nep-dev New Economics Papers
on Development
Issue of 2006‒09‒23
53 papers chosen by
Jeong-Joon Lee
Towson University

  1. Asymmetric property rights in China's economic growth By Zhang, Xiaobo
  2. The role of agriculture in development: Implications for Sub-Saharan Africa By Diao, Xinshen; Hazell, Peter; Resnick, Danielle; Thurlow, James
  3. Does good governance contribute to pro-poor growth? A Review of the Evidence from Cross-Country Studies By Resnick, Danielle; Birner, Regina
  4. Village inequality in Western China: Implications for Development Strategy in Lagging Regions By Xing, Li; Fan, Shenggen; Luo, Xiaopeng; Zhang, Xiaobo
  5. Shocks, sensitivity and resilience: Tracking The Economic Impacts Of Environmental Disaster On Assets In Ethiopia And Honduras By Carter, Michael R.; Little, Peter D.; Mogues, Tewodaj; Negatu, Workneh
  6. Trade liberalization under CAFTA: An Analysis of the Agreement With Special Reference to Agriculture and Smallholders in Central America By Morley, Samuel
  7. Moving up and moving down: A New Way of Examining Country Growth Dynamics By Rockmore, Marc; Zhang, Xiaobo
  8. Public investment to reverse Dutch disease: The Case of Chad By Levy, Stephanie
  9. Has trade liberalization in South Africa affected men and women differently? By Thurlow, James
  10. Shocks, livestock asset dynamics and social capital in Ethiopia By Mogues, Tewodaj
  11. Early childhood nutrition, schooling, and sibling inequality in a dynamic context: evidence from South Africa By Yamauchi, Futoshi
  12. Nutrition mapping in Tanzania: an exploratory analysis By Simler, Kenneth R.
  13. Insights from poverty maps for development and food relief program targeting: an application to Malawi By Benson, Todd
  14. Conflict, food insecurity, and globalization: By Messer, Ellen; Cohen, Marc J.
  15. The impact of an experimental nutritional intervention in childhood on education among Guatemalan adults: By Maluccio, John A.; Hoddinott, John; Behrman, Jere R.; Martorell, Reynaldo; Quisumbing, Agnes R.; Stein, Aryeh D.
  16. Gender, labor, and prime-age adult mortality: evidence from South Africa By Yamauchi, Futoshi; Buthelezi, Thabani; Velia, Myriam
  17. Shadow Economies and Corruption all over the World: What do we really know? By Friedrich G. Schneider
  18. The Solow Model in the Empirics of Growth and Trade By Erich Gundlach
  19. From Groundnuts to Globalization: A Structural Estimate of Trade and Growth By Christian Broda; Joshua Greenfield; David Weinstein
  20. Land and Power: Theory and Evidence from Chile By Jean-Marie Baland; James A. Robinson;
  21. Angel or Devil? China's Trade Impact on Latin American Emerging Markets By Jorge Blázquez-Lidoy; Javier Rodríguez
  22. Policy Coherence for Development: A Background Paper on Foreign Direct Investment By Thierry Mayer
  23. Regulation, Competition and Productivity Convergence By Paul Conway; Donato de Rosa; Giuseppe Nicoletti; Faye Steiner
  24. Macroeconomic Effects of Fiscal Policies: Empirical Evidence from Bangladesh, China, Indonesia and the Philippines By Geoffrey Ducanes; Marie Anne Cagas; Duo Qin; Pilipinas Quising; Mohammad Abdur Razzaque
  25. Financial system structure in Colombia : a proposal for a reform agenda By De la Cruz, Javier; Stephanou, Constantinos
  26. Group versus individual liability : a field experiment in the Philippines By Gine, Xavier; Karlan, Dean S.
  27. Azerbaijan ' s household survey data : explaining why inequality is so low By Ersado, Lire
  28. Rural vulnerability in Serbia By Ersado, Lire
  29. Governance matters V: aggregate and individual governance indicators for 1996 - 2005 By Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
  30. Rich States, Poor States: Convergence and Polarisation in India By Sanghamitra Bandyopadhyay
  31. Knowledge-Driven Economic Development By Sanghamitra Bandyopadhyay
  32. Patent Laws and Innovation in China By Linda Y. Yueh
  33. Contacts, Social Capital and Market Institutions - A Theory of Development By Paul Frijters; Dirk Bezemer; Uwe Dulleck
  34. Effects of taxes financing decisions and firm value in Nigeria By Adelegan, Olatundun
  35. The relationship between economic growth and inequality: evidence from the age of market liberalism By Angeles-Castro, Gerardo
  36. Financing Agricultural Development: The Political Economy of Public Spending on Agriculture in Sub-Saharan Africa By Palaniswamy, Nethra; Birner, Regina
  37. Financial Development and Inequality: Brazil 1985-99 By Meyer Bittencourt, Manoel F. Meyer
  38. FDI, Regulations and Growth By Busse, Matthias; Groizard, José Luis
  39. Why exporters can be financially constrained in a recently liberalised economy? A puzzle based on Argentinean firms during the 1990s By Espanol, Paula
  40. Financial Liberalisation, Bureaucratic Corruption and Economic By Blackburn, Keith; Forgues-Puccio, Gonzalo F.
  41. Export Diversification, Externalities and Growth: Evidence for Chile By Herzer, Dierk; Nowak-Lehman, Felicitas D.
  42. Determinants of the Growth Semi-Elasticity of Poverty Reduction By Klasen, Stephan; Misselhorn, Mark
  43. A Multilevel Approach to Explain Child Mortality and Undernutrition in South Asia and Sub-Saharan Africa By Harttgen, Kenneth; Misselhorn, Mark
  44. Sectoral Aid Priorities: Are Donors Really Doing their Best to Achieve the Millennium Development Goals? By Thiele, Rainer; Nunnenkamp, Peter; Dreher, Axel
  45. The debt-growth nexus in poor countries: a reassessment By Presbitero, Andrea F.
  46. Local Financial Development and the Aid-Growth Relationship By Nkusu, Mwanza; Sayek, Selin
  47. Bargaining over Fertility in Rural Ethiopia By Seebens, Holger
  48. Creating National Poverty Profiles and Growth Incidence Curves with Incomplete Income or Consumption Expenditure Data: An Application to Bolivia By Grosse, Melanie; Klasen, Stephan; Spatz, Julius
  49. The role of food from natural resources in reducing vulnerability to poverty: a case study from Zimbabwe By Mithöfer, Dagmar; Waibel, Hermann; Akinnifesi, Festus
  50. The Pathways out of Poverty in Rural Indonesia – an empirical assessment By McCulloch, Neil; Weisbrod, Julian; Timmer, Peter
  51. Credit for what? Informal credit as a coping strategy of market women in northern Ghana By Schindler, Kati
  52. Riding the Elephants: The Evolution of World Economic Growth and Income Distribution at the End of the Twentieth Century (1980-2000) By Albert Berry; John Serieux
  53. Development Aid and Economic Growth: A Positive Long-Run Relation By Sanjay G. Reddy; Camelia Minoiu

  1. By: Zhang, Xiaobo
    Abstract: "This paper highlights the difference between secure investor property rights and loosely defined individual property rights. Globalization and fiscal decentralization have intensified this difference. On the one hand, in the presence of mobile foreign direct investments and under the arrangement of fiscal decentralization, local governments compete vigorously to offer various protections on the property rights of investors; on the other hand, local governments and developers attempt to acquire land at as low price as possible by taking advantage of the loopholes inherent in the Chinese law. Secure investor property rights together with weak protections on individuals' land property rights is argued to be one of the major drivers of China's rapid economic growth. But the same factor can veer those individuals being deprived of land into violence and social unrest, which may undermine China's social stability and long-term sustainable growth." from Authors' Abstract
    Keywords: Property rights, Investments, economic growth, China, individual land property, Fiscal policies, Decentralization,
    Date: 2006
  2. By: Diao, Xinshen; Hazell, Peter; Resnick, Danielle; Thurlow, James
    Abstract: "This paper provides a nuanced perspective on debates about the potential for Africa's smallholder agriculture to stimulate growth and alleviate poverty in an increasingly integrated world. In particular, the paper synthesizes both the traditional theoretical literature on agriculture's role in the development process and discusses more recent literature that remains skeptical about agriculture's development potential for Africa. In order to examine in greater detail the relevance for Africa of both the “old” and “new” literatures on agriculture, the paper provides a typology of African countries based on their stage of development, agricultural conditions, natural resources, and geographic location... More broadly, the paper demonstrates that conventional theory on the role of agriculture in the early stage of development remains relevant to Africa. While the continent does face new and different challenges than those encountered by Asian and Latin American countries during their successful transformations, most African countries cannot significantly reduce poverty, increase per capita incomes, and transform into modern economies without focusing on agricultural development." from Authors' Abstract
    Keywords: Growth-poverty linkages, Smallholders, Poverty alleviation, Agricultural development Africa, Agriculture Economic aspects, Ethiopia, Ghana, Rwanda, Uganda, Zambia,
    Date: 2006
  3. By: Resnick, Danielle; Birner, Regina
    Abstract: "Even though both “good governance” and “pro-poor growth” have become important concepts in development thinking and practice, studies that assess to which extent and how good governance contributes to pro-poor growth are still relatively scarce. After reviewing the two concepts, this paper develops a conceptual framework that specifies the linkages between different aspects of governance and pro-poor growth. Using this framework, the paper reviews a range of quantitative cross-country studies that include measures of governance as independent variables and focuses on the dependent variable in at least two of the three dimensions of pro-poor growth: poverty, inequality, and growth. The review shows that governance indicators that capture a sound decision-making environment for investment and policy implementation, such as political stability and rule of law, are associated with growth but provide mixed results in regard to poverty reduction. On the other hand, governance indicators that refer to transparent political systems, such as civil liberties and political freedom, tend to be conducive for poverty reduction, but the evidence is rather mixed, and the relationship of these variables with growth remains unclear. The paper discusses the methodological challenges inherent in this literature and suggests areas for future research." Authors' Abstract
    Keywords: Governance, Pro-poor growth, Cross-country studies, Growth-poverty linkages, Poverty reduction, Inequality, Decision-making,
    Date: 2006
  4. By: Xing, Li; Fan, Shenggen; Luo, Xiaopeng; Zhang, Xiaobo
    Abstract: "Increased regional inequality has been a major concern in many emerging economies like China, India, Vietnam and Thailand. However, even a large inequality is observed within the lagging regions. The objective of this paper is to look into what are the sources of within region inequality using the community surveys and a census type of households in Western China. This snapshot view of inequality within and between rural villages in western China is based on a census-type household survey in three administrative villages and a sampling survey of 286 natural villages in the poor province of Guizhou in 2004. In contrast to coastal regions, nonfarm income is distributed unevenly in this inland western region. This accounts for the largest share of overall income inequality. But agriculture is still the rural people's major source of livelihood in this particular location. On the expenditure side, health care is one of the most important sources of inequality. Because rural income is strongly related to human capital, the uneven access to health care will translate into a larger income gap in the long run. The analysis based on the natural village survey indicates that income varies widely across villages. Access to infrastructure and markets, education, and political participation explain most of this variation. These findings have important implications on the future development strategy in promoting lagging regions development and poverty reduction. While the overall economic development will be the main instrument to bring the majority poor out of poverty, a targeted approach has become increasingly crucial in helping the poor villages and households. It is critical to understand why these villages and households can not participate in the growth process and how development programs and various transfer programs help them to overcome the constraints they face." Authors' Abstract
    Keywords: Rural development, Poverty reduction, Inequality, Public investment, China, Asia, Household surveys, Agriculture, Income Rural areas,
    Date: 2006
  5. By: Carter, Michael R.; Little, Peter D.; Mogues, Tewodaj; Negatu, Workneh
    Abstract: "Droughts, hurricanes and other environmental shocks punctuate the lives of poor and vulnerable populations in many parts of the world. The direct impacts can be horrific, but what are the longer-term effects of such shocks on households and their livelihoods? Under what circumstances, and for what types of households, will shocks push households into poverty traps from which recovery is not possible? In an effort to answer these questions, this paper analyses the asset dynamics of Ethiopian and Honduran households in the wake of severe environmental shocks. While the patterns are different across countries, both reveal worlds in which the poorest households struggle most with shocks, adopting coping strategies which are costly in terms of both short term and long term well-being. There is some evidence that shocks threaten long term poverty traps and that they tend to militate against any tendency of the poor to catch up with wealthier households. Policy implications are discussed in terms of access to markets and the design of government safety net programs." Authors' Abstract
    Keywords: Environmental disasters, Economic situation, Impact evaluation, Droughts, Vulnerability, households, Livelihoods, Poverty, coping strategies, Safety nets, Government policy,
    Date: 2006
  6. By: Morley, Samuel
    Abstract: "This paper is a description and an analysis of trade liberalization under CAFTA. It shows that in the short run the impact of the agreement is likely to be small... Since the U.S. already grants tariff-free access under the CBI, trade liberalization in the CAFTA treaty appears to be asymmetric, with most of the tariff reductions being granted by the Central American countries. That is misleading for two reasons. First there really were some significant tariff barriers in the United States for agricultural commodities under the CBI. Many of these are removed under CAFTA. Second, the current favorable special treatment of the five Central American countries under the CBTPA and the CBI will expire in 2008 if CAFTA is not implemented. CAFTA makes permanent the tariff concessions of the CBI and the liberalized rules of origin of the CBTPA... The fact that the tariff reductions and TRQs granted by the Central American countries under CAFTA will not cause significant price reductions does not mean that domestic producers will be unaffected by the agreement. In the long run the level of protection of many important commodities such as rice, pork and poultry will be significantly lower. But the tariff reductions in these sectors are gradual. That gives farmers time to adjust and to become more competitive. What will be critical from a policy perspective is that this time is used wisely to increase productivity, switch to more profitable crops and take advantage of the new opportunities opened up by CAFTA.." Authors' Abstract
    Keywords: trade liberalization, Agriculture, Smallholders, Tariff on farm produce, Prices, Crops Economic aspects, Central America Free Trade Agreement (CAFTA), Caribbean Basin Initiative (CBI),
    Date: 2006
  7. By: Rockmore, Marc; Zhang, Xiaobo
    Abstract: "Do the countries which grow share the same features as those which decline? How can some countries achieve such long-term sustainable growth while others fail so badly? This paper builds on the emerging literature on growth asymmetries by examining movement across income categories in the World Development Reports over a significant period of time. The results confirm the existence of asymmetries and find that the factors which are correlated with movement upwards or downwards are markedly different. Evidence is presented which suggests that growth episodes share some common features while economic collapse may occur for a broader range of reasons." Authors' Abstract
    Keywords: economic growth, income growth, Growth dynamics, Growth asymmetries, trade, Economic policy, Conflict, Institutions, Geography,
    Date: 2006
  8. By: Levy, Stephanie
    Abstract: "This paper studies the relevance of agricultural policies for avoiding Dutch Disease, which affects many less developed countries experiencing a resource boom. Using a computable general equilibrium model calibrated for Chad, we study the impact of using this country's annual oil revenue for public investment, particularly in the development of road and irrigation infrastructure. Our model takes into account the integration of markets and migration processes. We find that improving water access would reduce Chad's dependence on food aid and entail a substantial improvement in rural household welfare." Author's Abstract
    Keywords: Agricultural policies, Computable general equilibrium (CGE), infrastructure, Public investment, Rural households, Market integration, trade, Road construction Economic aspects,
    Date: 2006
  9. By: Thurlow, James
    Abstract: "Trade liberalization is a central part of South Africa's post-Apartheid development strategy. However, despite considerable reforms, the country has failed to generate pro-poor growth, with both unemployment and inequality worsening over the last ten years. This has raised concern that trade liberalization may have worked against the country's development objectives. This study uses a dynamic general equilibrium and microsimulation model to assess the effects of trade liberalization on growth, employment and poverty in South Africa. More specifically, it examines how men and women have been affected differently and whether liberalization has contributed to the faster rise in female unemployment and poverty. The results suggest that trade policies have not contributed to increased poverty and that trade-induced technological change has accelerated growth. However, liberalization has changed the sectoral structure of production and has exacerbated income inequality. While male and female workers have benefited from trade-induced growth, it is male-headed households who have benefited more from rising factor incomes. Trade reforms have however contributed to the observed decline in the gender wage gap, but this has been driven by rising employment amongst higher-skilled female workers. As such, the decline in poverty amongst female-headed households has remained small. While further liberalization may increase growth and reduce poverty, it is men and male-headed households who are more likely to benefit. These findings suggest that, while there is no trade-off between trade reform and poverty reduction, the country should not rely on further liberalization to generate pro-poor growth or address the prevailing inequalities between different population groups, such as men and women." Author's Abstract
    Keywords: trade liberalization, Inequality, Unemployment, General equilibrium model, Microsimulation model, Poverty, Gender issues, Female labor, Income inequality, Trade reform, Pro-poor growth,
    Date: 2006
  10. By: Mogues, Tewodaj
    Abstract: "This paper uses household survey panel data of 416 rural households to study livestock asset dynamics in the north-east of Ethiopia. The period under examination (1996-2003) was marked by severe environmental shocks, including a series of droughts. Using as point of departure the literature on the evolution of productive assets in the presence of risk, which relates asset paths to initial endowments, we test the hypothesis of wealth divergence and the existence of asset poverty traps. Results indicate rather that livestock asset dynamics are marked by convergence over time. Examining the role of social capital in recovery and growth of households' endowments, both local social relationships as well as ‘bridging' social capital seem to have a positive effect on asset holdings directly, as well as indirectly by mitigating the impact of income shocks on livestock capital." Authors' Abstract
    Keywords: livestock, Household surveys, Environmental disasters, Poverty, assets, Social capital, Droughts,
    Date: 2006
  11. By: Yamauchi, Futoshi
    Abstract: "This paper examines the effects of early childhood nutrition on schooling inputs and outcomes to assess the dynamic nature of human capital production, using panel data from South Africa. Height-for-age Z-score is used as a measure of health and nutritional status in early childhood. Based on a comparison of siblings, this analysis concludes that improving children's health significantly lowers the age when they start school, increases grade attainment, and decreases grade repetition in the early stage of schooling. However, this positive effect diminishes at later stages. The results also show that households allocate more of their resources (such as school fee expenditure) to healthy children at the early stage, although wealthier households may invest more in less well endowed children in an attempt to reduce sibling inequality. However, fewer resources are allocated to healthy children at later stages. By the time of transition from primary to secondary school, the healthy child can increase household income by seeking employment in the labor market. In other words, while health capital augments the efficiency of investment in schooling at the early stage, it may increase opportunity costs at the later stage, which may deter investment in schooling." Authors' Abstract
    Keywords: Children Nutrition, Health capital, Height-for-age, Schooling, Investments, South Africa, Nutrition Evaluation, Nutritional status, Household resource allocation, Households Economic aspects,
    Date: 2006
  12. By: Simler, Kenneth R.
    Abstract: "For effective decisionmaking, policymakers and program managers often need detailed information about the welfare of the population, including knowledge about which specific areas are most affected by poverty and undernutrition. Household sample surveys are an important source of information, yet because the typical sample size is only a few thousand observations, the information is only useful for inferences at high levels of aggregation, such as the nation or large regional units. In contrast, data sources with wider coverage, such as national censuses, rarely capture detailed information on welfare levels. Recently small-area estimation techniques have been applied to the study of poverty to produce estimates of poverty, or poverty maps, for small geographic units. This paper uses household survey and unit record census data from Tanzania to explore the possibility of applying small-area estimation methods to the study of children's nutritional status as measured by anthropometry. Overall, undernutrition models have had lower explanatory power than poverty models, which has important implications for the precision of the small-area estimates. The analysis finds that applying small-area estimation techniques to anthropometric data is feasible, although the relatively low explanatory power of the regressions does limit both the degree of disaggregation possible and the power to detect significant differences in undernutrition prevalence between districts and subdistricts. In the case of Tanzania, the nutrition mapping approach reveals considerable heterogeneity in nutritional status within regions and within districts. The most striking finding is the much lower levels of undernutrition in areas classified as urban, including relatively small district centers." Authors' Abstract
    Keywords: Nutrition mapping, malnutrition, Anthropometry, Small area estimation, Tanzania,
    Date: 2006
  13. By: Benson, Todd
    Abstract: "Poverty mapping applies models of household welfare developed from detailed household consumption and expenditure surveys to the extensive but less detailed data from national censuses. A poverty map for Malawi, developed by drawing upon information from the 1997–98 Malawi Integrated Household Survey with the 1998 Malawi Population and Housing Census, provides aggregate estimates of household welfare and poverty at a highly disaggregated level—down to the level of local government wards. Given the close association between welfare and food security in most Malawi households, such a detailed poverty map can be of considerable value to development and relief organizations, as they plan and target activities to improve the ability of poor households to cope with food scarcity. This paper assesses the value of the Malawi poverty map with reference to two activities of the World Food Programme (WFP) in Malawi: the Food for Assets and Development (FFASD) public works program and the Vulnerability Analysis and Mapping (VAM) food insecurity information generation system. First, the poverty targeting efficiency of the FFASD program is evaluated using the poverty map to determine whether the FFASD projects are preferentially located in areas where disproportionate numbers of the poor are found. This is done in part by comparing the poverty targeting efficiency of the WFP program to that of the Malawi Social Action Fund Public Works Programme projects. Second, WFP employs the VAM methodology to determine how and where to employ its resources from year to year. The potential value of the poverty map as a component of the VAM process in Malawi is then considered. The results indicate that the poverty map is an effective and objective way to geographically target projects and programs on a poverty basis in Malawi. In assessing household vulnerability to food insecurity, the poverty map serves as a useful proxy indicator of spatial variability in the ability of the population to cope with food scarcity. Poverty maps, in those countries were they are available, should be a privileged data source for undertaking any national vulnerability analyses. However, the poverty map needs to be used with complementary data to better understand the risks households face that might result in food scarcity and the actual mechanisms households use to cope with such stresses." Authors' Abstract
    Keywords: Poverty mapping, food security, Malawi, Food relief, Targeting,
    Date: 2006
  14. By: Messer, Ellen; Cohen, Marc J.
    Abstract: "We explore how globalization, broadly conceived to include international humanrights norms, humanitarianism, and alternative trade, might influence peaceful and foodsecure outlooks and outcomes. The paper draws on our previous work on conflict as a cause and effect of hunger and also looks at agricultural exports as war commodities. We review studies on the relationships between (1) conflict and food insecurity, (2) conflict and globalization, and (3) globalization and food insecurity. Next, we analyze countrylevel, historical contexts where export crops, such as coffee and cotton, have been implicated in triggering and perpetuating conflict. These cases suggest that it is not export cropping per se, but production and trade structures and food and financial policy contexts that determine peaceful or belligerent outcomes. Export cropping appears to contribute to conflict when fluctuating prices destabilize household and national incomes and when revenues fund hostilities. Also, in these scenarios, governments have not taken steps to progressively realize the right to adequate food or to reduce hunger and poverty. We conclude by exploring implications for agricultural development, trade, and human rights policies." Authors' Abstract
    Keywords: Hunger, Conflict, war, Globalization, Crops, exports, coffee, Cotton, Human rights, Right to food, Fair trade,
    Date: 2006
  15. By: Maluccio, John A.; Hoddinott, John; Behrman, Jere R.; Martorell, Reynaldo; Quisumbing, Agnes R.; Stein, Aryeh D.
    Abstract: "Early childhood nutrition is thought to have important effects on education, broadly defined to include various forms of learning. We advance beyond previous literature on early childhood nut ition on education in developing countries by (1) using unique longitudinal data from a nutritional experiment with lifetime educational measures; (2) avoiding confounding the estimates by excluding potentially endogenous right-side variables; and (3) using estimators that allow for nonnormal distributions. Our results indicate significantly positive, and fairly substantial, effects of the randomized intervention a quarter century after it ended: increased grade attainment by women, via increased likelihood of entering and completing primary school and some secondary school; speedier grade progression by women; higher scores on cognitive tests for both men and women; and higher scores on educational achievement tests for both men and women. To account for possible biases in the calculation of standard errors and to control for sample attrition, alternative estimations were run and found to be robust." Authors' Abstract
    Keywords: malnutrition, Children, Education, Early childhood nutrition, Nutritional intervention,
    Date: 2006
  16. By: Yamauchi, Futoshi; Buthelezi, Thabani; Velia, Myriam
    Abstract: "This paper examines the impact of prime-age adult mortality on the transition from school to the labor market of adolescents and on decisions by female adults to participate in the labor force in South Africa. The analysis focuses on that period—1998–2004—when South Africa experienced excess mortality due to the HIV/AIDS epidemic. We find, first, that deaths of prime-age adults significantly increase both male and female adolescents' labor force participation because they stop their schooling in order to help support their families. Female school enrollment may also decrease because girls are required to stay at home to take care of the sick. Therefore, the total negative impact on schooling is larger among female adolescents than among male adolescents. Second, we find that female adults tend to join the labor force following the death of prime-age adult males. This change could cause a decrease in the time they spend on housework and child rearing. Combined, these findings imply that excess mortality of prime-age adults disrupts human capital formation." Authors' Abstract
    Keywords: South Africa, Gender, Labor supply, Schooling, Prime-age adult mortality, Human capital,
    Date: 2006
  17. By: Friedrich G. Schneider (Department of Economics, Johannes Kepler University Linz, Austria)
    Abstract: Estimations of the size and development of the shadow economy for 145 countries, including developing, transition and highly developed OECD economies over the period 1999 to 2003 are presented. The average size of the shadow economy (as a percent of "official" GDP) in 2002/03 in 96 developing countries is 38.7%, in 25 transition countries 40.1%, in 21 OECD countries 16.3% and in 3 Communist countries 22.3%. An increased burden of taxation and social security contributions, combined with a labor market regulation are the driving forces of the shadow economy. Furthermore, the results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. Finally, the various estimation methods are discussed and critically evaluated.
    Keywords: shadow economy of 145 countries; tax burden; tax moral; quality of state institutions; regulation; DYMIMIC and other estimation methods
    JEL: O17 O5 D78 H2 H11 H26
    Date: 2006–09
  18. By: Erich Gundlach
    Abstract: Translated to a cross-country context, the Solow model (Solow, 1956) predicts that international differences in steady state output per person are due to international differences in technology for a constant capital output ratio. However, most of the cross-country growth literature that refers to the Solow model has employed a specification where steady state differences in output per person are due to international differences in the capital output ratio for a constant level of technology. My empirical results show that the former specification can summarize the data quite well by using a measure of institutional technology and treating the capital output ratio as part of the regression constant. This reinterpretation of the cross-country Solow model provides an interesting implication for empirical studies of international trade. Harrod-neutral technology differences as presumed by the Solow model can explain why countries have different factor intensities and may end up in different cones of specialization.
    Keywords: Solow Model, Lerner diagram
    JEL: O40 F11
    Date: 2006–09
  19. By: Christian Broda; Joshua Greenfield; David Weinstein
    Abstract: Starting with Romer [1987] and Rivera-Batiz-Romer [1991] economists have been able to model how trade enhances growth through the creation and import of new varieties. In this framework, international trade increases economic output through two channels. First, trade raises productivity levels because producers gain access to new imported varieties. Second, increases in the number of varieties drives down the cost of innovation and results in ever more variety creation. Using highly disaggregate trade data, e.g. Gabon's imports of Gambian groundnuts, we structurally estimate the impact that new imports have had in approximately 4000 markets per country. We then move from groundnuts to globalization by building an exact TFP index that aggregates these micro gains to obtain an estimate of trade on productivity growth for each country. We find that in the typical country in the world, new imported varieties account for 15 percent of its productivity growth. These effects are larger in developing countries where the median impact of new imported varieties equals a quarter of national productivity growth.
    JEL: E00 F43 O4
    Date: 2006–09
  20. By: Jean-Marie Baland; James A. Robinson;
    Abstract: We study the connection between employment and political control. Many employment relationships concede rents to workers. For example, when worker effort is crucial for production, but only imperfectly observed. We show that, depending on the political institutions, the presence of such rents allows employers to use the threat of withdrawing them to control their workers' political behavior. We thus demonstrate that employment does not simply generate income, it also gives power to control the behavior of others. The analysis focuses on the salient example of political control, where landlords coerce the votes of their workers in the absence of a secret ballot. The model we develop generates predictions about electoral outcomes which can be tested by investigating the impact of the introduction of an effective secret ballot. Such an institutional reform reduces landlords' control, and in consequence, we should observe changes in voting behavior, since workers whose votes were previously controlled and sold can now vote freely. We test the predictions of the model by examining in detail the effects of the introduction of the secret ballot in Chile in 1958. We show that, consistent with our theory, the political reforms led to large changes in voting behavior. Before the reforms, localities with more pervasive patron-client relationships tend to exhibit a much stronger support for the right-wing parties, traditionally associated with the landed oligarchy. After the reform however, this difference across localities completely disappeared.
    JEL: D72 O54 Q15
    Date: 2006–09
  21. By: Jorge Blázquez-Lidoy; Javier Rodríguez
    Abstract: China’s economy has expanded by leaps and bounds, with dazzling progress since it first opened to foreign investment and reform in 1978. Over the last 25 years and after a long period of economic autarky, the country has emerged as a major player in world trade. Its accession to the World Trade Organisation (WTO) in 2001 was a milestone. China presents both a threat and an opportunity for Latin American emerging markets. On average and despite some exceptions, Latin America is a clear trade winner from Chinese global integration. This contribution studies China’s exporting and importing structure, using a database of 620 different goods. It builds two indices of trade competition to compare Chinese impacts over 1998-2004 on 34 economies, of which 15 are Latin American. The results generally confirm that there is no relevant trade competition between China and Latin America. Not surprisingly, countries that export mainly commodities face lower competition, because China is a net importer of raw materials. But the emergence of China is also a wake-up call for Latin American countries. More reforms are needed, especially in infrastructures if the region wishes to maintain its comparative advantages. Latin America will have also to deal with the Chinese bonanza. The dark side of this windfall is the risk of being stuck out of the global value chain in a raw material corner. <BR>L’économie de la Chine s’est développée à pas de géants, en progressant de manière spectaculaire depuis qu’elle a commencé à s’ouvrir aux investissements étrangers et s’est réformée en 1978. Tout au long des 25 dernières années et suite à une longue période d’autarcie économique, le pays s’est imposé en tant qu’acteur majeur du commerce mondial. Son adhésion à l’Organisation Mondiale du Commerce (OMC) en 2001 a été un événement de taille. Ainsi, la Chine représente à la fois une menace et une opportunité pour les marchés émergents d’Amérique latine. En moyenne et en dépit de certaines exceptions, l’Amérique latine fait partie des gagnants de l’intégration globale de la Chine. Ce document étudie les structures d’importation et d’exportation de la Chine, en s’appuyant sur une base de données composée de 620 biens. Deux indices de compétitivité commerciale ont été élaborés afin de comparer les impacts de la Chine sur 34 économies tout au long de la période 1998-2004, 15 d’entre elles étant des économies latino-américaines. De manière générale, les résultats confirment qu’il n’y a pas de concurrence importante entre la Chine et l’Amérique latine. Mais l’émergence de la Chine appelle aussi les pays latino-américains à se réveiller. Si la région souhaite maintenir ses avantages comparatifs, d’autres réformes sont nécessaires, en particulier au niveau des infrastructures.
    Date: 2006–06–29
  22. By: Thierry Mayer
    Abstract: Increasing the flow of foreign direct investment (FDI) to developing countries is a cornerstone of new international development commitments. Accordingly, this paper reviews the state of knowledge regarding i) the factors that lead firms to build a plant overseas and ii) the influence that other policies (notably foreign aid) might have on those decisions. There are two broad motives for FDI: a “horizontal” motivation (to gain access to markets in the recipient country) and a “vertical” one (to exploit differences in production costs at various points in the production process). The clear message of the empirical literature (much of it focused on FDI flows between rich countries) is that market access is quantitatively far more important than production costs. What are the lessons for policy coherence? Positive effects of FDI on growth depend on a country’s absorptive capacity; aid can be used to promote human-capital accumulation while trade policies can facilitate the export orientation of the host economy. Both of these actions increase the likelihood of reaping rewards from FDI inflows. In particular, aid policies can aim at improving a recipient country’s communication infrastructure and institutional capacity. These policies attract FDI in turn, as they lower production costs and improve the prospects for productivity gains. Finally, trade facilitation between poor countries (to enlarge the market access represented by a given FDI destination) and temporary non-reciprocal market access improvements granted by rich countries could help attract FDI. <BR>Augmenter les flux d’investissements direct à l’étranger (IDE) vers les pays en développement est une pierre angulaire dans les engagements pris en terme de développement international. Dans une telle perspective, cet article évalue l’état des connaissances en ce qui concerne : i) les facteurs qui conduisent les entreprises à construire des usines à l’étranger, et ii) l’influence que les autres politiques (notamment l’aide étrangère) sont susceptibles d’avoir sur ces décisions. Les deux principaux facteurs à l’origine des IDE sont tout d’abord une motivation « horizontale » (pour gagner l’accès aux marchés du pays récipiendaire) et une autre « verticale » (pour exploiter les différences de coûts de production à plusieurs niveaux de la chaîne de production). La littérature empirique (une grande partie d’entre elle se concentrant sur les flux d’IDE entre pays riches) énonce clairement que l’accès au marché est une motivation quantitativement plus importante que les coûts de production. Quelles sont les leçons à en tirer quant à la cohérence des politiques ? Les effets positifs des IDE sur la croissance dépendent de la capacité d’absorption du pays ; l’aide peut être utilisée pour promouvoir l’accumulation de capital humain tandis que les politiques commerciales peuvent faciliter l’orientation des exportations dans l’économie récipiendaire. Ces deux actions augmentent la probabilité pour un pays de récolter les fruits des afflux d’IDE. En particulier, les politiques d’aide peuvent avoir comme objectif d’améliorer les infrastructures de communication et la capacité institutionnelle du pays récipiendaire. Ces politiques attirent alors des IDE en retour, car elles réduisent les coûts de production et améliorent les perspectives liées aux gains de productivité. Finalement, la promotion des échanges entre pays pauvres (afin d’élargir l’accès au marché représenté par une destination d’IDE donnée) et les améliorations provisoires de l’accès unilatéral au marché accordé par les pays riches sont susceptibles d’aider à attirer des IDE.
    Date: 2006–07–31
  23. By: Paul Conway; Donato de Rosa; Giuseppe Nicoletti; Faye Steiner
    Abstract: This paper investigates the effect of product market regulations on the international diffusion of productivity shocks. The empirical results indicate that restrictive product market regulations slow the process of adjustment through which best practice production techniques diffuse across borders and new technologies are incorporated into the production process. This suggest that remaining cross-country differences in product market regulation can partially explain the recent observed divergence of productivity in OECD countries, given the emergence of new general-purpose technologies over the 1990s. The paper also investigates two channels through which product market regulations might affect the international diffusion of productivity shocks, namely the adoption of information and communications technology and the location decisions of multi-national enterprises. In both cases the effect of anticompetitive product market regulation is found to be negative and significant. <P>Régulation, concurrence et convergence de la productivité <BR>Cette étude analyse les effets de la régulation dans les marchés des biens sur la diffusion des chocs de productivité au niveau international. Les résultats empiriques indiquent que les restrictions dans les marchés des biens ralentissent le processus d'ajustement à travers lequel les techniques de production les plus avancées se répandent au-delà des frontières et sont incorporées dans l'activité productive. Ces résultats suggèrent que les différentes approches dans la régulation des marchés des biens qui caractérisent encore les pays de l'OCDE peuvent expliquer en partie la tendance à la divergence des niveaux de productivité qui a été observée récemment dans la zone OCDE, étant donné l'émergence des nouvelles technologies de l'information et communication au cours de la même période. L'étude analyse aussi deux canaux par lesquels la régulation peut influencer la diffusion des chocs de productivité au niveau international : l'investissement en nouvelles technologies de l'information et communication et les décisions de localisation des filiales des entreprises multinationales. Dans les deux cas, les résultats suggèrent que l'effet des régulations qui font obstacle à la concurrence dans les marchés des biens est négatif et significatif.
    Keywords: foreign direct investment, investissement direct étranger, productivity convergence, institutions and growth, information and communication technologies, panel data analysis, convergence de la productivité, institutions et croissance, technologies de l'ínformation et communication, analyse en données de panel
    JEL: C33 O11 O33 O40 O47
    Date: 2006–09–04
  24. By: Geoffrey Ducanes (University of the Philippines); Marie Anne Cagas (Asian Development Bank and University of the Philippines); Duo Qin (Queen Mary, University of London and Asian Development Bank); Pilipinas Quising (Asian Development Bank); Mohammad Abdur Razzaque (University of Dhaka, Bangladesh)
    Abstract: This paper studies macroeconomic effects of fiscal policies in four Asian countries – Bangladesh, China, Indonesia, and the Philippines – by means of structural macroeconometric model simulations. It is found that short-term fiscal multipliers from an untargeted increase in government expenditure are positive but much less than those from an increased expenditure targeted to capital spending. The multiplier effects from fiscal expansion via a tax rate reduction are found to be typically much less than through higher spending. The effectiveness of automatic stabilizers in general, and more specifically whether expenditure or tax-side stabilizer is more effective, differs across countries.
    Keywords: Fiscal policy, Growth, Public finance, Deficit
    JEL: E62 E17 C53 P52
    Date: 2006–09
  25. By: De la Cruz, Javier; Stephanou, Constantinos
    Abstract: The objective of this policy paper is to identify and propose high-level legal and regulatory reforms to Colombia ' s financial system structure that would enhance efficiency and/or mitigate risks. Five specific and four general reforms are proposed and evaluated based on their compatibility with the aforementioned objectives, ease of implementation, impact, and consistency with international practice. Potential implications for supervision and competition, as well as likely criteria for developing a carefully sequenced reform roadmap, are also highlighted.
    Keywords: Banks & Banking Reform,Financial Intermediation,Corporate Law,Non Bank Financial Institutions,Financial Crisis Management & Restructuring
    Date: 2006–09–01
  26. By: Gine, Xavier; Karlan, Dean S.
    Abstract: Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which started with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group lending claims to improve repayment rates and lower transaction costs when lending to the poor by providing incentives for peers to screen, monitor, and enforce each other’s loans. However, some argue that group liability creates excessive pressure and discourages good clients from borrowing, jeopardizing both growth and sustainability. Therefore, it remains unclear whether group liability improves the lender’s overall profitability and the poor’s access to financial markets. The authors worked with a bank in the Philippines to conduct a field experiment to examine these issues. They randomly assigned half of the 169 pre-existing group liability ' centers ' of approximately twenty women to individual-liability centers (treatment) and kept the other half as-is with group liability (control). We find that the conversion to individual liability does not affect the repayment rate, and leads to higher growth in center size by attracting new clients.
    Keywords: Banks & Banking Reform,Knowledge Economy,Banking Law,Education for the Knowledge Economy,Contract Law
    Date: 2006–09–01
  27. By: Ersado, Lire
    Abstract: While the Azerbaijan household income and expenditure survey (HIES) data satisfy most empirical regularities expected in a typical household survey data, the unequality measures based on the data are unusually low. For example, for the latest three years for which we have data (2002 - 2004), the consumption Gini coefficient (the commonly used summary measure of inequality) is in the range of 16 - 18 percent. This is among the lowest Gini coefficients ever observed in any country, and is extremely low even with the standard of countries generally considered as most equal in the world. Azerbaijan, a transitional economy with a significant natural resource base, is unlikely to be the most equal country in the world. The objective of this paper is to investigate why inequality measures are unusually low in the Azerbaijan household survey data. The author presents a methodology for diagnosing and identifying the potential sources of low inequality in the data, including cluster analysis at the primary sampling unit level. The main inference from the findings of the cluster analysis is that the observed low inequality indices are not due to poor supervision of the interviewers and the data collection process. The author finds that the main culprits for the observed low inequality in the HIES data are (1) the low participation rates of wealthy households in the household surveys, and (2) the widespread availability of well-targeted public and private transfers.
    Keywords: Rural Poverty Reduction,Poverty Impact Evaluation,Services & Transfers to Poor,Inequality,Consumption
    Date: 2006–09–18
  28. By: Ersado, Lire
    Abstract: In the presence of risk and uncertainty, measures such as poverty rates are inadequate to analyze the well-being of poor households. The poor are not only concerned about the current low levels of their income or consumption, but also the likelihood of experiencing stressful declines in these levels in the future. Risks to livelihood are particularly important in rural areas where there is generally high dependence on agriculture and the environment. In this study, the author analyzes the nature, extent, and causes of rural vulnerability in Serbia using panel national household data from the 2002 and 2003 Serbia Living Standard Surveys. He measures rural vulnerability as a function of nonstochastic determinants of poverty as well as exposure to risk. While low levels of consumption (poverty) explain about 70 percent of vulnerability, the author identifies risk and uncertainty as crucial dimensions of rural life in accounting for the remaining 30 percent of household vulnerability. Households and regions with a greater share of their livelihood depending on agricultural activities are more at risk of vulnerability than those with a significantly higher share of their income coming from nonagricultural sources. Dependence on agricultural income is directly associated with higher aggregate risk, underscoring the agricultural sector’s lopsided exposure to covariate shocks in general, and the negative impact of the 2003 drought in particular. Rural vulnerability to poverty and risk is also strongly associated with asset ownership and access to markets to mobilize them in time of need.
    Keywords: Rural Poverty Reduction,Population Policies,Pro-Poor Growth and Inequality,Services & Transfers to Poor
    Date: 2006–09–01
  29. By: Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
    Abstract: The authors report on the latest version of the worldwide governance indicators, covering 213 countries and territories and measuring six dimensions of governance from 1996 until end-2005: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. The latest indicators are based on hundreds of variables and reflect the views of thousands of citizen and firm survey respondents and experts worldwide. Although global averages of governance display no marked trends during 1996-2005, nearly one-third of countries exhibit significant changes [for better or for worse] on at least one dimension of governance. Three new features distinguish this update. (1) The authors have moved to annual reporting of governance estimates. This update includes new governance estimates for 2003 and 2005, as well as minor backward revisions to biannual historical data for 1996-2004. (2) The authors are, for the first time, publishing the individual measures of governance from virtually every data source underlying the aggregate governance indicators. The ready availability of the individual data sources underlying the aggregate governance indicators is aimed at further enhancing the transparency of the methodology and of the resulting aggregate indicators, as well as helping data users and policymakers identify specific governance challenges in individual countries. (3) The authors present new evidence on the reliability of expert assessments of governance which, alongside survey responses, form part of the aggregate measures of governance.
    Keywords: Governance Indicators,National Governance,Economic Policy, Institutions and Governance,Statistical & Mathematical Sciences,Scientific Research & Science Parks
    Date: 2006–09–01
  30. By: Sanghamitra Bandyopadhyay
    Abstract: The distribution dynamics of incomes across Indian states are examined using the entire income distribution rather than using standard regression approaches. The period 1965 to 1997 exhibits twin-peaked dynamics: there are two income convergence clubs at 50% and 125% of the national average income. Disparities across the states declined over the sixties and then increased. The observed polarisation is explained by the disparate distribution of infrastructure, in particular, that of education, irrigation and literacy in the formation of the lower convergence club. Parametric analysis establishes irrigation, education, roads, industrial power consumption and bank deposits as infrastructure components explaining cross-state variation in growth.
    Keywords: Convergence Clubs, Distribution Dynamics, Education, Infrastructure, Panel Data, India
    JEL: C23 E62 O23
    Date: 2006
  31. By: Sanghamitra Bandyopadhyay
    Abstract: This paper examines the impact of mass media and information and communications technologies (ICT) as knowledge-based infrastructures on economic development. The results strongly suggest that both mass media and ICT penetration are negatively associated with corruption. This result holds across both the entire sample (of both developed and developing countries), and only for developing countries. The same result is also obtained for the effects of ICT and mass media on economic inequality. However, ICT reveals itself inequality increasing for the developing country sample but inequality decreasing for the entire sample. Finally, lower poverty is robustly associated with higher media (newspaper circulation) penetration.
    Keywords: Information and Communications Technologies, Mass Media, Economic Growth and Development, Poverty, Corruption, Inequality
    JEL: D30 D80 O1 O57
    Date: 2006
  32. By: Linda Y. Yueh
    Abstract: This paper explores whether the patent law and intellectual property rights (IPR) system have resulted in innovation in China during the reform period. It appears that the patent laws have produced a stock of patents, where the success rates of patent applications are fairly uniform across the country. As the IPR framework does not vary across provinces, we asked which factors would explain innovation in China. We find the main determinants of patents to be R&D expenditure and foreign direct investment, but not the number of researchers, though the level of human capital matters. We conclude that the patent laws in China have been associated with innovation that has accompanied economic growth despite imperfections in the legal system.
    Keywords: Intellectual Property Rights, Patent Laws, Law and Economics, Innovation, Economic Growth, China
    JEL: O34 K29 O4 O53 K19
    Date: 2006
  33. By: Paul Frijters; Dirk Bezemer; Uwe Dulleck (School of Economics and Finance, Queensland University of Technology)
    Abstract: We propose an endogenous growth model, that incorporates both an individual and a communal aspect of Social Capital. In our model, output increases with the stock of business contacts (Relational Capital as one aspect of Social Capital). The modelling of contact creation is based on matching theory. The cost of creating contacts decreases with more Community level Social Capital and Market Institutions.
    Keywords: Social Capital, Endogenous Growth, Relational Capital, Development, Economic Systems
    Date: 2005
  34. By: Adelegan, Olatundun
    Abstract: The study sets out to measure how the taxation of dividend and debt affects firm value. Tax hypothesis predicts that firm value is negatively related to dividends and positively related to debt. The study covered 1197 firm-year observations of manufacturing firms in Nigeria from 1984 to 2000. To achieve the objective, the study estimated the model on the average values for each firm and tested for industry effects using the ordinary least square (OLS) method. We found the opposite of tax hypotheses predictions from the regression results. We hypothesized that the relationship between dividends, debt and firm value will be affected by the size of the firm. We therefore partitioned the firms into two on the basis of size measured as market capitalization. We estimated separate equations for each sub-sample and found positive relationship between dividend and firm value and negative relationship between debt and firm value in both small-sized firms and big firms’ sub-sample. The study concludes that dividend and debt convey information about profitability of firms. This information about firms’ profitability obscures any tax effect of financing decisions. However, we found that earnings and investment are key determinants of firm value in Nigeria.
    Date: 2006
  35. By: Angeles-Castro, Gerardo
    Abstract: Based on panel data we find that the inequality-growth relationship follows an ordinary-U curve during the period 1970-1998, in which inequality first decreases and then increases with economic growth. We also find some evidence that the increasing pattern of inequality may reverse at higher levels of income. The time-series approach complements the analysis and reveals that a substantial group of countries capture a minimum turning point in the 1980s on average and it is found to occur earlier for developed economies compare to developing ones; only a few countries reverse inequality in a latter stage and display a maximum turning point during the late 1990s; these countries are associated with a high governance indicator and moderate expansion of trade and FDI. Hence, during the era of market openness the inequalitygrowth relationship changed and became positive, although it is likely that income distribution improves with economic growth at a latter stage; the implication of this is that this relationship can be described in period cycles.
    Keywords: Economic liberalisation, Income distribution, Economic Growth, Dynamic Panel Data Models, Time Series Analysis
    JEL: C22 C23 O15
    Date: 2006
  36. By: Palaniswamy, Nethra; Birner, Regina
    Abstract: Acknowledging that the agricultural sector can play an important role as an engine of pro-poor growth in Sub-Saharan Africa, the purpose of this paper is to identify the factors that influence the “political will” of governments to support this sector. The concept of “political resources” from the political science literature is used to guide the analysis, as it combines the insights from state-centered and society-centered approaches to explain agricultural policies. Drawing on panel data covering 14 Sub-Saharan African countries over the period 1980-2001, we present empirical evidence showing that political factors play an important role in determining government’s commitment to supporting agricultural development. We use a measure of democracy that varies both across countries and within countries over time. Estimates are presented for separate samples of democracies and non-democracies, and for a pooled sample of all countries and years irrespective of the democratic status. Our results suggest that the rural poor do exercise electoral leverage in democracies; larger rural population shares are associated with higher spending on agriculture in democracies but not in authoritarian regimes. We also find evidence consistent with the theoretical prior that larger farmers tend to be better organized in interest groups. Specifically, we find that the share of traditional agricultural exports such as coffee and cocoa in the total value of exports, which may be an indicator for the ability of farmers’ to organize themselves as interest groups, induces greater spending on agriculture. This result holds true for both democracies and nondemocracies.
    JEL: H3 H5 O13 Q18
    Date: 2006
  37. By: Meyer Bittencourt, Manoel F. Meyer
    Abstract: We examine the impact that financial development had on earnings inequality in Brazil in the 1980’s and 90’s. The empirical evidence, based on panel time series and time series data, shows that more broad access to financial and credit markets had a significant and robust effect in reducing inequality during the period investigated. We suggest that this is not only because the poor can invest the acquired credit in all sorts of productive activities, but also because those with access to financial markets can insulate themselves against recurrent poor macroeconomic performance, which is exemplified by extreme inflation rates. The main implication of the results is that a seemingly non-distortionary policy, such as more credit aimed at the poor, alleviates the high inequality present in Brazil and consequently improves welfare without distorting economic efficiency.
    Keywords: Financial development and markets, credit, inequality and welfare, inflation
    JEL: D31 E44 O11 O54
    Date: 2006
  38. By: Busse, Matthias; Groizard, José Luis
    Abstract: The paper explores the linkage between income growth rates and foreign direct investment (FDI) inflows. So far the evidence is rather mixed, as no robust relationship between FDI and income growth has been established. We argue that countries need a sound business environment in the form of good government regulations to be able to benefit from FDI. Using a comprehensive data set for regulations, we test this hypothesis and find evidence that excessive regulations restrict growth through FDI only in the most regulated economies. This result holds true for different specifications of the econometric model, including instrumental variable regressions.
    Keywords: Multinationals, Spillovers, Institutions, Development
    JEL: C31 F21 F43 L51
    Date: 2006
  39. By: Espanol, Paula
    Abstract: Trade-related characteristics have only been recently started to be included in empirical studies analysing the determinants of the financial constraints faced by firms. A result broadly shared by these studies is that exporting firms tend to be those less financially constrained. In this paper we test this result using panel data built up from quarterly balance sheet information for 74 Argentinean big firms covering the years of the currency board regime (1992-2001). We estimate an investment equation splitting up the sample between exporters and non-exporters. Using three alternative econometric models (random effects, fixed effects and instrumental variables) we find that, contrary to what is commonly stressed in the literature, exporting firms are the ones facing larger financial constraints on investment. We propose an explanation for this original result based on the currency appreciation that follows financial liberalisation processes in emerging countries, particularly in Argentina, which triggers a profit squeeze phenomenon for exportable firms, reducing their investment capacity.
    Keywords: financial constraint, investment, foreign trade, Argentine
    JEL: E22 O16 O54
    Date: 2006
  40. By: Blackburn, Keith; Forgues-Puccio, Gonzalo F.
    Abstract: We study the effect of international financial integration on economic development when the quality of governance may be compromised by corruption. Our analysis is based on a dynamic general equilibrium model of a small economy in which growth is driven by capital accumulation and public policy is administered by government- appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds, an opportunity that is made more attractive by financial liberalisation which, at the same time, raises efficiency in capital production. Our main results may be summarised as follows: (1) corruption is always bad for economic development, but its effect is worse if the economy is open than if it is closed; (2) the incidence of corruption may, itself, be affected by both the development and openness of the economy; (3) financial liberalisation is good for development when governance is good, but may be bad for development when governance is bad; and (4) corruption and poverty may co-exist as permanent, rather than just transitory, fixtures of an economy.
    Keywords: Corruption, development, financial liberalisation
    JEL: D73 F36 O11
    Date: 2006
  41. By: Herzer, Dierk; Nowak-Lehman, Felicitas D.
    Abstract: It is frequently suggested that export diversification contributes to an acceleration of growth in developing countries. Horizontal export diversification into completely new export sectors may generate positive externalities on the rest of the economy as export oriented sectors gain from dynamic learning activities due to contacts to foreign purchasers and exposure to international competition. Vertical diversification out of primary into manufactured exports is also associated with growth since primary export sectors frequently do not exhibit strong spillovers. Thus, it is to be expected that both horizontal and vertical export diversification are positively correlated with economic growth. However, there have been remarkably few empirical investigations into the link between export diversification and growth. This paper attempts to examine the hypothesis that export diversification is linked to economic growth via externalities of learning-by-doing and learning-by-exporting fostered by competition in world markets. The diversification-led growth hypothesis is tested by estimating an augmented Cobb-Douglas production function on the basis of annual time series data from Chile. Based on the theory of cointegration three types of statistical methodologies are used: the Johansen trace-test, a multivariate error-correction model and the dynamic OLS procedure. The estimation results suggest that export diversification plays an important role in economic growth.
    Date: 2006
  42. By: Klasen, Stephan; Misselhorn, Mark
    Abstract: In this paper we examine the mathematical relationship between growth and distributional change on absolute (i.e. percentage point) changes in FGT poverty measures assuming a log-normal distribution. We also test the empirical relationship of the derived semi-elasticities of growth and distributional change on poverty and nd them to explain changes in poverty very well (in fact, better than a related study by Bourguignon (2003) that studied the 'regular' growth elasticity of poverty reduction). This relationship will allow us to predict where growth and distributional change will have the largest (absolute) impact on poverty reduction, which is very useful for predicting and analyzing progress towards meeting MDG1.
    Date: 2006
  43. By: Harttgen, Kenneth; Misselhorn, Mark
    Abstract: While undernutrition among children is very pervasive both in Sub- Saharan Africa and South Asia, child mortality is rather low in South Asia. In contrast to that Sub-Saharan African countries suffer by far the worst from high rates of child mortality. This different pattern of child mortality and undernutrition in both regions is well known, but approaches using aggregated macro data have not been able to explain it appropriately. In this paper we analyze the determinants of child mortality as well as child undernutrition based on DHS data sets for a sample of six developing countries in South Asia and Sub-Saharan Africa. We investigate the effects of individual, household and cluster socioeconomic characteristics using a multilevel model approach and examine their respective influences on both phenomena. We find that the determinants of child mortality and undernutrition differ significantly from each other. Access to health infrastructure is more important for child mortality, whereas the individual characteristics like wealth and educational and nutritional characteristics of mothers play a larger role for anthropometric shortfalls. Although very similar patterns in the determinants of each phenomenon are discernable, there are large differences in the magnitude of the coefficients. Besides regressions using a combined data set of all six countries show, that there are still significant differences between the two regions although taking account of a large set of covariates.
    Keywords: Child mortality, child undernutrition, multilevel modelling
    JEL: C40 I12 I31 I32 O57
    Date: 2006
  44. By: Thiele, Rainer; Nunnenkamp, Peter; Dreher, Axel
    Abstract: We analyze the aid portfolio of various bilateral and multilateral donors, testing whether they have prioritised aid in line with the Millennium Development Goals (MDGs). In doing so, we combine sectorally disaggregated aid data with indicators reflecting the situation of recipient countries regarding the MDGs. Our results show that donors differ not only in terms of their overall generosity and the general poverty orientation of aid, but also in the extent to which their sectoral aid allocation is conducive to achieving more specific MDGs such as all children completing a full course of primary schooling, reducing child and maternal mortality as well as reversing the spread of HIV/AIDS. Overall, while some MDGs, e.g., the fight against HIV/AIDS, have shaped the allocation of aid, the sector-specific results reveal that with respect to other MDGs, most notably primary education, there is a considerable gap between donor rhetoric and actual aid allocation. These results invite the conclusion that the current focus on substantially increasing aid in order to turn the tide in trying to achieve the MDGs misses one important point: Unless the targeting of aid is improved, higher aid will not have the desired effects. Our results suggest that at least part of the blame for missing the MDGs falls on insufficient targeting of aid.
    Keywords: Aid Allocation, MDGs, Development Aid
    JEL: F35 O11 O19
    Date: 2006
  45. By: Presbitero, Andrea F.
    Abstract: This paper investigates the relationship between external indebtedness and economic growth, with a particular attention to LICs, for which the theoretical arguments of debt overhang and liquidity constraint have to be reconsidered. The estimation of a growth model, with a panel of 121 developing countries, supports a negative and linear relationship between past values of the NPV of external public debt and current economic growth. This is due to the “extended debt overhang”, according to which a large indebtedness leads to misallocation of capital and discourage long-term investment and structural reforms. This work underlines the critical role of economic policies and institutions, the necessity of focusing on LICs and fostering macroeconomic stability.
    Keywords: External Debt, HIPC, Debt Relief, Economic Growth
    JEL: C33 F34 H63 O11
    Date: 2006
  46. By: Nkusu, Mwanza; Sayek, Selin
    Abstract: With official development assistance (ODA) set to rise as countries strive to meet the Millennium Development Goals (MDGs), aid effectiveness remains an important area of development policy. An increasing number of studies support the notion that ODA can contribute to growth in a nonlinear relationship. In this paper, we investigate a new hypothesis regarding this relationship: that deeper financial markets in aid-recipient countries facilitate the management of aid flows, thereby enhancing aid effectiveness. An empirical analysis, using a panel data set, finds robust support for the hypothesis.
    Keywords: Foreig d, economic growth, poverty, and financial development
    JEL: F35 I30 O40 O50
    Date: 2006
  47. By: Seebens, Holger
    Abstract: The results of the Demographic Health Survey (DHS) reveal that women in Ethiopia prefer fewer children than men, which can be explained by the greater costs that women have to incur from pregnancy, delivery and care for children. In view of differing preferences it is yet not clear which factors determine the final decision. The aim of this study is to shed light on the impact of different bargaining weights on family planning within married couples in rural Ethiopia. Bargaining over fertility can be split into two parts: spacing between births and the number of children. Building on the intrahousehold bargaining framework I investigate both aspects. Applying multistate and count data models I test the hypothesis that women’s bargaining power is negatively related to the number of children and positively to the period length between adjacent births using a detailed data set from rural Ethiopia. Both hypotheses find support from the data.
    Keywords: Fertility, intrahousehold bargaining, multistate model, Ethiopia
    Date: 2006
  48. By: Grosse, Melanie; Klasen, Stephan; Spatz, Julius
    Abstract: In many developing countries, there does not exist a time series of nationally representative household budget or income surveys, while there often are surveys of regions as well as nationally representative Demographic and Health Surveys (DHS) which lack information on incomes. This makes an analysis of trends and determinants of poverty and inequality impossible. This is also the situation in Bolivia where there exist urban household surveys and nationally representative DHS since 1989, while nationally representative household income surveys only exist since 1997. In this paper, we adjust a technique developed for poverty mapping exercises to link urban household income surveys with DHS data to generate a time series of household income data from 1989 to 2002. Our technique performs well on validation tests, is superior to imputing incomes from assets in the DHS, and is able to generate new information on poverty and inequality in Bolivia.
    Keywords: Microsimulation, survey matching, poverty, inequality, pro-poor growth, poverty profile, growth incidence curve, Bolivia
    JEL: C81 D31 I31 I32 O54
    Date: 2006
  49. By: Mithöfer, Dagmar; Waibel, Hermann; Akinnifesi, Festus
    Abstract: Vulnerability to poverty is a major problem in the rural areas of Sub Saharan Africa. Rural Households are confronted with various covariate and idiosyncratic shocks and are often severely constrained in coping with such events. They frequently resort to food from natural resources such as indigenous fruits during times of crisis. The availability of such food sources is increasingly at risk due to deforestation and biodiversity loss. The objective of this paper is to quantify the contribution of indigenous fruit trees towards reducing vulnerability to food insecurity and poverty. The methodology used is a multi-period stochastic household income model. The data were collected in a case study in Zimbabwe using detailed monthly income and expenditure records of a sample of 39 rural households in two areas. The two regions differ in their agricultural system. In one area horticulture, off-farm activities and exotic fruits are a major source of income while in the other area indigenous fruits are a more important source of income. This paper concentrates on the latter area. Model calculations show that rural households in Zimbabwe are highly vulnerable to seasonal fluctuations in income and therefore a critical period where households run high risk of being food insecure can be identified. While indigenous fruits, as a low cost natural resource, can facilitate income smoothing, the role of other sources of income must not be neglected. The paper concludes that diversified season-specific income generating portfolios must be designed of which indigenous fruit trees have a role to play.
    Keywords: Vulnerability, poverty, food security, seasonal fluctuations, wild food resources, Zimbabwe
    Date: 2006
  50. By: McCulloch, Neil; Weisbrod, Julian; Timmer, Peter
    Abstract: Since most poor live in rural areas, primarily engaged in low productivity farm activity, the pathway out of poverty must be strongly connected to productivity increases, whether they are realised in farming, rural non-farm enterprises or via urban migration. By utilizing the IFLS panel dataset for 1993 and 2000 from Indonesia, this paper shows, using empirical techniques, which pathways out of poverty were most successful in Indonesia’s past. Our findings suggest that the increased engagement of rural farmers in rural non-farm enterprises is a key way to alleviate rural poverty.
    Date: 2006
  51. By: Schindler, Kati
    Abstract: This paper analyzes the use of informal credit as a coping strategy against risk by market women in the city of Tamale, Ghana. Using qualitative research techniques, the analysis reveals that intra-household structure and allocation decisions determine these market-based coping strategies. Market women invest a considerable amount of working hours in maintaining complex credit networks as a safeguard against extreme risks. As a policy implication, this research suggests to provide market women with access to formal, reliable and long-term microfinance institutions, both to improve their ability to cope with risks and to reduce the risks they face.
    Keywords: micro-credit, informal markets, networks, coping strategies, intra-household allocation, women, Ghana
    JEL: D13 O12 O17
    Date: 2006
  52. By: Albert Berry; John Serieux
    Abstract: This paper presents estimates of world economic growth for 1970-2000, and changes in the intercountry and interpersonal distribution of world income between 1980 and 2000. These estimates suggest that, while the rate of growth of the world economy slowed in the 1980-2000 period, and average within-country inequality worsened, the distribution of world income among individuals, nevertheless, improved a little. However, that result was wholly due to the exceptional economic performances of China and India. Outside these two countries, the slowdown in world growth was even more dramatic, the distribution of world income unequivocally worsened, and poverty rates remained largely unchanged.
    Keywords: world inequality trends; international income distribution, convergence, world poverty trends
    JEL: F0 I3 O4
    Date: 2006–09
  53. By: Sanjay G. Reddy; Camelia Minoiu
    Abstract: We analyze the growth impact of official development assistance to developing countries. Our approach is different from that of previous studies in two major ways. First, we disentangle the effects of two components of aid: a developmental, growth-enhancing component, and a geopolitical, possibly growth-depressing component. Second, our specifications allow for the effect of aid on economic growth to occur over long time-lags. Our results indicate that developmental aid promotes long-run growth. The effect is large and robustly significant, and withstands an array of robustness checks including alternative specifications, choices of the proxy for development aid, and treatments of outliers.
    Keywords: official development assistance, economic growth
    JEL: O1 O2 O4
    Date: 2006–09

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