nep-dev New Economics Papers
on Development
Issue of 2007‒08‒18
thirteen papers chosen by
Jeong-Joon Lee
Towson University

  1. Do donors care about declining trade revenues from liberalization? an analysis of aid allocation By Javed Younas; Subhayu Bandyopadhyay
  2. Migration, Risk and the Intra-Household Allocation of Labor in El Salvador By Timothy J. Halliday
  3. Globalization of R&D and China – Empirical Observations and Policy Implications By Lundin, Nannan; Schwaag Serger, Sylvia
  4. Educational achievement and socioeconomic background: causality and mechanisms in Senegal By DUMAS Christelle; LAMBERT Sylvie
  5. The network structure of informal arrangements : evidence from rural Tanzania By COMOLA Margherita
  6. Aid and trade By SUWA-EISENMANN Akiko; VERDIER Thierry
  7. Measuring Rural Poverty in China: a Case Study Approach By Xiuqing Wang; Shujie Yao; Juan Liu; Xian Xin; Xiumei Liu; Wenjuan Ren
  8. A Note on Income Distribution and Growth By William Scarth
  9. Infrastructure in South Africa: Who is to finance and who is to pay? By Estian Calitz; Johan Fourie
  10. Brain Drain or Brain Gain? Micro Evidence from an African Success Story By Catia Batista; Aitor Lacuesta; Pedro C. Vicente
  11. What we do and don’t know about trade liberalization and poverty reduction By Rob Vos
  12. Malthus to Romer: On the Colonial Origins of the Industrial Revolution By Cordoba, Juan-Carlos
  13. The Weak Link Theory of Economic Development By Charles I. Jones

  1. By: Javed Younas; Subhayu Bandyopadhyay
    Abstract: Many developing country governments rely heavily on trade tax revenue. Therefore, trade liberalization can be a potential source of significant fiscal instability, and may affect government spending on development activities. Donor nations may take this into account in making their aid allocation decisions for developing nations. Our findings suggest that bilateral donors provide substantially larger amounts of aid to compensate (or reward) liberalizing recipient nations who also face declining trade tax revenues. Interestingly, these effects are statistically insignificant in the context of multilateral aid. Multilateral donors are more focused on income per capita and may be using it as a de facto measure of average living standards in the recipient nations.
    Date: 2007
  2. By: Timothy J. Halliday (Department of Economics and John A. Burns School of Medicine, University of Hawaii at Manoa)
    Abstract: We use panel data from El Salvador to investigate the intra-household allocation of labor as a risk-coping strategy. We show that adverse agricultural productivity shocks primarily increased male migration to the US with much smaller effects on female migration. This is consistent with the observation that the bulk of households allocated no women to the agricultural sector. These shocks also increased the number of hours that the household devoted to agricultural activities. These results do not contradict each other if one considers the possibility that the shocks had non-monotonic effects on shadow wages during the survey period. In contrast, damage sustained from the 2001 earthquakes exclusively stunted female migration. We argue that the reasons for this were that the earthquakes increased the demand for home production and that most men in our data are not engaged in domestic production at all.
    Keywords: Migration, Labor Supply, Insurance, Intra-Household Allocation
    Date: 2007–08–08
  3. By: Lundin, Nannan (Research Institute of Industrial Economics (IFN)); Schwaag Serger, Sylvia (ITPS)
    Abstract: As one of the world’s largest recipients of Foreign Direct Investment (FDI), China is emerging as a key global player in Research and Development (R&D). This rapid increase in R&D investment is mainly attributed to the effort of strengthening the indigenous innovation capacity of domestic actors and, to an increasing extent, to the process of globalization of R&D with multinational enterprises as key driving force. This paper provides a detailed overview of the relative importance of foreign R&D in China based on quantitative mapping in terms of R&D inputs, outputs and local linkages in R&D-related activities, combined with an in-depth description of the nature of foreign R&D activities. Our empirical observation suggests that the growing importance of China in the globalization of R&D is more than a ‘flash-in-the-pan’. On one hand, China is facing new challenges, but at the same time is attempting to seize the “window of opportunity” to compete for knowledge and human resources through structural adjustments and new policy initiatives. On the other hand, multinational enterprises from OECD countries are not only intensifying, but also diversifying their activities in a larger number of R&D intensive sectors in China. In such a rapid and dynamic development, China seems to emerge not only as an important source of R&D but also a key magnet of global R&D operations.
    Keywords: China; R&D; Globalization; Multinationals
    JEL: F23 O31 O32
    Date: 2007–08–09
  4. By: DUMAS Christelle; LAMBERT Sylvie
    Abstract: This paper addresses the relationship between schooling and socioeconomic background, in particular parents’ education. We use an original survey conducted in 2003 in Senegal that provides instruments to deal with the endogeneity of background variables. These instruments describe the environment in which parents lived when they were ten years old. The estimated effect of father’s education more than doubles when its endogeneity is accounted for and, unexpectedly, becomes much bigger than the impact of mother’s education. We focus on the understanding of the channels through which parental education affects children’s schooling and present results pointing at the role of parental education in shaping parental preferences for the education of their offspring. Finally, we present empirical evidence suggesting that family background has as much impact after entry to school as it does at younger ages.
    Keywords: schooling mobility, education demand.
    JEL: D12 I21 O12
    Date: 2007–05
  5. By: COMOLA Margherita
    Abstract: In developing countries, whenever formal economic and financial institutions lack strength, households are forced to rely on risk sharing and other informal arrangements based on pre-existing interpersonal relationships. This paper takes a network perspective to investigate how rural households form the links through which they provide and/or get economic support, and whether the connection structure of the community affects the formation of these links. I test the hypothesis that indirect contacts matter, that is, agents take into account not only potential partners’ characteristics, but also their position with respect to all other agents. A network formation framework with fully heterogeneous agents is first presented, following Jackson and Wolinsky (1996), an estimation procedure is then proposed and applied to data on a village in rural Tanzania. Results show that when agents evaluate the net advantage of forming a link they also consider the relative position and the wealth of indirect partners. My paper contributes to both network theory and the literature on risk sharing arrangements in that it proposes an innovative procedure to estimate endogenous network formation models, and provides evidence that network structure has an explanatory value disregarded by all previous studies, which are focused on direct relations only.
    Keywords: households, risk sharing arrangements, network structure, Tanzania.
    JEL: O15
    Date: 2007–05
  6. By: SUWA-EISENMANN Akiko; VERDIER Thierry
    Abstract: This paper surveys the recent theoretical and empirical literature that explores the relations between aid and trade and ask about the complementarity or substitution effects at work. We distinguish between the effects of aid on trade flows and its effect on trade policies, of the donor as well as the recipient countries. Special focus is given on trade facilitation, or “aid for trade”.
    Keywords: aid for trade, aid, competitiveness.
    JEL: F1 O19
    Date: 2007–07
  7. By: Xiuqing Wang; Shujie Yao; Juan Liu; Xian Xin; Xiumei Liu; Wenjuan Ren
    Abstract: This paper measures rural poverty in Hubei Province and Inner Mongolia in China. The poverty lines we derived by Ravallion's method differ from the official Chinese poverty lines. The official pan-country poverty line underestimates rural poverty in Hubei Province and overestimates rural poverty in Inner Mongolia. Poverty determinants are estimated by Logit as well as Probit models. The study notes that factors such as living in a mountainous area, lack of better irrigation conditions, a large family size, few fixed assets, few land owned and sole dependence on agriculture as a livelihood source would make a rural household more vulnerable to poverty. On the other hand, a rural household whose members are either better educated or trained laborers would statistically be less poor. The growth-redistribution decomposition reveals that for all the three FGT indexes in Hubei province, income growth contributed much to the alleviation of poverty, while the redistribution or inequality effects counteracted the growth effects and worsened poverty. The poverty incidence decomposition results reveal that about one third of the growth effects had been counteracted by the redistribution effects. This implies that future anti-poverty programs should pay more attention to solving the inequality problem in China. Poverty dominance analysis also helps us better understand the poverty situation. It reveals that rural poverty in Inner Mongolia is more severe than that in Hubei, and that poverty incidence in Hubei has lessened from 1997 to 2003, which are the same findings as those drawn from deriving poverty lines.
    Keywords: Rural Poverty Line, Poverty Determinants, Growth Redistribution Decomposition, Poverty Dominance, China
    JEL: I32 D33 C43
    Date: 2007
  8. By: William Scarth
    Abstract: Many analysts expect the aging population to lead to a reduction in the growth of living standards. Income inequality – a problem that has been accentuated by the payroll tax hikes that were necessary to fund the public pension as the population ages – is becoming an increasing challenge at the same time. As a result, policy-makers need to pursue initiatives that can simultaneously address both our efficiency and our equity objectives. With the challenge of the aging population, it is all the more important that we not rely on fiscal policies that involve a trade-off between growth and equality. This paper identifies a strategy for tax policy that meets these objectives.
    Keywords: fiscal policy, endogenous growth, efficiency and equity
    JEL: E10 E60 H30 O40
    Date: 2007–06
  9. By: Estian Calitz (Department of Economics, Stellenbosch University); Johan Fourie (Department of Economics, Stellenbosch University)
    Abstract: Against the backdrop of shifting views on the role of government in the provision of infrastructure, this paper distinguishes between the payment for and financing of the South African Government’s infrastructure investment programme. The paper also presents a classification system that enables a systematic mapping of all prospective projects, with reference to considerations of efficiency and equity. This mapping should assist in macro planning and in any analysis of the financial implications of project financing and cost recovery at all levels of government. The government’s financing strategy is questioned and alternatives are identified. The prospects for mobilising funds other than tax revenue are assessed, namely government loans, private equity, development finance and donor funds. Four investment projects are considered with a view to testing the classification system and evaluating the chosen financing options in terms of economic criteria.
    Keywords: Infrastructure financing, government loans, benefit taxation, guarantees, private-public partnerships, South Africa
    JEL: H54 H81 H72
    Date: 2007
  10. By: Catia Batista; Aitor Lacuesta; Pedro C. Vicente
    Abstract: Does emigration really drain human capital accumulation in origin countries? This paper explores a unique household survey designed and conducted to answer this specific question for the case of Cape Verde - the sub-Saharan African country with the largest fraction of tertiary-educated population living abroad, despite also having a fast-growing stock of human capital. Unlike previous literature, the ideal characteristics of our tailored survey allow us to explicitly test "brain gain" arguments according to which the possibility of own future emigration positvely contributes to educational attainment in the origin country. In particular, we introduce a new method to estimate this effect by using full histories of current and return migrants (which enable controlling for migrant selection on unobservables), and a new set of exclusion restrictions both at the regional and household levels. Our results are robust to the inclusion of controls for remittances, family disruption, and general equilibrium effects of emigration. In constructing a counterfactual distribution of skills to answer our research question, we combine the survey data with information from censuses of the destination cuntries to account for the characteristics of the labour force that is (permanent and temporarily) lost due to emigration. Our results point to commonly used "brain dran" figures to be significantly exaggerated, whereas there may be substantial "brain gains" from allowing free migration and encouraging return migration.
    Keywords: Brain Drain, Brain Gain, International Migration, Human Capital, Effects of Emigration in Origin Countries, Household Survey, Cape Verde, Sub-Saharan Africa
    JEL: F22 J24 O15 O55
    Date: 2007
  11. By: Rob Vos
    Abstract: Strong opinions about the impact of globalization on poverty are not always backed by robust factual evidence. As argued in this paper, however, it is not all that easy to lay our hands on ‘robust’ facts. Quantitative analyses of trade liberalization appear highly sensitive to basic modelling and parameter assumptions. Altering these could turn the expectation that, for instance, Africa’s poor stand to gain from further trade opening under the Doha Round into one in which they would stand to lose. Most studies agree though that trade opening probably adds to aggregate welfare, but gains are small and unevenly distributed.
    Keywords: computable general equilibrium models, trade policy, economic integration, trade and labour market interactions, welfare and poverty, international linkages to development, foreign exchange policy
    JEL: C68 F13 F15 F16 I3 O19 O24
    Date: 2007–08
  12. By: Cordoba, Juan-Carlos
    Abstract: We propose a unified theory to explain the diverse paths of economic and institutional development of colonized and colonizers following the great discoveries at the end of the XV century. In our theory, the institutional and economic divergence between Spain and England observed during the age of colonization obeys to the same forces put forward by Engerman and Sokoloff (1997) to explain the divergence between Latin America and North America: factor endowments at the moment of the conquest.
    Keywords: Malthus Stagnation; Endogenous Growth; Development
    JEL: O18 J10 N10 O57 E23 O11
    Date: 2007–08–10
  13. By: Charles I. Jones (University of California, Berkeley)
    Abstract: Per capita income in the richest countries of the world exceeds that in the poorest countries by more than a factor of 50. What explains these enormous differences? This paper returns to an old idea in development economics and proposes that complementarity and linkages are at the heart of the explanation. Just as a chain is only as strong as its weakest link, problems at any point in a production chain can reduce output substantially if inputs enter production in a complementary fashion. This paper builds a model with complementary inputs and links across sectors and shows that it can easily generate 50-fold aggregate income differences from plausible distributions of productivity in the underlying sectors.
    Date: 2007–02

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