nep-dev New Economics Papers
on Development
Issue of 2008‒04‒21
twelve papers chosen by
Jeong-Joon Lee
Towson University

  1. Large Institutional Underpinnings of Trustworthiness in Infrastructure Contracts: Trust and Trust Perceptions By Xeni Dassiou; Jon Stern
  2. Facing the Trial of Internationalizing Clinical Trials to Developing Countries: Some Evidence from Mexico By Santiago-Rodriguez, Fernando
  3. A Closer Look at the Relationship Between Life Expectancy and Economic Growth By Azomahou, Théophile; Boucekkine, Raouf; Diene, Bity
  4. Capture and Corruption in Public Utilities: the Cases of Water and Electricity in Sub-Saharan Africa By AURIOL, Emmanuelle; BLANC, Aymeric
  5. The Impact of College Graduation on Geographic Mobility: Identifying Education Using Multiple Components of Vietnam Draft Risk By Malamud, Ofer; Wozniak, Abigail
  6. Trevor Swan And The Neoclassical Growth Model By Robert W. Dimand; Barbara J. Spencer
  7. Prudent versus Imprudent Lending to Africa: From debt relief to emerging lenders By Helmut Reisen; Sokhna Ndoye
  8. Lending to the Poorest Countries: A New Counter-cyclical Debt Instrument By Daniel Cohen; Hélène Djoufelkit - Cottenet; Pierre Jacquet; Cécile Valadier
  9. Banking on Development. Private Financial Actors and Donors in Developing Countries By Javier Santiso
  10. "Performance of Urban India during Globalization Period: An Economic Analysis" By Narayana, Muttur Ranganathan
  11. "Globalization and Urban Growth: Evidence for Bangalore (India)" By Muttur Ranganathan Narayana
  12. Poverty Dynamics, Violent Conflict and Convergence in Rwanda By Patricia Justino; Philip Verwimp

  1. By: Xeni Dassiou (Department of Economics, City University, London); Jon Stern (Department of Economics, City University, London)
    Abstract: This paper discusses trust and trust perceptions in infrastructure contracts. We focus on perceptions of the trustworthiness of the government purchasers of infrastructure services (a) by supplying companies and (b) by governments. In particular, we allow for trust misalignments which may give rise to `undertrusting' and `overtrusting'. The core of the paper sets out a game theoretic model of contracts which we use to explore the impact of trust misalignment both on economic efficiency and on investment levels, taking account both of asset specificity issues and maladaptation costs. We explore flexible contracts with and without pre-payments, rigid contracts (which do not allow for post-investment renegotiation) and hybrid contracts. Their efficiency is compared to an incentive compatible benchmark contract. The model is also used to shed light on current issues on the sustainability of private investment infrastructure contracts both in OECD countries (e.g. Private-Public Partnerships) and in developing countries.
    Date: 2008–04
  2. By: Santiago-Rodriguez, Fernando (UNU-MERIT)
    Abstract: In pursuit of innovation, developing countries play an increasingly relevant role for multinational pharmaceutical firms. Driven partly by cost considerations but also by some host country-specific scientific and technological factors, global drug companies increasingly relocate part of their drug development activities to those countries. In particular, expansion of clinical trials performed in some of the more advanced developing countries is notable over the last years. This paper critically addresses some of these issues with particular reference to Mexico. The latter case equally illustrates some challenges developing countries face to accommodate and govern local performance of clinical trials according to strict internationally accepted regulatory and ethical principles.
    Keywords: Internationalization of R&D, Governance of clinical trials, Developing countries, Mexico
    JEL: I18 F23 L65
    Date: 2008
  3. By: Azomahou, Théophile (UNU-MERIT); Boucekkine, Raouf (CORE, Universite Catholique de Louvain); Diene, Bity (BETA, Universite Louis Pasteur, Strasbourg)
    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 perpetual youth" 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 two models departing from perpetual youth" by assuming successively age-dependent earnings and age-dependent survival probabilities. With age-dependent earnings, the obtained relationship is hump-shaped while agedependent survival laws do reproduce the convex-concave shape detected in the prior empirical study.
    Keywords: Life expectancy, economic growth, perpetual youth, age-dependent mortality, nonparametric estimation
    JEL: O41 I20 J10
    Date: 2008
  4. By: AURIOL, Emmanuelle; BLANC, Aymeric
    Date: 2008–01
  5. By: Malamud, Ofer (University of Chicago); Wozniak, Abigail (University of Notre Dame)
    Abstract: College-educated workers are twice as likely as high school graduates to make lasting long-distance moves, but little is known about the role of college itself in determining geographic mobility. Unobservable characteristics related to selection into college might also drive the relationship between college education and geographic mobility. We explore this question using a number of methods to analyze both the 1980 Census and longitudinal sources. We conclude that the causal impact of college completion on subsequent mobility is large. We introduce new instrumental variables that allow us to identify educational attainment and veteran status separately in a sample of men whose college decisions were exogenously influenced by their draft risk during the Vietnam War. Our preferred IV estimates imply that graduation increases the probability that a man resides outside his birth state by approximately 35 percentage points, a magnitude nearly twice as large as the OLS migration differential between college and high school graduates. IV estimates of graduation’s impact on total distance moved are even larger, with IV estimates that exceed OLS considerably. We provide evidence from the National Longitudinal Survey of Youth (NLSY) 1979 that our large IV estimates are plausible and likely explained by heterogeneous treatment effects. Finally, we provide some suggestive evidence on the mechanisms driving the relationship between college completion and mobility.
    Keywords: geographic mobility, education, college graduates, internal migration, instrumental variables
    JEL: J61 J24 I23
    Date: 2008–04
  6. By: Robert W. Dimand; Barbara J. Spencer
    Abstract: Trevor Swan independently developed the neoclassical growth model, publishing Swan (1956) ten months later than Solow (1956), but analyzing technical progress before Solow (1957). These independent contributions are sometimes recognized by reference to the "Solow-Swan growth model", but more commonly reference is made only to the "Solow growth model". This paper examines the history of Swan's development of the growth model, the similarities and differences between the approaches of Swan and Solow and the reasons why Swan's contribution has been overshadowed. We draw on unpublished work to show that in 1950, Swan had set out a number of the basic ideas of his growth model in a verbal format. In 1956, Swan published only a simplified version of his model based on a Cobb-Douglas production function. Swan's original and more general model (circulated in July 1956), was published only posthumously in 2002. This reluctance to publish was consistent with his perhaps counterproductive modesty and perfectionism. His well known paper, "Longer run problems of the Balance of Payments" was circulated in 1955, eight years before publication in 1963. His pioneering work in 1945, developing the first macroeconomic model of the Australian economy, was published posthumously in 1989.
    JEL: B2 B3 B4 O41
    Date: 2008–04
  7. By: Helmut Reisen; Sokhna Ndoye
    Abstract: Over recent years, a number of emerging creditors have increased their aid and lending to Africa’s Low-Income Countries (LICs). This has fed worries that new official lenders may be undoing years of international efforts to rein in over-indebtedness in Africa, to reduce the continent’s exposure to foreign-currency denominated debt and to encourage good governance by making loans conditional on political and economic reforms. These worries are reflected in the G8 Action Plan for Good Financial Governance in Africa, which attempts to include emerging lenders in the DSF framework — the Joint Bank-Fund Debt Sustainability Framework. The empirical analysis of debt dynamics distinguishes three country groups: African HIPC, HIPC-China (High China Presence), and Resource-rich IDA-only. All groups display marked trends of lower debt ratios (in net present value terms, NPV), in most cases below debtdistress level for even the lowest governance groups. Evidence on links between growth and lending may even suggest that African HIPC are currently under-leveraged. Generally, there is very little evidence of “imprudent lending” to debt relief beneficiaries in the figures up to 2006. The Asian giants lower debt ratios a little through debt relief, but they do this even more through stimulating exports and growth. This holds in particular for those countries towards which their lending is mostly directed: the resource-rich countries, rather than the debt-relief beneficiaries. <BR>Ces dernières années, un certain nombre de créanciers émergents ont accru leurs aides et leurs prêts en faveur des pays d'Afrique à faible revenu (LIC). On s'est dès lors inquiété que ces nouveaux prêteurs officiels puissent défaire des années d'efforts internationaux dans le but de ralentir le surendettement en Afrique, réduire l'exposition du continent aux devises étrangères ainsi qu'à la dette en question et encourager une bonne gouvernance en faisant de sorte que les emprunts dépendent des réformes politiques et économiques. Ces inquiétudes transparaissent dans le plan d'action du G8 qui vise une bonne gouvernance financière et tente d'inclure ces nouveaux prêteurs dans le cadre du CSD : le « Cadre de soutenabilité de la dette du FMI et de la Banque Mondiale ». Malheureusement, la DSF n'a pas exactement le profil pour ce type de situation : elle encourage à indiquer dans une moindre mesure les nouveaux prêts, doit s'attacher à des indicateurs opaques de gouvernances diverses, ne parvient pas à atteindre les déterminants économiques généraux de la viabilité de la dette et n'arrive pas à prendre en considération les versements et les biens publics dans ses analyses sur la viabilité de la dette. L'analyse concrète des dynamiques de la dette distingue trois types de pays : les PPTE africains, les PPTE chinois (pays à forte présence chinoise) et les pays emprunteurs d'IDA uniquement riches en ressources. Tous affichent des tendances claires de faibles taux de dette (en termes de valeur actualisée nette, VAN) et se trouvent dans la plupart des cas, sous un niveau de détresse lié à la dette et cela même pour les pays issus du groupe aux plus faibles gouvernances. Cette indication sur des liens entre la croissance et les prêts semblerait même indiquer que les HIPC africains sont actuellement sous exploités. En général, il y a peu d'indications quant aux « prêts imprudents » sur les bénéficiaires de soulagement de la dette dans les chiffres allant jusqu'en 2006. Les géants asiatiques réduisent légèrement les taux de dette grâce à des soulagements de la dette, mais surtout grâce à une croissance et une exportation stimulée. Ceci vaut en particulier pour tous ces pays dont les prêts sont le plus souvent destinés aux pays riches en ressources que ceux bénéficiaires d'un soulagement de la dette.
    Keywords: debt, dette
    JEL: F21 F34 F35
    Date: 2008–02–22
  8. By: Daniel Cohen; Hélène Djoufelkit - Cottenet; Pierre Jacquet; Cécile Valadier
    Abstract: One of the particular features of poor countries’ economies is their volatility, due mostly to their dependence on commodities. The paper shows that this volatility is a prime factor behind the debt crises of the poorest countries. It advocates the adoption by donors of a new lending instrument: the countercyclical loan (CCL). The key idea is to reduce the grace period of a typical concessional loan, from 10 to 5 years, and to keep the remaining grace periods as an asset that the country can draw upon, when a bad shock occurs. If no such bad shocks happen, or infrequently enough, the “floating grace” is redeemed to the country at the end of the loan as a repayment in advance without penalties. <BR>Une des caractéristiques des pays les plus pauvres est leur volatilité. Cet article montre que ce risque est l’un des facteurs essentiels qui explique les crises de dette de ces pays. A partir de ces résultats, l’article plaide en faveur de l’adoption par les bailleurs de fond d’un nouvel instrument de prêt : le prêt contra-cyclique (PCC). L’idée principale est de réduire la période de grâce d’un prêt concessionnel typique de 10 à 5 ans, et de garder les années de grâce restantes pour les utiliser en cas de mauvais choc. Si le pays ne subit aucun choc ou trop peu, cette « grâce flottante » est rendue au pays avant la fin du prêt, sous forme de remboursement anticipé sans pénalité.
    JEL: F21 F34 F35
    Date: 2008–04–03
  9. By: Javier Santiso
    Abstract: A large, untapped reservoir of potential partnerships between private financial institutions (banks, asset managers, private equity firms, etc.) and aid donors remains to be fully exploited. Banks, private equity and asset management firms are important parts of a broad set of private actors in the field. Private financial institutions take increasingly into account variables other than financial ones to assess their investment decisions around the world. The OECD Global Forum on Development could host a market place for ideas for improving and promoting donor-private financial institutions partnerships: an Innovation Laboratory on Development Finance. An OECD Development Finance Award hosted by the OECD Global Forum on Development should be created
    Date: 2008–03–11
  10. By: Narayana, Muttur Ranganathan (CIRJE, University of Tokyo and Institute for Social and Economic Change)
    Abstract: This paper aims at economic analysis of globalization and performance of urban India during the globalization period. India's recent process of globalization is identified with the start of national economic reforms since July 1991. India's degree of globalization, measured by internationalization of trade and capital, is shown to be low at global levels. Patterns of urbanization in the post-globalization period show higher growth and concentration of population, bigger size of organized employment, higher levels of consumption, and lower levels of poverty in bigger class-size cities. Urban economic growth is increasingly contributed by service sectors, declining share of manufacturing sector, and higher labour productivity. These experiences of urban India coincide with global experiences in countries such as China, G7, and Korea. Overall, aggregate economic performance of urban India is positive during the globalization period. Demands of globalization have transformed urban development into national policies and programmes. This implies a beginning for a national policy for urban development in India.
    Date: 2008–01
  11. By: Muttur Ranganathan Narayana (CIRJE, University of Tokyo and Institute for Social and Economic Change)
    Abstract: This paper aims at economic analysis of globalization and urban growth of Bangalore (capital of Karnataka State, and globally known as Silicon Valley of India, IT Hub of Asia, and IT Capital of India) in South India. It offers new insights and evidence for information and communication technology (ICT) sector as a major source for selective globalization and urban growth. Estimated combined contribution of ICT manufacturing and services to Bangalore's economic growth is compared with regional, national and international (OECD average) levels. Empirical results support for a remarkable performance of Bangalore at all levels, mainly driven by ICT sector. In addition, Bangalore's valuable contributions to regional and national economic growth are singled out. Available and new evidence are put together to explain select factors behind Bangalore's phenomenal economic growth under globalization.
    Date: 2008–01
  12. By: Patricia Justino (Institute of Development Studies at Sussex); Philip Verwimp (DIW Berlin)
    Abstract: Civil war and genocide in the 1990-2000 period in Rwanda - a small, landlocked, densely populated country in Central Africa - have had differential economic impacts on the country’s provinces. The reasons for this are the death toll of the genocide, the location of battles, the waves of migration and the local resurgence of war. As a result, the labour/land and labour/capital ratios at the provincial level changed considerably during that period. Using two cross-sections, we find empirical evidence for convergence between provinces following the conflict shocks: previously richer provinces in the east and in the north of the country experienced lower, even negative, economic growth compared to the poorer western and southern provinces. This has in turn affected significantly the dynamics of household poverty in Rwanda in the same period. Using a small but unique panel of households surveyed before and after the conflict period, we find that households whose house was destroyed or who lost land ran a higher risk of falling into poverty. This was particularly the case for households who were land-rich before the genocide. We do not find this for the loss of household labour. In the latter case the effect depends on the violent or non-violent character of the loss.
    Keywords: Conflict, poverty, Africa, panel data
    JEL: C33 I32 O55
    Date: 2008

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