nep-dev New Economics Papers
on Development
Issue of 2007‒03‒17
thirty-two papers chosen by
Jeong-Joon Lee
Towson University

  1. Is Foreign Aid a Vanguard of FDI? A Gravity-Equation Approach By KIMURA Hidemi; TODO Yasuyuki
  2. Population and Agricultural Development By James Roumasset
  3. Social Capital vs Institutions in the Growth Process By Ahlerup, Pelle; Olsson, Ola; Yanagizawa, David
  4. Procyclicality or Reverse Causality? By Dany Jaimovich; Ugo Panizza
  5. Boda Bodas Rule: Non-agricultural Activities and Their Inequality Implications in Western Kenya By Jann Lay; George Michuki M'Mukaria; Toman Omar Mahmoud
  6. Formal and Informal Rural Credit in Four Provinces of Vietnam By Mikkel Barslund; Finn Tarp
  7. Microfinance in LDCs: multipurpose NGOs linkage models By Chiara SANSEVERINO
  8. Accounting for Growth: Comparing China and India By Barry Bosworth; Susan M. Collins
  9. From 'OPEN SEASON' to ROYAL GAME': The Strategic Repositioning of Commercial Farmers across the Independence Transition in Zimbabwe By Angus Selby (QEH)
  10. From Uneven Ground: The Undermining of the Alliance Between Commercial Farmers and the State in Zimbabwe 1990 – 1996 By Angus Selby (QEH)
  11. Losing the Plot: The Strategic Dismantling of White Farming in Zimbabwe 2000-2005 By Angus Selby (QEH)
  12. Radical Realignments: The Collapse of the Alliance between White Farmers and the State in Zimbabwe 1995-2000 By Angus Selby (QEH)
  13. "Obstacles to School Progression in Rural Pakistan: An Analysis of Gender and Sibling Rivalry Using Field Survey Data" By Yasuyuki Sawada; Michael Lokshin
  14. Are Any Growth Theories Robust? By Steven N. Durlauf; Andros KOURTELLOS; Chih Ming Tan
  15. The Growth Effects of Openness to Trade and the Role of Institutions: New Evidence from African Countries By Léonce Ndikumana; Mina Baliamoune-Lutz
  16. Estimating real production and expenditures across nations : a proposal for improving the Penn World Tables By Feenstra, Robert C.; Heston, Alan; Timmer, Marcel P.; Deng, Haiyan
  17. More time is better : an evaluation of the full time school program in Uruguay By Cerdan-Infantes, Pedro; Vermeersch, Christel
  18. Specification of investment functions in Sub-Saharan Africa By Bayraktar, Nihal; Fofack, Hippolyte
  19. Do Visas Kill? Health Effects of African Health Professional Emigration By Michael Clemens
  20. Vietnam’s Trade Liberalisation: Potential Impacts on Child Well-being By Nguyen, Anh; Jones, Nicola
  21. Comparative Analysis of the Relationship Between Poverty and Underground economy in the Highly developed, Transition and Developing Countries By Obayelu, Abiodun, Elijah; Uffort, Larry
  23. Immigration, Wages, and Growth in the Host Nations By Mideksa, Torben
  24. An extension to the neoclassical growth modelto Estimate Growth and Level Effects By Rao, B. Bhaskara; Singh, Rup; Nisha, Fozia
  25. The Harris-Todaro Hypothesis By Khan, M. Ali Khan
  26. Wage Differentials, Rate of Return toEducation, and Occupational WageShare in the Labour Market of Pakistan By Hyder, Asma
  27. Demographic Dividend or Demographic Threat in Pakistan By Nayab, Durr-e-
  28. Foreign Aid, Resources and Export Diversification in Africa: A New Test of Existing Theories By Osakwe, Patrick N.
  29. Wheat Markets and Price Stabilisation in Pakistan: An Analysis of Policy Options By Dorosh, Paul; Salam, Abdul
  30. Crisis Region Western Africa: The cradle of African migration to Europe By Kohnert, Dirk
  31. Earnings Differential Between Male-Female In Indonesia: Evidence From Sakernas Data By Viktor Pirmana
  32. The Impact of Child Labor on Child’s Education: The Case of Indonesia By Pipit Pitriyan

  1. By: KIMURA Hidemi; TODO Yasuyuki
    Abstract: This paper investigates whether and how foreign aid facilitates foreign direct investment (FDI) flows into less developed countries. We employ a large data set of source-recipient country pairs and conduct gravity equation-type estimation. Our empirical methodology enables us to distinguish among three effects of aid on FDI: a positive "infrastructure effect," a negative "rent-seeking effect," and a positive "vanguard effect," which is specific to the same source-recipient country pair of aid and FDI. According to our empirical analysis, foreign aid in general does not necessarily have an infrastructure, rent-seeking, or vanguard effect. However, we find robust evidence that foreign aid from Japan has a vanguard effect, while aid from other donor countries reveals no such effect. This vanguard effect seems to be peculiar to the Japanese foreign aid.
    Date: 2007–03
  2. By: James Roumasset (Department of Economics, University of Hawaii at Manoa)
    Abstract: Thinking about population as a driver of agricultural development provides insights into induced technical and institutional change, whether it be Esther Boserup's declining fallow period, modern crop varieties, or the specialization pyramid that arises in labor-intensive agriculture. The non-convexities of research and development, infrastructure investments, and specialization imply that modest population pressure does not necessarily exert downward pressure on wages. As agricultural growth stimulates industrialization, the non-convexities of specialization become ever more compact. The combination of these and the increased demand for human capital, if not inhibited by policy failures, tends to promote a virtuous circle of human progress.
    Keywords: population, agricultural development, Boserup, non-convexities, specialization, institutional change
    JEL: J10 O12 O43 P23 Q01
    Date: 2007–03–03
  3. By: Ahlerup, Pelle (Department of Economics, School of Business, Economics and Law, Göteborg University); Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University); Yanagizawa, David (Stockholm University)
    Abstract: Is social capital always important for economic growth? A number of recent micro studies suggest that interpersonal trust and social capital will have its greatest impact on economic performance when court institutions are relatively weak. The conventional wisdom from macro studies, however, is that social capital is unconditionally good for growth. On the basis of the micro evidence, we outline an investment game between a producer and a lender in an incomplete-contracts setting. A key insight is that social capital will have the greatest e¤ect on the total surplus from the game at lower levels of institutional strength and that the effect of social capital vanishes when institutions are very strong. When we bring this prediction to an empirical cross-country growth regression, it is shown that the marginal effect of social capital (in the form of inter- personal trust) decreases with institutional strength. Our results imply that a one standard deviation rise in social capital in weakly institutionalized Nigeria should increase economic growth by 1.8 percentage points, whereas the same increase in social capital only increases growth by 0.3 percentage points in strongly institutionalized Canada. <p>
    Keywords: social capital; institutions; growth; investment
    JEL: O11
    Date: 2007–03–09
  4. By: Dany Jaimovich (Inter-American Development Bank); Ugo Panizza (United Nations Conference on Trade and Development)
    Abstract: There is a large literature showing that fiscal policy is either acyclical or countercyclical in industrial countries and procyclical in developing countries. Most of this literature is based on OLS regressions that focus on the correlation between a fiscal variable (usually the budget balance or expenditure growth) and either GDP growth or some measure of the output gap. This paper argues that such a methodology does not permit the identification of the effect of the business cycle on fiscal policy and hence cannot be used to estimate policy reaction functions. The paper proposes a new instrument for GDP growth and shows that, once GDP growth is properly instrumented, procyclicality tends to disappear.
    Keywords: Fiscal Policy, Business Cycle, Emerging Markets
    JEL: E62 E32 H62
    Date: 2007–03
  5. By: Jann Lay; George Michuki M'Mukaria; Toman Omar Mahmoud
    Abstract: Engagement in non-agricultural activities in rural areas can be classified into survival-led or opportunity-led. Survival-led diversification would decrease inequality by increasing the incomes of poorer households and thus reduce poverty. By contrast, opportunity-led diversification would increase inequality and have a minor effect on poverty, as it tends to be confined to non-poor households. Using data from Western Kenya, we confirm the existence of the differently motivated diversification strategies. Yet, the poverty and inequality implications differ somewhat from our expectations. Our findings indicate that in addition to asset constraints, rural households also face limited or relatively risky high-return opportunities outside agriculture.
    Keywords: Income diversification, non-agricultural activities, inequality, poverty, sub-Saharan Africa, Kenya
    JEL: Q12 O17 I31
    Date: 2007–03
  6. By: Mikkel Barslund (Department of Economics, University of Copenhagen); Finn Tarp (Department of Economics, University of Copenhagen)
    Abstract: This paper uses a survey of 932 rural households to uncover how the rural credit market operates in four provinces of Vietnam. Households obtain credit through formal and informal lenders. Formal loans are almost entirely for production and asset accumulation, while informal loans are used for consumption smoothening. Interest rates fell from 1997 to 2002, reflecting increased market integration. Moreover, the determinants of formal and informal credit demand are distinct. While credit rationing depends on education and credit history, in particular, regional differences in the demand for credit are striking. A ‘one size fits all’ approach to credit policy in Vietnam would be inappropriate.
    Keywords: rural credit; household survey; Vietnam
    JEL: O12 O16 O17 O18
    Date: 2007–03
  7. By: Chiara SANSEVERINO
    Abstract: The paper gives a theoretical framework of microfinance and it analyzes Non Governmental Organizations (NGOs) as Microfinance Institutions (MFIs). Multipurpose NGOs in LDCs were the leading part in the so called ‘microfinance revolution’. Nevertheless a ri-definition of their role is needed, given some critical impacts of NGO programs in microfinance and given the rise of new and more specialized providers. The hypotesis is that the new role can be pursuit through the promotion of strategic partnerships in which the multipurpose NGO, as promoter, manage the component of non-financial services and other functions which differ from financial service delivering itself, such as groups capacity building and designing loan schemes guarantee. This kind of ‘linkage model’ can overwork NGO ability to stay at the grassroots and succeeds in both reducing asymmetric information phenomena and administrative costs for the Financial Institutions. By doing so it channels new clients’ demand to formal financial system supply. This intermediation action will be highlighted through the analysis of four interesting cases in very different LDCs: Zimbabwe, Bosnia, Bolivia and India. The paper aims at showing some experiences which can contribute to deepen knowledge and improve microfinance good practises among operators
    Keywords: MFIs, NGOs, financial markets, formal and informal sectors, international linkages to development
    JEL: G21 L31 N2 O17 O19
    Date: 2007–03
  8. By: Barry Bosworth; Susan M. Collins
    Abstract: We compare the recent economic performances of China and India using a simple growth accounting framework that produces estimates of the contribution of labor, capital, education, and total factor productivity for the three sectors of agriculture, industry, and services as well as for the aggregate economy. Our analysis incorporates recent data revisions in both countries and includes extensive discussion of the underlying data series. The growth accounts show a roughly equal division in each country between the contributions of capital accumulation and TFP to growth in output per worker over the period 1978-2004, and an acceleration of growth when the period is divided at 1993. However, the magnitude of output growth in China is roughly double that of India at the aggregate level, and also higher in each of the three sectors in both sub-periods. In China the post-1993 acceleration was concentrated mostly in industry, which contributed nearly 60 percent of China’s aggregate productivity growth. In contrast, 45 percent of the growth in India in the second sub-period came in services. Reallocation of workers from agriculture to industry and services has contributed 1.2 percentage points to productivity growth in each country.
    JEL: F43 O1 O4
    Date: 2007–02
  9. By: Angus Selby (QEH)
    Abstract: This paper explores the strategic repositioning of commercial farmers across the Independence transition, from a close proximity to the Rhodesian Front to an alliance with the Mugabe regime. It argues, contrary to most analyses, that commercial farmers were instrumental in leading white Rhodesia towards negotiations, compromise and settlement, and that this positioned them well to retain their privileged access to land and the decision making process after Independence. Whilst recognising that ZANU PF compromised significantly, it illustrates that incomplete reconciliation and ongoing distortions in access to resources kept the racial aspects of the new alliance unsteady.
  10. By: Angus Selby (QEH)
    Abstract: This paper explores the deterioration of the strategic alliance between commercial farmers and the state in Zimbabwe after 1990. Expiry of the Lancaster House constitution, the implementation of a structural adjustment program and the formal emergence of a black 'empowerment' lobby combined with severe drought had significantly altered the nature of Zimbabwe's land debate by the mid 1990s. The deadlock in land redistribution during this period is often vaguely attributed to a combination of state apathy and white farmer resistance, but interest group dynamics were far more complex both internally and externally. This comprehensive analysis of the relative policies, positions and internal reconfigurations of key stakeholders explains the polarisation of the land debate, the collapse of the alliance and the slowdown in land transfers.
  11. By: Angus Selby (QEH)
    Abstract: This paper examines the dismantling of the white farming sector in Zimbabwe after 2000. It argues that although ZANU PF portrayed farm invasions as a demonstrable effort towards populist land reforms, the 'fast-track' strategy was primarily one of political survival, and that this is evident in the pattern of land invasions and land allocations. Farm invasions quickly evolved into a systematic and methodical purge of commercial farms, to undermine support for the MDC from farmers and farm workers. Local contexts and local politics shaped the nature of local invasions, but the overall program was centrally endorsed and centrally co-ordinated. The reallocation of farms and assets were strategically geared towards placating key groups and key individuals within ZANU PF's increasingly militarised patronage system. Finally, this paper explores the reactions, counter strategies and patterns of collapse within the white farming sector. It illustrates how the community and its institutions fragmented along established planes of historical division, re-emphasising the significance of differentiation among farmers, throughout their history.
  12. By: Angus Selby (QEH)
    Abstract: This paper explores the collapse of the alliance between commercial farmers and the state in Zimbabwe. It argues that relations had deteriorated irrevocably by the late 1990s, precluding opportunities for compromise, and concludes that farmer opposition to the constitutional referendum in 2000 was symptomatic of deteriorating relations, rather than the catalyst. These assertions are based on interpretation of several key interacting issues: the reconstitution and politicisation of land demand within Zimbabwe's deteriorating socio-economic climate; the internal reconfiguration of the ruling party under pressure from black empowerment interests and war veterans,; the radicalisation of land policy through ZANU PF's aggressive centralisation of the land issue within the political and economic crises; and finally, a limited awareness of these issues by commercial farmers, donors and the international community, and consequently poor counter-strategising by these groups.
  13. By: Yasuyuki Sawada (Faculty of Economis, University of Tokyo); Michael Lokshin (Policy Research Department, World Bank Group)
    Abstract: This paper aims to identify the obstacles to school progression by integrating field surveys conducted in twenty-five Pakistani villages, using economic theory and econometric analysis. The full-information maximum likelihood (FIML) estimation of the sequential schooling decision model reveals important dynamics of the gender difference in educational attainment, intrahousehold resource-allocation patterns, and transitory income and wealth effects. We find a high educational retention rate and observe that school progression rates between male and female students after secondary school are comparable. In particular, we find gender-specific and schooling-stage-specific birth-order effects on education. Our overall findings are consistent with the theoretical implications of optimal schooling behavior under binding credit constraints and the self-selection in education-friendly households. Finally, we find serious supply-side constraints on primary education for females.
    Date: 2007–03
  14. By: Steven N. Durlauf; Andros KOURTELLOS; Chih Ming Tan
    Abstract: The recent growth literature has seen an explosion of work exploring the role of new and fundamental theories of growth such as geography, institutions, ethnic fractionalization, and religion. Nevertheless, claims about the empirical validity of these new growth theories are typically made within very particular specifications of the growth model. In this paper, we investigate the robustness of these theories when the researcher appropriately accounts for model uncertainty. We first consider the robustness of these theories within the canonical growth regression framework. We then deviate from this framework to explore the impact of these new growth theories on the components of growth – TFP growth and physical and human accumulation rates – derived from a growth accounting exercise. We find very little evidence to support the contention that any of the new growth theories play an important and robust role in explaining growth and its components. We find instead that variation in growth may be robustly explained by differences in macroeconomic policies and unknown heterogeneity associated with regional groupings. We also find that, consistent with endogenous growth models, physical and human capital externalities are the main determinants of TFP growth.
    Keywords: Economic growth, Total Factor Productivity, Model Uncertainty
    JEL: C59 O40 O47
    Date: 2007
  15. By: Léonce Ndikumana (University of Massachusetts, Amherst, and UNECA, Addis Ababa); Mina Baliamoune-Lutz (University of North Florida and IED/Boston University)
    Abstract: In this paper, we explore the argument that one of the causes for the limited growth effects of trade openness in Africa may be the weakness of institutions. We also control for several major factors and, in particular, for export diversification, using a newly developed dataset on Africa. Results from Arellano-Bond GMM estimations on panel data from African countries show that institutions play an important role in enhancing the growth effects of trade. Moreover, we find that the joint effect of institutions and trade has a U-shape, suggesting that as openness to trade reaches high levels, institutions play a critical role in harnessing the trade-led engine of growth. The results from this paper are informative about the missing link between trade liberalization and growth in the case of African countries. JEL Categories:
    Date: 2007–03
  16. By: Feenstra, Robert C.; Heston, Alan; Timmer, Marcel P.; Deng, Haiyan
    Abstract: From its inception, the Penn World Tables (PWT), building on the International Comparisons Program (ICP) of the United Nations, has sought to compare the standard of living of individuals in different countries. That is, the term " real GDP per capita " as reported i n the PWT is intended to represent the ability to purchase goods and services by a representative agent in the economy. The same is true of benchmark comparisons as published by the United Nations, Eurostat, or OECD. But this expenditure-side interpretation of real GDP is quite different from the uses to which benchmark ICP and PWT data are frequently applied, such as in growth regressions, where " real GDP " is intended to reflect the production side of the economy. In this paper the authors propose a new approach to international comparisons of real GDP measured from the output side. They modify the traditional Gary-Khamis system, which measures real GDP from the expenditure side using real domestic expenditure, to include differences in the terms of trade between countries. The analysis shows that this system has a strictly positive solution under mild assumptions. On the basis of a set of domestic final output, import, and export prices and values for 151 countries in 1996, differences between real GDP measured from the expenditure and output side can be substantial, especially for small open economies.
    Keywords: Economic Theory & Research,Markets and Market Access,Free Trade,Access to Markets,Trade Policy
    Date: 2007–03–01
  17. By: Cerdan-Infantes, Pedro; Vermeersch, Christel
    Abstract: This paper estimates the impact of the full-time school program in Uruguay on standardized test scores of 6th grade students. The program lengthened the school day from a half day to a full day, and provided additional inputs to schools to make this possible, such as additional teachers and construction of classrooms. The program was not randomly placed, but targeted poor urban schools. Using propensity score matching, the authors construct a comparable group of schools, and show that students in very disadvantaged schools improved in their test scores by 0.07 of a standard deviation per year of participation in the full-time program in mathematics, and 0.04 in language. While the program is expensive, it may, if well targeted, help address inequalities in education in Uruguay, at an increase in cost per student not larger than the current deficit in spending between Uruguay and the rest of the region.
    Keywords: Tertiary Education,Education For All,Teaching and Learning,Primary Education,Secondary Education
    Date: 2007–03–01
  18. By: Bayraktar, Nihal; Fofack, Hippolyte
    Abstract: It is a well-known fact that one of the most important determinants of growth is private investment. But in the developing country context of widespread poverty, the effects of initial conditions on the process of capital accumulation have seldom been investigated. This paper highlights heterogeneity in the process of capital accumulation across different countries in Sub-Saharan Africa, and derives a formal specification of investment functions in the primary, industry, and service sectors in the region using a variation of the combined Tobin ' s Q Theory and the neoclassical models of investment. The results highlight a more rapid accumulation of capital in the relatively high income subpanel and a widening public-private capital accumulation gap. A functional specification points to the significance of aggregate profitability shocks, the financing cost of investment, and public capital stock in estimating the growth rate of private capital accumulation. These results are supported empirically, as highlighted by the relatively small absolute deviation between actual and predicted value distributions.
    Keywords: Investment and Investment Climate,Economic Theory & Research,Trade and Regional Integration,Non Bank Financial Institutions,Economic Growth
    Date: 2007–03–01
  19. By: Michael Clemens
    Abstract: The emigration of highly skilled workers can in theory lower social welfare in the migrant-sending country. If such workers produce a good whose consumption conveys a positive externality—such as nurses and doctors in a very poor country—the loss can be greater, and welfare can even decline globally. Policies to impede emigration thus have the potential to raise sending-country and global welfare. This study uses a new database of health worker emigration from Africa to test whether exogenous decreases in emigration raise the number of domestic health professionals, increase the mass availability of basic primary care, or improve a range of public health outcomes. It identifies the effect through two separate natural quasi-experiments arising from the colonial division of the African continent. These produce exogenous changes in emigration comparable to those that would result from different immigration policies in principal receiving countries. The results suggest that Africa's generally low staffing levels and poor public health conditions are the result of factors entirely unrelated to international movements of health professionals. A simple model proposes that such results would be explained by segmentation of health workforce labor markets in the sending countries. The results further suggest that emigration has caused a greater production of health workers in Africa.
    Keywords: emigration, health professionals, visas, africa, highly skilled workers, public health
    JEL: F22 I18 O15
  20. By: Nguyen, Anh; Jones, Nicola
    Abstract: Following extensive economic and market reforms and more than a decade of negotiations, Vietnam became the latest country to accede to the World Trade Organization in November 2006. While it is expected that greater integration into the world economy will boost Vietnam’s economic growth and contribute to the country’s ongoing transition towards a market economy, there are concerns about potentially negative impacts on vulnerable sectors of the population, including remote rural populations, women and children. This paper examines the possible impacts of Vietnam’s trade liberalisation on children in poor communities. It focuses on three key aspects of child well-being – child work (domestic and extra-household), educational attainment and health status – drawing on data from the first wave of the Young Lives Vietnam longitudinal survey on childhood poverty. Our main findings point to significant differences based on ethnicity, household poverty status and vulnerability to declining living standards, parental (especially maternal) education levels, children’s involvement in work activities, and access to public services.
    Keywords: Childwelfare; Vietnam; WTO; Education; Child Labour; Young Lives
    JEL: F15 I31 F16 I20
    Date: 2006
  21. By: Obayelu, Abiodun, Elijah; Uffort, Larry
    Abstract: Abstract This study was undertaken with the goal of analyzing the relationship between poverty rates and size of underground economy in the developed and developing countries and exploring whether there is a link between them. There are technical problems in linking them in that getting information from those who have undertaken underground activities are difficult. Secondary data were used to established hypothetical relationship and primary data for the empirical analysis. The results of the descriptive analysis revealed that underground economy and poverty have no geographical boundary. Although the incidence, and the size differs from one country to another. The incidences of poverty and shadow economy are larger in the poor (developing and transition) countries when compared with the highly developed countries. There is also a causal link between poverty and underground economy especially in the developing and transition countries with common factors such as high unemployment and corruption rates affecting both poverty and underground economy. High social security system and tax burden were found to account for the high rates of underground economies in the highly developed countries even with people’s awareness of its implications when caught. In developing countries like Nigeria, most people embark on unlicensed (and hence illegal) micro-enterprises / activities like production and sale of pure water, yoghurts, cutting down of economic trees, illegal running of private schools, drug trafficking, prostitution, black-market currency exchange, fake disclosure of actual business profit, in order to increase their levels of income by tax evasion or avoidance in the name of surviving. Government can reduce this menace to certain extent by engaging itself in sustainable poverty reduction activities, tax policy changes, embarking anti-corruption campaign and increase in job opportunities within the formal economy. Key words: Poverty, underground economy, developed, transition and developing countries
    Keywords: Poverty; underground economy; developed; transition and developing countries
    JEL: P51 P52
    Date: 2007–03–06
  22. By: Mideksa, Torben
    Abstract: A previous result by Kemnitz (2001) based on AK type endogenous growth model implied that the gains from immigration depends up on the percapita possession of capital stock by immigrant relative to that of the natives’. However, such a framework ignores the incentive labor creates for innovation and productivity. By using framework of horizontal innovation of Romer (1991), it is shown that immigration entails Pareto improvement even when immigrants posses no physical capital in contrast to the result in the literature.
    Keywords: Immigration Policy; Endogenous growth; Technical change
    JEL: O41 F22 O31 N30
    Date: 2007
  23. By: Mideksa, Torben
    Abstract: This paper investigates the impact of skilled immigrants on the welfare the host natives. By employing the idea of induced technical change, and the skilled wage premium, this paper tries to link skilled immigration with observed rise in college enrolment, rise in skilled wages, and further acceleration of skilled wage premium. Through creation of demand for skill complimenting capital goods, skilled immigration raise the incentive for skill directed technical change which fuel up skilled wage in North, international wage differential, and the incentive for human capital formation. The results of the model are consistent with broad empirical regularities observed for three decades or more.
    Keywords: Skilled immigration; technical change; human capital; economic growth.
    JEL: O41 J41 J31 O32 J61
    Date: 2007
  24. By: Rao, B. Bhaskara; Singh, Rup; Nisha, Fozia
    Abstract: The neoclassical growth model was extended by Mankiw, Romer and Weil (1992) to estimate the level effects of additional factors like human capital. We suggest a further extension to capture their permanent growth effects. Time series data from Fiji are used to show that the growth effect of human capital, although small, is significant. Furthermore, in our sample the specifications with a permanent growth effect performed better than specifications with only level effects.
    Keywords: The Solow Growth Model; Production Function; Shift Variables; Human Capital Level and Growth Effects.
    JEL: O56 O40 O1 I29 O30 O11 I20
    Date: 2006
  25. By: Khan, M. Ali Khan
    Abstract: The Harris-Todaro hypothesis replaces the equality of wages by the equality of ‘expected’ wages as the basic equilibrium condition in a segmented but homogeneous labour market, and in so doing it generates an equilibrium level of urban unemployment when a mechanism for the determination of urban wages is specified. This article reviews work in which the Harris-Todaro hypothesis is embedded in canonical models of trade theory in order to investigate a variety of issues in development economics. These include the desirability (or the lack thereof) of foreign investment, the complications of an informal sector, and the presence of clearly identifiable ethnic groups.
    Keywords: Harris-Todaro; Wages; Labour Economics; Labour Market; Rural to Urban Migration
    JEL: J3
    Date: 2007
  26. By: Hyder, Asma
    Abstract: This paper examines the magnitude of public/private wage differentials in Pakistan using data drawn from the 2001-02 Labour Force Survey. Pakistan Labour Force Survey is a nationwide survey containing micro data from all over the country containing demographic and employment information. As in many other countries, public sector workers in Pakistan tend to have higher average pay and educational levels as compared to their private sector counterparts. First, this paper presents the inter-sectoral earning equations for the three main sectors of the economy, i.e., public, private, and state-owned enterprises. These results are further decomposed into “treatment” and “endowment effect”. To examine the role of human capital in wage gap, the rate of return to different levels of schooling is calculated. These rates of return to education may be important for policy formulation. The relative earning share is also worked out to look into the distribution of wages across the occupational categories. The earning equations are estimated with and without correction for selectivity, which is also the main objective of the study, i.e., to find out if any non-random selection is taking place within these three sectors of employment.
    Keywords: Wage Differentials; Rate of Return to Education; Public Sector; Labour Markets
    JEL: J45 J24 J32
    Date: 2007
  27. By: Nayab, Durr-e-
    Abstract: Population growth and size have remained the focus of debate for centuries but the recent demographic transition in developing countries has made social scientists take note of the changing age structure of the population as well. As a result of declining population growth and consequent changes in age structure, the proportion of working-age population is increasing in most developing countries, with an associated decline in the dependent age population, offering a window of opportunity to these countries that is referred to as the “demographic dividend”. Pakistan is also going through the demographic transition, and is experiencing a once-in-a-lifetime demographic dividend as the working-age population bulges and the dependency ratio declines. This paper looks into the demographic dividend available to Pakistan and its implications for the country, mainly through three mechanisms: labour supply, savings, and human capital. For economic benefits to materialise, there is a need for policies dealing with education, public health, and those that promote labour market flexibility and provide incentives for investment and savings. On the contrary, if appropriate policies are not formulated, the demographic dividend might in fact be a cost, leading to unemployment and an unbearable strain on education, health, and old age security.
    Keywords: Demographic dividend; age-structure; demographic transition; Pakistan
    JEL: J11
    Date: 2006
  28. By: Osakwe, Patrick N.
    Abstract: Recent theoretical literature suggests that aid, geography, and resource endowments affect diversification of exports in Africa. This paper examines the validity of these popular views using a System-GMM methodology and panel data for African countries. The evidence suggests that aid, the quality of infrastructure, and resource endowments are robust determinants of diversification in Africa. It also suggests that there is no systematic relationship between geography and diversification. Furthermore, there is some evidence that institutional factors are important although it is not robust. Finally, the paper offers recommendations on how to promote export diversification in the region.
    Keywords: Exports; Aid; Diversification; Africa; Endowments
    JEL: O14 F13 F35
    Date: 2007–03
  29. By: Dorosh, Paul; Salam, Abdul
    Abstract: This article provides a quantitative analysis of the effects of Pakistan government domestic wheat procurement, sales, and trade policies on wheat supply, demand, prices, and overall inflation. Analysis of price multipliers indicates that increases in wheat procurement prices (one means of promoting domestic procurement) have relatively small effects on overall price levels. Partial equilibrium analysis of wheat markets suggests that fluctuations in production, rather than market manipulation, are plausible explanations for price increases in recent years. Comparisons of domestic and international prices suggest that promoting private sector imports is one alternative for increasing supply and stabilising market prices, particularly in years of production shortfalls. Overall, this paper concludes that market forces play a dominant role in price determination in Pakistan, and that policies that promote the private sector wheat trade can both increase price stability and reduce fiscal costs.
    Keywords: Wheat; Agricultural prices; Pakistan
    JEL: Q11 Q13
    Date: 2006
  30. By: Kohnert, Dirk
    Abstract: In the last decades the number of refugees from conflict regions in Africa increased dramatically. West Africa is the cradle of migration from Sub-Saharan Africa to Europe, were most African migrants with overseas destinations live. The European Union shares dual responsibility for the continuing migration pressure: First, because they fostered over decades corrupt and autocratic regimes with dire disregard to principles of ‘good governance’. The aftermath of these regimes is still to be felt today, and constitutes one of the underlying factors for politically motivated migration. Secondly, the EU contributed to Africa’s growing economic misery, due to the damaging effects of European selfish external trade policy. Nevertheless, the prevailing perspective of the EU concerning African immigration remains to be focused on security, the foreclosure of its external borders and prevention. Current EU programs to combat African migration by development orientated instead of adequate immigration policies is bound to fail, according to available evidence and literature. The drain of human capital from Africa is most pronounced in the employment sector for highly qualified personnel. Another remarkable trend is the ‘feminization’ of the brain drain in recent years, caused by the growing number of highly skilled African women looking for employment abroad. However, migration is not necessarily a zero-sum game. There are also positive – although often neglected - economic and socio-cultural effects of the brain drain. Remittances of African migrants contribute considerably not just to the wellbeing of their extended families at home, but to poverty reduction and development on a national level in general. They constitute the second largest source of external private finance, besides for-eign direct investment. In addition, a counteracting ‘brain gain’, i.e. new value systems, po-litical and spiritual orientations, acquired by migrants in Europe, results in a transfer of knowledge and of innovations.
    Keywords: migration; West Africa; Europe; remittances; brain-drain; foreign trade policy; security; circular migration;
    JEL: F22 N44 O55 F53 R23 O15 N37 O52 F42 N17 F35 O2
    Date: 2007–03–14
  31. By: Viktor Pirmana (Department of Economics, Padjadjaran University)
    Abstract: This Research aims to analyze the earnings inequality in Indonesia and to know whether the earnings inequality can be explained by individual characteristic factors such as education and experience; location both urban-rural and province where individual reside and work; and based on socio-demography-economic characteristic. Furthermore, this research tries to know how big those factors contribute to the existing inequality, before and after crisis. Using data from SAKERNAS 1996, 1999, 2002, and 2004, the valid observation is about 145660 individual. Result of analysis clearly indicate that there are significant gender inequalities in earnings in Indonesia, based on education and experience; urban-rural location and province where individual reside and work and based on socio-demography-economic characteristic. The profile of earnings inequality by gender seems to be an “inverted U” fashion, with the male-female earnings gap narrowing as educational attainment went up, and reached a plateau at the “post-secondary level” and then tapered off. The analysis also suggests that the industrial affiliation of female workers matter.The result of estimating Mincerian earnings equation shows that such factor as human capital (years of schooling and experience); socio-demography-economic characteristic (being household’s head, gender, marriage status, work sector); and location factors (urban-rural and province which individual reside and work), significantly affects individual earning in Indonesia. Meanwhile, the result of decomposing this earnings inequality indicate that factor causing earnings inequality between “male” and “female” is about 41.6 percent caused by endowment differences. On the other hand, most of the gap about 58.4 percent attributed to unobserved and unexplained factors, rather than attributed to differences in observable endowments.
    Keywords: Earnings inequality, Decomposition analysis, SAKERNAS, Indonesia
    JEL: O15
    Date: 2006–08
  32. By: Pipit Pitriyan (Department of Economics, Padjadjaran University)
    Abstract: Employing child as a labor is categorized as a violation to the human right. But it seems unavoidable in developing country to prevent children entering labor market. Many extensive literatures on the determinant of child labor have been found, but yet, there is limited research on the impact of children work on socioeconomic outcomes. This paper investigates the impact of child labor on child’s education by using the Indonesian Labor Survey/SAKERNAS 2002 data at the district level.
    Keywords: Child Labor, Bivariate Probit, SAKERNAS, Indonesia
    JEL: I20
    Date: 2006–08

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