nep-dev New Economics Papers
on Development
Issue of 2007‒02‒17
forty-five papers chosen by
Jeong-Joon Lee
Towson University

  1. Export Orientation among New Ventures and Economic Growth By Hessels, S.J.A.; Stel, A.J. van
  2. Family Planning as an Investment in Development: Evaluation of a Program's Consequences in Matlab, Bangladesh By Shareen Joshi; T. Paul Schultz
  3. The Political Economy of Infrastructure Investment in India By Chetan Ghate
  4. Does Education Matter in Patience Formation? Evidence from Ugandan Villages By Michal Bauer; Julie Chytilová
  5. Pro-Poor Growth and Gender Inequality By Stephan Klasen
  6. A Multilevel Approach to Explain Child Mortality and Undernutrition in South Asia and Sub-Saharan Africa By Kenneth Harttgen; Mark Misselhorn
  7. Competitive and Segmented Informal Labor Markets By Isabel Günther; Andrey Launov
  8. A Human Development Index by Income Groups By Michael Grimm; Kenneth Harttgen; Stephan Klasen; Mark Misselhorn
  9. Poverty, Undernutrition, and Child Mortality: Some Inter-Regional Puzzles and their Implications for Research and Policy By Stephan Klasen
  10. Perspectives on the World Income Distribution - Beyond Twin Peaks Towards Welfare Conclusions By Hajo Holzmann; Sebastian Vollmer; Julian Weisbrod
  11. Trends in Hours and Economic Growth By L. Rachel Ngai; Christopher A. Pissarides
  12. The Impact of Tax Morale and Institutional Quality on the Shadow Economy By Benno Torgler; Friedrich Schneider
  13. Stunting and Selection Effects of Famine: A Case Study of the Great Chinese Famine By Tue Gørgens; Xin Meng; Rhema Vaithianathan
  14. Exploring the Impact of Interrupted Education on Earnings: The Educational Cost of the Chinese Cultural Revolution By Xin Meng; Robert Gregory
  15. Wealth Accumulation and Distribution in Urban China By Xin Meng
  16. Does a Food for Education Program Affect School Outcomes? The Bangladesh Case By Xin Meng; Jim Ryan
  17. Growth, Development, and Technological Change By Volker Grossmann; Thomas M. Steger
  18. Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis By Benno Torgler; Friedrich Schneider
  19. Intra-household Gender Disparities in Children’s Medical Care before Death in India By Abay Asfaw; Stephan Klasen; Francesca Lamanna
  20. The shadow economy in Colombia: size and effects on economic growth By Friedrich Schneider; Bettina Hametner
  21. Growth, public investment and corruption with failing institutions. By David De la Croix; Clara Delavallade
  22. Education, corruption and growth in developing countries. By Cuong Le Van; Mathilde Maurel
  23. How " natural " are natural monopolies in the water supply and sewerage sector ? Case studies from developing and transition economies By Nauges, Celine; van den Berg, Caroline
  24. Artificial States By William Easterly; Alberto Alesina; Janina Matuszeski
  25. Payments for Progress: A Hands-Off Approach to Foreign Aid By Nancy Birdsall; Owen Barder
  26. Why Are There So Few Black-Owned Firms in Africa? Preliminary Results from Enterprise Survey Data By Vijaya Ramachandran; Manju Kedia Shah
  27. Female Empowerment: Impact of a Commitment Savings Product in the Philippines* By Dean Karlan; Nava Ashraf; Wesley Yin
  28. A Millennium Learning Goal: Measuring Real Progress in Education By Deon Filmer; Amer Hasan; Lant Pritchett
  29. China’s Exchange Rate Appreciation in the Light of the Earlier Japanese Experience By McKinnon, Ronald
  30. Educational(work)performance in african countries:problems policies and prospects By Nwaobi, Godwin
  31. On the re-assessment of inequality in Indonesia: household survey or national account? By Yusuf, Arief Anshory
  32. The economic consequences of the flight By Beja, Jr., Edsel
  33. Rising Regional Inequality in China: Policy Regimes and Structural Changes By Ho, Chun-Yu; Li, Dan
  40. AN EMPLOYMENT-TARGETED ECONOMIC PROGRAM FOR SOUTH AFRICA By Robert Pollin; Gerald Epstein; James Heintz; Leonce Ndikumana
  44. Education and economic growth By Geraint Johnes
  45. Measuring the research performance of Chinese higher education institutions using data envelopment analysis By Jill Johnes; Li Yu

  1. By: Hessels, S.J.A.; Stel, A.J. van (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: While it is generally acknowledged that entrepreneurship as well as export activity may both be important strategies for achieving national economic growth, it has remained unclear how export activity among new ventures is related to economic growth. This paper investigates whether the presence of export-oriented entrepreneurs is a more important determinant of economic growth than entrepreneurial activity in general. We focus on the national or macro-level and use data from the Global Entrepreneurship Monitor for a sample of 36 countries. An important advantage of using the macro-level is that indirect effects of exporting entrepreneurs that reach further than the performance of these firms themselves (e.g. spillovers) are captured in the analysis. To our knowledge, no attempt has been made thus far to link international activity of early-stage ventures to macro-economic out-comes. Our results suggest that export-oriented entrepreneurship is indeed more important for achieving high economic growth rates than entrepreneurial activity in general. This suggests that international activity by small and new firms strongly contributes to higher levels of competition and, consequently, to the emergence of highly dynamic economies and higher levels of economic growth.
    Keywords: Entrepreneurship;Export;Economic growth;Global Entrepreneurship Monitor;
    Date: 2007–01–26
  2. By: Shareen Joshi (University of Chicago); T. Paul Schultz (Economic Growth Center, Yale University)
    Abstract: The paper analyzes 141 villages in Matlab, Bangladesh from 1974 to 1996, in which half the villages received from 1977 to 1996 a door-to-door outreach family planning and maternal-child health program. Village and individual data confirm a decline in fertility of about 15 percent in the program villages compared with the control villages by 1982, as others have noted, which persists until 1996. The consequences of the program on a series of long run family welfare outcomes are then estimated in addition to fertility: women’s health, earnings and household assets, use of preventive health inputs, and finally the inter-generational effects on the health and schooling of the woman’s children. Within two decades many of these indicators of the welfare of women and their children improve significantly in conjunction with the program-induced decline in fertility and child mortality. This suggests social returns to this reproductive health program in rural South Asia have many facets beyond fertility reduction, which do not appear to dissipate over two decades.
    Keywords: Fertility, Family Planning, Gender and Development, Program Evaluation, Bangladesh
    JEL: O12 J13 I12 J16
    Date: 2007–02
  3. By: Chetan Ghate
    Abstract: We construct a simple political economy model with imperfect capital markets to explain infrastructure investments across Indian states. The model predicts that: i) the fixed cost of accessing the modern sector, ii) the initial stock of infrastructure, iii) median voter wealth, and iv) corruption, can all potentially explain why different states have different level of infrastructure investments. The theoretical model is motivated by recent empirical work on India that argues that there as on why per capita income across Indian states have diverged is because of the distribution of infrastructure investments. The model suggests that reducing leakages in funds earmarked for infrastructure and reducing the ?xed costs of accessing the modern sector - beyond their other well known effects - are policy complements. Together, they can incentivize politicians to spend more on infrastructure.
    Keywords: Public investment, positive political economy, median voter theorem
    JEL: P16 E43 O40
    Date: 2007–02
  4. By: Michal Bauer (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Julie Chytilová (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The paper aims to contribute to the understanding of why there is a lack of domestic saving and investment in rural parts of sub-Saharan Africa. It focuses on heterogeneity in inter-temporal preferences as a possible explanation of this important puzzle. The study is based on a unique experimental data set collected from 856 respondents in Ugandan villages and scrutinizes how individual patience – measured by the discount rate – is formed. The results suggest that Ugandan respondents are substantially less patient than their counterparts in similar experimental studies undertaken in developed countries and South Asia. We find a strong negative association between the level of education and the individual discount rate. Furthermore, we took advantage of the Ugandan education reform in 1996 and varying school frequency to demonstrate the causal relationship stemming from education to patience. The estimates suggest that an additional year at school decreases the discount rate on average by 35 percentage points after controlling for other characteristics (age, income group, sex, marital status and clan linkage). Our findings strongly accord with patience understood as a non-cognitive ability which needs to be taught by parents, learnt at school and promoted by social norms. The Ugandan responses, therefore, propose a new way in which education may influence development in sub-Saharan Africa – by shaping individual patience.
    Keywords: Time preference; patience; discount rate; education; savings; economic development; field survey; sub-Saharan Africa
    JEL: C93 D91 O12
    Date: 2007–02
  5. By: Stephan Klasen (Universität Göttingen, Germany)
    Abstract: This paper examines to what extent gender gaps in education, health, employment, productive assets and inputs can affect pro poor growth (in the sense of increasing monetary incomes of the poor). After discussing serious methodological problems with examining gender issues in the context of an income-based pro-poor growth framework, the paper considers theory and evidence on the impact of gender inequality on pro poor growth. While there is a considerable literature suggesting negative impacts of gender gaps on growth, there is much less information on the impact of gender gaps on inequality. The paper then examines the experiences of country cases and finds that gender inequality can have a significant effect on pro-poor growth, but that the importance and type of effects differ considerably between different regions. It also appears that the effects of gender gaps on pro-poor growth operate primarily via an impact on growth rather than an impact on distributional change.
    Keywords: Gender, Pro-Poor Growth, Operationalising Pro-Poor Growth
    JEL: J16 O4 O15
    Date: 2006–10–19
  6. By: Kenneth Harttgen (Universität Göttingen, Germany); Mark Misselhorn (Universität Göttingen, Germany)
    Abstract: While undernutrition among children is very pervasive both in Sub- Saharan Africa and South Asia, child mortality is rather low in South Asia. In contrast to that Sub-Saharan African countries suer by far the worst from high rates of child mortality. This dierent pattern of child mortality and undernutrition in both regions is well known, but approaches using aggregated macro data have not been able to explain it appropriately. In this paper we analyze the determinants of child mortality as well as child undernutrition based on DHS data sets for a sample of ve developing countries in South Asia and Sub-Saharan Africa. We investigate the eects of individual, household and cluster socioeconomic characteristics using a multilevel model approach and examine their respective inuences on both phenomena. We nd that the determinants of child mortality and undernutrition dier signi cantly from each other. Access to health infrastructure is more important for child mortality, whereas the individual characteristics like wealth and educational and nutritional characteristics of mothers play a larger role for anthropometric shortfalls. Although very similar patterns in the determinants of each phenomenon are discernable between countries, there are large dierences in the magnitude of the coecients. Besides regressions using a combined data set of all six countries show, that there are still signicant dierences between the two regions although taking account of a large set of covariates.
    Keywords: Child mortality, child undernutrition, multilevel modelling
    JEL: C40 I12 I31 I32 O57
    Date: 2006–10–19
  7. By: Isabel Günther (Universität Göttingen); Andrey Launov (Universität Würburg)
    Abstract: It has recently been argued that the informal sector of labor markets in de- veloping economies shows a dual structure with part of the informal sector being competitive to the formal sector and part of the informal sector being the result of market segmentation. To test this hypothesis, we formulate an econometric model which allows for a heterogeneous informal sector with unobserved individ- ual sector a±liation in the informal sector and which takes into account selection bias induced by the employment decision of individuals. Our empirical results for the urban labor market in C^ote d\'Ivoire show the existence of both competitive and segmented employment in the informal sector.
    Keywords: developing economy, informal labor market, segmentation, comparative advantage, selection bias, latent structure, finite mixture models
    JEL: J42 O17
    Date: 2007–01–09
  8. By: Michael Grimm (Universität Göttingen); Kenneth Harttgen (Universität Göttingen); Stephan Klasen (Universtität Göttingen); Mark Misselhorn (Universität Göttingen)
    Abstract: One of the most frequent critiques of the HDI is that is does not take into account inequality within countries in its three dimensions. We suggest a relatively easy and intuitive approach which allows to compute the three components and the overall HDI for quintiles of the income distribution. This allows to compare the level in human development of the poor with the level of the non-poor within countries, but also across countries. An empirical illustration for a sample of 13 low and middle income countries and 2 industrialized countries shows that inequality in human development within countries is indeed high. The results also show that the level of inequality is only weakly correlated with the level of human development itself.
    Keywords: Human Development, Income Inequality, Differential Mortality, Inequality in Education
    Date: 2007–01–09
  9. By: Stephan Klasen (Universität Göttingen)
    Abstract: This paper examines the relationship between measures of income poverty, undernourishment, childhood undernutrition, and child mortality in developing countries. While there is, as expected, a close aggregate correlation between these measures of deprivation, the measures generate some inter-regional paradoxes. Income poverty and child mortality is highest in Africa, but childhood undernutrition is by far the highest in South Asia, while the share of people with insufficient calories (undernourishment) is highest in the Caribbean. The paper finds that standard explanations cannot account for these inter-regional paradoxes, particularly the ones related to undernourishment and childhood undernutrition. The paper suggests that measurement issues related to the way undernourishment and childhood undernutrition is measured might play a significant role in affecting these inter-regional puzzles and points to implications for research and policy.
    Keywords: Millennium Development Goals, Undernutrition, Child Mortality, Poverty
    JEL: I1 I3 O1
    Date: 2007–01–09
  10. By: Hajo Holzmann (Georg-August-Universität Göttingen / Germany); Sebastian Vollmer (Georg-August-Universität Göttingen / Germany); Julian Weisbrod (Georg-August-Universität Göttingen / Germany)
    Abstract: This paper contributes towards the growing debate concerning the world distribution of income and its evolution over that past three to four decades. Our methodological approach is twofold. First, we formally test for the number of modes in a cross-sectional analysis where each country is represented by one observation. We contribute to existing studies with technical improvements of the testing procedure, enabling us to draw new conclusions, and an extension of the time horizon being analyzed. Second, we estimate a global distribution of income from national log-normal distributions of income, as well as a global distribution of log-income as a mixture of national normal distributions of log-income. From this distribution we obtain measures for global inequality and poverty as well as global growth incidence curves.
    Keywords: Convergence, Silverman\'s test, non-parametric statistics, bimodal, global income distribution, poverty, inequality, growth incidence curves
    JEL: O0 C5 I3 F0
    Date: 2007–02–06
  11. By: L. Rachel Ngai (CEP, London School of Economics and CEPR); Christopher A. Pissarides (CEP, London School of Economics, CEPR and IZA)
    Abstract: We study long-run trends in market hours of work and employment shifts across economic sectors driven by uneven TFP growth in market and home production. We focus on the substitutions between market and home production and on the structural transformation between agriculture, manufacturing and services. The model can rationalize the observed falling or U-shaped pattern for aggregate hours, the complete marketization of agriculture and manufacturing, and the shift from agriculture to services without violating balanced aggregate growth. We find support for the model’s predictions in long-run US data.
    Keywords: hours of work, labour supply, structural transformation, home production, marketization, balanced growth
    JEL: J21 J22 O14 O41
    Date: 2007–01
  12. By: Benno Torgler (University of California, Berkeley and CREMA); Friedrich Schneider (Johannes Kepler University of Linz, CREMA and IZA)
    Abstract: This paper analyses how tax morale and countries’ institutional quality affect the shadow economy, controlling in a multivariate analysis for a variety of potential factors. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. Relatively new available data sources offer the unique opportunity to shed more light in the understanding of a topic that has received an increased attention. We find strong support that a higher tax morale and a higher institutional quality lead to a smaller shadow economy.
    Keywords: shadow economy, tax morale, institutional quality, government intervention, corruption
    JEL: D73 D78 H2 H26 O17 O5
    Date: 2007–01
  13. By: Tue Gørgens (Australian National University); Xin Meng (Australian National University and IZA); Rhema Vaithianathan (Rhema Vaithianathan)
    Abstract: The Great Chinese Famine of 1959-1961 is puzzling, since despite the high death rates, there is no discernable diminution in height amongst the majority of cohorts who were exposed to the famine in crucial growth years. An explanation is that shorter children experienced greater mortality and that this selection offset stunting. We disentangle stunting and selection effects of the Chinese famine, using the height of the children of the famine cohort. We find significant stunting of about 2cm for rural females and slightly less for rural males who experienced the famine in the first five years of life. Our results suggest that mortality bias implies that raw height is not always a good measure of economic conditions during childhood.
    Keywords: famine, height, China, panel data, GMM
    JEL: C33 I12 N95 O15
    Date: 2007–01
  14. By: Xin Meng (Australian National University and IZA); Robert Gregory (Australian National University and IZA)
    Abstract: During the Chinese Cultural Revolution many schools stopped normal operation for a long time, senior high schools stopped student recruitment for up to 6 years, and universities stopped recruitment for an even longer period. Such large scale school interruptions significantly reduced the opportunity for a large cohort of individuals to obtain university degrees and senior high school qualifications. More than half of this cohort who would normally attain a university degree were unable to do so. We estimate that those who did not obtain a university degree, because of the Cultural Revolution, lost an average of more than 50 percent of potential earnings. Both genders suffered reduced attainment of senior high school certificates and more than 20 per cent prematurely stopped their education process at junior high school level. However, these education responses do not appear to have translated into lower earnings. In addition, at each level of education attainment most of the cohort experienced missed or interrupted schooling. We show, however, that given the education certificate attained, the impact on earnings of these missed years of schooling or lack of normal curricula was small.
    Keywords: education, earnings, Cultural Revolution, China
    JEL: I21 J31
    Date: 2007–01
  15. By: Xin Meng (Australian National University and IZA)
    Abstract: Under socialism it was neither possible nor necessary to accumulate significant levels of personal wealth. The acceleration of economic reform in the last decade, however, has brought dramatic increases in income and investment opportunities. Reform has also reduced social protections provided by the state welfare system. In response to these changes, between 1995 and 2002, urban average real household net total wealth increased by 24 per cent per annum. There is a concern, however, that those accumulating wealth are the economic and political elites while those unable to accumulate wealth are the most vulnerable workers who are losing social protection. Using Chinese urban survey data of 1995, 1999, and 2002, this paper investigates this issue. It is found that households with above average income have accumulated more wealth than their poorer counterparts. In addition, a large proportion of this wealth accumulation may be from non-earned sources, such as buying larger and better housing at highly subsidized prices. Furthermore, party members and their children have benefited a great deal from this fast wealth accumulation process. Although at lower rates, the poor and vulnerable have also been able to accumulate wealth.
    Keywords: wealth, distribution, China
    JEL: D31 I30
    Date: 2007–01
  16. By: Xin Meng (Australian National University and IZA); Jim Ryan (Australian National University)
    Abstract: The Food for Education (FFE) program was introduced to Bangladesh in 1993. This paper evaluates the effect of this program on school participation and duration of schooling using a household survey data collected in 2000, after 7 years of operation of the program. Using propensity score matching combined with difference-in-differences methodologies we estimate the average effect of FFE eligibility on the schooling outcomes. We found that the program is successful in that the eligible children on average have 15 to 27 per cent higher school participation rates, relative to their counterfactuals who were not but would have been eligible for the program. Conditional on school participation, participants also stay at school 0.7 to 1.05 years longer than their counterfactuals.
    Keywords: education, program evaluation
    JEL: J38 I28
    Date: 2007–01
  17. By: Volker Grossmann (University of Fribourg, CESifo and IZA); Thomas M. Steger (ETH Zurich and CESifo)
    Abstract: The theory of endogenous technical change has deeply contributed to our understanding of the fundamental sources of economic growth and development. In this chapter we survey important contributions in the field by focussing on the basic structure of endogenous growth models with horizontal as well as vertical innovation and emphasizing important implications for growth policy. We address issues like the scale effect problem, directed technological change to understand the evolution of wage inequality, long-run divergence between the innovating North and the imitating South due to inappropriate technology in the South, the relationship between trade and growth, competition and R&D, and the role of imperfect capital markets for R&D-based growth.
    Keywords: endogenous technical change, economic growth, horizontal innovations, scale effects, vertical innovations
    JEL: O10 O30 O40
    Date: 2007–01
  18. By: Benno Torgler (University of California, Berkeley and CREMA); Friedrich Schneider (Johannes Kepler University of Linz, CREMA and IZA)
    Abstract: This paper analyses how governance or institutional quality and tax morale affect the shadow economy, using an international country panel and also within country data. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. However, the limited number of investigations use crosssectional country data with a relatively small number of observations, and hardly any paper has investigated tax morale and provides evidence using within country data. Using more than 25 proxies that measure governance and institutional quality we find strong support that its increase leads to a smaller shadow economy. Moreover, an increase in tax morale reduces the size of the shadow economy.
    Keywords: shadow economy, tax morale, governance quality, government intervention, corruption
    JEL: D73 D78 H2 H26 O17 O5
    Date: 2007–01
  19. By: Abay Asfaw (International Food Policy Research Institute); Stephan Klasen (Göttingen University and IZA); Francesca Lamanna (Göttingen University)
    Abstract: The excess female mortality in India and other South Asian countries is no longer contentious. Less known are the reasons for such excess female mortality in the country. In this study, we argue that intra-household gender-discrimination in receipt of medical attention can be one of the most important factors for the unbalanced sex ratio in the country. The 52nd Indian National Sample Survey, which collected for the first time detailed verbal autopsies of deceased persons, is used in the analysis. Place of death, which indicates whether a person get medical help immediately before her/his death, is used as a health indicator variable. The multinomial logit results show that keeping all other factors constant, girls are 1.7 percent less likely to die in hospital than their brothers. The coefficients of different interaction variables also reveal that the probability of infant and very young girls with live female siblings to die in hospital is extremely low. The robustness of the results is also checked using different indicators. The results confirm that girls are highly discriminated in access to hospital treatment and in the number of times being hospitalized before their death compared to boys. Therefore, in addition to the current effort of the government to control sex-selective abortions, efforts should be made to reduce the current intra-household gender-disparities in getting medical care at least for life threatening illnesses.
    Keywords: gender discrimination, access to health care, place of death, India
    JEL: D63 I12 J16
    Date: 2007–01
  20. By: Friedrich Schneider (Department of Economics, Johannes Kepler University Linz, Austria); Bettina Hametner
    Abstract: Using the currency demand approach size and development of the Colombian shadow economy are estimated over the period from 1976 to 2002. In the 70s the size fluctuated around 20% of official GDP and rose to 50% in the 90s. The most important factors driving the shadow economy are unemployment and taxation. Analyzing the interaction between shadow and official economy, the shadow economy has a positive effect on the official one. Average growth rate of real per capita GDP is 1.11% between 1976 and 2002 and the shadow economy "explains" on average between 0.09 and 0.27 of this growth.
    Keywords: Colombian shadow economy; currency demand method; taxation; unemployment; interaction between the shadow and official economy
    JEL: O17 O5 D78 H2 H11 H26
    Date: 2007–01
  21. By: David De la Croix (CORE, Université Catholique de Louvain); Clara Delavallade (Centre d'Economie de la Sorbonne)
    Abstract: Corruption is thought to prevent poor countries from catching-up. We analyze one channel through which corruption hampers growth : public investment can be distorted in favor of specific types of spending for which rent-seeking is easier and better concealed. To study this distorsion, we propose an optimal growth model where households vote for the composition of public spending subject to an incentive constraint reflecting individuals' choice between productive activity and rent-seeking. At equilibrium, the intensity of corruption and the structure of public investment are determined by the predatory technology and the distribution of political power. Among different regimes, the model shows a possible scenario of distortion without corruption in which there is no effective corruption yet still the possibility of corruption distorts the allocation of public investment, thus hampering growth. We test the implications of the model on a panel of countries estimating a system of equations with instrumental variables. We find that countries with a high predatory technology invest more in housing and physical capital in comparison with health and education. For equal initial conditions, such countries grow slower and have higher corruption, in particular when political power is concentrated.
    Keywords: Public investment, optimal growth, corruption, political power.
    JEL: O41 H50 D73
    Date: 2006–10
  22. By: Cuong Le Van (Centre d'Economie de la Sorbonne); Mathilde Maurel (Centre d'Economie de la Sorbonne)
    Abstract: Education is key in explaining growth, as emphasized recently by Krueger and Lindahl (2001). But for a given level of education, what can explain the missing growth in developing countries ? Corruption, the poor enforcement of property rights, the government share of property rights, the government share of GDP, the regulations it imposes might influence the Total Factor Productivity (TFP thereafter) of a country's economic system. A number of empirical papers emphasize the consequences bad institutions have on growth, but few are examining the link between education, corruption (more generally bad institutions) and growth. Our model assumes that at low level of GDP per head and high level of corruption education spending has no impact on growth. The slope gets positive only at above critical size of corruption. The implications are tested using the data set of Xavier Sala-i-Martin, Gernot Doppelhofer and Ronald I. Miller (2004), which is extended with the aggregate governance indicators of Kaufman et ali.
    Keywords: Public spending, education, corruption, endogeneous growth.
    JEL: O41 H50 D73
    Date: 2006–12
  23. By: Nauges, Celine; van den Berg, Caroline
    Abstract: Using data from the International Benchmarking NETwork database, the authors estimate measures of density and scale economies in the water industry in four countries (Brazil, Colombia, Moldova, and Vietnam) that differ substantially in economic development, piped water and sewerage coverage, and characteristics of the utilities operating in the different countries. They find evidence of economies of scale in Colombia, Moldova, and Vietnam, implying the existence of a natural monopoly. In Brazil the authors cannot reject the null hypothesis of constant returns to scale. They also find evidence of economies of customer density in Moldova and Vietnam. The results of this study show that the cost structure of the water and wastewater sector varies significantly between countries and within countries, and over time, which has implications for how to regulate the sector.
    Keywords: Town Water Supply and Sanitation,Urban Water Supply and Sanitation,Economic Theory & Research,Water and Industry,Water Supply and Sanitation Governance and Institutions
    Date: 2007–02–01
  24. By: William Easterly; Alberto Alesina; Janina Matuszeski
    Abstract: Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures how artificial states are. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other one measures how straight land borders are, under the assumption the straight land borders are more likely to be artificial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.
    Keywords: Artificial states, political borders
    JEL: O10 F50
    Date: 2006–09
  25. By: Nancy Birdsall; Owen Barder
    Abstract: There are significant differences of opinion about the merits of additional aid in meeting the MDGs, including whether and how aid should be given in ‘fragile states’, whether additional aid on the scale envisioned can be effectively used even in well-managed economies, and whether the aid system, particularly in highly aid-dependent countries, undermines instead of strengthens local institutions. We discuss an approach to scaling up foreign aid that would explicitly be aimed at strengthening local capacity and institutions, including in fragile states. “Payments for progress” would link additional aid to clear evidence of progress already achieved on the ground. This approach would give flexibility and autonomy to local institutions, providing an opening for local institutional experimentation, while at the same time ensuring that aid pays only for real, measurable achievements. Donors would bind themselves as a group to pay a specific amount for clear evidence of progress against one or more agreed goals in low-income developing countries. Developing country governments would present an independently audited statement reporting their progress on the measures, and donors would pay the agreed amount. Payments would be determined as a function of the outcomes, and not linked to the implementation of any particular policies, any other intermediate outputs, or “tied” to purchases from particular suppliers or companies. Governments that found ways to provide services efficiently and so reduce the costs of providing them would benefit from a larger surplus. We discuss the issues such an approach raises—in setting the benchmarks against which progress is measured, in avoiding cheating, and in managing unintended negative consequences of an incentives-based approach. We conclude with a summary of the advantages for donors and recipients.
    Keywords: foreign aid, MDGs, aid-dependent countries, local capacity, fragile states, tied aid
    JEL: F33 F34 F35 O43
    Date: 2006–12
  26. By: Vijaya Ramachandran; Manju Kedia Shah
    Abstract: Much of the growth in Sub-Saharan Africa in the past decade has come from extractive industries, rather than from private, entrepreneurial activity. Furthermore, non-extractive activity in the private sector is often dominated by firms owned by ethnic minorities. This paper analyzes the characteristics of the formal private sector in five countries in sub-Saharan Africa, with a particular emphasis on Black African-owned (indigenous) firms. We find that indigenous firms start smaller and grow more slowly; however their rate of growth is positively influenced by whether the owner-entrepreneur has a university degree. We do not find overwhelming evidence that credit is the binding constraint but we do find that indigenous firms get less access to trade credit than firms owned by minority entrepreneurs. Finally, we discuss policy solutions that might enable a larger number of indigenous entrepreneurs to enter and survive in a vibrant, multi-ethnic private sector.
    Keywords: Sub Saharan Africa, extractive industries, formal private sector, indigenous entrepreneurs, credit
    JEL: O1 M20
  27. By: Dean Karlan; Nava Ashraf; Wesley Yin
    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
  28. By: Deon Filmer; Amer Hasan; Lant Pritchett
    Abstract: The Millennium Development Goal for primary schooling completion has focused attention on a measurable output indicator to monitor increases in schooling in poor countries. We argue the next step, which moves towards the even more important Millennium Learning Goal, is to monitor outcomes of learning achievement. We demonstrate that even in countries meeting the MDG of primary completion, the majority of youth are not reaching even minimal competency levels, let alone the competencies demanded in a globalized environment. Even though Brazil is on track to the meet the MDG, our estimates are that 78 percent of Brazilian youth lack even minimally adequate competencies in mathematics and 96 percent do not reach what we posit as a reasonable global standard of adequacy. Mexico has reached the MDG—but 50 percent of youth are not minimally competent in math and 91 percent do not reach a global standard. While nearly all countries’ education systems are expanding quantitatively nearly all are failing in their fundamental purpose. Policymakers, educators and citizens need to focus on the real target of schooling: adequately equipping their nation’s youth for full participation as adults in economic, political and social roles. A goal of school completion alone is an increasingly inadequate guide for action. With a Millennium Learning Goal, progress of the education system will be judged on the outcomes of the system: the assessed mastery of the desired competencies of an entire age cohort—both those in school and out of school. By focusing on the learning achievement of all children in a cohort an MLG eliminates the false dichotomy between “access/enrollment” and “quality of those in school”: reaching an MLG depends on both.
    Keywords: primary school, poverty, millenium development goals, school completion, school enrollment
    JEL: I28 I20 O15
    Date: 2006–08
  29. By: McKinnon, Ronald
    Abstract: For creditor countries on the periphery of the dollar standard such as China with current account surpluses, foreign mercantile pressure to appreciate their currencies and become more flexible is misplaced. Just the expectation of variable exchange appreciation seriously disrupts the natural tendency for wage growth to balance productivity growth and thus worsens the (incipient) deflation that China now faces. It could create a zero-interest liquidity trap in financial markets that leaves the central bank helpless to combat future deflation arising out of actual currency appreciation, as with the earlier experience of Japan. Exchange rate appreciation, or the threat of it, causes macroeconomic distress without having any predictable effect on the trade surpluses of creditor economies.
    Keywords: exchange rate, current account, China, Japan
    JEL: F31 F33 F42
    Date: 2006
  30. By: Nwaobi, Godwin
    Abstract: Without education, development will not occur, only an educated people can command the skills necessary for sustainable economic growth and for a better quality of life. Recognizing this fact, African governments have placed heavy emphasis on expanding educational opportunities from primary school through university to the past four decades. More over, international organization have put so much emphasis on supporting educational expansion and improvement in Africa. However, education in Africa is in crisis today (and most especially for African universities). Enrollments rise as capacities for government support decline; talented staff are abandoning the campuses; libraries are out dated; research output are dropping, students are protesting overcrowded and inhospitable conditions; staffs are equally protesting poor working conditions (with continues strikes); university graduates are seriously underemployed or unemployed; and general educational quality is deteriorating. The need for action is urgent and thus effective educational policy making is imperative for the eradication of the identified problems.
    Keywords: education; africa; university; primary; secondary; tertiary; nonformaleducation; gender; policies; policy reforms; female education; labour force; work performance; early childhood; formal education; lifelong learning; examinations
    JEL: I21 I22 I23 I20
    Date: 2007–01–30
  31. By: Yusuf, Arief Anshory
    Abstract: This paper is motivated by the inconsistency between food and non-food ex-penditure estimated from household survey data (SUSENAS) and from nationalaccount (I-O table) and its connection on the issue of inequality in Indonesia.Since non-food expenditure tend to be under-estimated when compared withnational account data, it imply the under-representation of the rich in the cal-culation of inequality in Indonesia. This paper, then applies an approach toreconciling household survey and national accounts data, by re-estimating thesampling weight through minimization of entropy distance of information takinghousehold survey weight as prior, while satisfying some aggregation constraints.The estimated weight then is used to calculate standard indicator of inequalityin Indonesia. The results suggests that while inequality in rural Indonesia doesnot change much, due to possible under-representation of the rich in the survey, inequality in urban Indonesia is highly under-estimated. The "Jakarta factor"seems to account mostly to this discrepancy.
    Keywords: inequality; Indonesia; entropy
    JEL: C80 D63
    Date: 2006–08–14
  32. By: Beja, Jr., Edsel
    Abstract: Capital flight is an economic threat to development. It aggravates resource constraints by making them more binding, thus undermining long-term economic growth. The downward spiral in the macroeconomic performance as the effect of capital flight results in lost jobs; in turn, this condition intensifies capital flight, thus creating a negative feedback process that undermines the structure of the country. As a result, the country that is lagging behind on the economic ladder is knocked several rungs down by capital flight, leading to the underdevelopment of the country. Counterfactual calculations for the Philippines reveal that capital flight lowered the quality of its economic growth and meant lost jobs. The sustained capital flight between 1970 and 2000 cost the country to lose its opportunity to achieve an economic take-off and to become an Asian economic tiger. Unless the Philippine government introduces decisive actions to address capital flight – its causes and the mitigation of the impacts – the country will remain caught in the perpetuity of crises, hollowed-out, and trapped in poverty.
    Keywords: Capital flight; Economic Consequences; Philippines
    JEL: E60 O40 E10 F40 O53
    Date: 2007–02–12
  33. By: Ho, Chun-Yu; Li, Dan
    Abstract: Regional inequality is severe in China since regional development is uneven due to various initial conditions and government policies. We employ unit root tests allowing for structural breaks to alternative inequality measures from 1952 to 2000. Empirical results indicate that (1) the regional inequality is trend stationary with structural breaks rather than follow a random walk. Thus, ignoring structural changes might induce incorrect inference and misleading policy implications; (2) the break points are associated with episodic events in Chinese economic history such as the Cultural Revolution and market reforms. It implies that the policies had a long-lasting and fundamental effect on the inequality.
    Keywords: Structural break; unit root; inequality; China
    JEL: R58 O15 C22
    Date: 2007–02–13
  34. By: Terry McKinley (International Poverty Centre)
    Abstract: The U.S. economy is monopolizing global net savings, i.e., about two-thirds of the total. Other rich countries, such as Japan and Germany, oil exporters, such as Saudi Arabia, middleincome countries, such as China, and even some low-income countries, such as India and Indonesia, export capital to finance yearly U.S. current-account deficits. The resulting global imbalances are neither sustainable nor equitable. Capital should be recycled to poorer countries, instead of funneled, overwhelmingly, to the world’s largest rich country. Low-income countries need a substantially higher injection of real external resources and should be allowed to pursue more expansionary, growth-oriented economic policies. Blaming capital-exporting developing countries, such as China, for global imbalances is not the answer. Such countries are merely succeeding in developing rapidly. Other rich countries, which account for most capital exports, have to take the lead in dramatically restructuring their expenditures. They will be able thereafter to absorb a greater share of developing-country exports. The danger of a recession in the U.S. is rising, threatening growth in the rest of the world. U.S. policymakers have to move aggressively to contain private consumption, especially real estate spending, in favor of productive private investment, and boost exports relative to imports. Without such a structural adjustment, the danger of a ‘hard landing’ for the U.S. economy—and, by implication, for the rest of the world—will escalate.
    Keywords: Global capital flows, world economy, structural adjustment, poverty
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–03
  35. By: Sergei Soares (International Poverty Centre, UNDP/IPEA); Emanuela di Gropello (World Bank)
    Abstract: The paper investigates why some schools in East Asia and Latin America are more efficient in the use of resources than others. It estimates input and output efficiencies and uses efficiency scores as dependent variables in analysis of variance and regression analyses. Input and output efficiencies are calculated using “hard” inputs such as number and quality of teachers and student socio-economic status, and “soft” inputs such as management; sorting and school autonomy are then used as explanatory variables in the variance and regression analysis. The results indicate that private management and student selection lead to high efficiencies and this result is negative for those who hope for quality public education for all; greater school autonomy leads to higher efficiencies, even for public schools that do not practice selection.
    Keywords: Efficiency, Education quality, School inputs, Poverty
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–04
  36. By: Hyun H. Son (International Poverty Centre)
    Abstract: This paper proposes a methodology to assess the pro-poorness of government fiscal policies in view of bringing marginal reforms. A government policy is said to be pro-poor if it benefits the poor proportionally more than the non-poor. The author first derives the poverty elasticity for the general class of poverty. Then, using the idea of poverty elasticity, she proposes a pro-poor index that can be utilized to assess government expenditure and tax policies. This index may be useful in making the government fiscal system more beneficial towards the poor through marginal reforms. The proposed methodology is applied to Thailand, utilizing the 1998 Socio-Economic Survey.
    Keywords: Poverty, Income distribution, Pro-poor, Tax policy, Public spending
    JEL: I3 D31 H2 H3
    Date: 2006–04
  37. By: Marcelo Medeiros (International Poverty Centre); Debora Diniz (University of Brasilia, Brazil); Flávia Squinca (University of Brasilia, Brazil)
    Abstract: The paper presents an analysis of the Continuous Cash Benefit Programme (BPC, which stands for Benefício de Prestação Continuada in Portuguese), an unconditional cash transfer to the elderly or to extremely poor individuals with disabilities. The information used in the assessment stems from the study of court decisions and laws related to the programme since its implementation, an analysis based on questionnaires applied to medical experts, interviews with the programme managers, as well as a review of pre-existing studies regarding BPC. In order to contribute to the management of the programme, as well as to improvements or even implementation of similar programmes in other countries, the study gives some recommendations about the design, operation and future evaluations of the programme.
    Keywords: Cash benefits, Poverty, Income distribution, Disabled persons, Brazil, Continuous Cash Benefit Programme
    JEL: I3 D31 H2 H3
    Date: 2006–05
  38. By: Anis Chowdhury (University of Western Sydney, Australia); Terry McKinley (International Poverty Centre)
    Abstract: This paper examines how macroeconomic policies can be managed to accommodate a large inflow of foreign aid to combat the HIV/AIDS epidemic and still maintain macroeconomic stability. Because of the daunting scale of this epidemic, funds need to be disbursed urgently in order to contain its spread, yet some economists worry that rapidly scaling up foreign assistance for this purpose will cause inflation and appreciation of the real exchange rate. If such effects occur, they could impair a country’s international competitiveness and endanger its growth prospects. However, this paper maintains that such effects can be minimised if governments and central banks coordinate fiscal, monetary and exchange rate policies. If they do, they should be able to both ‘spend’ aid in order to finance larger government programmes and ‘absorb’ aid in order to import more real resources. Often, governments that receive foreign aid neither spend nor absorb it fully, defeating the basic purpose of development assistance. Because governments fear inflation, they are reluctant to finance a significant increase in spending on HIV/AIDS programmes even when the funding is available. Central banks are reluctant to sell the foreign currency they receive from HIV/AIDS related aid because they fear that such an action might appreciate the domestic currency. However, if aid-induced spending on HIV/AIDS programmes minimises the adverse impact of the epidemic on human capabilities, not only would it combat a grave human development crisis but also it could safeguard long-term economic growth. Instead of adhering to restrictive macroeconomic policies, governments could target their increased spending on productivity enhancing public investment and central banks could amplify the flow of low-cost credit to stimulate private investment. If the real exchange rate does begin to appreciate, the central bank can implement means to manage its fluctuations in order to maintain competitiveness. Moreover, if a significant proportion of HIV/AIDS funds is used to directly finance the import of drugs and medical equipment that are not produced domestically (which is often the case), there is likely to be even less impact on inflation or appreciation of the exchange rate.
    Keywords: Macroeconomic policies, ODA, HIV/AIDS, Poverty
    JEL: I3 D31 H2 H3
    Date: 2006–05
  39. By: Nanak Kakwani (International Poverty Centre); Hyun H. Son (International Poverty Centre)
    Abstract: This paper proposes a methodology to estimate required growth rates, investment rates, and per capita foreign aid in US dollars in order to achieve the Millennium Development Goal (MDG) of halving poverty between 1990 and 2015. It provides a methodology which gives a linkage between costs of MDG, growth, poverty, and inequality. In this study, the methodology is applied only to the head-count poverty measure but is applicable to other poverty measures. This study takes into account the distributional aspect to derive the estimates of the projected growth and investment rates required for the next 10 years from 2005 to reach the MDG poverty reduction target. This has been done through simulating different growth scenarios: anti-poor, distribution neutral, and pro-poor. The proposed methodology is applied to the 15 Sub-Saharan African countries.
    Keywords: Growth, Poverty, Inequality, Millennium Development Goals, Foreign aid, Investment, Sub-Saharan Africa
    JEL: I3 D31 H2 H3
    Date: 2006–05
  40. By: Robert Pollin (Department of Economics and Political Economy Research Institute, University of Massachusetts-Amherst); Gerald Epstein (Department of Economics and Political Economy Research Institute, University of Massachusetts-Amherst); James Heintz (Department of Economics and Political Economy Research Institute, University of Massachusetts-Amherst); Leonce Ndikumana (Department of Economics and Political Economy Research Institute, University of Massachusetts-Amherst)
    Abstract: This is an independent report produced by a team of international and national consultants supported by the International Poverty Centre in Brasilia (IPC). Initial support for this report was provided by the Poverty Group of the United Nations Development Programme in New York. This report is part of a wider global research programme encompassing several other countries. The views in this report are the authors’ and not necessarily IPC’s. However, the IPC regards this report as an important contribution to the debate on economic policies and employment programmes in South Africa as well as in other countries in Africa. This report outlines a pro-poor, employment-focused economic policy framework for South Africa. Its specific focus is the severe problem of mass unemployment in South Africa today. Unemployment was between 26.5 and 40.5 percent as of March 2005, depending on whether one uses the ‘official’ or ‘expanded’ definition of unemployment (with the expanded definition including so-called ‘discouraged workers’). The paper’s concentration on the problem of mass unemployment is fully consistent with the stated goals of the current African National Congress (ANC) government. At the Growth and Development Summit in 2003, President Thabo Mbeki singled out “more jobs, better jobs, and decent work for all” as one of the country’s four key economic challenges. Currently, the preliminary presentations of the Government’s new economic policy framework, the “Accelerated and Shared Growth Initiative for South Africa (ASGISA)—indicate that it affirms its commitment to cutting the unemployment rate by half by 2014. This publication is a summary of the full report (which is on the website of the Political Economy Research Institute: Following an introductory first section, the full report consists of two short sections that lay out basic concerns, then two substantially longer sections presenting the framework for policy analysis and specific policy proposals. Section 2 presents evidence on the scope of the unemployment problem in South Africa today, considering the unemployed by gender, race, region, length of joblessness and age. It then examines how the country’s problem of mass unemployment can be usefully conceptualized in simple accounting terms—namely, as the result of 1) insufficiency in the rate of output growth, i.e., the economy’s production of goods and services, and 2) a declining number of jobs being created per unit of output. Section 3 examines supply-side perspectives on employment expansion. The fact that the South African economy is experiencing both high unemployment and rising capital intensity of production suggests to some analysts both an explanation for high unemployment and a solution to the problem. For these analysts, the explanation for the problem is straightforward: businesses will not hire more workers because they are convinced that the costs of doing so will exceed the benefits. Businesses therefore choose to either 1) maintain their operations at a lower level than they would if the benefits of hiring more workers exceeded the costs or 2) increase the use of machines in their operations as a substitute for employing workers as their preferred means of expanding their operations. Seen from this perspective, the solution to the problem of unemployment is also straightforward: lower the costs that businesses face in hiring more workers. In general, there are four possible ways in which the costs to businesses of hiring workers could fall: 1) workers receive lower overall compensation, including wages and benefits 2) the industrial relations system and labor market regulations—including laws and regulations regarding workers’ rights to organize, conflict resolution, and hiring and firing—operate with more flexibility for business 3) workers perform their workplace operations at a higher level of productivity or 4) the government absorbs some portion of the costs of hiring workers. In most discussions that consider the sources of unemployment from this business cost-oriented perspective, the focus generally is on the first way to reduce business costs, i.e., to lower wages and benefits for workers relative to both other input costs for production and the prices at which businesses can sell their final products. This study argues that the evidence linking mass unemployment to high labor costs is not persuasive. We also argue that wage cutting as a policy approach is certain to elicit strong resistance, which in turn will worsen the country’s investment climate. At the same time, we do indeed support measures to maintain wage increases in line with productivity growth and to improve the efficiency of the industrial relations system. This report also introduces a proposal for a hybrid program of credit and employment subsidies as a means through which the Government can effectively absorb a share of businesses’ labor costs. Section 4 of the report considers the demand-side forces in South Africa’s economy that will need to be mobilized to achieve faster economic growth and greater labor intensity. In terms of growth, the report discusses all four components of the conventional national income identity that, taken together, define economic growth—i.e., private investment, private consumption, net exports, and government spending. The report places particular stress in this section on the growth-enhancing effects of expanding public infrastructure investments. Indeed, public investment could expand both output and private sector productivity, and could correspondingly increase private investment and export competitiveness. It is significant that the ASGISA program also emphasizes the need for expanded public investment. In considering ways to increase the labor intensity of growth, the report examines two basic approaches. The first is the Expanded Public Works Program (EPWP) now being implemented by the national government. The second approach is to encourage accelerated growth in business activities within South Africa that are capable of generating large increases in employment. The report examines the relative labor intensity of various industries in South Africa as well as the ‘employment multipliers’ of industries, i.e., their capacity to generate relatively large numbers of new jobs through their upstream links with other business firms in the country. Section 5, which concludes the report, considers specific policy tools that can be deployed to promote faster growth, rising labor intensity and greater poverty reduction. It considers policy interventions in the following areas: fiscal policy, monetary policy, credit subsidies, and development banking; capital market and exchange rate controls; inflation control; and sectoral policies in the areas of a) monopolistic pricing and b) promoting growth of selected productivity-enhancing and import-substituting capital-intensive industries, on grounds other than employment benefits.
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–06
  41. By: Gerald Epstein (Department of Economics and Political Economy Research Institute, University of Massachusetts-Amherst); James Heintz (Department of Economics and Political Economy Research)
    Abstract: This Country Study summarizes the findings and recommendations of a UNDP-supported study on the linkages among central bank policy, the financial structure and employment outcomes in Ghana. The study maintains that monetary policy must be coordinated with financial sector reforms in order to generate poverty-reducing employment. Its analysis highlights serious problems of restrictive inflation-targeting, a high real interest rate policy and insufficient lending of financial resources for productive private investment. In response, it recommends that monetary policy in Ghana should be specifically geared to promoting economic growth and employment along with maintaining moderate levels of inflation. Targeting such real variables, it maintains, will imply regular collection of data, such as on employment trends. In order to lower the cost of borrowing and foster greater access to credit, the study offers several policy recommendations, including credit guarantee schemes, reducing interest rates on government securities, using asset-based reserve requirements to direct credit and forging stronger links between formal and informal financial institutions. The study’s main point is that monetary and financial sector policies should be recast as crucial instruments of development and be well integrated into Ghana’s Poverty Reduction Strategy.
    Keywords: Poverty, ECONOMIC, GHANA, REDUCTION
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–06
  42. By: Terry McKiley (International Poverty Centre)
    Abstract: This Country Study was part of a comprehensive UNDP-supported national report on Economic Policies for Growth, Employment and Poverty Reduction in Moldova. This study focuses on analysing Moldova’s public finances, including mobilizing more domestic revenue, reducing its external and domestic debt and re-allocating its public expenditures. It counsels against lowering rates on direct taxes, which it predicts will be not only inequitable but also ineffectual; instead, it offers alternative recommendations on how to raise more revenue and make the tax system more progressive. While commending the government of Moldova for being able to unilaterally reduce its external debt burden, it sharply criticizes international donors for not having provided the country with concessional lending during the difficult transition years of the 1990s. Had the country’s income per person been correctly calculated, it would have qualified for such lending and not been saddled with such an onerous debt burden. Lastly, the study recommends that the government devote more resources to economic services, and public investment in general, in order to stimulate a more rapid rate of growth and employment generation and focus more economic resources on poor households.
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–07
  43. By: John Weeks (International Poverty Centre); Terry McKiley
    Abstract: This Country Study critically examines fiscal policies in Zambia, particularly the effect of recent and projected debt relief on ‘fiscal space’. The study finds that due to associated policy conditionalities and other factors, HIPC debt relief will result in less fiscal space, rather than more. And projected G-8 debt relief will only marginally expand fiscal space. Part of the problem is that the Zambian government has little leeway to choose its own fiscal policies, despite donor rhetoric about ‘national ownership’ of poverty-reduction policies. Drawing on the analysis of a national study, the Country Study also estimates the additional public expenditures that would enable Zambia to reach the MDGs. In order to finance these expenditures, it proposes a diversified strategy of increasing tax revenue, expanding the fiscal deficit and obtaining more ODA. Finally, it recommends core elements of an expansionary macro framework that could support a seven per cent rate of economic growth (needed to attain MDG #1, i.e., halving extreme income poverty) and buttress the government’s effort to reach the other MDGs. In the process, it seeks to dispel common fears about the possible adverse effects of such fiscal expansion.
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–09
  44. By: Geraint Johnes
    Abstract: Contemporary views on the determinants of economic growth place education in centre stage. Yet the way in which education affects growth is not yet well understood. This paper begins by surveying the recent literature on the factors that affect growth, paying particular attention to education. It then proceeds to estimate a comprehensive model of growth, testing its robustness across regions of the world. Policy conclusions are drawn.
    Keywords: growth, education, political economy
    Date: 2006
  45. By: Jill Johnes; Li Yu
    Abstract: This study uses data envelopment analysis (DEA) to examine the relative efficiency of over 100 selected Chinese regular universities. Various models are developed to measure the research efficiency of these higher education institutions (HEIs) using data for 2003 and 2004. The findings show that the level of efficiency depends on whether or not a subjective measure of research output (based on experts’ opinions of the HEIs) is included as an output in the model. Mean efficiency is higher when the reputation variable is included (around 90%) than when it is not (mean efficiency is around 55% in this case). However, the rankings of the universities are remarkably insensitive to whether or not this variable is included. Bootstrapping procedures are used to find the 95% confidence intervals for the efficiencies, and indicate that the best and worst performing institutions are significantly different from each other; only the middle-performing 30% of HEIs cannot be distinguished from each other in terms of their performance. Further investigation suggests that regional location, source of funding and whether the university is comprehensive or specialist may all contribute to the observed differences in performance. The regional differences are consistent but not significant at conventional levels of significance; the efficiencies differ significantly by administrative type when the subjective measure of research output is excluded from the analysis; comprehensive universities consistently and significantly outperform specialist institutions. The possibility of regional differences in performance is particularly worrying since the already economically disadvantaged Western region may suffer a continued lag in development if its HEIs are less efficient than those in the better developed Central and coastal regions.
    Keywords: data envelopment analysis; efficiency measurement; Chinese higher education
    Date: 2006

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