nep-dev New Economics Papers
on Development
Issue of 2006‒12‒16
twenty-one papers chosen by
Jeong-Joon Lee
Towson University

  1. Agriculture, Diffusion,and Development: Ripple Effects of the Neolithic Revolutions By Louis Putterman
  2. Sub-Saharan Growth Surprises: Geography, Institutions And History in an all African Data Panel By Matthias Cinyabuguma; Louis Putterman
  3. The Long Term Growth Prospects of the World Economy: Horizon 2050 By Sandra Poncet
  4. Skilled Migration and Business Networks By Fredéric, DOCQUIER; Elisabetta, LODIGINI
  5. Education and Labour Market Outcomes in Sub-Saharan West Africa By Mathias Kuepie; Christophe Nordman; François Roubaud
  6. The Emergence of Institutions By Santiago Sanchez-Pages; Stephane Straub
  7. New technology, Human Capital and Growth for Developing Countries By Cuong Le Van; Manh-Hung Nguyen; Thai Bao Luong
  8. Can China’s Growth be Sustained? A Productivity Perspective By Zheng, Jinghai; Bigsten, Arne; Hu, Angang
  9. Aid and Economic Development in Africa By Bigsten, Arne
  10. Human Capital Inequality, Life Expectancy and Economic Growth By Amparo Castello-Climent; Rafael Domenech
  11. The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data By Charles Yuji Horioka; Junmin Wan
  12. Global Patterns of Income and Health: Facts, Interpretations, and Policies By Angus Deaton
  13. The Politics of Inclusion in the Monterrey Process By Barry Herman
  14. The Dual Divergence: Growth Successes and Collapses in the Developing World since 1980 By José Antonio Ocampo; María Angela Parra
  15. Rural Development, Environmental Sustainability, and Poverty Alleviation: A Critique of Current Paradigms By Susanne D. Mueller
  16. Evaluating Targeting Efficiency of Government Programmes: International Comparisons By Nanak Kakwani; Hyun H. Son
  17. Development and Social Goals: Balancing Aid and Development to Prevent ‘Welfare Colonialism’ By Erik S. Reinert
  18. Growth is Failing the Poor: The Unbalanced Distribution of the Benefits and Costs of Global Economic Growth By David Woodward; Andrew Simms
  19. Achieving the Millennium Development Goals: What’s wrong with existing analytical models? By Sanjay G. Reddy; Antoine Heuty
  20. Developing and Transition Economies in the Late 20th Century: Diverging Growth Rates, Economic Structures, and Sources of Demand By Codrina Rada; Lance Taylor
  21. Globalizing Inequality: ‘Centrifugal’ and ‘Centripetal’ Forces at Work By José Gabriel Palma

  1. By: Louis Putterman
    Date: 2006
  2. By: Matthias Cinyabuguma; Louis Putterman
    Date: 2006
  3. By: Sandra Poncet
    Abstract: This study develops long-term forecasts for world economic growth, based on a production function according to which an economy can grow by (1) deploying more inputs (labor and capital inputs) to production and/or by (2) becoming more efficient, i.e. producing more output per unit of input. An econometric analysis of past performance is carried out to describe the process by which physical capital accumulates over time and to estimate the parameters of a catch-up model of technology diffusion. We moreover account for the modification of real exchange rates against the US dollar. The results suggest that today’s advanced economies are to become a shrinking part of the world economy: in less than 50 years, China and India together could match the size of the US in current dollars (26.6 against 26.9% of the world GDP in 2050). China and India will stand out as an engine of new demand growth and spending, their GDP will grow at yearly average rate of 4.6 and 4.5%, respectively between 2005 and 2050. The largest economies in the world (by GDP) may no longer be the richest (in terms of income per capita).
    Keywords: Growth projections; emerging countries; human capital; technology diffusion; convergence
    JEL: O10 O40
    Date: 2006–10
  4. By: Fredéric, DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Elisabetta, LODIGINI (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: The role of migrants’ networks in promoting cross border investments has been stressed in the literature, possibly making migration and FDI complements rather than substitutes in the long run. In this paper, we estimate the magnitude of such business network externalities in dynamic empirical models of FDI-funded capital accumulation. We use original data on capital and migration stocks rather than flows. Regarding migrants, we distinquish the total and the skilled diasporas abroad. In both cross-sectional and panel frameworks, we find evidence of strong network externalities, mainly associated to the skilled diaspora. These network externalities are stronger for countries exhibiting intermediate corruption index.
    Keywords: FD1, Migration, Brain Drain, Network, Diaspo
    JEL: F2 O15 Z13
    Date: 2006–10–11
  5. By: Mathias Kuepie (DIAL,CEPS/INSTEAD); Christophe Nordman (DIAL, IRD, Paris); François Roubaud (DIAL, IRD, Paris)
    Abstract: (english) The purpose of this paper is to study the effects of education on urban labour market participation and earnings in seven major West African cities. Our results show that although education does not always guard against unemployment, it does increase individual earnings in Abidjan, Bamako, Cotonou, Dakar, Lome, Niamey and Ouagadougou and opens the door to get into the most profitable niches, which are found in the formal private and public sectors. We shed light on convex returns to education in all the cities considered. Besides, not controlling for the endogeneity of education leads to biased estimated returns (either upward or downward depending on the city) which stresses the complexity of the mechanisms linking education and earnings across cities and sectors. We also bring some support to the idea according to which social capital may largely be at work in this relationship. Finally, a major contribution of this paper is to provide evidence of significant effects of education on individual earnings in the informal sectors of the major WAEMU cities, even at high levels of schooling. _________________________________ (français) L'objectif de ce papier est d’étudier les effets de l’éducation sur la participation au marché du travail urbain et la rémunération du travail dans sept capitales d’Afrique de l’Ouest francophones. Nous montrons que si l’éducation ne constitue pas toujours un rempart contre le chômage, elle est un facteur incontestable d’accroissement des gains sur les marchés du travail d’Abidjan, Bamako, Cotonou, Dakar, Lomé, Niamey et Ouagadougou. Elle permet notamment aux individus les mieux dotés de s’insérer dans les créneaux les plus rentables à savoir les secteurs formels privé et public. Les rendements marginaux de l’éducation estimés sont convexes dans toutes les villes considérées. Nous montrons également que ne pas prendre en compte l’endogénéité supposée de la variable d’éducation dans les fonctions de gains conduit à surestimer ou à sous-estimer les rendements de l’éducation suivant les cas. Ce résultat rend compte de la complexité du lien entre éducation et revenus en fonction de la ville et du secteur d’affiliation des individus. De plus, nos estimations corroborent l’idée selon laquelle le capital social des travailleurs interférerait de façon significative dans ce mécanisme. Finalement, l’apport de notre étude est aussi de montrer que le capital éducatif, y compris à des niveaux élevés, permet un accroissement substantiel des gains dans le secteur informel de la plupart de ces grandes villes de l’UEMOA.
    Keywords: Returns to education, earnings, endogeneity, selectivity, informal sector, Sub-Saharan West Africa, Rendements de l’éducation, revenus, endogénéité, effet de sélection, secteur informel, Afrique de l’Ouest.
    JEL: J24 J31 O12
    Date: 2006–11
  6. By: Santiago Sanchez-Pages; Stephane Straub
    Abstract: This paper analyzes how institutions aimed at coordinating economic interactions may appear. We build a model in which agents play a prisoners’ dilemma game in a hypothetical state of nature. Agents can delegate the task of enforcing cooperation in interactions to one of them in exchange for a proper compensation. Two basic commitment problems stand in the way of institution formation. The first one is the individual commitment problem that arises because an agent chosen to run the institution may prefer to renege ex post. The second one is a “collective commitment” problem linked to the lack of binding agreements on the fee that will be charged by the centre once it is designated. This implies first that a potentially socially efficient institution may fail to arise because of the lack of individual incentives, and second that even if it arises, excessive rent extraction by the institution may imply a sub-optimal efficiency level, explaining the heterogeneity of observed institutional arrangements. An institution is less likely to arise in small groups with limited endowments, but also when the underlying commitment problem is not too severe. Finally, we show that the threat of secession by a subset of agents may endogenously solve part of the second commitment problem.
    Keywords: Institution, Coordination, State of nature, Secession.
    JEL: C72 D02 O17 Z13
  7. By: Cuong Le Van (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]); Manh-Hung Nguyen (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]); Thai Bao Luong (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I], CEPN - Centre d'économie de l'Université de Paris Nord - [CNRS : UMR7115] - [Université Paris-Nord - Paris XIII])
    Abstract: We consider a developing country with three sectors in economy: consumption goods, new technology, and education. Productivity of the consumption goods sector depends on new technology and skilled labor used for production of the new technology. We show that there might be three stages of economic growth. In the first stage the country concentrates on production of consumption goods; in the second stage it requires the country to import both physical capital to produce consumption goods and new technology capital to produce new technology; and finally the last stage is one where the country needs to import new technology capital and invest in the training and education of high skilled labor in the same time.
    Keywords: Optimal growth model, New technology capital, Human Capital, Developing country.
    Date: 2006–12–07
  8. By: Zheng, Jinghai (Department of Economics, School of Business, Economics and Law, Göteborg University); Bigsten, Arne (Department of Economics, School of Business, Economics and Law, Göteborg University); Hu, Angang (Center for China Studies, School of Public Policy and Management)
    Abstract: China’s unorthodox approach to economic transition has resulted in sustained high growth. However, in recent years Chinese economists have increasingly referred to the growth pattern as “extensive”, generated mainly through the expansion of inputs. Our investigation of the Chinese economy during the reform period finds that reform measures often resulted in one-time level effects on TFP. China now needs to adjust its reform program towards sustained increases in productivity. Market and ownership reforms, and open door policies have improved the situation under which Chinese firms operate, but further institutional reforms are required to consolidate China’s move to a modern market economy. <p>
    Keywords: Growth; Productivity; China
    JEL: D24 O47 O53
    Date: 2006–11–28
  9. By: Bigsten, Arne (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The question discussed in this in this paper is whether foreign aid can help accelerate growth in African countries. The paper reviews growth determinants and growth constraints in Africa and discusses how aid can help relieve the constraints. Issues covered are the choice of aid modalities, donor coordination, conditionality, and international integration. A key question addressed is how aid should be organised not to overburden the recipient system and to provide incentives for policy makers to perform. The paper also touches upon the need for international trade reforms and public goods investments. <p>
    Keywords: Aid; development; Africa.
    JEL: F35 O19
    Date: 2006–11–30
  10. By: Amparo Castello-Climent (Institute of International Economics, University of Valencia); Rafael Domenech (Institute of International Economics, University of Valencia)
    Abstract: This paper presents a model in which inequality affects per capita income when individuals decide to invest in education taking into account their life expectancy, which depends to a large extent on the human capital of their parents. Our results show the existence of multiple steady states depending on the initial distribution of education. The low steady state is a poverty trap in which children raised in poor families have low life expectancy and work as non-educated workers. The empirical evidence suggests that the life expectancy mechanism explains a major part of the relationship between inequality and human capital accumulation.
    Keywords: Life expectancy, human capital, inequality.
    JEL: J10 O10 O40
    Date: 2006–09
  11. By: Charles Yuji Horioka; Junmin Wan
    Abstract: In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the 1995-2004 period from China's household survey. We find that China's household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, and (in some cases) the real interest rate and the inflation rate. However, we find that the variables relating to the age structure of the population usually do not have a significant impact on the household saving rate. These results provide mixed support for the life cycle hypothesis, are consistent with the existence of inertia or persistence, and imply that China's household saving rate will remain high for some time to come.
    JEL: D12 D91 E21 J10
    Date: 2006–12
  12. By: Angus Deaton
    Abstract: People in poor countries live shorter lives than people in rich countries so that, if we scale income by some index of health, there is more inequality in the world than if we consider income alone. Such international inequalities in life expectancy decreased for many years after 1945, and the strong correlation between income and life-expectancy might lead us to hope that economic growth will improve people's health as well as their material living conditions. I argue that the apparent convergence in life expectancies is not as beneficial as might appear, and that, while economic growth is the key to poverty reduction, there is no evidence that it will deliver automatic health improvements in the absence of appropriate conditions. The strong negative correlation between economic growth on the one hand and the proportionate rate of decline of infant and child mortality on the other vanishes altogether if we look at the relationship between growth and the absolute rate of decline in infant and child mortality. In effect, the correlation is between the level of infant mortality and the growth of real incomes, most likely reflecting the importance of factors such as education and the quality of institutions that affect both health and growth.
    JEL: I1 O1 O15
    Date: 2006–12
  13. By: Barry Herman
    Abstract: The Monterrey Conference on Financing for Development in 2002 brought leaders and senior officials from Governments and international organizations, senior financial sector executives and NGO advocates together for the first time on “hard” financial and trade matters. The Conference provided a forum at which participants talked to each other in informal roundtables, as well as made public speeches. Commitments were made to increase development assistance and to improve global as well as national governance. This paper examines how this unique event came about, traces the backsliding in international dialogue since then, and suggests how it could be reinvigorated.
    Keywords: Development fi nancing; global dialogue; United Nations; North-South relations
    JEL: F02 F33 O10 O19
    Date: 2006–04
  14. By: José Antonio Ocampo; María Angela Parra
    Abstract: This paper argues that developing countries’ growth successes and collapses tend to cluster in specific time periods—and that only the existence of a global development cycle can explain this. The cycle reflects the external factors that affect all, or large clusters of developing countries, and thus constrain their growth possibilities. Nonetheless, country-specific factors—particularly patterns of specialization—play a significant role in determining growth dynamics. From this perspective, the paper shows a very large difference between the economic growth of developing countries diversifying into higher technology manufacturing exports and those experiencing success in natural resource intensive sectors.
    Keywords: economic growth, divergence, external factors, global development cycle, patterns of specialization, technological intensity of exports
    JEL: O1 O14 F1 F4 F43
    Date: 2006–06
  15. By: Susanne D. Mueller
    Abstract: Donors have developed new micro-level and local paradigms to address rural development, environmental sustainability, and poverty alleviation to bypass, ignore, and substitute for badly functioning and corrupt states. Yet, states still set the macro-economic, legal, and policy parameters or “rules of the game” within which other entities operate, and many non-state actors are only nominally independent. Hence, technical initiatives stemming from these paradigms, aimed at growth and equity are often theoretically misconceived and tend to fail when implemented. The paper critically discusses the new paradigms, including decentralization, civil society, microentrepreneurship, and capacity building, among others, mainly using African examples.
    Keywords: economic development, formal and informal and insitutional arrangements, development planning and policy, economic development, regional urban and rural analyses, formal and informal sectors, institutional arrangements, institutional linkages to development.
    JEL: O10 O17 O20 O18 O19
    Date: 2006–01
  16. By: Nanak Kakwani; Hyun H. Son
    Abstract: This paper suggests how the targeting efficiency of government programmes may be better assessed. Using the “pro-poor policy” (PPP) index developed by the authors, the study investigates not only the pro-poorness of government programmes geared to the poorest segment of the population but also basic service delivery in education, health and infrastructure. The paper also shows that the targeting efficiency for a particular socio-economic group should be judged on the basis of a ‘total-group PPP index’, to capture the impact of operating a programme for the group. Using micro-unit data from household surveys, the paper presents a comparative analysis for Thailand, the Russian Federation, Viet Nam and 15 African countries.
    Keywords: Targeting, universalism, pro-poor, poverty
    JEL: C15 I32
    Date: 2006–02
  17. By: Erik S. Reinert
    Abstract: The current development policy focus on poverty reduction is erroneous. Historically, successful development policy—from the late fifteenth century until the beginning of the twenty-first—has achieved structural change away from dependence on raw materials and agriculture, adding specialized manufacturing and services subject to increasing returns with a complex division of labour. In contrast, the Millennium Development Goals are heavily biased in favour of palliative economics: alleviating the symptoms of poverty, rather than attacking its real causes. This creates a system of ‘welfare colonialism’ increasing the dependence of poor countries, thereby hindering, rather than promoting, long-term structural change.
    Keywords: Millennium Development Goals, economic development, palliative economics, welfare colonialism
    JEL: F02 F13 O10 O19
    Date: 2006–01
  18. By: David Woodward; Andrew Simms
    Abstract: During 1990-2001, only 0.6 per cent of additional global income per capita contributed to reducing poverty below the $1-a-day line, down from 2.2 per cent during 1981-1990, and barely half the poor’s share of global income. Coupled with the constraints on global growth associated with climate change, and the disproportionately adverse net impact of climate change on the poor, this casts serious doubt on the dominant view that global growth should be the primary means of poverty reduction. Rather than growth, policies and the global economic system should focus directly on achieving social and environmental objectives.
    Keywords: Economic growth, income distribution, world inequality, poverty, environment, climate change
    JEL: D31 D63 Q56
    Date: 2006–03
  19. By: Sanjay G. Reddy; Antoine Heuty
    Abstract: This study critically evaluates analytical models presently used to estimate the cost of achieving the Millennium Development Goals (MDGs) from sources including the UN Millennium Project, the UN Development Programme, the World Bank and the Zedillo Commission. Effective strategic choices for achieving the MDGs must be based on sound assessments of the costs and benefits of alternative policies. However, the existing approaches are unreliable. They derive from implausible and restrictive assumptions, depend on poor quality data, and are undermined by the presence of large uncertainties concerning the future. An alternative and less technocratic approach to planning is required.
    Keywords: poverty, development, Millennium Development Goals
    JEL: O11 O21
    Date: 2006–09
  20. By: Codrina Rada; Lance Taylor
    Abstract: This study reviews the growth and development performance of developing countries in the latter part of the 20th century. Sustained growth among “successful” countries was accompanied by structural change in terms of output and labour share shifts, trade diversification, sustained productivity growth with some strong reallocation effects due to movements of labour from low to high productivity sectors. Neither the widely accepted “twin deficits” nor the “consumption-smoothing” behaviour views of macro adjustment seem to apply, though macroeconomic flexibility may be very important. Finally, neither human capital accumulation nor foreign direct investment are sufficient, by themselves, to stimulate growth.
    Keywords: economic development, structural change, comparative studies, development policy
    JEL: O11 O57
    Date: 2006–09
  21. By: José Gabriel Palma
    Abstract: This paper reassesses national income inequalities in this era of globalization. The main conclusion is that two opposite forces are at work: one ‘centrifugal’ at the two extremes of the distribution—increasing the disparity of income shares appropriated by the top and by the bottom four deciles across countries; and the other ‘centripetal’ in the middle—increasing the uniformity of the share of income going to deciles 5 to 9. Therefore, globalization is creating a situation where virtually all the intercountry diversity of income distribution is the result of differences in what the rich and the poor get in each country.
    Keywords: economic development, structural change, comparative studies, development policy
    JEL: D63 F J3 O1
    Date: 2006–09

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