nep-dev New Economics Papers
on Development
Issue of 2007‒07‒13
ten papers chosen by
Jeong-Joon Lee
Towson University

  1. Parochial Politics: Ethnic Preferences and Politician Corruption By Banerjee, Abhijit; Pande, Rohini
  2. The Impact of Population Growth on Economic Growth and Poverty Reduction in Uganda By Stephan Klasen; David Lawson
  3. Is the World Flat? Or Do Countries Still Matter? By Alberto Chong; Mark Gradstein
  4. Policy Volatility and Growth By Alberto Chong; Mark Gradstein
  5. UNSAFE SEX, AIDS, and DEVELOPMENT By Bhattacharya, Joydeep; Bunzel, Helle; Qiao, Xue
  6. Democracy and the feedback mechanism in Botswana By Sophia du Plessis
  7. Rethinking the Informal Economy: Linkages with the Formal Economy and the Formal Regulatory Environment By Martha Alter Chen
  8. Performance and corporate governance in microfinance institutions By Mersland, Roy; Strøm, Reidar Øystein
  9. Income, gender and consumption: A study of Malawian households By Davies, Simon
  10. Building a Better Rat Trap: Technological Innovation, Human Capital and the Irula By Siri Terjesen

  1. By: Banerjee, Abhijit; Pande, Rohini
    Abstract: This paper examines how increased voter ethnicization, defined as a greater preference for the party representing one's ethnic group, affects politician quality. If politics is characterized by incomplete policy commitment, then ethnicization reduces average winner quality for the pro-majority party with the opposite true for the minority party. The effect increases with greater numerical dominance of the majority (and so social homogeneity). Empirical evidence from a survey on politician corruption that we conducted in North India is remarkably consistent with our theoretical predictions.
    Keywords: Corruption; Ethnic Voting; India
    JEL: O12 P16
    Date: 2007–07
  2. By: Stephan Klasen (University of Goettingen); David Lawson (University of Manchester)
    Abstract: The paper examines the link between population and per capita economic growth, and poverty, using the interesting case study of Uganda. Although Uganda has recently experienced excellent economic growth and poverty reduction, it currently has one of the highest population growth rates in the world which, due to the inherent demographic momentum, will persist for some time to come. By combining both a macro and microeconometric approach, using panel data, we are able to consider the impact of population growth on per capita economic growth and poverty. We find both theoretical considerations and strong empirical evidence suggest that the currently high population growth puts a considerable break on per capita growth prospects in Uganda. Moreover, it contributes significantly to low achievement in poverty reduction and is associated with households being persistently poor and moving into poverty. This is therefore likely to make substantial improvements in poverty reduction, and per capita growth, very difficult.
    Keywords: Population, poverty, Uganda, household size
    JEL: O15 I32 J13
    Date: 2007–05–25
  3. By: Alberto Chong (Inter-American Development Bank); Mark Gradstein (Ben Gurion University/CEPR/CESifo)
    Abstract: This paper revisits the effects of a country’s institutional framework on individual firms’ behavior, in particular focusing on their propensity to comply with legal rules. The theoretical model presented here suggests that these effects may be of paramount significance—contrary to the recently popularized paradigm arguing that differences across countries have ceased to matter much. This paper’s empirical strategy consists of explaining the variation in measures of noncompliance with legal rules and employs a rich dataset based on thousands of firms from dozens of countries. We find that most of the variation emanates from country-wide differences in institutional quality, although some firm characteristics play a role as well. Our conclusion is that countries still matter in providing institutional infrastructure, which determines to a large extent the context within which firms operate.
    Keywords: Firms; Institutions; Law compliance; Country differences; Globalization
    JEL: D21 K42 O17 O57
    Date: 2006–11
  4. By: Alberto Chong (Inter-American Development Bank); Mark Gradstein (Ben Gurion University/CEPR/CESifo/IZA)
    Abstract: A growing body of recent macroeconomic evidence suggests that volatility is detrimental to economic growth. The channels through which volatility affects growth, however, are less clear; substantive evidence based on disaggregate data is almost non-existent. This paper offers a framework in which policy volatility has an adverse effect on firms' entry into productive industries, thereby affecting economic growth. Empirical support for this relationship is based on a detailed dataset of thousands of firms from some 80 countries. Additional evidence is provided on the channels through which volatility affects firm growth, showing that institutional obstacles magnify the effect.
    Keywords: International Firm Growth; Policy Volatility; Institutions; Finance
    JEL: E60 H11 O11
    Date: 2006–08
  5. By: Bhattacharya, Joydeep; Bunzel, Helle; Qiao, Xue
    Abstract: Much of Africa has been ravaged by the AIDS epidemic. There, heterosexual contact is the primary mode of transmission for the HIV virus. Even when access to condoms is good and their price low, a large fraction of young Africans continue to engage in unprotected sex. In this paper, we propose a simple two period rational model of sexual behavior that has the potential to explain why a large proportion of sexual activity in poor countries maybe unprotected. In the model economy, even when agents are perfectly cognizant of the risk involved in unsafe sexual activity, and fully internalize the effects of their own sexual behavior on their chance of catching the virus, they may rationally choose to engage in such risky behavior. Our results indicate that safe sexual practice is essentially a "normal good" and that development may be key to reducing HIV infectivity.
    Keywords: AIDS, rational choice, sexual behavior, safe sex
    JEL: E0 I1 O1
    Date: 2007–07–09
  6. By: Sophia du Plessis (Department of Economics, University of Stellenbosch)
    Abstract: No country knows what the right policy choices are because we live in a world of uncertainty. One way to improve policy choices is to ensure a good feedback mechanism. With feedback, current policy choices might be altered to ensure a better fit with prevailing circumstances. Botswana seems to be an interesting case study, where the deportation of a well-known academic placed a lid on its history of openness and public debate. This paper explores why a government respected for good management would choose to display such signs of autocracy, and how it is possible within the prevailing government institutions.
    Keywords: Poverty, Botswana, Botswana government, Democracy, Feedback mechanism, Institutions
    JEL: N17 N47 O38
    Date: 2007
  7. By: Martha Alter Chen
    Abstract: This paper explores the relationship of the informal economy to the formal economy and the formal regulatory environment. It begins with a discussion of the concept of the informal economy and its size, composition, and segmentation. It then discusses the linkages between the informal economy and the formal economy and the formal regulatory environment. The conclusion suggests why and how more equitable linkages between the informal economy and the formal economy should be promoted through an appropriate inclusive policy and regulatory environment.
    Keywords: informal sector, informal economy, informal enterprises, informal workers, formal economy, formal regulatory environment, linkages, formalization
    JEL: J01 J08 K23 K31 L22 L25 L26 O17
    Date: 2007–07
  8. By: Mersland, Roy; Strøm, Reidar Øystein
    Abstract: We trace the relationship between firm performance and corporate governance in microfinance institutions (MFI) utilising a self constructed global data set on MFIs, collected from third-party rating agencies. We study the effect of board characteristics, ownership type, competition and regulation on the MFI's outreach to poor clients and its financial performance. The results show that split roles of CEO and chairman, a female CEO, and competition are important explanations. Larger board size decreases the average loan size while individual guaranteed loan increases it. No difference between nonprofit organisations and shareholder firms in financial performance and outreach is found.
    Keywords: Microfinance organizations; governance; performance
    JEL: G32 G21 G30 O16 J23
    Date: 2007–06
  9. By: Davies, Simon
    Abstract: This paper uses 1998 household level data from urban Malawi to look at the impact on consumption patterns of the share of total household income accruing to different individuals within the household. Specifically, male and female income shares and other factors which may influence intra-household bargaining such as education are analysed. The study finds that for some categories of good such as personal and household hygiene and clothing, unitary household models are unsuitable as intra-household relationships and differing preferences of individuals play a key role in consumption choices. Overall the results indicate that females favour household hygiene, vehicle repair and girls’ clothing while males favour male clothing. Consumption choices are influenced by both the income and education of the main male and female members, and crucially, the impact of income shares on household consumption is non-linear.
    Keywords: Household Behaviour; Family Economics; Consumer Economics; Personal Income and Wealth Distribution; Economic Development; Africa; Malawi
    JEL: D19 D10 D33 D12
    Date: 2006–11–06
  10. By: Siri Terjesen (Brisbane Graduate School of Business, Australia; Max Planck Institute of Economics, Germany)
    Abstract: This case follows Sethu Sethunarayanan, Director of the non-profit Center for the Development of Disadvantaged People (CDDP), which is dedicated to the improvement of the Irula tribe in rural villages of southeast India. The Irulas specialize in catching rats, an activity which provides the bulk of their income and food. Following a routine visit to a local village, Sethu recognized an opportunity for a "better rat trap" to aid the Irula rat catchers. With feedback from rat catchers, Sethu developed an innovative new trap. His innovation won the prestigious Global Development Marketplace award from the World Bank which provided the funding necessary to commercialize the new technology. The venture’s implementation involved site visits to identify beneficiaries, health checks and treatment, preparatory workshops, factory establishment, factory training, production, women's micro-credit collectives, distribution and project evaluation. The case focuses on the relationship between human capital and technological entrepreneurship, considering the knowledge and skills required to commercialize technology for the rural poor and the positive impact on this greatly disadvantaged population.
    Keywords: Human Capital, India, Innovation, Irula, Social Entrepreneurship, Technological Entrepreneurship, World Bank
    Date: 2007–07–05

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