nep-dev New Economics Papers
on Development
Issue of 2007‒01‒13
73 papers chosen by
Jeong-Joon Lee
Towson University

  1. The Colonial Origins of Comparative Development: An Investigation of the Settler Mortality Data By David Albouy
  2. Industrialization and Infant Mortality By Maya Federman; David Levine
  3. Orphans and Schooling in Africa: A Longitudinal Analysis By David Evans; Edward Miguel
  4. Remittances and inequality: A dynamic migration model By Frédéric Docquier; Hillel Rapoport; I-Ling Shen
  5. India's Missing Women: Disentangling Cultural, Political and Economic Variables By Rubiana Chamarbagwala; Martin Ranger
  6. Female Empowerment: Impact of a Commitment Savings Product in the Philippines By Nava Ashraf; Dean Karlan; Wesley Yin
  7. Economic-Social Interaction during China’s Transition By Lindbeck, Assar
  8. An Essay on Economic Reforms and Social Change in China By Lindbeck, Assar
  9. Fear of China: is there a future for manufacturing in Latin America? By Mauricio Mesquita Moreira
  10. Does foreign direct investment affect wage inequality? An empirical investigation By Paolo Figini; Holger Görg
  11. The Utilisation of EU and US Trade Preferences for Developing Countries in the Agri-Food Sector By Jean-Christophe Bureau; Raja Chakir; Jacques Gallezot
  12. Decomposing the Effects of Financial Liberalization: Crises vs. Growth By Romain Ranciere; Aaron Tornell; Frank Westermann
  13. Looking ahead optimally in allocating aid By Adrian Wood (QEH)
  14. Children, War and World Disorder in the 21st Century: A Review of the Theories and the Literature on Children's Contributions to Armed Violence By Jo Boyden (QEH)
  15. Religious Schools, Social Values and Economic Attitudes: Evidence from Bangladesh By Mohammad Niaz Asadullah (Reading University) and Nazmul Chaudhury (World Bank)
  16. Formal and informal risk sharing in LDCs : theory and empirical evidence By Dubois, P.; Jullien, B.; Magnac, T.
  17. Testing Efficient Risk Sharing with Heterogeneous Risk Preferences: Semi-parametric Tests with an Application to Village Economies By Maurizio Mazzocco; Shiv Saini
  18. Corruption and Openness By Zvika Neeman; Daniele Paserman; Avi Simhon
  19. Capital Deepening and Non-Balanced Economic Growth By Daron Acemoglu; Veronica Guerrieri
  20. IQ in the Ramsey Model: A Naive Calibration By Garett Jones
  21. International Medical Technology Diffsion By Chris Papageorgiou; Andreas Savvides; Marios Zachariadis
  22. Overlapping Generations Models of an Age-Group Society: The Rendille of Northern Kenya By Merwan H. Engineer; Ming Kang; Eric Roth; Linda Welling
  23. Backslanted X Fertility Dynamics and Macroeconomics By Yishay D. Maoz
  24. Aid Effectiveness and Limited Enforceable Conditionality By Almuth Scholl
  25. Structural Change and the Kaldor Facts of Economic Growth By Reto Foellmi; Josef Zweilmueller
  26. Demographic Transition and Industrial Revolution: A Coincidence? By Oksana Leukhina; Michael Bar
  27. Intra- and Inter-sectoral Knowledge Spillovers and TFP Growth Rates By Nuria Quella
  28. Learning about Oneself: Technology Financing in a Tamil Fishing By Xavier Gine; Stefan Klonner
  29. War, resource competition and development By Nils-Petter Lagerlof
  30. Death and Development By Peter Lorentzen; John McMillan; Romain Wacziarg
  31. Health, Development, and the Demographic Transition By Matteo Cervellati; Uwe Sunde
  32. Transportation Costs, Agricultural Productivity and Cross-Country Income Differences By Tasso Adamopoulos
  33. The Role of Education in Economic Growth through the Sectoral Reallocation of Labor By Soohyung Lee
  34. Economic Development as Problem Solving By Yaw Nyarko
  35. Endogenous Financial Development and Industrial Takeoff By Alex William Trew
  36. The Effect of Financial Repression & Enforcement on Entrepreneurship and Economic Development By António Antunes; Tiago Cavalcanti; Anne Villamil
  37. "Democracy, Finance and Development " By Juan Pineiro Chousa; Haider A. Khan; Davit N. Melikyan; Artur Tamazian
  38. The Role of the Property Tax in Financing Rural Local Governments in Developing Countries By Richard M. Bird; Enid Slack
  39. Poverty, Inequality and Policy Affecting Vulnerable Groups in Moldova By Giovanni Andrea Cornia; UNICEF Innocenti Research Centre
  40. Beyond dualism: Multisegmented labor markets in Ghana By James Heintz; Fabian Slonimczyk
  41. Manufacturing, Increasing Returns and Economic Development in China, 1979-2004: A Kaldorian Approach By Yongbok Jeon
  42. Harnessing the Private Sector for Rural Development, Poverty Alleviation and HIV/Aids Prevention By Steven Lim; Michael P. Cameron; Krailert Taweekui; John Askwith
  43. The macro financing of natural hazards in developing countries By Mahul, Olivier; Gurenko, Eugene
  44. Contagion and firms ' internationalization in Latin America : evidence from Mexico, Brazil, and Chile By Sakho, Yaye Seynabou
  45. The composition of growth matters for poverty alleviation By Loayza, Norman V.; Raddatz, Claudio
  46. Informality trends and cycles By Loayza, Norman V.; Rigolini, Jamele
  47. Banking services for everyone ? Barriers to bank access and use around the world By Beck, Thorsten; Demirguc-Kunt, Asli; Martinez Peria, Maria Soledad
  48. Finance and hunger : empirical evidence of the agricultural productivity channel By Claessens, Stijn; Feijen, Erik
  49. Utilities reforms and corruption in developing countries By Estache, Antonio; Goicoechea, Ana; Trujillo, Lourdes
  50. Adult mortality and consumption growth in the age of HIV/AIDS By Beegle, Kathleen; De Weerdt, Joachim; Dercon, Stefan
  51. Water allocation strategies for the Kat Basin in South Africa : comparing negotiation tools and game theory models By Dinar, Ariel; Farolfi, Stefano; Patrone, Fioravante; Rowntree, Kate
  52. Are there lasting impacts of aid to poor areas ? Evidence from rural China By Chen, Shaohua; Mu, Ren; Ravallion, Martin
  53. The economics of consanguineous marriages By Do, Quy-Toan; Iyer, Sriya; Joshi, Shareen
  54. Patient satisfaction, doctor effort, and interview location : evidence from Paraguay By Das, Jishnu; Sohnesen, Thomas Pave
  55. Migration and remittances : causes and linkages By Niimi, Yoko; Ozden, Caglar
  56. The impact of commodity price changes on rural households : the case of coffee in Uganda By Bussolo, Maurizio; Godart, Olivier; Lay, Jann; Thiele, Rainer
  57. The structural determinants of external vulnerability By Loayza, Norman V.; Raddatz, Claudio
  58. Development and the interaction of enforcement institutions By Dhillon, Amrita; Rigolini, Jamele
  59. An assessment of reform options for the public service pension fund in Uganda By Bogomolova, Tatiana; Impavido, Gregorio; Pallares-Miralles, Montserrat
  60. Reducing distortions to agricultural incentives : progress, pitfalls, and prospects By Anderson, Kym
  61. Labor markets and income generation in rural Argentina By Verner, Dorte
  62. Rural poor in rich rural areas : poverty in rural Argentina By Verner, Dorte
  63. Road network upgrading and overland trade expansion in Sub-Saharan Africa By Buys, Piet; Deichmann, Uwe; Wheeler, David
  64. Does insurance market activity promote economic growth ? Country study for industrial and developing countries By Arena, Marco
  65. Measuring and reducing the impact of corruption in infrastructure By Kenny, Charles
  66. Reform of the intergovernmental transfer system in China By Shah, Anwar; Shen, Chunli
  67. Political accountability and regulatory performance in infrastructure industries : an empirical analysis By Gasmi, Farid; Noumba Um, Paul; Virto, Laura Recuero
  68. Conditional cash transfers and female schooling : the impact of the female school stipend program on public school enrollments in Punjab, Pakistan By Chaudhury, Nazmul; Parajuli, Dilip
  69. Current challenges in financial regulation By Claessens, Stijn
  70. Road infrastructure in Europe and Central Asia : does network quality affect trade ? By Shepherd, Ben; Wilson, John S.
  71. Trade liberalization, employment flows, and wage inequality in Brazil By Ferreira, Francisco H. G.; Leite, Phillippe G.; Wai-Poi, Matthew
  72. Factors impacting youth development in Haiti By Justesen, Michael; Verner, Dorte
  73. Can Sub-Saharan Africa leap into global network trade ? By Subramanian, Uma; Matthijs, Matthias

  1. By: David Albouy (Department of Economics, University of California, Berkeley)
    Abstract: In a seminal contribution, Acemoglu, Johnson, and Robinson (2001) evaluate the effect of property rights institutions on national income using estimated mortality rates of early European settlers as an instrument for the risk of capital expropriation. Returning to their original sources, I find the settler mortality data suffer from a number of inconsistencies, comparability problems, and questionable geographic assignments. When various methods are used to deal with these issues, the first-stage relationship between mortality and expropriation risk is no longer robust and typically insignificant. Consequently instrumental variable estimates are unreliable and suffer from weak instrument pathologies.
    Keywords: economic history, development, institutions, growth, colonialism, property rights, European settlement, mortality, measurement error, weak instrument,
    Date: 2006–09–20
  2. By: Maya Federman (Pitzer College); David Levine (Haas School of Business, University of California, Berkeley)
    Abstract: On average, infant mortality rates are lower in more industrialized nations, yet health and mortality worsened during early industrialization in some nations. This study examines the effects of growing manufacturing employment on infant mortality across 274 Indonesian districts from 1985 to 1995, a time of rapid industrialization. Compared with cross-national studies we have a larger sample size of regions, more consistent data definitions, and better checks for causality and specification. We can also explore the causal mechanisms underlying our correlations. Overall the results suggest manufacturing employment raised living standards, housing quality, and reduced cooking with wood and coal, which helped reduce infant mortality. At the same time, pollution from factories appears quite harmful to infants. The overall effect was slightly higher infant mortality in regions that experienced greater industrialization.
    Keywords: industrialization, infant mortality, Indonesia, pollution, indoor air pollution,
    Date: 2006–06–27
  3. By: David Evans (Department of Economics, Harvard University); Edward Miguel (Department of Economics, University of California, Berkeley)
    Abstract: AIDS deaths could have a major impact on economic development by affecting the human capital accumulation of the next generation. We estimate the impact of parent death on primary school participation using an unusual five-year panel data set of over 20,000 Kenyan children. There is a substantial decrease in school participation following a parent death, and a smaller drop before the death (presumably due to pre-death morbidity). Estimated impacts are smaller in specifications without individual fixed effects, suggesting that estimates based on cross-sectional data are biased toward zero. Effects are largest for children whose mothers died, and those with low baseline academic performance.
    Keywords: Parent death, education, HIV/AIDS, Africa,
    Date: 2006–06–27
  4. By: Frédéric Docquier (FNRS and IRES, Université Catholique de Louvain); Hillel Rapoport (Department of Economics, Bar-Ilan University, CADRE, Université de Lille 2, and CReAM, University College London); I-Ling Shen (IRES, Université Catholique de Louvain)
    Abstract: We develop a model to study the effects of migration and remittances on inequality in the origin communities. While wealth inequality is shown to be monotonically reduced along the time-span, the short- and the long-run impacts on income inequality may be of opposite signs, suggesting that the dynamic relationship between migration/remittances and inequality may well be characterized by an inverse U-shaped pattern. This is consistent with the findings of the empirical literature, yet offers a different interpretation from the usually assumed migration network effects. With no need to endogenize migration costs through the role of migration networks, we generate the same result via intergenerational wealth accumulation.
    Keywords: Migration, remittances, inequality
    JEL: O11 O15 J61 D31
    Date: 2006–12
  5. By: Rubiana Chamarbagwala (Indiana University); Martin Ranger (Indiana University)
    Abstract: The severe anti-female bias in natality and child mortality that gives rise to India's missing women has been widely documented and various explanations ranging from agricultural labor demand to dowries have been offered in the literature. In general, the low demand for girls has been interpreted as a rational response to economic constraints. This paper shows the importance of culture both in determining the value of girls and in shaping parental economic constraints. We find that conservative cultural attitudes, proxied by the electoral success of religious parties, are positively correlated with anti-female bias. Moreover, higher household expenditure is negatively correlated with the number of girls. This suggests that we cannot rely on rising income levels, brought about by economic growth, to improve the demographic disadvantage faced by Indian women. Our policy recommendations therefore focus on changing attitudes of son-preference that motivate anti-female bias as much as enforcement of gender-equality legislation.
    Keywords: Female Disadvantage, Mortality, Son Preference, India
    JEL: J11 J16 O12
    Date: 2006–12
  6. By: Nava Ashraf (Harvard Business School); Dean Karlan (Yale University, Economic Growth Center); Wesley Yin (University of Chicago)
    Abstract: Female "empowerment" has increasingly become a policy goal, both as an end to itself and as a means to achieving other development goals. Microfinance in particular has often been argued, but not without controversy, to be a tool for empowering women. Here, using a randomized controlled trial, we examine whether access to an individually-held commitment savings product leads to an increase in female decision-making power within the household. We find positive impacts, particularly for women who have below median decision-making power in the baseline, and we find this leads to a shift towards female-oriented durables goods purchased in the household.
    Keywords: Savings, Microfinance, Female empowerment, Household decision making, Commitment
    JEL: D12 D63 D91 J16 O12 O16
    Date: 2006–12
  7. By: Lindbeck, Assar (Research Institute of Industrial Economics)
    Abstract: I discuss the nature of the economic reforms in China during the last quarter of a century in the context of a typology of economic systems, emphasizing the interaction between economic and social mechanisms. I also consider China’s options for further reforms. I focus on economic reforms that make the growth path less resource demanding and social reforms that enhance income security and improve education and health care for disadvantaged population groups.
    Keywords: China; Transition Economies; Social Insurance; Human Services
    JEL: I18 I19 I38 O53 P30
    Date: 2006–12–04
  8. By: Lindbeck, Assar (Research Institute of Industrial Economics)
    Abstract: This paper applies a systems-oriented, “holistic” approach to China’s radical economic reforms during the last quarter of a century. It characterizes China’s economic reforms in terms of a multidimensional classification of economic systems. When looking at the economic consequences of China’s change of economic system, I deal with both the impressive growth performance and its economic costs. I also study the consequences of the economic reforms for the previous social arrangements in the country, which were tied to individual work units: agriculture communes, collective firms and state-owned enterprises. I continue with the social development during the reform period, reflecting a complex mix of social advances, mainly in terms of poverty reduction, and regress for large population groups in terms of income security and human services, such as education and, in particular, health care. Next, I discuss Chinas future policy options in the social field, whereby I draw heavily on relevant experiences in developed countries over the years. The future options are classified into three broad categories: policies influencing the level and distribution of factor income, income transfers including social insurance, and the provision of human services.
    Keywords: China; Transition Economies; Social Insurance; Human Services
    JEL: I18 I19 I38 O53 P30
    Date: 2006–12–06
  9. By: Mauricio Mesquita Moreira
    Abstract: El surgimiento de China origina cuestiones puntuales sobre el futuro de la industria de la manufactura en América Latina. Este documento analiza este desafío y sus implicancias. Comienza planteando la pregunta sobre si todavía es importante la industria de la manufactura para América Latina. Se cuestiona que la región no puede arriesgarse a dar la espalda a un camino de desarrollo absolutamente probado. Después continúa demostrando que la conjunción de los subsidios, la escala de productividad y el rol del gobierno hacen de China un competidor formidable. La importancia de este desafío se confirma a través del análisis de datos de comercio que sugieren un impacto sobre América Latina todavía bajo, pero al mismo tiempo representan una tendencia inquietante.
    Keywords: Access to markets, Trade, Exports, Industrial Sector, Latin America
    JEL: F13 F16
  10. By: Paolo Figini; Holger Görg
    Abstract: We use a panel of more than 100 countries for the period 1980 to 2002 to analyse the relationship between inward foreign direct investment (FDI) and wage inequality. We particularly check whether this relationship is non-linear, in line with a theoretical discussion. We find that the effect of FDI differs according to the level of development: we depict two different patterns, one for OECD (developed) and one for non-OECD (developing) countries. Results suggest the presence of a non linear effect in developing countries; wage inequality increases with FDI inward stock but this effect diminishes with further increases in FDI. For developed countries, wage inequality decreases with FDI inward stock and there is no robust evidence to show that this effect is non-linear.
    Keywords: Foreign Direct Investment, Wage Inequality, Multinational Firms
    Date: 2007–01–05
  11. By: Jean-Christophe Bureau; Raja Chakir; Jacques Gallezot
    Abstract: We calculate various indicators of the utilisation of preferences granted to developing countries by the EU and the US in the agricultural, food and fisheries sector. We conclude that only a very small proportion of the imports eligible to these preferences is actually exported outside a preferential regime. The rate of utilisation is therefore high. However, the flow of imports from poorest countries remains very limited in spite of rather generous tariff preferences, which leads to question the overall impact of the preferential agreements. In addition, preferential regimes overlap, and in such cases some regimes are systematically preferred to others. We use econometric estimates of the (latent) cost of using a given preference in order to explain why particular regimes are used. We focus on possible explanations, such as the cumulation rules (that restrict the use of materials originating from other countries), fixed administrative costs, and differences in the preferential margin.
    Keywords: Non Reciprocal Preferences, Trade and Development, Rules of Origin
    Date: 2007–01–05
  12. By: Romain Ranciere; Aaron Tornell; Frank Westermann
    Abstract: We present a new empirical decomposition of the effects of financial liberalization on economic growth and on the incidence of crises. Our empirical estimates show that the direct effect of financial liberalization on growth by far outweighs the indirect effect via a higher propensity to crisis. We also discuss several models of financial liberalization and growth whose predictions are consistent with our empirical findings.
    JEL: F3 F32 F33 F36 F43 O4
    Date: 2006–12
  13. By: Adrian Wood (QEH)
    Abstract: The Collier-Dollar approach to aid allocation has been less than fully embraced by donors – even those focused on poverty reduction – and has come into conflict with a different approach based on the Millennium Development Goals. These two approaches are shown to be special cases of a more general model of optimal aid allocation, in which donors care about future as well as current poverty. The model is illustratively applied to data for developing regions. Adding a poverty decline adjustment to the allocation formulae now used by aid agencies would make these formulae more efficient and more acceptable.
  14. By: Jo Boyden (QEH)
    Abstract: Young populations, and particularly young males, have been attributed a proclivity to aggression and unrest that puts societies at risk. Theories about the dangers of a demographic 'youth bulge' inform public and policy debates about the predictors of violent conflict, as evidenced most recently in the World Bank's World Development Report for 2007. This paper evaluates the validity and utility of claims linking youth bulges to civil conflicts by reviewing different literatures concerning naturalist ideas of young humans' innate aggression and cognitive incompetence as well as environmentalist ideas of environmental stimuli, processes of socialisation, and the dialectical relationship of structural conditions and human agency. This review finds that the moral panic propagated by youth bulge theorists is too often based on only one form of influence on human development and action, whether an aspect of environment, personal experience, or individual traits. A more cogent analysis must integrate the highly complex and dynamic processes involved in cognition and behaviour and aim to develop theories that take account of the social power, ideational and structural forms, and emotional and cognitive processes that young people experience and draw on in times of war. Theories of causality that fail to account for this complexity obscure understanding of the many ways in which young people and conflict may be linked.
  15. By: Mohammad Niaz Asadullah (Reading University) and Nazmul Chaudhury (World Bank)
    Abstract: This paper examines the social impact of a madrasa (Islamic religious school) reform program in Bangladesh. The key features of the reform are change of the curriculum and introduction of female teachers. We assess whether the reform is making any contribution in improving social cohesion in rural areas. We use new data on teachers and female graduates from rural Bangladesh and explore how attitudes toward desired fertility, working mothers, higher education for girls vis-à-vis boys, and various political regimes vary across secondary schools and modernised madrasas. We find some evidence of attitudinal gaps by school type. Modernised religious education is associated with attitudes that are conducive to democracy. On the other hand, when compared to their secular schooled peers, madrasa graduates have perverse attitude on matters such as working mothers, desired fertility and higher education for girls. We also find that young people's attitudes are interlinked with that of their teachers. Exposure to female and younger teachers leads to more favourable attitudes among graduates. These estimated effects are robust to conditioning on a rich set of individual, family and school traits. We conclude by discussing other social and economic implications of these findings.
  16. By: Dubois, P.; Jullien, B.; Magnac, T.
    Abstract: We develop and estimate a model of dynamic interactions where conmmitment is limited and contracts are incomplete to explain the patterns of income and consumption in village economies of less developped countries. Households can insure through both formal contracts and informal agreements, that is, agreements specifying voluntary transfers that need to be self-enforceable. This theoretical setting nests the case of complete markets when all riks can be insured by formal contracts and the case where only informal agreements are available. We derive a non-linear system of equations of interest for income and consumption. A key prediction of our model is that income and consumption are affected by lagged consumption as a consequence of the coexistence of formal and informal contracting possibilities. Using semi-parametric specifications, we prove identification, derive testable restrictions and estimate the model using data from Pakistan villages. Empirical results are consistent with the economic arguments. Incentive constraints due to self-enforcement bind with positive probability and formal contracts are used to reduce this probability. ...French Abstract : Les auteurs développent un modèle d'interactions dynamiques avec engagement limité et contrats incomplets pour expliquer les profils de revenu et de consommation dans les économies villageoises des pays en développement. Les ménages peuvent s'assurer à travers des accords formels et informels, c'est-à-dire, des accords spécifiant des transferts volontaires qui doivent être auto-exécutoire. Ils obtiennent un système d'équations non linéraires de revenu et de consommation. Une des prédictions clé du modèle est que le revenu et la consommation sont affectés par la consommation retardée à cause de la coexistence de contrats formels et informels. En utilisant une spécification semi-paramétrique, les auteurs prouvent l'identification et ils dérivent des restrictions testables qu'ils estiment sur des données du Pakistan. Les résultats empiriques confirment leurs arguments économiques.
    JEL: C14 D13 D91 L14 O12 Q0
    Date: 2006
  17. By: Maurizio Mazzocco (Economics University of Wisconsin-Madison); Shiv Saini
    Abstract: Previous tests of efficient risk sharing have assumed that households have identical risk preferences. This assumption is equivalent to the restriction that households can pool their resources, but cannot optimally allocate them according to individual risk preferences. In this paper, we first test the hypothesis of homogeneous risk preferences and reject it. This result implies that previous tests should have rejected efficiency even if households are perfectly sharing risk. We then derive two tests of efficient risk sharing that allow for heterogeneity in risk preferences. Using the two tests we cannot reject efficient risk sharing
    Keywords: Risk Sharing, Efficiency, Heterogeneous Risk Preferences
    JEL: D11 D12 O10
    Date: 2006–12–03
  18. By: Zvika Neeman; Daniele Paserman; Avi Simhon (The Hebrew University of Jerusalem)
    Abstract: We report an intriguing empirical observation. The relationship between corruption and output depends on the economy's degree of openness: in open economies, corruption and GNP per capita are strongly negatively correlated, but in closed economies there is no relationship at all. This stylized fact is robust to a variety of different empirical specifications. In particular, the same basic pattern persists if we use alternative measures of openness, if we focus on different time periods, if we restrict the sample to nclude only highly corrupt countries, if we restrict attention to specific geographic areas or to poor countries, and if we allow for the possible endogeneity of the corruption measure. We find that the extent to which corruption affects output is determined primarily by the degree of financial openness. The difference between closed and open economies is mainly due to the different effect of corruption on capital accumulation. We present a model, consistent with these findings, in which the main channel through which corruption affects output is capital drain.
    Keywords: corruption openness growth
    JEL: F2 H0 O1 O4
    Date: 2006–12–03
  19. By: Daron Acemoglu; Veronica Guerrieri (MIT)
    Abstract: This paper constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share (despite the equilibrium reallocation of capital and labor away from that sector). We first illustrate this force using a general two-sector model. We then investigate it further using a class of models with constant elasticity of substitution between two sectors and Cobb- Douglas production functions in each sector. In this class of models, non-balanced growth is shown to be consistent with an asymptotic equilibrium with constant interest rate and capital share in national income. Finally, we construct and analyze a model of “nonbalanced endogenous growth,†which extends these results to an economy with endogenous and directed technical change, and demonstrates that non-balanced technological progress can be an equilibrium phenomenon
    Keywords: capital deepening, endogenous growth, multi-sector growth, non-balanced
    JEL: O40 O41 O30
    Date: 2006–12–03
  20. By: Garett Jones (Economics and Finance Southern Illinois University)
    Abstract: I show that in a conventional Ramsey model, between one-fourth and one-half of the global income distribution can be explained by a single factor: The effect of large, persistent differences in national average IQ on the private marginal product of labor. Thus, differences in national average IQ may be a driving force behind global income inequality. These persistent differences in cognitive ability--which are well-supported in the psychology literature--are likely to be somewhat malleable through better health care, better education, and especially better nutrition in the world’s poorest countries. A simple calibration exercise in the spirit of Bils and Klenow (2000) and Castro (2005) is conducted. I show that an IQ-augmented Ramsey model can explain more than half of the empirical relationship between national average IQ and GDP per worker. I provide evidence that little of the IQ-productivity relationship is likely to be due to reverse causality.
    Keywords: Human Capital, Intelligence, IQ, Economic Growth
    JEL: E13 J24 O41
    Date: 2006–12–03
  21. By: Chris Papageorgiou (Department of Economics Lousiana State University); Andreas Savvides; Marios Zachariadis
    Abstract: Does medical technology originating in countries close to the technology frontier have a significant impact on health outcomes in countries distant from this frontier? This paper considers a framework where lagging countries may benefit from medical technology (a result of research and development by countries close to the frontier) that is embodied in medical imports or diffuses in the form of ideas. Using a novel dataset from a cross-section of 73 technology-importing countries, we show that medical technology diffusion is an important contributor to improved health status, as measured by life expectancy and mortality rates
    Keywords: International Technology Diffusion, Health Status
    JEL: O30 O40
    Date: 2006–12–03
  22. By: Merwan H. Engineer (University of Victoria); Ming Kang; Eric Roth; Linda Welling
    Abstract: This paper makes five contributions to the modeling of societies organized primarily according to age. First, it models the social rules adhered to by a particular age-group society, the Rendille of Northern Kenya. Second, it shows that their age-group rules are well represented by the standard overlapping generations (OLG) model. Third, we develop a genealogical OLG model that closely captures lifecycle transitions and lineages. Fourth, despite heterogeneity in the timing of marriage and birthing, the model can be calibrated using aggregate data. Fifth, the model permits an analysis of institutions that reveals the intergenerational conflicts between the lineages in changing the social rules
    Keywords: Overlapping Generations Model, Age-Group Societies, Institutions, Political Economy
    JEL: J1 J12 O1
    Date: 2006–12–03
  23. By: Yishay D. Maoz (Israel University of Haifa)
    Abstract: A large number of pairs of countries exhibit a dynamic pattern in which: (i) Fertility in both countries declines across time; (ii) Initially one country has higher fertility and lower per-capita income compared to the other; (iii) In time, as per-capita income converges, fertility rates in the poorer country become lower than in the richer one. This paper provides statistics on the prevalence of such dynamics and a theoretical model in which these dynamics emerge endogenously. Assuming that countries differ in the degree of utility substitution between consumption and rearing children is sufficient to generate all three components of these dynamics.
    Keywords: Fertility, Human Capital, Economic Growth
    JEL: J11 J13 O40
    Date: 2006–12–03
  24. By: Almuth Scholl (Economics, Institute of Economic Policy Humboldt University Berlin)
    Abstract: This paper analyzes optimal foreign aid policy in a neoclassical framework with a conflict of interest between the donor and the recipient government. Aid conditionality is modelled as a limited enforceable contract. We define conditional aid policy to be self-enforcing if, at any point in time, the conditions imposed on aid funds are supportable by the threat of a permanent aid cutoff from then onward. Quantitative results show that the effectiveness of unconditional aid is low while self-enforcing conditional aid strongly stimulates the economy. However, increasing the welfare of the poor comes at a high cost: to ensure aid effectiveness, less democratic political regimes have to receive permanently larger aid funds
    Keywords: foreign aid, conditionality, limited enforceable contracts, growth, sovereignty
    JEL: E13 F35 O1 O19
    Date: 2006–12–03
  25. By: Reto Foellmi (Institute for Empirical Research in Econ University of Zurich); Josef Zweilmueller
    Abstract: The model presented in this paper reconciles two of the most important features of the long-run growth process: the massive changes in the structure of production and employment; and the Kaldor facts of economic growth. Structural change occurs because Engel-curves are non-linear. Each new good goes through Engel's consumption cycle, i.e. starts out as a luxury with a high income elasticity and ends up as a necessity with a low income elasticity. The coexistence of stagnating and expanding industries imply a changing sectoral composition and a continuous reallocation of labor across sectors. Nonetheless macroeconomic aggregates grow at a constant rate, and the real interest rate and the labor share are constant. Our model also addresses the two-way causality between economic growth and structural change. Complementarities between aggregate and sectoral growth may give rise to multiple equilibria providing a possible explanation for development failures
    Keywords: Kaldor facts, Engel-curve, structural change, structural transformation, hierarchic preferences
    JEL: O40 O11 L16
    Date: 2006–12–03
  26. By: Oksana Leukhina (Economics UNC - Chapel Hill); Michael Bar
    Abstract: All industrialized countries experienced a transition from high birth rates and stagnant standards of living to low birth rates and sustained growth in per capita income. What contributed to this transformation? Were output and population dynamics driven by common or separate forces? We develop a general equilibrium model with endogenous fertility in order to quantitatively investigate the English case. We find that mortality decline significantly influences birth rates. Increased productivity has a negligible effect on birth rates but accounts for nearly all of the increase in per capita output, industrialization, urbanization, and the decline of land share in total income
    Keywords: demographic transition, industrial revolution, mortality, technological progress
    JEL: J10 O1 O4 E0
    Date: 2006–12–03
  27. By: Nuria Quella (Research Banco de Mexico)
    Abstract: In this paper I estimate unobserved labor-generated knowledge spillovers within and among six large macroeconomic sectors covering the totality of the US civilian economy from 1948 to 1991. Unobserved spillovers are identified by observed TFP changes measured using Dale Jorgenson’s quality-adjusted factor and product panel data. I construct a series of sectoral knowledge spillover matrices that show that changes in the magnitude and direction of spillovers are associated to the productivity slowdown in the US economy of the early seventies. These matrices also allow me to compute the gap between the market and the optimal allocation of labor among sectors. Moreover, I show that sectoral market wages do not capture the totality of spillovers and I measure the difference. My measurement of spillovers shows that from 1948 to 1991 manufacturing generated knowledge for all sectors, being overall the main engine of growth. Using Samuel Kortum’s data on patent production and use in the U.S. I find that sectoral labor generated knowledge flows coincide with the sectoral patterns of other, disembodied information flows. I also find the productivity slowdown coincides with a change in the pattern of generation and diffusion of spillovers. In the mid seventies manufacturing initiates its decline as the engine of growth and trade starts to catch up as the main generator of knowledge spillovers to the economy; simultaneously, the relative weight of all intra-sectoral spillovers diminishes in favor of spillovers between sectors. Finally, I find that the market allocates resources inefficiently, as spillovers are measured to be significant. More resources should go to the main spillover generating sector, that is, manufacturing, so that employment in this sector increases by 32%, and output by 8%; and wages increase in all sectors, except for services and mining.
    Keywords: Knowledge Spillovers, Productivity
    JEL: D24 J24 O30 O40
    Date: 2006–12–03
  28. By: Xavier Gine (DECRG The World Bank); Stefan Klonner
    Abstract: We study adoption of a costly new technology when the profitability of the new technique differs over individuals and there is uncertainty about these individual-specific differences. We establish that such individual-specific uncertainty results in a financing constraint when debt contracts are characterized by limited liability and limited commitment on the side of the borrower. In data from a Tamil coastal village, in which a new fishing boat became available in 2001, we find significant evidence for individual-specific uncertainty about the profitability of the new technology. Results suggest that this uncertainty reduces the amount of external finance available for the technology switch by 20 percent. The resulting need for complementary self-finance creates a wealth threshold, below which adoption, even if profitable, is not feasible. Kuznets-type inequality dynamics result on the middle run.
    Keywords: Learning, Competition, Credit Constraints
    JEL: O33 D83 D92
    Date: 2006–12–03
  29. By: Nils-Petter Lagerlof (Department of Economics York University)
    Abstract: A growth model is set up where war, population, and technology interact endogenously, capturing some trends observed throughout long-run human history. Agents compete for food for their survival. In environments with scarce resources -- meaning high population density, and/or low levels of technology -- agents allocate more of their time to fight for resources, which translates into a higher probability of war. Because technology is an input both in food production and conflict, technological progress exerts two opposing effects on killing: on the one hand, it mitigates resource scarcity, making war less likely; on the other hand, if war breaks out it is deadlier the more advanced is the level of technology. An economy may transit onto a path of peaceful prosperity where standards of living are rising, and the probability of war approaches zero. In the transition, however, it may pass a phase of excessive killing, as rising living standards have not yet made war an improbable event, but rising levels of technology have made war extremely lethal if and when it breaks out. A preliminary quantitative exercise indicates that the model can replicate an inversely U-shaped pattern of war and genocide deaths seen worldwide over the 20th century. Many of the underlying mechanisms also seem consistent with some important stylized facts of growth and war, in particular in 20th century Europe
    Keywords: War, genocide, resource competition, growth, development
    JEL: O4 N40 Q34
    Date: 2006–12–03
  30. By: Peter Lorentzen (Graduate School of Business Stanford University); John McMillan; Romain Wacziarg
    Abstract: Analyzing a variety of cross-national and sub-national data sources, we show that high adult mortality reduces economic growth by shortening time horizons. Higher adult mortality is associated with increased levels of risky behavior, higher fertility and lower investment in physical and human capital. Furthermore, the feedback effect from economic prosperity to better healthcare implies that mortality could be the source of a poverty-trap. In our regressions, adult mortality explains almost all of Africa's growth tragedy over the past forty years. Our analysis also supports grim forecasts of the long-run economic costs of the ongoing AIDS epidemic.
    Keywords: mortality, fertility, human capital, growth, investment
    JEL: I10
    Date: 2006–12–03
  31. By: Matteo Cervellati; Uwe Sunde (IZA)
    Abstract: This paper provides a unified theory of the economic and demographic transition. The main mechanism is based on optimal decisions about fertility and time investments in heterogeneous types of human capital. These decisions depend on different dimensions of health, which themselves are endogenously determined in the process of development. By disentangling the distinct roles that different dimensions of health, such as adult longevity, child mortality, and overall healthiness, play for education and fertility decisions, the model is able to generate dynamics that can replicate the historical development pattern in the Western world. The model generates an endogenous economic transition from a situation of sluggish growth in incomes and productivity to a modern growth regime. Closely related, a demographic transition from high mortality and high fertility to low mortality and low fertility arises, with an intermediate phase of increasing fertility despite falling mortality rates. The model can generate a positive correlation between income and fertility during early stages of development, as well as a decline net fertility in the last phase of the demographic transition, and it provides a rationale for fertility declines that precede drops in child mortality
    Keywords: endogenous life expectancy, child mortality, health, heterogeneous human capital, technological change
    JEL: E10 J10 O10
    Date: 2006–12–03
  32. By: Tasso Adamopoulos (Department of Economics York University)
    Abstract: There are large differences in transportation infrastructure across nations. Constructing a measure of transportation infrastructure density for a large set of countries, I show that the disparity in this measure between the 5% income rich and the 5% income poor countries is a factor of 28. Are these differences a source of productivity differences across nations? Using a three-sector, two-region, general equilibrium model, I show that high transport costs can distort the allocation of resources not only across geographically dispersed production units within sectors but also between agriculture and non-agriculture. Taking as given the observed differences in transportation infrastructure densities, I quantify the role of transportation for cross-country income differences. The calibrated model produces an income disparity of 10.9 between the 5% rich and 5% poor countries. This corresponds to an improvement of 35% relative to the disparity predicted by a two sector model of agriculture and non-agriculture. Furthermore, the effects of advancements in transportation are non-linear: the elasticity of aggregate labor productivity with respect to the stock of transportation infrastructure in the poorest nations is 15 times higher than in the richest ones
    Keywords: Productivity Differences, Sectoral Productivity, Transportation Costs
    JEL: O1 O4 Q10
    Date: 2006–12–03
  33. By: Soohyung Lee
    Abstract: The main questions of this paper are as follows: Whether and to what extent does rising educational attainment contribute to a country's economic growth by facilitating the reallocation of labor from the agricultural sector to the non-agricultural sector? The transition from the agricultural sector to the non-agricultural sector ("transition" hereinafter) is an important aspect of a country's development. Consider China as an example. In China, around 70% of the labor force worked in the agricultural sector in 1980, whereas only 47% remained in the agricultural sector in 2000. Over the same period of time, China's gross domestic product (GDP) per capita increased from U.S. $173 to $856. In addition, cross-country data demonstrate that developed countries have a lower share of employment in agriculture than less-developed countries. For instance, high income countries had 4% of their employees engaged in the agricultural sector in 2000, whereas middle income countries had 40% of their employees working in the agricultural sector. In low income countries, the share may be even larger: in Bangladesh, for example, more than 60% of employees work in the agricultural sector. Based on these empirical observations, using calibration exercises a number of papers have demonstrated the possibility that income differences across countries can be explained by different onsets of transition (Gollin et al. 2002, 2004, Parente et al. 2000, Restuccia et al. 2003). In contrast, there is little empirical research based on micro-level data studying the factors that affect the speed of transition. As far as I am aware, the most closely related empirical study of transition was carried out by Jeong and Kim (2005) using data for Thailand. However, the authors focused more on replicating gradual transition than on determinants governing the speed of transition. They relied on the assumption of “sector specific complementarity between work-experience and labor†to explain the slow transition, but did not provide direct empirical evidence for this assumption. In contrast to existing research, this paper tries to shed light on one hypothesized factor affecting the speed of transition: raising educational attainment may facilitate the labor force moving from the agricultural sector to the non-agricultural sector. I use a Chinese household panel dataset--the China Health and Nutrition Survey (CHNS)--to measure the extent to which educational attainment raises the probability of a worker obtaining a non-agricultural job. To extract the causal effect of education, I use the increase in the number of secondary schools during the Cultural Revolution (CR) in China (1966 to 1976) as an instrumental variable. Reducing the differences between the peasantry and the rest of the population was identified as being a major goal of the CR; as a result of this ideology, the policies of this period promoted mass education among underserved groups, including rural populations especially in terms of the secondary schooling (Hannum 1999). My preliminary results suggest that one more secondary school per 10,000 people in a province is correlated with an increase in 1.15 years of schooling. Using a Probit model with this instrumental variable, I estimate that one more year of schooling raises the probability a worker will obtain a non-agricultural job by 4.53%. However, what does this estimation imply for transition and aggregate economic growth? In China, the share employed in agriculture has decreased from 68.1% in 1982 to 50% in 2000 (Chinese Statistical Yearbook, 2003). On the other hand, the average years of schooling of workers in China has increased from 5.83 years to 7.66 years (Chinese Population Census 1982, 2000). Hence, this increase in schooling, 1.84 years, may have contributed 8.34% points to the decrease in the agricultural share of employment from 1982 to 2000. In terms of the real GDP growth, accurate growth accounting requires further study. However, a back-of-the-envelope calculation suggests that the decrease in the agricultural employment share due to rising educational attainment implies an increase of 0.65% points of the real GDP per worker growth per annum. Although the growth and level accounting remains to be done, I believe that this paper can contribute to the economic growth literature by testing whether and to what extent education causes growth. Within this research literature, many papers have suggested the possibility of a causal effect of education on growth, but a recent study by Bils and Klenow (2000) questions this causal relationship. For example, if we include the role of education in sectoral reallocation (0.65% point), the contribution of education to the annual growth rate of the real GDP per worker increases from about 20% to 32%. Therefore, we can conclude that education causes growth (at least 12%) and that its contribution to growth is significant
    Keywords: Education; Sectoral Shift; Transition; China
    JEL: O1 O5 I2 J6
    Date: 2006–12–03
  34. By: Yaw Nyarko (Economics New York University)
    Abstract: There has been a vast recent literature which has emphasized the role of human capital and knowledge on the economic growth process. This paper presents a model where the knowledge occurs through solving "problems." These problems which are partially idiosyncratic to the country. We think of a problem as a new technique or good. Each nation must master the problems associated with an activity in order to acheive productivity increases and growth. We will follow the tradition of learning by doing models where learning occurs after production on a good, or a particular type or grade of a good. Growth occurs by solving or learning about successively harder problems.
    Keywords: Development
    JEL: O40
    Date: 2006–12–03
  35. By: Alex William Trew
    Abstract: There is a large and growing literature on the relationship between financial development and economic growth. It suggests a positive causal link running from finance to growth. We consider, in broad terms, the existing historical evidence on this connection. We demonstrate that constraints on investment finance occur primarily in the presence of fixed costs. Investments in physical transport infrastructures are prime examples of projects in which financial constraints can retard industrial growth. Furthermore, an appreciation of spatial and dynamic elements is central: Infrastructure development was privately financed by spatially concentrated coalitions of modest investors. We contrast the institutional environment in Britain with that in continental Europe. We develop a theory of finance and growth that can account for the disaggregated and dynamic nature of the finance and development of infrastructure.
    Keywords: finance and growth, endogenous growth, economic integration, economic history.
    JEL: O11 O16 O40 N23
    Date: 2007–01
  36. By: António Antunes (Banco de Portugal, Departamento de Estudos Economicos, and Faculdade de Economia, Universidade Nova de Lisboa); Tiago Cavalcanti (Departamento de Economia, Universidade Federal de Pernambuco, INOVA, Faculdade de Economia, Universi-dade Nova de Lisboa.); Anne Villamil (Department of Economics, University of Illinois at Urbana- Champaign)
    Abstract: This paper studies the effect of financial repression and contract enforcement on entrepreneurship and economic development. We construct and solve a general equilibrium model with heterogeneous agents, occupational choice and two Financial frictions: intermediation costs and financial contract enforcement. Occupational choice and firm size are determined endogenously, and depend on agent type (wealth and ability) and the credit market frictions. The model shows that differences across countries in intermediation costs and enforcement generate differences in occupational choice, firm size, credit, output and inequality. Counterfactual experiments are performed for Latin American, European, transition and high growth Asian countries. We use empirical estimates of each country's financial frictions, and United States values for all other parameters. The results allow us to isolate the quantitative effect of these financial frictions in explaining the performance gap between each country and the United States. The results depend critically on whether a general equilibrium factor price effect is operative, which in turn depends on whether financial markets are open or closed. This yields a positive policy prescription: If the goal is to maximize steady-state efficiency, financial reforms should be accompanied by measures to increase financial capital mobility.
    Keywords: Financial frictions; Financial reform; Occupational choice; Development
    JEL: E60 G38 O11
  37. By: Juan Pineiro Chousa (University of Santiago de Compostila); Haider A. Khan (Graduate School of International Studies, University of Denver); Davit N. Melikyan (GSIS, University of Denver); Artur Tamazian (University of Santiago de Compostila)
    Abstract: The paper tests the hypothesis of a positive impact of democratization on growth and economic development in the sense of capabilities and improvements in well-being. We employ a probit model to estimate the probabilistic indicator for democracy for a large sample of countries. Panel regressions are applied to explain the impact on growth of political institutions (democracy), economic institutions and efficiency of financial management, along with more "traditional" factors. The empirical findings support the hypothesis of decisive role of democratic political and efficient economic institutions in stimulating economic growth. The main results also highlight the importance of effective allocation of financial resources. In addition to the growth regression results, it is argued, consistently with the capabilities approach to development by Sen, that many of the explanatory variables in the growth regression are positively related to development as capabilities enhancement. This is particularly true for democratic freedoms. Finally the problem of 'optimal' institutional development is discussed within the context of resource allocation, migration flows and political decisions.
    Date: 2006–12
  38. By: Richard M. Bird; Enid Slack (International Tax Program, Rotman School of Management, University of Toronto)
    Abstract: We argue in this paper that better rural local governments are needed to improve the lives of billions and that a good property tax is the key to improving rural local governments. Moreover, we suggest that only by giving local governments both the incentive and the ability to levy a property tax can effective rural local government and a meaningful rural property tax be achieved in most countries. Such a tax would often likely be a simple area-based levy, and the central government may not be too happy either with the way communities run the tax or how they spend the proceeds, but the critical role of the central government is to support and facilitate local action on this front, not to supplant it.
    Keywords: property tax, rural local government
    JEL: H11 H71 R51
    Date: 2006–12
  39. By: Giovanni Andrea Cornia; UNICEF Innocenti Research Centre
    Abstract: This paper analyzes the changes that have intervened in the field of income poverty and human poverty since the onset of the transition in Moldova. With a biblical contraction of GDP, a fast rise in inequality, a drop in social expenditure and a weakening of civil society, most indicators of income poverty and human poverty deteriorated sharply since 1991. A clear improvement is evident since 2001, but most indicators of wellbeing still have to recover their pre-transition levels. There is some scope for social and macroeconomic policy to help reducing the negative inheritance of the first ten years of transition. Macroeconomic policy is rather deflationary, and keeps aggregate growth below what is needed to eradicate poverty quickly while paying little attention to its impact on inequality. There is room therefore to place greater emphasis on an equitable pro-poor growth characterized by greater investment in agriculture and higher overall employment intensity, as well as a better allocation of migrant remittances and stronger social policies.
    Keywords: Child Poverty; Education; Family Policies; Social Policies;; Baltic States; Moldova;
    JEL: J13
    Date: 2006
  40. By: James Heintz (Political Economy Research Institute, University of Massachusetts); Fabian Slonimczyk (Department of Economics, University of Massachusetts)
    Abstract: Using estimates of earnings functions in Ghana, this paper examines patterns of labor market segmentation with regard to formal and informal employment. Persistent earnings differentials are used as indicators of limited mobility across segments of the employed labor force. We find evidence of labor market segmentation between formal and informal employment and between different categories of informal employment which cannot be fully explained by human capital, physical asset, or credit market variables. We argue that dualist labor market models may not be appropriate for understanding employment dynamics in all circumstances and an approach that recognizes the multi-segmented character of labor markets may be preferable. JEL Categories: J21, J30, O17, O55.
    Keywords: dualism, labor markets, employment, segmentation, Ghana.
    Date: 2007–01
  41. By: Yongbok Jeon
    Abstract: The aim of this study is to empirically test the validity of the Kaldorian approach to growth and development in China during its reform period of 1979-2004. In order to obtain robust results, both time-series and regional panel data formats are used. The present study finds from both data sets that the Kaldorian hypotheses about economic growth are valid in China during the reform period.
    Keywords: Economic growth in China, Kaldor’s Laws, increasing returns to scale, manufacturing industry
    JEL: O11 O14 O53 E12
    Date: 2006–08
  42. By: Steven Lim (University of Waikato); Michael P. Cameron (University of Waikato); Krailert Taweekui (Khon Kaen University); John Askwith
    Abstract: In resource-constrained developing countries, mobilizing resources from outside sources may assist in overcoming many development challenges. This paper examines the Thai Business Initiative in Rural Development (TBIRD), an NGO-sponsored program that brings together the comparative advantages and self-interest of rural villages, private sector firms and a facilitating NGO, to improve social and community health outcomes in rural areas. We analyze key issues in the program with data from Northeast Thailand. We find that the TBIRD program appears to improve the income earning and other prospects of the TBIRD factory workers. Further, TBIRD factory employment exhibits a pro-poor bias. A key impact is to provide jobs for people who might otherwise be at increased risk of HIV infection through poverty-induced decisions to migrate to urban centres and participate in the commercial sex industry. This program adds another important tool for development planners in the fight against HIV/AIDS.
    Keywords: rural development; poverty; HIV/AIDS; Thailand
    JEL: O29 I38 L31
    Date: 2007–01–15
  43. By: Mahul, Olivier; Gurenko, Eugene
    Abstract: The authors propose a financial model to address the design of efficient risk financing strategies against natural disasters at the country level. It is simple enough to shed analytical light on some of the key issues but flexible and realistic enough to provide some quantitative guidance on the ex ante financing of catastrophic losses. The risk financing problem is decomposed into two steps. First, the resource gap, defined as the difference between losses and available ex-post resources (such as post-disaster aid), is identified. It determines the losses to be financed by ex ante financial instruments (reserves, catastrophe insurance, and contingent debt). Second, the cost-minimizing financial arrangements are derived from the marginal costs of the financial instruments. The model is solved through a series of graphical analyses that make this complex financial problem easier to apprehend. This model captures and explains the main impacts of financial parameters (such as insurance premium, cost of capital) on efficient risk financing structures.
    Keywords: Insurance & Risk Mitigation,Banks & Banking Reform,Financial Intermediation,Natural Disasters,Non Bank Financial Institutions
    Date: 2006–12–01
  44. By: Sakho, Yaye Seynabou
    Abstract: The author investigates whether contagion matters when emerging market firms cross-list their stocks in a developed capital market. She develops a rational expectations model where financial markets are segmented along emerging markets ' borders and contagion spreads from one emerging market to another through the actions of international investors rebalancing their portfolio using stocks cross-listed in the developed market. The author finds that contagion is a cost of internationalization as cross-listed stocks are more affected by contagion than pure domestic stocks. Furthermore, a welfare analysis of international cross-listing versus financial autarky suggests that the benefits of internationalization in terms of less information asymmetry and better market efficiency offset the costs of contagion. Her model is able to explain some transmission of the 1998 Brazilian crisis to Mexico and Chile.
    Keywords: Markets and Market Access,Investment and Investment Climate,Access to Markets,Financial Intermediation,Economic Theory & Research
    Date: 2006–12–01
  45. By: Loayza, Norman V.; Raddatz, Claudio
    Abstract: This paper contributes to explain the cross-country heterogeneity of the poverty response to changes in economic growth. It does so by focusing on the structure of output growth. The paper presents a two-sector theoretical model that clarifies the mechanism through which the sectoral composition of growth and associated labor intensity can affect workers ' wages and, thus, poverty alleviation. Then it presents cross-country empirical evidence that analyzes first, the differential poverty-reducing impact of sectoral growth at various levels of disaggregation, and the role of unskilled labor intensity in such differential impact. The paper finds evidence that not only the size of economic growth but also its composition matters for poverty alleviation, with the largest contributions from labor-intensive sectors (such as agriculture, construction, and manufacturing). The results are robust to the influence of outliers, alternative explanations, and various poverty measures.
    Keywords: Pro-Poor Growth and Inequality,Population Policies,Economic Growth,Rural Poverty Reduction,Labor Markets
    Date: 2006–12–01
  46. By: Loayza, Norman V.; Rigolini, Jamele
    Abstract: This paper studies the trends and cycles of informal employment. It first presents a theoretical model where the size of informal employment is determined by the relative costs and benefits of informality and the distribution of workers ' skills. In the long run, informal employment varies with the trends in these variables, and in the short run it reacts to accommodate transient shocks and to close the gap that separates it from its trend level. The paper then uses an error-correction framework to examine empirically informality ' s long- and short-run relationships. For this purpose, it uses country-level data at annual frequency for a sample of industrial and developing countries, with the share of self-employment in the labor force as the proxy for informal employment. The paper finds that, in the long run, informality is larger in countries that have lower GDP per capita and impose more costs to formal firms in the form of more rigid business regulations, less valuable police and judicial services, and weaker monitoring of informality. In the short run, informal employment is found to be counter-cyclical for the majority of countries, with the degree of counter-cyclicality being lower in countries with larger informal employment and better police and judicial services. Moreover, informal employment follows a stable, trend-reverting process. These results are robust to changes in the sample and to the influence of outliers, even when only developing countries are considered in the analysis.
    Keywords: Labor Markets,Economic Theory & Research,Work & Working Conditions,Labor Standards,Inequality
    Date: 2006–12–01
  47. By: Beck, Thorsten; Demirguc-Kunt, Asli; Martinez Peria, Maria Soledad
    Abstract: Using information from 193 banks in 58 countries, the authors develop and analyze indicators of physical access, affordability, and eligibility barriers to deposit, loan, and payment services. They find substantial cross-country variation in barriers to banking and show that in many countries these barriers can potentially exclude a significant share of the population from using banking services. Correlations with bank- and country-level variables show that bank size and the availability of physical infrastructure are the most robust predictors of barriers. Further, the authors find evidence that in more competitive, open, and transparent economies, and in countries with better contractual and informational frameworks, banks impose lower barriers. Finally, though foreign banks seem to charge higher fees than other banks, in foreign dominated banking systems fees are lower and it is easier to open bank accounts and to apply for loans. On the other hand, in systems that are predominantly government-owned, customers pay lower fees but also face greater restrictions in terms of where to apply for loans and how long it takes to have applications processed. These findings have important implications for policy reforms to broaden access.
    Keywords: Banks & Banking Reform,Financial Intermediation,Economic Theory & Research,Financial Crisis Management & Restructuring,Competitiveness and Competition Policy
    Date: 2006–12–01
  48. By: Claessens, Stijn; Feijen, Erik
    Abstract: Using cross-country and panel regressions, the authors show that financial sector development significantly reduces undernourishment (hunger), largely through gaining farmers and others access to productivity-enhancing equipment, translating into beneficial income and general effects. They show specifically that a deeper financial sector leads to higher agricultural productivity, including higher cereal yields, through increased fertilizer and tractor use. Higher productivity in turn leads to lower undernourishment. The results are robust to various specifications and econometric tests and imply that a 1 percentage point increase in private credit to GDP reduces undernourishment by 0.22-2.45 percentage points, or about one-quarter the impact of GDP per capita.
    Keywords: Economic Theory & Research,Rural Poverty Reduction,Pro-Poor Growth and Inequality,Inequality
    Date: 2006–12–01
  49. By: Estache, Antonio; Goicoechea, Ana; Trujillo, Lourdes
    Abstract: This paper shows empirically that " privatization " in the energy, telecommunications, and water sectors, and the introduction of independent regulators in those sectors, have not always had the expected effects on access, affordability, or quality of services. It also shows that corruption leads to adjustments in the quantity, quality, and price of services consistent with the profit-maximizing behavior that one would expect from monopolies in the sector. The results suggest that privatization and the introduction of independent regulators have, at best, only partial effects on the consequences of corruption for access, affordability, and quality of utility services.
    Keywords: Infrastructure Regulation,Energy Production and Transportation,Town Water Supply and Sanitation,Social Accountability,ICT Policy and Strategies
    Date: 2006–12–01
  50. By: Beegle, Kathleen; De Weerdt, Joachim; Dercon, Stefan
    Abstract: The authors use a 13-year panel of individuals in Tanzania to assess how adult mortality shocks affect both short and long-run consumption growth of surviving household members. Using unique data which tracks individuals from 1991 to 2004, they examine consumption growth, controlling for a set of initial community, household and individual characteristics. The effect is identified using the sample of households in 2004 which grew out of baseline households. The authors find robust evidence that an affected household will see consumption drop 7 percent within the first five years after the adult death. With high growth in the sample over this time period, this creates a 19 percentage point growth gap with the average household. There is some evidence of persistent effects of these shocks for up to 13 years, but these effects are imprecisely estimated and not significantly different from zero. The impact of female adult death is found to be particularly severe.
    Keywords: Population Policies,Consumption,Housing & Human Habitats,Poverty Lines,Inequality
    Date: 2006–12–01
  51. By: Dinar, Ariel; Farolfi, Stefano; Patrone, Fioravante; Rowntree, Kate
    Abstract: Governments and developing agencies promote participatory approaches in solving common pool resource problems, such as in the water sector. Two main participatory approaches have been applied separately, namely negotiation and mediation. In this paper the authors apply the Role-Playing Game that is a component of the Companion Modeling approach, a negotiation procedure, and the Cooperative Game Theory (Shapley value and the Nucleolus solution concepts) that can be mirrored as a mediated mechanism to a water allocation problem in the Kat watershed in South Africa. While the absolute results of the two approaches differ, the negotiation and the cooperative game theory provide similar shares of the benefit allocated to the players from various cooperative arrangements. By evaluating the two approaches, the authors provide useful tips for future extension for both the Role-Playing Games and the Cooperative Game Theory applications.
    Keywords: Water Supply and Systems,Water Supply and Sanitation Governance and Institutions,Environmental Economics & Policies,Water Conservation,Town Water Supply and Sanitation
    Date: 2006–12–01
  52. By: Chen, Shaohua; Mu, Ren; Ravallion, Martin
    Abstract: The paper revisits the site of a large, World Bank-financed, rural development program in China 10 years after it began and four years after disbursements ended. The program emphasized community participation in multi-sectoral interventions (including farming, animal husbandry, infrastructure and social services). Data were collected on 2,000 households in project and nonproject areas, spanning 10 years. A double-difference estimator of the program ' s impact (on top of pre-existing governmental programs) reveals sizeable short-term income gains that were mostly saved. Only modest gains to mean consumption emerged in the longer term-in rough accord with the gain to permanent income. Certain types of households gained more than others. The educated poor were under-covered by the community-based selection process-greatly reducing overall impact. The main results are robust to corrections for various sources of selection bias, including village targeting and interference due to spillover effects generated by the response of local governments to the external aid.
    Keywords: Rural Poverty Reduction,Poverty Monitoring & Analysis,Economic Theory & Research,Poverty Impact Evaluation,Social Accountability
    Date: 2006–12–01
  53. By: Do, Quy-Toan; Iyer, Sriya; Joshi, Shareen
    Abstract: The institution of consanguineous marriage-a marriage contracted between close biological relatives-has been a basic building block of many societies in different parts of the world. This paper argues that the practice of consanguinity is closely related to the practice of dowry, and that both arise in response to an agency problem between the families of a bride and a groom. When marriage contracts are incomplete, dowries transfer control rights to the party with the highest incentives to invest in a marriage. When these transactions are costly however, consanguinity can be a more appropriate response since it directly reduces the agency cost. The paper ' s model predicts that dowry transfers are less likely to be observed in consanguineous unions. It also emphasizes the effect of credit constraints on the relative prevalence of dowry payment and consanguinity. An empirical analysis using data from Bangladesh delivers robust results consistent with the predictions of the model.
    Keywords: Anthropology,Population Policies,Education and Society,Population & Development,Gender and Law
    Date: 2006–12–01
  54. By: Das, Jishnu; Sohnesen, Thomas Pave
    Abstract: To examine the relationship between patient satisfaction and doctor performance, the authors observed 2,271 interactions between 292 doctors and their patients in 98 clinics and hospitals in Paraguay and conducted an exit-survey with the same patients as they left the clinic. For a subsample of 64 facilities they also interviewed patients who visited the facility within the last week. There are three patterns in the data: (1) Patient satisfaction is positively correlated with doctor effort, measured as a combination of time spent, questions asked, and examinations performed after controlling for observed doctor and patient characteristics; (2) However, accounting for unobserved doctor characteristics dramatically reduces the level of significance and size of correlation between effort and satisfaction, showing that much of the positive relationship is driven by these unobserved doctor-specific factors; and (3) Reported satisfaction is significantly lower for patients interviewed at home compared with those interviewed at the clinic. This leads the authors to conclude that even if patient satisfaction reflects some aspects of the doctor ' s performance, unobserved heterogeneity combined with survey biases limit the widespread applicability of patient satisfaction as an indicator of doctor performance.
    Keywords: Health Monitoring & Evaluation,Health Systems Development & Reform,Health Law,Educational Sciences,Gender and Health
    Date: 2006–12–01
  55. By: Niimi, Yoko; Ozden, Caglar
    Abstract: The authors empirically examine the determinants of remittance flows at the cross-country level. They consider, among other things, the significance of the level of migration, the education level of migrants, and financial sector development in determining remittances. Given the potential endogeneity problems, the migration and financial development variables are instrumented in the estimation. They find that the migration level is the main driver of remittance flows, even after controlling for the endogeneity bias through instrumental variable estimation. The authors also find that the education level of migrants relative to the population in home countries, the size of the economy, and the level of economic development of recipient countries adversely affect remittance flows. While they find the effect of financial sector development to be positive, its significance is not strongly supported in their analysis.
    Keywords: Population Policies,Remittances,Economic Theory & Research,Banks & Banking Reform,Pro-Poor Growth and Inequality
    Date: 2006–12–01
  56. By: Bussolo, Maurizio; Godart, Olivier; Lay, Jann; Thiele, Rainer
    Abstract: Policies and external shocks affecting agriculture, the main source of income for rural households, can be expected to have a significant impact on poverty. The authors study the case of Uganda. Throughout the 1990s, more than 90 percent of its poor lived in rural areas and, during the same period, large international price fluctuations as well as an extensive domestic deregulation affected the coffee sector, its main source of export revenues. Using data from three household surveys covering the 1990s, the authors confirm a strong correlation between changes in coffee prices (in a liberalized market) and poverty reduction. This is highlighted by comparing the performance of different households grouped according to their dependence on coffee farming. Regression analysis (based on pooled data from the three surveys) of consumption expenditure on coffee-related variables, other controls, and time-fixed effects corroborates that the mentioned correlation is not spurious. The authors also find that while both poor and rich farmers enter the coffee sector, the price boom benefits the poorer households relatively more, whereas the liberalization seems to create more opportunities for richer farmers. Finally, notwithstanding the importance of the coffee price boom, the agricultural policy framework and the thorough structural reforms in which the coffee market liberalization was embedded have certainly played a role in triggering overall agricultural growth. These factors appear to matter especially in the second half of the 1990s when prices went down but poverty reduction continued.
    Keywords: Crops & Crop Management Systems,Markets and Market Access,Rural Poverty Reduction,Access to Markets
    Date: 2006–12–01
  57. By: Loayza, Norman V.; Raddatz, Claudio
    Abstract: The authors examine empirically how domestic structural characteristics related to openness and product- and factor-market flexibility influence the impact that terms-of-trade shocks can have on aggregate output. For this purpose, they apply an econometric methodology based on semi-structural vector auto-regressions to a panel of 90 countries with annual observations for the period 1974-2000. Using this methodology, the authors isolate and standardize the shocks, estimate their impact on GDP, and examine how this impact depends on the domestic conditions outlined above. They find that larger trade openness magnifies the output impact of external shocks, particularly the negative ones, while improvements in labor market flexibility and financial openness reduce their impact. Domestic financial depth has a more nuanced role in stabilizing the economy. It helps reduce the impact of external shocks particularly in environments of high exposure-that is, when trade and financial openness are high, firm entry is unrestricted, and labor markets are rigid.
    Keywords: Pro-Poor Growth and Inequality,Free Trade,Economic Theory & Research,Inequality,Macroeconomic Management
    Date: 2006–12–01
  58. By: Dhillon, Amrita; Rigolini, Jamele
    Abstract: The authors examine how institutions that enforce contracts between two parties-producers and consumers-interact in a competitive market with one-sided asymmetric information and productivity shocks. They compare an informal enforcement mechanism, reputation, the efficacy of which is enhanced by consumers investing in " connectedness, " with a formal mechanism, legal enforcement, the effectiveness of which can be reduced by producers by means of bribes. When legal enforcement is poor, consumers connect more with one another to improve informal enforcement. In contrast, a well-connected network of consumers reduces producers ' incentives to bribe. In equilibrium, the model predicts a positive relationship between the frequency of productivity shocks, bribing, and the use of informal enforcement, providing a physical explanation of why developing countries often fail to have efficient legal systems. Firm-level estimations confirm the partial equilibrium implications of the model.
    Keywords: Economic Theory & Research,Insurance & Risk Mitigation,Markets and Market Access,Business Environment,Business in Development
    Date: 2006–12–01
  59. By: Bogomolova, Tatiana; Impavido, Gregorio; Pallares-Miralles, Montserrat
    Abstract: This paper analyzes the future liabilities that the Ugandan Public Service Pensions Fund might accumulate under the provisions of the Pensions Act (CAP 286) unless it is reformed. It then discusses alternative reform options that can be used in designing an educated homegrown reform of the fund. The paper supports a hybrid (two-pillar) reform option composed of a small defined benefit scheme and a complementary defined contribution scheme, instead of a pure defined contribution (monopillar) reform option discussed by policymakers in the country. The main reason for this is related to the fact that hybrid and pure defined contribution reforms will have the same impact on reducing pension expenditure (for the same grandfathering rules and surplus in the first pillar). In addition, everything else being equal, the hybrid reform is likely to produce higher average replacement rates due to the redistributive and pooling properties of the small defined benefit pillar.
    Keywords: Pensions & Retirement Systems,Enterprise Development & Reform,Population Policies,State Owned Enterprise Reform,Labor Markets
    Date: 2006–12–01
  60. By: Anderson, Kym
    Abstract: Most of the world ' s poorest people depend on farming for their livelihood. Earnings from farming in low-income countries are depressed partly due to a pro-urban bias in own-country policies, and partly because richer countries (including some developing countries) favor their farmers with import barriers and subsidies. Both sets of policies reduce national and global economic growth and add to inequality and poverty in developing countries. Acknowledgement of that since the 1980s has given rise to greater pressures for reform, both internal and external. Over the past two decades numerous developing country governments have reduced their sectoral and trade policy distortions, while many high-income countries continue with protectionist policies that harm developing country exports of farm products. Recent research suggests that the agricultural protectionist policies of high-income countries reduce welfare in many developing countries. Most of those studies also suggest that full global liberalization of merchandise trade would raise value added in agriculture in developing country regions, and that much of the benefit from global reform would come not just from reform in high-income countries but also from liberalization among developing countries, including in many cases own-country reform. These findings raise three key questions that are addressed in this paper: To what extent have the reforms of the past two decades succeeded in reducing distortions to agricultural incentives? Do current policy distortions still discriminate against farmers in low-income countries? And what are the prospects for further reform in the next decade or so?
    Keywords: Economic Theory & Research,Agribusiness,Free Trade,Rural Development Knowledge & Information Systems,Pro-Poor Growth and Inequality
    Date: 2006–12–01
  61. By: Verner, Dorte
    Abstract: This paper addresses three areas of the rural labor market-employment, labor wages, and agriculture producer incomes. Findings show that the poor allocate a lower share of their labor to farm sectors than the nonpoor do, but still around 70 percent work in agriculture, and the vast majority of rural workers are engaged in the informal sector. When examining nonfarm employment in rural Argentina, findings suggest that key determinants of access to employment and productivity in nonfarm activities are education, skills, land access, location, and gender. Employment analyses show that women have higher probability than men to participate in rural nonfarm activities and they are not confined to low-return employment. Moreover, workers living in poorer regions with land access are less likely to be employed in the nonfarm sector. There is strong evidence that educated people have better prospects in both the farm and nonfarm sectors, and that education is an important determinant of employment in the better-paid nonfarm activities. Labor wage analyses reveal that labor markets pay lower returns to poorer than to richer women and returns to education are increasing with increased level of completed education and income level. And nonfarm income and employment are highly correlated with gender, skills, household size, and education. This analysis also shows a rather heterogeneous impact pattern of individual characteristics across the income distribution, but education is important for all levels of income. Agricultural producer income analyses reveal that producers ' income monotonically increases with land size and with completed education level, and positively correlates with road access and use of electricity, fertilizer, and irrigation. Finally, farms operated by women are slightly more productive than farms operated by men.
    Keywords: Rural Poverty Reduction,Labor Markets,Population Policies,Work & Working Conditions
    Date: 2006–12–01
  62. By: Verner, Dorte
    Abstract: Rural poverty remains a crucial part of the poverty picture in Argentina. This paper used a rural dataset collected by the World Bank in 2003. Findings show that extreme income poverty in rural areas reached 39 percent of the people or 200,000-250,000 indigent families. These families tend to: be large, and young, and to escape from poverty as they mature and children leave the household (life cycle); live largely in dispersed areas where basic service provision is often weak and delivery is difficult (in particular school attendance beyond 11 years of age falls off very rapidly compared with grouped rural or urban areas); and be more likely to be small landholders than landless laborers. The structure of poverty in rural Argentina shows that larger households are poorer than smaller households, female-headed households are poorer than male-headed households, young households/household heads are poorer than older households/household heads, the poor tend to work more in the informal sector, and a greater share of those engaged in agriculture are poor. However, poverty is by no means strictly an agricultural problem. Furthermore, the deepest poverty is among the poorly educated and young household heads with children. Without interventions to improve their opportunities and assets, their plight is likely to worsen.
    Keywords: Rural Poverty Reduction,Population Policies,Pro-Poor Growth and Inequality,Services & Transfers to Poor
    Date: 2006–12–01
  63. By: Buys, Piet; Deichmann, Uwe; Wheeler, David
    Abstract: Recent research suggests that isolation from regional and international markets has contributed significantly to poverty in many Sub-Saharan African countries. Numerous empirical studies identify poor transport infrastructure and border restrictions as significant deterrents to trade expansion. In response, the African Development Bank has proposed an integrated network of functional roads for the subcontinent. Drawing on new econometric results, the authors quantify the trade-expansion potential and costs of such a network. They use spatial network analysis techniques to identify a network of primary roads connecting all Sub-Saharan capitals and other cities with populations over 500,000. The authors estimate current overland trade flows in the network using econometrically-estimated gravity model parameters, road transport quality indicators, actual road distances, and estimates of economic scale for cities in the network. Then they simulate the effect of feasible continental upgrading by setting network transport quality at a level that is functional, but less highly developed than existing roads in countries like South Africa and Botswana. The authors assess the costs of upgrading with econometric evidence from a large World Bank database of road project costs in Africa. Using a standard approach to forecast error estimation, they derive a range of potential benefits and costs. Their baseline results indicate that continental network upgrading would expand overland trade by about $250 billion over 15 years, with major direct and indirect benefits for the rural poor. Financing the program would require about $20 billion for initial upgrading and $1 billion annually for maintenance. The authors conclude with a discussion of supporting institutional arrangements and the potential cost of implementing them.
    Keywords: Transport Economics Policy & Planning,Common Carriers Industry,Rural Roads & Transport,Transport and Trade Logistics,Economic Theory & Research
    Date: 2006–12–01
  64. By: Arena, Marco
    Abstract: Insurance market activity, both as a financial intermediary and a provider of risk transfer and indemnification, may contribute to economic growth by allowing different risks to be managed more efficiently and by mobilizing domestic savings. During the past decade, there has been faster growth in insurance market activity, particularly in emerging markets given the process of liberalization and financial integration, which raises questions about its impact on economic growth. The author tests whether there is a causal relationship between insurance market activity (life and nonlife insurance) and economic growth. Using the generalized method of moments for dynamic models of panel data for 56 countries and for the 1976-2004 period, he finds robust evidence of a causal relationship between insurance market activity and economic growth. Both life and nonlife insurance have a positive and significant causal effect on economic growth. High-income countries drive the results in the case of life insurance. On the other hand, both high-income and developing countries drive the results in the case of nonlife insurance.
    Keywords: Insurance & Risk Mitigation,Economic Theory & Research,Banks & Banking Reform,Financial Intermediation,Non Bank Financial Institutions
    Date: 2006–12–01
  65. By: Kenny, Charles
    Abstract: This paper examines what we can say about the extent and impact of corruption in infrastructure in developing countries using existing evidence. It looks at different approaches to estimating the extent of corruption and reports on the results of such studies. It suggests that there is considerable evidence that most existing perceptions measures appear to be very weak proxies for the actual extent of corruption in the infrastructure sector, largely (but inaccurately) measuring petty rather than grand corruption. Existing survey evidence is more reliable, but limited in extent and still subject to sufficient uncertainty that it should not be used as a tool for differentiating countries in terms of access to infrastructure finance or appropriate policy models. The paper discusses evidence for the relative costs of corruption impacts and suggests that a focus on bribe payments as the indicator of the costs of corruption in infrastructure may be misplaced. It draws some conclusions regarding priorities for infrastructure anti-corruption research and activities in projects, in particular regarding disaggregated and actionable indicators of weak governance and corruption.
    Keywords: Corruption & Anitcorruption Law,Public Sector Corruption & Anticorruption Measures,Poverty Monitoring & Analysis,Social Accountability,Government Diagnostic Capacity Building
    Date: 2006–12–01
  66. By: Shah, Anwar; Shen, Chunli
    Abstract: In China, most of the service delivery responsibilities are assigned to the subnational governments. Yet for reasons of efficiency in tax collection and administration, the central government collects revenues far in excess of its expenditure needs. In 2003 the central government collected 70 percent of consolidated revenues but accounted for only 30 percent of consolidated expenditures. The initial fiscal surplus of the central government enables it to use its spending power to provide financing to subnational jurisdictions for the achievement of national objectives and to influence local priorities. This paper examines the incentives associated with the design of such transfers and their implications for the efficiency and equity of public service provision and accountable local governance in China. The paper argues that the existing design of such transfers is not consistent with efficiency and equity considerations. It further undermines local autonomy without enhancing local accountability while creating incentives for imprudent fiscal management. Its main limitations include a complex and opaque system, a piecemeal approach to gap filling, lack of consistency of design with objectives, focus on input controls without regard for output accountability, incentives to support an antiquated management paradigm, a one-size-fits-all approach to local financing, and lack of transparency and regulatory framework for the intergovernmental transfer system. The paper makes specific suggestions on a reform of this system to overcome these limitations and on better use of fiscal transfers to create responsive, responsible, equitable, and accountable local governance in China.
    Keywords: Intergovernmental Fiscal Relations and Local Finance Management,Regional Governance,Public & Municipal Finance,Urban Economics,Public Sector Management and Reform
    Date: 2006–12–01
  67. By: Gasmi, Farid; Noumba Um, Paul; Virto, Laura Recuero
    Abstract: The aim of this paper is to empirically explore the relationship between the quality of political institutions and the performance of regulation, an issue that has recently occupied much of the policy debate on the effectiveness of infrastructure industry reforms. Taking the view that political accountability is a key factor that links political structures and regulatory processes, the authors investigate, for the case of telecommunications, its impact on the performance of regulation in two time-series-cross-sectional data sets on 29 developing countries and 23 industrial countries covering the period 1985-99. In addition to confirming some well documented results on the positive role of regulatory governance in infrastructure industries, the authors provide empirical evidence on the impact of the quality of political institutions and their modes of functioning on regulatory performance. The analysis of the data sets shows that the (positive) effect of political accountability on the performance of regulation is stronger in developing countries. An important policy implication of this finding is that future reforms in these countries should give due attention to the development of politically accountable systems.
    Keywords: Infrastructure Regulation,Governance Indicators,National Governance,Statistical & Mathematical Sciences,Econometrics
    Date: 2006–12–01
  68. By: Chaudhury, Nazmul; Parajuli, Dilip
    Abstract: Instead of mean-tested conditional cash transfer (CCT) programs, some countries have implemented gender-targeted CCTs to explicitly address intra-household disparities in human capital investments. This study focuses on addressing the direct impact of a female school stipend program in Punjab, Pakistan: Did the intervention increase female enrollment in public schools? To address this question, the authors draw on data from the provincial school censuses of 2003 and 2005. They estimate the net growth in female enrollments in grades 6-8 in stipend eligible schools. Impact evaluation analysis, including difference-and-difference (DD), triple differencing (DDD), and regression-discontinuity design (RDD) indicate a modest but statistically significant impact of the intervention. The preferred estimator derived from a combination of DDD and RDD empirical strategies suggests that the average program impact between 2003 and 2005 was an increase of six female students per school in terms of absolute change and an increase of 9 percent in female enrollment in terms of relative change. A triangulation effort is also undertaken using two rounds of a nationally representative household survey before and after the intervention. Even though the surveys are not representative at the subprovincial level, the results corroborate evidence of the impact using school census data.
    Keywords: Education For All,Primary Education,Tertiary Education,Gender and Education,Education Reform and Management
    Date: 2006–12–01
  69. By: Claessens, Stijn
    Abstract: Financial intermediation and financial services industries have undergone many changes in the past two decades due to deregulation, globalization, and technological advances. The framework for regulating finance has seen many changes as well, with approaches adapting to new issues arising in specific groups of countries or globally. The objectives of this paper are twofold: to review current international thinking on what regulatory framework is needed to develop a financial sector that is stable, yet efficient, and provides proper access to households and firms; and to review the key experiences regarding international financial architecture initiatives, with a special focus on issues arising for developing countries. The paper outlines a number of areas of current debate: the special role of banks, competition policy, consumer protection, harmonization of rules-across products, within markets, and globally-and the adaptation and legitimacy of international standards to the circumstances facing developing countries. It concludes with some areas where more research would be useful.
    Keywords: Banks & Banking Reform,Financial Intermediation,Non Bank Financial Institutions,Economic Theory & Research,ICT Policy and Strategies
    Date: 2006–12–01
  70. By: Shepherd, Ben; Wilson, John S.
    Abstract: The authors present a new database of minimum distance road routes connecting 138 cities in 27 countries across Europe and Central Asia. They use it to show that improved road network quality is robustly associated with higher intraregional trade flows. Gravity model simulations suggest that an ambitious but feasible road upgrade could increase trade by 50 percent over baseline, exceeding the expected gains from tariff reductions or trade facilitation programs of comparable scope. Cross-country spillovers due to overland transit are important: total intraregional trade could be increased by 30 percent by upgrading roads in just three countries-Albania, Hungary, and Romania.
    Keywords: Transport Economics Policy & Planning,Free Trade,Common Carriers Industry,Transport and Trade Logistics,Trade Law
    Date: 2006–12–01
  71. By: Ferreira, Francisco H. G.; Leite, Phillippe G.; Wai-Poi, Matthew
    Abstract: Using nationally representative, economywide data, this paper investigates the relative importance of trade-mandated effects on industry wage premia; industry and economywide skill premia; and employment flows in accounting for changes in the wage distribution in Brazil during the 1988-95 trade liberalization. Unlike in other Latin American countries, trade liberalization appears to have made a significant contribution toward a reduction in wage inequality. These effects have not occurred through changes in industry-specific (wage or skill) premia. Instead, they appear to have been channeled through substantial employment flows across sectors and formality categories. Changes in the economywide skill premium are also important.
    Keywords: Economic Theory & Research,Free Trade,Labor Markets,Trade Policy,Trade Law
    Date: 2007–01–01
  72. By: Justesen, Michael; Verner, Dorte
    Abstract: Of the 1.6 million Haitian youth aged 15-24, only 13 percent are content with their lives. More than half of 20-year-olds have not completed secondary education and nearly half of youth in the labor market are unemployed. This paper investigates protective and risk factors predisposing youth to positive and negative behaviors. These factors, including poverty, gender, education, labor market, migration, family, health, and violence, are examined by using statistics and probability models based on Haiti ' s first household living conditions survey. Key findings show that female youth need special attention because they are more likely than their male peers to drop out of school and to be unemployed or inactive. Role models, guidance, expectations, and contacts in the form of parents or household heads are decisive factors in keeping youth in school, and to some extent, in their finding employment. In addition, domestic migration has a negative impact on the probability of being unemployed or inactive (positive self-selection), while marriage, drug abuse, and domestic violence increase the probability of dropping out of school.
    Keywords: Youth and Governance,Adolescent Health,Population Policies,Primary Education,Education For All
    Date: 2007–01–01
  73. By: Subramanian, Uma; Matthijs, Matthias
    Abstract: This paper examines opportunities for Sub-Saharan African countries to effectively participate in globalization, particularly given the increasing interest of China and India in Sub-Saharan Africa. How can Sub-Saharan Africa fully engage and gain benefits from global network trade? Over the past 15 years Asia has become Africa ' s fastest growing export market. Asian countries are much more open to trade than Europe or America. There seems to be no evidence to suggest that this trend will not continue in the near future. The authors acknowledge the numerous caveats in Asia ' s growing interest in the African continent, not least the " resource curse " of exports that are heavily concentrated on oil, minerals, and raw materials, as well as the fierce competition from Asia ' s cheap manufactured exports. However, they believe that there is strong evidence to suggest a clear potential for South-South cooperation in trade and investment. Drawing on evidence from their extensive research into international value chains, the authors identify five critical factors for effective participation in global network trade: price, speed-to-market, labor productivity, flexibility, and product quality. Underlying competitive performance of these critical factors are a country ' s policies and institutions. Effective policies, efficient institutions, and the necessary infrastructure will ensure the best outcome for trading countries. To improve the depth and sustainability of these five critical factors, it is important that developing countries create a supportive policy and institutional framework from the outset.
    Keywords: Markets and Market Access,Economic Theory & Research,Access to Markets,Transport Economics Policy & Planning,Transport and Trade Logistics
    Date: 2007–01–01

This nep-dev issue is ©2007 by Jeong-Joon Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.