nep-dev New Economics Papers
on Development
Issue of 2007‒12‒15
thirty-two papers chosen by
Jeong-Joon Lee
Towson University

  2. Technological Diversification By Miklos Koren; Silvana Tenreyro
  3. Growth and the Quality of Foreign Direct Investment: Is All FDI Equal? By Laura Alfaro; Andrew Charlton
  4. Tax Evasion in Kenya and Tanzania:Evidence from Missing Imports By Levin, Jörgen; Widell, Lars
  5. Child Height and Maternal Health Care Knowledge in Mozambique By Katleen Van den Broeck
  6. Trade Liberalisation is Good for You if You are Rich By Charles Ackah,; Oliver Morrissey
  7. Who Gains from Trade Protection in Ghana? A Household-Level Analysis By Charles Ackah,; Oliver Morrissey,; Simon Appleton
  8. Export processing Zones: Past and Future Role in Trade and Development By Michael Engman; Osamu Onodera; Enrico Pinali
  9. Surveying migrant households : a comparison of census-based, snowball, and intercept point surveys By Mistiaen, Johan; McKenzie, David J.
  10. The determinants of HIV infection and related sexual behaviors : evidence from Lesotho By de Walque, Damien; Corno, Lucia
  11. Improving indoor air quality for poor families : a controlled experiment in Bangladesh By Wheeler, David; Khaliquzzaman, M.; Huq, Mainul; Dasgupta, Susmita
  12. Regional integration in South Asia : what role for trade facilitation ? By Otsuki, Tsunehiro; Wilson, John S.
  13. Improving nutritional status through behavioral change : lessons from Madagascar By Umapathi, Nithin; Galasso, Emanuela
  14. Insurance, credit, and technology adoption : field experimental evidence from Malawi By Yang, Dean; Gine, Xavier
  15. Statistical analysis of rainfall insurance payouts in southern India By Vickery, James; Townsend, Robert; Gine, Xavier
  16. Distributional effects of educational improvements :are we using the wrong model ? By Rogers, F. Halsey; Bourguignon, Francois
  17. The composition of public expenditure and growth : a small-scale intertemporal model for low-income countries By Moreira, Emmanuel Pinto; Bayra ktar, Nihal
  18. Poverty reduction without economic growth ? explaining Brazil ' s poverty dynamics, 1985-2004 By Ravallion, Martin; Leite, Phillippe G.; Ferreira, Francisco H. G.
  19. Does employment generation really matter for poverty reduction ? By Serneels, Pieter; Paci, Pierella; Orecchia, Carlo; Gutierrez, Catalina
  20. The devil is in the shadow Do institutions affect income and productivity or only official income and official productivity? By Axel Dreher; Pierre-Guillaume Méon; Friedrich Schneider
  21. Specialize Rightly or Decline By Massimo TAMBERI; Alessia LO TURCO
  22. The Cleavage Model, Ethnicity and Voter Alignment in Africa: Conceptual and Methodological Problems Revisited By Gero Erdmann
  23. An Occupational Choice Model for Developing Countries By Gerardo Jacobs
  24. Migration, Learning, and Development By Zakharenko, Roman
  25. Theory, History and Evidence of Economic Convergence in Latin America By Paola Barrientos
  26. Macroeconomic and Welfare Effects of Public Infrastructure Investment in Five Latin American Countries By Carlos Gustavo Machicado
  27. Early Childbirth, Health Inputs and Child Mortality: Recent Evidence from Bangladesh By Pushkar Maitra; Sarmistha Pal
  28. Informality as a Stepping Stone: Entrepreneurial Entry in a Developing Economy By John Bennett; Saul Estrin
  29. DEMOCRATIZATION AND GROWTH By Elias Papaioannou; Gregorios Siourounis
  30. Fiscal decentralisation and gender responsive budgeting in South Africa: An appraisal. By Chakraborty, Lekha S.; Bagchi, Amaresh
  31. Gender responsive budgeting and fiscal decentralisation in India: A preliminary appraisal. By Chakraborty, Lekha S.
  32. Public infrastructure investment and non-market work in India: Selective evidence from time use data. By Chakraborty, Lekha S.

  1. By: Paulo Gala
    Date: 2007
  2. By: Miklos Koren; Silvana Tenreyro
    Abstract: Economies at early stages of development are often shaken by abrupt changes in growth rates, whereas in advanced economies growth rates tend to be relatively stable. To explain this pattern, we propose a theory of technological diversification. Production makes use of different input varieties, which are subject to imperfectly correlated shocks. Technological progress takes the form of an increase in the number of varieties, raising average productivity. In addition, the expansion in the number of varieties in our model provides diversification benefits against variety-specific shocks and it can hence lower the volatility of output growth. Technological complexity evolves endogenously in response to profit incentives. The decline in volatility thus arises as a by-product of firms' incentives to increase profits and is hence a likely outcome of the development process. We quantitatively asses the predictions of the model in light of the empirical evidence and find th at for reasonable parameter values, the model can generate a decline in volatility with the level of development comparable to that in the data.
    Keywords: volatility, endogenous growth, diversification, technological progress
    JEL: O0 O10 O11 O12 O30 O40
    Date: 2007–10
  3. By: Laura Alfaro; Andrew Charlton
    Abstract: In this paper we distinguish different "qualities" of FDI to re-examine the relationshipbetween FDI and growth. We use 'quality' to mean the effect of a unit of FDI on economicgrowth. However this is difficult to establish because it is a function of many differentcountry and project characteristics which are often hard to measure Hence, we differentiate"quality FDI" in several different ways. First, we look at the possibility that the effects of FDIdiffer by sector. Second, we differentiate FDI based on objective qualitative industrycharacteristics including the average skill intensity and reliance on external capital. Third, weuse a new dataset on industry-level targeting to analyze quality FDI based on the subjectivepreferences expressed by the receiving countries themselves. Finally, we use a two-stage leastsquares methodology to control for measurement error and endogeneity. Exploiting a newcomprehensive industry level data set of 29 countries between 1985 and 2000, we find thatthe growth effects of FDI increase when we account for the quality of FDI.
    Keywords: foreign direct investment, economic growth, industry data, spillovers,instrumental variables
    JEL: F23 F36 F43 O40
    Date: 2007–11
  4. By: Levin, Jörgen (Department of Business, Economics, Statistics and Informatics); Widell, Lars (Department of Business, Economics, Statistics and Informatics)
    Abstract: In this paper we estimate the amount of tax evasion in customs authorities in both Kenya and Tanzania by calculating measurement errors in reported trade flows between the two countries and correlate those errors with tax rates. We find that the measurement error is correlated with the tax rates in both Kenya and Tanzania. According to the Transparency International Corruption Perceptions Index, Kenya is more corrupt than Tanzania, but we find that the coefficient on tax is higher in Tanzania compared to Kenya implying that tax evasion on imported goods is higher in Tanzania compared to the Kenya. We also introduced a third country into our analysis, the United Kingdom, and tax evasion seems to be more severe in trade flows between Kenya and Tanzania compared to trade flows between the United Kingdom and Kenya/Tanzania. Finally we also find that the tax evasion coefficient is lower in the Kenya-United Kingdom case compared to the Tanzanian-United Kingdom case which supports our previous finding that tax evasion is more severe in the Tanzanian customs authority.
    Keywords: Tax evasion; corruption; trade; Kenya; Tanzania
    JEL: F14 H26
    Date: 2007–11–01
  5. By: Katleen Van den Broeck (Department of Economics, University of Copenhagen)
    Abstract: Stunting prevalence rates in Mozambique are very high (41 percent), especially in rural areas (46 percent). Recent research shows that consumption growth alone will not be sufficient to solve the problem of malnutrition. To investigate the role of additional determinants I use a two-stage quantile regression approach with specific attention to the role of maternal preventive health care knowledge and schooling. Three different scores for health care knowledge are used and show similar results. For rural Mozambique, I find that maternal schooling has positive effects especially in the top quintile of the height-for-age distribution while health care knowledge has a positive effect on height-for-age of under two year old children especially at the lower end of the distribution where the severely stunted children are located. Improving health care knowledge of mothers could substitute for the low levels of education and community health care facilities in rural areas and positively affect the height of the most severely stunted children.
    Date: 2007–10
  6. By: Charles Ackah,; Oliver Morrissey
    Abstract: This paper investigates the relationship between trade policy and growth using a dynamic panel regression model with GMM estimates for data on 44 developing countries over 1980-1999. Trade policy is captured by measures of tariffs, import and export taxes. Typically, the average effects of changes in such policy variables have been investigated. However, from a policy perspective, the differential effects on high-or low-income countries may be of more interest. Our preferred specification for growth thus includes as an explanatory variable an interaction term between trade barriers and initial income levels to capture the non-linearity in the relationship. This specification reveals a significant interaction effect under which the marginal impactof tariffs on growth is declining in initial income. In particular, for low-income countries tariffs appear to be associated with higher growth, whereas only for middle-income and richer countries is there a negative impact of tariffs on growth. The impact of a marginal change in protection on growth changes from positive to negative as income increases beyond a threshold level of GDP per capita (below which, in rough terms, a country would be classed as low-income). Put differently, trade liberalisation seems to offer the possibility of achieving faster growth only in relatively richer countries.
    Keywords: Growth; Openness; Trade barriers; Cross-country analysis
  7. By: Charles Ackah,; Oliver Morrissey,; Simon Appleton
    Abstract: In this paper, we present one of the first direct microeconometric studies of the impact of trade protection on household income in Ghana. Tariff measures at the two-digit ISIC level are matched to Ghanaian household survey data for 1991/92 and 1998/99 to represent the tariff for the industry in which the household head is employed. We examine the possibility that the effect of protection on income might not be uniform across households characterized by different skill levels. Specifically, we allow the relationship between welfare and trade policy to differ for households with different levels of education. In the absence of suitable panel data, the analysis applies pseudo-panel econometric techniques to our repeated cross-section data. This method has rarely been used in poverty analysis. The results suggest that higher tariffs are associated with higher incomes for households employed in the sector, so tariff reductions may reduce incomes (and increase poverty), at least in the short run, but with differing effects across skill groups. We find that this positive effect of protection is disproportionately greater for low skilled labour households, suggesting an erosion of welfare of unskilled labour households would result from trade liberalization. We conclude that contemplating trade liberalization without recognizing the complementary role of human capital investment may be a sub-optimal policy for the poor, at least in the short-run.
    Keywords: Tariffs; Trade liberalisation; Household welfare; Pseudo-panel; Ghana
  8. By: Michael Engman; Osamu Onodera; Enrico Pinali
    Abstract: This paper studies export processing zones (EPZs) which have become increasingly popular as a policy tool for development and export-oriented growth, and can be found in 130 countries around the world. The report consists of four parts. Part I provides a broad overview on the current use of EPZs, including the evolution of EPZ policy, their objectives and how these are achieved, and the incentives commonly offered. It presents case studies from China, India and Russia illustrating new trends and policies. Part II then provides a review of the economic costs and benefits of EPZs with particular focus on their trade and employment implications. Part III presents an analysis of how common EPZ policies relate to trade rules. It reviews the relationship between EPZs and the WTO Agreements such as the WTO Agreement on Subsidies and Countervailing Measures (ASCM), followed by a discussion of how EPZs are commonly treated in RTAs. Part IV concludes. EPZs are a sub-optimal policy from an economic point of view since it benefits the few and distorts resource allocation, but may be useful as a stepping stone to trade liberalisation on a national basis. Governments should consider all available policy options, and conduct a thorough cost/benefit analysis before implementation.
    Date: 2007–05–23
  9. By: Mistiaen, Johan; McKenzie, David J.
    Abstract: Few representative surveys of households of migrants exist, limiting the analysis of the effects of international migration on sending families. This paper reports 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. The authors 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: Population Policies,Small Area Estimation Poverty Mapping,Anthropology,Social Analysis,Access to Finance
    Date: 2007–12–01
  10. By: de Walque, Damien; Corno, Lucia
    Abstract: This paper analyzes the socioeconomic determinants of HIV infection and related sexual behaviors using the 2004 Lesotho Demographic and Health Survey. The authors find that in Lesotho education appears to have a protective effect: it is negatively associated with HIV infection (although not always significantly) and it strongly predicts preventive behaviors. The findings also show that married women who have extra-marital relationships are less likely to use a condom than non-married women. This is an important source of vulnerability that should be addressed in prevention efforts. The paper also analyzes HIV infection at the level of the couple. It shows that in 41 percent of the infected couples, only one of the two partners is HIV infected. Therefore, there are still opportunities for prevention inside the couple.
    Keywords: Population Policies,HIV AIDS,Gender and Health,Disease Control & Prevention,Health Monitoring & Evaluation
    Date: 2007–12–01
  11. By: Wheeler, David; Khaliquzzaman, M.; Huq, Mainul; Dasgupta, Susmita
    Abstract: The World Health Organization ' s 2004 Global and Regional Burden of Disease Report estimates that acute respiratory infections from indoor air pollution (pollution from burning wood, animal dung, and other bio-fuels) kill a million children annually in developing countries, inflicting a particularly heavy toll on poor families in South Asia and Africa. This paper reports on an experiment that studied the use of construction materials, space configurations, cooking locations, and household ventilation practices (use of doors and windows) as potentially-important determinants of indoor air pollution. Results from controlled experiments in Bangladesh are analyzed to test whether changes in these determinants can have significant effects on indoor air pollution. Analysis of the data shows, for example, that pollution from the cooking area diffuses into living spaces rapidly and completely. Furthermore, it is important to factor in the interaction between outdoor and indoor air pollution. Among fuels, seasonal conditions seem to affect the relative severity of pollution from wood, dung, and other biomass fuels. However, there is no ambiguity about their collective impact. All are far dirtier than clean fuels. The analysis concludes that if cooking with clean fuels is not possible, then building the kitchen with porous construction material and providing proper ventilation in cooking areas will yield a better indoor health environment.
    Keywords: Renewable Energy,Energy Production and Transportation,Air Quality & Clean Air,Pollution Management & Control,Sanitation and Sewerage
    Date: 2007–12–01
  12. By: Otsuki, Tsunehiro; Wilson, John S.
    Abstract: The trade performance of countries in South Asia over the past two decades has been poor relative to other regions. Exports from South Asia have doubled over the past 20 years to approximately USD 100 billion. In contrast, East Asia ' s exports grew ten times over the same period. The low level of intraregional trade has contributed to weak export performance in South Asia. The empirical analysis in this paper demonstrates gains to trade in the region from reform and capacity building in trade facilitation at the regional level. When considering intraregional trade, if countries in South Asia raise capacity halfway to East Asia ' s average, trade is estimated to rise by USD 2.6 billion. This is approximately 60 percent of the total intraregional trade in South Asia. Countries in the region also have a stake in the success of efforts to promote capacity building outside its borders. If South Asia and the rest of the world were to raise their levels of trade facilitation halfway to the East Asian average, the gains to the region would be estimated at USD 36 billion. Out of those gains, about 87 percent of the total would be generated from South Asia ' s own efforts (leaving the rest of the world unchanged). In summary, we find that the South Asian region ' s expansion of trade can be substantially advanced with programs of concrete action to address barriers to trade facilitation to advance regional goals.
    Keywords: Transport Economics Policy & Planning,Transport and Trade Logistics,Common Carriers Industry,Trade Policy,Free Trade
    Date: 2007–12–01
  13. By: Umapathi, Nithin; Galasso, Emanuela
    Abstract: This paper provides evidence of the effects of a large-scale intervention that focuses on the quality of nutritional and child care inputs during the early stages of life. The empirical strategy uses a combination of double-difference and weighting estimators in a longitudinal survey to address the purposive placement of participating communities and estimate the effect of the availability of the program at the community level on nutritional outcomes. The authors find that the program helped 0-5 year old children in the participating communities to bridge the gap in weight for age z-scores and the incidence of underweight. The program also had significant effects in protecting long-term nutritional outcomes (height for age z-scores and incidence of stunting) against an underlying negative trend in the absence of the program. Importantly, the effect of the program exhibits substantial heterogeneity: gains in nutritional outcomes are larger for more educated mothers and for villages with better infrastructure. The p rogram enables the analysis to isolate responsiveness to information provision and disentangle the effect of knowledge in the education effect on nutritional outcomes. The results are suggestive of important complementarities among child care, maternal education, and community infrastructure.
    Keywords: Population Policies,Health Monitoring & Evaluation,Early Child and Children ' s Health,Housing & Human Habitats,Nutrition
    Date: 2007–12–01
  14. By: Yang, Dean; Gine, Xavier
    Abstract: The adoption of new agricultural technologies may be discouraged because of their inherent riskiness. This study implemented a randomized field experiment to ask whether the provision of insurance against a major source of production risk induces farmers to take out loans to invest in a new crop variety. The study sample was composed of roughly 800 maize and groundnut farmers in Malawi, where by far the dominant source of production risk is the level of rainfall. We randomly selected half of the farmers to be offered credit to purchase high-yielding hybrid maize and improved groundnut seeds for planting in the November 2006 crop season. The other half of the farmers were offered a similar credit package but were also required to purchase (at actuarially fair rates) a weather insurance policy that partially or fully forgave the loan in the event of poor rainfall. Surprisingly, take up was lower by 13 percentage points among farmers offered insurance with the loan. Take-up was 33.0 percent for farmers who were offered the uninsured loan. There is suggestive evidence that the reduced take-up of the insured loan was due to the high cognitive cost of evaluating the insurance: insured loan take-up was positively correlated with farmer education levels. By contrast, the take-up of the uninsured loan was uncorrelated with farmer e ducation.
    Keywords: ,Access to Finance,Debt Markets,Hazard Risk Management,Crops & Crop Management Systems
    Date: 2007–12–01
  15. By: Vickery, James; Townsend, Robert; Gine, Xavier
    Abstract: Using 40 years of historical rainfall data, this paper estimates a distribution for payouts on rainfall insurance policies offered to farmers in the State of Andhra Pradesh, India, in 2006. The authors find that the contracts primarily protect households against extreme tail events; half the expected value of indemnities paid by the insurance are generated by only 2 percent of rainfall realizations. Contract payouts are significantly correlated cross-sectionally, and also inversely associated with real GDP growth. The paper discusses the implications of these findings for the potential benefits of insurance to households, the risks facing a financial institution underwriting rainfall insurance contracts, and pricing.
    Keywords: Debt Markets,Deposit Insurance,Labor Policies,,Emerging Markets
    Date: 2007–12–01
  16. By: Rogers, F. Halsey; Bourguignon, Francois
    Abstract: Measuring the incidence of public spending in education requires an intergenerational framework distinguishing between what current and future generations - that is, parents and children - give and receive. In standard distributional incidence analysis, households are assumed to receive a benefit equal to what is spent on their children enrolle d in the public schooling system and, implicitly, to pay a fee proportional to their income. This paper shows that, in an intergenerational framework, this is equivalent to assuming perfectly altruistic individuals, in the sense of the dynastic model, and perfect capital markets. But in practice, credit markets are imperfect and poor households cannot borrow against the future income of their children. The authors show that under such circumstances, standard distributional incidence analysis may greatly over-estimate the progressivity of public spending in education: educational improvements that are progressive in the long-run steady state may actually be regressive for the current generation of poor adults. This is especially true where service delivery in education is highly inefficient - as it is in poor districts of many developing countries - so that the educational benefits received are relatively low in comparison with the cost of public spending. The results have implications for both policy measures and analytical approaches.
    Keywords: ,Debt Markets,Access to Finance,Economic Theory & Research,Public Sector Expenditure Analysis & Management
    Date: 2007–12–01
  17. By: Moreira, Emmanuel Pinto; Bayra ktar, Nihal
    Abstract: This paper presents a small-scale intertemporal model of endogenous growth that accounts for the composition of public expenditure and externalities associated with public capital. Government spending is disaggregated into various components, including maintenance, security, and investment in education, health, and core infrastructure. After studying its long-run properties, the model is calibrated for Haiti, using country-specific information as well as parameter estimates from the literature. A variety of policy experiments are then reported, including a reallocation of spending aimed at creating fiscal space to promote public investment; an improvement in fiscal management that leads to a reduction in tax collection costs; higher spending on security; and a composite fiscal package.
    Keywords: ,Debt Markets,Economic Theory & Research,Public Sector Economics & Finance,Public Sector Expenditure Analysis & Management
    Date: 2007–12–01
  18. By: Ravallion, Martin; Leite, Phillippe G.; Ferreira, Francisco H. G.
    Abstract: Brazil ' s slow pace of poverty reduction over the last two decades reflects both low growth and a low growth elasticity of poverty reduction. Using GDP data disaggregated by state and sector for a twenty-year period, this paper finds considerable variation in the poverty-reducing effectiveness of growth-across sectors, across space, and over time. Growth in the services sector was substantially more poverty-reducing than was growth in either agriculture or industry. Growth in industry had very different effects on poverty across different states and its impact varied with initial conditions related to human development and worker empowerment. The determinants of poverty reduction changed around 1994: positive growth rates and a greater (absolute) elasticity with respect to agricultural growth contributed to faster poverty reduction. But because there was so little of it, economic growth played a relatively small role in accounting for Brazil ' s poverty reduction between 1985 and 2004. The taming of hyperinflation (in 1994) and substantial expansions in social security and social assistance transfers, beginning in 1988, accounted for a larger share of the overall reduction in poverty.
    Keywords: Rural Poverty Reduction,Achieving Shared Growth,Population Policies,Inequality
    Date: 2007–12–01
  19. By: Serneels, Pieter; Paci, Pierella; Orecchia, Carlo; Gutierrez, Catalina
    Abstract: This paper analyzes how the employment/productivity profile of growth and its sectoral pattern are correlated with poverty reduction. The authors use a sample of 104 short-run growth spells in developing countries, between 1980 and 2001. They also identify some conditions of the labor market and the economic environment that are associated with employment-intensive gro wth or specific sectoral growth. The results show that, in the short run, although the aggregate employment-rate intensity of growth does not matter for poverty reduction any more than the aggregate productivity intensity of growth, the sectoral pattern of employment growth and productivity growth is important. Employment-intensive growth in the secondary sector is associated with decreases in poverty, while employment-intensive growth in agriculture is correlated with poverty increases. Similarly, productivity-intensive growth in agriculture is associated with decreases in poverty. Although the study does not address causality, coincidence of these phenomena in this large sample of heterogeneous countries and periods suggests that, in the short run, the sectoral productivity and employment pattern of growth may have important implications for poverty alleviation. Therefore, policies for reducing poverty should not overlook the sectoral productivity and employment implications of different growth policies.
    Keywords: Achieving Shared Growth,Labor Policies,Rural Poverty Reduction,Labor Markets,Population Policies
    Date: 2007–12–01
  20. By: Axel Dreher (ETH Zurich, KOF Swiss Economic Institute and and CESifo,Germany); Pierre-Guillaume Méon (DULBEA, Université libre de Bruxelles, Brussels); Friedrich Schneider (Department of Economics, 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: 2007–11
  21. By: Massimo TAMBERI (Universita' Politecnica delle Marche, Dipartimento di Economia); Alessia LO TURCO (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: Is exporting potato chips really the same than exporting microchips? Is the rate of economic growth independent on the export structure? Is moving toward dynamic sectors a key for economic growth? Our purpose is to determine whether and how the sectoral composition of exports aects countries;growth. Dierently from Hausmann, Hwang and Rodrik (2006), we measure the nature of specialization as the average human capital content of countries' exports and we also propose the average world demand growth as an indicator to test whether demand apart from supply is relevant to growth. We finally test all these indexes in a panel data model of growth determinants finding a positive and significant relation between growth and the average skill content of countries' exports: a 1% increase in the average share of the human capital contained in exports causes the steady state real GDP per worker to grow of about 2%. Finally, there is slight evidence that moving towards export structures focused on moredynamic goods in terms of world demand growth helps growth too.
    Keywords: economic growth, panel data, specialization
    JEL: F43 O47
    Date: 2007–12
  22. By: Gero Erdmann (GIGA Institute of African Affairs)
    Abstract: Recent research on political parties and ethnicity has challenged the conventional wisdom about ethnicity as the major factor that explains voter alignment in Africa. The paper maintains that the cleavage model, although modified to include ethnicity, still provides heuristically the best foundation for the explanation of party formation and voting behaviour in Africa. It points out that inconclusive and contradicting research results about the salience of ethnicity can be attributed to a variety of unresolved methodological and conceptual problems linked to the ‘fluidity’ of the concept of ethnicity. To overcome these problems refined research designs and more sophisticated analytical tools are required. Finally, it is safe to assume that the relevance of ethnicity for the formation of party systems and voter alignment is not a uniform pattern across Africa, but will differ from one country to the other.
    Keywords: Africa, social cleavages, cleavage model, ethnicity, political parties, party systems
    Date: 2007–12
  23. By: Gerardo Jacobs
    Abstract: Most occupational choice models introduce only two options for agents: entrepreneurial activities or wage-employment. However, these models represent inadequately the labor force distribution from developing countries, where an important proportion of the total work force are self-employed workers. Some models introduce self-employment as an occupational choice. These works have a common feature : at equilibrium, wage earners belong to the lower end of the income distribution. However, for a large set of developing countries, peasants and small proprietors are part of a self employment sector that can mostly be found in the lower end of the income distribution. In this work, in contrast with previous efforts, self-employment formation is consistent with data from most developing countries. We pay special attention to the conditions under which either the economy ends in a low income equilibrium, where self-employment is the only form of production; or alternatively, a high income equilibrium with a well developed labor market. We study some public policy issues, paying special attention to role of capital markets and the efficiency of schooling.
    Keywords: Occupational Choice, Human Capital, Economic Development, General Equilibrium
    JEL: J24 O12
    Date: 2007
  24. By: Zakharenko, Roman
    Abstract: US-educated Indian engineers played a major role in the establishment of the “Silicon Valley of Asia” in Bangalore. The experience of India and other countries shows that returning well-educated emigrants, despite their small numbers, can make a difference. This paper builds a model of “local” knowledge spillovers, in which migration of a small number of highly skilled individuals greatly affects country-level human capital accumulation. All economic activity occurs in pairs of individuals randomly matched to each other. Each pair produces the consumption good; the skills of the two partners are complementary. At the same time, the less skilled partner increases human capital by learning from the more skilled colleague. With poor institutions at home, highly skilled individuals leave the country seeking better opportunities abroad. On the contrary, improved institutions foster return migration of emigrants who have acquired more knowledge while abroad. These return migrants greatly amplify the positive effect of better institutions.
    JEL: F22 C78 O15 J61
    Date: 2007–11
  25. By: Paola Barrientos (Department of Economics, University of Aarhus)
    Abstract: Economic convergence exists when two or more economies tend to reach a similar level of development and wealth. The study of convergence is an important topic because besides being useful for the debate between different theories, it can respond several inquiries such as if the distribution of income between economies has become more equal over time and if poor economies are catching up with the rich. Latin American countries are characterized by having few language barriers, similar culture, religion and common history. So convergence could be expected. However, literature about convergence in Latin America is scarce and preliminary analysis shows that divergence exists in the region. The thesis tries to fill in the gap by covering theoretical, historical and statistical evidence of convergence in the region during 106 years, from 1900 to 2005. The thesis uses a neoclassical growth model based on Solow and Ramsey models. After revising the economic history of 32 countries, several groups were identified and convergence was expected to occur. Different concepts of convergence are tested inside each group through graphs, single cross section regressions and panel data estimations. In general, the results show a success with the grouping. However, the groups that converged under all concepts are those composed by countries that have succeeded in industrializing and/or were able to build strong institutions that could promote welfare and economic growth in a globalization context. The speed of convergence for those countries is around 2%. It is also found that integration processes have not helped to accelerate convergence.
    Keywords: Convergence, Latin America
    JEL: O47 O54
    Date: 2007–12
  26. By: Carlos Gustavo Machicado (Institute for Advanced Development Studies)
    Abstract: It has been widely documented that investment in infrastructure is important for economic growth, but little work has been done in relation to the impact of infrastructure investment on other macroeconomic variables. This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model of a small open economy to study the effects of public investment in infrastructure on output, consumption, private investment, trade balance and welfare. The model is parameterized and solved for five representative countries from The Initiative for the Integration of Regional Infrastructure in South America (IIRSA), which include: Bolivia, Chile, Brazil, Venezuela and Argentina. I also analyze the growth effects on GDP by increasing or decreasing the effectiveness index of infrastructure in each of these countries. Naturally output will grow at a larger rate, if infrastructure is handled with greater efficiency.
    Keywords: Infrastructure, Economic Growth, Welfare
    JEL: H54 O40 D60
    Date: 2007–12
  27. By: Pushkar Maitra; Sarmistha Pal
    Abstract: This paper examines the relationship between early childbearing and child mortality in Bangladesh, a country where adolescent childbearing is of particular concern. We argue that effective use of specific health inputs could however significantly lower child mortality rates even among adolescent women. This offers an attractive policy option particularly when compared to the costly alternative of delaying age at marriage. In particular, we find that women having early childbirth tend to use health inputs differently from all other women. After correcting for this possible selectivity bias, the adverse effects of early childbirth on child mortality are reversed. The favourable effects of use of health inputs however continue remain statistically significant.
    Date: 2007–02
  28. By: John Bennett; Saul Estrin
    Abstract: We model decisions with respect to formality or informality for entrepreneurs in a new industry for a developing economy. We show that informality allows a leader to explore, without significant sunk costs, the potential profitability of the industry; that is, informality may be a stepping stone, enabling an entrepreneur to experiment cheaply in an uncertain environment. There are circumstances under which, without this option, the industry would not become established. We analyse the roles of parameters such as a minimum wage rate and we show that the existence of finance constraints can actually encourage entry in this context.
    Date: 2007–07
  29. By: Elias Papaioannou; Gregorios Siourounis
    Abstract: This paper challenges cross-sectional findings that democratic institutions have a negligible direct effect on economic growth. We employ a newly constructed data-set of permanent democratic transitions during the so-called Third Wave of Democratization and examine the within effect of democratization in countries that abandoned autocracy and consolidated representative institutions. We study democratization in a before-after event study approach that enables us to control for time-invariant country-specific effects and general time trends. The panel estimates imply that on average democratizations are associated with a one half to one percent increase in annual per capita growth. The dynamic analysis also reveals a J-shaped growth pattern: during the transition growth is slow and on average negative; in the medium and especially long run, however, growth stabilizes at a higher level. The evidence supports "development" theories of democracy and growth that highlight the positive impact of representative institutions on economic activity. They also favour Friedrich Hayek (1960)’s idea that the merits of democracy appear in the long run.
    Date: 2007–10
  30. By: Chakraborty, Lekha S. (National Institute of Public Finance and Policy); Bagchi, Amaresh (National Institute of Public Finance and Policy)
    Keywords: Gender ; Fiscal decentralisation
    Date: 2007–01
  31. By: Chakraborty, Lekha S. (National Institute of Public Finance and Policy)
    Keywords: Gender ; Fiscal decentralisation
    Date: 2007–05
  32. By: Chakraborty, Lekha S. (National Institute of Public Finance and Policy)
    Abstract: Theory of allocation of time revealed that historically market-time has never consistently been greater than the non-market time and therefore the allocation and efficiency of latter may be equally important, if not more, to economic growth than that of former. The time budget data challenged the existing theories on allocation of time where nonmarket time aggregates leisure and work at home. The time budget findings revealed that unpaid work at home and leisure are not affected in the same way by changes in socio-economic variables. Tricotomising the allocation of time into work in market, unpaid work at home and leisure has important policy implications; in integrating the care economy into economic modeling and in turn in macropolicy making. This is particularly important in the context of developing countries, where public infrastructure deficit induces locking of time in unpaid work spurting a trade off with the time otherwise spent in the market economy activities or eroding leisure. Against this backdrop, this paper examined the link between public infrastructure investment and time allocation across gender in the context of selected states in India. The direction of regression coefficients suggests that public infrastructure investment affects market work, non-market work and leisure time in different ways with evident gender differentials. The time allocation in SNA activity of women is found significant and inversely related to the public infrastructure related to water supply. But there is no evidence that the release of time locked up in unpaid SNA work through better infrastructure can have substitution effect towards market work. This gets reinforced by the significant positive link between infrastructure and time allocation in Non-SNA activity, which manifests forced leisure. This in turn implies that though infrastructure investment lessens the time stress in unpaid SNA activity; complementary employment policies are required along with infrastructure investment to ensure substitution effect of unpaid work with market work, which in turn can have impact on household poverty. In particular, the analysis of time budget statistics enables the identification of the complementary fiscal services required for better gender sensitive human development. The overall conclusion of the paper is that fiscal policies designed to redress income poverty can be partial if it does not take in to account aspects of time poverty.
    Keywords: Public infrastructure ; Investment
    Date: 2007–05

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