nep-dev New Economics Papers
on Development
Issue of 2007‒06‒30
38 papers chosen by
Jeong-Joon Lee
Towson University

  1. Political Regimes and Economic Growth in Latin America By Facundo Albornoz; Jayasri Dutta
  2. Consensual and Conflictual Democratization, Rule of Law, and Development By Cervellati, Matteo; Fortunato, Piergiuseppe; Sunde, Uwe
  3. The Determinants of Rural Child Labor: An Application to India By Congdon Fors, Heather
  4. Island Status, Country Size and Institutional Quality in Former Colonies By Congdon Fors, Heather
  5. FDI, Market Structure and R&D Investments in China By Lundin, Nannan; Sjöholm, Fredrik; He, Ping; Qian , Jinchang
  6. Decentralized Provision of Primary Healthcare in Rural Bangladesh – a Study of Government Facilities By Ahmad, Alia; Bose, Manik; Persson, Therése Hindman
  7. Specialization in Higher Education and Economic Growth By von Greiff, Camilo
  8. Does reform work? An econometric examination of the reform-growth puzzle By Babetskii, Ian; Campos, Nauro F.
  9. Impact Evaluation for Land Property Rights Reforms By Jonathan Conning; Partha Deb
  10. Does Trade and Technology Transmission Facilitate Inequality Convergence? An Inquiry into the Role of Technology in Reducing the Poverty of Nations By Gouranga Gopal Das
  11. Why Is Poverty So High Among Afro-Brazilians? A Decomposition Analysis of the Racial Poverty Gap By Carlos Gradín
  12. Population Policies, Fertility, Women’s Human Capital, and Child Quality By T. Paul Schultz
  13. Household Access to Microcredit and Child Work in Rural Malawi By Sudipta Sarangi; Gautam Hararika
  14. Should market liberalization precede democracy? Causal relations between political preferences and development By Pauline Grosjean; Claudia Senik
  15. The Colonial Origins of Civil War By Simeon Djankov; Marta Reynal-Querol
  16. Nigeria ' s growth record : Dutch disease or debt overhang ? By van Wijnbergen, Sweder; Pang, Gaobo; Budina, Nina
  17. Consumption risk, technology adoption, and poverty traps : evidence from Ethiopia By Christiaensen, Luc; Dercon, Stefan
  18. The cost of being landlocked : logistics costs and supply chain reliability By Marteau, Jean-Francois; Raballand, Gael; Arvis, Jean-Francois
  19. Are all labor regulations equal ? Assessing the effects of job security, labor dispute, and contract labor laws in India By Pages, Carmen; Ahsan, Ahmad
  20. Civil war risk in democratic and non-democratic neighborhoods By Raleigh, Clionadh
  21. HIV/AIDS and social capital in a cross-section of countries By David, Antonio C.
  22. Financing of the private sector in Mexico, 2000-05 : evolution, composition, and determinants By Munoz, Emanuel Salinas; Stephanou, Constantinos
  23. The Economic Community of West African States : fiscal revenue implications of the prospective economic partnership agreement with the European Union By Nielsen, Lynge; Zouhon-Bi, Simplice G.
  24. Financial intermediation in the pre-consolidated banking sector in Nigeria By Hesse, Heiko
  25. Power to the people : evidence from a randomized field experiment of a community-based monitoring project in Uganda By Svensson, Jakob; Bjorkman, Martina
  26. Shadow sovereign ratings for unrated developing countries By Mohapatra, Sanket; De, Prabal; Ratha, Dilip
  27. African Migration to Europe: Obscured Responsibilities and Common Misconceptions By Dirk Kohnert
  28. The Social Construction of Markets in a Transitional Economy: The Example of the Sugar Industry in China By Louis Augustin-Jean
  29. Developing Countries, Donor Leverage, and Access to Bird Flu Vaccines By CHAN Chee Khoon; Gilles de Wildt
  30. Modernizing the informal sector By Victor E. Tokman
  31. The conflict-growth nexus and the poverty of nations By Syed Mansoob Murshed
  32. The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania By Msuya, Elibariki
  33. Micro-finance in the India: the changing face of micro-credit Schemes By Wanchoo, Rajat
  34. Cultures of Innovation of the African Poor: Common Roots, Shared Traits, Joint Prospects? On the Articulation of Multiple Modernities in African Societies and Black Diasporas in Latin America By Kohnert, Dirk
  35. Corruption, uncertainty and growth By Djumashev, R
  36. A regional multiplier approach to estimating the impact of cash transfers: The case of cash aid in rural Malawi By Davies, Simon; Davey, James
  37. Have Pro-Poor Health Policies Improved the Targeting of Spending and the Effective Delivery of Health Care in South Africa? By Ronelle Burger; Christelle Grobler
  38. Sticking to the Facts: Official and Unofficial Stories about Poverty and Unemployment in South Africa By Charles Meth

  1. By: Facundo Albornoz; Jayasri Dutta
    Abstract: Living in a democratic society has been internationally recognized as a basic human right. While most of the literature tries to identify the effect of democracy on economic prosperity, little work has been done to understand the determinants of economic growth under democracy. This paper examines whether the determinants of economic growth in Latin America are sensitive to political institutions. We find two stark differences between democratic and autocratic growth: (1) democratic government consumption is significantly positive for economic growth. The opposite is true for autocratic government consumption. (2) The impact of human capital is only significant under democracies.
    Keywords: Economic Growth, Latin America, Democracy, Autocracy, Government Consumption, human capital
    JEL: H50 P16 N46
    Date: 2007–06
  2. By: Cervellati, Matteo; Fortunato, Piergiuseppe; Sunde, Uwe
    Abstract: This paper investigates the endogenous emergence of democracy and rule of law in an economy where heterogeneous individuals can get involved in predation activities. Decisions about public policies concern the extent of fiscal redistribution and property rights, whose costs depend on the extent of predation in the population. We characterize the dynamic evolution of the economy in which both the political regimes and public policies are endogenously determined. The theory delivers several novel results. Multiple politico-economic equilibria involving different public policies can be sustained conditional on beliefs about property rights enforcement. Democratization is endogenous, but the features of democracies are shown to be crucially related to the conditions under which democratization initially takes place. Democratic transitions supported by a large consensus serve as coordination device and lead to better protection of property and more stable political systems than democratic transitions imposed under conflictual environments. Conflictual transitions lead to failed democracies with potentially worse property rights protection than oligarchies. The novel predictions are in line with existing evidence and with results from newly collected data on constitutional principles.
    Keywords: commitment; conflict; consensual democracy; constitutional principles; democratization; inequality; oligarchy
    JEL: H10 N10 O10
    Date: 2007–06
  3. By: Congdon Fors, Heather (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: There are several factors that may contribute to the decision to send a child to work, such as poverty, market imperfections and parental preferences. The aim of this paper is to determine empirically the relative importance of these diverse factors on the incidence of child labor in rural India. In order to examine several potentially influential factors separately, we outline a theoretical model of child labor in a peasant household based on the model presented in Bhalotra and Heady (2003) with modifications to allow for the child to participate in different types of labor. We then use the theoretical model to specify and estimate an empirical model of rural child labor participation. Our results indicate that parental education and household income appear to play the most important role in determining whether a child works, attends school or is idle. Market imperfections, on the other hand, only play an important role in determining whether the child participates in family labor. <p>
    Keywords: child labor; school attendance; market imperfections; India
    JEL: I20 J13 J21
    Date: 2007–06–19
  4. By: Congdon Fors, Heather (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The purpose of this paper is to explore the effects of island status and country size on institutional quality, and to determine if these institutional effects can explain the relatively strong economic performance of islands and small countries. One of the main findings of this paper is that the relationship between island status and institutional quality is significantly positive, and that these results are robust to the inclusion of a number of control variables. Further, we find that country size is negatively related to institutional quality, which is in keeping with previous results. Finally, using an instrumental variable method we demonstrate that when Rule of Law is included in regressions on levels of per capita GDP, the positive effects of small country size and island status disappear. These results provide further support for our hypothesis that institutions account for these countries’ relatively better economic performance. <p>
    Keywords: islands; political institutions; economic institutions; rule of law; development
    JEL: N40 O10
    Date: 2007–06–19
  5. By: Lundin, Nannan (Research Institute of Industrial Economics (IFN)); Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN)); He, Ping (National Bureau of Statistics of China); Qian , Jinchang (National Bureau of Statistics of China)
    Abstract: FDI can be an important channel for developing countries’ ability to get access to new technology. The impact of FDI on domestically-owned firms’ technology development is less examined but it is frequently argued that technology externalities or demonstration effects could have a positive impact. Another and so far little examined effect of FDI on technology development in domestically-owned firms is through the impact on competition. We examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ R&D. Our analysis is conducted on a large dataset including all Chinese large and medium sized firms over the period 1998-2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D.
    Keywords: China; FDI; Competition; R&D
    JEL: F23 L11 O31
    Date: 2007–06–21
  6. By: Ahmad, Alia (Department of Economics, Lund University); Bose, Manik (World Fish Center); Persson, Therése Hindman (Econ Analys)
    Abstract: Bangladesh has made significant progress in health indicators in recent years in spite of her low level of income. This is mainly due to the commitment of the state supported by donors in providing preventive care with respect to child health and family planning. However, there are serious problems related to both access and quality of curative care that hurt the poor most. Infrastructures for service delivery exist at local level in rural areas but they function inefficiently. This paper deals with the systemic weaknesses of decentralized service provision of primary healthcare in Bangladesh and focuses on accountability links between different actors and functions of delegation, finance, performance, information and enforcement. The study is based on facility- and household-based data collected during 2005 in Khulna Division. The main findings of the study are: the health system in rural areas represents deconcentration rather than decentralization of central government functions where inter-sectoral discipline works poorly; local health providers are not accountable to local government, and poor citizens/clients are neither aware of their rights nor are capable of expressing their needs as effective channels do not exist.
    Keywords: decentralization; accountability; governance; primary healthcare
    JEL: I12 I18
    Date: 2007–06–18
  7. By: von Greiff, Camilo (Dept. of Economics, Stockholm University)
    Abstract: This paper presents a new market failure in the decision on educational type in higher education. Individuals choose types of education with different degrees of specialization. Labor market transformation makes some individuals opt for a non-specialized education type that broadens the future career possibilities in an uncertain labor market. However, the growth rate in the economy is assumed to positively depend on the amount of specialized workers that get a job within their specialized field. Imposing a tax and transfer scheme in favor of specialized education types may correct for the market failure and Pareto improve the economy if the transfer attracts a sufficiently large amount of new students to a specialized education type and if their effect on the growth rate is substantial.
    Keywords: Educational Choice; Growth
    JEL: H23 I22
    Date: 2007–06–27
  8. By: Babetskii, Ian (BOFIT); Campos, Nauro F. (BOFIT)
    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 generalised 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; transition; meta-analysis
    JEL: C49 O11 P21
    Date: 2007–06–26
  9. By: Jonathan Conning (Hunter College, Department of Economics); Partha Deb (Hunter College, Department of Economics)
    Abstract: A large number of land property rights reforms, including land formalization and titling projects, are taking place around the world today. The purpose of this paper is to describe some of the expected impacts of such interventions, the challenges and problems that arise in measuring and estimating these impacts, as well as survey designs and methods for purposeful impact evaluation to overcome or ameliorate these concerns. We present a practical approach to evaluation of programs that should be accessible to non-specialists interested in impact evaluation. Using a hypothetical example of a land titling program in an urban setting we illustrate with simple visual examples how the distribution of observable and unobservable characteristics of treatment and comparison group samples might change according to the nature of the program intervention and treatment selection rules ( e.g. how the project targets geographic areas or population groups, whether and how households are allowed to self-select, etc.). This visual approach focuses attention on the key importance of survey design and data collection strategies to avoid confounding effects, and eschews a good deal of the math usually required to present these issues. Most methods for impact evaluation analysis can be explained as strategies to anticipate and adjust to these sample selection issues and as efforts to maintain a balance between observable and unobservable characteristics in treatment and comparison groups.
    Keywords: Property rights, impact evaluation, land titling, land reform, average treatment effects, survey design.
    JEL: O1 O12 O17 C8 C21 P14
    Date: 2007
  10. By: Gouranga Gopal Das
    Abstract: Based on stylized evidence showing variation of the Gini coefficient of income inequality across skill cohorts and on the rapid rise in trade in technology-intensive goods, the ripple effects of technology transmission and income inequality are explored in a global Computable General Equilibrium (CGE) framework. An exogenous technology shock transmitted via trade from the United States induces productivity growth in developing regions. This spillover capture-aided by absorptive capability, better governance and institutions, technological symmetry and social acceptance-causes income to increase and income inequality to decline. The conjoined parameters retard growth's inequality-enhancing effect and thus facilitate long-run convergence of inequality between nations.
    Keywords: Fiscal policy , Risk management , Government expenditures , Bond markets , Emerging markets ,
    Date: 2007–01–31
  11. By: Carlos Gradín (Universidade de Vigo and IZA)
    Abstract: This study aimed to identify the major factors underlying the large discrepancy in poverty levels between two Brazilian racial groups: whites and Afro-Brazilians. We performed an Oaxaca-Blinder-type decomposition for nonlinear regressions in order to quantify the extent to which differences in observed geographic, sociodemographic, and labor characteristics (characteristics effect) account for this difference. The remaining unexplained part (coefficients effect) provides evidence on how these characteristics differentially impact on the risk of poverty in each group. A detailed decomposition of both effects allows the individual contribution of each characteristic to be determined. Our results show that the characteristics effect explains a large part of the discrepancy in poverty levels, with education and labor variables of household members explaining at least one half of the effect, and geographic and demographic variables accounting for the remainder. However, the unexplained part that remains significant has increased in importance in recent last years, and probably results from unequal access to high-quality education and the persistence of discrimination against colored workers in the labor market.
    Keywords: poverty, gap, race, skin color, decomposition, Oaxaca-Blinder, Brazil, PNAD, labor market, participation, education, household characteristics
    JEL: D31 D63 J15 J82 O15
    Date: 2007–05
  12. By: T. Paul Schultz (Yale University and IZA)
    Abstract: Population policies are defined here as voluntary programs which help people control their fertility and expect to improve their lives. There are few studies of the long-run effects of policy-induced changes in fertility on the welfare of women, such as policies that subsidize the diffusion and use of best practice birth control technologies. Evaluation of the consequences of such family planning programs almost never assess their long-run consequences, such as on labor supply, savings, or investment in the human capital of children, although they occasionally estimate the short-run association with the adoption of contraception or age-specific fertility. The dearth of long-run family planning experiments has led economists to consider instrumental variables as a substitute for policy interventions which not only determine variation in fertility but are arguably independent of the reproductive preferences of parents or unobserved constraints that might influence family life cycle behaviors. Using these instrumental variables to estimate the effect of this exogenous variation in fertility on family outcomes, economists discover these -cross effects- of fertility on family welfare outcomes tend to be substantially smaller in absolute magnitude than the OLS estimates of partial correlations referred to in the literature as evidence of the beneficial social externalities associated with the policies that reduce fertility. The paper summarizes critically the empirical literature on fertility and development and proposes an agenda for research on the topic.
    Keywords: consequences of fertility decline, child quality, evaluation of population policies
    JEL: J13 J24 O15
    Date: 2007–05
  13. By: Sudipta Sarangi; Gautam Hararika
    Abstract: This paper examines the effect of household access to microcredit upon work by seven to eleven year old children in rural Malawi. Given that microcredit organizations foster household enterprises wherein much child labor is engaged, this paper aims to discover whether access to microcredit might increase work by children. It is found that, in the peak harvest season, household access to microcredit, measured in a novel manner as self-assessed credit limits at microcredit organizations, raises the probability of child work in households with sample means of owned land and number of retail sales enterprises. It appears this is due to children having to take up more domestic chores as adults are busied in household enterprises following improved access to microcredit.
  14. By: Pauline Grosjean; Claudia Senik
    Abstract: This paper is dedicated to the relation between market development and democracy. We distinguish contexts and preferences and ask whether it is true that the demand for democracy only emerges after a certain degree of market development is reached, and whether, conversely, democratization is likely to be an obstacle to the acceptation of market liberalization. Our study hinges on a new survey rich in attitudinal variables: the Life in Transition Survey (LITS) conducted in 2006 by the European Bank for Reconstruction and Development and the World Bank, in 28 post-Transition countries. Our identification strategy consists in relying on the specific situation of frontier-zones. We find that democracy enhances the support for market development whereas the reverse is not true. Hence, the relativist argument according to which the preference for democracy is an endogenous by-product of market development is not supported by our data.
    Date: 2007
  15. By: Simeon Djankov; Marta Reynal-Querol
    Abstract: The dominant hypothesis in the literature that studies conflict is that poverty is the main cause of civil wars. We instead analyze the effect of institutions on civil war, controlling for income per capita. In our set up, institutions are endogenous and colonial origins affect civil wars through their legacy on institutions. Our results indicate that institutions, proxied by the protection of property rights, rule of law and the efficiency of the legal system, are a fundamental cause of civil war. In particular, an improvement in institutions from the median value in the sample to the 75th percentile is associated with a 38 percentage points’ reduction in the incidence of civil wars. Moreover, once institutions are included as explaining civil wars, income does not have any effect on civil war, either directly or indirectly.
    Keywords: Institutions, Civil wars
    Date: 2007–05
  16. By: van Wijnbergen, Sweder; Pang, Gaobo; Budina, Nina
    Abstract: Nigeria ' s oil boom has not brought an end to pe rennial stagnation in the non-oil economy. Is this the unavoidable consequence of the resource boom or have misguided policies contributed? This paper indicates that the extreme volatility of expenditure rather than Dutch Disease effects are behind the disappointing non-oil growth record. Fiscal policies failed to smooth highly volatile oil income; on the contrary government expenditure was more volatile than oil income. The authors provide econometric evidence showing that volatility of expenditure was increased by debt overhang problems. Moreover, they also find evidence of voracity effects that exacerbated expenditure volatility prior to 1984.
    Keywords: Public Sector Expenditure Analysis & Management,Economic Theory & Research,Public Sector Economics & Finance,Markets and Market Access,Economic Stabilization
    Date: 2007–06–01
  17. By: Christiaensen, Luc; Dercon, Stefan
    Abstract: Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferenc es, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented-the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data for Ethiopia. Historical rainfall distributions are used to identify the counterfactual consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just ex-ante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertilizer. The lack of insurance causes inefficiency in production choices.
    Keywords: Economic Theory & Research,Financial Intermediation,Consumption,Insurance & Risk Mitigation,Inequality
    Date: 2007–06–01
  18. By: Marteau, Jean-Francois; Raballand, Gael; Arvis, Jean-Francois
    Abstract: A large proportion of the least developed countries are landlocked and their access to world markets depends on the availability of a trade corridor and transit systems. Based on empirical evidence from World Bank projects and assessments in Africa, Central Asia, and elsewhere, this paper proposes a microeconomic quantitative description of logistics costs. The paper theoretically and empirically highlights that landlocked economies are primarily affected not only by a high cost of freight services but also by the high degree of unpredictability in transportation time. The main sources of costs are not only physical constraints but widespread rent activities and severe flaws in the implementation of the transit systems, which prevent the emergence of reliable logistics services. The business and donor community should push toward implementation of comprehensive facilitation strategies, primarily at the national level, and the design of robust and resilient transport and transit regimes. A better understanding of the political economy of transit and a review of the implementation successes and failures in this area are needed.
    Keywords: Transport Economics Policy & Planning,Transport and Trade Logistics,Common Carriers Industry,Economic Theory & Research,Rural Roads & Transport
    Date: 2007–06–01
  19. By: Pages, Carmen; Ahsan, Ahmad
    Abstract: This paper studies the economic effects of legal amendments on different types of labor laws. It examines the effects of amendments to labor dispute laws and amendments to job security legislation. It also identifies the effects of legal amendments related to the most contentious regulation of all-Chapter Vb of the Industrial Disputes Act-which stipulates that firms with 100 or mor e employees cannot retrench workers without government authorization. The analysis finds that laws that increase job security or increase the cost of labor disputes substantially reduce registered sector employment and output but do not increase the labor share. Labor-intensive industries, such as textiles, are the hardest hit by laws that increase job security while capital-intensive industries are most affected by higher labor dispute resolution costs. The paper concludes that widespread and increasing use of contract labor may have brought some output and employment gains but did not make up for the adverse effects of job security and dispute resolution laws.
    Keywords: Labor Markets,Labor Standards,Labor Management and Relations,Public Sector Regulation,Legal Products
    Date: 2007–06–01
  20. By: Raleigh, Clionadh
    Abstract: This study questions the extent to which domestic conflict is influenced by national, regional, and international relationships. It is designed to answer specific questions relating to the effects of neighboring characteristics on a state ' s risk of conflict and instability: What is the interaction between neighboring conflict and political disorder? Do democratic neighborhoods have different conflict trajectories than non-democratic neighborhoods and if so, where and why? Given that most poor countries are located in poor and conflictual neighborhoods, to what extent is there a relationship between poverty and political disorder in different regime neighborhoods? Using spatial lag terms to specify neighboring regime characteristics and multilevel models to differentiate between explanatory levels, this study reiterates the importance of domestic and neighboring factors in promoting or diminishing the risk of instability and conflict. However, the pronounced negative effects of autocratic and anocratic neighborhoods are mitigated by a growing domestic GDP. This study also finds that democratic neighborhoods are more stable, regardless of income level. Research presented here is unique in its contribution on how regime type is a significant development indicator, which in turn is salient in determining the risks of civil war across states.
    Keywords: Peace & Peacekeeping,Population Policies,Services & Transfers to Poor,Social Conflict and Violence,Post Conflict Reintegration
    Date: 2007–06–01
  21. By: David, Antonio C.
    Abstract: This paper attempts to quantify the impact of the HIV/AIDS epidemic on social capital with cross-country data. It estimates reduced-form regressions of the main determinants of social capital controlling for HIV prevalence, institutional quality, social distance, and economic indicators using data from the World Values Survey. The results obtained indicate that HIV prevalence affects social capital negatively. The empirical estimates suggest that a one standard deviation increase in HIV prevalence will lead to a 1 percent decline in trust, controlling for other determinants of social capital. If one moves from a country with a relatively low level of HIV prevalence such as Estonia, to a country with a high level such as Zimbabwe, one would observe an approximate 8 percent decline in social capital. These results are robust in a number of dimensions and highlight the empirical importance of an additional mechanism through which HIV/AIDS hinders the development process.
    Keywords: Social Capital,Population Policies,Inequality,Economic Theory & Research,HIV AIDS
    Date: 2007–06–01
  22. By: Munoz, Emanuel Salinas; Stephanou, Constantinos
    Abstract: The objective of this paper is to describe the evolution, composition, and determinants of financing to the nonfinancial private sector in Mexico between 2000 and 2005. Supported by the macroeconomic environment and financial system reforms, total financing to the private sector (particularly consumer credit) increased relative to GDP, while accessibility and affordability generally improved. Equity issuance did not play an important role during the period under consideration. Although the supply of financing shifted toward domestic nonbank providers, commercial banks remain the primary source of funding. Significant progress was made in cleaning up bank loan portfolios and in strengthening financial system soundness and infrastructure. The prospects for continued private sector financing growth remain very positive, but financing is not spread out evenly across all market segments. The authors conclude with some policy implications to further facilitate deeper and broader financing of the private sector.
    Keywords: Banks & Banking Reform,Financial Intermediation,Economic Theory & Research,Public Sector Economics & Finance,Financial Crisis Management & Restructuring
    Date: 2007–06–01
  23. By: Nielsen, Lynge; Zouhon-Bi, Simplice G.
    Abstract: This paper applies a partial equilibrium model to analyze the fiscal revenue implications of the prospective economic partnership agreement between the Economic Community of West African States (ECOWAS) and the European Union. The authors find that, under standard import price and substitution elasticity assumptions, eliminating tariffs on all imports from the European Union would increase ECOWAS ' imports from the European Union by 10.5-11.5 percent for selected ECOWAS countries, namely Cape Verde, Ghana, Nigeria, and Senegal. This increase in imports would be accompanied by a 2.4-5.6 percent decrease in total government revenues, owing mainly to lower fiscal revenues. Tariff revenue losses should represent 1 percent of GDP in Nigeria, 1.7 percent in Ghana, 2 percent in Senegal, and 3.6 percent in Cape Verde. However, the revenue losses may be manageable because of several mitigating factors, in particular the likelihood of product exclusions, the length of the agreement ' s implementation period, and the scope for reform of exemption regimes. The large country-by-country differences in fiscal revenue loss suggest that domestic tax reforms and fiscal transfers within ECOWAS could be important complements to the agreement ' s implementation.
    Keywords: Free Trade,Economic Theory & Research,Trade Policy,International Trade and Trade Rules,Trade Law
    Date: 2007–06–01
  24. By: Hesse, Heiko
    Abstract: This paper uses unique bank-by-bank balance sheet and income statement information to investigate the intermediation efficiency in the Nigerian pre-consolidated banking sector during 2000-05. The author analyzes whether the Central Bank of Nigeria ' s policy of recent banking consolidation can be justified and rationalized by looking at the determinants of spreads. A spread decomposition and panel estimations show that the reform of the banking sector could be the first step to raise the intermediation efficiency of the Nigerian banking sector. The author finds that larger banks have enjoyed lower overhead costs, increased concentration in the banking sector has not been detrimental to the spreads, both increased holdings of liquidity and capital might have led to lower spreads in 2005, and a stable macroeconomic environment is conducive to a more efficient channeling of savings to productive investments.
    Keywords: Banks & Banking Reform,Economic Theory & Research,Financial Intermediation,Financial Crisis Management & Restructuring,Investment and Investment Climate
    Date: 2007–06–01
  25. By: Svensson, Jakob; Bjorkman, Martina
    Abstract: This paper analyzes the importance of strengthening the relationship of accountability between health service providers and citizens for improving access to and quality of health care. How this is to be achieved, and whether it works, however, remain open questions. The paper presents a randomized field experiment on increasing community-based monitoring. As communities began to more extensively monitor the provider, both the quality and quantity of health service provision improved. One year into the program, there are large increases in utilization, significant weight-for-age z-score gains of infants, and markedly lower deaths among children. The findings on staff behavior suggest that the improvements in quality and quantity of health service delivery resulted from an increased effort by the staff to serve the community. Overall, the results suggest that community monitoring can play an important role in improving service delivery when traditional top-down supervision is ineffective.
    Keywords: Health Monitoring & Evaluation,Hou sing & Human Habitats,Health Economics & Finance,Disease Control & Prevention,Health Systems Development & Reform
    Date: 2007–06–01
  26. By: Mohapatra, Sanket; De, Prabal; Ratha, Dilip
    Abstract: The authors attempt to predict sovereign ratings for developing countries that do not have risk ratings from agencies such as Fitch, Moody ' s, and Standard and Poor ' s. Ratings affect capital flows to developing countries through international bond, loan, and equity markets. Sovereign rating also acts as a ceiling for the foreign currency rating of sub-sovereign borrowers. As of the end of 2006, however, only 86 developing countries have been rated by the rating agencies. Of these, 15 countries have not been rated since 2004. Nearly 70 developing countries have never been rated. The results indicate that the unrated countries are not always at the bottom of the rating spectrum. Several unrated poor countries appear to have a " B " or higher rating, in a similar range as the emerging market economies with capital market access. Drawing on the literature, the analysis presents a stylized relationship between borrowi ng costs and the credit rating of sovereign bonds. The launch spread rises as the credit rating deteriorates, registering a sharp rise at the investment grade threshold. Based on these findings, a case can be made in favor of helping poor countries obtain credit ratings not only for sovereign borrowing, but for sub-sovereign entities ' access to international debt and equity capital. The rating model, along with the stylized relationship between spreads and ratings can be useful for securitization and other financial structures, and for leveraging official aid for improving borrowing terms in poor countries.
    Keywords: Economic Theory & Research,Country Strategy & Performance,Financial Intermediation,External Debt,Inequality
    Date: 2007–06–01
  27. By: Dirk Kohnert (GIGA Institute of African Affairs)
    Abstract: The number of migrants from conflict regions in Africa has been increasing dramatically. The European Union shares dual responsibility for the continuing migration pressure: First, because it fostered over decades corrupt and autocratic regimes with dire disregard to principles of ‘good governance’. The aftermath of these regimes is still felt today and constitutes one of the underlying factors for politically motivated migration. Second, the EU contributed to Africa’s economic misery due to its selfish external trade policy. Nevertheless, the prevailing perspective of the EU and of its member countries concerning African immigration remains to be focused on security, the foreclosure of its external borders and prevention. Current EU programs and concepts to fight African migration are questionable. Even development-oriented approaches are bound to fail, if not backed by sustainable immigration policies.
    Keywords: Migration; West Africa; Europe; remittances; brain-drain; foreign trade policy; security; circular migration.
    JEL: F22 F35 F42 F53 N17 N37 N44 O15 O2 O52 O55 R23
    Date: 2007–05
  28. By: Louis Augustin-Jean
    Abstract: The entry of China into the WTO, in 2001, has generated a lot of research related to the marketization of China’s economy. This debate has overlooked a more important one, which is to analyse the shape taken by the organization of China’s economy, in relation to the reforms introduced by this country since the end of the 1970s and its integration into the world economy. In other words, the changes that are currently occurring, provide a unique chance to understand the role and the interaction of different agents in the (re)construction of a market. For this purpose, a specific industry has been selected. The choice of the sugar industry allows us to understand its organization from the basic producer (the farmer) up to the final consumer (the food industry). It also allows us to take into account the changes that are currently underway in the international market of sugar (due to changes in the sugar regime of the European Union, an increasing production in Brazil, etc.), which exert considerable pressure on an industry that is undergoing complete restructuring in China. Taking into account these changes, the paper makes use of the commodity value chain approach as well as of the sociology of organization. Based on a fieldwork conducted from 2004 to 2006, it shows that, while China’s central government seems committed to further liberalize its economy, the diverging interests of agents involved in the industry (farmers, mills, local and provincial authorities…) have in effect reinforced the role of the various levels of government agencies – despite the partial privatisation. It also shows that all the measures taken to protect the most vulnerable agents have led to increased instabilities and uncertainties in a market which, nonetheless, has been continuously expanding for the last 25 years.
    Date: 2007
  29. By: CHAN Chee Khoon; Gilles de Wildt
    Abstract: In early 2007, the Indonesian government decided to withhold its bird flu virus samples from WHO’s collaborating centres pending a new global mechanism for virus sharing that had better terms for developing countries. The 60th World Health Assembly subsequently resolved to establish an international stockpile of avian flu vaccines, and mandated WHO to formulate mechanisms and guidelines for equitable access to these vaccines. Are there analogous opportunities for study volunteers or donors of biological materials in clinical trials or other research settings to exercise corresponding leverage to advance health equity?
    Keywords: avian flu vaccines, global health equity, international health security, essential medicines, public patents
    JEL: I18
    Date: 2007–06
  30. By: Victor E. Tokman
    Abstract: The multiplicity of policies proposed to support the informal sector reflects the lack of a common definition. Although they may produce positive effects, these are limited and fail to constitute a comprehensive strategic approach. The different interpretations in the absence of a common definition as well as the strategies emerging from them are reviewed. The identification of informality with illegality and labour precariousness, although conceptually related, is often misleading. Lastly, it explores a strategic option to regulate the informal sector, tracing the different approaches to formalizing informal activities, to facilitate their full integration into the modernization process.
    Keywords: informal sector, regulation and informality
    JEL: O17 J48 D39
    Date: 2007–06
  31. By: Syed Mansoob Murshed
    Abstract: Lack of growth prevents poverty reduction and poverty increases conflict risk. The causes of growth failure in the long-term have similarities to the causes of civil war, the most obvious being institutional failure. The greed explanation for conflict is mainly applied in cross-country econometric investigation. Its validity as a direct causal mechanism behind the risk of civil war onset has been brought into serious question. The relationship between conflict onset and natural resource revenues, must work through other mechanisms, such as a weakening social contract and withering state capacity. The grievance explanation for contemporary civil war comes to the fore in detailed case studies. Here, inter-group or horizontal inequality has a great deal of explanatory power. Economic reconstruction following war should be broad based and pro-poor, addressing horizontal inequalities that helped engender conflict initially.
    Keywords: conflict, growth, institutions
    JEL: C78 D72 D74 D83 D74 D83
    Date: 2007–06
  32. By: Msuya, Elibariki
    Abstract: In this paper, the impact of Foreign Direct Investment (FDI) on agricultural productivity and poverty reduction are examined. Factors that hinder FDI flow to agriculture in Tanzania are assessed. Specifically, the role of FDI in improving an agricultural firm’s efficiency in Tanzania and reforms required for more effective investment promotion in agriculture are examined. The study uses literature review to draw its conclusions and policy recommendations. It is observed that FDI has a positive impact on productivity especially to smallholder farmers who are linked in integrated producer schemes. The study recommends rethinking of the smallholder institutional setup for increasing productivity and FDI flow to the agricultural sector. An important implication of the results is that FDI to Tanzania and specifically to agriculture, has a much more far- reaching economic and social impact than in other sectors.
    Keywords: FDI; Smallholders; Integrated Producer Schemes; Agricultural Productivity; Poverty Reduction; Tanzania
    JEL: Q01 F21 Q13
    Date: 2007
  33. By: Wanchoo, Rajat
    Abstract: Micro-Finance is emerging as a powerful instrument for poverty alleviation in the new economy. In India, micro-Finance scene is dominated by Self Help Groups (SHGs) - Banks linkage Programme, aimed at providing a cost effective mechanism for providing financial services to the 'unreached poor'. In the Indian context terms like "small and marginal farmers", " rural artisans" and "economically weaker sections" have been used to broadly define micro-finance customers. Research across the globe has shown that, over time, microfinance clients increase their income and assets, increase the number of years of schooling their children receive, and improve the health and nutrition of their families A more refined model of micro-credit delivery has evolved lately, which emphasizes the combined delivery of financial services along with technical assistance, and agricultural business development services. When compared to the wider SHG bank linkage movement in India, private MFIs have had limited outreach. However, we have seen a recent trend of larger microfinance institutions transforming into Non-Bank Financial Institutions (NBFCs). This changing face of microfinance in India appears to be positive in terms of the ability of microfinance to attract more funds and therefore increase outreach. In overall terms an organizational structure will help them achieve more transparence and efficiency
    Keywords: Microfinance; Microcredit; India;
    JEL: D02
    Date: 2007–06–10
  34. By: Kohnert, Dirk
    Abstract: The globalized Western culture of innovation, as propagated by major aid institutions, does not necessarily lead to empowerment or improvement of the well-being of the stakeholders. On the contrary, it often blocks viable indigenous innovation cultures. In African societies and African Diasporas in Latin America, cultures of innovation largely accrue from the informal, not the formal sector. Crucial for their proper understanding is a threefold structural differentiation: between the formal and informal sector, within the informal sector, according to class, gender or religion, and between different transnational social spaces. Different innovation cultures may be complementary, mutually reinforcing, or conflicting, leading in extreme cases even to a 'clash of cultures' at the local level. The repercussions of competing, even antagonistic agencies of innovative strategic groups are demonstrated, analyzing the case of the African poor in Benin and the African Diasporas of Brazil and Haiti.
    Keywords: economic development; cultural change; innovations; social structure; African Diaspora; Benin; Brazil; Haiti
    JEL: O57 Z1 E26 Z13 Z12 O31
    Date: 2006–07
  35. By: Djumashev, R
    Abstract: Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.
    Keywords: Corruption; growth; public goods; tax evasion; uncertainty
    JEL: E20 O16 O41 D92 D72 E60 H26 G11 H41
    Date: 2007–06–26
  36. By: Davies, Simon; Davey, James
    Abstract: This paper analyses the impact on the local economy of an emergency cash transfer programme in rural Malawi. The results are of interest given the growing use of cash transfers as development aid as well as the increasing popularity of such transfers as a form of social protection across Sub-Saharan Africa. Using a form of social accounting matrix, we find that there are widespread benefits for regional economy as a whole (with multiplier estimates of 2.02 to 2.45) and for certain groups in particular. Small farmers and small businesses gain particular advantage as this is where poorer households’ purchases are focused; education and health also benefit. Such payments can also help to support the regional economy during the most “lean” periods of the year.
    Keywords: Rural Economic Development; Cash Transfers; Income Multiplier; Poverty; Malawi; Africa
    JEL: D19 O15 O22 O18
    Date: 2007–06
  37. By: Ronelle Burger; Christelle Grobler (Stellenbosch University)
    Abstract: Abstract: Since 1994 there have been a number of radical changes in the public health care system in South Africa. Budgets have been reallocated, decision making was decentralised, the clinic network was expanded and user fees for primary health care were abolished. The paper examines how these recent changes have affected the incidence of spending and the accessibility and quality of health care. The paper finds that between 1995 and 2003 there have been advances in the pro-poor spending incidence of both clinics and hospitals. The increased share of the health budget allocated to the more pro-poor clinic services has contributed further to the improvement in the targeting of overall health spending. Also, it appears that the elimination of user fees for clinics and the expansion of the clinic network have helped to make health services more affordable and geographically accessible to the poor and were associated with a notable rise in health service utilisation for individuals in the bottom two expenditure quintiles.
    Keywords: fiscal incidence, South Africa, health
    JEL: H51 I18
    Date: 2007–06
  38. By: Charles Meth (University if KwaZulu-Natal)
    Abstract: Abstract: The major cause of poverty is unemployment. This paper looks at aspects of the way government responds to claims that are made, chiefly by academics, about poverty and unemployment. Official statistics on poverty and unemployment enjoy little favour among senior politicians and civil servants. ‘Unofficial’ poverty and unemployment statistics, by contrast, are seized upon with enthusiasm if they contradict the gloomy picture created by numbers that suggest (with monotonous regularity) that improvements in the lives of the poor are not happening fast enough. The first part of the paper explores possible explanations of government’s extreme sensitivity to criticism. The second part of the paper looks at an old chestnut, the repeated claim by government that the severity of the unemployment problem has (in part?) to do with the ‘fact’ that the number of economically active people has grown faster than the number of working age people. The third part of the paper looks briefly at the van der Berg et al (2005) poverty reduction estimates for the period 2000-2004 (they have the headcount falling from 18.5 to 15.4 million), before reproducing my estimates for the period 2001-2004 (the headcount falls from about 19.5 to somewhere in the region of 18 million. Suggestions are offered for the proper academic conduct upon releasing contentious results into a highly-charged political debate.
    Keywords: poverty, unemployment, South Africa, statistics
    JEL: A1
    Date: 2007–06

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