nep-dev New Economics Papers
on Development
Issue of 2006‒11‒25
fifty-one papers chosen by
Jeong-Joon Lee
Towson University

  1. The role of the tourism sector in economic development. Lessons from the Spanish experience By Isabel Cortes; Manuel Artis
  2. Dual labor markets and business cycles By David Cook; Hiromi Nosaka
  3. A quantitative analysis of China’s structural transformation By Robert Dekle; Guillaume Vandenbroucke
  4. Mutual Recognition Agreements and Trade Diversion: Consequences for Developing Nations By Alberto AMURGO PACHECO
  5. Social Capital as a Determinant of Economic Growth in Africa By Jerven, Morten
  6. On the Links between Violent Conflict and Chronic Poverty: How Much Do We Really Know? By Patricia Justino
  7. Self-selection in migration and returns to unobservable skills By Benoit Dostie; Pierre Thomas Léger
  8. Output Drops and the Shocks That Matter By Törbjörn I. Becker; Paolo Mauro
  9. Institutional Quality, Knightian Uncertainty, and Insurability: A Cross-Country Analysis By S. Nuri Erbas; Chera L. Sayers
  10. Do Debt-Service Savings and Grants Boost Social Expenditures? By Alun H. Thomas
  11. Oil and Growth in the Republic of Congo By Rina Bhattacharya; Dhaneshwar Ghura
  12. Financial Globalization: A Reappraisal By Kenneth Rogoff; M. Ayhan Kose; Eswar Prasad; Shang-Jin Wei
  13. What's Driving Private Investment in Malaysia? Aggregate Trends and Firm-Level Evidence By Roberto Pereira Guimarães; Olaf Unteroberdoerster
  14. What Explains Private Saving in Mexico? By Andrew Swiston; Ales Bulir
  15. Money Isn't Everything: The Challenge of Scaling Up Aid to Achieve the Millennium Development Goals in Ethiopia By Todd D. Mattina
  16. Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy: Lessons from Gabon By Daniel Leigh; Jan-Peter Olters
  17. Corruption and Technology-Induced Private Sector Development By Etienne B. Yehoue; Jean-François Ruhashyankiko
  18. The Stock Market and the Financing of Corporate Growth in Africa: The Case of Ghana By Charles Amo Yartey
  19. A Principal-Agent Theory Approach to Public Expenditure Management Systems in Developing Countries By Elisabeth Paul; Luc Leruth
  20. Economic Growth and Total Factor Productivity in Niger By Thomson Fontaine; Jean-Claude Nachega
  21. Financial Integration in the West African Economic and Monetary Union By Amadou N. R. Sy
  22. Fiscal Determinants of Inflation: A Primer for the Middle East and North Africa By Ludvig Söderling; Domenico Fanizza
  23. How Robust are Estimates of Equilibrium Real Exchange Rates: The Case of China By Steven Vincent Dunaway; Lamin Leigh; Xiangming Li
  24. A Debt Overhang Model for Low-Income Countries: Implications for Debt Relief By Junko Koeda
  25. Public Debt and Productivity: The Difficult Quest for Growth in Jamaica By Rodolphe Blavy
  26. The Magnitude and Distribution of Fuel Subsidies: Evidence from Bolivia, Ghana, Jordan, Mali, and Sri Lanka By Kangni Kpodar; Moataz El-Said; David Coady; Paulo A. Medas; David Newhouse; Robert Gillingham
  27. What Do Remittances Do? Analyzing the Private Remittance Transmission Mechanism in El Salvador By Nolvia N. Saca; Luis René Cáceres
  28. Changing Diets in China’s Cities: Empirical Fact or Urban Legend? By Dong, Fengxia; Fuller, Frank H.
  29. Understanding the Effects of Siblings on Child Mortality: Evidence from India By Gerald Makepeace; Sarmistha Pal
  30. Measuring Idiosyncratic Risk: Implications for Capital Flows By Eva Rytter Sunesen
  31. Behavioural Development Economics: Lessons from field labs in the developing world By Jeffery Carpenter; Juan Camilo Cardenas
  32. Characteristics of Individuals Afflicted by AIDS-related Mortality in Zambia By Antony Chapoto; T.S. Jayne
  33. Impact of HIV/AIDS-Related Deaths on Rural Farm Households' Welfare in Zambia: Implications for Poverty Reduction Strategies By Antony Chapoto; T.S. Jayne
  34. Reprint: The Many Paths of Cotton Sector Reform in Eastern and Southern Africa: Lessons From a Decade of Experience By David Tschirley; Colin Poulton; Duncan Boughton
  35. Rural Poverty Dynamics, Agricultural Productivity and Access to Resources By Paul Gamba; Elliot Mghenyi
  36. Agricultural Extension in Kenya: Practice and Policy Lessons By Milu Muyanga; T.S. Jayne
  37. Exploring the Paradox of Rwandan Agricultural Household Income and Nutritional Outcomes in 1990 and 2000 By Andrew McKay; Scott Loveridge
  38. Understanding Rwandan Agricultural Households' Strategies to Deal with Prime Age Illness and Death: A Propensity Score Matching Approach By Cynthia Donovan; Linda Bailey
  40. AIDS Treatment and Intrahousehold Resource Allocations: Children's Nutrition and Schooling in Kenya By Joshua S. Graff Zivin; Harsha Thirumurthy; Markus Goldstein
  41. Capital Account Liberalization: Theory, Evidence, and Speculation By Peter Blair Henry
  42. Educational Disparity in East and West Pakistan, 1947–71: Was East Pakistan Discriminated Against? By Mohammad Niaz Asadullah
  43. Effects of longevity and dependency rates on saving and growth: Evidence from a panel of cross countries By Hongbin Li; Junsen Zhang; Jie Zhang
  44. The Migration and FDI Puzzle: Complements or Substitutes? By Elena D'Agosto; Nazaria Solferino; Giovanni Tria
  45. Accounting for Inequality: A Proposed Revision of the Human Development Index By Elizabeth Stanton
  46. Partially awakened giants : uneven growth in China and India By Chaudhuri, Shubham; Ravallion, Martin
  47. Assessing job flows across countries : the role of industry, firm size, and regulations By Haltiwanger, John; Scarpetta, Stefano; Schweiger, Helena
  48. How are youth faring in the labor market ? Evidence from around the world By Fares, Jean; Montenegro, Claudio E.; Orazem, Peter F.
  49. Decentralisation in Uganda: Exploring the Constraints for Poverty Reduction By Susan Steiner
  50. How Does Neopatrimonialism Affect the African State? The Case of Tax Collection in Zambia By Christian von Soest
  51. Explaining Changes of Property Rights among Afar Pastoralists, Ethiopia By Bekele Hundie

  1. By: Isabel Cortes; Manuel Artis (Universitat de Barcelona)
    Abstract: Tourism is one of the most important sectors in the global economy and is considered an efficient tool with which to promote economic growth. The case of Spain's economy is well known in this respect; in fact, widespread consensus exists on the part played by tourism in enhancing the industrialisation process in Spain and the part played by foreign currency receipts from tourism in financing the imports of capital goods, which made the expansion of manufacturing possible. This paper aims to assess the real role of foreign currency receipts from tourism in Spain 's economy from 1960 to the present. The results of Spain 's experience may well help to guide policy decisions in developing countries in similar circumstances.
    Keywords: economic development, industrialisation, international tourism, spanish experience
    JEL: C22 L83 N74 O1
    Date: 2006
  2. By: David Cook; Hiromi Nosaka
    Abstract: In this paper, we model a dynamic general equilibrium model of a small open developing economy. We model labor markets as including both formal and informal urban employment as well as rural employment. We find that modelling dual labor markets helps explain why output in developing economies may fall even as labor inputs remain constant during financial crises. An external financial shock may lead to a reallocation of labor from productive formal sectors of the economy to less productive informal sectors.
    Keywords: Labor market
    Date: 2005
  3. By: Robert Dekle; Guillaume Vandenbroucke
    Abstract: Between 1978 and 2003 the Chinese economy experienced a remarkable 5.7 percent annual growth of GDP per labor. At the same time, there has been a noticeable transformation of the economy: the share of workers in agriculture decreased from over 70 percent to less than 50 percent. We distinguish three sectors: private agriculture and nonagriculture and public nonagriculture. A growth accounting exercise reveals that the main source of growth was TFP in the private nonagricultural sector. The reallocation of labor from agriculture to nonagriculture accounted for 1.9 percent out of the 5.7 percent growth in output per labor. The reallocation of labor from the public to the private sector also accounted for a significant part of growth in the 1996-2003 period. We calibrate a general equilibrium model where the driving forces are public investment and employment, as well as sectorial TFP derived from our growth accounting exercise. The model tracks the historical employment share of agriculture and the labor productivities of all three sectors quite well.
    Keywords: China
    Date: 2006
  4. By: Alberto AMURGO PACHECO (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: The paper presents a simple theory model showing the implications of Mutual Recognition Agreements (MRAs) for excluded nations. We show that MRAs harm third country exports (e.g. North-North MRAs can harm South) because of a trade-diversion effect. We use highly dis-aggregated trade data from developed and developing nations to test the model. We find empirical evidence in support of the model; North-North MRAs harm exports from developing countries.
    Keywords: International Economics, economic integration, Trade Policy, economic development, mutual recognition agreements, MRA, standards, trade diversion, zeros, cournot, quality, inspection, Canada, Mexico, USA, EU, European Union, FTA, TBT, regionalism
    JEL: F13 F15 O12
    Date: 2006–10–26
  5. By: Jerven, Morten (London School of Economics)
    Abstract: This paper reviews the methodology and evidence of recent regression literature attributing the African growth shortfall to lack of social capital. It finds that the literature is not able to account for the actual economic growth experience, only in a significantly reformulated and misleading way. The paper considers how social capital is defined and which proxies are used in the literature, and notes considerable theoretical and empirical inconsistency. In conclusion the paper supports the contention that social capital is best understood as an outcome, and not a cause of growth. At the present state of the literature explaining economic growth the use of social capital as a determinant. has not been empirically useful nor analytically coherent.
    Keywords: Social Capital; Africa; Economic Growth
    JEL: N17 O47 Z13
    Date: 2006–11–16
  6. By: Patricia Justino (Institute of Development Studies)
    Date: 2006–07
  7. By: Benoit Dostie (IEA, HEC Montréal); Pierre Thomas Léger (IEA, HEC Montréal)
    Abstract: Several papers have tested the empirical validity of the migration models proposed by Borjas (1987) and Borjas, Bronars, and Trejo (1992). However, to our knowledge, none has been able to disentangle the separate impact of observable and unobservable individual characteristics, and their respective returns across different locations, on an individual's decision to migrate. We build a model in which individuals sort, in part, on potential earnings - where earnings across different locations are a function of both observable and unobservable characteristics. We focus on the inter-provincial migration patterns of Canadian physicians. We choose this particular group for several reasons including the fact that they are paid on a fee-for-service basis. Since wage rates are exogenous, earning differentials are driven by differences in productivity. We then estimate a mixed conditional-logit model to determine the effects of individual and destination-specific characteristics (particularly earnings differentials) on physician location decisions. We find, among other things, that high-productivity physicians (based on unobservables) are more likely to migrate to provinces where the productivity premium is greater, while low-productivity physicians are more likely to migrate to areas where the productivity premium is lower. These results are consistent with a modified Borjas model of self-selection in migration based on both unobservables and observables.
    Keywords: Migration, self-selection, earnings, longitudinal data, productivity.
    JEL: J24 J61 C23 C35
    Date: 2006–01
  8. By: Törbjörn I. Becker; Paolo Mauro
    Abstract: Output drops are usually associated with major disruption for the residents of affected countries, both directly and often through ensuing, prolonged growth slowdowns. Using a century of data, we document that output drops are more frequent in countries at a lower stage of economic development. We then turn to a more in-depth analysis of the post-1970 era, examining output drops in a large panel of countries, and systematically relating them to a variety of shocks. We compute the expected cost of each type of shock as a function of the shock's frequency, the likelihood that the shock will be associated with a drop in output, and the size of the output drop. The largest costs are associated with external financial shocks (notably, sudden stops in financial flows) for emerging markets, and with real external shocks (in particular, terms-of-trade shocks) for developing countries.
    Keywords: Growth , output collapse , external shocks , volatility , crises , Economic growth , Financial crisis , Capital flows , Emerging markets , Trade ,
    Date: 2006–07–25
  9. By: S. Nuri Erbas; Chera L. Sayers
    Abstract: Knightian uncertainty (ambiguity) implies presence of uninsurable risks. Institutional quality may be a good indicator of Knightian uncertainty. This paper correlates non-life insurance penetration in 70 countries with income level, financial sector depth, country risk, a measure of cost of insurance, and the World Bank governance indexes. We find that institutional quality-transparency-uncertainty nexus is the dominant determinant of insurability across countries, surpassing the explanatory power of income level. Institutional quality, as it reflects on the level of uncertainty, is the deeper determinant of insurability. Insurability is lower when governance is weaker.
    Keywords: Institutional quality , Knightian Uncertainty , insurability ,
    Date: 2006–08–04
  10. By: Alun H. Thomas
    Abstract: This paper evaluates whether debt relief and grants can boost social expenditures in lowincome countries. It finds that declines in debt-service help raise social expenditures, but no relationship between grants and social expenditures. Moreover, since the mid-1980s, lowincome countries have managed to fully insulate social expenditures from the effects of budgetary tightening. The magnitude of the impact of these effects on social expenditures, however, is dwarfed by the resources needed to enable these countries to reach the Millennium Development Goals.
    Keywords: debt relief , grants , social expenditures , millennium development goals , Debt relief , Social policy , Government expenditures , Millennium Development Goals ,
    Date: 2006–08–04
  11. By: Rina Bhattacharya; Dhaneshwar Ghura
    Abstract: This paper investigates the linkages between oil and growth in Congo, where there appears to be no evidence of direct spillover effects. The empirical results suggest however that political instability has a negative effect on non-oil growth, and that the presence of oil could have fueled political instability by being associated with weakening institutions. The results also show that fiscal discipline is beneficial for growth. In addition, there are strong linkages between world oil prices and the real effective exchange rate, with movements in the latter having important indirect repercussions for growth.
    Keywords: oil , conflicts , economic growth , Oil , Congo, Republic of , Economic growth , Real effective exchange rates ,
    Date: 2006–08–14
  12. By: Kenneth Rogoff; M. Ayhan Kose; Eswar Prasad; Shang-Jin Wei
    Abstract: The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels and with a variety of apparently conflicting results. For instance, there is still little robust evidence of the growth benefits of broad capital account liberalization, but a number of recent papers in the finance literature report that equity market liberalizations do significantly boost growth. Similarly, evidence based on microeconomic (firm- or industry-level) data shows some benefits of financial integration and the distortionary effects of capital controls, while the macroeconomic evidence remains inconclusive. We attempt to provide a unified conceptual framework for organizing this vast and growing literature. This framework allows us to provide a fresh synthetic perspective on the macroeconomic effects of financial globalization, in terms of both growth and volatility. Overall, our critical reading of the recent empirical literature is that it lends some qualified support to the view that developing countries can benefit from financial globalization, but with many nuances. On the other hand, there is little systematic evidence to support widely cited claims that financial globalization by itself leads to deeper and more costly developing country growth crises.
    Keywords: Capital account liberalization , financial integration , growth and volatility , financial crises , developing countries , Globalization , Capital account liberalization , Financial crisis , Developing countries ,
    Date: 2006–08–21
  13. By: Roberto Pereira Guimarães; Olaf Unteroberdoerster
    Abstract: Private sector investment has been a key source of growth in Malaysia over the last three decades, but after an unprecedented decline in the wake of the Asian crisis it has remained sluggish in recent years. Using aggregate and firm-level data, this paper aims to explain these trends and their implications for Malaysia's investment and growth outlook. Aggregate data point to sustained overinvestment in the years prior to the Asian crisis and the role of shifts in investor perceptions as important determinants of the recent decline in private investment. Meanwhile, firm-level data suggest that low profitability, along with financing constraints affecting smaller firms and those in the services sector, has also been important.
    Keywords: private investment , long- and short-run dynamics , Tobin's Q , corporate investment , panel data analysis , Private investment , Malaysia , Economic growth ,
    Date: 2006–08–23
  14. By: Andrew Swiston; Ales Bulir
    Abstract: This paper examines the factors influencing Mexico's private saving rate. Cross-country analysis finds that Mexico's private saving is somewhat higher than could be explained by its fundamentals, but lower than in the average country in the sample. This analysis suggests that Mexico's greater reliance on external saving, its relatively high population dependency ratio, and its less developed financial system have been the main factors holding back private saving. Time-series analysis finds that movements in private saving have not been associated with similar shifts in investment, as changes in public saving and external saving have tended to offset movements in private saving. This is consistent with the direction of causality being from investment to saving and suggests that policy measures should focus on creating conditions favorable to increased investment.
    Keywords: Mexico , private saving , Ricardian equivalence , Private savings , Mexico , Investment , Inflation , Taxes ,
    Date: 2006–08–25
  15. By: Todd D. Mattina
    Abstract: This paper outlines the challenge of developing an operational macroeconomic framework in Ethiopia consistent with the large envisaged scaling up of aid to achieve the Millennium Development Goals (MDGs). This paper describes an MDG scenario that addresses both microeconomic and macroeconomic constraints, such as the need to boost sustainable growth, limit Dutch disease, formulate an exit strategy from aid dependency, enhance public financial management (PFM), and expand the supply of skilled labor. The paper will argue that a carefully sequenced MDG strategy is essential so that the scaled-up aid and public spending will remain in line with Ethiopia's absorptive capacity.
    Keywords: Millennium Development Goals , Dutch desease , absorptive capacity , aid scaling up , Millennium Development Goals , Ethiopia , Development assistance ,
    Date: 2006–09–05
  16. By: Daniel Leigh; Jan-Peter Olters
    Abstract: While models based on Friedman's (1957) permanent-income hypothesis can provide oilproducing countries with long-run fiscal targets, they usually abstract from short-run costs associated with consolidation. This paper proposes a model that takes such adjustment costs (or "habits") into account. Further operational realism is added by permitting differential interest rates on sovereign debt and financial assets. The approach is applied to Gabon, where oil reserves are expected to be exhausted in 30 years. The results suggest that Gabon's current fiscal-policy stance cannot be maintained, while the presence of habits justifies smoothing the bulk of the adjustment toward the sustainable level over three to five years.
    Keywords: Sustainable fiscal policy , habit formation , permanent-income hypothesis , Gabon , Fiscal policy , Gabon , Income , Investment , Economic models ,
    Date: 2006–09–05
  17. By: Etienne B. Yehoue; Jean-François Ruhashyankiko
    Abstract: This paper asks whether corruption might be the outcome of a lack of outside options for public officials or civil servants. We propose an occupational choice model embedded in an agency framework to address the issue. We show that technology-induced private sector expansion leads to a decline in publicly supplied corruption as it provides outside options to public officials who might otherwise engage in corruption. We provide empirical evidence that strongly shows that technology-induced private sector development is associated with a decline in aggregate corruption. This suggests that the decline in publicly supplied corruption outweighs the potential increase in privately supplied corruption that could result from private sector expansion.
    Keywords: Corruption , occupational choice , technology , private sector development , Corruption , Private sector , Economic models ,
    Date: 2006–09–12
  18. By: Charles Amo Yartey
    Abstract: This paper examines the corporate financing pattern in Ghana. In particular, it investigates whether Singh's theoretically anomalous findings that developing country firms make considerably more use of external finance and new equity issues than developed country firms to finance asset growth hold in the case of Ghana. Replicating Singh's methodology, our results show that compared with corporations in advanced countries, the average listed Ghanaian firm finances its growth of total assets mainly from short-term debt. The stock market, however, is the most important source of long-term finance for listed Ghanaian firms. Overall, the evidence in this paper suggests that the stock market is a surprisingly important source of finance for funding corporate growth and that stock market development in Ghana has been important.
    Keywords: Stock markets , corporate finance , corporate growth , Ghana ,
    Date: 2006–09–19
  19. By: Elisabeth Paul; Luc Leruth
    Abstract: A well-functioning public expenditure management (PEM) system is considered a critical pillar of government efficiency, on par with a low-distortion tax system and efficient tax administration. The paper discusses PEM systems in developing countries using an analytical framework based on principal-agent theory. This simple model can be applied to various PEM systems, and allows for comparisons between institutional settings. To illustrate this, we analyze the benefits derived from the use by the Ministry of Finance (MoF) of two control instruments; ex post audits and ex ante controls, and assess their value in terms of their ability to deter cheating. We derive a set of possible "control regimes" which can be used by the MoF. Although we illustrate the use of the model using developing countries, it is also relevant to developed economies.
    Keywords: Public expenditure management , principal-agent theory , developing countries ,
    Date: 2006–09–22
  20. By: Thomson Fontaine; Jean-Claude Nachega
    Abstract: This paper investigates empirically the sources of aggregate output growth and the determinants of total factor productivity (TFP) in Niger between 1963 and 2003. A growth accounting analysis indicates that the erosion in output per capita over the sample period is due to the negative growth of both TFP and physical capital per capita. Sound macroeconomic policies, supported by official development assistance and structural reforms, are found to be key to raising TFP growth.
    Keywords: Niger , sources of growth , total factor productivity , cointegration , Economic growth , Niger ,
    Date: 2006–09–27
  21. By: Amadou N. R. Sy
    Abstract: This study assesses the degree of financial integration in the West African Economic and Monetary Union (WAEMU). The structure of the financial sector and its institutional arrangements indicate that financial integration is well advanced in some aspects. Common and foreign ownership of banks is very high and cross-border transactions are frequent in the government securities markets. Common institutions help achieve a high degree of similarity of rules. There is nonetheless scope for further financial integration as indicated by persistent deviations from the law of one price, limited cross-border bank transactions, and differences in treatment. Policy measures could therefore help achieve greater financial convergence.
    Keywords: BCEAO , financial integration , Sigma- and Beta- Convergence , WAEMU ,
    Date: 2006–10–04
  22. By: Ludvig Söderling; Domenico Fanizza
    Abstract: Many countries in the Middle East and North Africa (MENA) region have recently experienced surges in money growth that apparently have not generated significant inflationary pressures. Moreover, several MENA countries have followed monetary policy rules that according to standard monetary theory should have produced macroeconomic instability and possibly hyperinflation. We argue that the Fiscal Theory of the Price Level could usefully provide insights on these developments. Our main conclusion is that a sound fiscal position constitutes a necessary condition for macroeconomic stability whereas "sound" monetary policy is neither sufficient nor necessary. Hence, fiscal policy and public debt deserve particular attention for maintaining macroeconomic stability, by and large consistent with Fund policy advice to MENA countries.
    Keywords: Fiscal theory of the price level , Algeria , Egypt , Lebanon , Morocco , Tunisia ,
    Date: 2006–10–06
  23. By: Steven Vincent Dunaway; Lamin Leigh; Xiangming Li
    Abstract: Increased attention is being paid to assessments of the actual values of countries' real exchange rates relative to their "equilibrium" values as suggested by "fundamental" determining factors. This paper assesses the robustness of alternative approaches and models commonly used to derive equilibrium real exchange rate estimates. Using China's currency to illustrate this analysis, the variance in estimates raises serious questions regarding how robust the results are. The basic conclusion from the tests used here is that, at least for China, small changes in model specifications, explanatory variable definitions, and time periods used in estimation can lead to very substantial differences in equilibrium real exchange rate estimates. Thus, such estimates should be treated with great caution.
    Keywords: China's equilibrium real exchange rate , robustness tests ,
    Date: 2006–10–13
  24. By: Junko Koeda
    Abstract: The paper presents a theoretical model to explain how debt overhang is generated in low-income countries and discusses its implications for debt relief. The paper indicates that the extent of debt overhang, and the effectiveness of debt relief, would depend on a recipient country's initial economic conditions and level of total factor productivity.
    Keywords: Debt overhang , debt relief , participation constraint , low-income countries , dynamic programming ,
    Date: 2006–10–16
  25. By: Rodolphe Blavy
    Abstract: The paper analyzes Jamaica's experience of low growth despite consistently high investment. Cross-country analysis provides evidence of a significant and negative relationship between total public debt and productivity growth. Looking at the specific channels through which high debt affects productivity growth and the allocation of resources in Jamaica, the study finds that high public debt has been associated with macroeconomic uncertainty and an output structure that relied excessively on a few maturing sectors with limited scope for productivity growth. Furthermore, public investment has been crowded out by debt service, further adversely affecting productivity growth.
    Keywords: Jamaica , growth , external debt , public debt , growth accounting , productivity ,
    Date: 2006–10–26
  26. By: Kangni Kpodar; Moataz El-Said; David Coady; Paulo A. Medas; David Newhouse; Robert Gillingham
    Abstract: With the recent jump in world oil prices, the issue of petroleum product pricing has become increasingly important in developing countries. Reflecting a reluctance of many governments to pass these price increases onto energy users, energy price subsidies are absorbing an increasing share of scarce public resources. This paper identifies the issues that need to be discussed when analyzing the fiscal and social costs of fuel subsidies. Using examples from analyses recently undertaken for five countries, it also identifies the magnitude of consumer subsidies and their fiscal implications. The results of the analysis show that-in all of these countries-energy subsidies have significant social and fiscal costs and are badly targeted.
    Keywords: Energy prices , subsidies , welfare distribution , household survey data ,
    Date: 2006–11–03
  27. By: Nolvia N. Saca; Luis René Cáceres
    Abstract: Family remittances are important for El Salvador's economy. This paper analyzes the impact of remittances on El Salvador's economy and the spillover effects on the other Central American countries. A vector autoregression (VAR) model is formulated, consisting of real and monetary variables. The results suggest that in, El Salvador, remittances lead to decreases in economic activity, international reserves, and money supply and increases in the interest rate, imports, and consumer prices. This underscores the need for reorienting economic policy in El Salvador to promote the use of remittances in capital formation activities to maximize the benefit of remittances.
    Keywords: Remittances , mechanism of transmission ,
    Date: 2006–11–08
  28. By: Dong, Fengxia; Fuller, Frank H.
    Abstract: China’s economic reforms, which began in 1978, resulted in remarkable income growth, and urban Chinese consumers have responded by dramatically increasing their consumption of meat, other livestock products, and fruits and by decreasing consumption of grain-based foods. Economic prosperity, a growing openness to international markets, and domestic policy reforms have changed the food marketing environment for Chinese consumers and may have contributed to shifts in consumer preferences. The objective of this paper is to uncover evidence of structural change in food consumption among urban residents in China. Both parametric and nonparametric methods are used to test for structural change in aggregate household data from 1981 to 2004. The tests provided a reasonably clear picture of changing food consumption over the study period.
    Keywords: China, demand models, food consumption, nonparametric analysis, parametric tests, structural change.
    Date: 2006–11–15
  29. By: Gerald Makepeace (Cardiff Business School and IZA Bonn); Sarmistha Pal (Brunel University)
    Abstract: Given the intrinsically sequential nature of child birth, timing of a child’s birth has consequences not only for itself, but also for its older and younger siblings. The paper argues that prior and posterior spacing between consecutive siblings are thus important measures of intensity of sibling competition for limited parental resources. While the available estimates of child mortality tend to ignore the endogeneity of sibling composition, we use a correlated recursive model of prior and posterior spacing and child mortality to correct it. There is evidence that uncorrected estimates underestimate the effects of prior and posterior spacing on child mortality.
    Keywords: sibling rivalry, birth spacing, endogeneity bias
    JEL: D13 I12 O15
    Date: 2006–10
  30. By: Eva Rytter Sunesen (Department of Economics, University of Copenhagen)
    Abstract: This paper offers two refinements of the traditional risk measure based on the volatility of growth. First, we condition GDP growth on structural characteristics of the host country that move only slowly and therefore can be partly predicted by an investor. Second, we adjust conditional risk for the systematic components due to the global and regional interdependence between alternative investment locations. The decomposition of conditional risk into its systematic and idiosyncratic components reveals that not only are African countries on average characterised by a larger conditional risk than Asian and Latin American countries, but the idiosyncratic risk factor also represents a larger share than in other developing countries. As a final contribution, we search the empirical literature on foreign direct investment and risk in order to determine which of the suggested risk measures provide the best description of idiosyncratic risk. Using a general-to-specific methodology, we find that both economic and political risk factors are important elements in the investment decision. We also find that commercial risk factors applied in the literature so far are poor determinants of idiosyncratic risk.
    Keywords: foreign direct investment; global and regional business cycles; risk decomposition
    JEL: E32 F21 O16 C23
    Date: 2006–10
  31. By: Jeffery Carpenter; Juan Camilo Cardenas
    Abstract: Explanations of poverty, growth and development more generally depend on the assumptions made about individual preferences and the willingness to engage in strategic behaviour. Economic experiments, especially those conducted in the field, have begun to paint a picture of economic agents in developing communities that is at some variance from the traditional portrait. We review this growing literature with an eye towards preference-related experiments conducted in the field. We rely on these studies, in addition to our own experiences in the field, to offer lessons on what development economists might learn from experiments. We conclude by sharing our thoughts on how to conduct experiments in the field, and then offer a few ideas for future research.
    Date: 2006
  32. By: Antony Chapoto; T.S. Jayne (Department of Agricultural Economics, Michigan State University)
    Abstract: Studies conducted in Sub-Saharan Africa during the 1980s generally found a positive correlation between socioeconomic characteristics such as education, income, and wealth and subsequent contraction of HIV. However, as the disease has progressed, the relationship between socioeconomic status and HIV contraction may have changed in many areas of Sub Saharan Africa, although there is little hard evidence to support this. This paper seeks to determine the ex ante socioeconomic characteristics of individuals who die between the ages of 15 to 59 years of age, using nationally representative panel data on 18,821 individuals surveyed in 2001 and 2004 in rural Zambia. The findings from this study will help policy-makers and development agencies better understand current transmission pathways of HIV/AIDS, which should help in the formulation of AIDS prevention and mitigation strategies.
    Keywords: food security, food policy, HIV/AIDS, socioeconomic status, Zambia
    JEL: Q18
    Date: 2005
  33. By: Antony Chapoto; T.S. Jayne (Department of Agricultural Economics, Michigan State University)
    Abstract: Using comprehensive rural farm household longitudinal data from Zambia, this paper measures the impacts of prime-age (PA) adult morbidity and mortality on crop production and cropping patterns, household size, livestock and non-farm income. The paper adopts and extends the counterfactual (difference-in-difference) approach by controlling for initial (pre-death) household conditions that may influence the severity of the impacts of adult mortality. In particular, the study controls for initial poverty status, landholding size, effective dependency ratios, and the gender and position of the deceased person. Moreover, the possibility that PA death in the household is endogenous is taken into account by conceptualizing the measurement of effects of prime-age adult death on rural agricultural households’ welfare as a two stage process: first, by examining the characteristics of afflicted households; and second, conditional on being afflicted, determining the effects of morbidity and mortality on indicators of household welfare both prior to and after mortality. The findings from this study provide important information that may assist governments, donors, and development planners in developing specific policies or interventions to mitigate the impacts of the disease on vulnerable households.
    Keywords: food security, food policy, HIV/AIDS, prime-age mortality, endogeneity, rural livelihoods
    JEL: Q18
    Date: 2005
  34. By: David Tschirley (Department of Agricultural Economics, Michigan State University); Colin Poulton; Duncan Boughton
    Abstract: With cotton sector reform in much of SSA a decade old, it is now possible to review the empirical record and begin drawing lessons from experience. This paper assesses the record of five countries in southern and eastern Africa: Tanzania, Uganda, Zimbabwe, Zambia, and Mozambique. In four of these countries, cotton is the first- or second most important smallholder cash crop; only in Uganda does it substantially lag other cash crops. The focus on the course of reform in each – initial conditions, key elements of the reform, and institutional response to it – and attempt to draw lessons for policy makers, donors, and researchers. the paper begins by outlining the challenges faced by cotton production and marketing systems. Next a review the range of pre-reform institutional responses to these challenges, before discussing the reform process in each country and reviewing the evolving institutional response to it. Finally, assess the performance that each country has achieved and attempt to relate this to its initial conditions and subsequent institutional responses, and closing by outlining lessons for strategies to improve cotton systems in SSA.
    Keywords: food security, food policy, cotton sector reform, Tanzania, Uganda, Zimbabwe, Zambia, Mozambique
    JEL: Q18
    Date: 2006
  35. By: Paul Gamba (Department of Agricultural Economics, Michigan State University); Elliot Mghenyi
    Abstract: The objectives of this paper are: measure the prevalence of rural poverty in 1997 and 2000, based on the nationwide Tegemeo survey; categorize households according to whether they were above the poverty line in both 1997 and 2000, entered into poverty or exited from poverty between 1997 and 2000, or were above the poverty line in both years; identifies the household-level and community-level factors associated with rural poverty through econometric analysis; and the implications of these results for the design of appropriate poverty reduction strategies. Such analysis is intended to guide donor programs and interventions designed to attack the roots of chronic poverty.
    Keywords: food security, food policy, Kenya, rural poverty
    JEL: Q18
    Date: 2005
  36. By: Milu Muyanga (Department of Agricultural Economics, Michigan State University); T.S. Jayne
    Abstract: The primary objective of this study is to assess the food crops and livestock extension service provision in Kenya with a broad aim of understanding what exists, what works and why. It seeks to expand knowledge on the nature of the existing extension providers, their characteristics, approaches employed and the challenges they face. Based on success cases, an attempt is made to delineate the fundamentals of ideal extension service system and the role of the government in such a scenario, with the aim of informing the implementation of the new National Agricultural Sector Extension Policy (NASEP).
    Keywords: food security, food policy, extension services, privatization, policy reform, Kenya
    JEL: Q18
    Date: 2006
  37. By: Andrew McKay; Scott Loveridge (Department of Agricultural Economics, Michigan State University)
    Abstract: A brief introduction to Rwanda, its recent history and agricultural policies provides context for the reader. This then leads into a brief discussion of rural livelihood strategies. Next is basic documentation of income and expenditure surveys conducted prior to the war (1990) and after the war (2000). Then patterns are compared in household strategies in a time before the disruptions to a time of relative calm after the major disruptions.
    Keywords: food security, food policy, Rwanda, household income, nutrition
    JEL: Q18
    Date: 2005
  38. By: Cynthia Donovan (Department of Agricultural Economics, Michigan State University); Linda Bailey
    Abstract: This research seeks to evaluate the agricultural strategies used by households in dealing with morbidity and mortality, and to determine differences in crop production between households that have experienced a recent adult illness or death due to illness compared to those without adult morbidity or mortality.
    Keywords: food security, food policy, Rwanda. morbity, mortality
    JEL: Q18
    Date: 2005
  39. By: Antony Chapoto (Department of Agricultural Economics, Michigan State University); T.S. Jayne; N. Mason
    Abstract: Beyond the obvious catastrophic effects of the HIV/AIDS pandemic on mortality, demographic changes, and the suffering of individuals and their families, we are still only learning about the complex longer-term effects of the pandemic on poverty and vulnerability. For example, the HIV/AIDS pandemic has substantially increased the number of widow-headed households in Africa. A huge number of conceptual and qualitative studies highlight gender inequalities in property rights, and the difficulties that widows and their dependents face in retaining access to land after the death of their husbands. HIV/AIDS has undoubtedly exacerbated such problems. However, there remains limited quantitative evidence using representative survey data on the extent to which widows lose their rights to land after the death of their husbands, whether they lose all or part of the land they were formerly controlling, and whether there are certain characteristics of the widow, her deceased husband, and/or her household that influence the likelihood of her losing land rights. It is highly possible that government programs designed to provide a safety net to vulnerable groups may not reach their potential if they ignore gender dimensions of local institutions and property rights.
    Keywords: food security, food policy, HIV/AIDS, Zambia, land
    JEL: Q18
    Date: 2006
  40. By: Joshua S. Graff Zivin; Harsha Thirumurthy; Markus Goldstein
    Abstract: The provision of life-saving antiretroviral (ARV) treatment has emerged as a key component of the global response to HIV/AIDS, but very little is known about the impact of this intervention on the welfare of children in the households of treated persons. We estimate the impact of ARV treatment on children’s schooling and nutrition outcomes using longitudinal household survey data collected in collaboration with a treatment program in western Kenya. We find that children’s weekly hours of school attendance increase by over 20 percent within six months after treatment is initiated for the adult household member. For boys in treatment households, these increases closely follow their reduced market labor supply. Similarly, young children’s short-term nutritional status—as measured by their weight-for-height Z-score—also improves dramatically. We argue that these treatment effects will be considerably larger when compared to the counterfactual scenario of no ARV treatment. The results provide evidence on how intrahousehold resource allocation is altered in response to significant health improvements. Since the improvements in children’s schooling and nutrition at these critical early ages will affect their socio-economic outcomes in adulthood, the widespread provision of ARV treatment is likely to generate significant long-run macroeconomic benefits.
    JEL: I1 I2 O12 O15
    Date: 2006–11
  41. By: Peter Blair Henry
    Abstract: Writings on the macroeconomic impact of capital account liberalization find few, if any, robust effects of liberalization on real variables. In contrast to the prevailing wisdom, I argue that the textbook theory of liberalization holds up quite well to a critical reading of this literature. The lion's share of papers that find no effect of liberalization on real variables tell us nothing about the empirical validity of the theory, because they do not really test it. This paper explains why it is that most studies do not really address the theory they set out to test. It also discusses what is necessary to test the theory and examines papers that have done so. Studies that actually test the theory show that liberalization has significant effects on the cost of capital, investment, and economic growth.
    JEL: E6 F3 F4 G15 O16 G12 G14 G18 G3 G31 G38 O11 O16 O19 O24 O4
    Date: 2006–11
  42. By: Mohammad Niaz Asadullah (SKOPE, Department of Economics, University of Oxford)
    Abstract: This paper documents the regional divide in educational facilities between East Pakistan (now Bangladesh) and West Pakistan between 1947 and 1971. During this period, the total number of primary schools in East Pakistan declined, leading to overcrowding of existing schools and classrooms. On the other hand, despite being endowed with fewer schools, West Pakistan surpassed East Pakistan in the total number of primary schools, and in teacher–student ratios. This evident educational disparity, we argue, cannot be attributed to regional differences in school age population, school types, the quality and unit cost of schooling. Rather, this problem is examined in terms of the hypothesis of ‘discrimination’ as an alternate explanation.
    JEL: I20 N35 N95
    Date: 2006–11–17
  43. By: Hongbin Li; Junsen Zhang; Jie Zhang (MRG - School of Economics, The University of Queensland)
    Abstract: While earlier empirical studies found a negative saving effect of old-age dependency rates without considering longevity, recent studies have found that longevity has a positive effect on growth without considering old-age dependency rates. In this paper, we first justify the related yet independent roles of longevity and old-age dependency rates in determining saving and growth by using a growth model that encompasses both neoclassical and endogenous growth models as special cases. Using panel data from a recent World Bank data set, we then find that the longevity effect is positive and the dependency effect is negative in savings and investment regressions. The estimates indicate that the differences in the demographic variables across countries or over time can well explain the differences in aggregate savings rates. We also find that both population age structure and life expectancy are important contributing factors to growth.
  44. By: Elena D'Agosto (Economics Department - University of Rome "Tor Vergata"); Nazaria Solferino (Economics Department - University of Milan "Bicocca"); Giovanni Tria (Economics Department - University of Rome "Tor Vergata")
    Abstract: This paper analyses the link between FDI inflows and migration waves from developing countries. In addition, it investigates mechanisms through which this link works. Empirical results indicate that FDI can be seen as substitutes of migration through direct and indirect labour demand. However, the paper demonstrates that a positive relationship (complementarity effect) between FDI and migration flows takes place. In longi-tudinal analysis results indicate that the complementarity effect prevails. In cross section analysis, estimating a two equation models, we find that a substitutability effect is at work through the impact of FDI on human capital accumulation but the direct complementarity effect also prevails.
    Keywords: International Migration, Human Capital, FDI
    JEL: F22 J24 F21
    Date: 2006–10–25
  45. By: Elizabeth Stanton
    Abstract: Human Development Index (HDI) is a country-level measure of social welfare based on national values for average life expectancy, rates of adult literacy and school enrollment, and gross domestic product (GDP) per capita. Since HDI is based entirely on national averages it can provide only limited information about distribution within countries. The distribution of access to key resources is an important determinant of the affect of health, education and income on both individual well-being and on the aggregate well-being of a population as a whole. This paper makes a case for the importance of inequality to measuring social welfare; presents an original alternative to HDI that includes the distribution of health, education, and income in each country; and reports the results of this inequality-adjusted HDI for 46 countries.
    Keywords: Human Development, Inequality, Social Welfare, HDI
    JEL: I H O
    Date: 2006
  46. By: Chaudhuri, Shubham; Ravallion, Martin
    Abstract: The paper examines the ways in which recent economic growth has been uneven in China and India and what this has meant for inequality and poverty. Drawing on analyses based on existing household survey data and aggregate data from official sources, the authors show that growth has indeed been uneven-geographically, sectorally, and at the household level-and that this has meant uneven progress against poverty, less poverty reduction than might have been achieved had growth been more balanced, and an increase in income inequality. The paper then examines why growth was uneven and why this should be of concern. The discussion is structured around the idea that there are both " good " and " bad " inequalities-drivers and dimensions of inequality and uneven growth that are good or bad in terms of what they imply for both equity and long-term growth and development. The authors argue that the development paths of both China and India have been influenced by, and have generated, both types of inequalities and that while good inequalities-most notably those that reflect the role of economic incentives-have been critical to the growth experience thus far, there is a risk that bad inequalities-those that prevent individuals from connecting to markets and limit investment and accumulation of human capital and physical capital-may undermine the sustainability of growth in the coming years. The authors argue that policies are needed that preserve the good inequalities-continued incentives for innovation and investment-but reduce the scope for bad ones, notably through investments in human capital and rural infrastructure that help the poor connect to markets.
    Keywords: Rural Poverty Reduction,Pro-Poor Growth and Inequality,Inequality,Population Policies
    Date: 2006–11–01
  47. By: Haltiwanger, John; Scarpetta, Stefano; Schweiger, Helena
    Abstract: This paper reviews the process of job creation and destruction across a sample of 16 industrial and emerging economies over the past decade. It exploits a harmonized firm-level data set drawn from business registers and enterprise census data. The paper assesses the importance of technological factors that characterize different industries in explaining cross-country differences in job flows. It shows that industry effects play an important role in shaping job flows at the aggregate level. Even more importantly, differences in the size composition of firms-within each industry-explain a large fraction of the overall variability in job creation and destruction. However, even after controlling for industry/technology and size factors there remain significant differences in job flows across countries that could reflect differences in business environment conditions. The authors look at one factor shaping the business environment, namely, regulations on hiring and firing of workers. To minimize possible endogeneity and omitted variable problems associated with cross-country regressions, we use a difference-in-difference approach. The empirical results suggest that stringent hiring and firing costs reduce job turnover, especially in those industries that require more frequent labor adjustment. Regulations also distort the patterns of industry/size flows. Within each industry, medium and large firms are more severely affected by stringent labor regulations, while small firms are less affected, probably because they are partially exempted from such regulations or can more easily circumvent them.
    Keywords: Labor Markets,Small Scale Enterprise,Microfinance,Inequality,Water and Industry
    Date: 2006–11–01
  48. By: Fares, Jean; Montenegro, Claudio E.; Orazem, Peter F.
    Abstract: This paper uses a new standardized micro database for a large set of developing countries to (1) describe the patterns of labor market outcomes for youth, and (2) explain the contributions of supply and demand factors to youth outcomes. The paper shows that youth face various difficulties in transitioning to work. This is reflected in their relatively higher unemployment rate, higher incidence of low paying or unpaid work, and a large share of youth who are neither working nor in school. This is especially true for young girls who are found outside the labor market, some engaged in home production. Finally, the paper also finds that cross-country estimates show that changes in the youth relative cohort size is unlikely to have a large effect on how youth are faring in the labor market.
    Keywords: Labor Markets,Youth and Governance,Adolescent Health,Population Policies,Children and Youth
    Date: 2006–11–01
  49. By: Susan Steiner (GIGA Institute for Ibero-American Studies)
    Abstract: It is often claimed that decentralisation is effective for the reduction of poverty due to in-herent opportunities for higher popular participation and increased efficiency in public service delivery. This paper is a qualitative assessment of the potential of the Ugandan decentralisation reform for poverty alleviation. The Ugandan government initiated an am-bitious decentralisation reform in 1992, which represents an example of full-fledged devo-lution with the transfer of far-reaching responsibilities to local governments. However, several shortcomings, such as low levels of accountability, insufficient human and finan-cial resources, corruption, patronage, and central resistance to decentralisation, constrain the proper implementation of the reform, putting improvements in participation and effi-ciency at risk and ultimately jeopardising the intended impact on poverty.
    Keywords: Decentralisation, Uganda, poverty reduction, participation, efficiency
    Date: 2006–11
  50. By: Christian von Soest (GIGA Institute of African Affairs)
    Abstract: Following the neopatrimonialism paradigm, it can be hypothesised that in African states informal politics of the rulers infringe on the collection of taxes and in turn reduce state revenues. This article tests this proposition for the case of Zambia. The main finding is that there is no linear correlation between a neopatrimonial system and the collection of taxes. Neopatrimonial continuity in the country is evidenced by three factors; the concentration of political power, the award of personal favours and the misuse of state resources. De-spite this continuity, the revenue performance has increased considerably with the crea-tion of the semi-autonomous Zambia Revenue Authority. This demonstrates that the effect of neopatrimonialism on public policy in the African state is highly context-specific and dependent on the interaction with additional variables. Donor pressure has been the most important in the Zambian case. In order to apply neopatrimonialism for further empirical work on public policy in the African state, these additional variables have to be incorpo-rated into the analysis.
    Keywords: Neopatrimonialism, collection of revenue, tax systems, Zambia, African state, donors
    Date: 2006–11
  51. By: Bekele Hundie (Humboldt University of Berlin, Institute of Agricultural Economics and Social Sciences Division of Resource Economics, Luisenstr. 56, 10099, Berlin)
    Abstract: This study aims at explaining property right changes in selected areas of Afar region in Ethiopia. Based on primary and secondary data, explanations are given on the existing types of land use arrangements and how the traditional communal rights of pastoralists have been changing. Both communal rights and individualized rights exist the latter being introduced with the establishment of commercial farms. The state is identified as one driving force behind property right changes especially in one study site (Ambash), which is suitable for irrigated agriculture whereas its direct intervention is minimal in other sites. The coercive interventions started in 1960s have had detrimental impacts on the livelihoods of pastoral households. In addition to the state as a change agent, natural as well as socioeconomic challenges are important in explaining the current changes in land use arrangements.
    Keywords: property rights, institutional change, pastoralists, state intervention, Afar, Ethiopia
    JEL: Q15 P26 P48
    Date: 2006–07

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