nep-dev New Economics Papers
on Development
Issue of 2007‒10‒27
twenty-two papers chosen by
Jeong-Joon Lee
Towson University

  1. Export Dynamics in Colombia: Firm-Level Evidence By Jonathan Eaton; Marcela Eslava; Maurice Kugler; James Tybout
  2. Sex Differences in Obesity Rates in Poor Countries: Evidence from South Africa By Anne Case; Alicia Menendez
  3. Demographic Change and the Structure of Wages: A Demand-Theoretic Analysis for Brazil By Ernesto F. L. Amaral; Daniel S. Hamermesh; Joseph E. Potter; Eduardo L.G. Rios-Neto
  4. Mosquitoes: The Long-term Effects of Malaria Eradication in India By David Cutler; Winnie Fung; Michael Kremer; Monica Singhal
  5. The Effect of FDI on Child Labor By Ronald B. Davies; Annie Voy
  6. Oligarchic Versus Democratic Societies By Daron Acemoglu
  7. Does the Welfare State Affect Individual Attitudes towards Immigrants? Evidence Across Countries By Giovanni Facchini; Anna Maria Mayda
  8. Trend in International Migration Flows and Stocks,1975-2005 By B. Lindsay Lowell
  9. Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia By Abdul Khaliq; Ilan Noy
  10. LSMS Data Quality in Maoist Influenced Areas of Nepal By Magnus Hatlebakk
  11. The Simplest Unified Growth Theory By Strulik, Holger; Weisdorf, Jacob
  12. New Technology, Human Capital and Growth for Developing Countries By Cuong Le Van; Manh-Hung Nguyen; Thai Bao Luong; Tu-Anh Nguyen
  13. Trade Liberalization, Competition and Growth By Omar Licandro; Antonio Navas-Ruiz
  14. Anti-Poverty Transfers without Riots in Tunisia By Christophe Muller
  15. Efficiency Gains from Trade Reform: Foreign Technology or Import Competition? Evidence from South Africa’s Manufacturing Sector By Riham Shendy
  16. Dual Track Reforms: With and Without Losers By Jiahua Che; Giovanni Facchini
  17. Poverty and Inequality Components: a Micro Framework By Abdelkrim Araar; Jean-Yves Duclos
  18. The Informal Sector By Aureo de Paula; Jose A. Scheinkman
  19. The Role of the Structural Transformation in Aggregate Productivity By Margarida Duarte; Diego Restuccia
  20. Thailand’s Economic Cooperation with Neighboring Countries and Its Effects on Economic Development within Thailand By Tsuneishi, Takao
  21. Trade, Foreign Investment and Myanmar’s Economic Development during the Transition to an Open Economy By Kudo, Toshihiro; Mieno, Fumiharu
  22. The Sandinista Revolution and Post-Conflict Development―Key Issues By Kagami, Mitsuhiro

  1. By: Jonathan Eaton; Marcela Eslava; Maurice Kugler; James Tybout
    Abstract: Using transactions-level customs data from Colombia, we study firm-specific export patterns over the period 1996-2005. Our data allow us to track firms' entry and exit into and out of individual destination markets, as well as their revenues from selling there. We find that, in a typical year, nearly half of all Colombian exporters were not exporters in the previous year. These new exporters tend to be extremely small in terms of their overall contribution to export revenues, and most do not continue exporting in the following year. Hence export sales are dominated by a small number of very large and stable exporters. Nonetheless, out of each cohort of new exporters, a fraction of firms go on to expand their foreign sales very rapidly, and over the period of less than a decade, these successful new exporters account for almost half of total export expansion. Finally, we find that new exporters begin in a single foreign market and, if they survive, gradually expand into additional destinations. The geographic expansion paths they follow, and their likelihood of survival as exporters, depend on their initial destination market.
    JEL: F10
    Date: 2007–10
  2. By: Anne Case; Alicia Menendez
    Abstract: Globally, men and women face markedly different risks of obesity. In all but of handful of (primarily Western European) countries, obesity is more prevalent among women than men. In this paper, we examine several potential explanations for this phenomenon. We analyze differences between men and women in reports and effects of the proximate causes of obesity -- physical exertion and food intake -- and the underlying causes of obesity -- childhood and adult poverty, depression, and attitudes about obesity. We evaluate the evidence for each explanation using data collected in an African township outside of Cape Town. Three factors explain the greater obesity rates we find among women. Women who were nutritionally deprived as children are significantly more likely to be obese as adults, while men who were deprived as children face no greater risk. In addition, women of higher adult socioeconomic status are significantly more likely to be obese, which is not true for men. These two factors can fully explain the difference in obesity rates we find in our sample. Finally (and more speculatively), women's perceptions of an 'ideal' female body are larger than men's perceptions of the 'ideal' male body, and individuals with larger 'ideal' body images are significantly more likely to be obese.
    JEL: D13 I10
    Date: 2007–10
  3. By: Ernesto F. L. Amaral; Daniel S. Hamermesh; Joseph E. Potter; Eduardo L.G. Rios-Neto
    Abstract: With rapidly declining fertility and increased longevity the age structure of the labor force in developing countries has changed rapidly. Changing relative supply of workers by age group, and by educational attainment, can have profound effects on labor costs. Their impacts on earnings have been heavily studied in the United States but have received little attention in Asia and Latin America, where supply shocks are at least as large and have often proceeded less evenly across the economy. We use data on 502 local Brazilian labor markets from Censuses 1970-2000 to examine the extent of substitution among demographic groups as relative supply has changed. The results suggest that age-education groups are imperfect substitutes, so that larger age-education cohorts see depressed wage rates, particularly among more-educated groups. The extent of substitution has increased over time, so that the decreasing size of the least-skilled labor force today is barely raising its remaining members' wages.
    JEL: J23 O15
    Date: 2007–10
  4. By: David Cutler; Winnie Fung; Michael Kremer; Monica Singhal
    Abstract: We examine the effects of malaria on educational attainment by exploiting geographic variation in malaria prevalence in India prior to a nationwide eradication program in the 1950s. Malaria eradication resulted in gains in literacy and primary school completion rates of approximately 12 percentage points. These estimates imply that the eradication of malaria can explain about half of the gains in these measures of educational attainment between the pre- and post-eradication periods in areas where malaria was prevalent. The effects are not present in urban areas, where malaria was not considered to be a problem in the pre-eradication period. The results cannot be explained by convergence across areas. We find gains for both men and women as well as for members of scheduled castes and tribes, a traditionally disadvantaged group.
    JEL: H51 I18 J24
    Date: 2007–10
  5. By: Ronald B. Davies (University of Oregon Economics Department); Annie Voy (University of Oregon Economics Department)
    Abstract: This paper examines the extent to which foreign direct investment (FDI) affects child labor. Using 1995 data for 145 countries, we find that, contrary to common fears, FDI is negatively correlated with child labor. This effect, however, disappears when controlling for per capita income. After doing so, we find no robust effect of either FDI or international trade on child labor. This result is robust to corrections for the endogeneity of FDI, trade, and income. Furthermore, this result is confirmed when using data from earlier years and when using fixed effects. This suggests that the impact of FDI and trade on child labor, if any, is the increases in income they generate.
    Keywords: Child Labor, Foreign Direct Investment, International Trade
    JEL: F14 F16 F23
    Date: 2006–10–01
  6. By: Daron Acemoglu
    Abstract: This paper develops a model to analyze economic performance under different political regimes. An oligarchic society, where political power is in the hands of major producers, protects their property rights, but also tends to erect significant entry barriers against new entrepreneurs. Democracy, where political power is more widely di used, imposes redistributive taxes on producers, but tends to avoid entry barriers. When taxes in democracy are high and the distortions caused by entry barriers are low, an oligarchic society achieves greater efficiency. Nevertheless, because comparative advantage in entrepreneurship shifts away from the incumbents, the inefficiency created by entry barriers in oligarchy deteriorates over time. The typical pattern is therefore one of rise and decline of oligarchic societies: of two otherwise identical societies, the one with an oligarchic organization will first become richer, but later fall behind the democratic society. I also discuss how democratic societies may be better able to take advantage of new technologies, how an oligarchic society might transition to democracy because of within-elite conflict, and how the unequal distribution of income in oligarchy supports the oligarchic institutions and may keep them in place even when they become significantly costly to society.
    Keywords: democracy, economic growth, entry barriers, oligarchy, political economy, redistribution, sclerosis.
    JEL: P16 O10
    Date: 2007
  7. By: Giovanni Facchini; Anna Maria Mayda
    Abstract: This paper analyzes welfare-state determinants of individual attitudes towards immigrants - within and across countries - and their interaction with labor-market drivers of preferences. We consider two different mechanisms through which a redistributive welfare system might adjust as a result of immigration. In the first model, immigration has a larger impact on individuals at the top of the income distribution, while under the second model it is low-income individuals who are most affected through this channel. Individual attitudes are consistent with the first welfare-state model and with labor-market determinants of immigration attitudes. In countries where natives are on average more skilled than immigrants, individual income is negatively correlated with pro-immigration preferences, while individual skill is positively correlated with them. These relationships have the opposite signs in economies characterized by skilled migration (relative to the native population). These results are confirmed when we exploit international differences in the characteristics of destination countries' welfare state.
    Date: 2007–10–14
  8. By: B. Lindsay Lowell
    Abstract: This paper discusses broad trends in the rates and levels of international migration over the past three decades, the places that migrants leave from and the destinations they choose; and some of the demographic and policy implications of these trends. It raises some features of international mobility trends over the past three decades that are, superficially, somewhat contradictory: stable rates of emigration but growing numbers of emigrants; and an apparent dynamism in the flow but a stable concentration of migrants going to more developed nations. On the one hand, these facts can be somewhat simply resolved by reference to the demographic divide between the less and more developed world. On the other hand, these facts hold implications for the past and future impacts of admission policies on international mobility. <BR>Ce document examine l’évolution générale des taux et des niveaux de migrations internationales au cours des trois dernières décennies, les points de départ des migrants et les destinations qu’ils choisissent, ainsi que quelques conséquences de cette évolution sur le plan de la démographie et des politiques. Il met en évidence certains aspects des tendances en matière de mobilité internationale observées ces trente dernières années qui, à première vue, paraissent assez contradictoires : stabilité des taux d’émigration mais augmentation du nombre d’émigrants, dynamisme apparent des flux mais stabilité de la concentration des migrants partant pour les pays avancés. D’un côté, on peut résoudre assez aisément cette énigme en rappelant la fracture démographique qui sépare les pays avancés du reste du monde mais, d’un autre côté, cette réalité a des implications s’agissant de l’impact passé et à venir des politiques d’admission sur la mobilité internationale.
    JEL: F22 J11 J61 N3 O15
    Date: 2007–09–27
  9. By: Abdul Khaliq (Department of Economics, Andalas University, Indonesia); Ilan Noy (Department of Economics, University of Hawaii at Manoa)
    Abstract: The paper investigates the impact of foreign direct investment (FDI) on economic growth using detailed sectoral data for FDI inflows to Indonesia over the period 1997-2006. In the aggregate level, FDI is observed to have a positive effect on economic growth. However, when accounting for the different average growth performance across sectors, the beneficial impact of FDI is no longer apparent. When examining different impacts across sectors, estimation results show that the composition of FDI matters for its effect on economic growth with very few sectors showing positive impact of FDI and one sector even showing a robust negative impact of FDI inflows (mining and quarrying). The sectors examined are: farm food crops, livestock product, forestry, fishery, mining and quarrying, non-oil and gas industry, electricity, gas and water, construction, retail and wholesale trade, hotels and restaurant, transport and communications, and other private and services sectors.
    Keywords: Foreign direct investment, economic growth, Indonesia
    JEL: F21 F23
    Date: 2007–10–01
  10. By: Magnus Hatlebakk
    Abstract: The first round of the Nepal Living Standards Survey (NLSS1) is a high quality data source that has been applied for a number of empirical studies. Data were collected in 1995/96, prior to the civil war in Nepal. The Maoist party of Nepal started the so called People's war in 1996, and gradually extended their influence in the rural areas. Eight years into the war, in 2003/04, the Central Bureau of Statistics, in collaboration with the World Bank, conducted the second round of the Nepal Living Standards Survey (NLSS2). We investigate to what extent the quality of the NLSS2 data has been affected by the Maoists. We find, if any, only minor support for the hypothesis. Furthermore, the Maoists have less control in the plains (terai), where a majority of the population lives, so data from the terai sub-sample of NLSS2 is, in particular, not likely to be biased by the Maoists.  
    Keywords: Household survey Civil war JEL classification: C810, O120
    Date: 2007
  11. By: Strulik, Holger; Weisdorf, Jacob
    Abstract: This paper provides a unified growth theory, i.e. a model that explains the very long-run economic and demographic development path of industrialized economies, stretching from the pre-industrial era to present-day and beyond. Making strict use of Malthus’ (1798) so-called preventive check hypothesis - that fertility rates vary inversely with the price of food - the current study offers a new and straightforward explanation for the demographic transition and the break with the Malthusian era. The current framework lends support to existing unified growth theories and is well in tune with historical evidence about structural transformation.
    Keywords: Economic Growth; Industrial Revolution; Population Growth; Structural Change
    JEL: J10 J13 O11 O14
    Date: 2007–10
  12. By: Cuong Le Van (Centre d’Economie de la Sorbonne, Universite Paris-1, France); Manh-Hung Nguyen (Centre d’Economie de la Sorbonne, Universite Paris-1, France); Thai Bao Luong (Centre d’Economie de la Sorbonne, Universite Paris-1, France); Tu-Anh Nguyen (Centre d’Economie de la Sorbonne, Universite Paris-1, France)
    Abstract: We consider a developing country with three sectors in economy: consumption goods, new technology, and education. Productivity of the consumption goods sector depends on new technology and skilled labor used for production of the new technology. We show that there might be three stages of economic growth. In the first stage the country concentrates on production of consumption goods; in the second stage it requires the country to import both physical capital to produce consumption goods and new technology capital to produce new technology; and finally the last stage is one where the country needs to import new technology capital and invest in the training and education of high skilled labor in the same time.
    Keywords: Optimal growth model, New technology capital, Human Capital, Developing country
    JEL: D51 E13
    Date: 2007–08
  13. By: Omar Licandro; Antonio Navas-Ruiz
    Abstract: The aim of this paper is to understand whether international trade may enhance innovation and growth through an increase in competition. We develop a two-country endogenous growth model, both countries producing the same set of goods, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition. Since countries produce the same set of goods, trade openness makes markets more competitive, reducing prices and raising the incentives to innovate. More general, a reduction on trade barriers enhances growth by reducing domestic firms' market power.
    Keywords: Trade openess, competition and growth, R&D
    JEL: F13 F43 O3
    Date: 2007
  14. By: Christophe Muller (Departamento de Fundamentos del Análisis Económico Universidad de Alicante, Campus de San Vicente)
    Abstract: (english) We draw some lessons from the Tunisian experience of social reforms and associated civil conflict. Our main interest is the riots that occurred after subsidy cuts and their possible substitution of price subsidies by direct cash transfers. We propose new welfare indicators apt to assess policy reforms in situations of fragile states. Finally, using micro level data we show that the plausible policy decision depend on parameters describing the balance between poverty and program exclusion risk. In the Tunisian case, only a much larger weight put on poverty relatively to exclusion could bring the decision maker to substitute the in force price subsidies with direct cash transfers, for fear of social unrest.
    Keywords: Poverty; Social conflicts; North Africa, Tunisia, Targeting; Social transfers.
    JEL: D63 H53 I38
    Date: 2007–09
  15. By: Riham Shendy
    Abstract: The empirical trade literature examining the effect of tariff reductions on productivity commonly proxies the former with Nominal Tariff Rates (NTR) and estimates the latter as the production function residual. In the context of the South African trade reform experience we examine the different channels by which tariff cuts affect productivity growth. Using industry level data for the manufacturing sector and covering the reform period from 1994 to 2004, we disentangle the differential effect of increased foreign competition, proxied by reductions in NTR, and that of the imported technology, proxied by the reductions in Input Tariff Rates (ITR), on productivity growth. Our measure of efficiency growth controls for the effect of tariff reductions on markups. The results suggest that the efficiency difference between foreign and domestic inputs have the major effect on productivity gains. Declines in ITR significantly raise productivity growth compared to an insignificant effect for NTR. Additionally, we find that higher protection rates are associated with higher markups, albeit this finding is not robust across all specifications.
    Keywords: Productivity, Trade Reform, Tariffs, Manufacturing, South Africa
    JEL: F12 F14 O55
    Date: 2007
  16. By: Jiahua Che; Giovanni Facchini
    Abstract: The dual track approach to market liberalization has been widely recognized as the key to the success of the Chinese economic reform. In this paper we study the effectiveness of this strategy in economic environments where the status quo government control is incomplete. We show that in a dynamic context contractual arbitrage will emerge, potentially resulting in efficiency losses and/or adverse distributional effects. By establishing a necessary and su±cient condition for the dual{track approach to retain its appeal in a dynamic context, our analysis provides a clear guideline to the broader applicability of this reform mechanism.
    Date: 2007–10–15
  17. By: Abdelkrim Araar; Jean-Yves Duclos
    Abstract: This paper explores the link between poverty and inequality through an analysis of the poverty impact of changes in income-component inequality and in between -an within- group inequality. This can help shed light on the theoretical and empirical linkages between poverty, growth and inequality. It might also help design policies to improve both equity and welfare. The tools are illustrated using the recent 2004 Nigerian national household survey. The analytical derived linkages are supported by the empirical illustration, and interesting insights also emerge from the empirical analysis. One such insight is that both the sign and the size of the elasticities can be quite sensitive to the choice of measurement assumptions (such as the choice of inequality and poverty aversion parameters, and that of the poverty line). The elasticities are also very much distributive-sensitive and dependent on the type of inequality-changing processes taking place. This also suggests that the response of poverty to growth can also be expected to be significantly context specific.
    Keywords: Poverty, inequality, poverty elasticities, redistribution
    JEL: D63 I32 O12
    Date: 2007
  18. By: Aureo de Paula (Department of Economics, University of Pennsylvania); Jose A. Scheinkman (Department of Economics, Princeton University)
    Abstract: This paper investigates the determinants of informal economic activity. We present two equilibrium models of informality and test their implications using a survey of 48,000+ small firms in Brazil. We define informality as tax avoidance; firms in the informal sector avoid tax payments but suffer other limitations. In the first model there is a single industry and informal firms face a higher cost of capital and a limitation on size. As a result informal firms are smaller and have a lower capital labor ratio. When education is an imperfect proxy for ability, we show that the interaction of the manager’s education and formality has a positive correlation with firm size. These implications are supported by our empirical analysis. A novel theoretical contribution in this paper is a model that highlights the role of value added taxes in transmitting informality. It predicts that the informality of a firm is correlated to the informality of firms from which it buys or sells. The model also implies that higher tolerance for informal firms in one production stage increases tax avoidance in downstream and upstream sectors. Empirical analysis shows that, in fact, various measures of formality of suppliers and purchasers (and its enforcement) are correlated with the formality of a firm. Even more interestingly, when we look at sectors where Brazilian firms are not subject to the credit system of value added tax, but instead the value added tax is applied at some stage of production at a rate that is estimated by the State, this chain effect vanishes.
    Keywords: Informal Sector, VAT, Tax Avoidance
    JEL: H2 H3 K4
    Date: 2007–08–27
  19. By: Margarida Duarte; Diego Restuccia
    Abstract: We investigate the role of sectoral differences in labor productivity and the process of structural transformation (the secular reallocation of labor across sectors) in accounting for the time path of aggregate productivity across countries. Using a simple model of the structural transformation that is calibrated to the growth experience of the United States, we measure sectoral labor productivity differences across countries. These differences are large and systematic: labor productivity differences between rich and poor countries are large in agriculture and services and smaller in manufacturing. When fed into the model, these sectoral labor productivity differences and the structural transformation they produce account for more than 50 percent of the fast catch-up in aggregate productivity observed in less developed economies and all of the stagnation and decline observed in more developed economies in recent decades.
    Keywords: labor productivity, structural transformation, sectoral productivity, employment, hours, cross-country data
    JEL: O1 O4
    Date: 2007–10–22
  20. By: Tsuneishi, Takao
    Abstract: Thailand’s economic cooperation with neighboring countries, including not only trade and investment but also economic assistance, is tied inseparably to regional development within Thailand. Assistance to develop infrastructure along economic corridors, for example, promotes Thai regional development. This study examines the trade and investment relationships between Thailand and its neighboring countries, as well as related economic policies of Thailand. The study also examines the type of economic assistance being extended, and the resulting regional development taking place. And lastly, the study considers policies for further cooperation by Thailand and the implications this has for Japanese economic cooperation.
    Keywords: GMS (Greater Mekong Subregion), ACMECS (Ayeyarwady-Chao Phraya-Mekong Economic Cooperation Strategy), Eonomic corridors, Border economic zones, Border trade, Thailand, Southeast Asia, Regional economic cooperation, Economic assistance, Economic development, International trade
    JEL: O53 R11
    Date: 2007–08
  21. By: Kudo, Toshihiro; Mieno, Fumiharu
    Abstract: Throughout the 1990s and up to 2005, the adoption of an open-door policy substantially increased the volume of Myanmar’s external trade. Imports grew more rapidly than exports in the 1990s owing to the release of pent-up consumer demand during the transition to a market economy. Accordingly, trade deficits expanded. Confronted by a shortage of foreign currency, the government after the late 1990s resorted to rigid controls over the private sector’s trade activities. Despite this tightening of policy, Myanmar’s external sector has improved since 2000 largely because of the emergence of new export commodities, namely garments and natural gas. Foreign direct investments in Myanmar significantly contributed to the exploration and development of new gas fields. As trade volume grew, Myanmar strengthened its trade relations with neighboring countries such as China, Thailand and India. Although the development of external trade and foreign investment inflows exerted a considerable impact on the Myanmar economy, the external sector has not yet begun to function as a vigorous engine for broad-based and sustainable development.
    Keywords: Myanmar (Burma), International trade, Cross-border trade, Foreign direct investment, Economic development, Development cooperation, Foreign investments
    JEL: F14 F21 P28
    Date: 2007–08
  22. By: Kagami, Mitsuhiro
    Abstract: Following Daniel Ortega’s victory in the presidential election held in November 2006, Nicaragua has been undergoing a transition from a democratic to authoritarian system. In the 1980s, Ortega served as President of the Sandinista government and implemented a Cuban-type socialist system, but the system failed and democracy was established during 1990-2007. Considering this failure, why did Ortega succeed in taking power again? This paper provides a brief history of modern Nicaragua and gives some insights into the twists of Latin American politics. The paper was prepared for the international seminar on Helping Failed States Recover: The Role of Business in Promoting Stability and Development, organized by the University of Kansas Center for International Business Education and Research (CIBER), held on April 4-6, 2007 in Lawrence. The opinions and views expressed herein are those of the author. All mistakes and/or errors are entirely the author’s responsibility.
    Keywords: Daniel Ortega, Violeta Chamorro, Enrique Bolanos, Hugo Chavez, Sandinista, Contra, Post-conflict recovery, Neo-liberal, Caudillo, Extreme poverty, Illiteracy rate, Nicaragua, Internal politics, Political parties, Democracy, Economic conditions
    JEL: O54
    Date: 2007–08

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