nep-dev New Economics Papers
on Development
Issue of 2008‒06‒27
twelve papers chosen by
Jeong-Joon Lee
Towson University

  1. Determinants of Institutional Quality in Sub-Saharan African Countries By Siba, Eyerusalem G.
  2. China in the world economy: Dynamic correlation analysis of business cycles By Fidrmuc, Jarko; Korhonen, Iikka; Bátorová, Ivana
  3. China and Central and Eastern European Countries: Regional networks, global supply chain or international competitors? By Fung, K.C.; Korhonen, Iikka; Li, Ke; Ng, Francis
  4. Educational Attainment, Growth and Poverty Reduction within the MDG Framework: Simulations and Costing for the Peruvian Case By Gustavo Yamada; Juan F. Castro; Arlette Beltran; Maria A. Cardenas
  5. Is There a Market for Voluntary Health Insurance in Developing Countries? By Mark Pauly; Fredric E. Blavin; Sudha Meghan
  6. How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive By Robert Koopman; Zhi Wang; Shang-Jin Wei
  7. Credit Rationing, Risk Aversion and Industrial Evolution in Developing Countries By Eric Bond; James R. Tybout; Hâle Utar
  8. How Pro-Poor is the Selection of Seasonal Migrant Workers from Tonga under New Zealand’s Recognised Seasonal Employer (RSE) Program? By John Gibson; David McKenzie; Halahingano Rohorua
  9. Who is Coming from Vanuatu to New Zealand under the New Recognised Seasonal Employer (RSE) Program? By David McKenzie; Pilar Garcia Martinez; L. Alan Winters
  10. Discourses on Violence in Costa Rica, El Salvador, and Nicaragua: Youth, Crime, and the Responses of the State By Peter Peetz
  11. The Causes and Consequences of Cross-Country Differences in Schooling Attainment By Schoellman, Todd
  12. Improving the Foreign Direct Investment Capacity of the Mountainous Provinces in Viet Nam By Nguyen, Binh Giang

  1. By: Siba, Eyerusalem G. (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In this study, a number of factors have been considered as potential determinants of institutional quality in Sub- Saharan African countries. The empirical analysis has shown that historical factors such as state legitimacy determine the quality of current institutions in the region. Foreign aid dependence is found to erode quality of governance as measured by rule of law. Variability of aid is found to counterbalance the destructive nature of high level of aid dependence. However, the last result is not retained in the robust regression analysis performed. Countries with strong political constraints on the ruling elites, proxied by checks and balances between executive and legislative branches of governments, and press freedom, are found to have better quality of institutions. Large countries and those closer to equator are disadvantaged in their success of building better quality institutions. Unlike the popular discussions, ethnic fractionalization and identity of last coloniser do not explain variations in institutional quality in the region. The paper also devotes a section for a case study of Ethiopian institutional development to complement the cross country analysis by adding cultural, historical and political specificities.
    Keywords: Institutional Quality; Rule of Law; Foreign Aid; Colonialism; Ethnic Fractionalization; Sub-Saharan Africa
    JEL: F35 N40 N47 P48
    Date: 2008–06–19
  2. By: Fidrmuc, Jarko (BOFIT); Korhonen, Iikka (BOFIT); Bátorová, Ivana (BOFIT)
    Abstract: We analyze the business cycles in China and in selected OECD countries between 1992 and 2006 using dynamic correlations. Nearly all OECD countries showpositive correlations of the very hort-run developments which may correspond to intensive supplier linkages. However, dynamic correlations at the business cycle frequencies are negative. Countries facing a comparably longer history of intensive trading links tend to show slightly higher correlations of business cycles with China. Even though trade and financial flows do not really increase correlations of business cycles between China and OECD countries, they lower the degree of business cycle synchronization within the OECD area.
    Keywords: business cycles; synchronization; trade; FDI; dynamic correlation
    JEL: E32 F15 F41
    Date: 2008–06–17
  3. By: Fung, K.C. (BOFIT); Korhonen, Iikka (BOFIT); Li, Ke (BOFIT); Ng, Francis (BOFIT)
    Abstract: China has emerged as one of the world's leading recipients of foreign direct investment (FDI). Meanwhile, the successful transition experience of many Central and Eastern European countries (CEECs) also enables them to attract an increasing share of global foreign investment, particularly from the European Union (EU). What is the relationship between inward FDI of China and the CEECs? We conceptualize the relationship according to three alternative paradigms: 1) China and the CEECs each exist in its own regional production network, with no linkage between FDI flows into China and into CEECs; 2) China and the CEECs together comprise a global production network, so that FDI into China is positively related to FDI into CEECs; and 3)FDI into China is a substitute for FDI into the CEECs, so that the correlation between them is negative. In this paper, we employ panel data to study this issue in detail. Specifically, we compare empirical estimates for 15 CEECs over the 15-year period 1990-2004 using four different econometric approaches: FGLS with Random effects, FGLS with fixed effects, EC2SLS and GMM. The result supports the conclusion that China's inward FDI does not crowd out CEECs' inward FDI. In fact, it shows that in some circumstances FDI flows in these two regions are moderately complementary. In addition, our analysis confirms the importance for FDI flows of recipient-country characteristics such as market size, degree of trade liberalization and labor quality, as well as a healthy global capital market.
    Keywords: foreign direct investment (FDI); regional networks; global supply chain; China’s FDI; Central and Eastern European Countries’ FDI
    JEL: F20 F21 F43
    Date: 2008–06–17
  4. By: Gustavo Yamada; Juan F. Castro; Arlette Beltran; Maria A. Cardenas
    Abstract: We propose a model that accounts for the potential feedback between schooling performance, human capital accumulation and long run GDP growth, and links these results with poverty incidence. Our simulation exercise takes into account targets for education indicators and GDP growth itself (as arguments in our planner's loss function) and provides two conclusions: (i) with additional funds which amount to 1 percent of GDP each year, public intervention could, by year 2015, add an extra 0.89 and 1.80 percentage points in terms of long-run GDP growth and permanent reduction in poverty incidence, respectively; and (ii) in order to engineer an intervention in the educational sector so as to transfer households the necessary assets to attain a larger income generation potential in the long run, we need to extend the original set of MDG indicators to account for access to higher educational levels besides primary education.
    Keywords: Millennium development goals, education, human capital, GDP growth, poverty, Peru
    JEL: O41 I32 C25 C41 C61
    Date: 2008
  5. By: Mark Pauly; Fredric E. Blavin; Sudha Meghan
    Abstract: In many developing countries the proportion of health care spending paid out of pocket is about half of all spending or more. This study examines the distribution of such spending by income and care type, and the variation in spending about its expected value, in order to see whether voluntary private health insurance that reduces variation in spending might be able to be supplied. Using data from the World Health Survey for 14 developing countries, we find that out of pocket spending varies by income but that most spending usually occurs in income quintiles below the topmost quintile. We use estimates of the variance of total spending, hospital spending, physician spending, and outpatient drug spending about their means to generate estimates of the risk premia risk averse consumers might pay for insurance coverage. For hospital spending and total spending, these risk premia as a percent of expenses are generally larger than reasonable estimates of private health insurer loading as a percent of expenses, suggesting that voluntary insurance might be feasible. However, the strong relationship between spending and income suggests that insurance markets may need to be segmented by income.
    JEL: I11
    Date: 2008–06
  6. By: Robert Koopman; Zhi Wang; Shang-Jin Wei
    Abstract: As China's export juggernaut employs many imported inputs, there are many policy questions for which it is crucial to know the extent of domestic and foreign value added in its exports. The best known approach - the concept of "vertical specialization" proposed by Hummels, Ishii and Yi (2001) - is not appropriate for countries that engage actively in tariff/tax-favored processing exports such as China, Mexico, and Vietnam. We develop a general formula for computing domestic and foreign contents when processing exports are pervasive. Because this new formula requires some input-output coefficients not typically available from a conventional input-output table, we propose a mathematical programming procedure to estimate these coefficients by combining information from detailed trade statistics with input-output tables. By our estimation, the share of foreign content in China's exports is at about 50%, almost twice the estimate given by the HIY formula. There are also interesting variations across sectors and firm ownership. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly high foreign content (about 80%). Foreign-invested firms also tend to have higher foreign content in their exports than do domestic firms.
    JEL: F1 O1 O53
    Date: 2008–06
  7. By: Eric Bond; James R. Tybout; Hâle Utar
    Abstract: Relative to their counterparts in high-income regions, entrepreneurs in developing countries face less efficient financial markets, more volatile macroeconomic conditions, and higher entry costs. This paper develops a dynamic empirical model that links these features of the business environment to firm ownership patterns, firm size distributions, productivity distributions, borrowing patterns, and cross-household savings behavior. Applied to panel data on Colombian apparel producers, the model yields econometric estimates of a credit market imperfection index, the sunk costs of creating a new business, and various other parameters. It also provides a basis for several counterfactual experiments. These show, inter alia, that an efficient credit market would improve the weighted-average efficiency of producers by about 5 percent, partly by allowing the most productive producers to expand and partly by reducing the incentives for inefficient firms to remain in the market. The gains from better intermediation accrue mainly during periods of macro volatility, and mainly to households with modest wealth but high entrepreneurial ability.
    JEL: D24 L26 O16
    Date: 2008–06
  8. By: John Gibson (University of Waikato); David McKenzie (World Bank, BREAD and IZA); Halahingano Rohorua (University of Waikato)
    Abstract: Temporary migration programs for unskilled workers are increasingly being proposed as a way to both relieve labour shortages in developed countries and aid development in sending countries without entailing many of the costs associated with permanent migration. New Zealand’s new Recognised Seasonal Employer (RSE) program is designed with both these goals in mind, enabling unskilled workers from the Pacific Islands to work in horticulture and viticulture in New Zealand for a period of up to seven months. However, the development impact on a sending country will depend not only on how many workers participate, but also on who participates. This paper uses new survey data from Tonga to examine the process of selecting Tongans to work in the RSE, and to analyze how pro-poor the recruitment process has been to date. We find that the workers recruited come from largely agricultural backgrounds and have lower average incomes and schooling levels than Tongans not participating in the program. We also compare the characteristics of RSE workers to those of Tongans applying to permanently migrate to New Zealand through the Pacific Access Category, and find the RSE workers to be more rural and less educated. The RSE therefore does seem to have succeeded in creating new opportunities for relatively poor and unskilled Tongans to work in New Zealand.
    Keywords: development seasonal migration; selectivity
    JEL: J61 O15
    Date: 2008–06–18
  9. By: David McKenzie (World Bank, BREAD and IZA); Pilar Garcia Martinez (World Bank); L. Alan Winters (University of Sussex, CEPR, IZA)
    Abstract: New Zealand’s new Recognised Seasonal Employer (RSE) program allows workers from the Pacific Islands to come to New Zealand for up to seven months to work in the horticulture and viticulture industries. One of the explicit objectives of the program is to encourage economic development in the Pacific. In this paper we report on the results of a baseline survey taken in Vanuatu, which allows us to examine who wants to participate in the program, and who is selected amongst those interested. We find the main participants are males in their late 20s to early 40s, most of whom are married and have children. Most workers are subsistence farmers in Vanuatu and have not completed more than 10 years of schooling. Such workers would be unlikely to be accepted under existing migration channels. Nevertheless, we find RSE workers from Vanuatu to come from wealthier households, and have better English literacy and health than individuals not applying for the program. Lack of knowledge about the policy and the costs of applying appear to be the main barriers preventing poorer individuals applying.
    Keywords: development; seasonal migration; selectivity
    JEL: J61 O15
    Date: 2008–06–18
  10. By: Peter Peetz (GIGA Institute of Latin American Studies)
    Abstract: The paper analyzes the social construction of youth violence in Nicaragua, Costa Rica, and El Salvador on the one hand, and the related security policies of the three states, on the other. In each country, there is an idiosyncratic way of constructing youth violence and juvenile delinquency. Also, each country has its own manner of reaction to those problems. In El Salvador youths are socially constructed as a threat to security, and the state implements predominantly repressive policies to protect citizens against that threat. In Nicaragua and Costa Rica, where the social discourse on youth violence is less prominent, the state's policies are neither very accentuated nor very coherent, whether in terms of repressive or nonrepressive measures. There are strong relations and mutual influences between the public's fear (or disregard) of youth violence and the state's policies to reduce it.
    Keywords: Central America, youth violence, security policies, discourse analysis
    Date: 2008–06
  11. By: Schoellman, Todd
    Abstract: This paper uses labor market evidence to quantify the importance of quality-adjusted schooling differences in accounting for cross-country income differences. I model labor markets that are consistent with cross-country data on schooling attainment, education quality, and the average returns to schooling of a country’s emigrants and its non-migrants. The model suggests that the Mincerian returns to schooling of immigrants to the United States measure the education qualities of their source countries. Measured this way, quality differences across countries are large, and the calibrated model shows that schooling accounts for a factor of 5 of the income difference between the U.S. and the poorest countries. The evidence suggests that immigrants to the U.S. are positively selected members of their source country, and that immigrants from developing countries are more selected than those from developed countries. Then the low education quality measured in the sample actually overestimates the education quality of the average non-migrant, particularly for developing countries. Two methods of controlling for selection among immigrants thus predict a moderately larger role for schooling, between a factor of 6.5 and 7.9.
    JEL: O47
    Date: 2008–05
  12. By: Nguyen, Binh Giang
    Abstract: The main purpose of this research is to suggest policies to improve the foreign direct investment attraction capacity in Northern Mountainous Provinces of Vietnam in short and medium-term. Though this region has huge potentials to develop, but poor infrastructure, remote location and bad FDI climate have hindered the FDI inflows. This research focuses on FDI climate factors, pays attention on region’s constraints, and suggests policy for three levels consisting of national, regional and provincial levels.
    Keywords: Vietnam, International investment, Long-term capital movements, Foreign investments, Local economy, Foreign Direct Investment (FDI)
    JEL: F21 O18
    Date: 2008–04

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