nep-dev New Economics Papers
on Development
Issue of 2006‒11‒04
twenty-six papers chosen by
Jeong-Joon Lee
Towson University

  2. Is the renminbi undervalued? By Jan Lemmen
  3. Terms of Trade Shocks in an Intertemporal Model: Should We Worry about the Dutch Disease or Excessive Borrowing? By Kuralbayeva, Karlygash; Vines, David
  4. The Persistence of Underdevelopment: Institutions, Human Capital or Constituencies By Rajan, Raghuram G; Zingales, Luigi
  5. What Determines Immigrations' Impact? Comparing Two Global Centuries By Hatton, Timothy J.; Williamson, Jeffrey G
  6. Lobbying, Corruption and Political Influence By Campos, Nauro F; Giovannoni, Francesco
  7. North-South Trade and Economic Growth By Dinopoulos, Elias; Segerstrom, Paul
  8. Contractual Institutions, Financial Development and Vertical Integration: Theory and Evidence By Macchiavello, Rocco
  9. Public Sector Motivation and Development Failures By Macchiavello, Rocco
  10. Understanding South Africa's Economic Puzzles By Rodrik, Dani
  11. Optimal accumulation in an endogenous growth setting with human capital By Frédéric, DOCQUIER; Oliver, Paddison; Pierre PESTIEAU
  12. Brain drain and human capital formation in developing countries : winners and losers By Michel, BEINE; Frédéric, DOCQUIER; Hillel, RAPOPORT
  13. Lost Decades: Lessons from Post-Independence Latin America for Today's Africa By Robert H. Bates; John H. Coatsworth; Jeffrey G. Williamson
  14. British Colonial Institutions and Economic Development in India By Shilpi Kapur; Sukkoo Kim
  15. Globalization, De-Industrialization and Mexican Exceptionalism 1750-1879. By Rafael Dobado González; Aurora Gómez Galvarriato; Jeffrey G. Williamson
  16. Mobilizing urban infrastructure finance within a responsible fiscal framework : South African case By van Ryneveld, Philip
  17. Land leasing and land sale as an infrastructure-financing option By Peterson, George E.
  18. Export promotion agencies : what works and what doesn ' t By Lederman, Daniel; Olarreaga, Marcelo; Payton, Lucy
  19. Urban infrastructure finance from private operators : what have we learned from recent experience ? By Annez, Patricia Clarke
  20. Migrant networks and foreign direct investment By Javorcik, Beata S.; Ozden, Caglar; Spatareanu, Mariana; Neagu, Cristina
  21. Services inputs and firm productivity in Sub-Saharan Africa : evidence from firm-level data By Arnold, Jens Matthias; Mattoo, Aaditya; Narciso, Gaia
  22. Trade reforms and welfare : an ex-post decomposition of income in Vietnam By Isik-Dikmelik, Aylin
  23. The demographic benefit of international migration : hypothesis and application to the Middle Eastern and North African contexts By Fargues, Philippe
  24. The fiscal framework and urban infrastructure finance in China By Ming Su; Quanhou Zhao
  25. The investment climate in post-conflict situations By Mills, Rob; Qimiao Fan
  26. The uneven development of microfinance: A Latin-American perspective By Annabel Vanroose

  1. By: Alejandro Gaviria; Carlos Medina; Carolina Mejía
    Abstract: This article presents an evaluation of an ambitious health reform implemented in Colombia during the first half of the nineties. The reform attempted to radically change public provision of health services, by means of the transformation of subsidies to supply (direct transfers to hospitals) into a new scheme of subsidies to demand (transfers targeted at the poorest citizens). Although the percentage of the population having medical care insurance has notably increased, mostly among the poorest, problems of implementation have been numerous. It has not been possible to achieve the transformation of subsidies to supply into subsidies to demand. At the same time, competition has not made it possible to increase the efficiency of many public hospitals, which continue to operate with very low occupation rates, while receiving hefty money transfers. Subsidies increased demand for medical consultations, but have curbed demand for hospitalizations. Nonetheless, subsidies might have adversely affected female’s labor market participation and even household consumption. As a whole, evidence suggests that the health reform has been effective in rationalizing households’ demand for health, but not in rationalizing public supply, and neither in increasing the efficiency of service providers.
    Date: 2006–01–24
  2. By: Jan Lemmen
    Abstract: The possible undervaluation of the renminbi is evaluated. A survey of the literature concludes toward a renminbi undervaluation of about 25% in real effective terms. This undervaluation is not expected to disappear any time soon.
    Keywords: China; exchange rates; outlook
    JEL: F31 O24 O53
    Date: 2006–10
  3. By: Kuralbayeva, Karlygash; Vines, David
    Abstract: This paper analyzes the impact of terms of trade and risk-premium shocks on a small open economy in an intertemporal, Dutch disease model, with international capital mobility. It is shown that when the economy experiences a permanent improvement in the terms of trade, the Dutch disease effect (real exchange rate appreciation) goes away in the new steady state, while the economy experiences de-industrialization even stronger than in the short-run. Second, a permanent improvement in the terms of trade coupled with a permanent reduction in the risk-premium leads to pro-industrialization and a real exchange rate appreciation. The mechanism behind appreciation of the real exchange rate in the long-run is different from the Dutch disease story. It occurs because reduction in the risk-premium reduces the costs of the production in the economy, and because (non-oil) traded sector benefits more from cheaper capital than the non-traded sector. The economy also accumulates more debt in response to these two shocks in the long-run.
    Keywords: capital inflows; Dutch disease; external debt; optimizing models; overborrowing; real exchange rate
    JEL: E44 F32 F34 F41
    Date: 2006–10
  4. By: Rajan, Raghuram G; Zingales, Luigi
    Abstract: Why is underdevelopment so persistent? One explanation is that poor countries do not have institutions that can support growth. Because institutions (both good and bad) are persistent, underdevelopment is persistent. An alternative view is that underdevelopment comes from poor education. Neither explanation is fully satisfactory, the first because it does not explain why poor economic institutions persist even in fairly democratic but poor societies, and the second because it does not explain why poor education is so persistent. This paper tries to reconcile these two views by arguing that the underlying cause of underdevelopment is the initial distribution of factor endowments. Under certain circumstances, this leads to self-interested constituencies that, in equilibrium, perpetuate the status quo. In other words, poor education policy might well be the proximate cause of underdevelopment, but the deeper (and more long lasting cause) are the initial conditions (like the initial distribution of education) that determine political constituencies, their power, and their incentives. Though the initial conditions may well be a legacy of the colonial past, and may well create a perverse political equilibrium of stagnation, persistence does not require the presence of coercive political institutions. We present some suggestive empirical evidence. On the one hand, such an analysis offers hope that the destiny of societies is not preordained by the institutions they inherited through historical accident. On the other hand, it suggests we need to understand better how to alter factor endowments when societies may not have the internal will to do so.
    Keywords: human capital; institutions
    JEL: L10
    Date: 2006–10
  5. By: Hatton, Timothy J.; Williamson, Jeffrey G
    Abstract: This paper asks whether history can shed light on the modern debate about immigration's labour market impact in high wage economies. It examines the relationship between migration and capital flows in the age of mass migration before 1914, the so-called first global century. It then assesses the effects of immigration on wages and employment with and without international capital mobility in first global century and today, that is, the second global century. The paper then explores the links between these economic relationships and immigration policy. It concludes with an explanation for the apparent difference in immigration's impact in the two global centuries, and thus on policy.
    Keywords: capital mobility; history; immigration; labour market impact; policy
    JEL: F22 J1 O15
    Date: 2006–10
  6. By: Campos, Nauro F; Giovannoni, Francesco
    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: corruption; institutions; lobbying; transition
    JEL: D72 E23 H26 O17 P16
    Date: 2006–10
  7. By: Dinopoulos, Elias; Segerstrom, Paul
    Abstract: This paper develops a dynamic general equilibrium model of North-South trade and economic growth. Both innovation and imitation rates are endogenously determined as well as the degree of wage inequality between Northern and Southern workers. Northern firms devote resources to innovative R&D to discover higher quality products and Southern firms devote resources to imitative R&D to copy state-of-the-art quality Northern products. The steady-state equilibrium and welfare implications of three aspects of globalization are studied: increases in the size of the South (i.e., countries like China joining the world trading system), stronger intellectual property protection (i.e., the TRIPs agreement that was part of the Uruguay Round) and lower trade costs.
    Keywords: economic growth; globalization; North-South trade; trade costs; welfare
    JEL: F12 F43 O31 O34
    Date: 2006–10
  8. By: Macchiavello, Rocco
    Abstract: This paper develops an industry equilibrium model of vertical integration under contractual imperfections with specific input suppliers and external investors. I assume that vertical integration economizes on the needs for contracts with specific input suppliers at the cost of higher financial requirements. I show that the two forms of contractual imperfections have different effects on the degree of vertical integration, and that contractual frictions with external investors affect vertical integration through two opposing channels: a direct negative, investment, effect and an indirect positive, entry, effect. Using cross-country-industry data, I present novel evidence on the institutional determinants of international differences in vertical integration which is consistent with the predictions of the theoretical model. In particular, I show that countries with more developed financial systems are relatively more vertically integrated in industries that are dominated by large firms.
    Keywords: contract enforcement; credit constraints; developing countries; industry equilibrium; vertical integration
    JEL: D23 L11 L22 O14
    Date: 2006–10
  9. By: Macchiavello, Rocco
    Abstract: This paper provides a theoretical analysis of the relationship between public sector motivation and development. In the model the public sector produces a public good and workers are heterogeneous in terms of public sector motivation (PSM). Wages in the private sector are increasing in the quality of the public good. In this context, public sector wage premia (PSWP) have two opposite effects: low PSWP help screen workers with PSM into the public sector, while high PSWP help motivate workers to be honest. Raising PSWP may not improve the quality of governance and multiple equilibria might arise. The model highlights that the relative importance of workers selection and provision of "on the job" incentives in the public sector varies in systematic ways with wages in the private sector. I provide anecdotal and original empirical evidence consistent with the theoretical predictions and discuss some policy implications for public sector reforms in developing countries.
    Keywords: corruption; developing countries; multiple equilibria; public sector motivation
    JEL: D73 H10 O11 P49
    Date: 2006–10
  10. By: Rodrik, Dani
    Abstract: South Africa has undergone a remarkable transformation since its democratic transition in 1994, but economic growth and employment generation have been disappointing. Most worryingly, unemployment is currently among the highest in the world. While the proximate cause of high unemployment is that prevailing wages levels are too high, the deeper cause lies elsewhere, and is intimately connected to the inability of the South African to generate much growth momentum in the past decade. High unemployment and low growth are both ultimately the result of the shrinkage of the non-mineral tradable sector since the early 1990s. The weakness in particular of export-oriented manufacturing has deprived South Africa from growth opportunities as well as from job creation at the relatively low end of the skill distribution. Econometric analysis identifies the decline in the relative profitability of manufacturing in the 1990s as the most important contributor to the lack of vitality in that sector.
    Keywords: economic growth; South Africa
    JEL: O11 O14
    Date: 2006–10
  11. By: Frédéric, DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Oliver, Paddison; Pierre PESTIEAU (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))
    Abstract: This paper considers a three-overlapping-generations model of endogeneous growth wherein human capital is the engine of growth. It first contrasts the ‘laissez-faire’ and the optimal solutions. Three possible accumulation regimes are distinguished. Then it discusses a standard set of tax-transfer instruments that allow for decentralization of the social optimum. Within the limits of our model, the rationale for the standard pattern of intergenerational transfers (the working-aged financing the education of the young and the pension of the old) is seriously questioned. On pure efficiency grounds, the case for generous public pensions is rather weak.
    Keywords: Endogenous growth, human capital, intergenerational transfers
    JEL: D90 H21 H52
    Date: 2006–05–15
  12. By: Michel, BEINE; Frédéric, DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Hillel, RAPOPORT
    Abstract: The brain drain has long been viewed as a serious constraint on poor countries development. However, recent theoretical literature suggests that emigration prospects can raise the expected return to human capital and foster investment in education at home. This paper takes advantage of a new dataset on emigration rates by education level (Docquier and Marfouk, 2006) to examine the impact of brain drain migration on human capital formation in developing countries. We find evidence of a positive effect of skilled migration prospects on gross human capital levels in a cross-section of 127 developing countries. For each country we then estimate the net effect of the brain drain using counterfactual simulations. We find that countries combining relatively low levels of human capital and low skilled emigration rates are likely to experience a net gain, and conversely. There appears to be more losers than winners, and in addition the former tend to lose relatively more than what the latter gain. At an aggregate level however, and given that the largest developing countries are all among the winners, brain drain migration may be seen not only as increasing the number of skilled workers worldwide but also the number of such workers living in developing countries.
    Keywords: Brain drain, skilled migration, human capital formation, immigration policy, developing countries
    JEL: F22 J24 O15
    Date: 2006–05–15
  13. By: Robert H. Bates; John H. Coatsworth; Jeffrey G. Williamson
    Abstract: Africa and Latin America secured their independence from European colonial rule a century and half apart: most of Latin America after 1820 and most of Africa after 1960. Despite the distance in time and space, they share important similarities. In each case independence was followed by political instability, violent conflict and economic stagnation lasting for about a half-century (lost decades). The parallels suggest that Africa might be exiting from a period of post-imperial collapse and entering a period of relative political stability and economic growth, as did Latin America a century and a half earlier.
    JEL: N0 O10 O54 O55
    Date: 2006–10
  14. By: Shilpi Kapur; Sukkoo Kim
    Abstract: We explore the impact of British colonial institutions on the economic development of India. In some regions, the British colonial government assigned property rights in land and taxes to landlords whereas in others it assigned them directly to cultivators or non-landlords. Although Banerjee and Iyer (2005) find that agricultural productivity of non-landlord areas diverged and out-performed relative to landlord areas after 1965 with the advent of the Green Revolution, we find evidence of superior economic performance of non-landlord regions in both the pre- and the post-independence periods. We believe that landlord and non-landlord regions diverged because their differing property rights institutions led to differences in incentives for development.
    JEL: N45 O10 P14
    Date: 2006–10
  15. By: Rafael Dobado González (Universidad Complutense de Madrid. Facultad de Ciencias Económicas y Empresariales. Dept. de Historia Económica); Aurora Gómez Galvarriato (CIDE. Division of Economics. México); Jeffrey G. Williamson (Harvard University. Department of Economics)
    Abstract: Like the rest of the poor periphery, Mexico had to deal with de-industrialization forces between 1750 and 1913, those critical 150 years when the economic gap between the industrial core and the primary-product-producing periphery widened to such huge dimensions. Yet, from independence to mid-century Mexico did better on this score than did most countries around the periphery. This paper explores the sources of Mexican exceptionalism with de-industrialization. It decomposes those sources into those attributable to productivity events in the core and to globalization forces connecting core to periphery, and to those attributable to domestic forces specific to Mexico. It uses a neo-Ricardian model (with non-tradable foodstuffs) to implement the decomposition, and advocates a price dual approach, and develops a new price and wage data base 1750-1878. There were three forces at work that account for Mexican exceptionalism: first,the terms of trade and Dutch disease effects were much weaker; second, Mexico maintained secular wage competitiveness with the core; and third, Mexico had the autonomy to devise effective ways to foster industry. The first appears to have been the most important.
    Date: 2006
  16. By: van Ryneveld, Philip
    Abstract: Since South Africa held its first democratic elections in 1994, it has given significant attention to building an effective system of decentralization including provincial and local government. While provincial governments are responsible mainly for the implementation of social services such as health and education, the provision of much of the urban infrastructure is the responsibility of local government. Although many challenges remain, the country has made significant progress over the past decade in addressing urban service backlogs in poor areas. At the same time, it has greatly improved macroeconomic fundamentals. The system of financing local government seeks to place accountability firmly at the local level, with most revenues in the larger urban centers raised locally through a combination of local taxes and fees for services, while poorer regions are predominantly grant funded. The objective has been to encourage the financing of capital infrastructure through local borrowing based on sustainable, transparent local finances rather than national repayment guarantees, which are outlawed. There is some indirect subsidization of loans through the state-owned Development Bank of Southern Africa. But the emphasis is on achieving redistribution through transparent, formula-based grants paid directly from national to local governments. While further bedding down of the system is needed, the approach is proving largely successful. The paper concludes by recommending that the existing division between provinces as providers of social services and local governments as the key locus of responsibility for services related to the built environment should be strengthened, particularly through the devolution of more urban transport related functions. A number of key risks are also highlighted, including issues related to the reform of local business taxes.
    Keywords: Municipal Financial Management,Urban Economics,Public & Municipal Finance,Regional Governance,Urban Governance and Management
    Date: 2006–11–01
  17. By: Peterson, George E.
    Abstract: Municipal land sales provide one option for financing urban infrastructure investment. In countries where land is owned by the public sector, land is by far the most valuable asset on the municipal balance sheet. Selling land or long-term leasing rights to land use while investing the proceeds in infrastructure facilities can be viewed as a type of portfolio asset adjustment. This paper shows that in China many municipalities have financed more than half of their high rates of infrastructure investment from land sales, for periods of 10 to 15 years. Much of the remaining investment has been financed by municipal borrowing against the collateral of land values. Other countries also have turned to land sales and leasing for infrastructure finance. From a local perspective, land sales have the advantage that they typically are free from the intergovernmental restrictions that require higher-level approval for increases in local tax rates or user fees and that restrict local government borrowing. However, financing municipal infrastructure investment through land sales creates special risks that are not recognized in most intergovernmental fiscal frameworks. One danger involves the use of proceeds to finance operating budgets. Risk exposure is exaggerated by the highly volatile nature of urban land markets and evidence that in some countries urban land values in 2006 reflected a real estate bubble. In the past, Hong Kong, a jurisdiction that has relied heavily on land-leasing to finance its infrastructure budget, has seen land sales fall to zero at the bottom of the real estate cycle. The greatest financial sector risk stems from municipal borrowing based on inflated land values offered as collateral to banks. Sound intergovernmental fiscal management will require tighter regulation of municipalities ' financial leveraging of land assets to avoid excessive risk taking by local governments.
    Keywords: Public Sector Economics & Finance,Municipal Financial Management,Public Sector Management and Reform,Regional Governance,Urban Governance and Management
    Date: 2006–11–01
  18. By: Lederman, Daniel; Olarreaga, Marcelo; Payton, Lucy
    Abstract: The number of national export promotion agencies (EPAs) has tripled over the past two decades. While more countries have made them part of their national export strategy, studies have criticized their efficiency in developing countries. Partly in reaction to these critiques, EPAs have been retooled (see ITC 1998 or 2000, for example). This paper studies the impact of existing EPAs and their strategies based on a new data set covering 104 industrial and developing countries. Results suggest that on average they have a strong and statistically significant impact on exports. For each $1 of export promotion, the paper estimates a $300 increase in exports for the median EPA. However, there is heterogeneity across regions, levels of development, and types of instruments. Furthermore, there are strong diminishing returns, suggesting that as far as EPAs are concerned, small is beautiful.
    Keywords: Country Strategy & Performance,Economic Theory & Research,Trade Policy,Tax Law,Marketing
    Date: 2006–11–01
  19. By: Annez, Patricia Clarke
    Abstract: The author examines the role of private participation in infrastructure (PPI) in mobilizing finance for key urban services, that is, urban roads, municipal solid waste management, and water and sanitation since the early 1990s when private participation came to be seen as a key element in infrastructure development. Her review indicates that for financing urban services, PPI has disappointed-playing a far less significant role than was hoped for, and which might be expected given the attention it has received and continues to receive in strategies to mobilize financing for infrastructure. Looking beyond the number, the author examines transactions and finds that there are good reasons-practical, political, economic and institutional-for these disappointments. Recommending that cities in developing countries try harder is not likely to relieve all these constraints. Experience shows that there are a number of features that raise the risk profile of urban infrastructure for private investors, which has meant that the bulk of the transactions that have taken place have been exceptions rather than harbingers of a growing trend. Many of the measures that could reduce the risk profile are outside the control of many cities, others unlikely to change, and yet another group of steps to be taken that would improve prospects for urban service provision, whether in the hands of public or private operators. These findings suggest a more pragmatic and selective approach to the focus on PPI as a source of finance, and more focus on the array of some of the fundamental steps, among them strengthening the public finances of cities to improve both the capacity to deliver services and to reduce the risks that private investors must take when they invest in urban infrastructure.
    Keywords: Transport Economics Policy & Planning,Public Sector Economics & Finance,Non Bank Financial Institutions,Urban Slums Upgrading,Urban Services to the Poor
    Date: 2006–11–01
  20. By: Javorcik, Beata S.; Ozden, Caglar; Spatareanu, Mariana; Neagu, Cristina
    Abstract: While there exists sizeable literature documenting the importance of ethnic networks for international trade, little attention has been devoted to studying the effects of networks on foreign direct investment (FDI). The existence of ethnic networks may positively affect FDI by promoting information flows across international borders and by serving as a contract enforcement mechanism. This paper investigates the link between the presence of migrants in the United States and U.S. FDI in the migrants ' countries of origin, taking into account the potential endogeneity concerns. The results suggest that U.S. FDI abroad is positively correlated with the presence of migrants from the host country. The data further indicate that the relationship between FDI and migration is driven by the presence of migrants with a college education.
    Keywords: Population Policies,Economic Theory & Research,Voluntary and Involuntary Resettlement,Anthropology,Human Migrations & Resettlements
    Date: 2006–11–01
  21. By: Arnold, Jens Matthias; Mattoo, Aaditya; Narciso, Gaia
    Abstract: The authors investigate the relationship between the productivity of African manufacturing firms and their access to services inputs. They use data from the World Bank Enterprise Survey for over 1,000 firms in 10 Sub-Saharan African countries to calculate the total factor productivity of firms. The Enterprise Surveys also contain unique measures of firms ' access to communications, electricity, and financial services. The availability of these measures at the firm level, both as subjective and objective indicators, allows the authors to exploit the variation in services performance at the subnational regional level. Furthermore, by using the regional variation in services performance, they are also able to address concerns about the possible endogeneity of the services variables. The results show a significant and positive relationship between firm productivity and service performance in all three services sectors analyzed. The authors thus provide support for the argument that improvements in services industries contribute to enhancing the performance of downstream economic activities, and thus are an essential element of a strategy for promoting growth and reducing poverty.
    Keywords: Economic Theory & Research,Education for the Knowledge Economy,Rural Communications,Commodities,Urban Economics
    Date: 2006–11–01
  22. By: Isik-Dikmelik, Aylin
    Abstract: This paper analyzes the impact of trade reforms on household welfare. In particular, it studies the importance of each of the links that together constitute the impact using data from the Vietnamese experience in the 1990s. The implementation of trade reforms in the 1990s, most noteworthy of which was the liberalization of rice, resulted in substantial improvement in welfare as evidenced by the drastic decline in poverty. Using analytical and empirical methods, the author examines the role of each channel (direct versus indirect) in this improvement for different groups of households. Results indicate that the growth has been broad based and pro-poor. Poorer households experienced more growth for each and every group analyzed. And contrary to the standard literature, net buyer households had more growth compared with net sellers, emphasizing the importance of indirect links. Decomposition of the growth shows that for rural households, both the direct effect and the multiplier effect drive growth while the multiplier effect was key in urban areas. The importance of the secondary effects underscores the need for a broader model to estimate the impact of trade reforms fully.
    Keywords: Rural Poverty Reduction,Economic Theory & Research,Small Area Estimation Poverty Mapping,Inequality,Consumption
    Date: 2006–11–01
  23. By: Fargues, Philippe
    Abstract: The view that international migration has no impact on the size of world population is a sensible one. But the author argues, migration from developing to more industrial countries during the past decades may have resulted in a smaller world population than the one which would have been attained had no international migration taken place for two reasons: most of recent migration has been from high to low birth-rate countries, and migrants typically adopt and send back to their home countries models and ideas that prevail in host countries. Thus, migrants are potential agents of the diffusion of demographic modernity, that is, the reduction of birth rates among nonmigrant communities left behind in origin countries. This hypothesis is tested with data from Morocco and Turkey where most emigrants are bound for the West, and Egypt where they are bound for the Gulf. The demographic differentials encountered through migration in these three countries offer contrasted situations-host countries are either more (the West) or less (the Gulf) advanced in their demographic transition than the home country. Assuming migration changes the course of demographic transition in origin countries, the author posits that it should work in two opposite directions-speeding it up in Morocco and Turkey and slowing it down in Egypt. Empirical evidence confirms this hypothesis. Time series of birth rates and migrant remittances (reflecting the intensity of the relationship kept by emigrants with their home country) are strongly correlated with each other. Correlation is negative for Morocco and Turkey, and positive for Egypt. This suggests that Moroccan and Turkish emigration to Europe has been accompanied by a fundamental change of attitudes regarding marriage and birth, while Egyptian migration to the Gulf has not brought home innovative attitudes in this domain, but rather material resources for the achievement of traditional family goals. Other data suggest that emigration has fostered education in Morocco and Turkey but not in Egypt. And as has been found in the literature, education is the single most important determinant of demographic transition among nonmigrant populations in migrants ' regions of origin. Two broader conclusions are drawn. First, the acceleration of the demographic transition in Morocco and Turkey is correlated with migration to Europe, a region where low birth-rates is the dominant pattern. This suggests that international migration may have produced a global demographic benefit under the form of a relaxation of demographic pressures for the world as a whole. Second, if it turns out that emigrants are conveyors of new ideas in matters related with family and education, then the same may apply to a wider range of civil behavior.
    Keywords: Population Policies,Gender and Social Development,Anthropology,Voluntary and Involuntary Resettlement,Human Migrations & Resettlements
    Date: 2006–11–01
  24. By: Ming Su; Quanhou Zhao
    Abstract: China has experienced more than 25 years of extraordinary economic growth. Underlying this growth has been a decentralized fiscal system, in which provinces and large cities are given the freedom to make infrastructure investments to stimulate local development, and are allowed to retain a large part of the fiscal revenues that are generated from economic activity. Although successful as a growth strategy, this policy created two problems for national fiscal management. First, it significantly reduced the central government ' s share of fiscal revenues, which fell from 34.8 percent in 1980 to 22 percent in 1992. Second, it widened economic and fiscal disparities between the rapidly growing urban coastal region and the rest of the country. Rapid growth in subnational debt (which rose 23-fold in a decade) and subnational nonperforming loans (estimated by the authors to range between US$100 billion and US$150 billion) has placed pressure on China ' s financial system. Traditionally, China has favored bank lending as a source of finance because the banking system has provided a vehicle for central political control over local debt. But as China ' s financial system matures, creditworthiness standards must become more important. The authors recommend greater use of the revenue streams from infrastructure assets as a financing source, and gradual relaxation of central political control over subnational debt. One step in this direction would permit leading cities to issue municipal bonds based on objective financial standards.
    Keywords: Banks & Banking Reform,Urban Economics,Public & Municipal Finance,Municipal Financial Management,Intergovernmental Fiscal Relations and Local Finance Management
    Date: 2006–11–01
  25. By: Mills, Rob; Qimiao Fan
    Abstract: This paper is a policy review of the role of investment climate in post-conflict situations. It summarizes the broad range of ways in which conflict negatively affects the investment climate, from macroeconomic instability to a degraded regulatory framework. It stresses that attention needs to be paid to the broader " enabling environment, " including institutions, governance, capacity, and social capital. It suggests that a vibrant private sector underpinned by a good investment climate is particularly important in the post-conflict recovery phase for three reasons: it generates employment, provides public services where the state has retrenched, and builds social capital. By addressing these important " greed and grievance " factors, the private sector helps reduce the likelihood of a return to conflict. The paper concludes by distilling key lessons relating to the management of the post-conflict reform process. Despite the importance of a good investment climate, greater effort is needed to ensure that private sector development reforms are included in the first round of post-conflict policymaking. Local ownership of reforms and enhanced local capacity to implement them is key to sustainable improvements in the investment climate. Development partners have an important role to play in facilitating dialogue and promoting partnerships between public and private sector stakeholders. At the same time, development partners need to ensure that their presence in fragile post-conflict economies does not damage the very sector they are trying to support.
    Keywords: Political Economy,Labor Markets,Trade and Regional Integration,Social Conflict and Violence,Investment and Investment Climate
    Date: 2006–11–01
  26. By: Annabel Vanroose (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and Section for Economic, Monetary and Financial Policy, Vrije Universiteit Brussel.)
    Abstract: This paper presents a first set of variables that explain the differences in the uneven development of the microfinance sector in Latin America. A cross-country regression is applied by using a unique dataset on the outreach of microfinance institutions in the year 2001. Results indicate that microfinance is more present in countries that have received a higher proportion of international support. Microfinance institutions reach more clients in high-inflation areas. Moreover, human capital and population density play a positive role in the growth of these institutions. The results indicate that the regulatory environment does not seem to play a significant role. On the other hand, the proxy for financial liberalization does.
    Keywords: microfinance, Latin America, financial sector development, aid, inflation.
    JEL: F35 G21 G28 O54 O57
    Date: 2006–10

This nep-dev issue is ©2006 by Jeong-Joon Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.