nep-dev New Economics Papers
on Development
Issue of 2007‒03‒24
43 papers chosen by
Jeong-Joon Lee
Towson University

  1. The Sources of Long-run Growth in Spain 1850-2000 By de la Escosura, Leandro Prados; Rosés, Joan R.
  2. Group versus Individual Liability: A Field Experiment in the Philippines By Giné, Xavier; Karlan, Dean S.
  3. Social Connections and Group Banking By Karlan, Dean S.
  4. Female Empowerment: Impact of a Commitment Savings Product in the Philippines By Ashraf, Nava; Karlan, Dean S.; Yin, Wesley
  5. Crises and growth : a Latin American perspective By Sebastian Edwards
  6. Overseas R&D Activities and Home Productivity Growth: Evidence from Japanese Firm-Level Data By TODO Yasuyuki; SHIMIZUTANI Satoshi
  7. What Determines Overseas R&D Activities? The Case of Japanese Multinational Firms By SHIMIZUTANI Satoshi; TODO Yasuyuki
  8. Determinants of change in household-level consumption and poverty in Uganda, 1992/93-1999/00: By Benin, Sam; Mugarura, Samuel
  9. Agricultural trade liberalization under Doha: the risks facing African countries By Badiane, Ousmane
  10. Assessing potential impact of avian influenza on poultry in West Africa: a spatial equilibrium model analysis By You, Liangzhi; Diao, Xinshen
  11. Exporing growth linkages and market opportunities for agriculture in Southern Africa: By Nin Pratt, Alejandro; Diao, Xinshen
  12. Development domains for Ethiopia: capturing the geographical context of smallholder development options By Chamberlin, Jordan; Pender, John; Yu, Bingxin
  13. Comparing the evolution of spatial inequality in China and India: a fifty-year perspective By Gajwani, Kiran; Kanbur, Ravi; Zhang, Xiaobo
  14. Pathways out of poverty during an economic crisis: An empirical assessment of rural Indonesia By Neil McCulloch; Julian Weisbrod; C. Peter Timmer
  15. Returns to Private Education in Peru By Sebastian Calonico; Hugo Ñopo
  16. The Causal Effect of Education on Aggregate Income By Marcelo Soto
  17. Specialization Patterns and the Factor Bias of Technology By Alejandro Cuñat and Marco Maffezzoli
  18. An Insight into the Growth of New Retail Formats in India By Sinha Piyush Kumar; Kar Sanjay Kumar
  19. Spatial Inequality in Chile By Claudio Agostini; Phillip Brown
  20. Sources of Inflation in Sub-Saharan Africa By Shanaka J. Peiris; Regis Barnichon
  21. Remittances in the Pacific Region By Aiko Mineshima; Christopher Browne
  22. Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa By Smita Wagh; Sanjeev Gupta; Catherine A. Pattillo
  23. Do South-South Trade Agreements Increase Trade? Commodity-Level Evidence from COMESA By Anna Maria Mayda; Chad Steinberg
  24. Colonial Origins, Institutions and Economic Performance in the Caribbean: Guyana and Barbados By Michael DaCosta
  25. Democracy and Foreign Education By Antonio Spilimbergo
  26. The Prospects for Sustained Growth in Africa: Benchmarking the Constraints By Simon Johnson; Jonathan David Ostry; Arvind Subramanian
  27. Are Regional Trade Agreements in Asia Stumbling or Building Blocks? Some Implications for the Mekong-3 Countries By Patrizia Tumbarello
  28. Can the Natural Resource Curse Be Turned Into a Blessing? The Role of Trade Policies and Institutions By Rabah Arezki; Frederik van der Ploeg
  29. Policies, Enforcement, and Customs Evasion: Evidence from India By Petia Topalova; Prachi Mishra; Arvind Subramanian
  30. Higher Education in India: The Need for Change By Pawan Agarwal
  31. Child Labor By Eric V. Edmonds
  32. Trade Adjustment and Human Capital Investments: Evidence from Indian Tariff Reform By Eric V. Edmonds; Nina Pavcnik; Petia Topalova
  33. Does Reform Work? An Econometric Examination of the Reform-Growth Puzzle By Ian Babetskii; Nauro F. Campos
  34. Class Origin, Family Culture, and Intergenerational Correlation of Education in Rural China By Hiroshi Sato; Li Shi
  35. Household-level Credit Constraints in Urban Ethiopia By Gamal Ibrahim; Abbi Kedir; Sebastian Torres
  36. Child Mortality, Income and Adult Height By Carlos Bozzoli; Angus S. Deaton; Climent Quintana-Domeque
  37. Using the Global Positioning System (GPS) in Household Surveys For Better Economics and Better Policy By John Gibson; David McKenzie
  38. Mobility and earnings in Ethiopia ' s urban labor markets, 1994-2004 By Bigsten, Arne; Mengistae, Taye; Shimeles, Abebe
  39. The " how to " of fiscal sustainability : a technical manual for using the fiscal sustainability tool By Bandiera, Luca; Budina, Nina; Klijn, Michel; van Wijnbergen, Sweder
  40. Pathways out of poverty during an economic crisis : an empirical assessment of rural Indonesia By McCulloch, Neil; Weisbrod, Julian; Timmer, C. Peter
  41. Subsidies and regulatory reform in West African cotton: What are the development stakes? By Shepherd, Ben; Delpeuch, Claire
  42. Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan By Siddiqui, Rizwana; Kemal, A R
  43. TRIPLE DIVIDENDS OF WATER CONSUMPTION CHARGES IN SOUTH AFRICA By Anthony Letsoalo; James Blignaut; Theuns de Wet; Martin de Wit; Sebastiaan Hess; Richard S.J. Tol; Jan van Heerden

  1. By: de la Escosura, Leandro Prados; Rosés, Joan R.
    Abstract: Between 1850 and 2000, Spain’s real income increased by about 40-fold, at an average rate of 2.5 percent. The sources of this long-run growth are investigated using Jorgenson-type growth accounting analysis. We find that growth upsurges are closely related to increases in TFP. Spanish economic growth went through three successive phases. The century before 1950 was characterized by slow growth driven by factor accumulation. TFP improvements pushed up explosive growth during the Golden Age and mitigated the deceleration during the transition to democracy years (1975-86). Since the accession to the European Union Spain has experienced a dramatic productivity slowdown.
    Keywords: factor accumulation; growth accounting; Spain; total factor productivity
    JEL: N13 N14 O47
    Date: 2007–03
  2. By: Giné, Xavier; Karlan, Dean S.
    Abstract: Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which started with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group lending claims to improve repayment rates and lower transaction costs when lending to the poor by providing incentives for peers to screen, monitor and enforce each other’s loans. However, some argue that group liability creates excessive pressure and discourages good clients from borrowing, jeopardizing both growth and sustainability. Therefore, it remains unclear whether group liability improves the lender’s overall profitability and the poor’s access to financial markets. We worked with a bank in the Philippines to conduct a field experiment to examine these issues. We randomly assigned half of the 169 pre-existing group liability 'centres' of approximately twenty women to individual-liability centres (treatment) and kept the other half as-is with group liability (control). We find that the conversion to individual liability does not affect the repayment rate, and leads to higher growth in centre size by attracting new clients.
    Keywords: group liability; informal economies; joint liability; micro-enterprises; microfinance; social capital
    JEL: C93 D71 D82 D91 O12 O16 O17
    Date: 2007–03
  3. By: Karlan, Dean S.
    Abstract: Lending to the poor is expensive due to high screening, monitoring, and enforcement costs. Group lending advocates believe lenders overcome this by harnessing social connections. Using data from FINCA-Peru, I exploit a quasi random group formation process to find evidence of peers successfully monitoring and enforcing joint-liability loans. Individuals with stronger social connections to their fellow group members (i.e., either living closer or being of a similar culture) have higher repayment and higher savings. Furthermore, I observe direct evidence that relationships deteriorate after default, and that through successful monitoring, individuals know who to punish and who not to punish after default.
    Keywords: group lending; informal savings; microfinance; social capital
    JEL: O12 O16 O17 Z13
    Date: 2007–03
  4. By: Ashraf, Nava; Karlan, Dean S.; Yin, Wesley
    Abstract: Female 'empowerment' has increasingly become a policy goal, both as an end to itself and as a means to achieving other development goals. Microfinance in particular has often been argued, but not without controversy, to be a tool for empowering women. Here, using a randomized controlled trial, we examine whether access to an individually-held commitment savings product leads to an increase in female decision-making power within the household. We find positive impacts, particularly for women who have below median decision-making power in the baseline, and we find this leads to a shift towards female-oriented durables goods purchased in the household.
    Keywords: commitment; female empowerment; household decision making; microfinance; savings
    JEL: D12 D63 D91 J16 O12 O16
    Date: 2007–03
  5. By: Sebastian Edwards
    Abstract: In this paper I use historical data to analyze the relationship between crises and growth in Latin America. I calculate by how much the region's GDP per capita has been reduced as a consequence of the recurrence of external crises. I also analyze the determinants of major balance of payments crises. The main conclusion is that it is unlikely that Latin America will, on average, experience a major improvement in long run growth in the future. It is possible that some countries will make progress in catching up with the advanced nations. This, however, will not be the norm; most Latin American countries are likely to fall further behind in relation to the Asian countries and other emerging nations. Not everything, however, is grim. My analysis also suggests that fewer Latin America countries will be subject to the type of catastrophic crises that affected the region in the past. Latin America's future will be one of "No crises and very modest growth".
    Date: 2007–03
  6. By: TODO Yasuyuki; SHIMIZUTANI Satoshi
    Abstract: This paper investigates the impact of overseas subsidiaries' R&D activities on the productivity growth of parent firms using firm-level panel data for Japanese multinational enterprises. We distinguish between overseas R&D for the utilization and acquisition of foreign advanced knowledge, or innovative R&D, and overseas R&D for the adaptation of technologies and products to local conditions, or adaptive R&D. Our major finding is that overseas innovative R&D helps to raise the productivity growth of the parent firm, while overseas adaptive R&D has no such effect. In addition, we examine whether overseas innovative R&D has an indirect effect on home productivity growth by improving the rate of return on home R&D. However, we find no evidence of such an indirect effect, suggesting that overseas innovative R&D does not engender any knowledge transfers from overseas to home R&D units.
    Date: 2007–03
  7. By: SHIMIZUTANI Satoshi; TODO Yasuyuki
    Abstract: This paper explores what factors determine the nature, extent, and location of Japanese multinationals' R&D activities abroad. Taking advantage of a rich micro-level dataset from the survey on Japanese overseas subsidiaries, the study distinguishes between two types of overseas R&D: innovative and adaptive. We find several differences between the determinants of overseas innovative and adaptive R&D. These differences confirm the view that overseas innovative R&D aims at the exploitation of foreign advanced knowledge, whereas overseas adaptive R&D is mostly influenced by the market size of the host country. Our results provide a convincing and comprehensive explanation of the geographical distribution of overseas R&D by Japanese MNEs.
    Date: 2007–03
  8. By: Benin, Sam; Mugarura, Samuel
    Abstract: "Recent estimates showing increase in the incidence of poverty in Uganda has kindled interest in understanding the factors that cause changes in poverty, as the reversal of the positive trend in the 1990s threatens the government's poverty eradication plan of reducing poverty to a level below 28% by 2014. Using a household and community panel dataset, this paper analyzes the factors contributing to change in household-level consumption and poverty... Results from econometric analyses suggest that adopting policies and strategies that reduce the pressure on agricultural land, creates employment opportunities, and improves access to farmland will be key interventions for raising real per capita consumption and reducing poverty across the country. However, the results also show that the impact of several factors are not the same across the country, suggesting that different interventions for raising consumption will also be needed for different parts of the country." from Authors' Abstract
    Keywords: Poverty, household consumption,
    Date: 2006
  9. By: Badiane, Ousmane
    Abstract: "African countries tend to be affected by global agricultural policies in the same way as other economies but with much more severe economy-wide repercussions... The present discussion paper 1) examines the vulnerability of Africa economies with respect to global agricultural trading policies and their induced changes in world agricultural markets, based on the above characteristics; 2) analyzes the efficiency effects within Africa's agricultural sector of world market distortions resulting from agricultural trading policies; 3) illustrates the impact of global protectionism on poverty levels and distribution among rural households in Africa and the implication for the objective of poverty reduction; 4) reviews the options and risks facing African countries in their pursuit of opportunities for greater participation in the global trading system, in particular in connection with the Doha trade agenda; and 5) discusses options for global trade liberalization that would best benefit African economies. The paper argues that the insistence on the part of African countries on Special and Differential Treatment entails much more risks than benefits for their economies. It also indicates that trade preferences have been less beneficial to African economies than usually assumed and at any rate have not been significant enough to compensate African countries for the negative impact of global protectionism. Finally, the paper also disagrees with the widely accepted conclusion that African countries would suffer from liberalization of global agricultural policies because they tend to be net food importers. That conclusion does not sufficiently take into consideration the dynamic long term effects of global policy changes on production and trading patterns among African countries and the potential efficiency effects that would emanate there from." Authors' Abstract
    Keywords: Agricultural policies, International trade, agricultural sector, Protectionism, Doha agreement, trade liberalization, Poverty reduction, Rural households,
    Date: 2006
  10. By: You, Liangzhi; Diao, Xinshen
    Abstract: "In this paper, the authors analyze the potential economic impacts of avian influenza (AI) in West Africa, taking Nigeria as an example. They find that, depending on the size of the affected areas, the direct impact of the spread of AI along the two major migratory bird flyways would be the loss of about 4 percent of national chicken production. However, the indirect effect—consumers' reluctance to consume poultry if AI is detected, causing a decline in chicken prices—is generally larger than the direct effect. The study estimates that Nigerian chicken production would fall by 21 percent and chicken farmers would lose US$250 million of revenue if the worst-case scenario occurred. The negative impact of AI would be unevenly distributed in the country, and some states and districts would be seriously hurt. This study is based on a spatial equilibrium model that makes use of the most recent spatial distribution data sets for poultry and human populations in West Africa. The study shows that, while most of the attention has focused on preventing global influenza pandemic, preventive measures are also needed at the national, subnational, and local levels, because AI could potentially have a huge negative impact on the poultry industry and the livelihood of smallholder farmers in many regions in West Africa.." Authors' Abstract
    Keywords: Computable general equilibrium (CGE) modeling, Small farmers, Spatial analysis (Statistics),
    Date: 2006
  11. By: Nin Pratt, Alejandro; Diao, Xinshen
    Abstract: "Considering the heterogeneity of the countries of southern Africa and the presence of South Africa and other middle-income countries in the region, southern Africa has a unique opportunity to exploit agricultural potential and regional trade opportunities through regional dynamics and integration. We analyze the implications of such opportunities for the growth of the low-income countries, using a regional general equilibrium model that captures growth linkages. We find that growth in the middle-income southern African countries, such as South Africa, benefits the region's low-income countries through increased demand for their agricultural exports. Agricultural productivity growth, however, is necessary for low-income countries to take advantage of South Africa's growth. Productivity growth in the low-income countries' grain and livestock sectors generates more growth in GDP and food consumption than growth in nontraditional export crops. Unlike other regions where growth in grain production is likely to be constrained by domestic demand, expanding middle-income economies in southern Africa provide additional demand for grains and livestock, slowing the decline in grain prices in the region." Authors' Abstract
    Keywords: Regional trade, General equilibrium model, Regional integration, Agricultural productivity, Grain production,
    Date: 2006
  12. By: Chamberlin, Jordan; Pender, John; Yu, Bingxin
    Abstract: "The choices that smallholder farmers are able to make are strongly conditioned by the geographic conditions in which they live. The importance of this fact for rural development strategy is not lost on policy makers. For example, the government of Ethiopia frequently frames policy discussions by broadly different geographical conditions of moisture availability, recognizing moisture reliable, drought prone and pastoralist areas. These conditions are seen as important criteria for determining the nature, extent and priority of development interventions for different parts of the country. There is considerable evidence, however, that other geographical factors also have important implications for rural development options. This paper uses agroecology, access to markets, and population density to define development domains: geographical locations sharing broadly similar rural development constraints and opportunities. Unlike similar efforts conducted elsewhere, this work is unique in that it seeks to move away from a subjective mapping of factors of theorized importance to a more rigorous definition of development domains on the basis of quantitative data on smallholder livelihood strategies. After selecting variables for mapping, we calibrate our definition for domains in such a way that their explanatory power is maximized across a range of livelihood strategies that figure in the current Ethiopian rural development discourse (market engagement, dependence upon agriculture, etc.)." Authors' Abstract
    Keywords: Smallholders, Small farmers, Geographic conditions, rural development strategies, Development policy, Agro-ecology, Market access, Livelihoods, Population density,
    Date: 2006
  13. By: Gajwani, Kiran; Kanbur, Ravi; Zhang, Xiaobo
    Abstract: "In the second half of the last century, both India and China have undergone major transitions and have moved to more liberalized economies. This paper relates the observed patterns in regional inequality to major events during this period. Because of China's institutional barriers to migration, regional inequality is much higher than in India. Also, China's decentralization and opening up are closely related to the observed regional inequality – particularly the inland-coastal disparity – since the reform period. From the Green Revolution age to the period of economic liberalization in India, the evolution of regional comparative advantage has shifted from the quality of land to the level of human capital as India integrates with the international market. Therefore, India's states have become clustered into two clubs: more educated and less educated ones." Authors' Abstract
    Keywords: Liberalization, Liberalized economies, Regional inequality, Migration, Decentralization, Green Revolution, Economic conditions, International economic relations, Human capital, Spatial inequality,
    Date: 2006
  14. By: Neil McCulloch (World Bank Office Jakarta); Julian Weisbrod (University of Goettingen); C. Peter Timmer (Center for Global Development)
    Abstract: Most poor people in developing countries still live in rural areas and are primarily engaged in low productivity farming activities. Thus pathways out of poverty are likely to be strongly connected to productivity increases in the rural economy, whether they are realised in farming, rural non-farm enterprises or via rural-urban migration. We use cross-sectional data from the Central Statistical Board (BPS) for 1993 and 2002, as well as a panel data set from the Indonesia Family Life Survey (IFLS) for 1993 and 2000, to show which pathways out of poverty were most successful over this period. Our findings suggest that increased engagement of farmers in rural non-farm enterprises is an important route out of rural poverty, but that most of the rural agricultural poor that exit poverty still do so while remaining rural and agricultural. Thus changes in agricultural prices, wages and productivity still play a critical role in moving people out of poverty.
    Keywords: Poverty dynamics, non-farm sector, micro-growth regression
    JEL: O12 O13 O18 O53 R11
    Date: 2007–03–21
  15. By: Sebastian Calonico (Inter-American Development Bank); Hugo Ñopo (Inter-American Development Bank)
    Abstract: The private provision of educational services has been representing an increasing fraction of the Peruvian schooling system, especially in recent last decades. While there have been many claims about the differences in quality between private and public schools, there is no complete assessment of the different impacts of these two type of providers on the labor markets. This paper is an attempt to provide such a comprehensive overview. We explore private-public differences in the individual returns to education in Urban Peru. Exploiting a rich pair of data sets (ENNIV 1997 and 2000) that include questions on type of education (public vs. private) for each educational level (primary, secondary, technical tertiary and university tertiary) to a representative sample of adults we are able to measure the differences in labor earnings for all possible educational trajectories. The results indicate higher returns to education for those who attended private schools than those who attended the public system. Nonetheless, these higher returns also show higher dispersion, reflecting wider quality heterogeneity within the private system. The private-public differences in returns are more pronounced at the secondary than at any other educational level. On the other hand, the private-public differences in returns from technical education are almost non-existent. A cohort approach paired with a rolling-windows technique allows us to capture generational evolutions of the private-public differences. The results indicate that these differences have been increasing during the last two decades.
    Keywords: Returns to schooling; wages.
    JEL: J31 I2
    Date: 2007–02
  16. By: Marcelo Soto (Instituto de Análisis Económico, Barcelona)
    Abstract: Empirical studies find that changes in schooling are not correlated with changes in per capita income. Similarly, the estimation in levels also produces minor coefficients for years of schooling. Low social returns and measurement error in educational variables have been invoked as possible explanations for such findings. This paper shows that collinearity between physical and human capital stocks seriously undermines the ability of educational indicators to display significance in panel data estimates. On top of that, failure to cope with endogeneity has produced biased estimates. As opposed to the earlier empirical literature, the social return on schooling is positive and significant, but no Lucas-type externalities are observed. Finally, the quality of education emerges as a significant determinant of heterogeneity in social returns across countries.
    Keywords: human capital, education, income growth, GMM estimation.
    JEL: J10 O10 O40
    Date: 2006–09
  17. By: Alejandro Cuñat and Marco Maffezzoli
    Abstract: Development accounting exercises based on an aggregate production function find technology is biased in favor of a country's abundant production factors. We provide an explanation to this finding based on the Heckscher-Ohlin model. Countries trade and specialize in the industries that use intensively the production factors they are abundantly endowed with. For given factor endowment ratios, this implies smaller international differences in factor price ratios than under autarky. Thus, when measuring the factor bias of technology with the same aggregate production function for all countries, they appear to have an abundant-factor bias in their technologies.
  18. By: Sinha Piyush Kumar; Kar Sanjay Kumar
    Abstract: The Indian retail sector is going through a transformation and this emerging market is witnessing a significant change in its growth and investment pattern. Both existing and new players are experimenting with new retail formats. Currently two popular formats -hypermarkets and supermarkets are growing very fast. Apart from the brick -mortar formats, brick -click and click-click formats are also increasingly visible on the Indian retail landscape. Consumer dynamics in India is changing and the retailers need to take note of this and formulate their strategies and tactics to deliver value to the consumer. This paper investigates modern retail developments and growth of modern formats in this country. We also discuss the challenges and opportunities available to the retailers to succeed in this country.
    Date: 2007–03–20
  19. By: Claudio Agostini (ILADES-Georgetown University, Universidad Alberto Hurtado); Phillip Brown (Colby College, Waterville, Maine, United States and International Food Policy Research Institute, Washington, D.C., United States.)
    Abstract: Despite success in reducing poverty over the last twenty years, inequality in Chile has remained virtually unchanged, making Chile one of the least equal countries in the world. High levels of inequality have been shown to hamper further reductions in poverty as well as economic growth and local inequality has been shown to affect such outcomes as violence and health. The study of inequality at the local level is thus crucial for understanding the economic well-being of a country. Local measures of inequality have been difficult to obtain, but recent theoretical advances have enabled the combination of survey and census data to obtain estimators of inequality that are robust at disaggregated geographic levels. In this paper, we employ this methodology to produce consistent estimators of inequality for every county in Chile. We find a great deal of variation in inequality, with county-level Gini coefficients ranging from 0.41 to 0.63.
    Keywords: Inequality, poverty mapping, Chile
    JEL: O15 D63 O54
    Date: 2007–03
  20. By: Shanaka J. Peiris; Regis Barnichon
    Abstract: This paper explores the sources of inflation in Sub-Saharan Africa by examining the relationship between inflation, the output gap, and the real money gap. Using heterogeneous panel cointegration estimation techniques, we estimate cointegrating vectors for the production function and the real money demand function to recover the structural output and money gaps for seventeen African countries. The central finding is that both gaps contain significant information regarding the evolution of inflation, albeit with a larger role played by the money gap. There is no significant evidence of asymmetry in the relationship.
    Keywords: Inflation , Phillips curve , money demand , panel cointegration , growth accounting , Inflation , Sub-Saharan Africa , Demand for money , Production , Accounting , Economic models ,
    Date: 2007–02–21
  21. By: Aiko Mineshima; Christopher Browne
    Abstract: Remittances are large and have grown substantially over the past decade in the Pacific region. This primarily reflects the impact of emigration due to low growth and limited employment prospects at home. Many Pacific emigrants settle abroad with their families for long periods, but maintain close links with their relatives, villages and churches. The paper finds that the altruistic motive for remittances remains much stronger in the Pacific region than in the rest of Asia, where investment considerations increasingly appear to predominate, especially for the large share of single citizens working abroad for limited periods.
    Keywords: Remittances , Pacific island countries , Workers remittances , Pacific Island countries ,
    Date: 2007–02–21
  22. By: Smita Wagh; Sanjeev Gupta; Catherine A. Pattillo
    Abstract: This paper assesses the impact of the steadily growing remittance flows to sub-Saharan Africa (SSA). Though the region receives only a small portion of the total recorded remittances to developing countries, and the volume of aid flows to SSA swamps remittances, this paper finds that remittances, which are a stable, private transfer, have a direct poverty mitigating effect, and promote financial development. These findings hold even after factoring in the reverse causality between remittances, poverty and financial development. The paper posits that formalizing such flows can serve as an effective access point for "unbanked" individuals and households, and that the effective use of such flows can mitigate the costs of skilled out-migration in SSA.
    Keywords: Workers remittances , Sub-Saharan Africa , Poverty reduction , Financial sector , Development ,
    Date: 2007–02–26
  23. By: Anna Maria Mayda; Chad Steinberg
    Abstract: South-South trade agreements are proliferating: Developing countries signed 70 new agreements between 1990 and 2003. Yet the impact of these agreements is largely unknown. This paper focuses on the static effects of South-South preferential trade agreements stemming from changes in trade patterns. Specifically, it estimates the impact of the Common Market for Eastern and Southern Africa (COMESA) on Uganda's imports between 1994 and 2003. Detailed import and tariff data at the 6-digit harmonized system level are used for more than 1,000 commodities. Based on a difference-in-difference estimation strategy, the paper finds that-in contrast to evidence from aggregate statistics-COMESA's preferential tariff liberalization has not considerably increased Uganda's trade with member countries, on average across sectors. The effect, however, is heterogeneous across sectors. Finally, the paper finds no evidence of trade-diversion effects.
    Keywords: South-South trade agreements , trade creation , trade diversion , International trade agreements , Uganda , Imports , Commodities , Developing countries , Common Market for Eastern and Southern Africa , Trade models ,
    Date: 2007–02–26
  24. By: Michael DaCosta
    Abstract: The countries that were once British colonies in the Caribbean share a common language and a colonial history of slavery, dominance of a plantation-based sugar industry, and broadly similar government and administrative traditions. Following independence in the late-1960s economic strategies and performance across the region diverged. However, by the end of the 1980s, in the face of economic collapse Guyana had abandoned its strategy of "cooperative socialism", and its economic policies converged with those generally supported by the IMF and World Bank. Despite this policy convergence and shared colonial origins, economic performance and social indicators in Guyana and Barbados have continued to diverge. The paper explores some of the origins of this divergence, and, in particular, the deep seated factors that derive from the countries' history, geography, and demographics. In Guyana, while the focus on sound macroeconomic policies and donor support has been important, the most pressing requirement for sustained progress is to strengthen domestic institutions and build consensus on the country's future direction.
    Keywords: Caribbean , Guyana , Barbados , institutions , economic history , Economic conditions , Barbados , Guyana , Caribbean ,
    Date: 2007–02–28
  25. By: Antonio Spilimbergo
    Abstract: Do foreign-educated individuals play a role in promoting democracy in their home countries? Despite the large amount of private and public resources spent on foreign education, there is no systematic evidence that foreign-educated individuals foster democracy in their home countries. Using a unique panel dataset on foreign students starting from 1950, I show that, indeed, foreign-educated individuals promote democracy in their home country, but only if the foreign education is acquired in democratic countries. The results are robust to reverse causality, country-specific omitted variables, and inclusion of a variety of control variables. The results are stronger for small countries.
    Keywords: Education , democracy , development , institutions , international students , Education , Governance ,
    Date: 2007–03–08
  26. By: Simon Johnson; Jonathan David Ostry; Arvind Subramanian
    Abstract: A dozen countries had weak institutions in 1960 and yet sustained high rates of growth subsequently. We use data on their characteristics early in the growth process to create benchmarks with which to evaluate potential constraints on sustained growth for sub-Saharan Africa. This analysis suggests that what are usually regarded as first-order problems-broad institutions, macroeconomic stability, trade openness, education, and inequality-may not now be binding constraints in Africa, although the extent of ill-health, internal conflict, and societal fractionalization do stand out as problems in contemporary Africa. A key question is to what extent Africa can rely on manufactured exports as a mode of "escape from underdevelopment," a strategy successfully deployed by almost all the benchmark countries. The benchmarking comparison specifically raises two key concerns as far as a development strategy based on expanding exports of manufactures is concerned: micro-level institutions that affect the costs of exporting, and the level of the real exchange rate-especially the need to avoid overvaluation.
    Keywords: Sustained growth , Africa , constraints , benchmark , Economic growth , Africa , Trade liberalization , Imports , Exports ,
    Date: 2007–03–08
  27. By: Patrizia Tumbarello
    Abstract: Is the recent proliferation of Regional Trade Agreements (RTAs) in Asia a healthy development, or runs the risk of turning into an unmanageable "noodle bowl" in the future? The goal of this paper is to shed some light on this question. The results show that membership in the Asian RTAs considered in this study have not, to date, occurred at the expense of trade with nonmembers, as most Asian countries' integration with the global economy preceded regional integration. However, looking forward, given their discriminatory nature, a proliferation of RTAs, which is not accompanied by continuing unilateral and multilateral liberalization, could run the risk of leading to costly trade diversion.
    Keywords: Regional trade agreements , gravity model , trade diversion , Asia , Mekong countries , panel data , Trade , Asia , Cambodia , Lao People's Democratic Republic , Vietnam ,
    Date: 2007–03–08
  28. By: Rabah Arezki; Frederik van der Ploeg
    Abstract: We criticize existing empirical results on the detrimental effects of natural resource dependence on the rate of economic growth after controlling for institutional quality, openness, and initial income. These results do not survive once we use instrumental variables techniques to correct for the endogenous nature of the explanatory variables. Furthermore, they suffer from omitted variables bias as they overestimate the effect of initial income per capita and thus underestimate the speed of conditional convergence. Instead, we provide new evidence for the impact of natural resource dependence on income per capita in a systematic empirical cross-country framework. In addition to a significant negative direct impact of natural resources on income per capita, we find a significant indirect effect of natural resources on institutions. We allow for interaction effects and provide evidence that the natural resource curse is particularly severe for economic performance in countries with a low degree of trade openness. Adopting policies directed toward more trade openness may thus soften the impact of a resource curse. We also check the robustness of our results by using a variety of instruments and also employing the ratio of natural capital rather than natural resource exports to national income as an explanatory variable. We find evidence that resource abundance, measured by the stock of natural capital, also induces a resource curse, but less severely for countries that are relatively open.
    Keywords: Resource curse , institutions , trade policies , growth performance , income per capita , Trade policy ,
    Date: 2007–03–09
  29. By: Petia Topalova; Prachi Mishra; Arvind Subramanian
    Abstract: We examine the effect of tariff policies on evasion of customs duties, in the context of the trade reform in India of the 1990s. We exploit the variation in tariff rates across time and products to identify the evasion elasticity, namely, the effect of tariffs on evasion, and relate this elasticity to factors related to customs enforcement or the quality of customs institutions. We find a positive and robust effect of tariffs on import tax evasion. We then show that the evasion elasticity is influenced by certain product characteristics that determine how easy it is to detect evasion (with more differentiated products exhibiting a higher evasion elasticity). This evasion elasticity, which we broadly interpret as reflecting the quality of customs administration, has not improved over the 1990s. Finally, our results suggest that the effectiveness of customs in addressing evasion may be better in India than China, although China appears to be catching up over time.
    Keywords: Customs evasion; tariffs; enforcement; institutions ,
    Date: 2007–03–15
  30. By: Pawan Agarwal (Indian Council for Research on International Economic Relations)
    Keywords: India's higher education sector, reforms in education, financing of India's Education, Quality assurance in education, funding of higher education, regulating higher education
    JEL: I20 I21 I22 I28 O32 J44
    Date: 2006–06
  31. By: Eric V. Edmonds (Dartmouth College, NBER and IZA)
    Abstract: In recent years, there has been an astonishing proliferation of empirical work on child labor. An Econlit search of keywords "child lab*r" reveals a total of 6 peer reviewed journal articles between 1980 and 1990, 65 between 1990 and 2000, and 143 in the first five years of the present decade. The purpose of this essay is to provide a detailed overview of the state of the recent empirical literature on why and how children work as well as the consequences of that work. Section 1 defines terms commonly used in the study of child time allocation and provides a descriptive overview of how children spend their time in low income countries today. Section 2 reviews the case for attention to the most common types of work in which children participate, focusing on that work's impact on schooling, health, as well as externalities associated with that work. Section 3 considers the literature on the determinants of child time allocation such as the influence of local labor markets, family interactions, the net return to schooling, and poverty. Section 5 discusses the limited evidence on different policy options aimed at influencing child labor. Section 6 concludes by emphasizing important research questions requiring additional research such as child and parental agency, the effectiveness of child labor policies, and the determinants of participation in the "worst forms" of child labor.
    Keywords: child labor, human capital, time allocation, schooling
    JEL: J13 J22 O15
    Date: 2007–02
  32. By: Eric V. Edmonds (Dartmouth College NBER and IZA); Nina Pavcnik (Dartmouth College NBER and CEPR); Petia Topalova (International Monetary Fund)
    Abstract: Do the short and medium term adjustment costs associated with trade liberalization influence schooling and child labor decisions? We examine this question in the context of India's 1991 tariff reforms. Overall, in the 1990s, rural India experienced a dramatic increase in schooling and decline in child labor. However, communities that relied heavily on employment in protected industries before liberalization do not experience as large an increase in schooling or decline in child labor. The data suggest that this failure to follow the national trend of increasing schooling and diminishing work is associated with a failure to follow the national trend in poverty reduction. Schooling costs appear to play a large role in this relationship between poverty, schooling, and child labor. Extrapolating from our results, our estimates imply that roughly half of India's rise in schooling and a third of the fall in child labor during the 1990s can be explained by falling poverty and therefore improved capacity to afford schooling.
    Keywords: schooling, child labor, literacy, trade liberalization, India
    JEL: J24 O15 J22 J13
    Date: 2007–02
  33. By: Ian Babetskii (Czech National Bank, CERGE-EI, and CES-ROSES, University of Paris 1); Nauro F. Campos (Brunel University, CEPR, WDI and IZA)
    Abstract: Why are socially beneficial reforms not implemented? One simple answer to this question (which has received little attention in the literature) is that this may be caused by generalized uncertainty about the effectiveness of reforms. If agents are unsure about whether a proposed reform will work, it will be less likely to be adopted. Despite the numerous benefits economists assign to structural reforms, the empirical literature has thus far failed to establish a positive and significant effect of reforms on economic performance. We collect data from 43 econometric studies (for more than 300 coefficients on the effects of reform on growth) and show that approximately one third of these coefficients is positive and significant, another third is negative and significant, and the final third is not statistically significant different from zero. In trying to understand this remarkable variation, we find that the measurement of reform and controlling for institutions and initial conditions are main factors in decreasing the probability of reporting a significant and positive effect of reform on growth.
    Keywords: structural reforms, economic growth
    JEL: O11 P21 C49
    Date: 2007–02
  34. By: Hiroshi Sato (Hitotsubashi University, Tokyo); Li Shi (Beijing Normal University)
    Abstract: This paper examines the determinants of intergenerational correlation of education in rural China by using a data from a large survey of households. Three generations who completed education during the period from pre-1949 to the beginning of the 2000s are included. The focus is on the influence of family class status (chengfen) on offspring education. Our investigation suggests that family class status is still important for the intergenerational transmission of education. The offspring of landlord/rich peasant families are more likely to achieve higher educational attainment, even though parental education, family wealth, and other family characteristics are the same. The unique determinant of the intergenerational transmission of education in the postreform era is found to be an education-oriented family culture, created as an intergenerational cultural rebound against class-based social discrimination during the Maoist era. We have also found that the cultural reaction is a combination of class-specific effects with cohort-specific effects.
    Keywords: education, intergenerational correlation, social class, social discrimination, family culture
    JEL: D31 J24 N35 O15
    Date: 2007–02
  35. By: Gamal Ibrahim; Abbi Kedir; Sebastian Torres
    Abstract: Empirical evidence on determinants of credit constraints and the amount borrowed by urban household in Sub-Saharan Africa is almost non-existent. Using an extended direct approach by virtue of the unique data set we have (the Fourth Round Ethiopian Urban Household Survey), we analysed the determinants of credit constraints and the amount borrowed by urban households. We find a high percentage of credit-constrained households, the majority of which constitute discouraged borrowers. Discrete choice models that control for potential endogeneity and selectivity bias have been fitted to our data. Our analysis shows current household resources, number of dependants, and location as significant correlates.
    Keywords: credit constrained households; credit rationing; endogeneity; instrumental variables; urban Ethiopia; Africa
    JEL: D12 O12 O55
    Date: 2007–03
  36. By: Carlos Bozzoli; Angus S. Deaton; Climent Quintana-Domeque
    Abstract: We investigate the childhood determinants of adult height in populations, focusing on the respective roles of income and of disease. We develop a model of selection and scarring, in which the early life burden of nutrition and disease is not only responsible for mortality in childhood but also leaves a residue of long-term health risks for survivors, risks that express themselves in adult height, as well as in late-life disease. Across a range of European countries and the United States, we find a strong inverse relationship between postneonatal (one month to one year) mortality, interpreted as a measure of the disease and nutritional burden in childhood, and the mean height of those children as adults. In pooled birth-cohort data over 30 years for the United States and eleven European countries, postneonatal mortality in the year of birth accounts for more than 60 percent of the combined cross-country and cross-cohort variation in adult heights. The estimated effects are smaller but remain significant once we allow for country and birth-cohort effects. In the poorest and highest mortality countries of the world, there is evidence that child mortality is positively associated with adult height. That selection should dominate scarring at high mortality levels, and scarring dominate selection at low mortality levels, is consistent with the model for reasonable values of its parameters.
    JEL: I12 J13 O12
    Date: 2007–03
  37. By: John Gibson (University of Waikato); David McKenzie (Development Research Group, The World Bank)
    Abstract: Distance and location are important determinants of many choices that economists study. While these variables can sometimes be obtained from secondary data, economists often rely on information that is self-reported by respondents in surveys. These self-reports are used especially for the distance from households or community centers to various features such as roads, markets, schools, clinics and other public services. There is growing evidence that self-reported distance is measured with error and that these errors are correlated with outcomes of interest. In contrast to self-reports, the Global Positioning System (GPS) can determine almost exact location (typically within 15 meters). The falling cost of GPS receivers (typically below US$100) makes it increasingly feasible for field surveys to use GPS as a better method of measuring location and distance. In this paper we review four ways that GPS can lead to better economics and better policy: (i) through constructing instrumental variables that can be used to understand the causal impact of policies, (ii) by helping to understand policy externalities and spillovers, (iii) through better understanding of the access to services, and (iv) by improving the collection of household survey data. We also discuss several pitfalls and unresolved problems with using GPS in household surveys.
    Keywords: distance; externalities; global positioning system; location; survey measurement
    JEL: C81 O12 R20
    Date: 2007–03–19
  38. By: Bigsten, Arne; Mengistae, Taye; Shimeles, Abebe
    Abstract: An analysis of panel data on individuals in a random selection of urban households in Ethiopia reveals large, sustained, and unexplained earnings gaps between public and private, and formal and informal sectors over the period 1994-2004. The authors have no formal evidence whether these gaps reflect segmentation of the labor market along either of these divides. In other words, they canno t show whether they are at least in part due to impediments to entry in the higher wage sector. But they do have evidence that, if segmentation explains any part of the observed earnings gaps, then it could only have weakened over the survey decade. The authors find, first, that the rate of mobility increased between the two pairs of sectors. Sample transition rates grew across survey waves, while state dependence in sector choice decreased. Second, the sensitivity of sector choice to earnings gaps increased over the same period. In particular, the role of comparative earnings in selection into the informal sector was evident throughout the survey decade and increased in magnitude over the second half of the period.
    Keywords: Labor Markets,Labor Standards,Work & Working Conditions,Markets and Market Access,Labor Management and Relations
    Date: 2007–03–01
  39. By: Bandiera, Luca; Budina, Nina; Klijn, Michel; van Wijnbergen, Sweder
    Abstract: Fiscal sustainability analysis (FSA) is an important component of macroeconomic analysis for many developing countries. To further enhance understanding of fiscal policy and the constraints faced by policymakers, the authors develop a toolkit for FSA in middle-income countries which builds on previous work in this area and on new developments in dealing with uncertainty. The FSA toolkit includes an Excel-based FSA tool and a technical manual accompanying it. The FSA tool is standardized and simple, but at the same time flexible enough to allow for user-defined country-specifics. This manual provides step-by-step technical instructions for running the FSA tool and includes mathematical appendices and a glossary.
    Keywords: Economic Theory & Research,External Debt,Strategic Debt Management,Economic Stabilization,Public Sector Economics & Finance
    Date: 2007–03–01
  40. By: McCulloch, Neil; Weisbrod, Julian; Timmer, C. Peter
    Abstract: Most poor people in developing countries still live in rural areas and are primarily engaged in low productivity farming activities. Thus pathways out of poverty are likely to be strongly connected to productivity increases in the rural economy, whether they are realized in farming, in rural nonfarm enterprises, or by way of rural-urban migration. The authors use cross-sectional data from the Central Statistical Board for 1993 and 2002, as well as a panel data set from the Indonesia Family Life Survey for 1993 and 2000, to show which pathways out of poverty were most successful over this period. The findings suggest that increased engagement of farmers in rural nonfarm enterprises is an important route out of rur al poverty, but that most of the rural agricultural poor that exit poverty still do so while remaining rural and agricultural. So changes in agricultural prices, wages, and productivity still play a critical role in moving people out of poverty.
    Keywords: Rural Poverty Reduction,Population Policies,Pro-Poor Growth and Inequality,Economic Theory & Research
    Date: 2007–03–01
  41. By: Shepherd, Ben; Delpeuch, Claire
    Abstract: • Available evidence strongly suggests that cotton producers in West Africa are relatively unresponsive to changes in world prices. This means they are poorly placed to take advantage of improved market conditions that might result from the reduction or abolition of cotton subsidies in rich countries. • To increase price responsiveness and ensure that the results of multilateral reform match producers’ expectations it is now more urgent than ever to undertake comprehensive regulatory reform of cotton marketing structures. • While most West African countries have already taken important steps in that direction, much work still remains to be done, in particular in Mali. The necessary path of reform is highly complex and country-specific, but we can suggest some overarching goals: Assuring closer alignment between world and domestic (producer) prices; Improving cotton sector productivity by reinforcing market infrastructure at crucial points in the supply chain, and ensuring openness to technological advances including biotechnology; Investing in physical and informational infrastructure so as to bring farmers closer to markets.
    Keywords: International trade; agriculture; cotton; commodity marketing; regulatory reform; West Africa.
    JEL: F13 Q17
    Date: 2007–03
  42. By: Siddiqui, Rizwana; Kemal, A R
    Abstract: Foreign capital inflows (FKI) help an economy by financing the imbalance between income and expenditure. However, their impact on poverty in the recipient economy is a controversial issue. In this study, we examine the impact on poverty in two different scenarios: (1) labour is homogeneous; (2) labour is heterogeneous. The Computable General Equilibrium model for Pakistan is used to conduct simulations in order to assess the impact of an increase in foreign capital on poverty both in the presence and in the absence of trade liberalisation. Several interesting results emerge from the study. First, FKI tends to reduce poverty in the presence as well as in the absence of trade liberalisation when labour is homogeneous. However, poverty reduction appears to be larger in the presence of trade liberalisation. Second, when labour is differentiated according to qualification and is assumed to be sector-specific, in the absence of trade liberalisation a higher proportion of benefits of FKI accrue to skilled labour and poverty increases by all measures for both urban and rural households. In the presence of trade liberalisation, FKI benefits unskilled labour more, and poverty is decreased irrespective of the choice of poverty indicators.
    Keywords: Capital inflow; Poverty; Pakistan
    JEL: F32
    Date: 2006
  43. By: Anthony Letsoalo; James Blignaut; Theuns de Wet; Martin de Wit; Sebastiaan Hess; Richard S.J. Tol (Economic and Social Research Institute, Dublin); Jan van Heerden
    Abstract: The South African government is exploring ways to address water scarcity problems by introducing a water resource management charge on the quantity of water used in sectors such as irrigated agriculture, mining and forestry. It is expected that a more efficient water allocation, lower use and a positive impact on poverty can be achieved. This paper reports on the validity of these claims by applying a computable general equilibrium model to analyse the triple dividend of water consumption charges in South Africa: reduced water use, more rapid economic growth, and a more equal income distribution. It is shown that the appropriate, budget-neutral combination of water charges, particularly on irrigated agriculture and coal mining, and reduced indirect taxes, particularly on food, would yield triple dividends.
    Keywords: water scarcity, water charges, triple dividend, poverty alleviation, computable general equilibrium model
    JEL: O13 Q25
    Date: 2005–04

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