nep-dev New Economics Papers
on Development
Issue of 2008‒04‒29
thirty-two papers chosen by
Jeong-Joon Lee
Towson University

  1. Women's Liberation: What's in It for Men? By Doepke, Matthias; Tertilt, Michèle
  2. Pitfalls of Participatory Programs: Evidence from a Randomized Evaluation in Education in India By Banerjee, Abhijit; Banerji, Rukmini; Duflo, Esther; Glennerster, Rachel; Khemani, Stuti
  3. Soap Operas and Fertility: Evidence from Brazil By Chong, Alberto; Duryea, Suzanne; La Ferrara, Eliana
  4. Links and Architecture in Village Networks By Krishnan, Pramila; Sciubba, Emanuela
  5. A new way to link development to institutions,policies and geography By Sudip Ranjan Basu
  6. Institution and Development Revisited:A Nonparametric Approach By Sudip Ranjan Basu
  7. Trade Policies and Export growth - employment and poverty impact in Tanzania By Levin, Jörgen; Olin, Mikael
  8. Impact of Special Economic Zones on Employment, Poverty and Human Development By Aradhna Aggarwal
  9. Capital Adequacy Regime in India: An Overview By Mandira Sarma; Yuko Nikaido
  10. Impact of Preventive Health Care on Indian Industry and Economy By Alka Chadha; Ali Mehdi; Garima Malik
  11. South Asian Integration Prospects and Lessons from East Asia By Ramesh Chandra; Rajiv Kumar
  12. Was the Mandal Commission Right? Living Standard Differences between Backward Classes and Other Social Groups in India By Gang, Ira N.; Sen, Kunal; Yun, Myeong-Su
  13. The Economics of Communist Party Membership: The Curious Case of Rising Numbers and Wage Premium during China’s Transition By Appleton, Simon; Knight, John; Song, Lina; Xia, Qingjie
  14. The Impact of Population Aging on the Labor Market: The Case of Sri Lanka By Vodopivec, Milan; Arunatilake, Nisha
  15. Growing out of Poverty: Trends and Patterns of Urban Poverty in China 1988–2002 By Appleton, Simon; Song, Lina; Xia, Qingjie
  16. In Search of Gender Bias in Household Resource Allocation in Rural China By Song, Lina
  17. Civil Wars beyond their Borders: The Human Capital and Health Consequences of Hosting Refugees By Baez, Javier E.
  18. China's Local Comparative Advantage By James Harrigan; Haiyan Deng
  19. Household Structures and Savings: Evidence from Household Surveys By Juan R. de Laiglesia; Christian Morrison
  20. Perceived Financial Risk and Divergence in the Economic Growth of Sub-Saharan African Countries. By Bichaka Fayissa; Christian Nsiah; Prathibha V. Joshi
  21. The South African informal sector (1997 – 2006) By Hassan Essop; Derek Yu
  22. Interregiona;Decomposition of labor productivity differences in China, 1987-1997 By Yang, Ling; Lahr, Michael/L
  23. Limited Insurance Within the Household: Evidence from a Field Experiment in Kenya By Robinson, Jonathan
  24. Remittances, Migration and Informality in Mexico. A Simple Model By Brambila Macias, Jose
  25. Migration Enclaves, Schooling Choices and Social Mobility By Piacentini, Mario
  26. The Dynamics of Parallel Economies. Measuring the Informal Sector in México By Brambila Macias, Jose
  27. Democracy, Diversification, and Growth Reversals By Cuberes, David
  28. The Changing Nature of Employment and the Reform of Labor and Social Security Legislation in Post-Apartheid South Africa By Makino, Kumiko
  29. Bank Borrowing and Financing of Medium-sized Firms in Indonesia By Hamada, Miki
  30. Alternatives for Projecting MDG Indicators By Rafael Guerreiro Osório
  31. Aid, Catastrophes and the Samaritan's Dilemma By Paul A. Raschky; Manijeh Schwindt
  32. Health and Civil War in Rural Burundi By Tom Bundervoet; Philip Verwimp; Richard Akresh

  1. By: Doepke, Matthias; Tertilt, Michèle
    Abstract: The nineteenth century witnessed dramatic improvements in the legal rights of married women. Given that these changes took place long before women gained the right to vote, they amounted to a voluntary renouncement of power by men. In this paper, we investigate men's incentives for sharing power with women. In our model, women's legal rights set the marital bargaining power of husbands and wives. We show that men face a tradeoff between the rights they want for their own wives (namely none) and the rights of other women in the economy. Men prefer other men's wives to have rights because men care about their own daughters and because an expansion of women's rights increases educational investments in children. We show that men may agree to relinquish some of their power once technological change increases the importance of human capital. We corroborate our argument with historical evidence on the expansion of women's rights in England and the United States.
    Keywords: Economic Growth; Human Capital; Political Economy; Return to Education; Women's Rights
    JEL: D13 E13 J16 N30 O43
    Date: 2008–04
  2. By: Banerjee, Abhijit; Banerji, Rukmini; Duflo, Esther; Glennerster, Rachel; Khemani, Stuti
    Abstract: Participation of beneficiaries in the monitoring of public services is increasingly seen as a key to improving their efficiency. In India, the current government flagship program on universal primary education organizes both locally elected leaders and parents of children enrolled in public schools into committees and gives these groups powers over resource allocation, and monitoring and management of school performance. However, in a baseline survey we found that people were not aware of the existence of these committees and their potential for improving education. This paper evaluates three different interventions to encourage beneficiaries’ participation through these committees: providing information, training community members in a new testing tool, and training and organizing volunteers to hold remedial reading camps for illiterate children. We find that these interventions had no impact on community involvement in public schools, and no impact on teacher effort or learning outcomes in those schools. However, we do find that the intervention that trained volunteers to teach children to read had a large impact on activity outside public schools—local youths volunteered to be trained to teach, and children who attended these camps substantially improved their reading skills. These results suggest that citizens face substantial constraints in participating to improve the public education system, even when they care about education and are willing to do something to improve it.
    Keywords: community participation; development economics; educational economics
    JEL: I21 O12
    Date: 2008–04
  3. By: Chong, Alberto; Duryea, Suzanne; La Ferrara, Eliana
    Abstract: What are the effects of television, and of role models portrayed in TV programs, on individual behavior? We focus on fertility choices in Brazil, a country where soap operas (novelas) portray families that are much smaller than in reality. We exploit differences in the timing of entry into different markets of Rede Globo, the network that has an effective monopoly on novelas production in this country. Using Census data for the period 1970-1991, we find that women living in areas covered by the Globo signal have significantly lower fertility. The effect is strongest for women of lower socioeconomic status and for women in the central and late phases of their fertility cycle, consistent with stopping behavior. The result is robust to placebo treatments and does not appear to be driven by selection in Globo entry. Finally, we provide suggestive evidence that novelas, and not just television, affected individual choices. First, people living in areas covered by the signal were more likely to name their children after novela characters. Second, entry of a network that relied on imported shows did not have a significant impact on fertility.
    Keywords: development; fertility; television
    JEL: J13 O12
    Date: 2008–04
  4. By: Krishnan, Pramila; Sciubba, Emanuela
    Abstract: In this paper we test the implications of a model of network formation on data from rural Ethiopia. In contrast to the current literature, we demonstrate the critical role of both number of links and architecture in determining the impact of social networks on outcomes. Social capital matters, but its impact differs by the architecture of the network to which one belongs.
    Keywords: Endogenous network formation; rural institutions; social networks
    JEL: D85 O12 O17 Z13
    Date: 2008–04
  5. By: Sudip Ranjan Basu (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: The paper aims to examine the role of institutions relative to economic policy and geography in explaining the differential level of development across countries over time. To that end, it attempts to construct a Development Quality Index (DQI) and an Institutional Quality Index (IQI) by using multivariate statistical method of principal components. It shows that (i) higher level of IQI along with economic policy and geography factors lead to a positive improvement in the level of DQI; and (ii) results remain robust for IQI and relatively robust for economic policy and geography even when it is compared across cross-section and panel data estimation for a set of 102 countries over 1980 to 2004. The results strongly indicate that institutions matter in the context of specific economic policy mixes and geography related factors illustrated by disease burden, etc. It demonstrates that relative influence of institutions varies across stages of development.
    Keywords: Development, Institutions, Economic policy, Geography, Principal component, Instrumental variables, Panel data
    JEL: C3 O10 O57 P51 R11
    Date: 2008–03–01
  6. By: Sudip Ranjan Basu (IUHEI, The Graduate Institute of International Studies, Geneva)
    Abstract: The paper uses nonparametric methodology to examine the role of institutions in understanding differential levels of development across countries. This technique estimates first order derivatives for every country allowing a deeper look into the impact of institutions on development. The preliminary cross-country findings show that (i) institutional quality positively and significantly increases development quality; and (ii) results remain ‘robust’ for different model specifications and choice of additional control variables. The analysis is carried out for a set of 102 countries over 1980 to 2004. Similar to parametric results established in the literature, the nonparametric analysis lends further support to the view that institutions matter in the context of economic policies and geographic factors.
    Keywords: Development, Institutions, Geography, Openness, Principal component, Nonparametric analysis
    JEL: C3 O10 O57 P51 R11
    Date: 2008–03–11
  7. By: Levin, Jörgen (Department of Business, Economics, Statistics and Informatics); Olin, Mikael (Department of Business, Economics, Statistics and Informatics)
    Abstract: This report focuses on trade and exchange rate policies in Tanzania. The composition of Tanzanian exports has changed dramatically since early 2000. In examining the determinants of trade with a particular focus on Tanzanian exports, we found that changes in the real exchange rate did not have a significant impact on exports. However, supply-side effects and trading partner economic performance are more important, as is the distance to market (or transport cost). The second part of this report discusses the impact of trade reforms on employment and poverty in the Tanzanian economy. In the long-term scenarios poorer households seem to gain more from trade liberalisation compared to the richer household groups. In the short-term, trade liberalisation would be beneficial to female workers and poor households, if labour is able to move between sectors. If wages are rigid, trade liberalisation will lead to unemployment and wages for casual labour will drop significantly. A nominal wage increase during liberalisation can have a significant impact on unemployment, driving casual workers’ wages down further. If the trade union adjusts worker premiums during trade reform, this would not only save some of the jobs of members, but also benefit non-unionised workers in other sectors as well. The alternative option of a reduction in export taxes would have a stronger impact on export supply, poor households would gain more than with liberalisation..
    Keywords: Trade liberalisation; labour markets; poverty; Tanzania
    JEL: C68 F01 F16
    Date: 2008–04–22
  8. By: Aradhna Aggarwal (Indian Council for Research on International Economic Relations)
    Abstract: This study aims at examining the impact of Special Economic Zones (SEZs) on human development and poverty reduction in India. It identifies three channels through which SEZs address these issues: employment generation, skill formation (human capital development), and technology and knowledge upgradation. It examines how the impact of SEZs is passed through each of these channels. The study finds that the modality differs significantly according to the characteristics of the SEZs, in particular, the level of their development as reflected in the composition of economic activities. Within this framework, the study examines the sectoral and economic composition of SEZ activities in India. It finds that labour intensive, skill intensive and technology intensive firms co exist in India's zones and, therefore argues that all the three effects described above are likely to be important in the Indian context. Empirical findings reported in the study are based on the data collected from both secondary sources and primary surveys. The primary survey based data was generated through extensive interviews of entrepreneurs and workers across the three largest SEZs (in terms of their contribution to exports and employment) : SEEPZ, Madras and Noida. The analysis reveals that `employment generation' has been the most important channel through which SEZs lend themselves to human development concerns, in India. Employment generated by zones is remunerative. Wage rates are not lower than those prevailing outside the zones. Besides, working conditions, non monetary benefits (such as transport, health and food facilities), incentive packages and social security systems are better than those prevailing outside the zones, in particular, in the small/informal sector. The role of SEZs in human capital formation and technology upgradation is found to be rather limited. The study argues that the zones' potential could not be exploited fully in India. This could primarily be attributed to the limited success of SEZs in attracting investment and promoting exports. The new SEZ policy gives a major thrust to SEZs. However the creation of SEZs alone does not ensure the realization of their potential. The government will need to play a more proactive role for effective realization of the full range of benefits from SEZs.
    Keywords: Special Economic Zones, Human Development, Employment, Poverty, Skill Formation, Technology Transfers, Local R&D
    JEL: F16 J31 J32 O15 O32
    Date: 2007–05
  9. By: Mandira Sarma (Indian Council for Research on International Economic Relations); Yuko Nikaido (Indian Council for Research on International Economic Relations)
    Abstract: In this paper we present an analytical review of the capital adequacy regime and the present state of capital to risk-weighted asset ratio (CRAR) of the banking sector in India. In the current regime of Basel I, Indian banking system is performing reasonably well, with an average CRAR of about 12 per cent, which is higher than the internationally accepted level of 8 per cent as well as India's own minimum regulatory requirement of 9 per cent. As the revised capital adequacy norms, Basel II, are being implemented from March 2008, several issues emerge. We examine these issues from the Indian perspective.
    Keywords: Capital Adequacy Ratio, Basel I, Basel II, Reserve Bank of India, SMEs lending
    JEL: G20 G21 G28
    Date: 2007–07
  10. By: Alka Chadha (Indian Council for Research on International Economic Relations); Ali Mehdi (Indian Council for Research on International Economic Relations); Garima Malik (Indian Council for Research on International Economic Relations)
    Abstract: In this study, the authors have tried to examine the empirical evidence on the relationship between preventive health care and labour productivity and corporate profitability. While doing so, they try to generate awareness on the positive role of preventive health care in boosting the corporate sector's performance and improving the country's economy. Toward the end, based on their findings, they offer recommendations for policymakers and corporate management to promote preventive healthcare practice among employees. The primary research undertaken for this study included an electronic survey of some of the most well-established companies in the country, as well as a field-cum-electronic survey with a sample of employees in Delhi and the National Capital Region. Preventive health care holds enormous promise for the competitiveness of Indian companies, and for the country's economy in the global arena. In an era when the service sector is gaining pre-eminence, the value of the individual employee has increased more than ever before. Employees with specialized skills are the focal point on whose well-being and performance the productivity of a company rests. In a highly competitive corporate environment, companies cannot afford the absence of their employees due to sickness, caused by a sedentary lifestyle, etc., or a poor performance at the workplace due to poor health. Both as part of their corporate social responsibility and to boost their profits, a number of firms are offering preventive health care facilities to their employees. And it is on their performance, productivity and profitability that India's growth potential and global competitiveness depends substantially. Unfortunately, while the corporate sector has been quick to realize the benefits of preventive health care, policy has lagged behind and we do not yet have fiscal or other incentives that encourage prevention. While public spending on health has stagnated at 0.9 per cent of the GDP since the mid-1980s, and the government per capita health expenditure is one of the lowest in the world (US$7, as against US$2,548 in the United States), the government should focus its limited resources towards the health of the poor, and provide tax exemptions to sections which can take care of their own health needs.
    Keywords: preventive, executive, corporate health care, check-ups; employee wellness; lifestyle changes; health policy; fiscal incentives
    JEL: I11 I18
    Date: 2007–09
  11. By: Ramesh Chandra (Indian Council for Research on International Economic Relations); Rajiv Kumar (Indian Council for Research on International Economic Relations)
    Abstract: In the context of the low levels of regional cooperation among South Asian countries when compared with the successful results from cooperation in East Asia (consisting of South East and East Asian countries), the objective of this paper is first to assess the prospects of cooperation among South Asian economies and then to draw lessons from East Asian regional experiments for South Asian regionalism for the betterment of these prospects. The main argument of the paper is that South Asia should adopt a twin-track approach: better integration within itself and better integration with rest of the world particularly East Asia. Both tracks would complement and supplement each other ensuring a greater chance of success.
    Keywords: South Asian integration prospects, Lessons from East Asian regionalism, Open regionalism, Asian development
    JEL: F15 F33 F36 O19
    Date: 2008–01
  12. By: Gang, Ira N. (Rutgers University); Sen, Kunal (University of Manchester); Yun, Myeong-Su (Tulane University)
    Abstract: Affirmative action has been at the heart of public policies towards the socially disadvantaged in India. Compensatory discrimination policies which have been adopted for the Scheduled Castes (SC) and Scheduled Tribes (ST) since independence were recommended for Other Backward Classes (OBC) by the Mandal Commission established by the Indian government in 1979. We examine why OBC have lower living standards, as measured by per capita household consumption expenditures, relative to the mainstream population, and whether these reasons are similar to those observed for SC and ST. We find that while the causes of the living standard gap for the OBC are broadly similar to those for the SC and ST, the role of educational attainment in explaining the gap is higher in importance for the OBC.
    Keywords: living standards, caste, reservation policy, decomposition
    JEL: I32 O12 J15
    Date: 2008–04
  13. By: Appleton, Simon (University of Nottingham); Knight, John (University of Oxford); Song, Lina (University of Nottingham); Xia, Qingjie (Peking University)
    Abstract: Why is it that, as the Chinese Communist Party has loosened its grip, abandoned its core beliefs, and marketized the economy, its membership has risen markedly along with the economic benefits of joining? We use three national household surveys, spanning eleven years, to answer this question with respect to labour market rewards in urban China. We conceptualize individual demand for Party membership as an investment in “political capital” that brings monetary rewards in terms of higher wages. This wage premium has risen with the growing wage differentials associated with the emergence of a labour market and the continuing value of political status in the semi-marketized transitional economy. However, a demand-side explanation does not explain the fact that the wage premium is higher for the personal characteristics that reduce the probability of membership. We develop an explanation in terms of a rationing of places and a scarcity value for members with those characteristics.
    Keywords: China, Communist Party, labour market, economic transition, wages
    JEL: J31 J40 J71 P20 P30
    Date: 2008–04
  14. By: Vodopivec, Milan (World Bank); Arunatilake, Nisha (Institute for Policy Studies of Sri Lanka)
    Abstract: Sri Lanka’s population is predicted to age very fast during the next 50 years, bringing a slowdown of labor force growth and after 2030 its contraction. Based on an original, 2006 representative survey of old people in Sri Lanka conducted as a part of this study, the paper examines labor market consequences of this process, focusing on retirement pathways and the determinants of labor market withdrawal. The paper finds that a vast majority of Sri Lankan old workers are engaged in the informal sector, work long hours, and are paid less than younger workers. Moreover, as one of the first findings of its kind, the paper shows that labor market duality that characterizes most developing countries carries over to old age: (i) previous employment is the most important predictor of the retirement pathway; (ii) older workers fall into two categories: civil servants and formal private sector workers, who generally stop working before they reach 60 because they are forced to do so by mandatory retirement regulations, and casual workers and the self-employed, who are forced to work until very old age (or death) due to poverty and who stop working primarily because of poor health; and (iii) the option of part-time work is used primarily by workers who held regular jobs in their prime age employment, but not by casual workers and self-employed.
    Keywords: population aging, labor supply of old workers, labor demand for old workers
    JEL: J11 J14 J26
    Date: 2008–04
  15. By: Appleton, Simon (University of Nottingham); Song, Lina (University of Nottingham); Xia, Qingjie (Peking University)
    Abstract: This paper estimates trends in absolute poverty in urban China from 1988 to 2002 using the Chinese Household Income Project (CHIP) surveys. Poverty incidence curves are plotted, showing that poverty has fallen markedly during the period regardless of the exact location of the poverty line. Income inequality rose from 1988 to 1995 but has been fairly constant thereafter. Models of the determination of income and poverty reveal widening differentials by education, sex and party membership. Income from government anti-poverty programs has little impact on poverty, which has fallen almost entirely due to overall economic growth rather than redistribution.
    Keywords: poverty, inequality, economic growth, welfare, public policy, China
    JEL: O15 J38 O38
    Date: 2008–04
  16. By: Song, Lina (University of Nottingham)
    Abstract: This paper tests three hypotheses concerning intra-household resource allocation in rural China. First, whether increasing the women's bargaining power alters household expenditure patterns. Second, whether households allocate fewer resources to daughters than to sons. Third, whether increasing the bargaining power of women reduces pro-boy discrimination. We find that expenditure patterns do vary with proxies for women's bargaining power. Pro-boy discrimination is suggested by: lower female outlay equivalent ratios for adult goods; greater sensitivity of household health spending to young boys than to young girls; and high male sex ratios. No evidence is found to support the third hypothesis.
    Keywords: intrahousehold allocation, women, bargaining power, China
    JEL: D1 D13 D61
    Date: 2008–04
  17. By: Baez, Javier E. (Syracuse University)
    Abstract: Between 1993 and 1994, extremist militia groups carried out the extermination of ethnic Tutsis and moderate Hutus in the genocides of Burundi and Rwanda. Nearly one million people were killed and thousands were forcibly uprooted from their homes. Over the course of a few months, Kagera – a region in northwestern Tanzania – received more than 500,000 refugees from these wars. This region is home to a series of geographic natural barriers, which resulted in variation in refugee intensity. I exploit this variation to investigate the short and long run causal effects of hosting refugees on the outcomes of local children. Reduced-form estimates offer evidence of adverse impacts almost 1.5 years after the shock: a worsening of children’s anthropometrics of 0.3 standard deviations, an increase of 15 to 20 percentage points in the incidence of infectious diseases and an increase of roughly 7 percentage points in mortality for children under five. I also exploit intra- and inter-cohort variation and find that childhood exposure to this massive arrival of refugees reduced height in early adulthood by 1.8 cm (1.2%), schooling by 0.2 years (7.1%) and literacy by 7 percentage points (8.6%). Designs using the distance from the village to the border with Rwanda as an alternative instrumental strategy for refugee intensity support the findings. The estimates are robust across a variety of samples, specifications and estimation methods and provide evidence of a previously undocumented indirect effect of civil wars on the well-being of children and subsequent economic growth in refugee-hosting communities.
    Keywords: civil conflicts, refugees, children, human capital, health, Africa
    JEL: O10 O12 O15
    Date: 2008–04
  18. By: James Harrigan; Haiyan Deng
    Abstract: China's trade pattern is influenced not just by its overall comparative advantage in labor intensive goods but also by geography. We use two variants of the Eaton-Kortum (2002) model to study China's local comparative advantage. The theory predicts that China's share of export markets should grow most rapidly where China's share is initially large. A corollary is that exporters that have a big market share where China's share is initially large should see the largest fall in their market shares. These market share change predictions are strongly supported in the data from 1996 to 2006. We also show theoretically that since trade costs are proportional to weight rather than value, relative distance affects local comparative advantage as well as the overall volume of trade. The model predicts that China has a comparative advantage in heavy goods in nearby markets, and lighter goods in more distant markets. This theory motivates a simple empirical prediction: within a product, China's export unit values should be increasing in distance. We find strong support for this effect in our empirical analysis on product-level Chinese exports in 2006.
    JEL: F1 F14
    Date: 2008–04
  19. By: Juan R. de Laiglesia; Christian Morrison
    Abstract: This paper examines the relationship between household structures, the institutions that shape them and physical and human capital accumulation using household and individual data from China, Indonesia, Côte d’Ivoire and Ghana. Household structures differ greatly across countries and are very diverse within countries. In the two African countries studied a large share of the population live in extended households and/or polygamous ones. Such household structures are the exception or even absent in the Asian cases, where nuclear monogamous households prevail. This paper finds that polygamy is negatively related to capital accumulation. Wealth per capita is significantly lower in polygamous households even after controlling for income, age and literacy of the household head. A first analysis of the possible channels suggests that the larger size of polygamous households plays an important role. A similar result is found for education: enrolment rates are never higher but frequently lower in these households. The diversity across countries demonstrates that polygamy has very different meanings across societies... <BR>Ce document examine les relations entre les structures des ménages, les institutions qui les façonnent et l’accumulation de capital physique et humain, en utilisant des données par ménage et par individu en provenance de Chine, d’Indonésie, de Côte-d’Ivoire et du Ghana. Les structures des ménages varient beaucoup d’un pays à l’autre et sont très diverses à l’intérieur même des pays. Dans les deux pays africains étudiés une partie importante de la population vit dans des ménages étendus et/ou polygames. De telles structures des ménages sont l’exception ou même absentes dans les pays d’Asie où le ménage nucléaire et monogame prédomine. Ce document constate que la polygamie a une relation négative avec le processus d’accumulation de capital. La richesse par tête est significativement inférieure dans les ménages polygames même après avoir contrôlé par le revenu, l’âge et l’éducation du chef de ménage. Une première analyse des mécanismes possibles qui pourraient expliquer ces résultats suggère que la taille plus grande des ménages polygames joue un rôle important. On trouve un résultat semblable pour l’éducation : les taux de scolarisation ne sont jamais supérieurs mais souvent moins élevés dans ces ménages. La diversité selon les pays prouve que la polygamie a des significations très différentes selon les sociétés...
    Keywords: Africa, Afrique
    JEL: D12 J12 O12 O16 Z10
    Date: 2008–01
  20. By: Bichaka Fayissa; Christian Nsiah; Prathibha V. Joshi
    Abstract: Since the 1970’s, countries of the Sub-Saharan African region have experienced slow economic growth and development in comparison to other regions of the world. This paper studies the role of perceived financial risk in explaining the divergence of economic growth among Sub-Saharan African countries by employing regression techniques on panel data for the period of 1984 to 2000. Our findings suggest that higher ratings of a country’s investment environment (used as a proxy for reduced perceived financial risk) tend to make the flow of external funds more accessible to African countries and spur their economic growth.
    Keywords: Economic growth, financial risk, foreign direct investment, human capital, physical capital, political rights, openness, panel data.
    JEL: C33 F20 G32 O40 O5
    Date: 2008–04
  21. By: Hassan Essop (Department of Economics, Stellenbosch University); Derek Yu (Department of Economics, Stellenbosch University)
    Abstract: According to the 2006 September Labour Force Survey, approximately 22% of the employed (excluding domestic workers and agricultural employment) are engaged in informal sector activities as their main work to sustain themselves and their dependents. Given the large size of the informal sector in relation to the formal sector, it is imperative to understand the dynamics and trends within the informal sector. This paper provides a detailed quantitative descriptive analysis of the South African informal sector between 1997 and 2006 using the October Household Survey and the Labour Force Survey data, adding to the work on informal markets done by authors such as Devey, Skinner & Valodia (2003, 2006a, 2006b), Muller (2003) and Muller & Posel (2004). Such an analysis could not only enhance the informal sector literature currently available, but also increase the depth of analysis available to policy makers.
    Keywords: South Africa, Household survey, Labour market trends, informal sector
    JEL: J00
    Date: 2008
  22. By: Yang, Ling; Lahr, Michael/L
    Abstract: The literature on regional disparities in China is both broad and deep. Nonetheless much of its focus has been on the effects of trade liberalization and national policies toward investment in interior provinces. Few pieces have examined whether the disparities might simply be due to differences in industry mix, final demand, or even interregional trade. Using multiregional input-output tables and disaggregated employment data, we decompose change in labor productivity growth for seven regions of China between 1987 and 1997 into five partial effects—changes in value added coefficients, direct labor requirements, aggregate production mix, interregional trade, and final demand. Subsequently we summarize the contributions to labor productivity of the different factors at the regional level. In this way, we present a new perspective for recent causes of China’s interregional disparity in GDP per worker.
    Keywords: Decomposition; input-output analysis; productivity; regional disparity; China
    JEL: O1 C6 R11 O4
    Date: 2008–04–04
  23. By: Robinson, Jonathan
    Abstract: This paper presents results from a randomized field experiment to test for the importance of limited commitment (due to incomplete contract enforceability) in explaining intra-household risk sharing arrangements in Kenya. The experiment followed 142 daily income earners and their spouses for 8 weeks. Every week, each individual had a 50% chance of receiving a 150 Kenyan shilling (US $2) income shock (equivalent to about 1.5 days' income for men and 1 week's income for women). This paper has 2 main results. First, since the experimental payments are random, they allow for a direct test of allocative Pareto efficiency. I reject efficiency, as male private goods expenditures are sensitive to the receipt of the payment. Second, the experiment varied the level of intra-household correlation in the experimental payments between couples. I find that women send bigger transfers to their husbands when shocks are independent or negatively correlated, a result consistent with the presence of limited commitment. I find no difference in transfers for men, likely because the shocks were too small to cause the limited commitment constraint to bind for them.
    JEL: O12
    Date: 2008–04–17
  24. By: Brambila Macias, Jose
    Abstract: In this paper, we analyse the possible channels through which informality, remittances and migration could interact and consequently affect growth in Mexico. In order to do so, we develop a simple endogenous growth model that allows for remittances and the coexistence of the formal and informal sector in the production function. In the literature, there is no agreement regarding the effects of the informal sector on economic growth. Moreover, thanks to globalization, migration and remittances have increased significantly their macroeconomic weight, renewing interest in studying the interactions that these variables might have, especially in developing countries like Mexico, where remittances are the third source of income after oil and tourism revenues. Our model shows that remittances play a crucial role on enhancing the Mexican resource constraint, while the possibility of migration in the informal sector drains the aggregate labor force. However, the magnitude of potential remittances may offset this loss, thus having an overall positive effect on economic growth.
    Keywords: Growth; Informal Sector; Migration; Remittances
    JEL: F22 O17 O40 F24
    Date: 2008–03–31
  25. By: Piacentini, Mario
    Abstract: This paper investigates the presence of a network externality which might explain the persistence of low schooling achievements among internal migrants. A simple analytical framework is presented to show how an initial human capital disparity between migrants and non migrants can translate into persistent skill inequality if origin shapes the composition of social networks. We test empirically whether young migrantsschooling decisions are affected by the presence of covillagers at destination, using data on life-time histories of migration and education choices from a rural region of Thailand. Different modelling approaches are used to account for the self-selection of young migrants, for potential endogeneity of the network size, and for unobserved heterogeneity in individual preferences. The size of the migrant network is found to negatively affect the propensity of young migrants to pursue schooling while in the city. This fi…nding suggests that policies seeking to minimising strati…cation in enclaves might have a socially multiplied impact on schooling participation, and, ultimately, affect the socio-economic mobility of the rural born.
    Keywords: human capital; schooling; networks; migration; inequality
    JEL: O1 O10 O15
    Date: 2008–03–01
  26. By: Brambila Macias, Jose
    Abstract: The existence of parallel economies that operate in the shadows of informality within most Latin American countries is widely recognized by the economic literature. However, its composition, size and effects on economic growth are still open questions. In this paper, we estimate the size and the evolution of the Mexican informal economy in the last three decades using a vector error correction model. In addition to the standard explanatory variables traditionally used in the currency demand approach, we include remittances given their relevance in the Mexican economic system. The results indicate that informality prior to the late 1980’s accounted for at least two thirds of GDP, while stabilizing around one third of GDP in the last decade. Furthermore, our estimates provide evidence of a positive long run relationship between informality and economic growth.
    Keywords: Informal Sector; currency demand; VEC; Remittances
    JEL: C32 O17 F24 E41
    Date: 2008–03–31
  27. By: Cuberes, David
    Abstract: There exists convincing evidence that democratic countries are less volatile. This conclusion is usually reached with respect to volatility as measured by the standard deviation of annual growth rates of per capita GDP which includes both low and high frequency fluctuations. However, recently several studies have documented that significant changes in trend-growth, such as growth accelerations that last a decade or similar periods of negative growth, are quite common. In this paper we ask whether democracy also has a stabilizing effect on trend-volatility, i.e. whether more democratic countries experience fewer and milder swings of trend-growth. We find a common phenomenon medium term reversals of growth, that is periods of exceptionally high growth are, on average, followed by periods of exceptionally low growth, and vice versa. The propensity to experience large swings of trend growth is not uniform across countries-less democratic countries are more susceptible to it. When compared with factors commonly associated with volatility such as measures of quality of institutions, macroeconomic policies and financial development, we find that democracy is the most robust predictor of a country's propensity for growth reversals. We construct a model in which non-democracies have high barriers of entry for new firms. This leads to less sectoral diversification: fewer sectors are operated but more resources are channeled to each. In an uncertain environment this leads to infrequent but large growth accelerations when one of the few sectors operated is successful. However, these accelerations are followed by large declines when fortunes change in favor of the missing sectors. We present empirical evidence that confirms the positive relationship between democracy and industrial diversification.
    Keywords: Democracy; growth reversals; diversification; structural breaks
    JEL: O11 O43 O16 O57
    Date: 2008–04–23
  28. By: Makino, Kumiko
    Abstract: This paper tries to understand the current status of South African labor market, which is changing in contradictory directions, i.e. a strengthening of the rights and protection of workers at the same time as the flexibilization of employment, in the context of the characteristics of labor and social security legislation in South Africa, as well as the nature of labor and social security reforms after democratization. We put emphasis on the corporatist nature of labor policy-making as the factor influencing the course of reforms; it is argued that the apparently contradictive changes can be explained consistently by the corporatist labor policy-making process which has been practiced notwithstanding the problem of representativeness.
    Keywords: South Africa, Labor market, Social security, Corporatism, Employment
    JEL: I38 J21 J30 J50 J65
    Date: 2008–03
  29. By: Hamada, Miki
    Abstract: The improvement of financial intermediation functions is crucial for a robust banking system. When lending, banks have to cope with such problems as information asymmetry and adverse selection. In order to mitigate these problems, banks have to product information and improve their techniques of lending. During the 1998 financial crisis, Indonesia's banking system suffered severe damage and revealed that the country's banking intermediation functions did not work well. This paper examines the financial intermediation functions of banks in Indonesia and analyzes the importance of bank lending to firms. The focus is on medium-sized firms, and "relationship lending", one of the bank lending techniques, is used to examine financial intermediation in Indonesia. The results of logit regressions show that the relationship between a bank and a firm affects the probability of bank lending. The amount of borrowing and collateral are also affected by a firm's relationship with a bank. When viewed from the standpoint of relationship lending to medium-sized firms, Indonesian banks cannot be criticized for any malfunction of financial intermediation.
    Keywords: Relationship lending, Financial intermediation function, Medium-sized firms, Indonesia, Banks, Finance, Small and medium-scale enterprises
    JEL: G21 G30 N25
    Date: 2008–03
  30. By: Rafael Guerreiro Osório (International Poverty Centre)
    Abstract: Although the Millennium Development Goals are global, in the sense that they are to be reached by the whole world, not necessarily by countries individually, in many countries the true commitment to them has led many to ask the question: will my country reach all or some of the MDGs by 2015? Are we on or off track? If off track, how far are we? To answer this question it is mandatory to perform some kind of projecting exercise. We talk of projections, not of forecasts, for there are many variables that can intervene to determine the performance of a country in its pursuit of the goals. Furthermore we have to deal with the fact that we cannot really predict what is going to happen up to 2015, but just make assumptions. However, projections can indeed be so accurate as to resemble forecasts. This is the case when there is plenty of data available, as well as technical expertise in projecting, and time. Unfortunately, this is seldom the case, particularly in developing countries. The common situation faced by those who ask the question on whether the MDGs will be reached by a certain country by 2015 is that of scarcity of data and/or of technical skills. (...)
    Keywords: Alternatives for Projecting MDG Indicators
    Date: 2008–04
  31. By: Paul A. Raschky; Manijeh Schwindt
    Abstract: This paper discusses the impact of expected foreign aid in case of catastrophic events on the level of mitigative activities in aid-receiving countries. The theoretical model shows that the anticipation of foreign aid partly crowds out preventive collective action. The crowding-out effect can result in both a lower probability of surviving an disaster and an increase in an event's proportion. In order to test the theoretical propositions we analyse the effect of foreign aid dependence on a) ex-ante risk-management activity proxied by the death toll from 317 major earthquakes occurring worldwide between 1980 and 2002 and b) the likelihood of cholera epidemics between 1980 and 2001. Our estimates suggest that foreign aid in previous years is crowding out ex-ante risk-management activities in recipient countries. The paper concludes with propositions on the deployment of foreign aid.
    Keywords: Foreign Aid, Samaritan's Dilemma, Catastrophes
    JEL: O17 O19 Q54
  32. By: Tom Bundervoet (Vrije Universiteit Brussel (VUB), Belgium); Philip Verwimp (German Institute for Economic Research (DIW Berlin)); Richard Akresh (University of Illinois at Urbana-Champaign)
    Abstract: We combine household survey data with event data on the timing and location of armed conflicts to examine the impact of Burundi’s civil war on children’s health status. The identification strategy exploits exogenous variation in the war’s timing across provinces and the exposure of children’s birth cohorts to the fighting. After controlling for province of residence, birth cohort, individual and household characteristics, and province-specific time trends, we find an additional month of war exposure decreases children’s height for age z-scores by 0.047 standard deviations compared to non-exposed children. The effect is robust to specifications exploiting alternative sources of exogenous variation.
    Keywords: Child health, economic shocks, stunting, Africa, civil war
    JEL: I12 J13 O12
    Date: 2008

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