nep-dev New Economics Papers
on Development
Issue of 2008‒04‒12
seventeen papers chosen by
Jeong-Joon Lee
Towson University

  1. Determinants of Foreign Direct Investment in Cambodia: Country-Specific Factor Differentials By Cuyvers L.; Plasmans J.; Soeng R.; Van den Bulcke D.
  2. Employment, Wages and Poverty in the Organized and the Unorganized Segments of the Non-Agricultural Sector in India--All-India, 2000-2005 By K. SUNDARAM
  3. Human capital differentials across municipalities and states in Brazil By Bernardo L. Queiroz; André B. Golgher
  4. From Cities to Productivity and Growth in Developing Countries By Duranton, Gilles
  5. Migration and The Equilibrium Prevalence of Infectious Diseases By Mesnard, Alice; Seabright, Paul
  6. Escaping Epidemics Through Migration? Quarantine Measures Under Asymmetric Information About Infection Risk. By Mesnard, Alice; Seabright, Paul
  7. Formal and Informal Risk Sharing in LDCs: Theory and Empirical Evidence By Dubois, Pierre; Jullien, Bruno; Magnac, Thierry
  8. Immigrant Selection in The OECD By Belot, Michèle; Hatton, Timothy J.
  9. Trading Population for Productivity: Theory and Evidence By Galor, Oded; Mountford, Andrew
  10. Monitoring Works: Getting Teachers to Come to School By Duflo, Esther; Hanna, Rema; Ryan, Stephen
  11. Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America By Campos, Nauro F; Kinoshita, Yuko
  12. Rain and the Democratic Window of Opportunity By Brückner, Markus; Ciccone, Antonio
  13. Inequality in Land Ownership, the Emergence of Human Capital Promoting Institutions and the Great Divergence By Galor, Oded; Moav, Omer; Vollrath, Dietrich
  14. Second-Best Institutions By Rodrik, Dani
  15. The Innovativeness of Foreign Firms in China By Urem, Branka; Alcorta, Ludovico; An, Tongliang
  16. Different channels of impact of education on poverty: an analysis for Colombia By Blanca Zuluaga
  17. Impact of the Debt Ratio on Firm Investment: A case study of listed companies in China By YUAN Yuan; MOTOHASHI Kazuyuki

  1. By: Cuyvers L.; Plasmans J.; Soeng R.; Van den Bulcke D.
    Abstract: Multinational Companies (MNCs) serve foreign markets by exporting to, by licensing or by engaging in international production in the host countries. Cambodia has become the destination of foreign direct investment (FDI) after its first-ever general elections in 1993. Based on approved foreign-invested projects, the majority of Cambodia’s inward FDI came from Asian neighboring countries, in particular, Malaysia, Taiwan, and China, which together accounted for about 60% of the total. The United States is the fourth largest investor in Cambodia. Cuyvers et al. (2006) provide an overview of inward FDI trends in Cambodia over the period 1994-2004. This paper seeks to uncover factors influencing inward FDI in Cambodia by empirically studying its economic and geographic as well as political determinants. Panel data analysis is used to investigate the factors affecting both approved FDI and realized FDI in the Kingdom of Cambodia during 1995-2005. Investment decisions are made by the foreign investors after having compared the factors affecting their locational decisions between the home country and the potential host countries. Therefore, relative data, rather than absolute ones, are used. A better understanding of the meanings of these factors which determine the inflows of FDI, both approved and realized, should be useful for policy recommendation and implementation. This paper is organized as follows. Section 2 reviews the relevant literature and outlines the hypotheses formulation. Section 3 presents a stochastic economic model. The discussion about the data takes place in section 4. The estimation methodology and estimation results are presented in sections 5 and 6, respectively. Section 7 concludes.
    Date: 2008–03
  2. By: K. SUNDARAM (Department of Economics, Delhi School of Economics, Delhi, India)
    Abstract: Analysing the Unit Record Data from the NSS 55th and 61st Round Employment-Unemployment Surveys, the Organized Sector Workforce in non-agriculture is shown to be larger than the corresponding DGE&T estimates by 16.5 million in 2004-05 and to have increased by 5.4 million between 2000 and 2005 instead of the 1.6 decrease indicated by the corresponding DGE&T estimates. Examining some features of employment contracts of the regular wage/salary workers who account for 88 percent of the organized sector workforce, it is shown that between 14 to 27 million of the 41.5 million workers in organized non-agriculture are perhaps better labeled as Informal Workers who are without access to a set of social security benefits though they are located in the formal sector. Also presented are our estimates of workforce in the unorganized segment of non-agriculture in the country as a whole as also those in urban India who constitute the Urban Informal Sector. An analysis of labour productivity in the organized-unorganized segments of broad industry groups for 1999-2000 and 2004-05 is followed by an examination of differences across the organized-unorganized divide in average daily earnings and in the poverty status of adult workers in non-agricultural activities for 2004-05
    Keywords: Employment in organized sector, Urban Informal Sector, Labour Productivity, Wage Differentials, Poverty status of workers.
    JEL: I32 J21 J31
    Date: 2008–03
  3. By: Bernardo L. Queiroz (Cedeplar-UFMG); André B. Golgher (Cedeplar-UFMG)
    Abstract: In this paper, we investigate the distribution of more educated and skilled people in Brazilian municipalities and states. Previous evidence shows a high concentration of college educated and high skilled workers in some areas of the country. We investigate whether the increase in the number of high skill workers is faster in municipalities with high initial levels of human capital than in municipalities with lower initial levels. We develop a theoretical model to explain the convergence/divergence of regional skill levels In Brazil. We estimate OLS models based on the theoretical model to explain empirically wage differentials in Brazil. Last, we compute standard segregation and isolation measures to show the trends in the distribution of skilled workers across states and cities in Brazil. We find that educated and qualified workers are concentrated in some areas of the country and recent decades show a higher concentration of them across states and cities.
    Keywords: human capital, segregation, regional differences, Brazil
    JEL: J21 J24 R23
    Date: 2008–03
  4. By: Duranton, Gilles
    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: 2008–01
  5. By: Mesnard, Alice; Seabright, Paul
    Abstract: This paper models how migration both influences and responds to differences in disease prevalence between cities, regions and countries, and show how the possibility of migration away from high-prevalence areas affects long-run steady state disease prevalence. We develop a dynamic framework where both migration and prevention behaviour respond to the prevalence of disease, to the costs of migration and of treatment, and to current and anticipated health regulations. The model treats disease prevalence as an endogenous consequence of other features of the areas concerned, notably their economic endowments. It explores how pressure for migration in response to differing equilibrium levels of disease prevalence causes countervailing differences in city characteristics, notably in land rents. Competition for scarce housing in low-prevalence areas can create pressures for segregation, with disease concentrated in high-prevalence "sinks". We show that multiple steady states may exist and explore their comparative static properties. In particular we find that migration can have positive health benefits, in that reductions in barriers to migration can reduce steady-state disease incidence in low-prevalence areas while having no impact on prevalence in high-prevalence areas. This may have important consequences for policy; in some circumstances, public health measures may need to avoid discouraging migration away from high-disease areas.
    Keywords: development; infectious diseases; migration; public health; quarantine
    JEL: I18 O15 O19 R23
    Date: 2008–01
  6. By: Mesnard, Alice; Seabright, Paul
    Abstract: This paper explores implications of the fact that individuals know more than the authorities about their risk of infection and can take migration decisions before their health status is publicly observable. In a 2-period model we study under which conditions the presence of quarantine measures may lead to inefficient outcomes as individuals' interest in migration to escape centres of disease may become stronger and generate negative externalities imposed on other uninfected individuals.
    Keywords: epidemic diseases; migration; public policy; quarantine
    JEL: I18 O15 O19 R23
    Date: 2008–01
  7. By: Dubois, Pierre; Jullien, Bruno; Magnac, Thierry
    Abstract: We develop and estimate a model of dynamic interactions in which commitment is limited and contracts are incomplete to explain the patterns of income and consumption growth in village economies of less developed countries. Households can insure each other through both formal contracts and informal agreements, that is, self-enforcing agreements specifying voluntary transfers. This theoretical setting nests the case of complete markets and the case where only informal agreements are available. We derive a system of non-linear equations for income and consumption growth. A key prediction of our model is that both variables are affected by lagged consumption as a consequence of the interplay of formal and informal contracting possibilities. In a semi-parametric setting, we prove identification, derive testable restrictions and estimate the model with the use of data from Pakistan villages. Empirical results are consistent with the economic arguments. Incentive constraints due to self-enforcement bind with positive probability and formal contracts are used to reduce this probability.
    Keywords: Contracts; Incomplete Markets; Informal Transfers; Risk sharing
    JEL: C14 D13 D91 L14 O12
    Date: 2008–01
  8. By: Belot, Michèle; Hatton, Timothy J.
    Abstract: The selection of immigrants by skill and education is a central issue in the analysis of immigration. Since highly educated immigrants tend to be more successful in host country labour markets and less of a fiscal cost it is important to know what determines the skill-selectivity of immigration. In this paper we examine the proportions of highly educated among migrants from around 80 source countries who were observed as immigrants in each of 29 OECD countries in 2000/1. We develop a variant of the Roy model to estimate the determinants of educational selectivity by source and destination country. We also estimate the determinants of the share of migrants from different source countries in each destination country’s immigrant stock. Two key findings emerge. One is that the effects of the skill premium, which is at the core of the Roy model, can be observed only after we take account of poverty constraints operating in source countries. The other is that cultural links and distance are often more important determinants of the proportion of high educated immigrants in different OECD countries than wage incentives or policy.
    Keywords: Immigration; Skill Selection
    JEL: F22 J15 J61
    Date: 2008–02
  9. By: Galor, Oded; Mountford, Andrew
    Abstract: This research argues that the differential effect of international trade on the demand for human capital across countries has been a major determinant of the distribution of income and population across the globe. In developed countries the gains from trade have been directed towards investment in education and growth in income per capita, whereas a significant portion of these gains in less developed economies have been channelled towards population growth. Cross-country regressions establish that indeed trade has positive effects on fertility and negative effects on education in non-OECD economies, while inducing fertility decline and human capital formation in OECD economies.
    Keywords: Demographic Transition; Growth; Human Capital; International Trade
    JEL: F11 F43 J10 N30 O40
    Date: 2008–02
  10. By: Duflo, Esther; Hanna, Rema; Ryan, Stephen
    Abstract: This paper combines a randomized experiment and a structural model to test whether monitoring and financial incentives can reduce teacher absence and increase learning. In 57 schools in India, randomly chosen out of 113, a teacher’s daily attendance was verified through photographs with time and date stamps, and his salary was made a non-linear function of his attendance. The teacher absence rate changed from 42 percent in the comparison schools to 21 percent in the treatment schools. To separate the effects of the monitoring and the financial incentives, we estimate a structural dynamic labour supply model that allows for heterogeneity in preferences and auto-correlation of external shocks. The teacher response was almost entirely due to the financial incentives. The estimated elasticity of labour with respect to the incentive is 0.306. Our model accurately predicts teacher attendance in two out-of-sample tests on the comparison group and a treatment group that received different financial incentives. The program improved child learning: test scores in the treatment schools were 0.17 standard deviations higher than in the comparison schools.
    Keywords: education; financial incentives; India
    JEL: I20 I21 J13 J30 O10
    Date: 2008–02
  11. By: Campos, Nauro F; Kinoshita, Yuko
    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: financial reform; foreign direct investment; Latin America; privatization; trade liberalization; transition economies
    JEL: F21 H11 O16
    Date: 2008–02
  12. By: Brückner, Markus; Ciccone, Antonio
    Abstract: According to the economic approach to political transitions, negative transitory economic shocks can give rise to a window of opportunity for democratic change. We examine this hypothesis using yearly rainfall variation over the 1980-2004 period in 41 Sub-Saharan African countries. We find that a 25% drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points. A 5% fall in income due to low rainfall raises the probability of democratization by around 7 percentage points. We also find that rainfall does not affect transitions from democracy to autocracy.
    Keywords: democratization; transitory economic shocks
    JEL: O0 P0
    Date: 2008–02
  13. By: Galor, Oded; Moav, Omer; Vollrath, Dietrich
    Abstract: This paper suggests that inequality in the distribution of land ownership adversely affected the emergence of human capital promoting institutions (e.g., public schooling) and thus the pace and the nature of the transition from an agricultural to an industrial economy, contributing to the emergence of the great divergence in income per capita across countries. The prediction of the theory regarding the adverse effect of the concentration of land ownership on education expenditure is established empirically based on evidence from the beginning of the 20th century in the US.
    Keywords: Geography; Great Divergence; Growth; Human capital; Institutions; Land Inequality
    JEL: O10 O40
    Date: 2008–03
  14. By: Rodrik, Dani
    Abstract: The focus of policy reform in developing countries has moved from getting prices right to getting institutions right, and accordingly countries are increasingly being advised to move towards "best-practice" institutions. This paper argues that appropriate institutions for developing countries are instead "second-best" institutions - those that take into account context-specific market and government failures that cannot be removed in short order. Such institutions will often diverge greatly from best practice. The argument is illustrated using examples from four areas: contract enforcement, entrepreneurship, trade openness, and macroeconomic stability.
    Keywords: economic development; governance
    JEL: O1
    Date: 2008–03
  15. By: Urem, Branka (UNU-MERIT); Alcorta, Ludovico (Maastricht School of Management); An, Tongliang (School of Business, Nanjing University)
    Abstract: This paper studies the relationship between foreign ownership and innovations of high novelty in context of advanced developing countries. We develop hypotheses about a direct relationship in terms of two dimensions, propensity and intensity of innovations of high novelty, and a contingency hypothesis about the moderating impact of R&D internationalisation on the relationship with propensity. The analysis is based on innovation survey data on manufacturing firms from Jiangsu province of China. Hypotheses are tested using non-parametric methods. We find that foreign firms do not have a higher propensity of innovations of high novelty, not even when they engage in formal R&D. However, the evidence suggests that foreign firms have a higher intensity of innovations of high novelty than domestic firms.
    Keywords: multinational enterprises, foreign firms, innovation, manufacturing, China
    JEL: F23 L60 O31 O32
    Date: 2008
  16. By: Blanca Zuluaga
    Abstract: This paper analyses pecuniary and non-pecuniary effects of education on poverty. Two are the main contributions: first, the pecuniary analysis employs the recently developed technique of instrumental variable quantile regression, very helpful method when one is interested in the lowest or highest extremes of the distribution function of the dependent variable. In fact, quantile regression offers coefficient estimations for any conditional quantile. The second contribution derives from our purpose to highlight the non-pecuniary returns to education: resources invested in education bring future returns to individuals, not only reflected in monetary earnings, but also in higher levels of satisfaction of basic needs.
    Keywords: education, poverty, quantile regression, Colombia
    JEL: I30 I20
    Date: 2008–03
  17. By: YUAN Yuan; MOTOHASHI Kazuyuki
    Abstract: In this paper, we analyze whether the total debt ratios and bank loan ratios of Chinese listed companies had any impact on their fixed investment in 2001-2006, and whether this impact, if it existed, differed among companies with differing investment opportunities. Our results are as follows. First, our analysis reveals that the total debt ratio (bank loan ratio) did have a negative impact on fixed investment among Chinese listed companies. Secondly, the total debt ratio (bank loan ratio) had a stronger negative impact on low-growth companies than on high-growth companies, implying that the total debt ratio (bank loan ratio) actually restrained companies from overinvestment. Finally, the analysis led to the interesting result that the bank loan ratio had a stronger impact on fixed investment than the total debt ratio, and actually had the strong effect of restraining investment particularly by low-growth companies, implying that in China, banks supervise the investment activities of companies more strongly than other creditors.
    Date: 2008–04

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