nep-dev New Economics Papers
on Development
Issue of 2007‒06‒11
37 papers chosen by
Jeong-Joon Lee
Towson University

  1. Polarization, Fractionalization and Conflict By Joan Esteban
  2. FDI and Credit Constraints: Firm Level Evidence in China By Jerome Hericourt; Sandra Poncet
  3. Decentralization, Corruption, and the Unofficial Economy By Michael Alexeev; Luba Habodaszova
  4. Dynamic Multi-Level Analysis of Households' Living Standards and Poverty: Evidence from Vietnam By Arnstein Aassve; Bruno Arpino
  5. New Directions in the Analysis of Inequality and Poverty By Stephen P. Jenkins; John Micklewright
  6. Corruption and trade protection: evidence from panel data By Subhayu Bandyopadhyay; Suryadipta Roy
  7. Foreign aid and export performance: a panel data analysis of developing countries By Jonathan Munemo; Subhayu Bandyopadhyay; Arabinda Basistha
  8. Teacher Shortages, Teacher Contracts and their Impact<br />on Education in Africa By Jean Bourdon; Markus Frölich; Katharina Michaelowa
  9. Impact of Social Labeling on Child Labor in the Indian Carpet Industry By Chakrabarty, Sayan; Grote, Ulrike
  10. Trust and Growth: A Shaky Relationship By Berggren, Niclas; Elinder, Mikael; Jordahl, Henrik
  11. Poverty in Rural Cambodia: The Differentiated Impact of Linkages, Inputs and Access to Land By Engvall, Anders; Sjöberg, Örjan; Sjöholm, Fredrik
  12. Provision of Primary Healthcare Services in Urban areas of Bangladesh – the Case of Urban Primary Health Care Project By Ahmad, Alia
  13. Is the elephant stepping on its trunk? The problem of India´s unbalanced growth By Douhan, Robin; Nordberg, Anders
  14. The Case of OD in an NGO in India By Nair Nisha; Vohra Neharika
  15. Financial Development, Openness and Institutions: Evidence from Panel Data By Badi H. Baltagi; Panicos O. Demetriades; Siong Hook Law
  16. Domestic Institutions and the Bypass Effect of Financial Globalization By Jiandong Ju; Shang-Jin Wei
  17. The Growth Effect of Democracy: Is It Heterogenous and How Can It Be Estimated? By Torsten Persson; Guido Tabellini
  18. 'De-industrialisation' and colonial rule: The cotton textile industry in Indonesia, 1820-1941 By Pierre van der Eng
  19. Impacts of International Migration and Remittances By Richard P.C. Brown; Gareth Leeves
  20. Institutional Development, Financial Deepening and Economic Growth: Evidence from China By Paul Wachtel; Iftekhar Hasan; Mingming Zhou
  21. Globe: Asian Growth and Trade Poles: India, China, and East and Southeast Asia By Karen Thierfelder; Scott McDonald; Sherman Robinson
  22. The Convergence Implications of Biased Technological Diffusion By Ahmed S. Rahman
  23. Giving children a better start : preschool attendance and school-age profiles By Manacorda, Marco; Galiani, Sebastian; Berlinski, Samuel
  24. India rising - faster growth, lower indebtedness By Wes, Marina; Pinto, Brian; Pang, Gaobo
  25. Population size, concentration, and civil war : a geographically disaggregated analysis By Raleigh, Clionadh; Hegre, Havard
  26. A poverty-focused evaluation of commodity tax options By Essama-Nssah, B.
  27. The impact of remittances on poverty and human capital : evidence from Latin American household surveys By Lop ez, J. Humberto; Fajnzylber, Pablo; Acosta, Pablo
  28. Youth Dependency, Institutions, and Economic Growth By Tomas Kögel
  29. Microfinance: Are its promises ethically justified? By Annabel Vanroose
  30. Distribution matters: Expressed Value Judgements among Health Planners in Tanzania By Trygve Ottersen; Deogratius Mbilinyi; Ottar Mæstad; Ole Frithjof Norheim
  31. CONSUMER PREFERENCES FOR QUALITY CHARACTERISTICS ALONG THE COWPEA VALUE CHAIN IN NIGERIA, GHANA AND MALI By Fulgence Joseph Mishili; Joan Fulton; Mustafa Jamal; J. Lowenberg-DeBoer; Musa Shehu; Saket Kushwaha; Kofi Marfo; Alpha Chergna
  32. Sectoral Shift, Wealth Distribution, and Development By Yuki, Kazuhiro
  33. Borrower Empowerment and Savings: A Two-stage Micro-finance Scheme By Roy Chowdhury, Prabal
  34. When leisure becomes excessive: a bifurcation result in endogenous growth theory By Gomes, Orlando
  35. Skills Shortages in South Africa: A Literature Review By Reza Daniels
  36. Impact of Export Subsidies on Pakistan’s Exports By Nadeem Ul Haque; M. Ali Kemal
  37. High-tech exports from developing countries: A symptom of technology spurts or statistical illusion? By Martin Srholec

  1. By: Joan Esteban
    Date: 2007–04–01
  2. By: Jerome Hericourt; Sandra Poncet
    Abstract: In this paper, we assess the success of the ongoing financial system reforms in China through the investigation of the extent to which firms are financially constrained. We focus on the part played by Foreign Direct Investment (FDI) in funding Chinese corporate sector as we analyze whether incoming foreign investment in China plays an important role in alleviating domestic firms’ credit constraints. Using firm-level data on 2,200 domestic companies for the period 1999-2002 and splitting domestic firms into public and private firms, we find that public firms’ investment decisions are not sensitive to debt ratios or the cost of debt. Nor is there any evidence that public firms are affected by foreign firms presence. We interpret this as evidence in support of the notion of a soft budget constraint for public firms. In contrast, private domestic firms appear more credit constrained than state-owned firms but their financing constraints tend to ease in a context of abundant foreign investment. Our results confirm that the development of cross-border relationships with foreign firms helps private domestic firms to bypass both the financial and legal obstacles that they face at home(Huang, 2003).
    Keywords: Financial constraint; corporate finance; Foreign Direct Investment; China
    JEL: E22 E44 G31 O16
    Date: 2007–05
  3. By: Michael Alexeev (Indiana University Bloomington); Luba Habodaszova (City University/VSM, Bratislava, Slovakia)
    Abstract: We analyze the implications of decentralization for the incentives of local governments to provide productivity enhancing local public goods and extort bribes from local entrepreneurs. We show that an increase in the share of locally raised tax revenue left with the local government raises its incentives to provide public goods and brings more entrepreneurs into the official economy. Corruption, measured by the size of bribes that local officials charge entrepreneurs for issuing licenses for operating officially, may increase or decrease, depending on the extent to which public goods enhance the entrepreneur’s productivity. The tests using cross-sectional country-level data support the model’s implications.
    Keywords: decentralization, local public goods, corruption, unofficial economy
    JEL: H77 D73 O17
    Date: 2007–05
  4. By: Arnstein Aassve (Institute for Social and Economic Research); Bruno Arpino (University of Florence)
    Abstract: The paper investigates the role of multi-level structures in poverty analysis based on household level data. We demonstrate how multi-level models can be applied to standard poverty analysis and highlight its usefulness in terms of assessing the extent community characteristics matter in determining poverty status and dynamics. We provide two applications. The first is an example of a growth model that control for characteristics measured at the initial time period, and considers directly to what extent the same characteristics contribute to explain changes in economic wellbeing over time. In the second application we model the determinants of escaping poverty. Both applications use longitudinal data from Vietnam recorded at two points in time during the nineties, a period where Vietnam experienced strong economic growth. We demonstrate that failing to control for multi-level data structures could give incorrect inference about the effect of covariates of interest. We also demonstrate how the multi-level models can be used for regional and community level policy analysis that otherwise is difficult to implement in more standard regression analysis.
    Date: 2007–05
  5. By: Stephen P. Jenkins (Institute for Social and Economic Research); John Micklewright (School of Social Sciences, University of Southampton)
    Abstract: Over the last four decades, academic and wider public interest in inequality and poverty has grown substantially. In this paper we address the question: what have been the major new directions in the analysis of inequality and poverty over the last thirty to forty years? We draw attention to developments under seven headings: changes in the extent of inequality and poverty, changes in the policy environment, increased scrutiny of the concepts of 'poverty' and 'inequality' and the rise of multidimensional approaches, the use of longitudinal perspectives, an increase in availability of and access to data, developments in analytical methods of measurement, and developments in modelling.
    Keywords: income redistribution, inequality, poverty
    Date: 2007–05
  6. By: Subhayu Bandyopadhyay; Suryadipta Roy
    Abstract: This paper provides new estimates of the effects of corruption and poor institutions on trade protection. It exploits data on several measures of trade protection including import duty, international trade taxes, and the trade-GDP ratio. The paper complements the literature on the relationship between corruption and trade reform. It deviates from the previous literature in several ways. First, unobserved heterogeneity among countries have been controlled with properly specified fixed effects exploiting the time dimension present in the dataset. Secondly, instead of using tariff and non-tariff barriers, more general measures of trade protection have been used. The issue of endogeneity of corruption with respect to trade policy has been addressed using proper instruments for corruption used in previous studies. Moreover, two separate institutional measures have been used in the same regression to estimate their comparative impacts on trade policy. In general, we find that corruption and lack of contract enforcement have strong impacts to increase trade protection and negative effects on trade openness.
    Keywords: Tariff ; International trade
    Date: 2007
  7. By: Jonathan Munemo; Subhayu Bandyopadhyay; Arabinda Basistha
    Abstract: The effect of foreign aid on economic activity of a country can be dampened due to potentially adverse effects on exports through a real exchange rate appreciation. In this study we examine the long-term relationship between export performance and foreign aid in developing countries while accounting for other factors. The estimates of direct effect of foreign aid on exports are imprecise. However, the effect of the quadratic term of foreign aid on exports is negative and precise. This implies large amount of foreign aid does adversely affect export performance. The results are robust to the use of two different export performance measures and different sub-samples.
    Keywords: Developing countries - Economic conditions ; Exports
    Date: 2007
  8. By: Jean Bourdon (IREDU - Institut de recherche sur l'éducation : Sociologie et Economie de l'Education - [CNRS : FRE5211] - [Université de Bourgogne]); Markus Frölich (SIAW-HSG - [University of St. Gallen]); Katharina Michaelowa (Institut für Politikwissenschaft - [University of Zurich])
    Abstract: Primary school enrolment rates are very low in francophone Africa. In order to enhance education supply, many<br />countries have launched large teacher recruitment programmes in recent years, whereby teachers are no longer engaged on civil servant positions, but on the basis of (fixed-term) contracts typically implying considerably lower salaries and a sharply reduced duration of professional training. While this policy has led to a boost of primary enrolment, there is a concern about a loss in the quality of education. In this paper we analyse the impact on educational quality, by estimating nonparametrically the quantile treatment effects for Niger, Togo and Mali, based on very informative data, comparable across these countries. We find that contract teachers do relatively better for low ability children in low grades than for high ability children in higher grades. When positive treatment effects were found, they tended to be more positive at the low to medium quantiles; when negative effects were found they tended to be more pronounced at the high ability quantiles. Hence, overall it seems that contract teachers do a relatively better job for teaching students with learning difficulties than for teaching the ‘more advanced' children. This implies that contract teachers tend to reduce inequalities in student outcomes. At the same time, we also observe clear differences between the countries. We find that, overall, effects are positive in Mali, somewhat mixed in Togo (with positive effects in 2nd and negative effects in 5th grade) and negative in Niger. This ordering is consistent with theoretical expectations derived from a closer examination of the different ways of implementation of the contract teacher programme in the three countries. In Mali and, to some extent, in Togo, the contract teacher system works more through the local communities. This may have led to closer monitoring and more effective hiring of contract teachers. In Niger, the system was changed in a centralized way with all contract teachers being public employees, so that there is no reason to expect much impact on local monitoring. In addition, the extremely fast hiring of huge numbers of contract teachers may also have contributed to relatively poor performance in Niger. These results are expected to be relevant for other sub-Saharan African countries, too, as well as for the design of new contract teacher programmes in the future.
    Keywords: Subsaharan Africa ; Primary school ; Enrolment ; Teachers ; Recruitment programme ; Civil servants ; Teacher training ; Quality of education ; Mali ; Togo ; Niger
    Date: 2007–05–29
  9. By: Chakrabarty, Sayan; Grote, Ulrike
    Abstract: Does the labeling of tradable products like carpets which have been produced without child labor contribute to decreased vulnerability of poor households and their children? This paper analyzes which factors determine the probability of a child to work in the carpet industry, and examines the influence of non governmental organizations (NGOs) like Rugmark which are engaged in the social labeling process. Data was obtained from interviews with 417 households in North India. Based on their calorie intake, the households were dissected into two groups, one very poor group below and another one above the subsistence level. The econometric analysis shows that a child living in a very poor household is more likely to work when his/her calorie intake increases (nutritional efficiency wage argument), while the opposite is true for a child from the above-subsistence household group. In addition, it has been found that social labeling has no significant influence on the very poor households. In contrast, at the above-subsistence level, social labeling has a significant positive welfare influence on the households. Furthermore, the occurrence of child labor is more likely for NGOs without monitoring.
    Keywords: Social Labeling, Child Labor, Carpet Industry, India
    JEL: D13 C81 I20 J22 O12
    Date: 2007–05
  10. By: Berggren, Niclas (The Ratio Institute); Elinder, Mikael (Uppsala University); Jordahl, Henrik (Research Institute of Industrial Economics (IFN))
    Abstract: We conduct an extensive robustness analysis of the relationship between trust and growth by investigating a later time period and a bigger sample than in previous studies. In addition to robustness tests that focus on model uncertainty, we systematize the investigation of outlier influence on the results by using the robust estimation technique Least Trimmed Squares. We find that when outliers (especially China) are removed, the trust-growth relationship is no longer robust. On average, the trust coefficient is half as large as in previous findings.
    Keywords: Trust; Growth; Robustness; Social Capital; Outliers
    JEL: O40 Z13
    Date: 2007–05–24
  11. By: Engvall, Anders (Stockholm School of Economics); Sjöberg, Örjan (Stockholm School of Economics); Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN))
    Abstract: Cambodia has been growing rapidly over the past few years but still remains one of the poorest countries in East Asia. In particular, poverty is widespread in rural Cambodia. This paper examines rural poverty in Cambodia with a view to furthering our understanding of the factors that might explain its occurrence and persistence. Setting out from the existing literature, it appears that reduced rural poverty in Cambodia would have to rest on two pillars. Firstly, improvements in agricultural productivity are necessary. Secondly, other income earning opportunities for the rural population have to be established. Using the 2004 Cambodian Socio-Economic Survey, and focusing on the binding constraints to development and poverty alleviation, we add detail to this picture. Our econometric results show that the main causes to poverty differ between landowners and landless and between different regions. Inputs to agriculture are critical to the landowning poor whereas linkages with the rest of the economy, while also essential to landowners, are of vital importance to the landless poor if their lot is to be improved.
    Keywords: Asia; Cambodia; Poverty; Rural; Agriculture; Linkages
    JEL: O12 O13 O18
    Date: 2007–05–26
  12. By: Ahmad, Alia (Department of Economics, Lund University)
    Abstract: Primary healthcare in Bangladesh is supposed to be a public responsibility, and until recently the government has tried to provide basic services directly through its own bureaucracy. However, the public sector faces acute problems in meeting the growing needs of urban population, especially the poor. In recent years, new institutions such as partnerships with not-for-profit private organizations are sought to improve the access and quality of primary care. This paper focuses on one urban partnership project, UPHCP in Bangladesh. It analyzes the accountability relationships among different stakeholders involved in the project and cost effectiveness of contracting out. The paper finds that the accountability relationships in UPHCP are not transparent, and the programme is costly in terms of human resources because of multiple principals and agents involved compared to direct government provision. The beneficial impact of UPHCP on urban primary care is well-documented, but such institutional arrangement will have difficulties in expansion on a large scale without external assistance. Another weakness of the programme is the lack of a sense of ownership and trust in its continuity among the population that works against social accountability and client power.
    Keywords: Contracting out; NGO's; Primary healthcare
    JEL: I12 I18
    Date: 2007–05–29
  13. By: Douhan, Robin (The Research Institute of Industrial Economics); Nordberg, Anders (Department of Economics)
    Abstract: It is often assumed that recent success in the high-technology software industry will lead India’s development. However, evidence suggests that basic manufacturing industry is stagnant. This paper proposes a mechanism that ties these two trends together. A big-push type of model, featuring linkages between firms, demand spill-over, and technology choice is elaborated. By imposing di¤erent cost structures on the manufacturing and high-technology industries the model describes outcome in terms of distribution between sectors. It is found that a policy promoting a high-technology sector can have negative effects on the manufacturing industry as well as aggregate income. A policy directing resources towards infrastructure benefits all sectors and increases aggregate income. The results from the model are found to correpond with the recent development pattern in India.
    Keywords: Industrialization; India; Industrial structure
    JEL: L16 O14 O25
    Date: 2007–06–01
  14. By: Nair Nisha; Vohra Neharika
    Abstract: This organizational development exercise was carried out in a prominent NGO that works in the area of rights and advocacy in the state of Jharkand in India. The OD exercise was part of the Applied Behavioral Science course of the first author’s graduate program which required the application of behavioral science theory to a live organization under the supervision of her guide, the second author. The intervention proved to be quite an educative one, both because it was in the developmental sector posing a different set of challenges than conventional organizations and also because the organization itself was in a state of flux at the time of the intervention. The entire exercise was spread over a period of four months. This paper discusses some of the issues and improvement areas that emerged through interviews with senior management and also reflections on some of the key lessons learnt during the process of intervention, with implications for OD in developmental organizations.
    Date: 2007–05–28
  15. By: Badi H. Baltagi; Panicos O. Demetriades; Siong Hook Law
    Abstract: Utilising four annual panel datasets and dynamic panel data estimation procedures we find that trade and financial openness, as well as economic institutions are statistically important determinants of the variation in financial development across countries and over time since the 1980s. However, we find mixed support for the hypothesis that the simultaneous opening of both trade and capital accounts is necessary to promote financial development in a contemporary setting.
    Keywords: Financial development; Trade Openness; Financial Openness; Economic Institutions; Financial Liberalization; Dynamic Panel Data Analysis
    JEL: F19 G29
    Date: 2007–05
  16. By: Jiandong Ju; Shang-Jin Wei
    Abstract: This paper proposes a simple model to study the relationship between domestic institutions - financial system, corporate governance, and property rights protection - and patterns of international capital flows. It studies conditions under which financial globalization can be a substitute for reforms of domestic financial system. Inefficient financial system and poor corporate governance in a country may be completely bypassed by two-way capital flows in which domestic savings leave the country in the form of financial capital outflows but domestic investment takes place via inward foreign direct investment. While financial globalization always improves the welfare of a developed country with a good financial system, its effect is ambiguous for a developing country with an inefficient financial sector/poor corporate governance. However, the net effect for a developing country is more likely to be positive, the stronger its property rights protection. This is consistent with the observation that developed countries are often more enthusiastic about capital account liberalization around the world than many developing countries. A noteworthy feature of this theory is that financial and property rights institutions can have different effects on capital flows.
    JEL: F21 F30 G15
    Date: 2007–06
  17. By: Torsten Persson; Guido Tabellini
    Abstract: We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously underestimated the growth effects of democracy. In particular, we find an average negative effect on growth of leaving democracy on the order of -2 percentage points implying effects on income per capita as large as 45 percent over the 1960-2000 panel. Heterogenous characteristics of reforming and non-reforming countries appear to play an important role in driving these results.
    JEL: H11 O11
    Date: 2007–06
  18. By: Pierre van der Eng
    Abstract: Did colonial rule in Indonesia have a de-industrialising impact? Using the case of the cotton textile industry, this paper finds little evidence. Value added in the industry increased in Java during 1820-71, increased more than three-fold during 1874-1914 and doubled during 1934-41. Most activity involved finishing of imported cotton cloth. Spinning and weaving increased marginally, as high labour intensity of small-scale production, marginal local raw cotton production, and competitive international markets for yarn and cloth precluded domestic production. Unfavourable real exchange rates discouraged investment in modern spinning and weaving ventures. From 1934, production increased rapidly due to trade protection and technological change in small-scale weaving.
    Keywords: Cotton textiles, manufacturing, Indonesia, trade policy, technological change
    JEL: F13 L67 N65 O14 O33
    Date: 2007
  19. By: Richard P.C. Brown (School of Economics, The University of Queensland); Gareth Leeves (School of Economics, The University of Queensland)
    Abstract: We use original 2005 survey data from Fiji and Tonga on remittances and household income to estimate the combined impact of migration and remittances on the composition of household income. A two-stage methodology is followed. A variable for the predicted number of migrants in each household is generated to control for selectivity in migration. This variable is then used in a 3SLS remittances and income equation system. In neither country do we observe significant impacts on agricultural cash income, but, in relation to other income sources, including subsistence agriculture, wages and non-agricultural business activities, some significant and different effects are found, both positive and negative. These findings suggest that the duration and intensity of remittance-driven migration, and the structure of economic activity within a community are important in understanding the influences of migration and remittances on household resource allocation and production decisions and on the community’s economic transformation.
    Date: 2007
  20. By: Paul Wachtel; Iftekhar Hasan; Mingming Zhou
    Date: 2007
  21. By: Karen Thierfelder (United States Naval Academy); Scott McDonald (The University of Sheffield); Sherman Robinson (University of Sussex)
    Abstract: Using a global general equilibrium trade model, this study analyzes the impact on developing countries, of (1) the dramatic expansion of trade by India, China, and an integrated East and Southeast (E&SE) Asia trade bloc and (2) productivity growth in the region. China is an integral member of the E&SE Asia bloc, with strong links through value chains and trade in intermediate inputs, while India is not part of any trade bloc. The analyses consider the importance of their different degrees of integration into regional and global economies, focusing on potential complementarities and competition with other developing countries.
    Date: 2007–06
  22. By: Ahmed S. Rahman (United States Naval Academy)
    Abstract: This paper presents a model of a developing economy that endogenizes both technological biases and demographic trends. As knowledge diffuses from foreign R&D-producing regions, potential innovators decide which technologies to develop after considering available factors of production, and individuals decide the quality and quantity of their children after considering available technologies. This interaction creates multiple growth paths- some economies develop labor-intensive techniques and expand the pool of unskilled labor; others grow into societies of highly skilled individuals and expanding outputs per capita. I find that if developing countries wish to achieve good prospects for income convergence, they should promote the flow of knowledge from the most developed regions, even if this results initially in a technology-skill mismatch. Such knowledge flows are more likely to promote the twin growths in human capital and technologies characteristic of the biggest economic success stories.
    Date: 2007–06
  23. By: Manacorda, Marco; Galiani, Sebastian; Berlinski, Samuel
    Abstract: The authors study the effect of pre-primary education on children ' s subsequent school outcomes by exploiting a unique feature of the Uruguayan household survey (ECH) that collects retrospective information on preschool attendance in the context of a rapid expansion in the supply of pre-primary places. Using a within household estimator, they find small gains from preschool attendance at early ages that magnify as children grow up. By age 15, treated children have accumulated 0.8 extra years of education and are 27 percentage points more likely to be in school compared with their untreated siblings. Instrumental variables estimates that control for nonrandom selection of siblings into preschool lead to similar results. The authors speculate that early grade repetition harms subsequent school progression and that pre-primary education appears as a successful policy option to prevent early grade failure and its long lasting consequences.
    Keywords: Primary Education,Education For All,Youth and Governance,Early Childhood Development,Educational Sciences
    Date: 2007–06–01
  24. By: Wes, Marina; Pinto, Brian; Pang, Gaobo
    Abstract: Over the past 25 years, India ' s economy grew at an average real rate of close to 6 percent, with growth rates in recent years accelerating to 9 percent. Yet by 2005-06, the general government debt-to-GDP ratio was 34 percentage points higher than in the 1980s. The authors examine the links between public finances and growth in the post-1991 period. They argue that the main factor in the deterioration of government debt dynamics after the mid-1990s was a reform-induced loss in trade, customs, and financial repression taxes. Over time, these very factors plus lower entry barriers have contributed to stronger microfoundations for growth by increasing competition and hardening budget constraints for firms and financial sector institutions. The authors suggest that the impressive growth acceleration of the past few years, which is now lowering government indebtedness, can be attributed to the lagged effects of these factors, which have taken time to attain a critical mass in view of India ' s gradual reforms. Similarly, the worsening of public finances during the late 1990s can be attributed to the cumulative effects of tax losses, the negative growth effects of cuts in capital expenditure that were made to offset the tax losses, and a pullback in private investment (hence, growth and taxes), a situation which is now turning around. Insufficient capital expenditures have contributed to the infrastructure gap, which is seen as a constraint especially for rapid growth in manufacturing. The authors discuss ongoing reforms in revenue mobilization and fiscal adjustment at the state level, which if successfully implemented, will result in a better alignment of public finances with growth by generating further fiscal space for infrastructure and other development spending.
    Keywords: Economic Theory & Research,Banks & Banking Reform,Investment and Investment Climate,Public Sector Economics & Finance,External Debt
    Date: 2007–06–01
  25. By: Raleigh, Clionadh; Hegre, Havard
    Abstract: Why do larger countries have more armed conflict? This paper surveys three sets of hypotheses forwarded in the conflict literature regarding the relationship between the size and location of population groups: Hypotheses based on pure population mass, on distances, on population concentrations, and some residual state-level characteristics. The hypotheses are tested on a new dataset-ACLED (Armed Conflict Location and Events Dataset)-which disaggregates internal conflicts into individual events. The analysis covers 14 countries in Central Africa. The conflict event data are juxtaposed with geographically disaggregated data on populations, distance to capitals, borders, and road networks. The paper develops a statistical method to analyze this type of data. The analysis confirms several of the hypotheses.
    Keywords: Population Policies,Social Conflict and Violence,Demographics,Country Population Profiles,Health Indicators
    Date: 2007–06–01
  26. By: Essama-Nssah, B.
    Abstract: The difficulties faced by many developing cou ntries in raising revenue from direct taxes have forced them to rely heavily on indirect taxes to finance development interventions. The purpose of this paper is to show how to identify socially desirable options for commodity taxation in the context of a poverty reduction strategy. Within the logic of social evaluation the author assesses tax options on the basis of value judgments underlying members of the additively separable class of poverty measures. The criterion hinges on both the pattern of consumption of each commodity and the price elasticity of the poverty measure used. An application of this methodology to data for Guinea shows that many components of food expenditure (particularly cereals, grains, and roots) would be good candidates for exemption from value-added tax. Even though expenditure on health and education is distributed in favor of the non-poor, their importance for human capital development argues for a program of targeted subsidies in a broader context of cost recovery.
    Keywords: Rural Poverty Reduction,Population Policies,Economic Theory & Research,Pro-Poor Growth and Inequality
    Date: 2007–06–01
  27. By: Lop ez, J. Humberto; Fajnzylber, Pablo; Acosta, Pablo
    Abstract: This paper explores the impact of remittances on poverty, education, and health in 11 Latin American countries using nationally representative household surveys and making an explicit attempt to account for one of the inherent costs associated with migration-the potential income that the migrant may have made at home. The main findings of the study are the following: (1) regardless of the counterfactual used remittances appear to lower poverty levels in most recipient countries; (2) yet despite this general tendency, the estimated impacts tend to be modest; and (3) there is significant country heterogeneity in the poverty reduction impact of remittances ' flows. Among the aspects that have been identified in the paper that may lead to varying outcomes across countries are the percentage of households reporting remittances income, the share of remittances of recipient households belonging to the lowest quintiles of the income distribution, and the relative importance of remittances flows with respect to GDP. While remittances tend to have positive effects on education and health, this impact is often restricted to specific groups of the population.
    Keywords: Population Policies,Remittances,Poverty Monitoring & Analysis,Pro-Poor Growth and Inequality,Small Area Estimation Poverty Mapping
    Date: 2007–06–01
  28. By: Tomas Kögel (Dept of Economics univ. of Loughborough)
    Abstract: The present paper shows empirically that the youth dependency ratio (the population below working age divided by the population of working age) reduces economic growth even after controlling for institutions. The institutional variable, the paper controls for, is the measure for institutions that is recently preferred in prominent work by Acemoglu and co-authors. Institutions turn out to have a significant and positive effect on economic growth. The significance of the youth dependency ratio and of institutions appears to be robust to controlling for various variables, including malaria prevalence. Hence, the paper finds evidence that demography, as well as institutions, both matter for economic growth.
    Keywords: Economic Growth; Fertility; Age structure effects.
    JEL: J11 O40 O47
    Date: 2007–05
  29. By: Annabel Vanroose (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and Section for Economic, Monetary and Financial Policy, Vrije Universiteit Brussel.)
    Abstract: Microfinance is increasingly seen as a major development tool. Its promise to help the poor by providing financial services is seen as the major reason for its support. Nevertheless, its effectiveness on actual poverty reduction is not yet clear and therefore it generates some unresolved ethical questions. These become even more prominent in the process of commercialization. The impact on poverty is usually measured in financial terms. In this paper, poverty is defined in a broader sense to include deficiency in financial as well as human and social capital. The article shows that, in this broad sense, microfinance may have negative as well as positive effects on poverty.
    Keywords: Ethics, microfinance, commercialization, poverty.
    JEL: A13 I32 D63
    Date: 2007–06
  30. By: Trygve Ottersen; Deogratius Mbilinyi; Ottar Mæstad; Ole Frithjof Norheim
    Abstract: Maximising health as the guiding principle for resource allocation in health has been challenged by concerns about the distribution of health outcomes. There are few empirical studies which consider these potentially divergent objectives in settings of extreme resource scarcity. The aim of this study is to fill some of this knowledge gap by exploring distributional preferences among health planners in Tanzania. Methodology: A deliberative group method was employed. Participants were health planners at district and regional level, selected by strategic sampling. The health planners alternated between group discussion and individual tasks. Respondents ranked health programmes with different target groups, and selected and ranked the reasons they thought should be given most importance in priority setting. Findings: A majority consistently assigned higher rankings to programmes where the initial life expectancy of the target group was lower. A high proportion of respondents considered "affect those with least life expectancy" to be the most important reason in priority setting. Conclusion: Distribution of health outcomes, in terms of life-years, matters. Specifically, the lower the initial life expectancy of the target group, the more important the programme is considered. Such preferences are compatible, within the sphere of health, with what ethicists call "prioritarianism".
    Keywords: Tanzania Priority setting Equity Stated preferences Group deliberation
    Date: 2006
  31. By: Fulgence Joseph Mishili; Joan Fulton; Mustafa Jamal; J. Lowenberg-DeBoer (Department of Agricultural Economics, College of Agriculture, Purdue University, USA); Musa Shehu (Department of Agricultural Economics and Extension, Bayero University, Nigeria); Saket Kushwaha (Agricultural Economics and Extension Programme, Abubakar Tafawa Balewa University, Nigeria); Kofi Marfo (Crops Research Institute, Kumasi, Ghana); Alpha Chergna (Institute for Rural Economics, Mali)
    Abstract: The production and trade of cowpea (Vigna Uniculata), called “blackeyed peas” in the US, are a growing business for farmers and merchants serving the rapidly expanding urban areas of West and Central Africa. Cowpea fits the needs of the urban poor. It is an inexpensive source of protein that does not require refrigeration. A better understanding of consumer preferences for cowpea is essential to market development. The main objective of the study was to determine the cowpea grain quality characteristics that command a price premium or provoke a discount in Ghanaian, Malian and Nigerian markets. Specifically, the study looked at the impact of the grain size, texture, color, eye color, and bruchid-damaged grains on cowpea market prices. The data for the study were collected from six markets in Ghana; four markets were in the capital city of Accra and two markets in Kumasi. In Mali, two markets were surveyed, Marché de Sabalibougou and Marché Medine. In Nigeria three markets were surveyed, Iddo in Lagos; Monday, in Maiduguri; and Dawanau in Kano. Hedonic pricing methods provide a statistical estimate of premiums and discounts. The results of the study indicated that cowpea consumers in Ghana, Mali and Nigeria are willing to pay a premium for large cowpea grains. Cowpea consumers discount grains with storage damage from the very first bruchid hole. The impact of price on other cowpea quality characteristics such as skin color and texture, and eye color varies locally. Implications for development of the cowpea value chain include: 1) breeders and cowpea production researchers should identify cost-effective ways to increase cowpea grain size because larger grain size is almost universally preferred, and 2) entomologists and storage experts should develop and transfer improved storage technologies to reduce damage discounts, and 3) serving local markets requires a portfolio of grain skin color, eye color and skin texture combinations.
    Keywords: Cowpeas market chains, consumer preference, hedonic price analysis
    JEL: D12 Q13
    Date: 2007
  32. By: Yuki, Kazuhiro
    Abstract: There are two phenomena widely observed when an economy departs from an underdeveloped state and starts rapid economic growth. One is the shift of production, employment, and consumption from the traditional sector to the modern sector, and the other is a large increase in educational levels of its population. The question is why some economies have succeeded in such structural change, but others do not. In order to examine the question, an OLG model that explicitly takes into account the sectoral shift and human capital accumulation as sources of development is constructed. It is shown that, for a successful structural change, an economy must start with a wealth distribution that gives rise to an adequate size of 'middle class'. Once the economy initiates the 'take-off', the sectoral shift and human capital growth continue until it reaches the steady state with high income and equal distribution. However, when the productivity of the traditional sector is low, irrespective of the initial distribution and the productivity of the modern sector, it fails in the sectoral shift and ends up in one of steady states with low income and high inequality. Thus, sufficient productivity of the traditional sector is a prerequisite for development.
    Keywords: Human capital; Sectoral shift; Structural change; Wealth distribution
    JEL: O11 O15
    Date: 2007–05–30
  33. By: Roy Chowdhury, Prabal
    Abstract: We consider group-lending with joint liability where the provision of loans is conditional on prior savings. In a dynamic model with moral hazard and endogenous group-formation, we examine the effect of such schemes on the allocation of loans between strongly and weakly empowered borrowers. We find that he savings requirement may help to screen out weak borrowers. Further, as long as the borrowers are not too similar, it increases the incentive for ``positive assortative matching (PAM).'' For intermediate interest rates, group-lending leads to ``PAM'' with a screening out of weak borrowers. It is thus feasible, whereas individual lending, which does not allow for such screening, is not. Interestingly, for relatively high interest rates, individual lending may dominate group-lending.
    Keywords: Assortative matching; empowered borrowers; joint liability lending; savings.
    JEL: O12 O20 O15 O17 G21
    Date: 2007–06
  34. By: Gomes, Orlando
    Abstract: The traditional assumption concerning endogenous labor supply in models of economic growth is that utility increases with leisure, independently of the specific time allocation of the representative agent observed at a given moment. In this note, we explore the consequences, over dynamic stability, of assuming that the agent dislikes having free time in excess, i.e., of considering that the marginal utility of leisure is not necessarily positive for every value of the leisure share (in particular, for high values of this share). By including this assumption in a typical AK endogenous growth model, we find that the system will rest, independently of parameter values, on a bifurcation line.
    Keywords: Labor-leisure choice; Leisure utility; Endogenous growth; Dynamic analysis.
    JEL: C61 O41 J22
    Date: 2007–06
  35. By: Reza Daniels (School of Economics, University of Cape Town)
    Abstract: Abstract: This paper conducts a review of the literature on skills shortages in South Africa. It is demonstrated that different Government departments have different views concerning the definition of skills shortages. This is largely due to the omission in any official government literature of tying the concept of “skills shortages” to productivity. There is also a complex and frequently overlapping institutional architecture that undermines the effective administration of skills development. An important example of this is that the link between providing skills training and accrediting individuals with a qualification that acknowledges this training is very poorly administered, highlighting poor coordination between the Department of Labour and Department of Education. Among Sectoral Education and Training Authorities (SETAs), there is also under-performance on their mandate to provide skills training for the unemployed – an activity that is flagged in this review simply because of the strong public good nature to this activity and the fact that only SETAs are institutionally empowered to effect this change. A variety of policy recommendations are made with respect to both closed- and open-economy solutions to skills shortages. A key point is that immigration legislation must be relaxed in order to help solve the pervasive skills constraints in South Africa.
    Keywords: South Africa: skills, training, education, SETAs
    JEL: A1
    Date: 2007–05
  36. By: Nadeem Ul Haque (Pakistan Institute of Development Economics, Islamabad.); M. Ali Kemal (Pakistan Institute of Development Economics, Islamabad.)
    Abstract: Throughout Pakistan’s history, policy has sought to promote exports through government support and incentives. The government machinery is geared to export promotion especially through direct and indirect subsidies. Surprisingly, these policies have been continued without serious examination. This paper makes a first attempt to evaluate these policies by estimating the impact of two such schemes—export financing and rebate/refund schemes—on export performance. Our analysis shows that, over the long run, the export financing scheme had a negative effect on exports while the rebate/refund scheme affected exports insignificantly. Subsidy schemes clearly do not seem to work, yet they have been retained for many years.
    Keywords: Rebate, Duty Drawback, Export Financing, Exports, Trade, Exchange Rate, Co-integration, Vector Error Correction, Pakistan
    JEL: C32 F13 F14 F31
    Date: 2007
  37. By: Martin Srholec (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: Specialization in high-tech products is frequently used to capture technology intensity of exports. The literature suggests that developing countries are increasingly becoming exporters of high-tech products, and some may even be among the most deeply specialized countries in the field of high-tech exports. The paper scrutinizes the relevance of the taxonomies that classify exports by technological intensity in this context. It is shown that specialization in high-tech exports typically does not appear in tandem with indigenous technological capabilities in developing countries. The analysis of intra-product imports suggests that the bulk of high-tech exports can actually be attributed to the effect of increasingly international fragmentation of production systems in electronics on trade statistics. It is confirmed in an econometric framework that while domestic technological capabilities have some influence on export performance in electronics, it is the propensity to import electronics components that accounts for by far the largest proportion of cross-country differences in specialization in electronics exports. The paper concludes with some implications for policy and future research.
    JEL: F10 O10 O30
    Date: 2005–12

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