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on Development |
| By: | Leandro Prados de la Escosura |
| Abstract: | Was the Civil War (1936-39) originated by staggering inequality and extreme poverty? How did Franco’s dictatorship (1939-75) affect inequality and poverty? As a first step to provide an answer, growth and inequality over the long-run are assessed and their impact on absolute poverty calibrated. The paper concludes that during the last one and a half centuries economic growth, but also the decline in inequality during the Interwar years and since the late 1950s, led to a substantial reduction in absolute poverty. Raising inequality and poverty do not seem to have triggered the Civil War. |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cte:whrepe:wp06-04&r=dev |
| By: | James Albrecht; Lucas Navarro; Susan Vroman (Department of Economics, Georgetown University) |
| Abstract: | In many economies, there is substantial economic activity in the informal labor market, beyond the reach of government policy. Labor market policies, which by definition apply only to the formal-sector can have important spillover effects on the informal sector. The relative sizes of the informal and formal sectors adjust, the skill composition of the workforce in the two sectors changes, etc. In this paper, we build an equilibrium search and matching model to analyze the effects of labor market policies in an economy with an informal sector. Our model extends Mortensen and Pissarides (1994) by allowing for ex ante worker heterogeneity with respect to formal-sector productivity. We analyze the effects of labor market policy on informal- and formal-sector output, on the division of the workforce into unemployment, informal-sector employment and formal-sector employment, and on wages. Finally, our model allows us to examine the distributional implications of labor market policy; specifically, we analyze how labor market policy affects the distributions of wages and productivities across formal-sector matches. Classification-JEL Codes: E26, J64, J65, O17 |
| Keywords: | search, matching, informal sector |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~06-06-06&r=dev |
| By: | Schclarek, Alfredo (Department of Economics, Lund University) |
| Abstract: | This paper theoretically studies the role of the financial system in promoting macroeconomic stability and growth. It also explains endogenously the development of the financial system as part of the growth process. The productive sector engages in R\&D activities, and finances its activities through access to the financial system. While vertical innovation spurs economic growth, horizontal innovation creates new industry sectors, and thus enhances industry diversification. Higher industry diversification deepens the financial system by improving its ability to finance the productive sector. Economies that are more diversified, and thus more financially developed, have higher growth rates and are less volatile. There is a role for the government to subsidize innovation, especially horizontal innovation. |
| Keywords: | vertical innovation; horizontal innovation; industry diversification; financial development; economic growth; imperfect information |
| JEL: | E22 E32 E44 O16 O30 O41 |
| Date: | 2006–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2006_019&r=dev |
| By: | Orazio Attanasio (Institute for Fiscal Studies and University College London); Emla Fitzsimons (Institute for Fiscal Studies); Ana Gomez; Diana Lopez; Costas Meghir (Institute for Fiscal Studies and University College London); Alice Mesnard (Institute for Fiscal Studies) |
| Abstract: | The paper studies the effects of Familias en Acción, a conditional cash transfer programme implemented in rural areas in Colombia in 2002, on school enrolment and child labour. Using a quasi-experimental approach, our methodology makes use of an interesting feature of the data, which allows us to identify anticipation effects. Our results show that the programme increased school participation of 14 to 17 year old children quite substantially, by between 5 and 7 percentage points, and had lower, but non-negligible effects on enrolment of younger children of between around 1.5 and 2.5 percentage points. In terms of work, the effects are generally largest for younger children whose participation in domestic work decreased by around 10 to 12 percentage points after the programme but whose participation in income-generating work remained largely unaffected by the programme. We also find evidence of school and work time not being fully substitutable, suggesting that some, but not all, of the increased time at school may be drawn from children’s leisure time. |
| JEL: | I28 I38 J22 O15 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:06/13&r=dev |
| By: | Nauro F. Campos (Brunel University, CEPR and IZA Bonn); Francesco Giovannoni (CMPO, University of Bristol) |
| Abstract: | Conventional wisdom suggests that lobbying is the preferred mean for exerting political influence in rich countries and corruption the preferred one in poor countries. Analyses of their joint effects are understandably rare. This paper provides a theoretical framework that focus on the relationship between lobbying and corruption (that is, it investigates under what conditions they are complements or substitutes). The paper also offers novel econometric evidence on lobbying, corruption and influence using data for about 4000 firms in 25 transition countries. Our results show that (a) lobbying and corruption are substitutes, if anything; (b) firm size, age, ownership, per capita GDP and political stability are important determinants of lobby membership; and (c) lobbying seems to be a much more effective instrument for political influence than corruption, even in poorer, less developed countries. |
| Keywords: | lobbying, corruption, transition, institutions |
| JEL: | E23 D72 H26 O17 P16 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2313&r=dev |
| By: | Friedrich Schneider (Johannes Kepler University of Linz and IZA Bonn) |
| 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 morale, quality of state institutions, regulation, DYMIMIC and other estimation methods |
| JEL: | O17 O5 D78 H2 H11 H26 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2315&r=dev |
| By: | Pedro S. Martins (Queen Mary, University of London, CEG-IST Lisbon and IZA Bonn); Luiz A. Esteves (Universidade Federal do Paraná and Università di Siena) |
| Abstract: | We provide evidence about the determinants of the wage structures of developing countries by examining the case of Brazil. Our specific question is whether Brazil’s dramatic income and wage differentials can be explained by the division of rents between firms and their employees, unlike in competitive labour markets. Using detailed individual-level matched panel data, covering a large share of manufacturing firms and more than 30 million workers between 1997 and 2002, we consider the endogeneity of profits, by adopting different measures of profits and different instruments and by controlling for spell fixed effects. Our results, robust to different specifications and tests, indicate no evidence of rent sharing. This conclusion contrasts with findings for most developed countries, even those with flexible labour markets. Possible explanations for the lack of rent sharing include the weakness of labour-market institutions, the high levels of worker turnover and the macroeconomic instability faced by the country. |
| Keywords: | wage bargaining, instrumental variables, matched employer-employee data, developing countries |
| JEL: | J31 J51 C31 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2317&r=dev |
| By: | Tatyana Chesnokova; Kala Krishna |
| Abstract: | This paper looks at the effect of credit constraints on skill acquisition when agents have heterogeneous abilities and wealth. We use a two factor general equilibrium model and assume credit markets are absent. We explore the effects of trade on factor earnings as well as the evolution of the distribution of income in small and large economies. Our work suggests that developed countries need to ensure access to education when liberalizing trade to ensure they reap the potential gains from trade. |
| JEL: | F16 O15 O16 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12411&r=dev |
| By: | Laura Alfaro; Areendam Chanda; Sebnem Kalemli-Ozcan; Selin Sayek |
| Abstract: | The empirical literature finds mixed evidence on the existence of positive productivity externalities in the host country generated by foreign multinational companies. We propose a mechanism that emphasizes the role of local financial markets in enabling foreign direct investment (FDI) to promote growth through backward linkages, shedding light on this empirical ambiguity. In a small open economy, final goods production is carried out by foreign and domestic firms, which compete for skilled labor, unskilled labor, and intermediate products. To operate a firm in the intermediate goods sector, entrepreneurs must develop a new variety of intermediate good, a task that requires upfront capital investments. The more developed the local financial markets, the easier it is for credit constrained entrepreneurs to start their own firms. The increase in the number of varieties of intermediate goods leads to positive spillovers to the final goods sector. As a result financial markets allow the backward linkages between foreign and domestic firms to turn into FDI spillovers. Our calibration exercises indicate that a) holding the extent of foreign presence constant, financially well-developed economies experience growth rates that are almost twice those of economies with poor financial markets, b) increases in the share of FDI or the relative productivity of the foreign firm leads to higher additional growth in financially developed economies compared to those observed in financially under-developed ones, and c) other local conditions such as market structure and human capital are also important for the effect of FDI on economic growth. |
| JEL: | F23 F36 F43 O40 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12522&r=dev |
| By: | Jesus Crespo Cuaresma; Gernot Doppelhofer |
| Abstract: | We propose a framework for assessing the existence and quantifying the effect of threshold effects in cross-country growth regressions in the presence of model uncertainty. The method is based on Bayesian model averaging tech- niques and generalizes the Bayesian Averaging of Classical Estimates (BACE) method put forward by Sala-i-Martin, Doppelhofer, and Miller (2004). We ap- ply the method presented in this paper to a set of 21 variables that have been found to be robustly related to economic growth in a cross-section of 88 coun- tries. We find no evidence of robust threshold effects generated by the initial level of GDP per capita. However, we find that the proportion of years a country has been open to trade is an important source of nonlinear effects on economic growth. |
| JEL: | C11 C15 O20 O50 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:0608&r=dev |
| By: | Ronelle Burger (Department of Economics, Stellenbosch University); Christelle Swanepoel (Bureau of Economic Research, Stellenbosch University) |
| Abstract: | Since 1994 there have been a number of radical changes in the public health care system in South Africa. Budgets have been reallocated, decision making was decentralised, the clinic network was expanded and user fees for primary health care were abolished. The paper examines how these recent changes have affected the incidence of spending and the accessibility and quality of health care. The paper finds that between 1995 and 2003 there have been advances in the pro-poor spending incidence of both clinics and hospitals. The increased share of the health budget allocated to the more pro-poor clinic services has contributed further to the improvement in the targeting of overall health spending. Also, it appears that the elimination of user fees for clinics and the expansion of the clinic network have helped to make health services more affordable and geographically accessible to the poor and were associated with a notable rise in health service utilisation for individuals in the bottom two expenditure quintiles. South Africa’s spending on clinics and hospitals is well targeted and more progressive than other developing country public health systems. Unfortunately, it appears that to a considerable extent this result is driven by perceptions that services offered in public hospitals and clinics are of a low and variable quality. These perceptions seem to be encouraging most of those who can afford to pay more for health services to opt out of the public health system, thereby increasing the pro-poor incidence of public health spending. Complaints by users of public health facilities include long waiting times, staff rudeness and problems with drug availability. Dissatisfaction with health services is significantly higher in the public sector than in the private sector and the gap has expanded slightly over time. It is consequently not surprising that a substantial and increasing share of individuals – also including the very poorest – prefer to consult private providers. |
| Keywords: | fiscal incidence, South Africa, health |
| JEL: | H51 I18 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers26&r=dev |
| By: | Francis Nathan Okurut (Department of Economics, University of Botswana) |
| Abstract: | This study specifically investigated the factors that influenced access by the poor and Blacks to credit in the segmented financial sector in South Africa, using income and expenditure survey data from 1995 and 2000. The study sheds light on the extent of financial sector deepening through household participation especially among the poor and Blacks, in the context of the fight against poverty. In this study, three types of credit were identified. Formal credit was defined to include debts from commercial banks (including mortgage finance and car loans), semi-formal credit included consumption credit (for household assets such as furniture and open accounts in retail stores), and informal credit specifically referred to debts from relatives and friends.Multinomial logit models and Heckman probit models with sample selection were used for analytical work. The results suggest that the poor and Blacks have limited access to the formal and semi-formal financial sectors. At the national level, access to bank credit is positively and significantly influenced by age, being male, household size, education level, household per capita expenditure and race (being Coloured, Indian or White). Being poor has a negative and significant effect on formal credit access. Semi-formal credit access is positively and significantly influenced by household size, per capita expenditure, provincial location (Eastern Cape, Northern Cape, Free State and North West) and being Coloured. The negative and significant factors in determining access to semi-formal credit include being male, rural location, being poor and being White. Informal credit access is negatively and significantly influenced by education level and race (being Coloured or White). Among the poor, access to bank credit is positively and significantly influenced by being male, provincial location (Western Cape, Gauteng and Mpumalanga) and being Coloured. Access to semi-formal credit is positively and significantly determined by household per capita expenditure, provincial location (Western Cape, Northern Cape, North West and Gauteng) and being Indian. Access to informal credit by the poor is positively and significantly influenced by provincial location (Kwazulu Natal and Gauteng). Within the black population, access to bank credit is positively and significantly influenced by age, being male, household per capita expenditure and education level. Semi-formal credit access by Blacks is positively and significantly influenced by household size, household per capita expenditure, education level and provincial location (Eastern Cape, Northern Cape, Free State and North West). However being male, poor and located in a rural area negatively affected access to semi-formal credit by Blacks. Informal credit access by Blacks is negatively influenced by education level, but positively influenced by being located in the Western and Eastern Cape. These findings confirm that improving access to organized credit markets (i.e formal and semi-formal credit markets) by the poor and Blacks, remains important in the fight against poverty. |
| Keywords: | credit, poverty, South Africa |
| JEL: | N27 D14 G2 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers27&r=dev |
| By: | Johan Fourie (Department of Economics, University of Stellenbosch) |
| Abstract: | The causes of the poor white problem, first noted at a Dutch Reformed Church Synod in 1886, were unclear; many blamed the inadequate education system, urbanisation, cheap wages or cultural factors, while others argued that external events such as the rinderpest disease or the Anglo-Boer war added to the numbers of poor whites. Today, poverty is still at the heart of many policy debates in South Africa. A bad educational legacy, urbanisation, labour legislation, culture and tradition, and external factors are still amongst the factors said to be the causes of poverty. This paper assesses the similarities and differences between black poverty today and white poverty a century ago, and suggests possible policy lessons to learn from the past. |
| Keywords: | poverty, poor white problem, inequality, policy proposals |
| JEL: | N37 N97 I31 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:sza:wpaper:wpapers28&r=dev |
| By: | Alessandro Fedele |
| Abstract: | This paper reviews recent literature on joint liability lending in microcredit markets characterized by adverse selection. This mode of lending consists of granting individual loans to wealthless borrowers provided that they form groups: if a group does not fully repay its obligations, then the microlender cut off all members from future credit until the debt is repaid. Joint liability lending is able to extract information through a peer selection mechanism, with the effect of raising both repayment rates and welfare with respect to individual lending. |
| Keywords: | microcredit, underdeveloped economies, joint liability lending. |
| JEL: | D82 L31 O12 O16 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:mis:wpaper:20060901&r=dev |