nep-dev New Economics Papers
on Development
Issue of 2007‒03‒10
58 papers chosen by
Jeong-Joon Lee
Towson University

  1. Inflation and Finance: Evidence from Brazil By Manoel F. Bittencourt
  2. Poverty and Productivity in Female-Headed Households in Zimbabwe By Sara Horrell; Pramila Krishnan
  3. Nonlinearities in Cross-Country Growth Regressions: A Bayesian Averaging of Thresholds (BAT) Approach By Gernot Doppelhofer; Jesus Crespo Cuaresma
  6. Resource curse in reverse: The coffee crisis and armed conflict in Colombia By OEINDRILA DUBE; JUAN FERNANDO VARGAS
  7. Public Action for Public Goods By Banerjee, Abhijit; Iyer, Lakshmi; Somanathan, Rohini
  8. Self-selection patterns in Mexico-U.S. migration: The role of migration networks By David McKenzie; Hillel Rapoport
  9. The Brain Drain and the World Distribution of Income and Population By Andrew Mountford; Hillel Rapoport
  10. International inequality and polarization in living standards, 1870-2000 : evidence from the Western World By Leandro Prados de la Escosura
  11. A Macroeconomic Estimation of the Education Production Function By Nadir Altinok
  12. Financing Constraint and Firm Investment Following a Financial Crisis in Indonesia By Agustinus Prasetyantoko
  13. The Human Capital Cost of Landmine Contamination in Cambodia By Ouarda Merrouche
  14. Who Joins Ethnic Militias? A Survey of the Oodua People’s Congress in South western Nigeria By Yvan Guichaoua
  15. Rural-Urban Migration and Urban Poverty: Socio-Economic Profiles of Rickshaw Pullers and Owner-Contractors in North-East Delhi By Takashi Kurosaki; Yasuyuki Sawada; Asit Banerji; S. N. Mishra
  16. Aid and Growth: Politics Matters? By Matteo Bobba; Andrew Powell
  17. Two Views on Institutions and Development: The Grand Transition vs. the Primacy of Institutions By Martin Paldam; Erich Gundlach
  18. International Evidence on Fiscal Solvency: Is Fiscal Policy "Responsible"? By Enrique G. Mendoza; Jonathan D. Ostry
  19. China’s Trade and Growth: Impact on Selected OECD Countries By Malory Greene; Nora Dihel; Przemyslaw Kowalski; Douglas C. Lippoldt
  20. Making Trade Policy in a New Democracy after a Deep Crisis: Indonesia By Kelly Bird; Sandy Cuthbertson; Hal Hill
  21. The Hope for Hysteresis in Foreign Aid By Gil S. Epstein; Ira N Gang
  22. Decentralizing Aid with Interested Parties By Gil S. Epstein; Ira N Gang
  23. Immigration Amnesty and Immigrant's Earnings By Ira N. Gang; Myeong-Su Yun
  24. A Note on Decomposing Differences in Poverty Incidence Using Regression Estimates: Algorithm and Example By Sumon Kumar Bhaumik; Ira N. Gang; Myeong-Su Yun
  25. Poverty in Rural India: Ethnicity and Caste By Ira N. Gang; Kunal Sen; Myeong-Su Yun
  26. How Important is Human Capital? A Quantitative Theory Assessment of World Income Inequality By Andres Erosa; Tatyana Koreshkova; Diego Restuccia
  27. Adjustment to Target Capital, Finance, and Growth By Antonio Ciccone; Elias Papaioannou
  28. Financial Integration, Productivity and Capital Accumulation By Alessandra Bonfiglioli
  29. For Public Service or Money: Understanding Geographical Imbalances in the Health Workforce in Ethiopia By Pieter Serneels; Magnus Lindelow; José Garcia Montalvo; Abigail Barr
  30. Migration from Zambia : ensuring temporariness through cooperation By Amin, Mohammad; Mattoo, Aaditya
  31. International financial integration through equity markets : which firms from which countries go global ? By Claessens, Stijn; Schmukler, Sergio L.
  32. The worldwide governance indicators project : answering the critics By Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
  33. Extending health insurance to the rural population : an impact evaluation of China ' s new cooperative medical scheme By Wagstaff, Adam; Lindelow, Magnus; Gao Jun; Xu Ling; Qian Juncheng
  34. The impact of trade with China and India on Argentina ' s manufacturing employment By Castro, Lucio; Olarreaga, Marcelo; Saslavsky, Daniel
  35. Beyond legal origin and checks and balances : political credibility, citizen information, and financial sector development By Keefer, Philip
  36. How good a map ? Putting small area estimation to the test By Demombynes, Gabriel; Elbers, Chris; Lanjouw, Jean O.; Lanjouw, Peter
  37. Capital market development : whither Latin America ? By de la Torre, Augusto; Gozzi, Juan Carlos; Schmukler, Sergio L.
  38. Walking up the down escalator : public investment and fiscal stability By Easter ly, William; Irwin, Timothy; Serven, Luis
  39. Trade integration in East Asia : the Role of China and production networks By Haddad, Mona
  40. Quantifying international migration : a database of bilateral migrant stocks By Parsons, Christopher R.; Skeldon, Ronald; Wa lmsley, Terrie L.; Winters, L. Alan
  41. A review of migration and fertility theory through the lens of African immigrant fertility in France By Anne Genereux
  42. Short- and medium-term determinants of current account balances in Middle East and North Africa countries By Aristovnik, Aleksander
  43. Banking Sector Integration and Competition in CEMAC By Saab, Samer; Vacher, Jerome
  44. An endogenous growth model for selected Asian countries and estimates of the steady state growth rates By Rao, B. Bhaskara; Singh, Rup
  45. The cost of ownership in microfinance organization By Mersland, Roy
  46. Microbanks: Ownership, performance and social tradeoffs - a global analysis By Mersland, Roy; Strøm, R. Øystein
  47. Corrupt Bureaucracy and Growth By Djumashev, Ratbek
  48. Wage Trends in Post-Apartheid South Africa: Constructing an Earnings Series from Household Survey Data By Rulof Burger; Derek Yu
  49. Women in the South African Labour Market, 1995 - 2005 By Carlene van der Westhuizen; Sumayya Goga; Liberty Ncube; Morné Oosthuizen
  50. Impact of Municipal Regulations on SMMEs By AFReC; BEES; MCA
  51. Recent Findings on Tax-Related Regulatory Burden on SMMEs in South Africa. Literature Review and Policy Options By Doubell Chamberlain; Anja Smith
  52. India’s Missing Women: Disentangling Cultural, Political and Economic Variables By Rubiana Chamarbagwala; Martin Ranger
  53. Hard or Soft? Institutional Reforms and Infrastructure Spending as Determinants of Foreign Direct Investment in China By K. C. Fung; Alicia García-Herrero; Hitomi Iizaka; Alan Siu
  54. Towards a More Employment-Intensive and Pro-Poor Economic Growth in Bolivia By Luis Carlos Jemio; Maria del Carmen Choque
  55. Ruggedness: The blessing of bad geography in Africa By Nathan Nunn; Diego Puga
  56. Testing the Natural Resource Curse Hypothesis in Indonesia: Evidence at the Regional Level By Ahmad Komarulzaman; Armida Alisjahbana
  57. On the re-assessment of inequality in Indonesia: household survey or national account? By Arief Anshory Yusuf
  58. Productivity Growth in Thailand and Indonesia: How Agriculture Contributes to Economic Growth By Peter Warr

  1. By: Manoel F. Bittencourt
    Abstract: In this paper we examine the impact of inflation on financial development in Brazil. The data available permit us to cover the eventful period between 1985 and 2002 and the results-based initially on time series and then on panel time series data and analysis, and robust for different estimators, specifications and financial development measures-suggest that high and erratic rates of inflation presented deleterious effects on finance at the time. The main policy implication arising from the results is that poor macroeconomic performance, exemplified by high rates of inflation, can only have detrimental effects on finance, a variable that is important for directly affecting, e.g., economic growth and development, and income inequality. Therefore, low and stable inflation is a necessary first step to achieve a more inclusive and active financial sector with all its attached benefits.
    Keywords: Financial development, inflation, growth, inequality, Brazil.
    JEL: E31 E44 O11 O54
    Date: 2007–01
  2. By: Sara Horrell; Pramila Krishnan
    Abstract: A household survey conducted in rural Zimbabwe in 2001 is used to compare the position of de facto and de jure female-headed households to those with a male head. These households are characterised by different forms of poverty that impinge on their ability to improve agricultural productivity. However, once inputs are accounted for, it is only for growing cotton that female-headed households’ productivity is lower than that found for male-headed households. General poverty alleviation policies will benefit the female-headed household but specific interventions via extension services and access to marketing consortia are also indicated.
    Keywords: Africa, Zimbabwe, gender, poverty, female-headed households, agriculture
    JEL: O12
    Date: 2006–07
  3. By: Gernot Doppelhofer; Jesus Crespo Cuaresma
    Abstract: We propose a Bayesian Averaging of Thresholds (BAT) approach for assessing the existence and quantifying the effect of threshold effects in cross- country growth regressions in the presence of model uncertainty. The BAT method extends the Bayesian Averaging of Classical Estimates (BACE) approach proposed by Sala-i-Martin, Doppelhofer, and Miller (2004) by allowing for uncertainty over nonlinear threshold effects. We apply our method to a set of determinants of long-term economic growth in a cross section of 88 countries. Our results suggest that when model uncertainty is taken into account there is no evidence for robust threshold effects caused by the Initial Income, measured by GDP per capita in 1960, but that the Number of Years an Economy Has Been Open is an important source of nonlinear effects on growth.
    Keywords: Model Uncertainty, Model Averaging, Threshold Estimation, Non-Linearities, Determinants of Economic Growth
    JEL: C11 C15 O20 O50
    Date: 2007–02
  4. By: Jean-Paul Faguet; Fabio Sánchez
    Abstract: The effects of decentralization on public sector outputs is much debated but little agreed upon. This paper compares the remarkable case of Bolivia with the more complex case of Colombia to explore decentralization’s effects on public education outcomes. In Colombia, decentralization of education finance improved enrollment rates in public schools. In Bolivia, decentralization made government more responsive by re-directing public investment to areas of greatest need. In both countries, investment shifted from infrastructure to primary social services. In both, it was the behavior of smaller, poorer, more rural municipalities that drove these changes.
    Date: 2006–03–25
  5. By: Christian Jaramillo; Jorge Tovar
    Abstract: The objective of this paper is to measure the impact of trade on the sectoral labor markets. Using the Colombian National Household Survey and comparable trade-related data, we study how changes in trade policy affect the sectoral demands for labor, as measured by the change in wages and employment. We develop a structural model and estimate its reduced form specification to determine an elasticity between measures of sectoral tariffs and labor demand, correcting for tariff endogeneity. The data used covers the period of 1984 through 1999. This allows us to take advantage of the natural experiment represented by the Colombian trade liberalization process of the early nineties. The results suggest that sector tariff levels over the period are positively correlated with their employment levels, but only for tradable sectors. In the case of wages, there is no evidence that they were affected by the trade reform.
    Date: 2006–08–05
    Abstract: Between 1998 and 2003 production increases in Brazil and Vietnam drove down the price of coffee by 73 percent in global markets, triggering the “international coffee crisis”. We examine the effect of this exogenous price shock on Colombia’s civil war, exploring whether politically-motivated violence presented different dynamics in the coffee –growing regions relative to the non- coffee regions, during the pre-crisis and crisis periods. Using a difference-in-differences framework, we find causal evidence that the steep decline in coffee prices substantially increased both the incidence and intensity of Colombia’s civil war. We also propose a simple model linking the price shock to violence and empirically examine the relative importance of three potential mechanisms. While crop substitution from coffee to coca explains very little of the variation, a disproportionate increase in poverty in coffee areas is associated with greater violence, as is a lower state capacity.
    Date: 2006–12–10
  7. By: Banerjee, Abhijit; Iyer, Lakshmi; Somanathan, Rohini
    Abstract: This paper focuses on the relationship between public action and access to public goods. It begins by developing a simple model of collective action which is intended to capture the various mechanisms that are discussed in the theoretical literature on collective action. We argue that several of these intuitive theoretical arguments rely on special additional assumptions that are often not made clear. We then review the empirical work based on the predictions of these models of collective action. While the available evidence is generally consistent with these theories, there is a dearth of quality evidence. Moreover, a large part of the variation in access to public goods seems to have nothing to do with the “bottom-up” forces highlighted in these models and instead reflect more “top-down” interventions. We conclude with a discussion of some of the historical evidence on top-down interventions.
    Keywords: collective action; public goods
    JEL: H41
    Date: 2007–03
  8. By: David McKenzie (World Bank, Development Economics Research Group); Hillel Rapoport (Department of Economics, Bar-Ilan University, CADRE, Université de Lille 2, and CReAM, University College London)
    Abstract: This paper examines the role of migration networks in determining self-selection patterns of Mexico-U.S. migration. We first present a simple theoretical framework showing how such networks impact on migration incentives at different education levels and, consequently, how they are likely to affect the expected skill composition of migration. Using survey data from Mexico, we then show that the probability of migration is increasing with education in communities with low migrant networks, but decreasing with education in communities with high migrant networks. This is consistent with positive self-selection of migrants being driven by high migration costs, as advocated by Chiquiar and Hanson (2005), and with negative self-selection of migrants being driven by lower returns to education in the U.S. than in Mexico, as advocated by Borjas (1987).
    Keywords: Migration, migration networks, educational attainments, self-selection, Mexico
    JEL: O15 J61 D31
    Date: 2007–01
  9. By: Andrew Mountford (Department of Economics, Royal Holloway, University of London); Hillel Rapoport (Department of Economics, Bar-Ilan University, CADRE, Université de Lille 2, and CReAM, University College London)
    Abstract: This paper models the evolution of the world distribution of income and shows that while the distribution of income per capita across economies in the world will be stable in the long run, the world distribution of population may be divergent. The paper then uses this model to analyze the impact of the current trend towards predominantly skilled emigration from poor to rich countries on fertility, human capital formation, and growth, in both the sending and receiving countries. It shows that in the long run, brain drain migration patterns may increase world inequality as relatively poor countries grow large in terms of population. In the short run however, it is possible for world inequality to fall due to rises in GDP per capita in large developing economies with low skilled emigration rates.
    Date: 2007–04
  10. By: Leandro Prados de la Escosura
    Abstract: A long-run view of inter-country inequality in living standards is provided for a large sample of countries in Western Europe, the European Offshoots, Japan – OECD, for short- and Latin America. A long term rise in real per capita income inequality is found. The deepening gap between OECD and Latin America was the major factor beneath this increase. Inequality in non-economic indicators of well-being (longevity, education, and human development) fell in the long run but a gap between OECD and Latin America remained by 2000. Polarization took place in the Western World during the second half of the twentieth century.
    Date: 2007–02
  11. By: Nadir Altinok (IREDU - Institut de recherche sur l'éducation : Sociologie et Economie de l'Education - [CNRS : FRE5211] - [Université de Bourgogne])
    Abstract: The aim of this paper is to test the existence of an education production function based on data resulting from international surveys of pupil assets. The results of the estimates, using first the total sample, and then making distinctions according to the economic level of the country, show significant differences concerning the relationships between educational inputs and outputs. Thus, inconsistencies found in former analyses in terms of estimating the education production function can partially be explained by the fact that they failed to take into account the economic level of the countries analysed.
    Keywords: Education quality ; Human Capital ; Public Expenditure
    Date: 2007–02–26
  12. By: Agustinus Prasetyantoko (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines])
    Abstract: This paper deals with the sensitivity relation between firm-level investment and its internal liquidity by splitting samples into two different groups of firms, which are tradable (T) and non-tradable (N) sector. The study includes 226 listed companies in Jakarta Stock Exchange (JSX) by at least five consecutive years in the period of 1994 – 2004. This paper finds that during boom period, N-sector is less financially constrained, but in burst period, N-sector has greater financial constraints. It leads us to the explanation that during boom period N-sector grows faster than T-sector, but when crisis hits T-sector recovers more easily. By employing panel data analysis, our findings support an argument that asymmetric financing opportunities among N and T-sector are common in developing countries. Accordingly, this paper provides important explanations on firm-level investment behavior around financial crisis, which could be pivotal considerations in monetary and other relevant policies
    Keywords: asymmetric financing opportunities ; financing constraint ; firm investment ; financial crisis
    Date: 2007–02–28
  13. By: Ouarda Merrouche (European University Institute)
    Abstract: The International Campaign to Ban Landmines production and use estimates that there are more than 80 billion landmines in the ground in more than 80 countries. Despite the scale of the problem and large investments by OECD countries to clear mines in low income countries, the economic consequences of landmine contamination have been so far unexamined by economists working on the economics of wars, perhaps due to the lack of data thus far. Using unique data from Cambodia, this paper estimates the effect of landmine contamination on human capital. These effects are identified using difference-in-differences (DD) and instrumental variables (IV) estimators. In the DD framework I exploit two sources of variation in an individual’s exposure to the conflict: her age in 1970 due to the spread of landmines over time and landmine contamination intensity in her district of birth. The IV specification uses the distance to the Thai border as an exogenous source of variation in landmine contamination intensity. The IV estimate indicates a education loss of 0.4 years at the mean and no visible effect on earnings. I discuss three factors that probably drive down the returns to education in post-war Cambodia: (1) The downgrading of educated people during the Khmer rouge regime (2) Direct Effects of landmines on the returns to education (3) the destruction of physical capital and technological delay through capital-skill complementarity.
    Date: 2006–12
  14. By: Yvan Guichaoua (Centre for Research on Inequality, Human Security and Ethnicity, Queen Elizabeth House, University of Oxford)
    Abstract: The economic analysis of conflicts assigns a crucial role to the rebellion making process. However, the existing literature on this issue often rests on unsatisfactory microfoundations. It tends to overemphasize two extreme forms of mobilisation, namely purely greed-driven or, alternatively, purely ideology-driven. It does not fully address the puzzles associated with the leader-followers interaction within violent organisations. The present paper is an empirical account describing how rank and file members of an ethnic militia are mobilised. The survey shows that the purely economic explanation of violent mobilisation does not hold despite the fact the militia levers its own funds. At least two other considerations are at play for members: first, the feeling of danger, the desire of protection against fuzzily identified risks (criminality, unknown future, menace from other ethnic groups etc.); second, the social proximity to militia insiders. In fact, vulnerability (either perceived or real) might be a more decisive factor in enlistment than poverty per se. Additionally, the paper suggests that the militia studied in Nigeria doesn’t fit the usual binary classification of rebel groups (predatory or ideological) as it is simultaneously an economic, social and political actor in the communities where it operates.
    Keywords: civil conflicts, militia, Nigeria, mobilisation
    Date: 2007–01
  15. By: Takashi Kurosaki; Yasuyuki Sawada; Asit Banerji; S. N. Mishra
    Date: 2007–03
  16. By: Matteo Bobba (Inter-American Development Bank); Andrew Powell (Inter-American Development Bank)
    Abstract: The literature on aid effectiveness has focused more on recipient policies than the determinants of aid allocation yet a consistent result is that political allies obtain more aid from donors than non-allies. This paper shows that aid allocated to political allies is ineffective for growth, whereas aid extended to countries that are not allies is highly effective. The result appears to be robust across different specifications and estimation techniques. In particular, new methods are employed to control for endogeneity. The paper suggests that aid allocation should be scrutinized carefully to make aid as effective as possible.
    Keywords: : Aid impact; Economic growth; Instrumental Variables; Generalized method of moments; Panel data
    JEL: O1 O2 O4 C23
    Date: 2007–01
  17. By: Martin Paldam; Erich Gundlach
    Abstract: The Grand Transition (GT) view claims that economic development is causal to institutional development, and that many institutional changes can be understood as transitions occurring at roughly the same level (zones) of development. The Primacy of Institutions (PoI) view claims that economic development is a consequence of an exogenous selection of institutions. Our survey of the empirical evidence and our own estimates reveal that it is easy to find con-vincing evidence supporting either of the two views. Property rights do affect development as suggested by the PoI. However, democracy is mainly an effect of development as suggested by the GT. We conclude that the empirical results are far too mixed to allow for a robust assessment that one of the two views is true and the other false. This finding implies that focusing on institutional development is unlikely to be successful as the key strategy for the economic development of poor countries.
    Keywords: Grand transition, primacy of institutions, democracy, corruption, development
    JEL: B25 O1
    Date: 2007–03
  18. By: Enrique G. Mendoza; Jonathan D. Ostry
    Abstract: This paper looks at fiscal solvency and public debt sustainability in both emerging market and advanced countries. Evidence of fiscal solvency, in the form of a robust positive conditional relationship between public debt and the primary fiscal balance, is established in both groups of countries, as well as in the sample as a whole. Evidence of fiscal solvency is much weaker, however, at high debt levels. The debt-primary balance relationship weakens considerably in emerging economies as debt rises above 50 percent of GDP. Moreover, the relationship vanishes in high-debt countries when the countries are split into high- and low-debt groups relative to sample means and medians, and this holds for industrial countries, emerging economies, and in the combined sample. These findings suggest that many industrial and emerging economies, including several where fiscal solvency has been the subject of recent debates, appear to conduct fiscal policy responsibly. Yet our results cannot reject the hypothesis of fiscal insolvency in groups of countries with high debt ratios, where the response of the primary balance to increases in debt is not statistically significant.
    JEL: E62 F34 F41 H6 H68
    Date: 2007–03
  19. By: Malory Greene; Nora Dihel; Przemyslaw Kowalski; Douglas C. Lippoldt
    Abstract: This paper examines China's emergence as a global player in international markets over the last few decades. It provides an overview of China's trade policy environment following the country's process of market opening and joining the WTO. The report analyses China’s role in international processing activities and moving up the global value chain. It also examines China’s impact on world prices and the deterioration of its own terms of trade. The paper looks at China's two-pronged export...
    Keywords: telecommunications, investment, trade and growth, trade policy, insurance, banking, intellectual property rights, computable general equilibrium, value chain, China, services trade, trade restrictiveness index
    Date: 2006–11–28
  20. By: Kelly Bird; Sandy Cuthbertson; Hal Hill
    Abstract: This paper examines the recent political economy of trade policy in Indonesia against the backdrop of two key events: the deep economic crisis of 1997-98, and the transition from three decades of rapid growth under an authoritarian regime to a weaker but democratic state. We investigate both international and domestic trade policy. The international trade policy regime has remained largely open, perhaps surprisingly in view of the unpopularity of liberal economic policies in the wake of the crisis and the forces advocating more protectionist policies. However, this openness is precarious, and lacks both institutional and community opinion support. In contrast, while remaining largely open at the international border, domestic barriers to trade have increased. This conjunction of economic crisis and weak, democratic states is a common phenomenon in the developing world, and the lessons for trade policy from the Indonesian experience over this decade are therefore relevant to many other countries.
    Keywords: Trade Reform, Political Economy, Domestic Trade, Indonesia
    Date: 2007
  21. By: Gil S. Epstein (Bar-Ilan University); Ira N Gang (Rutgers University)
    Abstract: We argue that a purpose of foreign aid is to whet the appetite of the recipient in order to bring about a long term commitment to what the donor perceives as a need, but which the recipient may rank lower down on his list of undertakings, or may be sufficiently resource constrained as to be unable to start the project. In other words, we explore the implications and conditions for success of a donor trying to affect long-term recipient policy by creating path dependence. Once the project is established, aid can be removed without reversing the process that has been set in motion. Quite simply, the donor wants its project to stick. We place a formal structure on this.
    Keywords: foreign aid, rent seeking, governance, decentralization
    JEL: O10 O19 F35
    Date: 2006–12–01
  22. By: Gil S. Epstein (Bar-Ilan University); Ira N Gang (Rutgers University)
    Abstract: This paper analyzes the decentralization of decision-making in aid-giving in a theoretical rent-seeking framework. In this analysis the root donor establishes a necessary criterion for potential recipients: good governance. The potential recipients compete in hierarchal contests for funds. The paper investigates whether, under certain reasonable conditions, fashionable aid procedures will lead to the development of a poverty trap.
    Keywords: foreign aid, rent seeking, governance, decentralization
    JEL: O10 O19 F35
    Date: 2006–12–01
  23. By: Ira N. Gang (Rutgers University); Myeong-Su Yun (Tulane University)
    Abstract: We review the role immigration amnesties have played in US immigration policy, placing them in the context of similar programs embarked upon by other nations. The theory of amnesties suggests rent-seeking, bargaining, and costs as reasons for a country offering an amnesty, often in conjunction with increased border controls, internal enforcement and employer penalties. We model an immigration amnesty in which the destination country has a formal sector employing only legal immigrants, an informal sector employing both legal and illegal immigrants, and open unemployment. The model focuses on the productivity enhancing effects of legalization, and establishes specific conditions under which unemployment, the informal sector and the formal sectors increase/decrease in size. Building on these insights, our empirical work examines Mexican migration to the US. We study who are migrants; among migrants, who are legalized via IRCA, and who are legalized via sponsorship of family or employer. Furthermore, to measure the impact of amnesty on welfare of migrants, we estimate earnings equations of various migrants groups.
    Keywords: amnesty, illegal migration, border controls, IRCA
    JEL: J61 J68 H59
    Date: 2006–12–01
  24. By: Sumon Kumar Bhaumik (Brunel University); Ira N. Gang (Rutgers University); Myeong-Su Yun (Tulane University)
    Abstract: This paper decomposes differences in poverty incidence (head count ratio) using estimates from a regression equation, synthesizing the approaches proposed in World Bank (2003) and Yun (2004). A significance test is developed for characteristics and coefficients effects when decomposing differences in poverty incidence. The proposed method is implemented for studying differences in poverty incidence between Serbians and Albanians in Kosovo using Living Standard Measurement Survey.
    Keywords: poverty incidence, decomposition, headcount, probit
    JEL: C20 I30
    Date: 2006–12–01
  25. By: Ira N. Gang (Rutgers University); Kunal Sen (University of Manchester); Myeong-Su Yun (Tulane University)
    Abstract: This paper analyzes the determinants of rural poverty in India, contrasting the situation of scheduled caste (SC) and scheduled tribe (ST) households with the non-scheduled population. The incidence of poverty in SC and ST households is much higher than among non-scheduled households. By combining regression estimates for the ratio of per capita expenditure to the poverty line and an Oaxaca-type decomposition analysis, we study how these differences in the incidence of poverty arise. We find that for SC households, differences in characteristics explain the gaps in poverty incidence more than differences in transformed regression coefficients. In contrast, for ST households, the transformed regression coefficients play the more important role.
    Keywords: poverty, caste, ethnicity, decomposition
    JEL: I32 O12 J15
    Date: 2006–12–01
  26. By: Andres Erosa; Tatyana Koreshkova; Diego Restuccia
    Abstract: We develop a quantitative theory of human capital investment in order to evaluate the magnitude of cross-country differences in total factor productivity (TFP) that explains the variation in per-capita incomes across countries. We build a heterogeneous-agent economy with cross-sectional variation in ability, schooling, and expenditures on schooling quality. In our theory, the parameters governing human capital production and random ability process have important implications for a set of cross-sectional statistics - Mincer return, variance of earnings, variance of schooling, and intergenerational correlation of earnings. These restrictions of the theory and U.S. household data are used to pin down the key parameters driving the quantitative implications of the theory. Our main finding is that human capital accumulation strongly amplifies TFP differences across countries. In particular, we find an elasticity of output per worker with respect to TFP of 2.8: a 3-fold difference in TFP explains a 20-fold difference in output per worker. We argue that the cross-country differences in human capital implied by the theory are consistent with a wide array of evidence including earnings of immigrants in the United States, average mincer returns across countries, and the relationship between average years of schooling and per-capita income across countries. The theory implies that using Mincer returns to measure human capital understates differences across countries by a factor of 2.
    Keywords: output per worker, TFP, human capital, heterogeneity, inequality
    JEL: O1
    Date: 2007–03–06
  27. By: Antonio Ciccone; Elias Papaioannou
    Abstract: Does financial development result in capital being reallocated more rapidly to industries where it is most productive? We argue that if this was the case, financially developed countries should see faster growth in industries with investment opportunities due to global demand and productivity shifts. Testing this cross-industry cross-country growth implication requires proxies for (latent) global industry investment opportunities. We show that tests relying only on data from specific (benchmark) countries may yield spurious evidence for or against the hypothesis. We therefore develop an alternative approach that combines benchmark-country proxies with a proxy that does not reflect opportunities specific to a country or level of financial development. Our empirical results yield clear support for the capital reallocation hypothesis.
    Keywords: Financial development, sector analysis, growth, measurement error, investment opportunities
    JEL: E23 E O40 F30 G10
    Date: 2006–11
  28. By: Alessandra Bonfiglioli
    Abstract: Understanding the mechanism through which financial globalization affect economic performance is crucial for evaluating the costs and benefits of opening financial markets. This paper is a first attempt at disentangling the effects of financial integration on the two main determinants of economic performance: productivity (TFP)and investments. I provide empirical evidence from a sample of 93 countries observed between 1975 and 1999. The results suggest that financial integration has a positive direct effect on productivity, while it spurs capital accumulation only with some delay and indirectly, since capital follows the rise in productivity. I control for indirect effects of financial globalization through banking crises. Such episodes depress both investments and TFP, though they are triggered by financial integration only to a minor extent. The paper also provides a discussion of a simple model on the effects of financial integration, and shows additional empirical evidence supporting it.
    Keywords: Capital account liberalization, financial development, banking crises, growth, productivity, investments
    JEL: G15 F43 O40 C23
    Date: 2006–09
  29. By: Pieter Serneels; Magnus Lindelow; José Garcia Montalvo; Abigail Barr
    Abstract: Geographical imbalances in the health workforce have been a consistent feature of nearly all health systems, and especially in developing countries. In this paper we investigate the willingness to work in a rural area among final year nursing and medical students in Ethiopia. Analyzing data obtained from contingent valuation questions, we find that household consumption and the student’s motivation to help the poor, which is our proxy for intrinsic motivation, are the main determinants of willingness to work in a rural area. We investigate whoe is willing to help the poor and find that women are significantly more likely than men. Other variables, including a rich set of psychosocial characteristics, are not significant. Finally, we carry out some simulation on how much it would cost to make the entire cohort of starting nurses and doctors chooseto take up a rural post.
    Keywords: Health care delivery, health workers, labour supply, public service
    JEL: D1 J22 J64
    Date: 2006–11
  30. By: Amin, Mohammad; Mattoo, Aaditya
    Abstract: The paper analyzes migration from Zambia in order to understand how migration policy can support development in the least developed countries. Overall emigration from Zambia is not high by regional standards, but the pattern of migration is skewed toward the skilled and away from the unskilled. A development-friendly approach to migration for Zambia would strive to ensure the temporariness of both types of movement. First, industrial countries may be willing to accept a higher level of unskilled immigration if they could be certain that it is temporary. Second, any adverse effects of brain drain would be greatly alleviated if skilled emigration is temporary. The problem is that host countries cannot unilaterally ensure temporariness of unskilled migration because repatriation cannot be accomplished without the help of source countries like Zambia, and source countries today have little incentive to facilitate the return of the unskilled. At the same time, source countries like Zambia cannot unilaterally ensure temporariness of the skilled because repatriation cannot be accomplished without the help of the host countries, and host countries currently have little incentive to send back the skilled. So, there is a strong case and considerable scope for cooperation between source countries like Zambia and destination countries in the design and implementation of migration policy so that unskilled migration becomes feasible and skilled migration takes a more desirable form.
    Keywords: Population Policies,Health Monitoring & Evaluation,Human Migrations & Resettlements,Voluntary and Involuntary Resettlement,Country Strategy & Performance
    Date: 2007–03–01
  31. By: Claessens, Stijn; Schmukler, Sergio L.
    Abstract: The authors study international financial integration analyzing firms from various countries raising capital, trading equity, and cross-listing in major world stock markets. Using a large sample of 39,517 firms from 111 countries covering the period 1989-2000, they find that, although international financial integration increases substantially over this period, only relatively few countries and firms actively participate in international markets. Firms more likely to internationalize are from larger and more open economies, with higher income, better macroeconomic policies, and worse institutional environments. These firms tend to be larger, grow faster, and have higher returns and more foreign sales. While changes occur with internationalization, these firm attributes are present before internationalization takes place. The results suggest that international financial integration will likely remain constrained by country and firm characteristics.
    Keywords: Microfinance,Small Scale Enterprise,Economic Theory & Research,Markets and Market Access,Investment and Investment Climate
    Date: 2007–03–01
  32. By: Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
    Abstract: The Worldwide Governance Indicators, reporting estimates of six dimensions of governance for over 200 countries between 1996 and 2005, have become widely used among policymakers and academics. They have also attracted some explicit written criticisms. In this short paper the authors synthesize 11 critiques offered by four recent papers. They then refute them as either conceptually incorrect or empirically unsubstantiated.
    Keywords: Governance Indicators,National Governance,Statistical & Mathematical Sciences,Economic Policy, Institutions and Governance,Public Sector Corruption & Anticorruption Measures
    Date: 2007–03–01
  33. By: Wagstaff, Adam; Lindelow, Magnus; Gao Jun; Xu Ling; Qian Juncheng
    Abstract: In 2003, after over 20 years of minimal health insurance coverage in rural areas, China launched a heavily subsidized voluntary health insurance program for rural residents. The authors use program and household survey data, as well as health facility census data, to analyze factors affecting enrollment into the program and to estimate its impact on households and health facilities. They obtain estimates by combining differences-in-differences with matching methods. The authors find some evidence of lower enrollment rates among poor households, holding other factors constant, and higher enrollment rates among households with chronically sick members. The household and facility data point to the scheme significantly increasing both outpatient and inpatient utilization (by 20-30 percent), but they find no impact on utilization in the poorest decile. For the sample as a whole, the authors find no statistically significant effects on average out-of-pocket spending, but they do find some-albeit weak-evidence of increased catastrophic health spending. For the poorest decile, by contrast, they find that the scheme increased average out-of-pocket spending but reduced the incidence of catastrophic health spending. They find evidence that the program has increased ownership of expensive equipment among central township health centers but had no impact on cost per case.
    Keywords: Health Monitoring & Evaluation,Housing & Human Habitats,Small Area Estimation Poverty Mapping,Regional Rural Development,Health Economics & Finance
    Date: 2007–03–01
  34. By: Castro, Lucio; Olarreaga, Marcelo; Saslavsky, Daniel
    Abstract: For many in Latin America, the increasing participation of China and India in international markets is seen as a looming shadow of two " mighty giants " on the region ' s manufacturing sector. Are they really mighty giants when it comes to their impact on manufacturing employment? The authors attempt to answer this question by estimating the effects of trade with China and India on Argentina ' s industrial employment. They use a dynamic econometric model and industry level data to estimate the effects of trade with China and India on the level of employment in Argentina ' s manufacturing sector. Results suggest that trade with China and India only had a small negative effect on industrial employment, even during the swift trade liberalization of the 1990s.
    Keywords: Labor Markets,Free Trade,Economic Theory & Research,Water and Industry,Trade Policy
    Date: 2007–03–01
  35. By: Keefer, Philip
    Abstract: The existing literature emphasizes and contrasts the role of political checks and balances and legal origin in determining the pace of financial sector development. This paper expands substantially on one aspect of this debate: the fact that government actions that promote financial sector development, whether prudent financial regulation or secure property and contract rights, are public goods and sensitive to political incentives to provide public goods. Tests of hypotheses emanating from this argument yield four new conclusions. First, two key determinants of those incentives-the credibility of pre-electoral political promises and citizen information about politician decisions-systematically promote financial sector development. Second, these political factors, along with political checks and balances, operate in part through their influence on the security of property rights, an argument asserted but not previously tested. Third, contrary to findings elsewhere in the literature, the political determinants of financial sector development are significant even in the presence of controls for legal origin. Finally, and again in contrast to the literature, the evidence here suggests that legal origin primarily proxies for political phenomena. Legal origin is a largely insignificant determinant of financial sector development when those phenomena are fully taken into account.
    Keywords: Economic Theory & Research,Privatization,Political Economy,Inequality,Legal Products
    Date: 2007–03–01
  36. By: Demombynes, Gabriel; Elbers, Chris; Lanjouw, Jean O.; Lanjouw, Peter
    Abstract: The authors examine the performance of small area welfare estimation. The method combines census and survey data to produce spatially disaggregated poverty and inequality estimates. To test the method, they compare predicted welfare indicators for a set of target populations with their true values. They construct target populations using actual data from a census of households in a set of rural Mexican communities. They examine estimates along three criteria: accuracy of confidence intervals, bias, and correlation with true values. The authors find that while point estimates are very stable, the precision of the estimates varies with alternative simulation methods. While the original approach of numerical gradient estimation yields standard errors that seem appropriate, some computationally less-intensive simulation procedures yield confidence intervals that are slightly too narrow. The precision of estimates is shown to diminish markedly if unobserved location effects at the village level are not well captured in underlying consumption models. With well specified models there is only slight evidence of bias, but the authors show that bias increases if underlying models fail to capture latent location effects. Correlations between estimated and true welfare at the local level are highest for mean expenditure and poverty measures and lower for inequality measures.
    Keywords: Small Area Estimation Poverty Mapping,Rural Poverty Reduction,Science Education,Scientific Research & Science Parks,Population Policies
    Date: 2007–03–01
  37. By: de la Torre, Augusto; Gozzi, Juan Carlos; Schmukler, Sergio L.
    Abstract: Over the past decades, many countries have implemented significant reforms to foster capital market development. Latin American countries were at the forefront of this process. The authors analyze where Latin American capital markets stand after these reforms. They find that despite the intense reform effort, capital markets in Latin America remain underdeveloped relative to markets in other regions. Furthermore, stock markets are below what can be expected, given Latin America ' s economic and institutional fundamentals. The authors discuss alternative ways of interpreting this evidence. They argue that it is difficult to pinpoint which policies Latin American countries should pursue to overcome their poor capital market development. Moreover, they argue that expectations about the outcome of the reform process may need to be revisited to take into account intrinsic characteristics of emerging economies. The latter may limit the scope for developing deep domestic capital markets in a context of international financial integration.
    Keywords: Markets and Market Access,Economic Theory & Research,Access to Markets,Financial Economics,Financial Intermediation
    Date: 2006–03–01
  38. By: Easter ly, William; Irwin, Timothy; Serven, Luis
    Abstract: Fiscal adjustment becomes like walking up the down escalator when growth-promoting spending is cut so much as to lower growth and thus the present value of future tax revenues to a degree that more than offsets the improvement in the cash deficit. Although short-term cash flows matter, a preponderant focus on them encourages governments to invest too little. Cash flow targets also encourage governments to shift investment spending off budget, by seeking private investment in public projects-irrespective of its real fiscal or economic benefits. To evade the action of cash flow targets, some have suggested excluding from their scope certain investments (such as those undertaken by public enterprises deemed commercial or financed by multilaterals). These stopgap remedies might sometimes help protect investment, but they do not provide a satisfactory solution to the underlying problem. Governments can more effectively reduce the biases created by the focus on short-term cash flows by developing indicators of the long-term fiscal effects of their decisions, including accounting and economic measures of net worth, and where appropriate including such measures in fiscal targets or even fiscal rules, replacing the exclusive focus on liquidity and debt.
    Keywords: Public Sector Expenditure Analysis & Management,Public Sector Economics & Finance,Investment and Investment Climate,Economic Stabilization,Fiscal Adjustment
    Date: 2007–03–01
  39. By: Haddad, Mona
    Abstract: Production networks have been at the heart of the recent growth in trade among East Asian countries. Fragmen tation trade, reflected mainly in the trade in parts and components, is expanding more rapidly than the conventional trade in final goods. This is mainly due to the relatively more favorable policy setting for international production, agglomeration benefits arising from the early entry into this new form of specialization, considerable intercountry wage differentials in the region, lower trade and transport costs, and specialization in products exhibiting increasing returns to scale. The economic integration of China has deepened production fragmentation in East Asia, countering fears of crowding out other countries for international specialization. International production fragmentation in East Asia has intensified intraregional trade but has depended heavily on extraregional trade in final goods. While production networks centered on China have contributed significantly to growth in East Asia, they also breed vulnerabilities. They have not automatically led to technology spillovers and have led to an extreme interdependence across East Asian countries.
    Keywords: Economic Theory & Research,Free Trade,Trade Policy,Trade Law,Technology Industry
    Date: 2007–03–01
  40. By: Parsons, Christopher R.; Skeldon, Ronald; Wa lmsley, Terrie L.; Winters, L. Alan
    Abstract: This paper introduces four versions of an international bilateral migration stock database for 226 by 226 countries and territories. The first three versions each consist of two matrices, the first containing migrants defined by country of birth, that is, the foreign-born population; the second, by nationality, that is, the foreign population. Wherever possible, the information is collected from the 2000 round of censuses, though older data are included where this information was unavailable. The first version of the matrices contains as much data as could be collated at the time of writing but also contains gaps. The later versions progressively use a variety of techniques to estimate the missing data. The final matrix, comprising only the foreign-born, attempts to reconcile all of the available information to provide the researcher with a single and complete matrix of international bilateral migrant stocks. The final section of the paper describes some of the patterns evident in the database. For example, immigration to the United States is dominated by Latin America, whereas Western European immigration draws heavily on Eastern Europe, Central Asia, and the Mediterranean region. Over one-third of world migration is from developing to industrial countries and about a quarter between developing countries. Intra-developed country and intra-FSU (former Soviet Union) flows each account for about 15 percent of the total. Over half of migration is between countries with linguistic ties. Africa accounts for 8 percent of Western Europe ' s immigration and much less of that to other rich regions.
    Keywords: Population Policies,International Migration,Human Migrations & Resettlements,Voluntary and Involuntary Resettlement,Statistical & Mathematical Sciences
    Date: 2007–03–01
  41. By: Anne Genereux (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: This paper evaluates fertility and migration theory in order to further understand the impact of migration on fertility. I first analyze the fertility and migration literature separately and then look at the burgeoning literature on the impact of migration on fertility. As a result, I propose an integrated framework for analyzing the migration-fertility nexus. Within the fertility context, I use Bongaarts and Watkins concept of social interaction, whereas within the migration context, I draw on Massey’s capitalist transition theory, and Pessar and Mahler’s ‘gendered geometries of power’. This integrated framework considers three major factors: the sending country, the global context of migration systems, and the receiving country. Gender is the key to understanding fertility decisions within all three levels. Migration from Africa to France is considered in order to exemplify these processes. Bozon’s typology of African demographic patterns shows how and why the sending country matters for future childbearing decisions post-migration. To further explore this facet, four countries are used to evaluate the impact of migrating from specific types of countries on fertility post-migration: Senegal, Mali, Cameroon, and Rwanda. The global context of migration is constantly changing, both encouraging and restraining men and women in particular ways, which also affects fertility choices. Finally, the receiving country interacts with migrants in various ways—immigration policies, the economy, and social institutions—playing important roles in fertility outcomes.
    Keywords: Africa, France, fertility, migration
    JEL: J1 Z0
    Date: 2007–02
  42. By: Aristovnik, Aleksander
    Abstract: The main aim of the paper is to examine the short- and medium-term empirical link between current account balances and a broad set of (economic) variables proposed by theoretical and empirical literature. The paper focuses on the Middle East and North Africa (MENA), an economically diverse region, which has so far mainly been neglected in such empirical analyzes. For this purpose, a (dynamic) panel-regression technique is used to characterize the properties of current account variations across selected MENA economies in the 1971-2005 period. The results, which are generally consistent with theoretical and previous empirical analyses, indicate that higher (domestic and foreign) investment, government expenditure and foreign interest rates have a negative effect on the current account balance. On the other hand, a more open economy, higher oil prices and domestic economic growth generate an improvement in the external balance, whereas the latter implies that the domestic growth rate is associated with a larger increase in domestic savings than investment. Finally, the results show a relatively high persistency of current accounts and reject the validity of the stages of development hypothesis as poorer countries in the region reveal a higher current account surplus (or lower deficit).
    Keywords: MENA countries; current account; determinants; dynamic panel data
    JEL: O53 F32
    Date: 2007–02–01
  43. By: Saab, Samer; Vacher, Jerome
    Abstract: This paper considers the extent of retail banking integration in the Communauté Economique et Monétaire d'Afrique Centrale (CEMAC) and the level of bank competition at the regional level. Using a mix of quantitative and qualitative indicators, the paper finds some evidence of price convergence in average interest rate spreads. However, this observed fact is not supported by an increase in cross-border flows in retail loans and deposits, and price convergence may merely reflect excess liquidity in the region. Other data also indicate that bank competition within the CEMAC as a region is limited, complementing the findings on integration. Addressing shortfalls in legal and regulatory frameworks, infrastructure, and markets would facilitate integration.
    Keywords: Central African Economic and Monetary Community; Banks; Competition; Bank soundness; Financial soundness indicators; Monetary unions; Economic cooperation; CEMAC
    JEL: G21 E58
    Date: 2007–01–01
  44. By: Rao, B. Bhaskara; Singh, Rup
    Abstract: This paper develops an endogenous growth model with externalities of the ``manna from heaven'' type due to learning by doing and trade openness to show that they are significant for 6 Asian countries. The estimated parameters of the augmented production functions are used to compute the steady state growth rates for Singapore, Malaysia, Thailand, Hong Kong, Korea and the Philippines. A few broad policies to improve these steady state growth rate are suggested.
    Keywords: Endogenous Growth; Learning by Doing Trade Openness; Steady State Growth Rate; Newly Developing Asian Countries.
    JEL: O39 O1 O53 O47 O2
    Date: 2007–03–07
  45. By: Mersland, Roy
    Abstract: This article analyses the cost of ownership in microfinance organizations. We specifically compare the ownership-cost of Shareholders Firms (SHFs), Non Profit Organizations (NPOs) and Cooperatives (COOPs). A paradoxical situation motivates us: Most providers of microfinance, both historically and today, are NPOs or COOPs, while several policy papers advocate SHFs. Based on an extension of Hansmann’s (1996) economic theory of ownership we propose that cost variables related to market contracting of microfinance services favor NPOs and COOPs, whereas most cost variables related to the practice of ownership favor SHFs. We conclude that in severe imperfect markets, where most microfinance organizations operate, NPOs and COOPs are still needed.
    Keywords: Microfinance; ownership; corporate governance; nonprofits; transformation; global study
    JEL: O16 G32
    Date: 2007–01–15
  46. By: Mersland, Roy; Strøm, R. Øystein
    Abstract: Suppliers of microfinance are typically Non Governmental Organizations (NGOs), cooperatives or specialized microfinance institutions incorporated as Shareholder Firms (SHFs). Leaving out the cooperatives we study whether NGOs and SHFs differ in bringing along social benefit to their clients. Specifically, is there a trade-off between different dimensions of social benefits, and can these tradeoffs predict ownership type? To frame the comparison of NGOs and SHFs we make use of Schreiner’s (2002) framework for discussion of the social benefits of microfinance. A self constructed dataset with unusually high-quality rating information from 132 NGOs and 68 SHFs in 53 countries is used to carry out the statistical tests. Our findings indicate that SHFs and NGOs are more similar than different. Our hypothesis that NGOs are more socially oriented than SHFs is rejected. SHFs’ benefit in scale and scope seems not related to ownership, but to legal constraints impeding NGOs to mobilize savings. Our second conclusion is that we cannot find a trade-off among outreach variables. Specifically, the return on assets is higher in NGOs. We conclude that ownership doesn’t influence the performance of microfinance organizations. Our conclusion is in line with findings in the general banking industry.
    Keywords: Microfinance; outreach tradeoffs; transformation; commercialization; ownership; corporate governance
    JEL: O16 G32
    Date: 2007–01–30
  47. By: Djumashev, Ratbek
    Abstract: In this paper, we analyze implications of corruption on growth. We extend existing growth models by incorporating ubiquitous corruption as a by-product of the public sector. Corruption affects both taxation and public good provision, and therefore causes income redistribution and inefficiencies in the public sector. These effects of corruption lead to lower growth through distortions of investment incentives and resources allocation.
    Keywords: Corruption; growth; public goods; tax evasion
    JEL: H40 D92 O17 E60
    Date: 2006
  48. By: Rulof Burger; Derek Yu (Department Of Economics, Stellenbosch University)
    Abstract: Abstract: This paper examines South African wage earnings trends using all the available post-1994 household survey datasets. This allows us to identify and address the sources of data inconsistencies across surveys in order to construct a more comparable earnings time series. Taking account of the inconsistencies in questionnaire design and the presence of outliers, we find that it is possible to construct a fairly stable earnings series for formal sector employees. We find that claims that workers have on average experienced a substantial decrease in their real wage earnings in the post-apartheid era is based on choosing datasets on either side of Statistics South Africa’s changeover from October Household Surveys (OHS) to the more consistent Labour Force Surveys (LFS), which caused a discontinuous and inexplicably large drop in average earnings. The data actually show an increase in real wage earnings in the post-transition period for formal sector employees, and does not provide strong evidence of decreasing wages in the informal economy. The paper also investigates changes in the distribution of earnings, as well as mean earnings trends by population group, gender and skill category.
    Keywords: South Africa, Earnings, Wages, Labour market trends
    JEL: J31
    Date: 2007–02
  49. By: Carlene van der Westhuizen; Sumayya Goga; Liberty Ncube; Morné Oosthuizen (Development Policy Research Unit,University of Cape Town)
    Abstract: Abstract: Recent research has found that changing policies and attitudes and improved economic performance have impacted on the labour market dynamics for women and the increased feminisation of the South African labour force since the mid-1990s has been well documented. While employment has increased more rapidly for women than for men over the period, it has been suggested that women are overrepresented in low-income, less secure employment. In addition, insufficient jobs were created to absorb the additional entrants to the labour market and as a result women are also overrepresented amongst the unemployed. The objective of this report is to provide an overview of the changes in the status of women in the South African labour market between 1995 and 2005. The report finds that the feminisation of the South African labour force between 1995 and 2005 has been driven specifically by greater numbers of African women entering the labour force. Women benefited more from the increased demand for labour over the period than men, accounting for more than half of the increase in employment, with the bulk accruing to African women. In line with previous research it is found that the majority of women find jobs as unskilled and low-paid Elementary Workers. Female unemployment rates increased for all covariates, but African women and young women in particular struggled to find employment. When returns to employment are considered, it is clear that discrimination by gender and race remains. When real mean monthly earnings in 2001 and 2005 are compared it is found that women of all race groups earned less than men in both years, with the exception of Coloureds in 2005. African women, specifically, are undoubtedly the most vulnerable participants in the labour force, particularly if they are young and poorly educated. Even those African women who did find employment continue to earn considerably less than their White counterparts, with very large differences especially at the lower skills levels.
    Keywords: South African labour force, discrimination by gender and race, labour market dynamics for women
    JEL: A1
    Date: 2007–02
    Abstract: Abstract: The regulatory impact of municipalities on small enterprise is inextricably linked to their developmental and service delivery roles. A general lack of information about municipal regulations and their enforcement was also discerned among the small businesses interviewed. The most significant distinctions of four categories of micro, very small, small and medium enterprise are as follows: – Micro survivalist and micro non-survivalist businesses also classified as the informal sector. This category requires a specialised focus through standardised regulations and transparent and predictable service delivery arrangements. Where possible, targeted support for certain, highly viable micro businesses could assist them in becoming formalised and graduate to the very small status. – Very small businesses are on the threshold of becoming more established, small or medium enterprises. They are already formalised which means that the initial regulatory barrier posed through licensing and zoning applications has been crossed. This category requires municipal support in the form of business advice, training and reliable provision of utilities. – Small and medium enterprises stand to gain significantly from effective supply chain management policies of municipalities that rely on unbundling of larger projects, capacity building of businesses and regular monitoring and evaluation of the regulatory environment. A range of recommendations to enhance municipal regulatory role is offered in this paper.
    Keywords: small enterprises, regulatory impact, municipal regulations
    JEL: A1
    Date: 2006–05
  51. By: Doubell Chamberlain; Anja Smith (Genesis Analytics)
    Abstract: Abstract: Regulatory compliance costs impose a deadweight burden on firms and therefore should be minimised. In achieving this goal, it is necessary to embrace a process of smart regulation, rather than focus on deregulation. Tax compliance cost is one type of regulatory costs that is often viewed to have a large negative impact on SMMEs. To gauge the impact of this cost on small business in South Africa, this document reviews three available studies on the impact of tax compliance costs on South African SMMEs. The three studies reviewed are: • Counting the Cost of Red Tape for Business in South Africa by SBP (2005); • Measurement of Value Added Tax Act and Regional Services Councils Act-induced Administrative Burdens for South African Small Businesses by Upstart Business Strategies (2004), commissioned by the Department of Trade and Industry (dti); and • SMME Facilitation Program (Report Version) by the South African Revenue Services (SARS) to be released in 2005. South African tax compliance costs cannot be judged in isolation. Available information on South African tax compliance costs and their impact on SMMEs are captured in the three reviewed studies. The SBP (2005) study estimates total regulatory compliance costs for formal firms in South Africa to have been approximately R79 billion in 2004, 6.5 per cent of GDP, and total tax compliance costs to have been roughly R20 billion in the same year. Due to the nature of the report, it makes no tax-specific recommendations and only focuses on broad regulatory compliance recommendations. The Upstart Business Strategies (2004) study focuses on two specific taxes, Value-Added Tax (VAT) and Regional Service Council Levies (not administered by SARS, but by regional service councils). The study employs Mistral®, a proprietary “bottom-up” technique to quantify tax compliance costs. The study finds that the average SMME spends approximately R6 027 on two compliance activities associated with VAT – recordkeeping and completion tax returns. The total VAT compliance cost for an average SMME is estimated to range between R6 000 and R8 000 annually. The recommendations of the study are of a broad practical nature and focused on reducing the time spent on specific tax compliance activities. It does not specify the how of its recommendations, for example, it suggests that the internal reliability of SARS logistics needs to be improved and that queing time spent at SARS needs to be reduced, but does not explain how these outcomes should be achieved. The SARS (2005) study does not generate its own empirical data. It reviews the empirical findings of the above two studies and findings of other studies broadly or specifically focused on SMMEs and the formal/informal economic divide. In addition, it draws on a number of qualitative insights gained during interaction with a range of individuals and organisations aware of small business concerns. A number of recommendations with regards to SARS structures (for example, creation of a Small Business Centre and Small Business help desks), SARS communication channels and SARS products (specifically VAT) are made. Rather than simply focusing on small “cosmetic” tax changes, what is required is intensive co-ordination of SMME policy across different government departments. The narrow focus of the reviewed studies, excluding the SARS report, strengthen the idea that relevant policy considerations do not extend beyond the implementation of technical changes to tax legislation. However, a strong case can be made for a number of other SMME policy-related issues to receive greater emphasis than tax compliance costs. Conclusions relative to tax compliance cost include the fact that a large component of tax compliance costs can be ascribed to firm-level inefficiencies. While a reduction in the tax compliance burden can help to create a more enabling environment for business, a special tax regime for small businesses might not be the best way to achieve lower compliance costs. Far more than simply tax changes will be required to unlock the South African SMME market.
    Keywords: SMMEs, Regulatory compliance costs, tax compliance costs
    JEL: A1
    Date: 2006–03
  52. By: Rubiana Chamarbagwala (Department of Economics, Indiana University); Martin Ranger (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    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, is 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.
    Date: 2006–11
  53. By: K. C. Fung (University of California at Santa Cruz); Alicia García-Herrero (Banco de España); Hitomi Iizaka (University of California at Santa Cruz); Alan Siu (University of Hong Kong - School of Economics and Finance)
    Abstract: In this paper, we examine empirically whether hard infrastructure, in the form of more highways and railroads, or soft infrastructure, in the form of more market oriented institutions through deeper reform, lead to more foreign direct investment (FDI) in China. We use data of outward FDI from the United States, Japan, Hong Kong, Taiwan and Korea to various regions of China from 1990 to 2002. We control for the standard determinants of FDI, namely regional market size, wage rates, human capital and tax policies. We add indices of hard and soft infrastructure and find that soft infrastructure, in the form of more market oriented institutions through deeper structural reform, consistently outperforms hard infrastructure as a determinant of FDI.
    Keywords: china, fdi determinants
    JEL: F21 F23
    Date: 2006–06
  54. By: Luis Carlos Jemio (Institute for Advanced Development Studies); Maria del Carmen Choque
    Abstract: The reform program and growth pattern exhibited by the Bolivian economy in the last decade did not favour employment creation and consequently not an effective reduction of poverty. During the last decade, those sectors where the bulk of employment is concentrated, presented the lowest growth rates of GDP, labour productivity and real incomes. The present paper analyzes in detail the two sectors where the bulk of employment and poverty is concentrated (agriculture and the urban informal sector) in order to determine the critical constraints to improvements in productivity, employment generation, and reductions in poverty.
    Keywords: Employment, Poverty, Growth, Bolivia
    JEL: J24 O54 O17
    Date: 2006–12
  55. By: Nathan Nunn (University of British Columbia); Diego Puga (Universitat Pompeu Fabra & IMDEA)
    Abstract: There is controversy about whether geography matters mainly because of its contemporaneous impact on economic outcomes or because of its interaction with historical events. Looking at terrain ruggedness, we are able to estimate the importance of these two channels. Because rugged terrain hinders trade and most productive activities, it has a negative direct effect on income. However, in Africa rugged terrain afforded protection to those being raided during the slave trades. Since the slave trades retarded subsequent economic development, in Africa ruggedness also has had a historical indirect positive effect on income. Studying all countries worldwide, we find that both effects are significant statistically and that for Africa the indirect positive effect dominates the direct negative effect. Looking within Africa, we provide evidence that the indirect effect operates through the slave trades. We also show that the slave trades, by encouraging population concentrations in rugged areas, have also amplified the negative direct impact of rugged terrain in Africa.
    Keywords: terrain ruggedness, slave trades, Africa, economic development
    JEL: O11 O13 N50 N40
    Date: 2007–03–01
  56. By: Ahmad Komarulzaman (Department of Economics, Padjadjaran University); Armida Alisjahbana (Department of Economics, Padjadjaran University)
    Abstract: Resource curse literatures explain that countries abundant with natural resources tend to grow slower. This hypothesis is relevant for Indonesia as it is a country rich in natural resources. This paper tries to investigate empirically the relationship between resources abundance and its impact on economic development at the regional level using cross section regression approach. The regional financial data from ministry of finance are combined with regional specific data from BPS to seek the pattern. The paper will shed light on whether resources rich regions in Indonesia are trapped in this curse.
    Keywords: Natural resource rent, resource curse hypothesis, Indonesia
    JEL: Q01 Q56 R11
    Date: 2006–08
  57. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: This paper is motivated by the inconsistency between food and non-food expenditure 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
  58. By: Peter Warr (Australian National University)
    Abstract: Total factor productivity growth in the agricultural, industry and services sectors is studied in this paper for two countries: Thailand and Indonesia, over the period 1981 to 2002. A feature of the analysis is the decomposition of aggregate total factor productivity growth into two components: productivity growth in individual sectors; and the reallocation of resources from low productivity to high productivity sectors. The results show that in both countries virtually all factor productivity growth at the sectoral level derives from agriculture, but the reallocation of resources away from agriculture was a much larger source of aggregate productivity growth.
    Keywords: total factor productivity growth, Thailand, Indonesia
    JEL: O47 Q10 O30
    Date: 2006–02

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