nep-dev New Economics Papers
on Development
Issue of 2006‒12‒09
nineteen papers chosen by
Jeong-Joon Lee
Towson University

  1. Human Capital, Fertility and Growth By Oded Galor
  2. Lost Decades: Lessons from Post-Independence Latin America for Today's Africa By Bates, Robert H; Coatsworth, John H; Williamson, Jeffrey G
  3. Origins and Consequences of Child Labour Restrictions: A Macroeconomic Perspective By Doepke, Matthias; Krüger, Dirk
  4. Interpersonal, Intertemporal and Spatial Variation in Risk Perceptions: Evidence from East Africa By Cheryl Doss; John McPeak; Christopher Barrett
  5. Poverty Analysis Using an International Cross-Country Demand System By Cranfield, John; Preckel, Paul; Hertel, Thomas
  6. Fiscal Implications of Aids in South Africa By Johansson, Lars
  7. Volatility of Development Aid: From the Frying Pan Into the Fire? By Aleš Bulir; A. Javier Hamann
  8. Villages where China’s Ethnic Minorities Live By Bjorn Gustafsson; Ding Sai
  9. Intergenerational Transmission of Abilities and Self Selection of Mexican Immigrants By Vincenzo Caponi
  10. Brain Drain and Inequality Across Nations By Frédéric Docquier
  11. Heterogeneous Human Capital and Migration: Who Migrates from Mexico to the US? By Vincenzo Caponi
  12. The Babeldaob Road: The Impact of Road Construction on Rural Labor Force Outcomes in the Republic of Palau By Randall Akee
  13. The Long Run Health and Economic Consequences of Famine on Survivors: Evidence from China’s Great Famine By Xin Meng; Nancy Qian
  14. On Defining and Measuring the Informal Sector By Andrew Henley; G. Reza Arabsheibani; Francisco G. Carneiro
  15. Does the shadow economy raise observed aggregate efficiency? A cross-country comparison By Pierre-Guillaume Méon; Friedrich G. Schneider; Laurent Weill; Axel Dreher
  16. The Origins of Governments: From Amorphy to Anarchy and Hierarchy By Matthew Baker; Erwin Bulte; Jacob Weisdorf
  17. Functional and structural complementarities of banks and microbanks in L.D.C's By SODOKIN, Koffi
  18. Poverty and Inequality Nexus: Illustrations with Nigerian Data By Abdelkrim Araar; Awoyemi Taiwo Timothy
  19. Growth with Equity is Better for the Poor By Sami Bibi

  1. By: Oded Galor
    Date: 2006
  2. By: Bates, Robert H; Coatsworth, John H; Williamson, Jeffrey G
    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.
    Keywords: Africa; development; economic history; Latin America; lost decades
    JEL: N0 O10 O54 O55
    Date: 2006–11
  3. By: Doepke, Matthias; Krüger, Dirk
    Abstract: In this paper we investigate the positive and normative consequences of child-labour restrictions for economic aggregates and welfare. We argue that even though the laissez-faire equilibrium may be inefficient, there are usually better policies to cure these inefficiencies than the imposition of a child-labour ban. Given this finding, we investigate the potential political-economic reasons behind the emergence and persistence of child-labour legislation. Our investigation is based on a structural dynamic general equilibrium model that provides a coherent and uniform framework for our analysis.
    Keywords: child labour; inequality; political economy; welfare
    JEL: J40 J82 O11 O40
    Date: 2006–11
  4. By: Cheryl Doss (Yale University); John McPeak (Syracuse University); Christopher Barrett (Cornell University)
    Abstract: This study investigates variation over time, space and household and individual characteristics in how people perceive different risks. Using original data from the arid and semi-arid lands of east Africa, we explore which risks concern individuals and how they assess their relative level of concern about these identified risks. Because these assessments were gathered for multiple time periods, sites, households and individuals within households, we are able to identify the degree to which risk perceptions vary across time, across communities, across households within a community, and across individuals within a household. We find the primary determinants of risk rankings to be changing community level variables over time, with household specific and individual specific variables exhibiting much less influence. This suggests that community based planning and monitoring of development efforts that address risk exposure should be prioritized. We also find that individuals throughout this area are most concerned about food security overall, so that development efforts that directly address this problem should be given the highest priority.
    Keywords: risk ranking, risk perceptions, intrahousehold, Africa, Kenya, Ethiopia
    JEL: O12 D80 Q0
    Date: 2006–11
  5. By: Cranfield, John; Preckel, Paul; Hertel, Thomas
    Abstract: This paper proposes a new method for ex ante analysis of the poverty impacts arising from policy reforms. Three innovations underlie this approach. The first is the estimation of a global demand system using a combination of micro-data from household surveys, and macro-data from the International Comparisons Project. The second innovation relates to a methodology for post-estimation calibration of the global demand system, giving rise to country specific demand systems and an associated expenditure function which, when aggregated across the expenditure distribution, reproduce observed per capita budget shares exactly. The third innovation is use of the calibrated expenditure function to calculate the change in the head-count of poverty, poverty gap and squared poverty gap arising from policy reforms, where the poverty measures are derived using a unique poverty level of utility, rather than an income or expenditure-based measure. We employ these techniques with a demand system for food, other non-durables and services estimated using a combination of 1996 ICP data set and national expenditure distribution data. To illustrate the usefulness of these calibrated models for policy analysis, we assess the impacts of an assumed five percent food price rise as might be following a multilateral trade agreement.
    Date: 2006
  6. By: Johansson, Lars (Dept. of Economics, Stockholm University)
    Abstract: The number of people living with HIV is alarmingly large. In addition to the incomprehensible human suffering of those directly affected, AIDS also has large, negative economic effects. In this paper, I study the fiscal implications of the HIV/AIDS epidemic in South Africa in a standard neo-classical growth model. I find that an antiretroviral program is to a large extent self financing. Improvement in dependency ratios and health care cost savings would pay for Rand 144 billion of a full epidemiological intervention. The indirect effect through the changing demographic structure will be more important than the direct health care cost saving effect. I also explore different taxation policies. The households would be willing to sacrifice an amount equal to 12% of GDP in the first period to be subject to an optimal (Ramsey) fiscal policy rather than an alternative fixed debt to GDP policy. The optimal policy implies an increase in government debt during the peak of the epidemic.
    Keywords: AIDS; Fiscal Impact; Economic Impact; Fiscal Policy; Taxation
    JEL: E17 E21 E23 E62 H21 H23
    Date: 2006–12–04
  7. By: Aleš Bulir; A. Javier Hamann
    Abstract: The positive impact of foreign aid is limited by the erratic behavior of aid flows. The introduction in 1999 of various initiatives anchored in Poverty Reduction Strategy Papers (PRSPs) which were aimed at strengthening coordination among donors, improving the design of financial support programs, and improving domestic records of policy implementation should have led to an improvement in the time series properties of aid flows. We find no evidence of any fundamental changes in the way aid has been delivered in the past five years. If anything, aid volatility has worsened somewhat and the information value of long-term lending commitments has declined. We take these results to mean that the main causes of the volatility and unpredictability of aid, and the broader issue of macroeconomic instability in low-income countries, have not been addressed in a systematic manner by the donor community.
    Keywords: Development assistance , Financial programs , Low income developing countries ,
    Date: 2006–03–21
  8. By: Bjorn Gustafsson (University of Göteborg and IZA Bonn); Ding Sai (Chinese Academy of Social Sciences)
    Abstract: This paper investigates how ethnic minorities in rural China are faring compared with the ethnic majority. The village is the unit of analysis and large surveys for 2002 are used. Minority villages in northeast China are found to have a somewhat better economic situation than the average majority village, but minority villages in the southwest are clearly faring worse. Industrialisation, inputs in agricultural production, stock of human capital of the labour force, wage level on the local labour market as well as indicators of path dependency are all found to affect the economic situation of a village. Location is the single most important circumstance working against a favourable economic situation for minority villages in the north- and particularly the southwest. Low village income results in long-distance migration for many ethnic minorities, but for some minorities their ethnicity hinders migration.
    Keywords: China, ethnic minorities, income, wealth, migration
    JEL: J15 O12 P32
    Date: 2006–11
  9. By: Vincenzo Caponi (Ryerson University and IZA Bonn)
    Abstract: Building on Borjas (1993) I develop an intergenerational model of self-selection of migration and education that allows for a complex selection mechanism. In particular, it allows for the possibility that agents are selected differently depending on the schooling level they choose. As in Mayer (2005) I assume that agents are endowed with two abilities, manual and intellectual, and use the intergenerational structure of the model to infer potential earnings of a person for different levels of education and in different countries. This makes it possible to quantify the self selection bias of estimates of the return to education and migration. The model is estimated using data on Mexicans in the US from the CPS and on Mexicans residents in Mexico from the Mexican census. The findings are that there is a significant loss of human capital faced by immigrants that is not transmitted to their children. While immigrants are observed to earn less because they find it difficult to adapt their skills to the host country, their children earn more because they can inherit all the abilities of their parents, including that part that could not be used for producing earnings. Moreover, in the case of immigrants, parents with larger amounts of intellectual ability migrate more and tend to choose to remain high school educated. However, they migrate with the expectation of their children becoming college educated. Therefore, measures that rely on the earnings performance and educational attainment of immigrants underestimate the amount of human capital they bring into the host country.
    Keywords: international migration, human capital, self selection, intergenerational mobility
    JEL: F22 J24 J61
    Date: 2006–11
  10. By: Frédéric Docquier (FNRS, IRES, Université Catholique de Louvain and IZA Bonn)
    Abstract: Is the brain drain a curse or a boon for developing countries? This paper reviews what is known to date about the magnitude of the brain drain from developing to developed countries, its determinants and the way it affects the well-being of those left behind. First, I present alternative measures of the brain drain and characterize its evolution over the last 25 years. Then, I review the theoretical and empirical literature. Although the brain drain is a major source of concern for origin countries, it also induces positive effects through various channels such as remittances, return migration, diaspora externalities, quality of governance and increasing return to education. Whilst many scientists and international institutions praise the unambiguous benefits of unskilled migration for developing countries, my analysis suggests that a limited but positive skilled emigration rate (say between 5 and 10 percent) can also be good for development. Nevertheless, the current spatial distribution of the brain drain is such that many poor countries are well above this level, such as sub-Saharan African and Central American countries.
    Keywords: F22, J61
    Date: 2006–11
  11. By: Vincenzo Caponi (Ryerson University and IZA Bonn)
    Abstract: In this paper I document the fact that the relationship between human capital, as measured by education, and migration choices among Mexicans is U-shaped: the highest and lowest educated tend to migrate more than the middle educated. I provide an explanation for the Ushaped relationship based on the interaction of two forces. On the one hand, there is a loss of human capital faced by emigrants, due to imperfect transferability, that is progressive with education and causes the negative relationship. On the other hand, the altruism towards future generations and the transmission of human capital from one generation to the next drives the positive relationship. I calibrate the model to match relevant moments from the Mexican and US Censuses, and use the calibrated model for policy evaluation. I evaluate the long run effect of the Progresa policy on education and migration. I show that, by giving a monetary contribution to poor families that send their children to school at lower grades, the Mexican government will improve the educational distribution of future generations and this in turn will shift the composition of immigrants towards the higher educated. Overall it will lower emigration from Mexico attenuating the pressure, especially of illegal immigrants.
    Keywords: migration, Mexico, heterogeneous human capital, Progresa
    JEL: F22 J61 O15
    Date: 2006–11
  12. By: Randall Akee (IZA Bonn and Harvard University)
    Abstract: This research examines the impact of road construction on rural labor force outcomes in a developing country. A new road built in the Republic of Palau links formerly inaccessible rural areas to more urban wage sector employment. We use two censuses conducted five years apart which perfectly bracket the road construction period. The data allow us to identify households that moved in the intervening five year period, thereby correcting any endogenous movement attributable to the road construction. Utilizing a difference-indifference regression strategy and matched panel data, we find that households impacted by the new road construction tend to increase their wage sector employment, decrease their self-employment in agriculture, decrease the number of international migrants sent abroad and increase their ownership of automobiles. The findings also show that inequality decreases both within and between regions. The impact of road construction on average household wages and income is negligible.
    Keywords: infrastructure, economic development, rural labor force
    JEL: O18 R29 R40
    Date: 2006–11
  13. By: Xin Meng (Australian National University and IZA Bonn); Nancy Qian (Brown University)
    Abstract: In the past century, more people have perished from famine than from the two World Wars combined. Many more were exposed to famine and survived. Yet we know almost nothing about the long run impact of famine on these survivors. This paper addresses this question by estimating the effect of childhood exposure to China’s Great Famine on adult health and labor market outcomes of survivors. It resolves two major empirical difficulties: 1) data limitation in measures of famine intensity; and 2) the potential joint determination of famine occurrences and survivors’ outcomes. As a measure of famine intensity, we use regional cohort size of the surviving population in a place and time when there is little migration. We then exploit a novel source of plausibly exogenous variation in famine intensity to estimate the causal effect of childhood exposure to famine on adult health, educational attainment and labor supply. The results show that exposure to famine had significant adverse effects on adult health and work capacity. The magnitude of the effect is negatively correlated with age at the onset of the famine. For example, for those who were one year old at the onset of the famine, exposure on average reduced height by 2.08% (3.34cm), weight by 6.03% (3.38kg), weight-for-height by 4% (0.01 kg/cm), upper arm circumference by 3.95% (0.99cm) and labor supply by 6.93% (3.28 hrs/week). The results also suggest that famine exposure decreased educational attainment by 3% (0.19 years); and that selection for survival decreased withinregion inequality in famine stricken regions.
    Keywords: health, education, famine, China
    JEL: I10 I2 J1
    Date: 2006–11
  14. By: Andrew Henley (University of Wales Swansea); G. Reza Arabsheibani (University of Wales Swansea, WELMERC and IZA Bonn); Francisco G. Carneiro (World Bank and Universidade Catolica de Brasilia)
    Abstract: A range of alternative empirical definitions of informal activity have been employed in the literature. Choice of definition is often dictated by data availability. Different definitions may imply very different conceptual understandings of informality. This paper investigates the degree of congruence between three definitions of informality based on employment contract registration, on social security protection and the characteristics of the employer and employment using Brazilian household survey data for the period 1992 to 2001. 64% of the economically active are informal according to at least one definition, but only 40% are informal according to all three. Steady compositional changes have been taking place amongst informal workers, conditional on definition. Econometric analysis reveals that the conditional impact of particular factors (demographic, educational attainment, family circumstances) on the likelihood of informality varies considerably from one definition to another. Results suggest growing heterogeneity within the informal sector. Informal activity may be as much associated with entrepreneurial dynamism as with any desire to avoid costly contract registration and social protection. However there is no a priori reason for entrepreneurial activity to be unprotected. Results in the paper confirm this. Consequently definitions of informality based on occupation and employer size seem the most arbitrary in practice even if conceptually well-founded.
    Keywords: informal employment, social protection, self-employment, entrepreneurship
    JEL: J21 J42
    Date: 2006–11
  15. By: Pierre-Guillaume Méon (DULBEA, University of Brussels, Belgium); Friedrich G. Schneider (Department of Economics, Johannes Kepler University Linz, Austria); Laurent Weill (Institut d’Etudes Politiques, Université Robert Schuman, Strasbourg, France); Axel Dreher (Department of Management, Technology, and Economics, KOF, ETH Zürich (Swiss Federal Institute of Technology Zurich), CH-8092 Zürich, Switzerland)
    Abstract: We analyze how adding the shadow economy to official output figures affects technical efficiency. We find that this only slightly affects the ranking of efficiency scores, but increases average efficiency. Our results are robust to the functional form of the production technology and the adjustment of labor to account for years of schooling.
    Keywords: shadow economy; income; aggregate productivity; efficiency
    JEL: O11 O17 O47 O5
    Date: 2006–07
  16. By: Matthew Baker (Department of Economics, Hunter College - City University of New York); Erwin Bulte (Development Economics Group, Wageningen University); Jacob Weisdorf (Department of Economics, University of Copenhagen)
    Abstract: We analyze development trajectories of early civilizations where population size and technology are endogenous, and derive conditions under which such societies optimally “switch” from anarchy to hierarchy – when it is optimal to elect and support a ruler. The ruler provides an efficient level of law and order, but creams off part of society’s surplus for his own consumption. Switching to hierarchy occurs if the state of technology exceeds a threshold value, but societies may also be “trapped” at lower levels of technology – perpetuating conditions of anarchy. We present empirical evidence based on the Standard Cross Cultural Sample that support the model’s main predictions.
    Keywords: origins of institutions; common defense; raiding; hunter-gatherers; SCCS
    JEL: D74 O10 N4
    Date: 2006–12
  17. By: SODOKIN, Koffi (LEG - CNRS UMR 5118 - Université de Bourgogne)
    Abstract: The prime objective of this paper is to explain the concept of monetary payments as a foundation of an analytical construction of microfinance institutions (microbanks) and official banks (banks) functional complementarity's in Less Developing Countries (L.D.C's). The second objective is to show that in L.D.C's production process, part of the non spent generated income is preserved after the payment operation, in the form of deposits accounts near microbanks and banks. The share preserved near microbanks, when it is not used to finance consumer expenditure and the income generating activities, is often invested in a portfolio of deposits account near banks. Microbanks are structurally complementary to banks. They are, for this purpose, a "super deposits accounts de facto" for households which do not have access to banks financial services. From a functional point of view and taking into account their role in microfirms production cost funding, microbanks cause monetary income generation. They are "banks de facto" and are functionally complementary to banks in L.D.C's.
    Keywords: Microfinance institutions ; non monetary intermediaries ; official banks ; money creation ; Banks ; microbanks ; complementarity ; monetary intermediation ; financial intermediation ; West Africa ; Low Developing Countries.
    JEL: E42 E44 O11 O17
    Date: 2006–10
  18. By: Abdelkrim Araar; Awoyemi Taiwo Timothy
    Abstract: The main aim of this paper is to explore the link between poverty and inequality. In developing countries, there is a general consensus that high inequality can dampen significantly the impact of economic performance on poverty. In this paper, we propose a new theoretical framework that links poverty and inequality. We also show between and within group inequalities, as well as inequality in income sources, can contribute to total poverty. The methodology of the paper is illustrated using the 2004 Nigerian national living standard survey.
    Keywords: Poverty, Inequality
    JEL: D63 D64
    Date: 2006
  19. By: Sami Bibi
    Abstract: Putting the combat against poverty to the fore as the main objective of the development process has raised the issue of the linkage between economic growth, inequality and poverty. There is now a growing agreement that both the rate and the distributional impact of growth are important in fighting poverty. This means that pro-poorness of a given growth rate is more important in certain cases than in others. Using complete and partial poverty orderings, this paper suggests indices of pro-poor growth according to different ethical principles. Evidence from Mexico and Tunisia shows that economic growth periods were to a large extent equitable and even largely pro-poor during the last two decades.
    Keywords: Pro-poor growth, Poverty measurement, Robustness analysis
    JEL: D31 D63 I32 O40
    Date: 2006

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