nep-dev New Economics Papers
on Development
Issue of 2008‒01‒05
39 papers chosen by
Jeong-Joon Lee
Towson University

  1. The Role of Provincial Policies in Fiscal Equalization Outcomes in China By Jorge Martinez-Vazquez; Baoyun Qiao; Li Zhang
  2. What is Middle Class about the Middle Classes Around the World? By Banerjee, Abhijit; Duflo, Esther
  3. Does inequality make us rebel ? A renewed theoretical model applied to South Mexico By Jean-Franois, MAYSTADT
  4. A closer look at the relationship between life expectancy and economic growth By Raouf, BOUCEKKINE; Bity, DIENE; ThŽophile, AZOMAHOU
  5. Why capital maintenance should be a key development tool ? By Raouf, BOUCEKKINE; Blanca, MARTINEZ; Cagri, SAGLAM
  6. Foreign Direct Investment, Intra-Regional Trade and Production Sharing in East Asia By Nathalie AMINIAN; K. C. FUNG; IIZAKA Hitomi
  7. The determinants of household saving in China: a dynamic panel analysis of provincial data By Charles Yuji Horioka; Junmin Wan
  8. Effect of Microfinance on Vulnerability, Poverty and Risk in Low Income Households By Bali Swain, Ranjula; Floro, Maria
  9. Reducing intergroup prejudice and conflict with the media: A field experiment in Rwanda By Elizabeth Levy Paluck
  10. Containing ethnic conflicts through ethical voting? Evidence from Ethiopia By Marie-Anne Valfort
  11. Empirical Evidence on the New International Aid Architecture By Stijn Claessens; Danny Cassimon; Bjorn Van Camperhout
  12. Review of the Recent Trends in Development Economics Research: With Experience from the Federal Region of Kurdistan By Almas Heshmati
  13. Labor Outflows and Labor Inflows in Puerto Rico By George J. Borjas
  14. Complements versus Substitutes and Trends in Fertility Choice in Dynastic Models By Larry E. Jones; Alice Schoonbroodt
  15. Aging and Death under a Dollar a Day By Abhijit V. Banerjee; Esther Duflo
  16. Occupational Choice and Development By Jan Eeckhout; Boyan Jovanovic
  17. Fiscal Decentralisation, Chinese Style: Good for Health Outcomes? By Hiroko Uchimura; Johannes P. Jütting
  18. Solow or Lucas?: Testing Growth Models Using Panel Data from OECD Countries By Jens Arnold; Andrea Bassanini; Stefano Scarpetta
  19. From cities to productivity and growth in developing countries By Gilles Duranton
  20. What matters to African firms ? the relevance of perceptions data By Turner, Ginger; Shah, Manju Kedia; Ramachandran, Vijaya; Gelb, Alan
  21. Securing property rights in transition: lessons from implementation of China ' s rural land contracting law By Jin, Songqing; Deininger, Klaus
  22. Land reforms, poverty reduction, and economic growth : evidence from India By Nagarajan, Hari K.; Jin, Songqing; Deininger, Klaus
  23. Does it pay firms to register for taxes ? the impact of formality on firm profitability By Sakho, Yaye Seynabou; McKenzie, David
  24. Developing countries and enforcement of trade agreements : why dispute settlement is not enough By Hoekmanm Bernard M.; Bown, Chad P.
  25. Fiscal spending and economic performance : some stylized facts By de Melo, Jaime; Carrere, Celine
  26. Is Accra a superstar city ? By Mathema, Ashna S.; Buckley, Robert M.
  27. Land rental markets in the process of rural structural trans formation : productivity and equity impacts in China By Jin, Songqing; Deininger, Klaus
  28. Where to sell ? market facilitie s and agricultural marketing By Umali-Deininger, Dina; Shilpi, Forhad
  29. Aid inflows and the real effective exchange rate in Tanzania By Rowe, Francis; Li, Ying
  30. Assessing the Impact of Development Cooperation: the Case of African Growth and Opportunity Act (AGOA) and U.S. Imports from Sub-Saharan Africa. By Bichaka Fayissa; Badassa Tadasse
  31. The Fundamental Duality Theorem of Balanced Growth By Ian King; Don Ferguson
  32. Joining Panel Data with Cross-Sections for Efficiency Gains: an Application to a Consumption Equation for Nicaragua By R. Bruno; M. Stampini
  33. SME financing in China By Chen Xiang Liu
  34. Environment, Human Development and Economic Growth after Liberalisation: An Analysis of Indian States By Mukherjee, Sacchidananda; Chakraborty, Debashis
  35. Ethnic Wage Inequality in Vietnam: Empirical Evidence from 2002 By Pham, T. Hung; Reilly, Barry
  36. Trade,Financial and Growth Nexus in Pakistan By Arshad Khan, Muhammad; Qayyum, Abdul
  37. Diversities and Disparities among Female-Headed Households in Rural Malawi By Takane, Tsutomu
  38. Has Low Productivity Constrained Competitiveness of African Firms? : Comparison of the Firm Performances with Asian Firms By Fukunishi, Takahiro
  39. The Economic Effects of Croatia's Accession to the EU By Arjan Lejour; Andrea Mervar; Gerard Verweij

  1. By: Jorge Martinez-Vazquez (Andrew Young School of Policy Studies); Baoyun Qiao (Andrew Young School of Policy Studies, Georgia State University); Li Zhang (Andrew Young School of Policy Studies)
    Abstract: In this paper, we use pooled data for central-provincial and provincial-local governments in 2000-01, overall involving over 4000 sub-provincial governments, to assess China 's sub-national fiscal equalization practices and outcomes. Our goal is to explain horizontal fiscal disparities between and within provinces, with a special focus on the role played by intermediate-level governments, particularly the provincial governments, on overall equalization outcomes in China . The significant policy implication of our findings is that if the goal of the central government is to improve equity in the distribution of fiscal resources throughout the entire national territory, it will not be enough to improve the design and size of central-provincial transfers. There will be a need to re-structure and control the structure and practices of provincial-local government transfers.
    Keywords: Fiscal Equalization, central-Provincial, China, sub-national fiscal equalization
    Date: 2007–03–01
  2. By: Banerjee, Abhijit; Duflo, Esther
    Abstract: This paper uses household surveys from 13 developing countries to describe consumption choices, health and education investments, employment patterns and other features of the of the economic lives of the “middle classes” defined as those whose daily consumption per capita is between $2 and $4 or between $6 and $10. The data shed lights on differences and similarities between the middle classes and the poor and helps discriminating between various theories of the role of the middle classes in the development process. We find that the average middle class person is not an entrepreneur in waiting: while he or she might run a business, this is usually a small, not very profitable business. The single most important characteristic of the middle class seems to be that they are more likely to be holding a steady job. Perhaps as a result, they also have fewer, healthier, and better educated children. While there are clear differences in consumption patterns between the poor and the middle classes, there are also very strong resemblance within countries, and contrasts across countries, which might either reflect the importance of relative prices in shaping consumption decisions or the power of norms/fashions in determining consumption.
    Keywords: consumption; development; investment; middle class
    JEL: I32 O10 O12
    Date: 2007–12
  3. By: Jean-Franois, MAYSTADT (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: Since Collier and Hoeffler (1998, 2004), it has been supported that inequality, measured at national level, does not affect the risk of conflict. Based on a renewed theoretical framework, the purpose of the paper is to explore the role of inequality in localized conflicts. We argue that previous findings might be biased by the myopic nature of cross-country analysis. Consistently with the model, Probit estimations indicate that income inequality measured at municipal level was significant in motivating people to support the rebellion in South Mexico. At this geographical level, we also find an increase in income per capita could exacerbate the risk of conflict in a situation where the rebel leader would have greater incentives to loot the local production compared to the opportunity cost associated with fighting for the worker.
    Keywords: Rebellion, Inequality, Income, Mexico
    JEL: O18 O54 C35
    Date: 2007–12–07
  4. By: Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Bity, DIENE; ThŽophile, AZOMAHOU
    Abstract: We first provide a nonparametric inference of the relationship between life expectancy and economic growth on an historical data for 18 countries over the period 1820-2005. The obtained shape shows up convexity for low enough values of life expectancy and concavity for large enough values. We then study this relationship on a benchmark model combining Òperpetual youthÓ and learning-by-investing. In such a benchmark, the generated relationship between life expectancy and economic growth is shown to be strictly increasing and concave. We finally examine a model departing from Òperpetual youthÓ by assuming age-dependent survival probabilities. We show that life-cycle behavior combined with age-dependent survival laws can reproduce our empirical finding.
    Keywords: Life expectancy, economic growth, perpetual youth, age-dependent mortality, nonparametric estimation
    JEL: O41 I20 J10
    Date: 2007–12–14
  5. By: Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Blanca, MARTINEZ; Cagri, SAGLAM
    Abstract: We study optimal growth model ˆ la Nelson and Phelps (1966) where labor resources can be allocated either to production, technology adoption or capital maintenance. We first characterize the balanced growth paths of a benchmark model without maintenance. Then we introduce the maintenance activity via the depreciation rate of capital. We characterize the optimal allocation of labor across the three activities. Through maintenance deepens the technological gap by diverting labor ressources from adoption, we find that it generally increases the long run output level. Moreover we find that long term output response to policy shocks is slightly higher in the presence of maintenance.
    Keywords: Adoption, Maintenance, Technological gap, Output gap
    JEL: E22 E32 O40
    Date: 2007–12–14
  6. By: Nathalie AMINIAN; K. C. FUNG; IIZAKA Hitomi
    Abstract: The aim of this paper is twofold. First, it examines the trend and nature of East Asian trade. The United Nations BEC classification is utilized to categorize total trade into trade in semi-finished goods, trade in components and parts, trade in capital goods as well as trade in final consumption goods. It shows that the increasing importance of East Asia as a trading region is due at least partially to the rising trade in components and parts. Next, it tries to find out if foreign direct investment plays a role in the import and export behavior of East Asian intra-regional trade. Using a gravity model, it evidences that in general FDI is important in explaining imports and exports of intra-East Asian trade. In particular, FDI is especially important in explaining trade in components and parts, followed by trade in capital goods. This helps confirm that FDI and trade associated with production fragmentation in East Asia are complementary.
    Date: 2007–12
  7. By: Charles Yuji Horioka; Junmin Wan
    Abstract: In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the 1995-2004 period from China's household survey. We find that China's household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, and (in some cases) the real interest rate and the inflation rate. However, we find that the variables relating to the age structure of the population usually do not have a significant impact on the household saving rate. These results provide mixed support for the life cycle hypothesis as well as the permanent income hypothesis, are consistent with the existence of inertia or persistence, and imply that China's household saving rate will remain high for some time to come.
    Keywords: Saving and investment - China
    Date: 2007
  8. By: Bali Swain, Ranjula (Department of Economics); Floro, Maria (Department of Economics)
    Abstract: Uncertainty and unpredictability faced by low-income households increase their vulnerability making poverty even more unbearable. India¡¦s National Bank for Agriculture and Rural Development (NABARD)-initiated Self-Help Group (SHG) program, which is currently the largest and fastest growing microfinance program in the developing world, has been aggressively promoted as a way of combating poverty. This paper investigates whether or not SHG participation results in reducing poverty and vulnerability. A theoretical framework is developed to examine the mechanisms through which the pecuniary and non-pecuniary effects of the SHG program on the beneficiaries¡¦ earnings and empowerment, influence their households¡¦ ability to manage risk. Going beyond the traditional poverty estimates, we use a vulnerability measure which quantifies the welfare loss associated with poverty as well as different types of risks like aggregate and idiosyncratic risks. Applying this measure to an Indian panel survey data for 2000 and 200ƒ£, we find that SHG members have lower vulnerability as compared to a group of non-SHG (control) members. Furthermore, we find that the poverty contributes to about 80 percent of the vulnerability faced by the household followed by aggregate risk.
    Keywords: Microfinance; Vulnerability; Poverty; Risk Coping
    JEL: D14 G21 I32
    Date: 2007–12–21
  9. By: Elizabeth Levy Paluck (Harvard University)
    Abstract: Can the media reduce intergroup prejudice and conflict? Despite the high stakes of this question, understanding of the mass media’s role in shaping prejudiced beliefs, norms, and behaviors is very limited. A yearlong field experiment in Rwanda tested the impact of a radio soap opera about two Rwandan communities in conflict, which featured messages about reducing intergroup prejudice, violence, and trauma. Compared to communities who listened to a control radio soap opera, listeners’ perceptions of social norms and their behaviors changed concerning some of the most critical issues for Rwanda’s post conflict society, namely intermarriage, open dissent, trust, empathy, cooperation and discussion of personal trauma. However, the radio program did little to influence listeners’ personal beliefs. Group discussion was a notable feature of the listening experience. Taken together, the results suggest that radio can communicate social norms and influence behaviors that contribute to intergroup tolerance and reconciliation.
    Keywords: Education-entertainment, prejudice reduction, conflict reduction, trauma, field experiment, mass media, radio, social norms
    Date: 2007–10
  10. By: Marie-Anne Valfort (Paris School of Economics)
    Abstract: In an ethnically polarized country, does aversion towards inter-ethnic inequity induce citizens to vote for a party promoting an equitable allocation of national resources among ethnic groups? We base our analysis on a survey that we conducted among 331 students from Addis Ababa University. We show that aversion towards inter-ethnic inequity does exert a significant influence on university students’ vote. Yet, its relative impact is small in comparison to the impact of ethnic group loyalty which determines ethnic voting. We provide confirmation that some specific sociodemographic characteristics significantly (i) increase the degree of aversion towards inter-ethnic inequity and (ii) lower ethnic group loyalty. Those characteristics have in common that they reduce the ‘psychological’ distance between ethnic groups, like living in a cosmopolitan city and having parents belonging to different ethnic groups.
    Keywords: Africa, Ethiopia, ethnic conflict, voting behavior, aversion towards inter-ethnic inequity.
    JEL: D02 D63 D64 D72 H77 N47
    Date: 2007–11
  11. By: Stijn Claessens; Danny Cassimon; Bjorn Van Camperhout
    Abstract: We study how 22 donors allocate their bilateral aid among 147 recipient countries over the 1970- 2004 period to investigate whether changes in the international aid architecture?at the international and country level?have led to changes in behavior. We find that after the fall of the Berlin wall, and especially in the late nineties, bilateral aid responds more to economic need and the quality of a recipient country's policy and institutional environment and less to debt, size, and colonial linkages. Importantly, we find that when a country uses a PRSP and passes the HIPC decision point the perverse effect of large bilateral and multilateral debt shares on aid flows is reduced, suggesting less defensive lending. Overall, it appears international aid architecture changes have led to more selectivity in aid allocations. The specific factors causing these changes remain unclear, however. Furthermore, there remain large differences among donors in selectivity that appear to relate to donors' own institutional environments. Together this suggests that further reforms will have to be multifaceted.
    Date: 2007–12–14
  12. By: Almas Heshmati (University of Kurdistan Hawler, HIEPR and IZA)
    Abstract: This study is a review of the recent trends in development economics research. The focus is on the development in the recent decades as a result of increased globalization of knowledge, technologies and economies. In particular I look at the development in a number area where similar trends are observed. The areas studied include globalization, in-sourcing and outsourcing activities, the increased flow of direct foreign investment and its heterogeneous regional distribution, the increased public investment in information and communication technologies as infrastructure for development, the importance of commercialization and transfer of technologies, and increased income inequality and concentration of severe poverty in certain regions. In addition I briefly elaborate on the role of education, research, and training to enhance development capability and capacity, the increased strategic importance of natural resources and the increased interregional trade flow. I also investigate the development in the Federal Region of Kurdistan since its gained self-governance in 1991 as a case study by referring to the above developments.
    Keywords: development economics, information and communication technology, foreign direct investment, globalization, outsourcing, technology, capability, energy, trade flows, inequality and poverty, technology transfer
    JEL: D83 F10 F21 I30 L24 O10 O47
    Date: 2007–12
  13. By: George J. Borjas
    Abstract: Although a sizable fraction of the Puerto Rican-born population moved to the United States, the island also received large inflows of persons born outside Puerto Rico. Hence Puerto Rico provides a unique setting for examining how labor inflows and outflows coexist, and measuring the mirror-image wage impact of these flows. The study yields two findings. First, the skills of the out-migrants differ from those of the in-migrants. Puerto Rico attracts high-skill in-migrants and exports low-skill workers. Second, the two flows have opposing effects on wages: in-migrants lower the wage of competing workers and out-migrants increase the wage.
    JEL: J60 J61
    Date: 2007–11
  14. By: Larry E. Jones; Alice Schoonbroodt
    Abstract: The Barro-Becker model is a simple intuitive model of fertility choice. In its original formulation, however, it has not been very successful at reproducing the changes in fertility choice in response to decreased mortality and increased income growth that demographers have emphasized in explaining the demographic transition. In this paper we show that this is due to an implicit assumption that number and utility of children are complements, which is a byproduct of the high intertemporal elasticity of substitution (IES) typically assumed in the fertility literature. We show that, not only is this assumption not necessary, but both the qualitative and quantitative properties of the model in terms of fertility choice change dramatically when substitutability and high curvature are assumed. To do so, we first derive analytical comparative statics and perform quantitative experiments. We find that if IES is less than one, model predictions of changes in fertility amount to about two-thirds of those observed in U.S. data since 1800. There are two major sources to these predicted changes, the increase in the growth rate of productivity which accounts for about 90 percent of the predicted fall in fertility before 1880, and changes in mortality which account for 90 percent of the predicted change from 1880 to 1950.
    JEL: E13 J11 J13 O11
    Date: 2007–12
  15. By: Abhijit V. Banerjee; Esther Duflo
    Abstract: This paper uses household survey data form several developing countries to investigate whether the poor (defined as those living under $1 or $2 dollars a day at PPP) and the non poor have different mortality rates in old age. We construct a proxy measure of longevity, which is the probability that an adult's mother and father are alive. The non-poor's mothers are more likely to be alive than the poor's mothers. Using panel data set for Indonesia and Vietnam, we also find that older adults are significantly more likely to have died five years later if they are poor. The direction of causality is unclear: the poor may be poor because they are sick (and thus more likely to die), or they could die because they are poor.
    JEL: I12 I32 O12 O15
    Date: 2007–12
  16. By: Jan Eeckhout; Boyan Jovanovic
    Abstract: The rise in world trade since 1970 has raised international mobility of labor services. We study the effect of such a globalization of the world's labor markets. We find that when people can choose between wage work and managerial work, the output gains are U-shaped: A worldwide labor market raises output by more in the rich and the poor countries, and by less in the middle-income countries. This is because the middle-income countries experience the smallest change in the factor-price ratio, and where the option to choose between wage work and managerial work has the least value in the integrated economy. Our theory also establishes that after economic integration, the high skill countries see a disproportionate increase in managerial occupations. Using aggregate data on GDP, openness and occupations from 115 countries, we find evidence for these patterns of occupational choice.
    JEL: L0 O1
    Date: 2007–12
  17. By: Hiroko Uchimura; Johannes P. Jütting
    Abstract: This paper analyses the effect of fiscal decentralisation on health outcomes in China using a panel data set with nationwide county-level data. We find that counties in more fiscally decentralised provinces have lower infant mortality rates than counties where the provincial government remains the main spending authority, if certain conditions are met. Spending responsibilities at the local level need to be matched with county governments’ own fiscal capacity. For county governments that have only limited revenues, the ability to spend on local public goods such as health care depends crucially upon intergovernmental transfers. The findings of this paper, therefore, support the common assertion that fiscal decentralisation can lead to more efficient production of local public goods, while also highlighting the conditions required for this result to be obtained. <BR>Ce papier analyse l’effet de la décentralisation fiscale sur la santé en Chine, à partir d’une analyse de panel avec des données de district recueilli au niveau national. Les auteurs trouvent que, sous certaines conditions, les districts aux systèmes plus décentralisés ont des taux de mortalité infantiles moins élevés que ceux où le gouvernement provincial reste la principale autorité. Les responsabilités pour les dépenses au niveau local doivent toutefois être accompagnées de capacités fiscales adéquates. Pour les gouvernements de districts à bas revenus, la capacité à investir dans des biens publics comme les services de santé, dépend principalement des transferts intergouvernementaux. Les analyses confirment l’argument selon lequel la décentralisation fiscale peut mener à une plus grande efficacité des biens publics, en soulignant les conditions nécessaires pour atteindre ce résultat.
    Keywords: health, santé, fiscal decentralisation, décentralisation fiscale, China, Chine, Health-care finance, financement des services de santé
    JEL: H51 H72 H75 I18
    Date: 2007–11
  18. By: Jens Arnold; Andrea Bassanini; Stefano Scarpetta
    Abstract: In this paper, we test whether the growth experience of a sample of OECD countries over the past three decades is more consistent with the human-capital augmented Solow model of exogenous growth, or with an endogenous growth model à la Uzawa-Lucas with constant returns to scale to “broad” (human and physical) capital. We exploit the different non-linear restrictions implied by these two models to discriminate between them. Using pooled crosscountry time-series data, we specify our growth regression by imposing cross-country homogeneity restrictions only on long-run coefficients, while letting the speed of convergence and short term dynamics to vary across countries. While there are indeed good reasons to believe in common long-run coefficients, given that OECD countries have access to common technologies and have intensive intra-industry trade and foreign direct investment, the theoretical models imply that the speed of convergence to the steady state differs across countries because of cross-country heterogeneity in population growth, technical change and progressiveness of the income tax. Therefore, standard dynamic fixed effect specifications, by imposing cross-country homogeneity restrictions on speed of convergence and short-run parameters, suffer from a heterogeneity bias and are not suited to implement our tests. The results suggest a strong effect of human capital accumulation: the estimated long-run effect on output of one additional year of education (about 6-9%) is also within the range of the estimates obtained in microeconomic analyses of the private returns to schooling. Our estimated speed of convergence is too fast to be compatible with the augmented Solow model, while is consistent with the Uzawa-Lucas model with constant returns to scale. This main finding is robust to several robustness tests. <P>Solow ou Lucas? : Un test des modèles de croissance basé sur des données en panel pour les pays de l’OCDE <BR>Dans cet article nous analysons le processus de croissance dans un groupe de pays de l’OCDE au cours des trois dernières décennies. Nous cherchons à établir si ce processus est plus conforme à un modèle de croissance exogène à la Solow ou bien à un modèle de croissance endogène à la Uzawa-Lucas avec des rendements d’échelle constants par rapport au capital au sens large (humain et physique). Pour cela, nous exploitons les contraintes non-linéaires propres aux deux modèles et nous étudions leur conformité avec les données. En utilisant des données de panel, nous spécifions une équation de croissance dans laquelle les paramètres de court terme et la vitesse de convergence varient d’un pays à l’autre, alors que seuls les paramètres de long terme sont supposés communs. Alors qu’il y a de bonnes raisons pour faire l’hypothèse que les coefficients à long terme sont égaux entre les pays de l’OCDE qui ont accès aux mêmes technologies et ont des relations commerciales étroites, les deux modèles théoriques suggèrent que la vitesse de convergence devrait différer selon les pays en raison de différences dans le taux de croissance de la population, le progrès technique et le taux de progressivité des impôts. Dans ces conditions, les spécifications dynamiques standard à effets fixes qui imposent l’homogénéité de tous les paramètres souffrent d’un biais et ne sont pas valables pour notre test des deux modèles. Nos résultats suggèrent un impact positif et significatif de l’accumulation du capital humain sur la croissance de la production par tête : une année supplémentaire de niveau moyen d’études dans un pays aurait un effet positif à long terme sur la production (de 6-9 %), ce qui est en accord avec l’évidence microéconomique sur le taux de rendement privé de l’investissement en éducation. La vitesse de convergence estimée est trop rapide pour être compatible avec le modèle de Solow. En revanche, nos résultats sont compatibles avec un modèle de Uzawa-Lucas avec des rendements d’échelle constants. Ce résultat principal est confirmé par des tests de robustesse.
    Keywords: growth, human capital, croissance, capital humain, panel data, données de panel
    JEL: O11 O15 O41
    Date: 2007–12–20
  19. By: Gilles Duranton
    Abstract: This paper reviews the evidence about the effects of urbanisation and cities on productivity and economic growth in developing countries using a consistent theoretical framework. Just like in developed economies, there is strong evidence that cities in developing countries bolster productive efficiency. Regarding whether cities promote self-sustained growth, the evidence is suggestive but ultimately inconclusive. These findings imply that the traditional agenda of aiming to raise within-city efficiency should be continued. Furthermore, reducing the obstacles to the reallocation of factors and activities, and more generally promoting the movement of human capital and goods across cities may have significant positive dynamic effects as well static ones.
    Keywords: Cities in developing countries, growth, urbanisation
    JEL: O18 R11
    Date: 2007–12–19
  20. By: Turner, Ginger; Shah, Manju Kedia; Ramachandran, Vijaya; Gelb, Alan
    Abstract: Can perceptions data help us understand investment climate constraints facing the private sector? Or do firms simply complain about everything? In this paper, the authors provide a picture of how firms ' views on constraints differ across countries in Sub-Saharan Africa. Using the World Bank ' s Enterprise Surveys database, they find that reported constraints reflect country characteristics and vary systematically by level of income-the most elemental constraints to doing business (power, access to finance, ability to plan ahead) appear to be most binding at low levels of income. As countries develop and these elemental constraints are relaxed, governance-related constraints become more problematic. As countries move further up the income scale and the state becomes more capable, labor regulation is perceived to be more of a problem-business is just one among several important constituencies. The authors also consider whether firm-level characteristics-such as size, ownership, exporter status, and firms ' own experience-affect firms ' views on the severity of constraints. They find that, net of country and sector fixed effects and firm characteristics, firms ' views do reflect their experience as evidenced by responses to other questions in surveys. The results suggest that there are both country-level and firm-level variations in the investment climate. Turning to the concept of " binding constraints, " the Enterprise Surveys do not generally suggest one single binding constraint facing firms in difficult business climates. However, there do appear to be groups of constraints that matter more at different income levels, with a few elemental constraints being especially important at low levels and a few regulatory constraints at high levels, but a difficult range of governance-related constraints at intermediate levels. Adjusting to a constraint does not mean that firms then do not recognize it-for example, generator-owning firms are not distinguishable from other firms when ranking electricity as a constraint. Overall, firms do appear to discriminate between constraints in a reasonable way. Their views can provide a useful first step in the business-government consultative process and help in prioritizing more specific behavioral analysis and policy reforms.
    Keywords: ,Emerging Markets,Microfinance,Governance Indicators,Access to Finance
    Date: 2007–12–01
  21. By: Jin, Songqing; Deininger, Klaus
    Abstract: This paper is motivated by the emphasis on secure property rights as a determinant of economic development in recent literature. The authors use village and household level information from about 800 villages throughout China to explore whether legal reform increased protection of land rights against unauthorized reallocation or expropriation with below-average compensation by the state. The analysis provides nation-wide evidence on a sensitive topic. The authors find positive impacts, equivalent to increasing land valu es by 30 percent, of reform even in the short term. Reform originated in villages where democratic election of leaders ensured a minimum level of accountability, pointing toward complementarity between good governance and legal reform. The paper explores the implications for situations where individuals and groups hold overlapping rights to land.
    Keywords: Common Property Resource Development,Municipal Housing and Land,Access to Finance,Political Economy,Land and Real Estate Development
    Date: 2007–12–01
  22. By: Nagarajan, Hari K.; Jin, Songqing; Deininger, Klaus
    Abstract: Recognition of the importance of institutions that provide security of property rights and relatively equal access to economic resources to a broad cross-section of society has renewed interest in the potential of asset redistribution, including land reforms. Empirical analysis of the impact of such policies is, however, scant and often contradictory. This paper uses panel household data from India, together with state-level variation in the implementation of land reform, to address some of the deficiencies of earlier studies. The results suggest that land reform had a significant and positive impact on income growth and accumulation of human and physical capital. The paper draws policy implications, especially from the fact that the observed impact of land reform see ms to have declined over time.
    Keywords: Rural Poverty Reduction,Political Economy,Rural Development Knowledge & Information Systems,Municipal Housing and Land,Rural Land Policies for Poverty Reduction
    Date: 2007–12–01
  23. By: Sakho, Yaye Seynabou; McKenzie, David
    Abstract: This paper estimates the impact of registering for taxes on firm profits in Bolivia, the country with the highest levels of informality in Latin America. A new survey of micro and small firms enables the authors to control for a rich set of measures of owner ability and business motivations that can affect both profits and the decision to formalize. The paper identifies the impact of tax registration on business profitability using the distance of a firm from th e tax office where registration occurs, conditional on the distance to the city center, as an instrument for registration. Proximity to the tax office provides firms with more information about registration, but is argued to not directly affect profits. The findings show that tax registration leads to significantly higher profits for the firms that the instrument affects. However, there is also evidence of heterogeneous effects of tax formality on profits. Tax registration is found to increase profits for the mid-size firms in the sample, but to lower profits for both the smaller and larger firms, in contrast to the standard view that formality increases profits. The analysis shows that owners of large firms who have managed to stay informal have higher entrepreneurial ability than formal firm owners, in contrast to the standard view (correct among smaller firms) that informal firm owners have low ability.
    Keywords: Microfinance,Debt Markets,Transport Economics Policy & Planning,Taxation & Subsidies,E-Business
    Date: 2007–12–01
  24. By: Hoekmanm Bernard M.; Bown, Chad P.
    Abstract: Poor countries are rarely challenged in formal World Trade Organization trade disputes for failing to live up to commitments, reducing the benefits of their participation in international trade agreements. This paper examines the political-economic causes of the failure to challenge poor countries, and discusses the static and dynamic costs and externality implications of this failure. Given the weak incentives to enforce World Trade Organization rules and disciplines against small and poor members, bolstering the transparency function of the World Trade Organization is important for making trade agreements more relevant to trade constituencies in developing countries. Although the paper focuses on the World Trade Organization system, the arguments also apply to reciprocal North-South trade agreements.
    Keywords: Economic Theory & Research,Trade Law,Free Trade,Emerging Markets,World Trade Organization
    Date: 2007–12–01
  25. By: de Melo, Jaime; Carrere, Celine
    Abstract: This paper comp lements the cross-country approach by examining the correlates of growth acceleration in per capita gross domestic product around " significant " public expenditure episodes by reorganizing the data around turning points, or events. The authors define a growth event as an increase in average per capita growth of at least 2 percentage points sustained for 5 years. A fiscal event is an increase in the annual growth rate of primary fiscal expenditure of approximately 1 percentage point sustained for 5 years and not accompanied by an aggravation of the fiscal deficit beyond 2 percent of gross domestic product. These definitions of events are applied to a database of 140 countries (118 developing countries) for 1972-2005. After controlling for the growth-inducing effects of positive terms-of-trade shocks and of trade liberalization reform, probit estimates indicate that a growth event is more likely to occur in a developing country when surrounded by a fiscal event. Moreover, the probability of occurrence of a growth event in the years following a fiscal event is greater the lower is the associated fiscal deficit, confirming that success of a growth-oriented fiscal expenditure reform hinges on a stabilized macroeconomic environment (through a limited primary fiscal deficit).
    Keywords: Public Sector Expenditure Analysis & Management,Fiscal Adjustment,Economic Conditions and Volatility,Debt Markets,Achieving Shared Growth
    Date: 2007–12–01
  26. By: Mathema, Ashna S.; Buckley, Robert M.
    Abstract: A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid residents. We consider the case of Accra, Ghana, in this light, estimating the elasticity of housing supply and discussing the implications for growth and income distribution. There is not a great deal of data available to examine trends in Accra, so our method is indirect. First, we use a variant of the traditional monocentric city model to calculate the elasticity of Accra ' s housing supply relative to those of other similarly-sized African cities. This suggests that housing supply responsiveness is much higher elsewhere. This muted supply responsiveness is consistent with the observed higher housing prices. Second, we estimate a number of traditional housing demand equations and reduced form equations. Placing a number of restrictions on the equations allows us to infer Accra ' s housing supply elasticity. Taken together, our approaches suggest that lower-income families in Accra have such poor housing conditions because the market is extremely unresponsive to demand. Although the outcomes we have traced-high housing prices and low quality-are not unusual relative to the other developed country superstar cities, they are extreme. The welfare costs are considerable, so much so that in addition to direct housing market effects, these policies also appear to have potentially significant implications for the achievement of more equitable growth.
    Keywords: Economic Theory & Research,Housing & Human Habitats,Banks & Banking Reform,,Public Sector Management and Reform
    Date: 2007–12–01
  27. By: Jin, Songqing; Deininger, Klaus
    Abstract: The importance of land rental for overall economic development has long been recognized in theory, yet empirical evidence on the productivity and equity impacts of such markets and the extent to which they realize their potential has been scant. Representative data from China ' s nine most important agricultural provinces illustrate the impact of rental markets on households ' economic strategies and welfare, and the productivity of land use at the plot level. Although there are positive impacts in each of these dimensions, transaction costs constrain participation by many producers, thus preventing rental markets from attaining their full potential. The paper identifies factors that increase transaction costs and provides a rough estimate of the productivity and equity impacts of removing them.
    Keywords: Banks & Banking Reform,Political Economy,Economic Theory & Research,Rural Development Knowledge & Information Systems,Labor Policies
    Date: 2007–12–01
  28. By: Umali-Deininger, Dina; Shilpi, Forhad
    Abstract: This paper analyzes the effect of facilities and infrastructure available at the market place on a farmer ' s decision to sell at the market using a comprehensive survey of farmers, markets and villages conducted in Tamil Nadu, India in 2005. The econometric estimation shows that the likelihood of sales at the market increases significantly with an improvement in market facilities and a decrease in travel time from the village to the market. The results suggest that wealth reduces a farmer ' s cost of accessing market facilities more than it increases her/his opportunity cost of leisure. The wealthy farmers are able to capture a disproportionate share of the benefits of facilities available at congested markets. The policy simulation, however, shows that the marginal benefits from an improvement in market facilities will favor poorer farmers in the context of India.
    Keywords: Markets and Market Access,Transport Economics Policy & Planning,Debt Markets,Access to Markets,Housing & Human Habitats
    Date: 2007–12–01
  29. By: Rowe, Francis; Li, Ying
    Abstract: Tanzania is well placed to receive a significant increase in aid inflows in coming years. Despite the potential for the additional aid inflows to raise income levels in the country, increasing them may bring about structural changes in the economy that may be unwelcome. One such change is an appreciation of the real exchange rate that leads to a contraction of traditional export sectors and a loss of export competitiveness. This paper employs a reduced-form equilibrium real exchange rate approach to explain movements in Tanz ania ' s real effective exchange in recent decades. Particular attention is paid to the relationship between aid inflows and the real effective exchange rate. The authors find that the long-run behavior of the real effective exchange rate is influenced by terms of trade movements, the government ' s trade liberalization efforts, and aid inflows. Positive terms-of-trade movements are associated with an appreciation, periods of improving trade liberalization are associated with a depreciation, and increases in aid inflows are associated with a depreciation in the real effective exchange rate. Although the last result is non-standard, it is not empirically unique and does have theoretical underpinnings. A detailed analysis of this relationship over the last decade shows that the Bank of Tanzania ' s response to aid inflows is likely the main reason for the finding.
    Keywords: Currencies and Exchange Rates,Debt Markets,Economic Theory & Research,Emerging Markets,Economic Stabilization
    Date: 2007–12–01
  30. By: Bichaka Fayissa; Badassa Tadasse
    Abstract: We evaluate the impact of the unilateral trade policy concession known as African Growth and Opportunity Act (AGOA) on U.S. imports from eligible Sub-Saharan African (SSA) countries. Using U.S.-SSA countries’ trade data that span the years 1991-2006, we find that AGOA has contributed to the initiation of new and the intensification of existing U.S. imports in both manufactured and non-manufactured goods and several product categories. However, compared to its import initiation impact, the import intensification effect of the Act has been marginal. Our results have important policy implication for further intensification of African exports to the U.S. markets.
    Keywords: AGOA, Trade Agreements, Trade Initiation, Trade Intensification
    JEL: F13 F14 F15
    Date: 2007–12
  31. By: Ian King; Don Ferguson
    Abstract: In this paper we demonstrate that a simple duality relation underlies balanced growth models with non-joint production. Included in this class of models is the standard neoclassical growth model and endogenous growth models that admit balanced growth paths. In all of these models, the optimal transformation frontier and the factor price frontier take precisely the same mathematical formulation. Studying these identical frontiers in the context of the different models provides new insights into the relative structures of these models, the role of savings, and the nature of dynamic efficiency in each.
    JEL: O40 O41
    Date: 2007
  32. By: R. Bruno; M. Stampini
    Date: 2007–11
  33. By: Chen Xiang Liu
    Abstract: SMEs have a great contribution in China’s economic expansion. However, the financing predicament currently faced by SMEs constitutes a great bottleneck for their development. Banks are reluctant to lend to them, mainly due to the lack of collateral and their poor capability in pricing risk. This is the reason why credit guarantee institutions play a key role in SME financing and the perfection of the credit guarantee system is important for promoting their access to credit. In addition, the lifting of the ceiling on lending rates as well as other steps taken by banking authorities will encourage bank lending to SMEs. Finally, informal finance has a significant part in SME financing.
    Keywords: SME financing, credit guarantee, informal finance
    JEL: E26 E51 G21 O53
    Date: 2007
  34. By: Mukherjee, Sacchidananda; Chakraborty, Debashis
    Abstract: Economic growth does not necessarily ensure environmental sustainability for a country. The relationship between the two is far more complicated for developing countries like India, given the dependence of a large section of the population on natural resources for livelihood. Under this backdrop, the current study attempts to analyze the relationships among Environmental Quality (EQ), Human Development (HD) and Economic Growth (EG) for 14 major Indian States during post liberalisation period (1991-2004). Further, for understanding the changes in EQ with the advancement of economic liberalisation, the analysis is carried out by dividing the sample period into two: Period A (1990–1996) and Period B (1997–2004). For both the sub-periods, 63 environmental indicators have been clustered under eight broad environmental groups and an overall index of EQ using the HDI methodology. The EQ ranks of the States exhibit variation over time, implying that environment has both spatial and temporal dimensions. Ranking of the States across different environmental criteria (groups) show that different States possess different strengths and weaknesses in managing various aspects of EQ. The HDI rankings of the States for the two periods are constructed by the HDI technique following the National Human Development Report 2001 methodology. We attempt to test for the Environmental Kuznets Curve hypothesis through multivariate OLS regression models, which indicate presence of non-linear relationship between several individual environmental groups and per capita net state domestic product (PCNSDP). The relationship between EQ and economic growth however does not become clear from the current study. The regression results involving individual environment groups and HDI score indicate a slanting N-shaped relationship. The paper concludes that individual States should adopt environmental management practices based on their local (at the most disaggregated level) environmental information. Moreover, since environmental sustainability and human well-being are complementary to each other, individual States should attempt to translate the economic growth to human well-being.
    Keywords: Environmental Quality; Economic Liberalisation; Economic Growth; Human Development; India.
    JEL: Q50 O10 O15 O13 Q24 Q01 Q25 O1 I2 Q40 O4 I10
    Date: 2007–07
  35. By: Pham, T. Hung; Reilly, Barry
    Abstract: This paper complements earlier studies on ethnic minority underdevelopment in Vietnam by empirically examining the ethnic wage gap in the Vietnamese labour market, using data from a large-scale household survey conducted in 2002. The paper uses the ‘index number’ decomposition method suggested by Oaxaca (1973) to decompose the ethnic wage gap into treatment and endowment effects at both the mean and at selected quantiles of the conditional wage distribution. The results confirm the existence of an ethnic wage gap in the labour market, through this gap is found to be substantially narrower than the ethnic gap observed using household living standard measures for Vietnam. Decomposition results reveal that the ethnic wage gap is largely attributable to differentials in the returns to endowments, a finding invariant to whether the mean or selected quantiles of the conditional wage distribution is examined.
    Keywords: Wage inequality; ethnic minority; quantile regression; Vietnam
    JEL: J3 J7
    Date: 2007–11
  36. By: Arshad Khan, Muhammad; Qayyum, Abdul
    Abstract: This paper empirically investigates the impact of trade and financial liberalization on economic growth in Pakistan using annual observations over the period 1961-2005. The analysis is based on the bound testing approach of cointegration advanced by Pesaran et al (2001). The empirical findings suggest that both trade and financial liberalization policies play an important role in nhancing economic growth in Pakistan in the long-run. However, the short-run responses of real deposit rate and trade policy variables are very low, suggesting further acceleration of reform process. The feedback coefficient suggests a very slow rate of adjustment towards long-run equilibrium. The estimated equation remains stable over the period of study as indicated by CUSUM and CUSUMQ stability tests.
    Keywords: Trade Liberalization; Financial Development; Economic Growth; Bound Test
    JEL: O10 C22 F43 G10
    Date: 2007–12
  37. By: Takane, Tsutomu
    Abstract: Using data obtained from a survey carried out in six villages in various parts of rural Malawi, this paper examines some of the main characteristics of female-headed households. In the study villages, most female-headed households are in a disadvantageous position relative to their male counterparts in terms of labour endowment, farm size, and agricultural productivity. The high cost of inputs, especially of fertilizer, prevents resource-poor female-headed households from improving maize self-sufficiency through increased productivity and from engaging in high-return agriculture such as tobacco production. The paper also shows that there are marked disparities within the category of female-headed households. Factors that enable some female-headed households to achieve high income include the availability of high-return nonfarm income opportunities, use of social networks to obtain labour and income opportunities, land acquisition through flexible applications of inheritance rules, and the existence of informal tobacco marketing. Livelihood diversification is adopted by both male- and female-headed households, but many of the female-headed households engage in low-return and low-entry-barrier activities such as agricultural wage labour. On the other hand, the high off-farm income in the wealthier female-headed households enables them to purchase fertilizer for own-farm production, contributing to an improvement in productivity and resultant increases in their total income.
    Keywords: Gender, Livelihoods, Farm income, Off-farm income, Poverty, Malawi, Africa, Household, Women, Agriculture
    JEL: Q12
    Date: 2007–10
  38. By: Fukunishi, Takahiro
    Abstract: It has been argued that the slow growth of productivity is one of critical sources of stagnation of the African manufacturing sector but empirical supports are limited. Using the inter-regional firm data of the garment industries, productive efficiency and its contribution to unit costs are compared between Kenya and Bangladesh which is the one of the largest exporters in the world. Our estimates have indicated that there is no clear gap in the average technical efficiency of the two industries despite conservative estimation, while allocative efficiency is significantly lower in the Kenyan industry. Unit costs greatly differ between the two industries, where impact of inefficiency on unit costs is small and labour cost appears to have the largest impact. Productivity accounts little for the stagnation in the garment industry.
    Keywords: Technical efficiency, Allocative efficiency, Manufacturing, Sub-Saharan Africa, Productivity, Manufacturing industries, Kenya, Bangladesh
    JEL: D24 L67 O33
    Date: 2007–12
  39. By: Arjan Lejour (CPB Netherlands Bureau for Economic Policy Analysis); Andrea Mervar (The Institute of Economics, Zagreb); Gerard Verweij (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: We explore the economic implications of Croatia's possible accession to the European Union. We focus on two main changes associated with the EU-membership: accession to the internal European Market and institutional reforms in Croatia triggered by the EU-membership. GDP per capita in Croatia is estimated to rise by about 1.1 percent as a result of accession to the internal market. In particular the textile and wearing apparel sectors expand. If Croatia succeeds in reforming its domestic institutions in response to the EU-membership, income levels in Croatia could increase even more. In particular, tentative estimates suggest that GDP per capita in Croatia could even rise by additional 8 percent. Overall, the macroeconomic implications for the existing EU countries are negligible.
    Keywords: regional economic integration, general equilibrium model, gravity equations, institutional reform, Croatia
    JEL: F13 F15
    Date: 2007–12

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