nep-dev New Economics Papers
on Development
Issue of 2008‒03‒15
twenty papers chosen by
Jeong-Joon Lee
Towson University

  1. Explaining Success and Failure in Development By Szirmai, Adam
  2. From Violence to Voting: War and political participation in Uganda By Christopher Blattman
  3. Migration, Risk and the Intra-Household Allocation of Labor in El Salvador By Halliday, Timothy
  4. Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America By Campos, Nauro F.; Kinoshita, Yuko
  5. ‘Arranged’ Marriage, Co-Residence and Female Schooling: A Model with Evidence from India By Dasgupta, Indraneel; Maitra, Pushkar; Mukherjee, Diganta
  6. Performance Spillovers and Social Network in the Workplace: Evidence from Rural and Urban Weavers in a Chinese Textile Firm By Kato, Takao; Shu, Pian
  7. Consequences of Data Error in Aggregate Indicators: Evidence from the Human Development Index By Wolff, Hendrik; Chong, Howard; Auffhammer, Maximilian
  8. Impact of Reforms on Plant-Level Productivity and Technical Efficiency: Evidence from the Indian Manufacturing Sector By Bhaumik, Sumon K.; Kumbhakar, Subal C.
  9. Remittances, Liquidity Constraints and Human Capital Investments in Ecuador By Calero, Carla; Bedi, Arjun S.; Sparrow, Robert
  10. Heterogeneous Impacts in PROGRESA By Djebbari, Habiba; Smith, Jeffrey A.
  11. Caste, Kinship and Sex Ratios in India By Tanika Chakraborty; Sukkoo Kim
  12. Intermediate Goods, Weak Links, and Superstars: A Theory of Economic Development By Charles I. Jones
  13. The Cognitive Link Between Geography and Development: Iodine Deficiency and Schooling Attainment in Tanzania By Erica M. Field; Omar Robles; Máximo Torero
  14. Sovereign Borrowing by Developing Countries: What Determines Market Access? By R. Gaston Gelos, Ratna Sahay and Guido Sandleris
  15. Evaluation in the practice of development By Ravallion, Martin
  16. Youth risk-taking behavior in Brazil : drug use and teenage pregnancy By Verner, Dorte; Cardoso, Ana Rute
  17. India's Health Initiative: Financing Issues and Options By Deolalikar, Anil B.; Jamison, Dean T.; Laxminarayan, Ramanan
  18. Cost-effectiveness of Disease Interventions in India By Chow, Jeffrey; Darley, Sarah R.; Laxminarayan, Ramanan
  19. Fertility decline, baby boom and economic growth By Murphy, Kevin M; Simon, Curtis; Tamura, Robert
  20. Shadow Economy, Tax Morale, Governance and Institutional Quality: A Panel Analysis By Benno Torgler; Friedrich Schneider

  1. By: Szirmai, Adam (UNU-MERIT, Maastricht University)
    Abstract: Since 1950, there has been considerable diversity in developing country experiences. Some countries and some regions have experienced rapid growth and catch up, others have fallen behind. At a global level there is an increasing inequality of per capita incomes. However, within the framework of increasing inequality, some countries have experienced accelerated catch up. The speed of catch up in the successful countries is more rapid than in previous historical periods. This paper analyses the sources of success and failure in economic development in the post-war period. It applies a framework of proximate, intermediate and ultimate causality. Proximate factors refer to the directly quantifiable economic sources of growth, intermediate factors refer to demand and policies, ultimate sources refer to the deeper historical, cultural, geographic and institutional sources of development. Monocausal explanations of success and failure are rejected. However, amongst the various sources of growth, the paper places special emphasis on developing countries' ability to tap into global knowledge flows. There is not a single example of successful catch up since 1868 which did not involve tapping into international technology. The extent to which countries can profit from international technology flows depends on their absorptive capacities, technological capabilities and systems of innovation.
    Keywords: Catch Up, Economic Development, Economic Growth, Advantages of Backwardness, Absorptive Capacity
    JEL: O11 O33 O43 O47 P52
    Date: 2008
  2. By: Christopher Blattman (Center for Global Development & Yale University)
    Abstract: What is the political legacy of violent conflict? This paper presents evidence for a link between war, violence and increased individual political participation and leadership among former combatants and victims of violence, and uses this link to understand the deeper determinants of individual political behavior. The setting is northern Uganda, where rebel recruitment methods generated quasiexperimental variation in who became a rebel conscript and who did not. Original survey data shows that the exogenous element of conscription (by abduction) leads to significantly greater political participation later in life. The principal determinant of this increased political participation, moreover, appears to be war violence experienced. Meanwhile, abduction and violence do not appear to affect multiple nonpolitical types of community participation. I show that these patterns are not easily explained by models of participation based on simple rational preferences, social preferences, mobilization by elites, or information availability. Only ‘expressive’ theories of participation appear consistent with the patterns observed, whereby exposure to violence augments the value a person places on the act of political expression itself. The implications for general theories of political participation are discussed.
    Date: 2008–01
  3. By: Halliday, Timothy (University of Hawaii at Manoa)
    Abstract: We use panel data from El Salvador and investigate the intra-household allocation of labor as a risk-coping strategy. Adverse agricultural productivity shocks both increased male migration to the US and male agricultural labor supply. This is not a contradiction if there were non-monotonic effects on shadow wages within the survey period. In contrast, damage sustained from the 2001 earthquakes exclusively stunted female migration. This is consistent with the earthquakes increasing the demand for home production.
    Keywords: migration, labor supply, insurance, intra-household allocation
    JEL: J22 J61
    Date: 2008–01
  4. By: Campos, Nauro F. (Brunel University); Kinoshita, Yuko (International Monetary Fund)
    Abstract: This paper investigates the role of structural reforms – privatization, financial reform and trade liberalization – as determinants of FDI inflows based on newly constructed dataset on structural reforms for 19 Latin American and 25 Eastern European countries between 1989 and 2004. Our main finding is a strong empirical relationship from reforms to FDI, in particular, from financial liberalization and privatization. These results are robust to different measures of reforms, split samples, and potential endogeneity and omitted variables biases.
    Keywords: privatization, financial reform, trade liberalization, foreign direct investment, Latin America, transition economies
    JEL: H11 F21 O16
    Date: 2008–02
  5. By: Dasgupta, Indraneel (University of Nottingham); Maitra, Pushkar (Monash University); Mukherjee, Diganta (affiliation not available)
    Abstract: We model the consequences of parental control over choice of wives for sons, for parental incentives to educate daughters, when the marriage market exhibits competitive dowry payments and altruistic but paternalistic parents benefit from having married sons live with them. By choosing uneducated brides, some parents can prevent costly household partition. Paternalistic self-interest consequently generates low levels of female schooling in the steady state equilibrium. State payments to parents for educating daughters fail to raise female schooling levels. Policies (such as housing subsidies) that promote nuclear families, interventions against early marriages, and state support to couples who marry against parental wishes, are however all likely to improve female schooling. We offer evidence from India consistent with our theoretical analysis.
    Keywords: arranged marriage, dowry, bride price, female literacy, marriage markets, stable marriage allocation
    JEL: D10 D91 J12 J16
    Date: 2008–02
  6. By: Kato, Takao (Colgate University); Shu, Pian (MIT)
    Abstract: We provide some of the first rigorous evidence on performance spillovers and social network in the workplace. The data we use are rather extraordinary – weekly data for rejection rates (proportion of defective output) for all weavers in a firm during a 12 months (April 2003-March 2004) period, more than 10,000 observations. Our fixed effect estimates first point to significant spillovers of performance from high-ability weavers to low-ability weavers. On the other hand, we find no evidence for performance spillovers from low-ability to high-ability weavers. The findings are consistent with the knowledge sharing hypothesis that low-ability workers learn from high-ability workers but not vice versa. Second, by exploiting the well-documented fact that an exogenously-formed sharp divide between urban workers and rural migrant workers exists in firms in Chinese cities, we find that performance spillovers/knowledge sharing take place only within the confines of social network. Specifically rural low-ability weavers are found to improve their performance as their high-ability teammates (who are also rural migrants) improve their performance while they do not benefit from performance improvement of their high-ability teammates who are urban residents. Such heterogeneous performance interdependence of workers within the same team suggests that our evidence for performance spillovers is less likely to be a result of team specific demand shocks that generate spurious performance interdependence of all team members.
    Keywords: knowledge sharing, performance spillovers, social network
    JEL: M5 J24 L2
    Date: 2008–02
  7. By: Wolff, Hendrik (University of Washington); Chong, Howard (University of California, Berkeley); Auffhammer, Maximilian (University of California, Berkeley)
    Abstract: This paper examines the consequences of data error in data series used to construct aggregate indicators. Using the most popular indicator of country level economic development, the Human Development Index (HDI), we identify three separate sources of data error. We propose a simple statistical framework to investigate how data error may bias rank assignments and identify two striking consequences for the HDI. First, using the cutoff values used by the United Nations to assign a country as ‘low’, ‘medium’, or ‘high’ developed, we find that currently up to 45% of developing countries are misclassified. Moreover, by replicating prior development/macroeconomic studies, we find that key estimated parameters such as Gini coefficients and speed of convergence measures vary by up to 100% due to data error.
    Keywords: measurement error, international comparative statistics
    JEL: O10 C82
    Date: 2008–02
  8. By: Bhaumik, Sumon K. (Brunel University); Kumbhakar, Subal C. (Binghamton University, New York)
    Abstract: It is generally believed that the structural reforms that usher in competition and force companies to become more efficient were introduced later in India following the macroeconomic crisis in 1991. However, whether the post-1991 growth is an outcome of more efficient use of resources or greater use of factor inputs, especially capital, remains an open empirical question. In this paper, we use plant-level data from 1989-90 and 2000-01 to address this question. Our results indicate that while there was an increase in the productivity of factor inputs during the 1990s, most of the growth in value added is explained by growth in the use of factor inputs. We also find that median technical efficiency declined in all but one of the industries between the two years, and change in technical efficiency explains a very small proportion in the change in gross value added.
    Keywords: efficiency, growth decomposition, productivity, manufacturing
    JEL: C13 O12
    Date: 2008–02
  9. By: Calero, Carla (Ministerio de Coordinación de Desarrollo Social- SIISE); Bedi, Arjun S. (Institute of Social Studies); Sparrow, Robert (Institute of Social Studies)
    Abstract: Over the last decade Ecuador has experienced a strong increase in financial transfers from migrated workers, amounting to 6.4 percent of GDP and 31.5 percent of total exports of goods and services in 2005. This paper investigates how remittances via trans-national networks affect human capital investments through relaxing resource constraints and facilitate households in consumption smoothing by reducing vulnerability to economic shocks. In particular, we explore the effects of remittances on school enrolment and child work in Ecuador. Identification relies on instrumental variables, exploiting information on source countries of remittances and regional variation in the availability of bank offices that function as formal channels for sending remittances. Our results show that remittances increase school enrolment and decrease incidence of child work, especially for girls and in rural areas. Furthermore, we find that aggregate shocks are associated with increased work activities, while remittances are used to finance education when households are faced with these shocks. This suggests that liquidity constraints and vulnerability to covariate risk are especially relevant in rural areas, as it affects household’s investments in human capital of school age children. In this context both child labour supply and transnational remittances serve as coping mechanisms.
    Keywords: migration, remittances, trans-national networks, education, child labour, Ecuador
    Date: 2008–02
  10. By: Djebbari, Habiba (Université Laval); Smith, Jeffrey A. (University of Michigan)
    Abstract: The “common effect” model in program evaluation assumes that all treated individuals have the same impact from a program. Our paper contributes to the recent literature that tests and goes beyond the common effect model by investigating impact heterogeneity using data from the experimental evaluation of the Mexican conditional cash transfer program PROGRESA. Our analysis builds upon and extends that in Heckman, Smith and Clements (1997) and more recent studies of quantile treatment effects and random coefficient models. We find strong evidence of systematic (i.e. subgroup) variation in impacts in PROGRESA and modest evidence of heterogeneous impacts conditional on the systematic impacts. We find evidence against the perfect positive dependence assumption that underlies the interpretation of quantile treatment effects as impacts at quantiles of the untreated outcome distribution. Our paper concludes with a discussion of the policy relevance of our findings and of heterogeneous impacts more generally.
    Keywords: heterogeneous impacts, randomized experiment, quantile treatment effects
    JEL: C21 C14 I38
    Date: 2008–02
  11. By: Tanika Chakraborty; Sukkoo Kim
    Abstract: This paper explores the relationship between kinship institutions and sex ratios in India at the turn of the twentieth century. Since kinship rules varied by caste, language, religion and region, we construct sex-ratios by these categories at the district-level using data from the 1901 Census of India for Punjab (North), Bengal (East) and Madras (South). We find that the female to male sex ratio varied inversely by caste-rank, rose as one moved from the North to the East and then to the South, was lower for Hindus than Muslims, and was lower for the northern Indo-Aryan rather than the southern Dravidian speaking peoples. We also find that the female deficit was greater in wheat growing regions and in areas with higher rainfall and alluvial soil. We argue that these systematic patterns in the data are largely explained by variations in the institution of family, kinship and inheritance.
    JEL: J12 N35 O17
    Date: 2008–03
  12. By: Charles I. Jones
    Abstract: Per capita income in the richest countries of the world exceeds that in the poorest countries by more than a factor of 50. What explains these enormous differences? This paper returns to several old ideas in development economics and proposes that linkages, complementarity, and superstar effects are at the heart of the explanation. First, linkages between firms through intermediate goods deliver a multiplier similar to the one associated with capital accumulation in a neoclassical growth model. Because the intermediate goods' share of revenue is about 1/2, this multiplier is substantial. Second, just as a chain is only as strong as its weakest link, problems at any point in a production chain can reduce output substantially if inputs enter production in a complementary fashion. Finally, the high elasticity of substitution associated with final consumption delivers a superstar effect: GDP depends disproportionately on the highest levels of productivity in the economy. This paper builds a model with links across sectors, complementary inputs, and highly substitutable consumption, and shows that it can easily generate 50-fold aggregate income differences.
    JEL: O11 O4
    Date: 2008–03
  13. By: Erica M. Field; Omar Robles; Máximo Torero
    Abstract: An estimated 20 million children born each year are at risk of brain damage from in utero iodine deficiency, the only micronutrient deficiency known to have significant, non-reversible effects on cognitive development. Cognitive damage from iodine deficiency disorders (IDD) has potentially important implications for economic growth through its effect on human capital attainment. To gauge the magnitude of this influence, we evaluate the impact of reductions in fetal IDD on child schooling attainment that resulted from an intensive distribution of iodized oil capsules (IOC) in Tanzania. We look for evidence of improvements in cognitive ability attributable to the intervention by assessing whether children who benefited from IOC in utero exhibit higher rates of grade progression at ages 10 to 14 relative to siblings and older and younger children in the district who did not. Our findings suggest that reducing fetal IDD has significant benefits for child cognition: Protection from IDD in utero is associated with 0.36 years of additional schooling. Furthermore, the effect appears to be substantially larger for girls, consistent with new evidence from laboratory studies indicating greater cognitive sensitivity of the female fetus to maternal thyroid deprivation. There is no indication that IOC improved rates of illness or school absence due to illness, suggesting that IOC improves schooling through its effect on cognition rather than its effect on health. However, there is weak evidence that the program also reduced child but not fetal or infant mortality, which may bias downward the estimated effect on education. Cross-country regression estimates corroborate the results from Tanzania, indicating a strong negative influence of total goiter rate and strong positive influence of salt iodization on female school participation. Together, these findings provide micro-level evidence of the direct influence of ecological conditions on economic development and suggest a potentially important role of variation in rates of learning disability in explaining cross-country growth patterns and gender differences in schooling attainment.
    JEL: I1 I21 O12 O55
    Date: 2008–03
  14. By: R. Gaston Gelos, Ratna Sahay and Guido Sandleris
    Abstract: What determines the ability of governments from developing countries to access international credit markets? We examine this question using detailed data on sovereign bond issuances and public syndicated bank loans between 1980 and 2000. A key finding of this paper is that the frequency of default does not reduce market access and there appears to be no lengthy exclusion from credit markets following a default. We also find that trade openness, a standard measure of a country's links with the rest of the world, and traditional liquidity and macroeconomic indicators do not help much in explaining market access. However, a country's vulnerability to shocks and the perceived quality of economic policies and institutions appear to influence the government’s ability to tap the markets.
    Date: 2008
  15. By: Ravallion, Martin
    Abstract: Knowledge about development effectiveness is constrained by two factors. First, the project staff in governments and international agencies who decide how much to invest in research on specific interventions are often not well informed about the returns to rigorous evaluation and (even when they are) cannot be expected to take full account of the external benefits to others from new knowledge. This leads to under-investment in evaluative research. Second, while standard methods of impact evaluation are useful, they often leave many questions about development effectiveness unanswere d. The paper proposes ten steps for making evaluations more relevant to the needs of practitioners. It is argued that more attention needs to be given to identifying policy-relevant questions (including the case for intervention); that a broader approach should be taken to the problems of internal validity; and that the problems of external validity (including scaling up) merit more attention.
    Keywords: Poverty Monitoring & Analysis,Science Education,Scientific Research & Science Parks,Population Policies,Tertiary Education
    Date: 2008–03–01
  16. By: Verner, Dorte; Cardoso, Ana Rute
    Abstract: Using an extensive survey that addresses risk factors faced by the population in the shantytowns (favelas) of Fortaleza, Brazil, the aim of this paper is to study risk-taking behavior by youth, focusing on drug use and teenage pregnancy. The paper analyzes the impact of factors such as exposure to mass media, the existence of support networks, self-esteem, and the occurrence of violence at home and in the neighborhood, on the probability of risk-taking behavior. A bivariat e probit model is estimated. The findings indicate that reliance on support networks and exposure to mass media are associated with a lower probability of either type of risk behavior. Living in a violent home increases drug consumption. Race does not have a significant impact on either type of behavior.
    Keywords: Adolescent Health,Population Policies,Health Monitoring & Evaluation,Youth and Governance,Gender and Health
    Date: 2008–03–01
  17. By: Deolalikar, Anil B.; Jamison, Dean T.; Laxminarayan, Ramanan (Resources for the Future)
    Abstract: In response to the challenge of sustaining the health gains achieved in the better-performing states and ensuring that the lagging states catch up with the rest of the country, the Indian government has launched the National Rural Health Mission. A central goal of the effort is to increase public spending on health from the current 1.1 percent of GDP to roughly 2–3 percent of GDP within the next five years. In this paper, we examine the current status of health financing in India, as well as alternatives for realizing maximal health gains for the incremental expenditures.
    Keywords: health financing, public spending, India, cost-effectiveness
    JEL: I10 I12 I18
    Date: 2007–10–31
  18. By: Chow, Jeffrey; Darley, Sarah R. (Resources for the Future); Laxminarayan, Ramanan
    Abstract: Health improvements in India, while significant, have not kept up with rapid economic growth rates. The poor in India face high out-of-pocket payments for health care, a significant burden of infectious diseases, and a rapidly increasing burden of non-communicable diseases. Against this backdrop, the central government has proposed doubling government expenditures on health over the next few years. Planned increases in public spending will involve making difficult decisions about the most effective and efficient health interventions if they are to translate into improved population health. To inform the selection of interventions that should be included in a universal health package, this study generated and reviewed cost-effectiveness information for interventions that address the major causes of disease burden in India. We find that India has great potential for improving the health of its people at relatively low cost. Devoting just one percent of GDP (approximately US$6 billion) to a well-designed health program nationwide could save as much as 480 million healthy years of life.
    Keywords: India, health expenditures, cost-effectiveness, public spending
    JEL: H51 H70 I10 I18
    Date: 2007–12–13
  19. By: Murphy, Kevin M; Simon, Curtis; Tamura, Robert
    Abstract: We present new data documenting the secular decline in fertility in the states of the United States, the dramatic convergence in fertility, child schooling, parental schooling, survival probabilities. In addition we document the disparate nature of the Baby Boom in the United States. There were two different regimes, a large Baby Boom and a Small Baby Boom. The large Baby Boom regions also had the smallest increase in child schooling, whereas the small Baby Boom regions had the largest increase in child schooling. We present suggestive evidence that falling mortality risk is strongly positively correlated with falling fertility, rising education levels of parents is strongly negatively related to fetility, and that population density is negatively related to fertility. Finally we show the robust negative correlation of mortality risk on child schooling attainment, and positve correlation of population density and child schooling attainment.
    Keywords: mortality; density; fertility decline; baby boom; economic growth
    JEL: J13 J24 O4
    Date: 2008–03–03
  20. By: Benno Torgler; Friedrich Schneider
    Abstract: The following paper examines the different options to finance local public infrastructure in Ethiopia based on the assumption that the federal government of Ethiopia will not provide any guarantees for local borrowing. Besides a detailed description of the local public finance system and the capital market in Ethiopia, the paper also sets out some international successful practices in municipal infrastructure financing. Based on the observation of the Ethiopian case and the consideration of the international experiences, the paper has two major pillars that very specifically identify actions required for implementation. On the one hand, the paper recommends a number of feasible arrangements to generate a revenue enhancement of the local authorities in the existing intergovernmental framework. On the other hand, the paper suggests a solution - for creditworthy as well as for potentially creditworthy urban local governments (ULG) - to finance their future demand of public infrastructure together with the national finance institutions as well as the international donors.
    Keywords: Shadow economy, tax morale, governance quality, government intervention, corruption
    JEL: D73 D78 H2 H26 O17 O5
    Date: 2007–12

This nep-dev issue is ©2008 by Jeong-Joon Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.