nep-dev New Economics Papers
on Development
Issue of 2008‒05‒24
thirteen papers chosen by
Jeong-Joon Lee
Towson University

  1. Wealth Constraints, Skill Prices or Networks: What Determines Emigrant Selection? By Jesús Fernández-Huertas Moraga
  2. New Evidence on Emigrant Selection By Jesús Fernández-Huertas Moraga
  3. Aid-Financed Public Investments and the Dutch Disease: Evidence from Tanzania By Asmah, Emmanuel E.; Levin, Jorgen
  4. Poverty and Violent Conflict: A Micro-Level Perspective on the Causes and Duration of Warfare By Patricia Justino
  5. African Trade Policy in the 1990s: Political Economy or Technocratic Reforms? By Chris Jones; Oliver Morrissey; Doug Nelson
  6. Are Imports in Africa Responsive to Tariff Reductions? By Chris Jones; Oliver Morrissey
  7. Aggregate and Sector Import Price Elasticities for a Sample of African Countries By Chris Jones
  8. New empirical evidence on local financial development and growth By Andrea Vaona; Roberto Patuelli
  9. A model of growth and finance: FIML estimates for India By Rao, B. Bhaskara; Tamazian, Artur
  10. Are any growth theories linear? Why we should care about what the evidence tells us By Henderson, Daniel J.; Papageorgiou, Chris; Parmeter, Christopher F.
  11. A Test for Multimodality of Regression Derivatives with an Application to Nonparametric Growth Regressions By Henderson, Daniel J.
  12. Deep determinants of economic growth – empirical verification with panel data models By Tomasz Brodzicki; Dorota Ciolek
  13. Myanmar Sugar SMEs: History, Technology, Location and Government Policy By San Thein; Kudo, Toshihiro

  1. By: Jesús Fernández-Huertas Moraga
    Abstract: The productive characteristics of migrating individuals, emigrant selection, affect welfare. The empirical estimation of the degree of selection suffers from a lack of complete and nationally representative data. This paper uses a new and better dataset to address both issues: the ENET (Mexican Labor Survey), which identifies emigrants right before they leave and allows a direct comparison to non-migrants. This dataset presents a relevant dichotomy: it shows on average negative selection for Mexican emigrants to the United States for the period 2000-2004 together with positive selection in Mexican emigration out of rural Mexico to the United States in the same period. Three theories that could explain this dichotomy are tested. Whereas higher skill prices in Mexico than in the US are enough to explain negative selection in urban Mexico, its combination with network effects and wealth constraints is required to account for positive selection in rural Mexico.
    Keywords: international migration, selection, wealth constraints, household survey
    JEL: F22 O15 J61 D33
    Date: 2008–03–12
  2. By: Jesús Fernández-Huertas Moraga
    Abstract: This paper examines the extent to which Mexican emigrants to the United States are negatively selected, that is, have lower skills than individuals who remain in Mexico. Previous studies have been limited by the lack of nationally representative longitudinal data. This one uses a newly available household survey, which identifies emigrants before they leave and allows a direct comparison to non-migrants. I find that, on average, US bound Mexican emigrants from 2000 to 2004 earn a lower wage and have less schooling years than individuals who remain in Mexico, evidence of negative selection. This supports the original hypothesis of Borjas (AER, 1987) and argues against recent findings, notably those of Chiquiar and Hanson (JPE, 2005). The discrepancy with the latter is primarily due to an under-count of unskilled migrants in US sources and secondarily to the omission of unobservables in their methodology.
    Keywords: international migration, selection, household survey
    JEL: F22 O15 J61 D33
    Date: 2008–04–10
  3. By: Asmah, Emmanuel E. (Department of Business, Economics, Statistics and Informatics); Levin, Jorgen (Department of Business, Economics, Statistics and Informatics)
    Abstract: In this paper we discuss the impact of scaling-up aid in Tanzania using an economy-wide dynamic CGE model. The major conclusions coming out from this work is that productivity effects matter. If additional aid and consequently increased public spending has a positive impact on productivity this would spur GDP growth and reduce the risk of an appreciating real exchange rate. In a way this resembles previous results in the aid-growth literature that aid has a positive impact on growth in a country with good economic policies assuming that good policies have a positive impact on productivity. Presenting various scenarios on the impact of additional aid a sustained GDP growth rate of around 7 percent would be possible to achieve in a modest scaling-up aid scenario without any significant changes in the real exchange rate.
    Keywords: Aid:Dutch:Disease:Tanzania
    JEL: F35 O11 O55
    Date: 2008–05–14
  4. By: Patricia Justino (Institute of Development Studies)
    Abstract: This paper argues that endogenous mechanisms linking processes of violent conflict and household poverty provide valuable micro foundations to the ongoing debate on the causes and duration of armed conflicts. Household poverty affects the onset, sustainability and duration of violent conflict due to the direct and indirect effects of violence on the economic behaviour and decisions of households in conflict areas. These effects lead to the emergence of symbiotic relationships between armed groups and households living in areas they control that may sustain the conflict for a long time. The strength of this relationship is a function of two interdependent variables, namely household vulnerability to poverty and household vulnerability to violence.
    Keywords: Household poverty, household welfare, causes of armed conflict, duration of conflict, micro-foundations of conflict
    JEL: D74 I32
    Date: 2008–05
  5. By: Chris Jones; Oliver Morrissey; Doug Nelson
    Abstract: The majority of African countries implemented import liberalisation in the 1990s. This paper explores factors that may explain the pattern of protection and of tariff reform. We consider political economy explanations, motivated specifically by the Grossman and Helpman (1994) model of protection in response to industry lobbies, and the possibility that reforms are technocratic. Using industry-level data for a sample of six African countries, we find limited evidence that political economy factors have influenced the pattern of tariffs or tariff reductions since the early 1990s. One result does appear frequently: relative sector size (measured by the number of employees or establishments) appears to be associated with the relative level of protection. We then explore various descriptive statistics for tariff changes in seven African countries. The analysis suggests that the pattern of tariff reductions was essentially technocratic in structure - across the board reduction in average tariffs and in the dispersion of rates, with larger proportional reductions for higher tariffs – consistent with policy reforms being guided by the World Bank. While political economy factors may have influenced the initial pattern of protection, the technocratic reforms since the early 1990s have diluted political economy influences on average and relative protection.
    Keywords: Pattern of Protection, Tariff Reform, Political Economy, Africa
  6. By: Chris Jones; Oliver Morrissey
    Abstract: In the 1980’s and 1990’s many African countries liberalised their trade policy, although since the mid 1990s there are countries that did not alter tariffs. This allows us to analyse the effects of trade liberalisation on the change in imports using Difference-in-Differences techniques that allow us to evaluate the impact on imports of trade liberalisation at the general and sector-specific level. During the period of study (1996-2004), Algeria (in 1997), Ethiopia (2001), Egypt (1998), Tanzania (2000) and Uganda (2000) all liberalised their tariffs. These countries act as a ‘treatment’ group. In comparison, Cameroon, Gabon and Madagascar all left their tariffs unchanged. These countries act as our ‘control’ group or counterfactual. We compare the effects on imports for liberalising countries relative to non-liberalising countries, controlling for the timing of liberalisation, trends in import capacity (country effects) and in sector imports across countries (product market effects). Overall, using three methods of measuring imports, there is little evidence that suggests imports increased for the treatment group countries relative to the control group countries. This is true at the general and sector-specific levels.
    Keywords: Tariffs, Difference-in-Difference, liberalisation, Africa
  7. By: Chris Jones
    Abstract: This paper applies panel data methods to a simple imperfect substitutes model to estimate import demand elasticities for ten African countries. The elasticities are estimated at three levels of aggregation. Firstly, we generate aggregate elasticities for each country. Secondly, we use interactive dummy variables to create estimates for 16 sectors defined by the World Customs Organisation (WCO). Finally, we estimate elasticities for each of the 94 2-digit product lines defined by the Harmonised System (HS). In total there are 10 aggregate estimates, 158 estimates for the 16 WCO sectors; and 911 estimates at the 2-digit level. Using Fixed-Effects, the aggregate estimates do not differ significantly from unity. However, as we move to different levels of aggregation the estimates have much more variability. In general, import demand appears more elastic in sectors that have relatively high levels of domestic production or where there are exports.
    Keywords: Imports, Import Demand Elasticities, Africa
  8. By: Andrea Vaona (Facoltà di Economia, Università di Lugano, Svizzera; Kiel Institute for the World Economy, Kiel, Germany; University of Verona, Department of Economic Sciences, Verona, Italy); Roberto Patuelli (Facoltà di Economia, Università di Lugano, Svizzera)
    Abstract: In this paper, we show that the regional finance-growth nexus in Italy is robust to a series of innovations with respect to the existing literature on the topic. We use finer measures of economic and financial development, as well as instruments with a deeper economic content. We rely on state-of-the-art cross-sectional and panel estimation methods, and we offer a thorough investigation of the nonlinearities in the relation between finance and growth. Our results show that, while local financial development is a key factor for economic growth, in regions with inefficient courts more credit might translate into reduced growth due to opportunistic behaviour and the consequent misallocation of funds.
    Keywords: Finance, Growth, Regions, Italy, Cross-Section Analysis, Panel Data Analysis
    JEL: O18 O16 C31
    Date: 2008–05–13
  9. By: Rao, B. Bhaskara; Tamazian, Artur
    Abstract: Many empirical works addressed the nature of the relationship between economic growth and financial developments. Although these studies concede that they are interdependent, they have used single equations methods for estimation. In particular in the country specific studies the Granger causality tests are applied to equations estimated with the single equations methods to determine whether financial developments cause growth or vice versa. This paper uses the full information maximum likelihood method to estimate a two equations model of growth and finance for India. We also argue that in virtually all these empirical works the specification of the output equation is unsatisfactory. Our results with the Indian data show that there is no evidence to support the view that finance follows where enterprise goes. Furthermore, financial developments have a small but significant permanent growth effect in India.
    Keywords: Steady State Growth Rate; Financial Development; Solow Model; Simultaneous Equation Model and FIML Estimates
    JEL: C32 O11 O16 E44
    Date: 2008–05–14
  10. By: Henderson, Daniel J.; Papageorgiou, Chris; Parmeter, Christopher F.
    Abstract: Recent research on macroeconomic growth has been focused on resolving several key issues, two of which, specification uncertainty of the growth process and variable uncertainty, have received much attention in the recent literature. The standard procedure has been to assume a linear growth process and then to proceed with investigating the relevant variables that determine growth across countries. However, a more appropriate approach would be to recognize that a misspecified model may lead one to conclude that a variable is relevant when in fact it is not. This paper takes a step in this direction by considering conditional variable uncertainty with full blown specification uncertainty. We use recently developed nonparametric model selection techniques to deal with nonlinearities and competing growth theories. We show how one can interpret our results and use them to motivate more intriguing specifications within the traditional studies that use Bayesian Model Averaging or other model selection criteria. We find that the inclusion of nonlinearities is necessary for determining the empirically relevant variables that dictate growth and that nonlinearities are especially important in uncovering key mechanism of the growth process.
    Keywords: Growth Nonlinearities; Irrelevant Variables; Least Squares Cross Validation; Bayesian Model Averaging; Parameter Heterogeneity
    JEL: O10 C14 C12 C15 O40
    Date: 2008–05–13
  11. By: Henderson, Daniel J.
    Abstract: This paper presents a method to test for multimodality of an estimated kernel density of parameter estimates from a local-linear least-squares regression derivative. The procedure is laid out in seven simple steps and a suggestion for implementation is proposed. A Monte Carlo exercise is used to examine the finite sample properties of the test along with those from a calibrated version of it which corrects for the conservative nature of Silverman-type tests. The test is included in a study on nonparametric growth regressions. The results show that in the estimation of unconditional β-convergence, the distribution of the parameter estimates is multimodal with one mode in the negative region (primarily OECD economies) and possibly two modes in the positive region (primarily non-OECD economies) of the parameter estimates. The results for conditional β-convergence show that the density is predominantly negative and unimodal. Finally, the application attempts to determine why particular observations posess positive marginal effects on initial income in both the unconditional and conditional frameworks.
    Keywords: Nonparametric Kernel; Convergence; Modality Tests
    JEL: O10 C14 C15 O40
    Date: 2008–04–18
  12. By: Tomasz Brodzicki (Faculty of Economics, University of Gdansk); Dorota Ciolek (Faculty of Management, Department of Econometrics, University of Gdansk)
    Abstract: We verify the impact of the so-called deep determinants on the level of economic real GDP per capita for an unbalanced panel of 207 economies within the period 1996-2004 using the Hausman-Taylor method of estimation. Institutional variables are detected to be endogenous. The results confirmed the assumed impact of deep determinants on the observed disparities in economic development. In most cases the basic specification of the model suggested by the empirical literature (log of openness, rule of law, distance from equator) is statistically significant and the impact of the variables has the anticipated direction. Several other specifications are tested and they perform pretty well. As the distance from equator has been detected not to be statistically insignificant in several specifications (for Asia and Europe) a combination of exogenous geographical variables enters the model with positive results. The basic specification of the model fits well the context of Africa and South America. It however performs badly for Asia. The quality of institutions is of prime importance for southern hemisphere economies as well as for former (currently economies in transition) and current socialist economies. The permanent improvement in the quality of institutions is the key determinant of success of economic transformation – underperformance in this area leads to smaller gains in terms of GDP per capita levels attained.
    Keywords: economic growth, economic development, institutions, geography, openness, panel data models, Hausman-Taylor estimator
    Date: 2008–05
  13. By: San Thein; Kudo, Toshihiro
    Abstract: Small and medium enterprises (SMEs) engaged in sugar processing in Myanmar appeared in the last decade of the socialist era. An acute sugar deficit, restricted trade in white sugar, and high demand from the conventional dairy business led to the growth of sugar SMEs by appropriate blending of semi-finished products (syrup) in the fields, which were then processed in vacuum pans and centrifugals to obtain white sugar. This became a tradable commodity and sugar SMEs grew in clusters in big cities. They are family-owned businesses. However, they lack the bagasse-based power generation. In recent years, large modern sugar factories operated by private and military companies have emerged as key players. The current shortage of fuel feedstock and competition for raw materials have become driving forces that shift sugar SMEs from market-oriented to raw material-oriented locations. Internal competition among key players made sugar price highly volatile, too. Being placed on a level playing field, the whole industry should be upgraded in terms of price and quality to become export-oriented.
    Keywords: Myanmar (Burma), Small and medium enterprise (SME), State-owned economic enterprise (SEE), Sugar, Sugarcane, Resource-based location, Market economy, Mandalay, Pyawbwe
    JEL: L11 L52 L66 N85
    Date: 2008–04

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