|
on Development |
| By: | Francesc Dilme (Universitat de Barcelona) |
| Abstract: | We develop a simple model where two technologies are available to produce the same good, and we study under what conditions both will be used. We use the model to analyze the consequences of the simultaneous use of two different technologies for the economic variables and economic growth. Finally, we explore how migrations of factors affect the technological change and the performance of the economy. |
| Keywords: | solow model, migration, technological change |
| JEL: | O41 O15 O33 O11 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:bar:bedcje:2007186&r=dev |
| By: | Bruckner, Markus; Ciccone, Antonio |
| Abstract: | Are civil wars partly caused by low economic growth? And do democratic institutions attenuate the impact of low growth on the likelihood of civil war? Our approach to answering these questions exploits that international commodity prices have a significant effect on income growth in Sub-Saharan African countries. We show that lower income growth makes civil war more likely in non-democracies. This effect is significantly weaker in democracies. So much so, that we do not find a link between growth and civil war in countries with democratic institutions. Our results therefore point to an interaction between economic and institutional causes of civil war. |
| Keywords: | civil war; Commodity prices; growth; rainfall |
| JEL: | O0 P0 Q0 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6568&r=dev |
| By: | Lars Osberg; Jiaping Shao; Kuan Xu (Department of Economics, Dalhousie University; Department of Economics, Dalhousie University; Department of Economics, Dalhousie University) |
| Keywords: | height-for-age; child heath; growth; inequality; poverty; food subsidies; China |
| Date: | 2007–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:dal:wparch:wider_nov_18_2007.pdf&r=dev |
| By: | Akita, Takahiro; Miyata, Sachiko |
| Abstract: | "This paper considers urban-rural location and education as the main causes of expenditure inequality and attempts to examine inequality changes associated with urbanization and educational expansion in Indonesia from 1996 to 2002, using Indonesian monthly household consumption expenditure data. It introduces a hierarchical framework of inequality decomposition by population subgroups, which enables researchers to analyze inequality resulting from differences in educational attainment as well as inequality within each educational group, after the effects on inequality of urban–rural differences in the composition of educational attainments are removed. It finds that the urban sector's higher educational group contributes significantly to overall inequality. Inequality within the group increased significantly once Indonesia recovered from the financial crisis of 1998. This, together with educational expansion in urban areas, led to a conspicuous rise in urban inequality. Overall expenditure inequality has increased markedly, due not only to the rise in urban inequality but also a widening urban-rural disparity, accompanied by a population shift from the rural to the urban sector. Since more people will obtain higher education as the economy continues to develop, and more jobs requiring specialized skills become available in urban areas, urban inequality is likely to remain high. In order to mitigate urban inequality and thus overall inequality, the government needs to introduce policies that could reduce inequality among households whose heads have a tertiary education." from Authors' Abstract |
| Keywords: | Expenditure inequality, Urbanization, Educational expansion, Theil index, Two-stage nested inequality decomposition analysis, |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:00728&r=dev |
| By: | Konstantinos Angelopoulos; George Economides; Vangelis Vassilatos |
| Abstract: | This paper shows that the dependence of the standard real business cycle (RBC) model on unobservable technology shocks can be reduced once we allow for weak property rights. This is motivated by the empirical observation that changes in institutions in emerging markets are related to the evolution of the main macroeconomic variables. We thus incorporate weak property rights in the baseline RBC model and use the ICRG dataset to obtain a proxy for the persistence and standard deviation of the degree of protection of property rights in Mexico. We find that this model does not need to rely on unobservable technology shocks, as innovations to the degree of protection of property rights only (i.e. without a technology shock) can predict the second moments of the main economic variables quite well. |
| Keywords: | Property rights, institutions, business cycles |
| JEL: | D7 E62 E32 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2007_35&r=dev |
| By: | Hajo Holzmann (Institute of Stochastics, University of Karlsruhe / Germany); Sebastian Vollmer (Ibero-America Institute, University of Goettingen / Germany); Julian Weisbrod (Department of Economics, University of Goettingen / Germany) |
| Abstract: | We estimate and analyze the global income distribution from national log-normal income distributions for the years 1970 to 2003, as well as the income distribution of seven regional subsamples. From these distributions we obtain measures for global and regional inequality and poverty, and find decreasing global poverty and inequality during the time period. By decomposing inequality into within and between country inequality using Theils’ measure of inequality, we observe declining inequality between countries whereas overall inequality within countries increased. Furthermore, we calculate growth incidence curves for five year periods between 1970 and 2003, as well as a growth incidence curve for the entire period and corresponding rates of pro-poor growth. In the global income distribution, the 8.5th to 63.5th global income percentiles experienced above average percentile growth rates, while the remaining very lowest quantiles experienced also the lowest percentile growth rates. Using the regional decomposition we find that while in 1970 more than half of the worlds extreme poor and poor people lived in East Asia, it is Sub-Saharan Africa where nowadays two thirds of the extreme poor and half of the worlds poor live. |
| Keywords: | Global income distribution, poverty, inequality, growth incidence curves, pro-poor growth convergence |
| JEL: | I32 I31 O47 F01 |
| Date: | 2007–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:got:iaidps:161&r=dev |
| By: | Hajo Holzmann (Institute of Stochastics, University of Karlsruhe / Germany); Sebastian Vollmer (Ibero-America Institute, University of Goettingen / Germany); Julian Weisbrod (Department of Economics, University of Goettingen / Germany) |
| Abstract: | In this paper we analyze the world´s cross-national distribution of income and its evolution from 1970 to 2003. We argue that modeling this distribution by a finite mixture and investigating its number of components has advantages over nonparametric inference concerning the number of modes. In particular, the number of components of the distribution does not depend on the scale chosen (original or logarithmic), whereas the number of modes does. Instead of so-called twin-peaks, we find that the distribution appears to have only two components in 1970-1975, but consists of three components from 1976 onwards, a low, average and high mean-income group, with group means diverging over time. Here we apply recently developed modified likelihood ratio tests for the number of components in a finite mixture. The intra distributional dynamics are investigated in detail using posterior probability estimates. |
| Keywords: | cross-national income distribution; mixture models; modified likelihood ratio test; nonparametric density estimation |
| JEL: | C12 O11 O47 F01 |
| Date: | 2007–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:got:iaidps:162&r=dev |
| By: | Manoel Bittencourt (School of Economics, University of Cape Town / South Africa) |
| Abstract: | We examine how macroeconomic performance, mainly in the role of high rates of inflation, affected earnings inequality in the 1980s and early 1990s in Brazil. The results–based initially on national timeseries, and then on the relatively novel sub-national panel time-series T N data and analysis–show that the extreme inflation, combined with the incomplete indexation coverage seen at the time, had a regressive and significant impact on inequality. Thus, sound macroeconomic policies, which keep inflation low and stable in the long run, are to be a necessary first step of any policy package implemented to alleviate inequality in Brazil. |
| Keywords: | Brazil, inequality, inflation, indexation |
| JEL: | D31 E31 O11 O54 |
| Date: | 2007–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:got:iaidps:163&r=dev |
| By: | Manoel Bittencourt (School of Economics, University of Cape Town / South Africa) |
| Abstract: | We examine the impact of financial development on earnings inequality in Brazil in the 1980s and first half of the 1990s. The evidence– based on panel-time series data and analysis–shows that financial development had a significant and robust effect in reducing inequality during the period. We suggest that this is not only because the poorer can invest the acquired credit in either short or long-term productive activities, but also because those with access to financial markets can insulate themselves against recurrent poor macroeconomic performance, which is exemplified by high rates of inflation. The main implication of the results is that a deeper and more active financial sector, alleviates the high inequality seen in Brazil without distorting economic efficiency. |
| Keywords: | Financial development, inequality, Brazil |
| JEL: | D31 E44 O11 O54 |
| Date: | 2007–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:got:iaidps:164&r=dev |
| By: | Manoel Bittencourt (School of Economics, University of Cape Town / South Africa) |
| Abstract: | We examine the impact of inflation on financial development in Brazil and the data available permit us to cover the period between 1985 and 2002. The results–based initially on time-series and then on panel time-series data and analysis, and robust for different estimators and financial development measures–suggest that inflation presented deleterious effects on financial development at the time. The main implication of the results is that poor macroeconomic performance, exemplified in Brazil by high rates of inflation, have detrimental effects to financial development, a variable that is important for affecting, e.g. economic growth and income inequality. Therefore, low and stable inflation, and all that it encompasses, is a necessary first step to achieve a deeper and more active financial sector with all its attached benefits. |
| Keywords: | Financial development, inflation, Brazil |
| JEL: | E31 E44 O11 O54 |
| Date: | 2007–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:got:iaidps:165&r=dev |
| By: | Reinikka, Ritva (World Bank); Svensson, Jakob (Institute for International Economic Studies, Stockholm University) |
| Abstract: | What motivates religious not-for-profit health care providers? This paper uses a change in financing of not-for-profit health care providers in Uganda to test two theories of organizational behavior. We show that financial aid leads to more laboratory testing, lower user charges, and increased utilization. These findings are consistent with the view that religious not-for-profit providers are intrinsically motivated to serve (poor) people and that these preferences matter quantitatively. |
| Keywords: | not-for-profit organizations; health care provision; organizational behavior; Uganda |
| JEL: | I10 L31 O12 |
| Date: | 2007–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iiessp:0754&r=dev |
| By: | Miracle Ntuli (University of Cape Town and IZA) |
| Abstract: | A striking feature of labour supply in South Africa is the phenomenal expansion in the labour force participation of women from 38 percent in 1995 to 46 percent in 2004. Even so, their participation has been persistently lower than that of men whose participation rates were 58 percent and 62 percent respectively. Furthermore, analyses of women’s participation rates by race show that the rates for historically disadvantaged groups such as Africans are still lower than those of Whites. For instance, in 1995 African women had a participation rate of 34 percent and it increased to 43 percent in 2004 while the corresponding rates for White women were 52 percent and 59 percent. In light of these disparities, this paper uses survey data to examine the determinants of the low level and also of the changes in African women’s labour force participation, during the first decade of democracy (1995-2004). By focussing on a ten year period, this research substantially differs from earlier studies which were preoccupied with short periods such as one year. A longer period is analytically advantageous because it allows the capturing of the changes and the robustness of the key determinants of female labour force participation in South Africa. Such information is important not only for reviewing existing policies but also for the formulation of new ones to increase female labour force participation which is a prerequisite for economic development. The study utilises a decomposition technique devised by Even and Macpherson (1990). The findings exhibit that female participation responded positively to education which has been the prime factor. Non-labour income, marriage, fertility and geographical variations in economic development persistently stifled participation. It is argued that the perceived change in participation is due to emigration and changes in human capital and financial endowments. Another important discovery is that -9 percent of the observed shifts in the participation rates from 1995-2004 is due to disparities in characteristics while differences in coefficients account for 109 percent of the shifts. |
| Keywords: | feminisation, labour force, decomposition analysis |
| JEL: | J21 J22 J16 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3119&r=dev |
| By: | Eliane Badaoui (THEMA, Université de Cergy-Pontoise); Eric Strobl (Ecole Polytechnique Paris and IZA); Frank Walsh (University College Dublin) |
| Abstract: | We estimate the wage penalty associated with working in the South African informal sector. To this end we use a rich data set on non-self employed males that allows one to accurately distinguish workers employed in the informal sector from those employed in the formal sector and link individuals over time. Implementing various econometric approaches we find that there is a gross wage penalty of a little over 18 per cent for working in the informal sector. However, once we reduce our sample to a group for which we can reasonably calculate earnings net of taxes and control for time invariant unobservables the wage penalty disappears. |
| Keywords: | informal sector, wage penalty, South Africa |
| JEL: | J31 O17 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3151&r=dev |
| By: | Philippe Aghion (Harvard University); Philippe Askenazy (Paris School of Economics and IZA); Renaud Bourlès (Université de la Méditerranée (GREQAM)); Gilbert Cette (Banque de France (DAMEP) and Université de la Méditerranée (CEDERS)); Nicolas Dromel (CREST-INSEE and Université Cergy-Pontoise (THEMA)) |
| Abstract: | This note investigates the effects of the education level, product market rigidities and employment protection legislation on growth. It exploits macro-panel data for OECD countries. For countries close to the technological frontier, education and rigidities are significantly related to TFP growth. The contribution of the interaction between product market regulation and labour market rigidity seems particularly substantial. |
| Keywords: | productivity, growth, regulations, market rigidities, education |
| JEL: | O47 J24 J68 L40 O57 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3166&r=dev |
| By: | David J. McKenzie (World Bank and IZA); Johan Mistiaen (World Bank) |
| Abstract: | Few representative surveys of households of migrants exist, limiting our ability to study the effects of international migration on sending families. We report the results of an experiment designed to compare the performance of three alternative survey methods in collecting data from Japanese-Brazilian families, many of whom send migrants to Japan. The three surveys conducted were 1) Households selected randomly from a door-to-door listing using the Brazilian Census to select census blocks; 2) A snowball survey using Nikkei community groups to select the seeds; and 3) An intercept point survey collected at Nikkei community gatherings, ethnic grocery stores, sports clubs, and other locations where family members of migrants are likely to congregate. We analyze how closely well-designed snowball and intercept point surveys can approach the much more expensive census-based method in terms of giving information on the characteristics of migrants, the level of remittances received, and the incidence and determinants of return migration. |
| Keywords: | migration, surveys, rare elements, intercept-point |
| JEL: | C42 O12 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3173&r=dev |
| By: | Eric V. Edmonds (Dartmouth College, NBER and IZA); Philip Salinger (Dartmouth College) |
| Abstract: | Why do young children migrate without a parent? We consider the economic components of the answer to this question by examining the correlates of out-migration for children under 15 whose mother's reside in Bihar and Uttar Pradesh, India. 1 million children appear to have migrated away from home in our data. On average 3 percent of living children 5-14 in our communities are away from home, but the fraction of out-migrant children ranges between 0 and 29 percent. We find that the data are consistent with a classical view of migration: children on average appear to migrate out of competitive, rural child labor markets for net financial gain. The costs of migration are important. Children are less likely to migrate from more remote locations. Children are less likely to migrate from locations where child wages are higher. Overall, patterns of child migration away from their mothers look similar to what other researchers have observed in adult populations in different social and economic contexts. |
| Keywords: | child labor, migration, India |
| JEL: | J82 O15 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3174&r=dev |
| By: | David McKenzie (World Bank, BREAD and IZA); Yaye Seynabou Sakho (World Bank) |
| Abstract: | This paper estimates the impact of registering for taxes on firm profits in Bolivia, the country with the highest levels of informality in Latin America. A new survey of micro and small firms enables us to control for a rich set of measures of owner ability and business motivations that can affect both profits and the decision to formalize. We identify the impact of tax registration on business profitability using the distance of a firm from the tax office where registration occurs, conditional on the distance to the city center, as an instrument for registration. Proximity to the tax office provides firms with more information about registration, but is argued to not directly affect profits. We find tax registration leads to significantly higher profits for the firms that the instrument affects. However, we also find evidence of heterogeneous effects of tax formality on profits. Tax registration is found to increase profits for the mid-sized firms in our sample, but to lower profits for both the smaller and larger firms, in contrast to the standard view that formality increases profits. We show that owners of large firms who have managed to stay informal are of higher entrepreneurial ability than formal firm owners, in contrast to the standard view (correct among smaller firms) that informal firm owners are low ability. |
| Keywords: | informal sector, entrepreneurial ability, tax registration |
| JEL: | O17 O12 D21 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3179&r=dev |
| By: | Gary S. Fields (Cornell University and IZA); Robert Duval-Hernández (CIDE and IZA); Samuel Freije (Universidad de las Américas); María Laura Sánchez Puerta (World Bank) |
| Abstract: | This paper examines changes in individual earnings during positive and negative growth periods in three Latin American economies: Argentina, Mexico, and Venezuela. We ask whether those individuals who start in the best economic position are those who experience the largest earnings gains or the smallest earnings losses; this is the "divergent mobility" hypothesis. We also compare periods of positive economic growth with those of negative economic growth, asking whether those groups of individuals that experience large positive earnings gains when the economy is growing are the same as those that experience large earnings losses when the economy is contracting; this is the "symmetry of mobility" hypothesis. We find very occasional support for the divergent mobility hypothesis in scattered years in the cases of Mexico and Venezuela, and no support at all in the case of Argentina. Rather, earnings mobility is most frequently convergent or neutral in all three countries. As for the symmetry of mobility hypothesis, we find that it is rejected in most cases; rather, those groups that gain the most when the economy is growing are also the ones that gain the most when the economy is contracting. Furthermore, we explain how the absence of divergence is compatible with rising inequality in the countries under study. |
| Keywords: | earnings mobility, income convergence, Latin America |
| JEL: | D31 J3 J6 O54 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3184&r=dev |
| By: | Eswar S. Prasad (Cornell University and IZA); Raghuram G. Rajan (University of Chicago); Arvind Subramanian (Peterson Institute for International Economics) |
| Abstract: | We document the recent phenomenon of "uphill" flows of capital from nonindustrial to industrial countries and analyze whether this pattern of capital flows has hurt growth in nonindustrial economies that export capital. Surprisingly, we find that there is a positive correlation between current account balances and growth among nonindustrial countries, implying that a reduced reliance on foreign capital is associated with higher growth. This result is weaker when we use panel data rather than cross-sectional averages over long periods of time, but in no case do we find any evidence that an increase in foreign capital inflows directly boosts growth. What explains these results, which are contrary to the predictions of conventional theoretical models? We provide some evidence that even successful developing countries have limited absorptive capacity for foreign resources, either because their financial markets are underdeveloped, or because their economies are prone to overvaluation caused by rapid capital inflows. |
| Keywords: | North-South capital flows, financial globalization |
| JEL: | F3 F4 E2 O4 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3186&r=dev |
| By: | Carmen Pagés (Inter-American Development Bank and IZA); Marco Stampini (Sant’ Anna School of Advanced Studies) |
| Abstract: | This paper assesses labor market segmentation across formal and informal salaried jobs and self-employment in three Latin American and three transition countries. It looks separately at the markets for skilled and unskilled labor, inquiring if segmentation is an exclusive feature of the latter. Longitudinal data are used to assess wage differentials and mobility patterns across jobs. To study mobility, the paper compares observed transitions with a new benchmark measure of mobility under the assumption of no segmentation. It finds evidence of a formal wage premium relative to informal salaried jobs in the three Latin American countries, but not in transition economies. It also finds evidence of extensive mobility across these two types of jobs in all countries, particularly from informal salaried to formal jobs. These patterns are suggestive of a preference for formal over informal salaried jobs in all countries. In contrast, there is little mobility between self-employment and formal salaried jobs, suggesting the existence of barriers to this type of mobility or a strong assortative matching according to workers’ individual preferences. Lastly, for both wage differentials and mobility, there is no statistical difference across skill levels, indicating that the markets for skilled and unskilled labor are similarly affected by segmentation. |
| Keywords: | labor mobility, segmentation, barriers to entry, skills, informality, Latin America, transition economies |
| JEL: | J21 J24 J31 J63 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3187&r=dev |
| By: | Marcos Chamon (International Monetary Fund); Eswar Prasad (Cornell University and IZA) |
| Abstract: | From 1995 to 2005, the average urban household saving rate in China rose by 8 percentage points, to about one quarter of disposable income. We use household-level data to explain why households are postponing consumption despite rapid income growth. Tracing cohorts over time indicates a virtual absence of consumption smoothing over the life cycle. The age profile of savings has an unusual U-shaped pattern, with saving rates being the highest among the youngest and oldest households. We find that financial underdevelopment, as reflected in constraints on borrowing and low returns on financial assets, partially accounts for this pattern. Moreover, overall saving rates have increased across all demographic groups. We argue that this can be explained by the rising private burden of expenditures on housing, education, and health care. |
| Keywords: | household savings, age and cohort profiles of savings, borrowing constraints, precautionary savings, financial development, demographics |
| JEL: | D12 E21 O16 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3191&r=dev |
| By: | Azumendi, Sebastian Lopez; Diop, Makhtar; Guasch, Jose Luis; Andres, Luis |
| Abstract: | This paper focuses on an evaluation and benchmarking of the governance of regulatory agencies in the electricity sector in Latin American Countries (LAC). Using a unique database, we develop an index of regulatory governance and rank all the agencies in the LAC countries. The index is an aggregate number of the evaluation of four key governance characteristics: autonomy, transparency, accountability, and regulatory tools, including not only formal aspects of regulation but also indicators related to actual implementation. Based on 18 different indexes, we analyze the positions of agencies with regard to different aspects of their regulatory governance, considering not only performance in each variable but also scores in the different components of each category. This evaluation allows for the identification of particular country shortcomings regarding governance, and indicates needed improvements. Although the region shows an overall good governance design of their regulatory agencies, the implementation of the independent regulator model still faces several challenges. This is particularly evident in political autonomy and in the informal aspects of governance, where the region shows the largest number of countries with the lowest scores. Trinidad and Tobago and Brazil show the best results and Ecuador, Honduras, and Chile the poorest performances. The rest of the countries vary according to the different indexes. We give each governance variable equal weights and positively test the robustness of our approach using Principal Component Analysis. |
| Keywords: | National Governance,Governance Indicators,Public Sector Corruption & Anticorruption Measures,Country Strategy & Performance,Banks & Banking Reform |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4380&r=dev |
| By: | Medvedev, Denis; Bussolo, Maurizio |
| Abstract: | This paper summarizes the policy lessons from applications of the Maquette for MDG Simulations (MAMS) model to two low income countries: Ghana and Honduras. Results show that costs of MDGs achievement could reach 10-13 percent of GDP by 2015, although, given the observed low productivity in the provision of social services, significant savings may be realized by improving efficiency. Sources of financing also matter: foreign aid inflows can reduce international competitiveness through real exchange appreciation, while domestic financing can crowd out the private sector and slow poverty reduction. Spending a large share of a fixed budget on growth-enhancing infrastructure may mean sacrificing some human development, even if higher growth is usually associated with lower costs of social services. The pursuit of MDGs increases demand for skills: while this encourages higher educational attainments, in the short term this could lead to increased income inequality and a lower poverty elasticity of growth. |
| Keywords: | Population Policies,,Achieving Shared Growth,Public Sector Economics & Finance,Public Sector Expenditure Analysis & Management |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4383&r=dev |
| By: | Page, John; Arbache, Jorge Saba |
| Abstract: | Low and highly volatile growth define Africa ' s growth experience. But there is no evidence that growth volatility is associated to long term economic performance. This result may be misleading if it suggests that volatility is not important for economic and social progress. In this paper we use a variant of the method developed by Hausmann, Pritchett, and Rodrik (2005) to identify both growth acceleration and deceleration episodes in Africa between 1975 and 2005. The authors find that Africa has had numerous growth acceleration episodes in the last 30 years, but also nearly a comparable number of growth collapses, offsetting most of the benefits of growth. Had Africa avoided its growth collapses, it would have grown 1.7 percent a year instead of 0.7 percent, and its GDP per capita would have been more than 30 percent higher in 2005. The authors also find that growth accelerations and decelerations have an asymmetric impact on human development outcomes. Finally, our results suggest that it is easier to identify the likely institutional and policy origins of growth decelerations than of growth accelerations. |
| Keywords: | Governance Indicators,Achieving Shared Growth,Economic Conditions and Volatility,Economic Growth,Nutrition |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4384&r=dev |
| By: | Ravallion, Martin |
| Abstract: | Policy-oriented discussions often assume that " better targeting " implies larger impacts on poverty or more cost-effective interventions. The literature on the economics of targeting warns against that assumption, but evidence has been scarce. The paper begins with a critical review of the strengths and weaknesses of the targeting measures found in practice. It then exploits an unusually large micro data set for China to estimate aggregate and local-level poverty impacts of the country ' s main urban antipoverty program. Standard measures of targeting are found to be uninformative, or even deceptive, about impacts on poverty and cost-effectiveness in reducing poverty. In program design and evaluation, it would be better to focus directly on the program ' s outcomes for poor people than to rely on prevailing measures of targeting. |
| Keywords: | Services & Transfers to Poor,Poverty Monitoring & Analysis,Population Policies,Poverty Impact Evaluation,Poverty Reduction Strategies |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4385&r=dev |
| By: | Thomas, Duncan; Friedman, Jed |
| Abstract: | The 1997 Indonesian financial crisis resulted in severe economic dislocation and political upheaval, and the detrimental consequences for economic welfare, physical health, and child education have been previously established in numerous studies. We also find the crisis adversely impacted population psychological well-being. We document substantial increases in several different dimensions of psychological distress among male and female adults across the entire age distribution over the crisis period. In addition, the imprint of the crisis can be seen in the differential impacts of the crisis on low education groups, the rural landless, and residents in those provinces that were hit hardest by the crisis. Elevated levels of psychological distress persist even after indicators of economic well-being such as household consumption had returned to pre-crisis levels suggesting long-term deleterious effects of the crisis on the psychological well-being of the Indonesian population. |
| Keywords: | Health Monitoring & Evaluation,Disease Control & Prevention,Gender and Health,Population Policies,Health Systems Development & Reform |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4386&r=dev |
| By: | van der Mensbrugghe, Dominique; Medvedev, Denis; E. De Hoyos, Rafael; Bussolo, Maurizio |
| Abstract: | Over the past 20 years, aggregate measures of global inequality have changed little even if significant structural changes have been observed. High growth rates of China and India lifted millions out of poverty, while the stagnation in many African countries caused them to fall behind. Using the World Bank ' s LINKAGE global general equilibrium model and the newly developed Global Income Distribution Dynamics (GIDD) tool, this paper assesses the distribution and poverty effects of a scenario where these trends continue in the future. Even by anticipating a deceleration, growth in China and India is a key force behind the expected convergence of per-capita incomes at the global level. Millions of Chinese and Indian consumers will enter into a rapidly emerging global middle class-a group of people who can afford, and demand access to, the standards of living previously reserved mainly for the residents of developed countries. Notwithstanding these positive developments, fast growth is often characterized by high urbanization and growing demand for skills, both of which result in widening of income distribution within countries. These opposing distributional effects highlight the importance of analyzing global disparities by taking into account - as the GIDD does - income dynamics between and within countries. |
| Keywords: | Inequality,Economic Theory & Research,,Emerging Markets,Achieving Shared Growth |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4392&r=dev |
| By: | E. Valladares, Elio; Ernesto Lopez-Cordova, J.; Gonzalez, Alvaro |
| Abstract: | This pap er measures the extent to which firms in developing countries are the target of bribes. Using new firm-level survey data from 33 African and Latin American countries, we first show that perceptions adjust slowly to firms ' experience with corrupt officials and hence are an imperfect proxy for the true incidence of graft. We then construct an experience-based index that reflects the probability that a firm will be asked for a bribe in order to complete a specified set of business transactions. On average, African firms are three times as likely to be asked for bribes as are firms in Latin America, although there is substantial variation within each region. Last, we show that graft appears to be more prevalent in countries with excessive regulation and where democracy is weak. In particular, our results suggest that the incidence of graft in Africa would fall by approximately 85 percent if countries in the region had levels of democracy and regulation similar to those that exist in Latin America. |
| Keywords: | Public Sector Corruption & Anticorruption Measures,Corruption & Anitcorruption Law,Crime and Society,E-Business,Access to Finance |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4394&r=dev |
| By: | Bhattacharya, Soma; Cropper, Maureen |
| Abstract: | This paper describes the role of public transport and the nature and incidence of transport subsidies in Mumbai, India. Mumbai has an extensive rail and bus network, and public transport is used for over 75 percent of all motorized trips in Greater Mumbai. Both rail and bus fares in Mumbai are subsidized: BEST, which operates public buses in Mumbai, is also an electric utility, and subsidizes bus fares from electricity revenues. We analyze the incidence of these subsidies, and their effect on mode choice, using data from a survey of households in Greater Mumbai. In Mumbai, as in many cities, the middle class is more likely to use public transport for travel than the poor. The poor, however, also use public transit, and their expenditure on public transit constitutes, on average, a larger share of their income than it does for the middle class. It is, therefore, the case that the poor benefit from transit subsidies in Mumbai, as well as the middle and upper-middle classes; however, the poorest 27 percent of the population receives only 19 percent of bus subsidies and 15.5 percent of rail subsidies. Indeed, 26 percent of the lowest income households surveyed do not use rail, while 10 percent do not use bus, implying that they receive no transit subsidies. Expenditure on transpo rt accounts for 16 percent of income in the lowest income category ( < 5000 Rs./month), with 10 percent of income, on average, spent on bus and rail fares. This percentage, however, is not evenly distributed: it is much higher than 10 percent for households in which workers take the bus or train to work, and lower for households in which the main earner walks to work. Even in these households, however, 12.5 percent of income is spent on transportation. Expenditure on public transport would be even higher if bus fares in Mumbai were not subsidized. In 2005-2006, transport revenues of BEST fell below total costs by 30 percent and below operating costs by 20 percent. Rail fares, which are much lower than bus fares per km traveled, officially covered operating costs and almost covered depreciation expenses. |
| Keywords: | Transport Economics Policy & Planning,Transport in Urban Areas,Urban Transport,Roads & Highways, |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4395&r=dev |
| By: | Gooptu, Sudarshan; Ianchovichina, Elena |
| Abstract: | This paper uses a growth diagnostics approach à la Hausmann, Rodrik, and Velasco (HRV) to identify the most ' binding ' constraints to private sector growth in Mongolia - a small, low-income, mineral-rich, transition economy. The approach of applying the HRV methodology is useful in those cases where a lack of data prevents us from estimating shadow prices to identify the most ' binding ' constraint to growth. We find that although Mongolia is not liquidity constrained and has grown rapidly in recent years, economic growth has been narrowly based. Investment has flowed mainly into a small number of firms operating in mining and construction. The low level of private investment in sectors outside mining and construction has been due to low returns - a result of costly and unreliable transportation services; lengthy and complex transit proc edures, including customs and trade rules; distortionary taxes; coordination failures, at both domestic and international levels; and growing corruption. Poor financial intermediation is also a problem that has kept the cost of finance high, although lower than in previous years. Alleviating these binding constraints will ensure that Mongolia maintains the path towards sustained, broad-based growth. |
| Keywords: | Transport Economics Policy & Planning,Debt Markets,Economic Theory & Research,,Emerging Markets |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4396&r=dev |
| By: | Elbadawi, Ibrahim A.; Bodea, Cristina |
| Abstract: | The most influential recent work on the determinants of civil wars found the factors associated with the grievance motivation to be largely irrelevant. Our paper subjects the results of this empirical work to further scrutiny by embedding the study of civil war in a more general analysis of varieties of violent contestation of political power within the borders of the state. Such an approach, we argue, will have important implications for how we think theoretically about the occurrence of domestic war as well as how we specify our empirical tests. In the empirical model, the manifestation of domestic conflict range from low intensity violence and coups to civil war. Our multinomial specification of domestic conflict supports the hypothesis that diversity accentuates distributional conflict and thus increases the risk of civil war. We also find that democracies may be more efficient than autocracies in reducing the risk of civil war. |
| Keywords: | Post Conflict Reconstruction,Population Policies,Social Conflict and Violence,Peace & Peacekeeping,Hazard Risk Management |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4397&r=dev |
| By: | Page, John; Arbache, Jorge Saba |
| Abstract: | Using the most recent purchasing power parity data for 44 sub-Saharan African countries, this paper examines the characteristics of long run growth in Africa between 1975 and 2005. The authors investigate the following issues: cross-country income structure, income convergence, the country level distribution of income, growth and income persistence, and formation of convergence clubs. |
| Keywords: | Economic Conditions and Volatility,Economic Theory & Research,Achieving Shared Growth,Economic Growth,Inequality |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4398&r=dev |
| By: | Fasih, Tazeen |
| Abstract: | This paper exploits a natural experiment approach to identify the impact of legislation (Employment of Children Act 1991) in Pakistan on participation of children in the labor markets. The law prohibits employment of children less than 14 years of age in sectors other than agriculture or household enterprises. With micro-data, making use of regression discontinuity data design, the study finds some evidence that the Employment of Children Act 1991 helped in reducing the employment of children immediately after its implementation. |
| Keywords: | Youth and Governance,Street Children,Children and Youth,Child Labor,Labor Policies |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4399&r=dev |
| By: | Wilson, John S.; Shepherd, Ben; Helble, Matthias |
| Abstract: | The authors show in this paper that increasing the transparency of the trading environment can be an important complement to traditional liberalization of tariff and non-tariff barriers. Our definition of transparency is grounded in a transaction cost analysis. The authors focus on two dimensions of transparency: predictability (reducing the cost of uncertainty) and simplification (reducing information costs). Using the Asia Pacific Economic Cooperation (APEC) member economies as a case study, the authors construct indices of importer and exporter transparency for the region from a wide range of sources. Our results from a gravity model suggest that improving trade-related transparency in APEC could hold significant benefits by raising intra-APEC trade by proximately USD 148 billion or 7.5 pecent of baseline trade in the region. |
| Keywords: | Economic Theory & Research,Free Trade,Emerging Markets,Debt Markets,Trade Policy |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4401&r=dev |
| By: | Das, Maitreyi Bordia; Blunch, Niels-Hugo |
| Abstract: | Using a recent household survey for two cohorts of married women, this paper examines norms about gender equality in education for children and adults. Among the main findings are that gender education gap norms have changed: younger generations of women are more positive about female vs. male education, both as pertaining to child and adult education outcomes. Perhaps the strongest result is that Bangladeshi women are more likely to espouse attitudes of gender equalit y in education for their children and less so about gender equality among spouses. It is also easier to explain norms regarding children ' s education and more difficult to explain norms about equality in marriages. The authors believe that question on relative education of boys and girls captures the value of education per se, while the question on educational equality in marriage captures the norms regarding marriage and the relative worth of husbands and wives. The effect of education in determining norms is significant though complex, and spans own and spousal education, as well as that of older females in the household. This indicates sharing of education norms effects or externalities arising from spousal education in the production of gender education gap norms within marriage as well as arising from the presence of older educated females in the household. Lastly, the authors also find associations between gender education gap norms and household poverty, information processing and religion, though the evidence here is more mixed. |
| Keywords: | Gender and Development,Population Policies,Primary Education,Gender and Law,Access & Equity in Basic Education |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4404&r=dev |
| By: | Axel Dreher (KOF Swiss Economic Institute, ETH Zurich); Pierre-Guillaume Méon (University of Brussels, DULBEA, Belgium); Friedrich Schneider (Department of Economics, Johannes Kepler University of Linz, Austria) |
| Abstract: | This paper assesses the relationship between institutions, output, and productivity, when official output is corrected for the size of the shadow economy. Our results confirm the usual positive impact of institutional quality on official output and total factor productivity, and its negative impact on the size of the underground economy. However, once output is corrected for the shadow economy, the relationship between institutions and output becomes weaker. The impact of institutions on total (“corrected”) factor productivity even becomes insignificant. Differences in corrected output must then be attributed to differences in factor endowments. These results survive several tests for robustness. |
| Keywords: | shadow economy, income, aggregate productivity, development accounting |
| JEL: | O11 O17 O47 O5 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:07-179&r=dev |
| By: | Alice Nicole Sindzingre |
| Abstract: | The concepts of coordination and cooperation are widely used in economics, and particularly in game theory. They were also at the foundation of development economics at the time of WWII, with Paul Rosenstein-Rodan highlighting the existence of intersectoral spillovers effects, multiple equilibria and underdevelopment traps. These concepts returned to the forefront of development theory in the 1970s with the notions of coordination failure and poverty traps, as well as the research on social norms. One example was Samuel Bowles’ seminal concept of ‘institutional poverty traps’, i.e. highly inegalitarian institutions that persist even though they are inefficient. Membership institutions are of particular relevance in developing countries, and therefore in development economics. The paper explores the cognitive dimensions of coordination failures and institutional traps; it reveals that local institutions in developing countries may be efficient and examines the conditions in which norms create poverty traps, in particular membership norms. Firstly, it is argued that institutions and norms are key causes of the formation and persistence of poverty traps. Institutions and norms are complex cognitive devices, some beliefs and norms appear to be particularly resilient and difficult to revise. Secondly, it is shown that no particular institutional form is ex ante a cause of poverty traps: depending on contexts, the same institutional forms can be efficient or inefficient. It is the combination of multiple elements – economic and political environment, and social norms - that create thresholds effects and entrap groups into low equilibria. Thirdly, it is argued that the norms that organise group membership, because they involve beliefs that are difficult to revise, are typical factors of poverty traps. |
| Keywords: | Poverty traps, coordination failures, social norms |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2007-26&r=dev |
| By: | Rao, B. Bhaskara; Singh, Rup |
| Abstract: | The Solow growth model is extended with an endogenous growth framework to estimate the effects of trade openness on the steady state growth rate (SSGR). Estimates of the augmented production functions are used to compute the SSGRs for Singapore, Malaysia, Hong Kong, India and Thailand. That good policies increase the growth effects of openness is also tested with an interactive term. Our results show that Singapore has the highest SSGR of 2.75%, followed by Hong Kong and Thailand with 2.5%. India and Malaysia have lower SSGRs of 1.7% and 0.5% respectively. |
| Keywords: | Exogenous and Endogenous Growth; Trade Openness; Steady State Growth Rate; Country Specific Estimates with Time Series Data; Asian Countries |
| JEL: | O33 |
| Date: | 2007–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5851&r=dev |
| By: | Suman Ghosh (Department of Economics, College of Business, Florida Atlantic University); Eric Van Tassel (Department of Economics, College of Business, Florida Atlantic University) |
| Abstract: | In this paper we develop a two period model of a credit market to study the interaction between a monopolistic moneylender and a subsidized microfinance institution. We assume that lenders face a moral hazard problem that is diminished as agents are able to take increased equity positions in their production projects. In this setting, we identify a range of subsidy levels for which the behavior of the moneylender complements the poverty reduction mission of the microfinance institution. We also explain why a policy of offering subsidized loans in the second period to agents who are poor due to a project failure in the prior period, does not distort agents’ incentives to work hard and save in the first period. By varying the subsidy level available to the microfinance institution we discover that for small subsidies the moneylender may be better off with the microfinance institution in the market, and that when subsidies are excessive this can harm the poverty reduction mission of the microfinance institution. |
| Keywords: | microfinance, poverty, moral hazard, contracts |
| JEL: | O12 G21 D86 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:fal:wpaper:07001&r=dev |
| By: | Pedro M. G. Martins (Visiting IPC Researcher, Institute for Development Studies, Sussex) |
| Abstract: | The main aim of this Working Paper is to assess the impact of foreign aid inflows on public expenditure, revenue and domestic borrowing in Ethiopia. The paper provides a literature overview of the fiscal effects of aid, and then applies a fiscal response model to Ethiopian data for the period 1964-2005. Since the empirical literature finds little evidence of common cross-country patterns, this highlights the important role that country-specific circumstances play in determining fiscal outcomes. By studying the particular fiscal dynamics in Ethiopia, the paper finds that foreign aid has had a positive impact on government investment, while its effect on current expenditure has been less pronounced. Moreover, by disaggregating aid inflows into grants and foreign lending, the paper is able to analyse their specific roles and impacts. The results support the conclusion that aid inflows increase public investment, with loans having a stronger impact than grants. Both aid grants and loans have a strong negative effect on domestic borrowing, suggesting that aid and domestic financing are close substitutes. Finally, the results also appear to support the hypothesis that higher aid flows displace domestic revenues. However, this particular finding does not seem to be robust across the sample. |
| Keywords: | Foreign Aid, Aid Effectiveness, Fiscal Response Literature, Ethiopia |
| JEL: | C51 F35 H30 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:wpaper:41&r=dev |
| By: | John Hudson; Paul Mosley (Department of Economics, The University of Sheffield) |
| Keywords: | aid volatility, disasters, trust |
| JEL: | O16 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2007015&r=dev |
| By: | Muhammad Akram (International Institute of Islamic Economics, International Islamic University, Islamabad.); Faheem Jehangir Khan (Pakistan Institute of Development Economics, Islamabad) |
| Abstract: | The study has been carried out to measure the incidence of government spending on education in Pakistan at the provincial (both rural and urban) level, using the primary data of the Pakistan Social Standard Living Measures Survey (PSLM), 2004-2005, and by employing the three-step Benefit Incidence Approach methodology. The paper reviews the national policies emphasising provision of education in Pakistan, as well as the trend in coverage and public sector spending on education facilities in Pakistan. The study examines the inequalities in resource distribution and service provision in relation to the government education expenditure. The rural areas of Pakistan are the more disadvantaged in the provision of the education facilities. Overall, the expenditure on the education sector is progressive, both at the regional and the provincial levels. However, variation exists in the shares of different income groups’ benefit from the provision of educational facilities created by public expenditure. |
| Keywords: | Education, Public Expenditure, Public Policy, Gini Coefficient, Concentration Coefficient, Benefit Incidence Approach |
| JEL: | H52 H53 I21 I22 I28 I38 O18 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pid:wpaper:2007:40&r=dev |
| By: | Cuong Le Van (Centre d'Economie de la Sorbonne, Universite Paris-1, France); Katheline Schubert (Université Paris 1 Panthéon-Sorbonne, CNRS, Paris School of Economics); Tu Anh Nguyen (Centre d'Economie de la Sorbonne, Universite Paris-1, France) |
| Abstract: | This paper studies the optimal growth of a developing non-renewable natural resource producer, which extracts the resource from its soil, and produces a single consumption good with man-made capital. Moreover, it can sell the extracted resource abroad and use the revenues to buy an imported good, which is a perfect substitute of the domestic consumption good. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We study the optimal extraction and depletion of the exhaustible resource, and the optimal paths of accumulation of capital and of domestic consumption. We show that the extent to which the country will optimally escape from the poverty trap and the exhaustible resource will be a blessing depends on the characteristics of its technology and of the revenues from the resource function, on its impatience, on the level of its initial stock of capital, and on the abundance of the natural resource. If the marginal productivity of capital at the origin is greater than the sum of the social discount rate and the depreciation rate, the country will accumulate capital along the entire growth path, and will escape from the poverty trap, whatever its initial stocks of capital and resource, and provided that the marginal revenue obtained from the exportation of the resource is finite at the origin. On the contrary, if the marginal productivity of capital is lower than the depreciation rate whatever the level of capital, and if moreover the initial stock of capital is small, then the country will never accumulate; it will consume the revenues obtained from selling abroad the extracted resource, until there is no resource left and the economy collapses. We also show that any optimal path may be decentralized in a competitive equilibrium by using a tax/subsidy scheme for firms. |
| Keywords: | Optimal growth, Exhaustible resource, Convex-concave technology, Poverty trap, Competitive equilibrium with tax/subsidy |
| JEL: | Q32 C61 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:dpc:wpaper:1507&r=dev |
| By: | Sushanta Mallick; Tomoe Moore |
| Abstract: | Within the mechanism of endogenous growth, this paper empirically investigates the impact of financial capital on economic growth for a panel of 60 developing countries, through the channel of domestic capital formation. By estimating the model for different income groups, it is found that while private FDI flows exert beneficial complementarity effects on the domestic capital formation across all income-group countries, the official financial flows contribute to increasing investment in the middle income economies, but not in the low income countries. The latter appears to demonstrate that the aid-growth nexus is supported in the middle income countries, whereas the misallocation of official inflows is more likely to exist in the low income countries, suggesting that aid effectiveness remains conditional on the domestic policy environment. |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:cgs:wpaper:5&r=dev |
| By: | T. Krishna Kumar; Sushanta Mallick; Jayarama Holla |
| Abstract: | This paper assesses deprivation in India employing a measure proposed by Sitaramam and using consumption data at the household level. As cereals constitute a staple food and form a major portion of expenditure on food, the deprivation measure considered here is deprivation in cereal consumption. The total expenditure at which the Engel curve for cereals turns from concave to convex is taken as the cut-off to determine the deprived households. It is shown that cereal deprivation at the all-India level exhibits a declining trend over the period 1987-88 and 1999-2000, in the rural sector, while there is little change in the urban sector. Further, this decline in cereal deprivation seems to have been slowing down during the reform period. The estimates of deprivation are poorly correlated with the HCI and PGI at state level, both in rural and urban sectors. They, however, have better temporal correlations with those poverty measures. We offer some explanation for these observed differences in alternate deprivation indices. The trends in cereal deprivation are accompanied in some cases by a decline, in real terms, in maximum cereal consumption of each group of consumers. Whether this is an improvement or otherwise of the living standards of the poor, must await further analysis of per capita food consumption in general, with an analysis of prices and quantities of various food items. It is hoped that this kind of study on deprivation of essential commodities may increase our understanding of poverty, and even suggest direct intervention strategies. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:cgs:wpaper:7&r=dev |