firm Dynamics to Identify the Cost of Financing Constraints in Ghanaian Manufacturing By Schündeln, Matthias
  34. Inequality and growth: A joint analysis of demand and supply By Shen, Ling
  35. Uganda: No more pro-poor growth? By Kappel, Robert; Lay, Jann; Steiner, Susan
  36. Measuring and Explaining Government Inefficiency in Developing Countries By Van de Sijpe, Nicolas; Rayp, Glenn
  37. Exchange rate risk and economic reform: the case of endogenous institutional change in China By Veit, Wolfgang
  38. Inequality and Heterogeneous Returns to Education in Mexico (1992-2002) By Mehta, Aashish; Villarreal, Hector J.

  1. By: Ben J. Heijdra; Ward E. Romp
    Abstract: We construct an overlapping generations model for the small open economy which incorporates a realistic description of the mortality process. Agents engage in educational activities at the start of life and thus create human capital to be used later on in life for production purposes. Depending on the strength of the intergenerational externality in the human capital production function, the model gives rise to exogenous or endogenous growth. The effects of demographic shocks and fiscal stimuli on the growth path are derived, both at impact, during transition, and in the long run.
    Keywords: demography, education, human capital, economic growth, fertility rate, ageing, overlapping generations, small open economy
    JEL: D91 E10 F41 J11 O40
    Date: 2006
  2. By: Michel Aglietta (CEPII); Vladimir Borgy (CEPII); Jean Chateau (OECD); Michel Juillard (CEPREMAP); Jacques le Cacheux (Observatoire Français des Conjonctures Économiques); Gilles le Garrec (Observatoire Français des Conjonctures Économiques); Vincent Touze (Observatoire Français des Conjonctures Économiques)
    Date: 2006
  3. By: Christophe Muller (Universidad de Alicante); Sami Bibi (Faculté des Sciences Economiques et de Gestion de Tunis (FSEGT) and Unité de Recherche en Econométrie Appliquée (URECA));
    Abstract: This paper introduces a new methodology to target direct transfers against poverty. Our method is based on observable correlates and on estimation methods that focus on the poor. Using data from Tunisia, we estimate ‘focused’ transfer schemes that improve anti-poverty targeting performances. Post-transfer poverty can be substantially reduced with the new estimation method. The impact of these schemes on the welfare of the poor is also much stronger than the current food subsidies system in Tunisia. Finally, the obtained levels of undercoverage of the poor is so low that ‘proxy-means’ focused transfer schemes becomes a realistic alternative to price subsidies, likely to avoid social unrest.
    Keywords: Poverty; Targeting; Transfers.
    JEL: D12 D63 H53 I32 I38
    Date: 2006–04
  4. By: Anne Y. Kester
    Abstract: Since the IMF launched the data standards initiatives a decade ago, 145 of its 184 member countries have participated. This 80 percent participation rate reaffirms the importance countries place on data transparency in the globalized economy, which the initiatives promote. The wide participation can be attributed to the consultative process that has allowed for the development of a coherent program that takes account of countries' capabilities, delineates clear responsibilities between the IMF and participating countries, and establishes effective monitoring procedures to ensure the credibility of the standards for policymakers, capital markets, and the general public. The approach has also provided checks and balances and fostered accountability. The initiatives may provide insights for the promotion of similar international standards.
    Keywords: Exchange rate policy surveillance , Special Data Dissemination Standard , General Data Dissemination System , Dissemination Standards Bulletin Board , Transparency , Economic databases ,
    Date: 2006–04–27
  5. By: Catriona Purfield
    Abstract: This paper examines how growth has varied across India's states. It finds that (i) the income gap between rich and poor states has widened; (ii) rich and faster-growing states have been more effective in reducing poverty; (iii) poor and slower-growing states have had little success in generating private sector jobs; (iv) labor and capital flows do little to close income gaps; and (v) the volatility in economic growth is greatest in poor states. Differences in states' policies affect the cross-state pattern of growth. Greater private sector investment, smaller governments, and better institutions are found to have a positive impact on growth.
    Keywords: Economic growth , India , Economic reforms , Income distribution ,
    Date: 2006–04–28
  6. By: Daria Zakharova; Annalisa Fedelino
    Abstract: We survey quantitative fiscal conditionality in selected sub-Saharan African PRGFsupported programs, and assess the conditionality against some possible benchmarks and best practices. While noting many caveats, the paper suggests some possible scope for further attuning of this conditionality to countries' specific macro-fiscal situations. The paper also offers some suggestions on how quantitative fiscal conditionality might be further enhanced.
    Date: 2006–05–12
  7. By: Gonzalo Salinas; Markus Haacker
    Abstract: Using available data on the distribution of HIV/AIDS prevalence across population groups for four sub-Saharan African countries and transposing this information to household income and expenditure surveys, we simulate the impact of HIV/AIDS on poverty and inequality. We find that the epidemic lowers average income and increases poverty, and that the jump in poverty is larger than expected from the fall in average income. This disproportionate increase in poverty reflects the large share of the population living on the threshold of poverty and the higher HIV prevalence rates in those segments of the population.
    Keywords: Income distribution , Sub-Saharan Africa , Ghana , Kenya , Swaziland , Zambia , Poverty , Economic growth , Health care , HIV and AIDS , Social security ,
    Date: 2006–05–25
  8. By: Atsushi Iimi
    Abstract: Botswana is typical of the countries that are endowed with abundant natural resources. Although it is commonly accepted that resource-rich economies tend to fail in accelerating growth, Botswana has experienced the most remarkable economic performance in the region. Using the latest cross-country data, this study empirically readdresses the question of whether resource abundance can contribute to growth. It finds that governance determines the extent to which the growth effects of resource wealth can materialize. In developing countries in particular, the quality of regulation, such as the predictability of changes of regulations, and anticorruption policies, such as transparency and accountability in the public sector, are most important for effective natural resource management and growth.
    Keywords: Development , Botswana , Governance ,
    Date: 2006–06–12
  9. By: Christopher Crowe
    Abstract: This paper presents and then tests a political economy model to analyze the observed positive relationship between income inequality and inflation. The model's key features are unequal access to both inflation-hedging opportunities and the political process. The model predicts that inequality and 'elite bias' in the political system interact to create incentives for inflation. The paper's empirical section focuses on this predicted interaction effect. The identification strategy involves using the end of the Cold War as a source of exogenous variation in the political environment. It finds robust evidence in support of the model.
    Date: 2006–07–07
  10. By: John Cady; Anthony J. Pellechio
    Abstract: The effects of the IMF's data standards initiatives on sovereign borrowing costs in private capital markets are investigated for 26 emerging market and developing countries. Stable and significant panel econometric estimates indicate that subscription to the Special Data Dissemination Standard (SDDS) reduces launch spreads by an average of 20 percent while participation in the General Data Dissemination System (GDDS) reduces spreads for those countries with access to capital markets by an average of 8 percent. These estimates correspond to discounts of some 50 and 20 basis points, respectively. Evidence of similar discounts is also found when launch yields are analyzed.
    Keywords: Public debt , Capital markets , Transparency , Special Data Dissemination Standard , General Data Dissemination System , Economic models ,
    Date: 2006–04–05
  11. By: Hélène Poirson
    Abstract: This paper assesses the effects of India's tax system on growth, through the level and productivity of private investment. Comparison of India's indicators of effective tax rates and tax revenue productivity with other countries shows that the Indian tax system is characterized by: (1) a high dependence on indirect taxes, (2) low average effective tax rates and tax productivity, and (3) high marginal effective tax rates and large tax-induced distortions on investment and financing decisions. The paper finds that the most recently proposed package of reforms would improve tax productivity and lower the marginal tax burden and tax-induced distortions. But firms that rely on internal sources of funds or face problems borrowing would continue to face high marginal tax rates.
    Keywords: Economic growth , India , Tax policy , Tax reforms , Indirect taxation , Tax rates ,
    Date: 2006–04–20
  12. By: Anastasia Guscina; Olivier Jeanne
    Abstract: This paper presents a new database on government debt in 19 emerging market countries since 1980. The data set focuses on the structure of debt in terms of jurisdiction of insurance, maturity, currency composition and indexation. The paper presents stylized facts on debt structures and preliminary evidence on their determinants. We observe substantial crosscountry variation in the structure of domestic debt and find it to be associated with countries' record of monetary stability.
    Keywords: Debt management , Public debt , Domestic debt , External debt , Emerging markets , Databases ,
    Date: 2006–04–26
  13. By: Axel Dreher (Department of Management, Technology, and Economics, KOF, ETH Zürich (Swiss Federal Institute of Technology Zurich), CH-8092 Zürich, Switzerland); Friedrich G. Schneider (Department of Economics, Johannes Kepler University Linz, Austria)
    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
  14. By: Andrea Vaona; Stefano Schiavo
    Abstract: In this paper we adopt both a nonparametric and a semi-parametric IV estimator to show that the relationship between inflation and output growth is non-linear and that there exists a threshold level below which inflation has no effects on growth.
    Keywords: Inflation, Growth
    JEL: E31 O49 C14
    Date: 2006–07
  15. By: Channing Arndt (Purdue University); Sam Jones (Ministry of Planning and Development, Mozambique); Finn Tarp (Department of Economics, University of Copenhagen)
    Abstract: This paper considers the relationship between external aid and development in Mozambique from 1980 to 2004. The main objective is to identify the specific mechanisms through which aid has influenced the developmental trajectory of the country and whether one can plausibly link outcomes to aid inputs. We take as our point of departure a growth accounting analysis and review both intended and unintended effects of aid. Mozambique has benefited from sustained aid inflows in conflict, post-conflict and reconstruction periods. In each of these phases aid has made an unambiguous, positive contribution both enabling and supporting rapid growth since 1992. At the same time, the proliferation of donors and aid-supported interventions has burdened local administration and there is a distinct need to develop government accountability to its own citizens rather than donor agencies. In ensuring sustained future growth, Mozambique will have to develop its capacity to maximise the benefits from its natural resources while ensuring at the same time the necessary framework is put in place to promote constructive integration in international markets.
    Keywords: Mozambique; foreign aid; development
    JEL: F35 O10 O55
    Date: 2006–06
  16. By: Lee Bransetter; Nicholas Lardy
    Abstract: As China has become an increasingly important part of the global trading system over the past two decades, interest in the country and its international economic policies has increased among international economists who are not China specialists. This paper represents an attempt to provide the international economics community with a succinct summary of the major steps in the evolution of Chinese policy toward international trade and foreign direct investment and their consequences since the late 1970s. In doing so, we draw upon and update a number of more comprehensive book-length treatments of the subject. It is our hope that this paper will prove to be a useful resource for the growing numbers of international economists who are exploring China-related issues, either in the classroom or in their own research.
    JEL: O53 O19 F43 F14
    Date: 2006–07
  17. By: Skoufias, Emmanuel; di Maro, Vincenzo
    Abstract: Conditional cash transfer (CCT) programs aim to alleviate poverty through monetary and in-kind benefits, as well as reduce future levels of poverty by encouraging investments in education, health, and nutrition. The success of CCT programs at reducing poverty depends on whether, and the extent to which, cash transfers affect adult work incentives. The authors examine whether the PROGRESA program of Mexico affects adult participation in the labor market and overall adult leisure time, and they link these effects to the impact of the program on poverty. Using the experimental design of PROGRESA's evaluation sample, the authors find that the program does not have any significant effect on adult labor force participation and leisure time. Theirfindings on adult work incentives are reinforced further by the result that PROGRESA leads to a substantial reduction in poverty. The poverty reduction effects are stronger for the poverty gap and severity of poverty measures.
    Keywords: Rural Poverty Reduction,Population Policies,Poverty Monitoring&Analysis,Health Monitoring&Evaluation
    Date: 2006–08–01
  18. By: Allen, Franklin; Chakrabarti, Rajesh; De, Sankar; Qian, Jun; Qian, Meijun
    Abstract: The authors examine the legal and business environments, financing channels, and governance mechanisms of various types of firms in India and compare them to those from other countries. Despite its English commonlaw origin, strong legal protection provided by the law, and a democratic government, corruption within India's legal system and government significantly weakens investor protection in practice. External financing of firms has been dominated by nonmarket sources of financing, while the characteristics of listed firms are similar to those from countries with weak investor protection. The evidence, including results based on a survey of small and medium-scale private firms, shows thatalternative financing channels provide the most important source of funds. The authors also find that informal governance mechanisms, such as those based on reputation, trust, and relationships are more important than formal mechanisms (such as courts) in resolving disputes, overcoming corruption, and supporting growth.
    Keywords: Banks&Banking Reform,Corporate Law,Financial Intermediation,Governance Indicators,Small Scale Enterprise
    Date: 2006–08–01
  19. By: Dean, Judith M.; Wainio, John
    Abstract: In recent debates, trade preference erosion has been viewed by some as damaging to developing countries, and by others as insignificant, except in a few cases. But little data have been available to back either view. The objective of this paper is to improve our measures of the size, utilization, and value of all U.S. nonreciprocal trade preference programs in order to shed light on this debate. Highly disaggregated data are used to quantify the margins, coverage, utilization, and value of agricultural and nonagricultural tariff preferences for all beneficiary countries in the U.S. regional programs and in the Generalized System ofPreferences. Results show that U.S. regional tariff preference programs are generally characterized by high coverage of beneficiary countries'exports, high utilization by beneficiary countries, and low tariff preference margins (except on apparel). For 29 countries, the value of U.S. tariff preferences was 5 percent or more of 2003 dutiable exports to the United States, even after incorporating actual utilization. Most of this value is attributable to nonagricultural tariff preferences, and to apparel preferences in particular. These results suggest that preference erosion may be significant for more countries than many had thought.
    Keywords: Free Trade,Trade Policy,Insurance&Risk Mitigation,Economic Theory&Research,Agribusiness&Markets
    Date: 2006–08–01
  20. By: Eggleston, Karen; Ling, Li; Qingyue, Meng; Lindelow, Magnus; Wagstaff, Adam
    Abstract: The authors report the results of a review of the Chinese-language and English-language literatures on service delivery in China, asking how well China ' s health care providers perform, what determines their performance, and how the government can improve it. They find current performance leaves room for improvement in terms of quality, responsiveness to patients, efficiency, cost escalation, and equity. The literature suggests that these problems will not be solved by simply shifting ownership to the private sector, or by simply encouraging providers-public and private-to compete with one another for individual patients. In contrast, substantial improvements could be (and in some places have already been) made by changing the way providers are paid-shifting away from fee-for-service and the distorted price schedule toward prospective payments. Active purchasing by insurers could further improve outcomes.
    Keywords: Health Monitoring & Evaluation,Health Law,Health Economics & Finance,Health Systems Development & Reform,Population Policies
    Date: 2006–08–01
  21. By: Klytchnikova, Irina; Diop, Ndiame
    Abstract: This paper analyzes the distributional impacts of trade reforms in rural areas of Bangladesh. The liberalization of trade in irrigation equipment and fertilizer markets during the early 1990s has led to structural changes in the agricultural sector and a significant increase in rice productivity. A resulting increase in output has been associated with a decline in producer and consumer rice prices of approximately 25 percent. Using a combination of ex-post and ex-ante approaches, the authors investigate the implications of the changes in rice productivity and prices for the welfare of households. They find that the net effects of increased rice productivity and lower rice prices have benefited the poor. Regardless of the particular category analyzed, the poorest households emerged as being particularly positively affected by reforms in the 1990s. This mainly reflects the fact that they are predominantly net rice buyers in both urban and rural markets. In contrast, large net sellers of rice, among the better-off households in the rural areas, were the main losers. Since net buyers in rural areas tend to be poorer than net sellers, trade liberalization has benefited the poor. Although the authors are not able to test empirically what has happened to the welfare level of agricultural wage earners, secondary evidence suggests that they have gained from trade liberalization.
    Keywords: Rural Poverty Reduction,Economic Theory & Research,Markets and Market Access,Crops & Crop Management Systems
    Date: 2006–08–01
  22. By: Gourdon, Julien; Maystre, Nicolas; de Melo, Jaime
    Abstract: Using tariffs as a measure of openness, the authors find consistent evidence that the conditional effects of trade liberalization on inequality are correlated with relative factor endowments. Trade liberalization is associated with increases in inequality in countries well-endowed in highly skilled workers and capital or with workers that have very low education levels and in countries relatively well-endowed in mining and fuels. Trade liberalization is associated with decreases in inequality in countries that are well-endowed with primary-educated labor. Similar results are also apparent when decile data are used instead of the usual Gini coefficient. The results are strongly supportive of the factor-proportions theory of trade and suggest that trade liberalization in poor countries where the share of the labor force with very low education levels (likely employed in nontradable activities) is high raises inequality. In the sample, countries with low education levels also have relatively scarce endowments of capital. Quantitatively capital scarcity is the dominating effect so that trade liberalization is accompanied by reduced income inequality in low-income countries. Within-country inequality is also positively correlated with measures of macroeconomic instability. Simulation results suggest that relatively small changes in inequality as measured by aggregate measures of inequality like the Gini coefficient are magnified when estimates are carried out using decile data.
    Keywords: Free Trade,Economic Theory & Research,Inequality,Trade Law,Pro-Poor Growth and Inequality
    Date: 2006–08–01
  23. By: Ahsan, Quamrul
    Abstract: The focus of this paper is on the rural poor of south Asia and their struggle to cope with the seasonal risk of unemployment and the ensuing income risks. In the absence of formal credit or insurance markets the rural poor typically resort to, among other options, the following informal strategies to cope with seasonal income risks: (i) seasonal rural-to-urban migration, and (ii) mutual (ex-post) transfers between families of friends and relatives. Access to credit through a microfinance institution could also provide a competing source of insurance. The question raised in this paper is how the access to credit may affect the more traditional/time honoured means of risk coping, such as seasonal migration. Given that credit, i.e., a creditfinanced activity, is potentially a substitute for seasonal migration, it is reasonable to argue that easy access to credit (or high return on credit) will lower the incidence of migration. However, there also exists a potential complementarity between the two activities (if implemented jointly) in terms of gains due to diversification of income risks. That is, given that income from migration is not typically subject to the same shocks as income generated by a credit-financed activity, a joint adoption of both activities creates opportunities for diversification of risk in the family incomes portfolio. If the diversification gains are large enough then the adoption of both activities jointly will be preferred to adopting either of the activities individually. In that event, introduction of microfinance in rural societies may result in raising the incidence of migration. The joint adoption case for rural households is modelled using a choice theoretic framework, and exact conditions are derived for when joint adoption is preferable to adoption of a single project. The model of joint adoption is estimated by applying a Bivariate Probit regression model on a single cross-section of household survey data from rural Bangladesh. Our preliminary results show that indeed the probability of participation in migration by household members is positively related to the probability of the household being a credit recipient.
    Keywords: Development, South Asia, Poverty, Microfinance, Rural labour markets, Rural-to-urban migration, Risk-coping strategies
    JEL: D1 D81 J43 J61 O1 Q12 R23
    Date: 2005
  24. By: Boerner, Kira; Hainz, Christa
    Abstract: In transition and developing countries, we observe rather high levels of corruption even they have democratic political systems. This is surprising from a political economy perspective, as a majority of the people generally suffers from high corruption levels. Our model based on the fact that corrupt officials have to pay an entry fee to get lucrative positions. In a probabilistic voting model, we show that a lack of financial institutions can lead more corruption as more voters are part of the corrupt system. Well-functioning financial institutions, in turn, can increase the political support for anti-corruption measures.
    Keywords: Corruption, Financial Markets, Institutions, Development, Voting
    JEL: D72 D73 O17
    Date: 2005
  25. By: Brück, Tilman
    Abstract: This paper analyses post-war coping strategies by farm households in developing countries. The analysis is based on a portfolio model of activity choices in war-affected rural Sub-Saharan Africa. A case study using farm household survey data estimates the determinants of agricultural coping strategies in post-war Mozambique. Post-war coping strategies are expected to differ from pre- and mid-crisis coping strategies. War-affected households are forced to adopt very risky coping strategies that re-enforce their vulnerability. Households choose between market and non-market forms of exchange and even exit markets entirely. Post-war reconstruction policy should focus on re-capitalizing households and providing public goods.
    Keywords: agriculture, households, rural development, war, Mozambique, Africa
    Date: 2005
  26. By: Dreher, Axel
    Abstract: In theory, the IMF could influence economic growth via several channels, among them advice to policy makers, money disbursed under its programs, and its conditionality. This paper tries to disentangle those effects empirically. Using panel data for 98 countries over the period 1970-2000 it analyzes whether IMF involvement influences economic growth in program countries. Consistent with the results of previous studies, it is shown that IMF programs reduce growth rates when their endogeneity is accounted for. There is only weak evidence that compliance with conditionality mitigates this negative effect. IMF loans have no statistically significant impact.
    Keywords: IMF programs, growth, compliance, conditionality
    JEL: F33 F34 O57
    Date: 2005
  27. By: Fuentes, Raúl
    Abstract: This paper presents a two-sector small semi-open economy Ramsey growth model involving foreign aid as an input in the production function. An activist government allocates this input endogenously across sectors and optimizes policies in a non-standard way. Once calibrated, mainly on countries exhibiting medium relative prices values, the model reproduces the main stylized facts outlined in the literature and suggests a strategy that could make aid work.
    Keywords: Foreig d, Economic development, Economic growth, Quantitative approach
    JEL: E62 F35 O11 O23 O41
    Date: 2005
  28. By: Blackburn, Keith; Forgues-Puccio, Gonzalo F.
    Abstract: This paper presents an analysis of bureaucratic corruption, income inequality and economic development. The analysis is based on a dynamic general equilibrium model in which bureaucrats are appointed by the government to implement a redistributive programme of taxes and subsidies designed to benefit the poor. Corruption is reflected in bribery and tax evasion as bureaucrats conspire with the rich in providing false information to the government. In accordance with empirical evidence, the model predicts a positive relationship between corruption and inequality, and a negative relationship between corruption and development.
    Keywords: Corruption, inequality, development.
    JEL: D31 D73 H26 O11
    Date: 2005
  29. By: Grimalda, Gianluca; Vivarelli, Marco
    Abstract: We draw on a dynamical two-sector model and on a calibration exercise to study the impact of a skill-biased technological shock on the growth path and income distribution of a developing economy. The model builds on the theoretical framework developed by Silverberg and Verspagen (1995) and on the idea of localised technological change (Atkinson and Stiglitz, 1969) with sector-level increasing returns to scale. We find that a scenario of catching-up to the highgrowth steady state is predictable for those economies starting off with a high enough endowment of skilled workforce. During the transition phase, if the skill upgrade process for the workforce is relatively slow, the typical inverse-U Kuznets pattern emerges for income inequality in the long run. Small scale Kuznets curves, driven by sectoral business cycles, may also be detected in the short run. Conversely, economies initially suffering from significant skill shortages remain trapped in a low-growth steady state. Although the long-term trend is one of decreasing inequality, small-scale Kuznets curves may be detected even in this case, which may cause problems of observational equivalence between the two scenarios for the policy-maker. The underlying factors of inequality, and the evolution of a more comprehensive measure of inequality than the one normally used, are also analysed.
    Keywords: Skill-biased technological change, inequality, Kuznets curve, catching-up
    JEL: O33 O41
    Date: 2005
  30. By: Grimm, Michael; Günther, Isabel
    Abstract: Despite the recent and intense debate on how to define and measure pro-poor growth, there is one important issue which has so far not received sufficient attention: how applications of pro-poor growth measurements can appropriately take into account relative price changes, which, given the heterogeneity of consumption patters across the income distribution, often lead to significant inflation inequality. We show that incorporating inflation inequality into pro-poor growth measurements is not only a methodological necessity but if ignored can seriously bias assessments of the pro-poorness of growth. Using household expenditure surveys, we suggest simple methodologies which are able to redress such biases and appropriately reflect the changes of relative prices and the development of the purchasing power of the poor in pro-poor growth measurements. Empirically, we illustrate our concepts for the case of Burkina Faso using growth incidence curves and poverty change decompositions as pro-poor growth measurements.
    Keywords: Pro-Poor Growth, Differential Inflation, Burkina Faso
    JEL: D12 D63 I32 O12
    Date: 2005
  31. By: Stamatakis, D.; Petrakis, P.E.
    Abstract: This article, adapted from Tamura’s theoretical proposition, empirically investigates capital convergence in three country groups belonging to significantly different development categories: G7, developed and developing. Human capital evaluation, in this context, goes beyond enrolment and/or attainment rates. In addition to enrolments and government spending, alternative factors determining human capital effectiveness synthesize an idea of enhanced human capital proxy. Empirical results indicate moderate evidence of convergence among the three-country groups when conventional variables are included. The convergence “picture” is quite different when additional variables are empirically examined, implying the existence of a “convergence trap” caused by initial endowments on human capital.
    Keywords: advanced (OECD), developed (OECD), developing (world), USA, Mexico, Mauritius (as examples of each of the above), human capital, convergence,
    Date: 2005
  32. By: Klump, Rainer; Prüfer, Patricia
    Abstract: The UN Millennium Development Goals have recognized poverty reduction as the main goal of global development policy. A comprehensive framework to evaluate the effectiveness of single policy measures and policy packages with respect to poverty reduction is still lacking, though. Policy evaluation is exposed to manifold uncertainties given the dependency of the preferred outcomes on a chosen policy, available information, and policy makers' preferences. We show that Bayesian Model Averaging (BMA) is most valuable in this context as it addresses the parameter and model uncertainty inherent in development policies. Using data for the 61 Vietnamese provinces we are able to ascertain the most important determinants of poverty from a large number of potential explanatory variables.
    Keywords: Poverty determinants, Vietnam, model uncertainty, Bayesian Model Averaging (BMA)
    JEL: C11 C52 O18 O53 R11
    Date: 2005
  33. By: Schündeln, Matthias
    Abstract: Economic development requires the growth of productive firms. However, financing constraints may limit firms’ investment abilities. This paper estimates the cost of financing constraints to firms, for example in terms of idle investment opportunities, and their aggregate implications. To this end, I develop and estimate a dynamic model of firm-level investment. The model allows me to deal with the main identification problem faced by work that studies financing constraints, namely to identify the investment opportunities and the constraints of a firm separately. The model also allows for other potential explanations of the observed phenomenon, in particular adjustment costs and uncertainty. I solve the model using dynamic programming methods and estimate it via simulation methods, using firm level data from Ghana. Counterfactual analyses are then carried out to quantify the importance of financing constraints. These counterfactuals indicate that removing the constraints would imply economically significant increases in investment that are associated with higher levels of consumption.
    Date: 2005
  34. By: Shen, Ling
    Abstract: The paper contributes to the literature of income inequality and economic growth in two directions. First, it analyzes the impact of income inequality on economic growth both through the supply of human capital and the incentive to invent induced by the demand for better quality goods. Secondly, I decompose Gini-coefficient in two variables, which have different effect on the economic performance. Thus, our result suggests that the empirical research on the base of Gini-coefficient can not generate an overall relationship between income inequality and economic growth.
    Date: 2005
  35. By: Kappel, Robert; Lay, Jann; Steiner, Susan
    Abstract: This article illustrates changing growth regimes in Uganda from pro-poor growth in the 1990s to growth without poverty reduction, actually even a slight increase in poverty, after 2000. Not surprisingly, we find that good agricultural performance is the key determinant of direct pro-poor growth in the 1990s as well as lower agricultural growth is the root cause of the recent increase in poverty. Yet after 2000, low agricultural growth appears to have induced important employment shifts out of agriculture, which have dampened the increase in poverty. We also assess the indirect way of pro-poor growth by analysing the incidence of public spending and the tax system and find that indirect pro-poor growth has only been achieved to a limited extend.
    Date: 2005
  36. By: Van de Sijpe, Nicolas; Rayp, Glenn
    Abstract: We show the relevance of government expenditure inefficiency using the Barro (1990) model. We estimate government inefficiency for 52 developing countries using a data envelopment analysis. The estimated inefficiencies are subsequently used in a general to specific approach in order to identify their determinants. We find the government expenditure inefficiency is primarily determined by governance and political variables, and structural country variables. Economic policy determinants apparently count less. Government inefficiency of the Sub Saharan countries in the sample is substantially higher.
    Keywords: Government inefficiency, data envelopment analysis, economic development
    JEL: H21 H50 O23
    Date: 2005
  37. By: Veit, Wolfgang
    Abstract: Over the past 15 years the mutual importance of institutional economics and development economics have grown strongly. This paper attempts to apply institutional analysis to issues of economic development by analysing China’s reform process after her accession to the WTO on the background of the hypothesis of vertically dependent institutions. It will be shown that institutions on a lower level (e.g. a fixed exchange rate regime) are dominated by higher level institutions like (e.g. laws governing firms, financial and labour markets). The latter are dominated by institutions on a higher level, for example by regulations governing the economic and political system. Consequently, economic policy options like a change in the exchange rate regime will depend on adjustments in areas ranging from constitutional to company law. In the second chapter, the concept of hierarchical institutions is introduced. In the third chapter, the general results of China’s recent trade liberalisation under WTO rules and the issue of a fixed exchange rate to the US Dollar are recounted. In the fourth chapter, reforms necessitated by China’s accession to the WTO, and reflected by the present exchange rate regime, are identified. This is followed by the analysis of institutions that are conducive to successful implementation of those reforms in China.
    Date: 2005
  38. By: Mehta, Aashish; Villarreal, Hector J.
    Date: 2005

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