nep-dev New Economics Papers
on Development
Issue of 2007‒12‒01
forty-four papers chosen by
Jeong-Joon Lee
Towson University

  1. China and India in International Trade: from Laggards to Leaders? By Francoise Lemoine; Deniz Unal-Kesenci
  2. Export Diversification: What’s behind the Hump? By Cadot, Olivier; Carrère, Céline; Strauss-Kahn, Vanessa
  3. The other Europeans : inmigration into Latin America and the international labour market (1870-1930) By Blanca Sanchez Alonso
  4. Empowerment through technology: gender dimensions of social capital build-up in Maharashtra, India By Padmaja, Ravula; Bantilan, Cynthia
  5. Gender, Wealth, and Participation in Community Groups in Meru Central District, Kenya: By Kristin E. Davis; Martha Negash
  6. Farmer groups enterprises and the marketing of staple food commodities in Africa: By Coulter, Jonathan
  7. Routes of Infection: Exports and HIV Incidence in Sub-Saharan Africa By Emily Oster
  8. Foreign Capital and Economic Growth By Eswar S. Prasad; Raghuram G. Rajan; Arvind Subramanian
  9. Migration and Trade in a World of Technological Differences: Theory with an Application to Eastern-Western European Integration By Susana Iranzo; Giovanni Peri
  10. Human Rights and Human Development By Sakiko Fukuda-Parr
  11. The Productivity Effects of Privatization in Ukraine: Estimates from Comprehensive Manufacturing Firm Panel Data, 1989–2005 By J. David Brown; John S. Earle
  12. Fiscal policy, public expenditure composition, and growth theory and empirics By Rajaram, Anand; Rezai, Armon; Diallo, Bobo; Greiner, Alfred; Semmler, Willi
  13. Gauging the welfare effects of shocks in rural Tanzania By Sarris, Alexander; Hoffmann, Vivian; Christiaensen, Luc
  14. Bank privatization in Sub-Saharan Africa : the case of Uganda commercial bank By Fuchs, Michael; Cull, Robert; Clarke, George R.G.
  15. Reducing the transaction costs of development assistance Ghana ' s multi-donor budget support (MDBS) experience from 2003 to 2007 By Cavalcanti, Carlos
  16. Current debates on infrastructure policy By Fay, Marianne; Estache, Antonio
  17. Non-Performing Loans and Productivity in Chinese Banks: 1997-2006 By Matthews, Kent; Guo, Jianguang; Zhang, Nina
  18. Emperical Applications of Neoclassical Growth Models the "Fit" of the Solow Augmented Growth Model By Jalles, João Tovar
  19. Wages, Prices, and Living Standards in China,1738-1925: in comparison with Europe, Japan, and India By Robert Allen; Jean-Pascal Bassino; Debin Ma; Christine Moll-Murata; Jan Luiten van Zanden
  20. Inflation and Financial Development: Evidence from Brazil By Bittencourt, Manoel
  21. Empirical Evidence on the New International Aid Architecture By Claessens, Stijn; Cassimon, Danny; Campenhout, Bjorn van
  22. Pesticides And Farmer Health In Nicaragua: A Willingness To Pay Approach By Garming, Hildegard; Waibel, Hermann
  23. Robust Multiperiod Poverty Comparisons By Gräb, Johannes; Grimm, Michael
  24. Measuring Chronic Non-Income Poverty By Günther, Isabel; Klasen, Stephan
  25. The impact of Inequality on Economic Growth: Evidence for Mexico 1895-1994 By Gutiérrez-Romero, Roxana
  26. A Human Development Index by Income Groups By Grimm, Michael; Harttgen, Kenneth; Klasen, Stephan; Misselhorn, Mark
  27. Fiscal Decentralization, Chinese Style: Good for Health Outcomes? By Uchimura, Hiroko; Jütting, Johannes P.
  28. Forced to Freedom? Empirical relations between aid and economic freedom By Knedlik, Tobias; Kronthaler, Franz
  29. Boda-bodas1 Rule: Non-agricultural Activities and Their Inequality Implications in Western Kenya By Lay, Jann; M'Mukaria, George Michuki; Mahmoud, Toman Omar
  30. Trade, Productivity and Institutional Quality: Issues and Empirics By Martínez-Zarzoso, Inmaculada; Doyle, Eleanor
  31. Rural Nonfarm Employment and Incomes in the Eastern Himalayas By Micevska, Maja; Rahut, Dil Bahadur
  32. The Impact of Political Risk on Sovereign Bond Spreads: Evidence from Latin America By Moser, Christoph
  33. Does Inequality Harm Income Mobility and Growth? An Assessment of the Growth Impact of Income and Education Inequality in Paraguay 1992 – 2002 By Otter, Thomas
  34. Does it Make a Difference? Comparing Growth Effects of European and North American FDI in Latin America By Prüfer, Patricia; Tondl, Gabriele
  35. Household Risk Management in Rural and Urban Thailand By Rungruxsirivorn, Ornsiri
  36. Incentive Effects of Transfers within the Extended Family: The Case of Indonesia By Schueler, Dana
  37. Perspectives on the World Income Distribution: Beyond Twin Peaks Towards Welfare Conclusions By Holzmann, Hajo; Vollmer, Sebastian; Weisbrod, Julian
  38. Changes in Determinants of Poverty and Inequality during Transition: Household Survey Evidence from Ukraine By Brück, Tilman; Danzer, Alexander M.; Muravyev, Alexander; Weißhaar, Natalia
  39. Conflict and Production: An Application to Natural Resources By Wick, Katharina
  40. Solow (1956) as a Model of Cross-Country Growth Dynamics By McQuinn, Kieran; Whelan, Karl
  41. Life of elderly in India By prasad, syam
  42. Property Tax in Urban China By Dan Li; Shunfeng Song
  43. Urban Poor in China: A Case Study of Changsha By Erqian Zhu; Shunfeng Song
  44. Initial Factors Behind The Third Wave of Democratization By Elias Papaioannou; Gregorios Siourounis

  1. By: Francoise Lemoine; Deniz Unal-Kesenci
    Abstract: China and India are demographic giants which have become big economic powers before getting rich. Their rise in international trade has created two symmetric shocks, on the supply of manufactured goods and the demand of primary goods, contributing to a reversal in world relative prices. They have kept traditional specialisation in textiles but have developed new outward-oriented sectors linked to new technology. Foreign firms, through offshoring and outsourcing, have played a critical part in turning China into a global export platform for electronic products, and India into a global centre for ICT services. Beyond the question of their technological catch-up, the challenge is now their quality upgrading, especially for China. In the two countries, there is a debate about the necessary changes to make long term growth sustainable. Their successful integration in world trade has not solved the problem of their overall oversupply of labour, but has accentuated the shortage of highly-skilled personnel.
    Keywords: China; India; foreign trade; technology; terms of trade
    JEL: F14 F15
    Date: 2007–11
  2. By: Cadot, Olivier; Carrère, Céline; Strauss-Kahn, Vanessa
    Abstract: The paper explores the evolution of export diversification patterns along the economic development path. Using a large database with 159 countries over 17 years at the HS6 level of disaggregation (4’998 product lines) we look for action at the “intensive” and “extensive” margins (diversification of export values among active product lines and by addition of new product lines respectively) using various export concentration indices and the number of active export lines. We also look at new product introduction as an indicator of “export-entrepreneurship”. We find a hump-shaped pattern of export diversification similar to what Imbs and Wacziarg (2003) found for production and employment. Low and Middle income countries diversify mostly along the extensive margin whereas high income countries diversify along the intensive margin and ultimately re-concentrate their exports towards fewer products. Such hump-shaped pattern is consistent with the conjecture that countries travel across diversification cones as discussed in Schott (2003, 2004) and Xiang (2007).
    Keywords: Export diversification; International trade; Latin America
    JEL: F1 O11
    Date: 2007–11
  3. By: Blanca Sanchez Alonso
    Abstract: Not all Europeans migrated to the United States. Between 1879 and 1930 13 million of Europeans went to Latin America; however, Latin America is not fully incorporated into current debates on the cost and benefits from Atlantic migration. This paper surveys Latin America immigration experience since the late nineteenth century to 1930. It assesses inferences about European migrants in Latin America derived from the experience of migrants in the United States and questions its validity. The topics covered here include migration trends and chronology, national origin of the flows and the evolution of real wages. New data on the cost of passages for transatlantic migration is also presented. This is followed by an examination of the immigrants’ contribution to economic growth in Latin America dealing basically with the issue of human capital brought in by European immigrants. The extent to which immigrants alter the composition of the labour force and the demographic structure, both in the short and the long run is also examined. A final section concludes with some new avenues for future research.
    Date: 2007–11
  4. By: Padmaja, Ravula; Bantilan, Cynthia
    Abstract: "This paper explores how and to what extent women and men have benefited from the build-up of social capital in technology uptake, and the role of women in this process. Using a case study on Groundnut Production Technology (GPT) in Maharashtra, India, a systematic documentation of the process by which farmers – both men and women - as well as the whole community became empowered through the build-up of social capital is presented. The focus of the paper is on collective action as a mechanism to stimulate gender-equitable change processes. Our evidence suggests that the technology uptake process was enhanced with the build up of social capital, whereby men and women from all class and caste groups came together for improving their livelihoods. Collective action was enhanced with the increased involvement and participation of women. Strong kinship ties were developed among diverse classes all over the village including landless tribal women, who formed the major labor force for this technology. The paper concludes that social networks played a crucial mediating role in the process of technology uptake. The build-up of social capital played an important role in influencing impacts from the technology because of the ways in which social networks and social relationships facilitated technology dissemination. Gender relations played a significant role in mediating the translation of economic benefits into well being of the individual, the family and community. Finally, it is suggested that further insights into the role of social networks and power relations in the village may be examined in greater detail by establishing the village network architecture, especially marginalized groups." Author's Abstract
    Keywords: Empowerment, Technology adoption, Agricultural growth, Agricultural technology, Gender, Social capital buildup, Social networks, Impact, Collective action,
    Date: 2007
  5. By: Kristin E. Davis; Martha Negash
    Abstract: "TA mixed-methods, multiple-stage approach was used to obtain data on how gender and wealth affected participation in community groups in Meru, Kenya, and how men and women farmers obtain and diffuse agricultural information. Research techniques included participant observation, documentary analysis, semi-structured interviews, social mapping, group timelines, and structured questionnaires. Dairy-goat farmer groups were interviewed for the study. Qualitative data provided baseline information, and helped in the formulation of research questions. Quantitative data were analyzed using contingency tables, descriptive statistics, correlations, tests of significance, and regression. Factors that affected participation in different types of groups included household composition, age, and gender. Women made up 59 percent of the dairy-goat group (DGG) members, with the DGG project encouraging women's participation. Women made up 76 percent of DGG treasurer positions; 43 percent of secretary positions, and 30 percent of chairperson positions. Gender also influenced participation in clan groups, water groups, and merry-go-round (savings and loans) groups. Wealth did not appear to have a significant effect on participation in community groups. Extension was the most important information source for both men and women farmers. However, church and indigenous knowledge (passed on from parents) seemed more important to women. Both men and women mentioned other farmers, groups, and “baraza” (public meetings used to make announcements and diffuse information) as important information sources, but they rated them at different levels of importance. Men were diffusing information to greater numbers of people than women, although men and women diffused to similar sources. This study shows that because men and women traditionally participate in different types of groups and receive agricultural information from different sources, development agencies must target different types of groups and institutions to reach men, women, or poor farmers. Mechanisms should be developed to include women, the poor, and other targeted groups in community associations that provide market and other income-earning opportunities.." Author's Abstract
    Keywords: Gender, Collective action,
    Date: 2007
  6. By: Coulter, Jonathan
    Abstract: "There are some apparently successful cases of collective marketing with staple food commodities (grains and root crops), but these are less common than cases involving higher value agricultural products. These can be attributed to the benefit/cost ratio to participants being generally higher for collective marketing of the higher-value crops. Some of the costs are ‘hidden', in the sense that they are borne by individuals in time spent in attending meetings, and not shown in the financial statements of the enterprises concerned. Examining a series of cases, the paper advocates an approach to the marketing of staples which involves analyzing the value chain and identifying those activities which on the one hand, best lend themselves to individual initiative, and those where on the other hand, group approaches are more likely to prosper. Dual purpose food marketing involving village storage in anticipation of both external market opportunities and local lean season shortages usually falls into the former category. Collective initiatives have a higher probability of success when they complement agricultural intensification and involve bulking substantial quantities of produce for quality-conscious commercial buyers. Prospects for successful collective marketing are moreover greater where there is a history of collective endeavor, where focused on simple activities like bulking and distribution of inputs, where primary groups are small and homogenous in terms of interests and objectives, where they can establish lasting relationships with strong trade counterparties, where supported by effective training (especially re attitudes, numeracy, and business skills), where they can access effectively managed storage and inventory credit services, and where there is framework of law enforcement. The immediate poverty alleviation and programmatic priorities of funding agencies often undermine the effectiveness of promotional activities in support of collective marketing. This problem may be addressed by instituting systems of independent review and peer review processes, and involving open discussion of pros and cons of individual and collective approaches." authors' abstract
    Keywords: Collective marketing, Producer organization, Staple food, Village storage, Inventory credit, Microfinance, Disbursement-driven,
    Date: 2007
  7. By: Emily Oster
    Abstract: I generate new data on HIV incidence and prevalence in Africa based on inference from mortality rates. I use these data to relate economic activity (specifically, exports) to new HIV infections in Africa and argue there is a significant and large positive relationship between the two: a doubling of exports leads to as much as a quadrupling in new HIV infections. This relationship is consistent with a model of the epidemic in which truckers and other migrants have higher rates of risky behavior, and their numbers increase in periods with greater exports. I present evidence suggesting that the relationship between exports and HIV is causal and works, at least in part, through increased transit. The result has important policy implications, suggesting (for example) that there is significant value in prevention focused on these transit oriented groups. I apply this result to study the case of Uganda, and argue that a decline in exports in the early 1990s in that country appears to explain between 30% and 60% of the decline in HIV infections. This suggests that the success of the Ugandan anti-HIV education campaign, which encouraged changes in sexual behavior, has been overstated.
    JEL: F13 I12 J1 O24
    Date: 2007–11
  8. By: Eswar S. Prasad; Raghuram G. Rajan; Arvind Subramanian
    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.
    JEL: E2 F3 F4 O4
    Date: 2007–11
  9. By: Susana Iranzo; Giovanni Peri
    Abstract: Two prominent features of globalization in recent decades are the remarkable increase in trade and in migratory flows between industrializing and industrialized countries. Due to restrictive laws in the receiving countries and high migration costs, the increase in international migration has involved mainly highly educated workers. During the same period, technology in developed countries has become progressively more skill-biased, increasing the productivity of highly educated workers more than less educated workers. This paper extends a model of trade in differentiated goods to analyse the joint phenomena of migration and trade in a world where countries use different skill-specific technologies and workers have different skill levels (education). We calibrate the model to match the features of the Western European countries (EU-15) and the new Eastern European members of the EU. We then simulate the effects of freer trade and higher labor mobility between the two regions. Even in a free trade regime the removal of the restrictions on labor movements would benefit Europe as a whole by increasing the GNP of Eastern and Western Europe. Interestingly, we also find that the resulting skilled migration (the so-called "brain drain") from Eastern European countries would not only benefit the migrants but, through trade, could benefit the workers remaining in Eastern Europe as well.
    JEL: F16 F22 J31 J61 O52
    Date: 2007–11
  10. By: Sakiko Fukuda-Parr (The New School)
    Abstract: .
    Date: 2007–11
  11. By: J. David Brown (Heriot-Watt University); John S. Earle (W.E. Upjohn Institute for Employment Research and Central European University)
    Abstract: This paper estimates the effect of domestic and foreign privatization on multifactor productivity (MFP) using long panel data for nearly the universe of initially state-owned manufacturing firms in Ukraine. The longitudinal dimension of the data is used to measure and control for pre-privatization selection bias and to estimate long-run impacts. The data imply steadily increasing MFP as a result of domestic privatization, reaching about 25 percent relative to state-owned firms after six years. Until recently, Ukraine has had relatively few cases of privatization to foreign investors, and estimates of the MFP impact are more sensitive to controls for selection bias, but the results suggest foreign privatization produces a productivity advantage of about 40 percent in 2004–2005.
    Keywords: productivity, privatization, selection bias, foreign ownership, Ukraine
    JEL: D21 G34 J23 J31 L33 P31
    Date: 2007–05
  12. By: Rajaram, Anand; Rezai, Armon; Diallo, Bobo; Greiner, Alfred; Semmler, Willi
    Abstract: This paper responds to the development policy debate involving the World Bank and the IMF on the use of fiscal policy not only for economic stabilization but also to promote economic growth and increase per capita income. A key issue in this debate relates to the effect of the composition of public expenditure on economic growth. Policy makers and some researchers have argued that expenditure on growt h-enhancing functions could enhance future revenue and justify the provision of " fiscal space " in the budget. But there are no simple ways to identify the growth-maximizing composition of public expenditure. The current paper lays out a research strategy to explore the effects of fiscal policy, including the composition of public expenditure, on economic growth, using a time series approach. Based on the modeling strategy of Greiner, Semmler and Gong (2005) we develop a general model that features a government that undertakes public expenditure on (a) education and health facilities which enhance human capital, (b) public infrastructure such as roads and bridges necessary for market activity, (c) public administration to support government functions, (d) transfers and public consumption facilities, and (e) debt service. The proposed model is numerically solved, calibrated and the impact of the composition of public expenditure on the long-run per capita income explored for low-, lower-middle- and upper-middle-income countries. Policy implications and practical policy rules are spelled out, the extension to an estimable model indicated, a debt sustainability test proposed, and the out-of-steady-state dynamics studied.
    Keywords: Economic Theory & Research,Debt Markets,,Public Sector Expenditure Analysis & Management,Access to Finance
    Date: 2007–11–01
  13. By: Sarris, Alexander; Hoffmann, Vivian; Christiaensen, Luc
    Abstract: Studies of risk and its consequences tend to focus on one risk factor, such as a drought or an economic crisis. Yet 2003 household surveys in rural Kilimanjaro and Ruvuma, two cash-crop-growing regions in Tanzania that experienced a precipitous coffee price decline around the turn of the millennium, identified health and drought shocks as well as commodity price declines as major risk factors, suggesting the need for a comprehensive approach to analyzing household vulnerability. In fact, most coffee growers, except the smaller ones in Kilimanjaro, weathered the coffee price declines rather well, at least to the point of not being worse off than non-coffee growers. Conversely, improving health conditions and reducing the effect of droughts emerge as critical to reduce vulnerability. One-third of the rural households in Kilimanjaro experienced a drought or health shocks, resulting in an estimated 8 percent welfare loss on average, after using savings and aid. Rainfall is more reliable in Ruvuma, and drought there did not affect welfare. Surprisingly, neither did health shocks, plausibly because of lower medical expenditures given limited health care provisions.
    Keywords: Health Monitoring & Evaluation,Crops & Crop Management Systems,Access to Finance,Rural Poverty Reduction,
    Date: 2007–11–01
  14. By: Fuchs, Michael; Cull, Robert; Clarke, George R.G.
    Abstract: Previous empirical analyses have found that bank privatizations are more successful when the government fully relinquishes control, when the bank is privatized to a strategic investor, and when foreign-owned banks are allowed to participate in the bidding. The privatization of Uganda Commercial Bank (UCB) to the South African bank Stanbic met all these criteria, suggesting that it is a likely candidate for success. But other fe atures suggest reasons for caution: UCB dominated the Ugandan banking sector prior to privatization and the institutional environment in Uganda was less favorable than in many of the middle-income countries looked at in earlier empirical studies. Despite these concerns, the privatization appears to have been relatively successful. The portfolio of the privatized bank, which was cleaned prior to sale, remains relatively strong and profitability and credit growth are now on par with other Ugandan banks. Though market segmentation remains a concern since Stanbic faces little or no direct competition in many remote areas, some early results suggest that access to credit has improved for some hard-to-serve groups.
    Keywords: Banks & Banking Reform,Access to Finance,,Debt Markets,Emerging Markets
    Date: 2007–11–01
  15. By: Cavalcanti, Carlos
    Abstract: This paper examines whether the structure of the Multi-Donor Budget Support (MDBS) in Ghana evolved over time to minimize transaction costs commonly found in accessing and delivering development assistance in multi-donor settings. While the MDBS was expected to reduce the transaction costs involved in dealing with multiple development agencies, it created three additional sources of transaction costs: coordination failures, the costs of collective action, and measurement costs. The answer that emerges from this paper is that the structure of the MDBS evolved to mitigate these transaction costs. The problems associated with coordination was addressed by delegating the policy dialogue to sector-specific groups aimed at reaching agreements over a narrower set of issues and a mongst a smaller group of participants. Also, the MDBS reduced the cost of collective action by devising rules that allowed all the participating agencies to have a role in the decision-making process, and, in doing so, encouraged these agencies to increase the share of their contribution coming through the MDBS, rather than through large projects and off-budget disbursements. There was less success in reaching a settled view on how to reduce so-called measurement costs, however. While the group of development agencies made several attempts to overcome the difficulties in measuring progress in the program supported by the MDBS, it was not able to reach consensus on the extent to which the monitoring of the program should rely on outcome indicators. The Government did not favor the use of outcome indicators, and some development agencies placed greater emphasis on maintaining a dialogue around policy actions aimed at reaching the desired outcomes.
    Keywords: Economic Theory & Research,Debt Markets,Public Sector Expenditure Analysis & Management,,Development Economics & Aid Effectiveness
    Date: 2007–11–01
  16. By: Fay, Marianne; Estache, Antonio
    Abstract: This paper provides an overview of the major current debates on infrastructure policy. It reviews the evidence on the macroeconomic significance of the sector in terms of growth and poverty alleviation. It also discusses the major institutional debates, including the relative comparative advantage of the public and the private sector in the various stages of infrastructure service delivery as well as the main options for changes in the role of government (i.e. regulation and decentralization).
    Keywords: Transport Economics Policy & Planning,Public Sector Economics & Finance,Debt Markets,Non Bank Financial Institutions,Infrastructure Economics
    Date: 2007–11–01
  17. By: Matthews, Kent (Cardiff Business School); Guo, Jianguang; Zhang, Nina
    Abstract: This study examines the productivity growth of the nationwide banks of China over the ten years to 2006. Using a bootstrap method for the Malmquist index estimates of productivity growth are constructed with appropriate confidence intervals. The paper adjusts for the quality of the output by accounting for the non-performing loans on the balance sheets and test for the robustness of the results by examining alternative sets of outputs. The productivity growth of the state-owned banks is compared with the Joint-stock banks and it determinants evaluated. The paper finds that average productivity of the Chinese banks improved modestly over this period. Adjusting for the quality of loans, by treating NPLs as an undesirable output, the average productivity growth of the state-owned banks was zero or negative while productivity of the Joint-Stock banks was markedly higher.
    Keywords: Bank Efficiency; Productivity; Malmquist index; Bootstrapping
    JEL: D24 G21
    Date: 2007–11
  18. By: Jalles, João Tovar
    Abstract: The theories of country growth models are supported by the high scale variation observed in these countries’ growth rates. This is the reason behind those typical questions, like “Why did some East Asian countries grow so much?”, amongst others. Therefore, a lot of recent research has been focused in trying to explain why some countries are richer than others, using, for example, the human capital-augmented Solow Swan model of dispersion in income levels. The article by Mankiw, Romer and Weil [1992] contains a thorough empirical analysis of this type of Solow model augmented with human capital, based on version Penn World Table (ab hinc PWT) 4.0 of the famous Summers and Heston dataset. In this paper I apply a similar analysis to the augmented Solow model as presented in Jones [2002], Chapter 3. Like the augmented Solow model of Mankiw, Jones’ model has the basic Solow model as a special case. Using a more recent version PWT 5.6 of the Summers and Heston dataset, updated until 1997 and with the variable referring to the fraction of time individuals spend on learning new skills added, this paper aims to perform a new and revisited level and convergence analysis of both the (un)restricted basic and augmented Solow-Swan Model.
    Date: 2007
  19. By: Robert Allen; Jean-Pascal Bassino; Debin Ma; Christine Moll-Murata; Jan Luiten van Zanden
    Abstract: The paper develops data on the history of wages and prices in China from thr eighteenth century to the twentieth. These data are used to coompare Beijing, Canton, Suzhou and Shanghai to leading cities in Europe, India, and Japan in terms of nominal wages, the cost of living, and the standard of living. In the eighteenth century, the real income of building workers in Asia was similar to that of workers in the backward parts of Europe and far behind that of workers in the leading economies of northwestern Europe. Industrialization led to rising real wages in Europe and Japan. Real wages declined in China in the eighteenth and early nineteenth centuries and rose slowly in the late nineteenth and early twentieth. There was little cumulative changae in the standard of living or workers in Beijing, Canton, and lower Yangzi cities for two hundred years. The income disparities of the early twentieth century were due to long run stagnation in China combined development in Japan and Europe.
    Keywords: Great Divergence, Preindustrial Real Wages, England, Europe, China, Japan, India
    JEL: N33 N35
    Date: 2007
  20. By: Bittencourt, Manoel
    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
  21. By: Claessens, Stijn; Cassimon, Danny; Campenhout, Bjorn van
    Abstract: We conduct an empirical study on how 22 donors allocate their bilateral aid among 147 recipient countries over the 1970-2004 period to investigate whether recent changes in the international aid architecture-at the international and country level-have led to changes in donor behavior. We find that after the fall of the Berlin Wall and especially in the late nineties, bilateral aid responds more to economic needs and the quality of a country’s policy and institutional environment and less to debt, size and colonial and political linkages. We also find more selectivity by donors when a country uses a PRSP and passes the HIPC decision point. Importantly, PRSPs and HIPCs reduce the perverse effects of large bilateral and multilateral debt shares on aid flows, suggesting less defensive lending. Overall, it appears certain international aid architecture changes have led to more selectivity in aid allocations. The specific factors causing these changes remain unclear, however. And since there remain (large) differences among donors in selectivity that appear to relate to donors’ own institutional environments, reforms will have to be multifaceted.
    Keywords: development aid, aid allocation, selectivity, debt relief, HIPC, PRSP, aid architecture
    JEL: O11 O16 O19
    Date: 2007
  22. By: Garming, Hildegard; Waibel, Hermann
    Abstract: This study presents an economic valuation of health risks of pesticides among Nicaraguan vegetable farmers. A comprehensive valuation of market and non-market value components of human health is established through farmers’ willingness to pay (WTP) for low toxicity pesticides. Results show, that farmers are willing to spend about 28% of current pesticide expenditure for avoiding health risks. The validity of results is established in scope tests and a two-step regression model. WTP depends on farmers’ experience with poisoning, income variables and pesticide exposure. The results can help in targeting of rural health policies and the design of programmes aiming to reduce negative effects of pesticides.
    Keywords: Health risks of pesticides, Contingent Valuation, Nicaragua
    Date: 2007
  23. By: Gräb, Johannes; Grimm, Michael
    Abstract: We propose a methodology for comparing poverty over multiple periods across time and space without arbitrarily aggregating income over various years or relying on arbitrarily specified poverty lines. Following Duclos et al. (2006a), we use the multivariate stochastic dominance methodology to create dominance surfaces for different time spans. We elaborate the method for the bi-dimensional case, using income observed over two periods, one at the beginning and one at the end of a time span, as dimensions. We also embed in this framework a new concept of chronic and transient poverty. We illustrate our approach by performing poverty comparisons using data for Indonesia and Peru.
    Keywords: Chronic Poverty, Multiperiod Poverty, Poverty Dominance, Poverty Dynamics, Transient Poverty
    Date: 2007
  24. By: Günther, Isabel; Klasen, Stephan
    Abstract: An increasing interest in poverty dynamics has lately also led to an extensive literature on the analysis of chronic poverty. Based on Amartya Sen’s groundbreaking work on capabilities and functionings static poverty measures have long used non-income indicators. In contrast, measures of poverty dynamics - including chronic poverty – have in general conceptualised poverty only in an income dimension. Hence, this paper first critically discusses the conceptual and empirical potentials and limitations of analysing chronic poverty from a nonincome perspective. Second, it proposes methods to empirically measure chronic nonincome poverty, with an exploratory application to panel data from Vietnam from 1992 and 1997, which demonstrates that a range of useful insights can be generated from such an analysis. In particular, we find that the correlation between chronic income and non-income poverty is rather low which is mostly due to a low correlation between income and nonincome poverty in each period, while both move relatively closely over time. We also find a surprising amount of heterogeneity in static and dynamic non-income poverty within households.
    Date: 2007
  25. By: Gutiérrez-Romero, Roxana
    Abstract: The aim of the paper is to explore the influences of initial inequality on the long run distribution of wealth. The paper presents two mathematical models that analyse the occupational choice of individuals in the presence of capital constraints and risk in entrepreneurial activities. The models show that inequality and particularly polarization hinder economic growth. The higher the initial level of polarization is, the lower the long run aggregate wealth of the economy and the higher the long run polarization will be. The models are calibrated using numerical simulations. The implications of the models are assessed empirically using data on economic growth, and income distribution in Mexico, during the period 1895-1994, as well as the "Doing Business" databases of the World Bank. Policy-wise it is found that a more egalitarian wealth distribution and less poverty can be achieved through wealth redistribution policies and by improving the business climate. This can be done by reducing the cost of setting-up firms (technology,bureaucratic and administrative costs), introducing labour-market reforms encouraging the hiring of those typically excluded such as the poor, improving the access to credit markets by reducing the costs of creating and/or registering collateral and broadening the credit bureau coverage.
    Date: 2007
  26. By: Grimm, Michael; Harttgen, Kenneth; Klasen, Stephan; Misselhorn, Mark
    Abstract: One of the most frequent critiques of the HDI is that is does not take into account inequality within countries. We suggest a relatively easy and intuitive approach which allows to compute the three components and the overall HDI for quintiles of the income distribution. This allows comparisons of the level in human development of the poor and non-poor within and across countries. An empirical illustration shows large discrepancies in human development within countries especially in Africa. These discrepancies are lower the higher the HDI, but only weekly so. Inequality in income is generally higher than inequality in education and life-expectancy.
    Keywords: Human Development, Income Inequality, Differential Mortality, Inequality in Education
    Date: 2007
  27. By: Uchimura, Hiroko; Jütting, Johannes P.
    Abstract: This study analyzes the effect of fiscal decentralization on health outcomes in China using a panel data set with nationwide county-level data. We find that counties in more fiscal decentralized provinces have lower infant mortality rates compared with those counties in which the provincial government retains the main spending authority, if certain conditions are met. Spending responsibilities at the local level need to be matched with county government’s own fiscal capacity. For those local governments that have only limited revenues, their ability to spend on local public goods such as health care depends crucially upon intergovernmental transfers. The findings of this study thereby support the common assertion that fiscal decentralization can indeed lead to more efficient production of local public goods, but also highlights the necessary conditions to make this happen.
    Date: 2007
  28. By: Knedlik, Tobias; Kronthaler, Franz
    Abstract: The paper explores the relationships between economic freedom on the one side and development aid and IMF credit as approximation for conditional aid on the other side. After a short review of current literature the paper develops a simple panel regression model to evaluate the relationships. In contrast to previous research, our results allow the rejection of the hypothesis that IMF credit increases economic freedom and that development aid is not contributing to economic freedom. It could not be shown that countries can be forced to economic freedom by aid conditions. The paper discusses explanations of the empirical findings.
    Keywords: Aid receiving countries, economic freedom, development aid, IMF credit
    JEL: F35 O19 P10
    Date: 2007
  29. By: Lay, Jann; M'Mukaria, George Michuki; Mahmoud, Toman Omar
    Abstract: Diversification into non-agricultural activities in rural areas can be broadly classified as either survival-led or opportunity-led. The existence of these two types of non-agricultural activities implies a U-shaped relationship between the share of income derived from non-agricultural activities and household wealth as well as total household income. Survival-led engagement in non-agricultural activities would be inequality-decreasing through increasing the incomes of the poorer parts of the population and would reduce poverty. Opportunity-led diversification, by contrast, would increase inequality and have a minor effect on poverty, as it tends to be confined to non-poor households. Using data from a household survey conducted by ourselves in Western Kenya, we find the overall share of non-agricultural income in this very poor region to be important, but below the sub-Saharan African average. Multivariate analyses confirm the existence of both survival-led and opportunity-led diversification. Yet, the poverty and inequality implications of the differently motivated diversification strategies differ somewhat from our expectations. As expected, we find high-return activities to be confined to richer households, while both rich and poor households are engaged in low-return activities. Very poor households even appear to be excluded from the latter. Simple simulation exercises illustrate the inequality-increasing and very limited poverty effects of increases in high-return income, whereas increased low-return income shows substantial poverty reduction leverage. Our findings indicate that rural households do not only face asset constraints, but also very limited or relatively risky high-return opportunities outside agriculture.
    Keywords: Income diversification, non-agricultural activities, inequality, poverty, sub-Saharan Africa, Kenya
    JEL: I31 O17 Q12
    Date: 2007
  30. By: Martínez-Zarzoso, Inmaculada; Doyle, Eleanor
    Abstract: We estimate the relationship between productivity and trade for a panel of countries over the period 1980 to 2000 using instrumental-variables estimation of a productivity equation. We note that some estimates of productivity gains attributed to trade capture instead the roles of institutions and geography. The endogeneity of trade and institutional quality is accounted for by using instruments. We extend the Frankel and Romer (1999) specification, using real openness to measure trade (following Alcala and Ciccone, 2004), which allows for identification of channels through which trade and production scale affect productivity. The trade instrument is based on a ‘theoretically motivated’ gravity equation. The instruments for institutional quality come from Gwartney, Holcombe and Lawson (2004). Contrary to Alcala and Ciccone, our results suggest no robust relationship between real openness and labour productivity in the 1980s. Conversely, the relationship between productivity and real openness appears to be robust from 1990 onwards and similarly in the case of institutional quality. We also find evidence implying that countries with low-quality institutions are also able to benefit from openness to trade.
    JEL: F14 F43 O40
    Date: 2007
  31. By: Micevska, Maja; Rahut, Dil Bahadur
    Abstract: Nonfarm activities generate on average about 60 percent of rural households’ incomes in the eastern Himalayan region of India. This paper analyzes the determinants of participation in nonfarm activities and of nonfarm incomes across rural households. We present and explore an analytical framework that yields different activity choices as optimal solutions to a simple utility maximization problem. A unique data set collected in the eastern Himalayas allows us to closely examine the implications of the analytical framework. We conduct an empirical inquiry that reveals that education plays a major role in accessing more remunerative nonfarm employment. Other household assets and characteristics such as land, social status, geographical location, and credit access also play a role.
    Keywords: Nonfarm employment, Rural households, Incomes, Education, India
    JEL: O15 O18 Q12 R11
    Date: 2007
  32. By: Moser, Christoph
    Abstract: Sovereign risk is defined as a country’s ability-to-pay and willingness-to-pay its debt. This paper examines how cabinet reshuffles affecting the ministry of finance or economics are perceived by sovereign bond holders in twelve Latin American countries from 1992 to 2005. We find that such political news instantaneously increases bond spreads. Furthermore, spreads trend significantly upward in the 40 days leading up to the minister change, before flattening out on a higher level in the 40 days thereafter. Evidence suggests that uncertainty about the future course of economic policy and the government’s willingness-to-pay increases refinancing costs for respective emerging markets.
    Keywords: political instability, country risk, bond spreads, Latin America
    JEL: F30 F34 G14 H63
    Date: 2007
  33. By: Otter, Thomas
    Abstract: Poverty reduction is entirely determined by the growth rate of population’s mean per capita income1 and by the change in the distribution of income. This places the empirical relation between growth and inequality at the heart of poverty reducing strategies. This study, which estimates the relation for Paraguay, aims to identify the growth effects of income and education inequality while controlling other factors such as initial levels of wealth and human capital, family characteristics and unobserved spatial heterogeneity. The paper uses two sets of small area welfare estimates – often referred to as poverty maps – to estimate five different models of per capita income growth between 1992 and 2002, by comparing pseudo panel samples of these poverty maps. Since the analysis is based on groups of people, grouped in a pseudo panel, the results can be understood as well as an income mobility indicator. In the models used, standard errors were corrected to reflect the uncertainty as a result of income estimates, rather than income observations, being used. These corrections are sizable: standard errors using estimates are between 1 and 20 times larger than using income observations. The more homogeneous the sample is, the lower the error increase. Conditional convergence (initially low income groups grew faster) is confirmed by the results. They indicate that it is income inequality rather than human capital inequality, that affects growth and that this effect is negative. Nevertheless, there are also positive growth effects of human capital inequality, however some not as strong as income inequality results.
    Date: 2007
  34. By: Prüfer, Patricia; Tondl, Gabriele
    Abstract: FDI from the European Union (EU) ranks before FDI from North America (NA) in some of the Latin American countries. We investigate the impact of EU- versus NA-FDI on the growth rate including about 50 controls. Country specific effects and parameter heterogeneity are incorporated in our estimation. We use Bayesian Model Averaging to address model uncertainty and to select the best models and most robust parameters. Our results indicate that positive effects of FDI are dependent on the functioning of legal frameworks and the quality of infrastructure. EU-FDI is an important, robust growth determinant whereas NA-FDI is not.
    Keywords: Growth determinants, FDI, model uncertainty, Bayesian Model Averaging, Latin America
    JEL: C52 F21 F43 O54
    Date: 2007
  35. By: Rungruxsirivorn, Ornsiri
    Abstract: This paper examines the nature of risk faced by households in Thailand and the strategies that these households adopt to mitigate the adverse effect from income shortfalls. I use a new cross-section dataset that is based on a sample of both urban and rural households. I find that price shock is the most prevalent source of income shortfalls. I also find that the most common risk-mitigating strategy employed by households is to borrow from the Village Fund. Nonetheless, there is a high degree of heterogeneity among households, especially in terms of their sources of income and this plays a key role in determining how a household responds to shocks. Thus, it may not be advisable to design policy based on the paradigm of a representative consumer.
    Date: 2007
  36. By: Schueler, Dana
    Abstract: This study sheds light on the efficiency of informal mutual insurance systems. Evidence on the behavioral effects of remittances and inter-family transfers is still rare. This paper intends to analyze the incentive effects of internal interfamily transfers in Indonesia with improved econometric techniques. First differences and three-stage least squares are used to analyze incentive effects on working hours. The endogeneity of transfers received by the household and the number of migrants sent away are explicitly taken into account. Furthermore, different sectors of employment are distinguished in the analysis. The empirical analysis shows that inter-family transfers adversely influence the incentive to work. This finding holds for the informal non-agricultural sector. However, the negative incentive effect is partly compensated by migrants, who are recipients rather than providers of transfers in the short run.
    Keywords: Remittances, Transfers, Incentives, Three-Stage Least Squares
    Date: 2007
  37. By: Holzmann, Hajo; Vollmer, Sebastian; Weisbrod, Julian
    Abstract: This paper contributes towards the growing debate concerning the world distribution of income and its evolution over that past three to four decades. Our methodological approach is twofold. First, we formally test for the number of modes in a cross-sectional analysis where each country is represented by one observation. We contribute to existing studies with technical improvements of the testing procedure, enabling us to draw new conclusions, and an extension of the time horizon being analyzed. Second, we estimate a global distribution of income from national log-normal distributions of income, as well as a global distribution of log-income as a mixture of national normal distributions of log-income. From this distribution we obtain measures for global inequality and poverty as well as global growth incidence curves.
    Keywords: Convergence, Silverman's test, non-parametric statistics, bimodal, global income distribution, poverty, inequality, growth incidence curves
    JEL: C5 F0 I3 O0
    Date: 2007
  38. By: Brück, Tilman; Danzer, Alexander M.; Muravyev, Alexander; Weißhaar, Natalia
    Abstract: The paper analyzes the scale and the determinants of household poverty in Ukraine during transition. We derive estimates of poverty incidence and severity and estimate the determinants of poverty in 1996 and 2004 using two comparable surveys. Poverty in both periods follows some of the determinants commonly identified in the poverty literature, including greater poverty among households with children and with less education. We also identify features of poverty in transition, including the relatively low importance of unemployment and the existence of poverty even among households with employment. Poverty determinants change over time in line with emerging labor markets.
    Keywords: poverty, transition, Ukraine
    JEL: I32 J20 P20
    Date: 2007
  39. By: Wick, Katharina
    Abstract: We present a Stackelberg model of conflict, in which contestants have limited endowments to be put in two separate sectors, thus incorporating salient features of many conflicts. The model is applied to the case of conflict over natural resources. Consistent with amounting empirical evidence regarding a so-called "resource curse", we find that the relation between conflict intensity and resource rents is non-monotonous, and that the economy's income growth rate may be negatively affected by resource abundance.
    Keywords: Resource curse, exhaustible resources, civil war, economic performance and resources
    JEL: D74 O13 Q32
    Date: 2007
  40. By: McQuinn, Kieran; Whelan, Karl
    Abstract: Despite the widespread popularity of the Solow growth model, much of the recent empirical work based on the classic framework misrepresents a crucial feature of the model. Namely, the growth rate of technological progress, assumed to be exogenous in the Solow model, is often identified as being constant across countries. This simplification of the behavior of technological progess runs counter to the evidence and has had a number of significant implications for the interpretation of the Solow model. One implication has been an overemphasis on the role of factor accumulation in explaining cross-country income differentials. In addition, the commonly-cited empirical result that the speed of conditional convergence is slower than predicted by the Solow model is a function of this inaccurate assumption about technology rather than due to a failure of the model itself.
    Keywords: Solow; Growth; TFP
    JEL: O41 O47
    Date: 2007–01
  41. By: prasad, syam
    Abstract: Abstract of the paper Aging of population is a major aspect of the process of demographic transition. It is generally expressed as older individuals forming large share of the total population. Such an increase is considered to be an end product of demographic transition or demographic achievements with a decline in both fertility and mortality rates and consequent increase in the life expectancy at birth and older ages. The recent emphasis on studies pertaining to the elderly in the developing world is attributed to their increasing numbers and deteriorating conditions. The lives of many older people are affected more frequently by the social and economic insecurity that accompany demographic and development process (World Bank 1994). The growth of individualism and desire of the independence and autonomy of the young generation (serow 2001) affect the status of the elderly. The studies show that the socio economic condition of older women is more vulnerable in the context of the demographic and the socio cultural change (Tout 1993). The situation of the elderly poverty has been a consistent phenomenon in the third world as the older population is deprived of the basic needs (Keyfitz and Flieger 1990). In this paper we make an attempt to profile life of elderly that reflects on deprivation among the elderly. Here most important question is whether age acts a determining factor in the life of a person. Or does age mediates living condition along with other factors that coexistence in life. Is there any change in the living condition over chronological ladders of human life? How does differ life varies across chronological ladder across space in India over time through a narration of what is happening in the Indian states in the past decade. Here we look into four parameters that create risk and to which chronologically disadvantaged population has to respond. They are marital status, work status, living arrangements of the elderly and dependency. Then look into how close interactions between these factors affect the overall living of the elderly by using an index of life for the Indian states. Here we mainly focuses on how there is an over all decline in the life of elderly by looking into four dimensions of life in terms of marital status, economic status( work participation) dependency and living arrangements. Here we profile these aspects to understand pattern of living among elderly in Indian states. The paper highlights that the living condition of the elderly varies differently across Indian states. The various dimensions are vertically integrated to get a weighted index called in this paper as quality of life among the elderly that take value zero to one with higher value provides worse living condition. It is clear that position of the elderly in terms of material and social well being is betterly positioned in the states of north India rather than south India.
    Keywords: ageing; life of elderly; quality of life; demographic transition
    JEL: J14 I31 I3
    Date: 2007–11–27
  42. By: Dan Li (First Independent Bank of Nevada, Reno, NV); Shunfeng Song (Department of Economics, University of Nevada, Reno)
    Abstract: This paper examines the urban housing sector of China and proposes a property tax reform. Over the past decade, housing price in urban China has been increasing dramatically because of strong demand for self-use, investment and speculation. The booming housing market, however, has brought several challenges for further development, such as housing affordability, inequality, and possible housing bubble. One strategy is to reform the current property tax system. Specifically, this paper proposes that China significantly reduces taxes in circulation but levies property tax during possession. Doing so will increase housing affordability because of lower transaction costs, reduce speculation because of higher cost of holding, stabilize fiscal system because of more sustainable tax revenues, and improve the efficiency and fairness of the property tax system because of the implementation of “ability-to-pay” and “who use who pay” principles.
    Keywords: Property tax; China
    JEL: R23 R21 H20
    Date: 2007–11
  43. By: Erqian Zhu (Department of Resource Economics, University of Nevada, Reno); Shunfeng Song (Department of Economics, University of Nevada, Reno)
    Abstract: Since the late 1970s, many state-owned enterprise employees have been laid off and more and more rural people have migrated to urban areas. In this massive laying-off and migration process, many laid-off workers and migrants have become urban poor. Using data collected from a survey on 1641 relatively low-income households in Changsha in January 2007, this paper compares migrant workers with their city counterpart regarding income, employment, education, and social support. Based on qualitative and regression analysis, we found that worker’s age, Hukou status, education, enterprise ownership, and contract length are significantly affecting the annual income. There exists a big gap in the coverage of social security between urban and migrant workers. This paper provides some policy recommendations.
    Keywords: Urban poor; Hukou; Laid-off workers; Migrant workers; Income determinants; Social insurance
    JEL: R23 I30
    Date: 2007–11
  44. By: Elias Papaioannou; Gregorios Siourounis
    Abstract: We identify permanent democratic transitions during the Third Wave of Democratization and the nineties, when many former socialist countries moved towards representative rule. Using subjective political freedom indicators, electoral archives, and historical resources in 174 countries in the period 1960-2005, we identify 63 incidents of permanent democratic transitions, 3 reverse transitions from relatively stable democracy to autocracy and 6 episodes of small improvements in representative norms (borderline democratizations). We also classify non-reforming countries to stable autocracies and always democratic. We then use the constructed dataset to identify the significant correlates of successful democratic transitions, placing an emphasis to those countries that were non-democratic in the beginning of the Third Wave.
    Keywords: democratization, political development, institutions.
    Date: 2007

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