nep-dev New Economics Papers
on Development
Issue of 2008‒08‒31
forty-five papers chosen by
Jeong-Joon Lee
Towson University

  1. Options for Enforcing Labor Standards: Lessons from Bangladesh and Cambodia By Günseli Berik; Yana van der Meulen Rodgers
  2. Gender wage discrimination in Mexico: A distributional approach By Gurleen Popli
  3. The Impact of College Graduation on Geographic Mobility: Identifying Education Using Multiple Components of Vietnam Draft Risk By Ofer Malamud; Abigail Wozniak
  4. The financial storms in Vietnam’s transition economy: A reasoning on the 1991-2008 period By André Farber; Nguyen Huu Tu; Tran Tri Dung; Quan-Hoang Vuong
  5. Poverty and ‘Second Economy’ in South Africa: An Attempt to Clarify Applicable Concepts and Quantify Extent of Relevant Challenges By Vusi Gumede
  6. The Impact of a Cash Transfer Program on Cognitive Achievement: The Bono de Desarrollo Humano of Ecuador By Ponce, Juan; Bedi, Arjun S.
  7. Heterogeneous Impacts of Conditional Cash Transfers: Evidence from Nicaragua By Dammert, Ana C.
  8. Urban-Rural Consumption Inequality in China from 1988 to 2002: Evidence from Quantile Regression Decomposition By Qu, Zhaopeng (Frank); Zhao, Zhong
  9. Migration, Remittances and Children’s Schooling in Haiti By Amuedo-Dorantes, Catalina; Georges, Annie; Pozo, Susan
  10. Recent Developments in the Econometrics of Program Evaluation By Imbens, Guido W.; Wooldridge, Jeffrey M.
  11. Managing capital flows: The case of India. By Shah, Ajay; Patnaik, Ila
  12. Creditor Protection and Banking System Development in India By Simon Deakin; Panicos Demetriades; Gregory James
  13. Colonial Heritage and Economic Development By Asoni, Andrea
  14. Price convergence and geographic dimension of market integration: Evidence from China By Ritola, Maria
  15. Evaluating the Effects of Vocational Training in Africa By Christian Kingombe
  16. Private Equity: An Eye for Investment under African Skies? By Thomas Dickinson
  17. Trade and Innovation Project: Case Study No. 3: The Ending of the Multi-Fibre Agreement and Innovation in Sri Lankan Textile and Clothing Industry By Janaka Wijayasiri; Jagath Dissanayake
  18. Trade and Innovation Project: Case Study No. 4: Deregulation, Trade Reform and Innovation in the South African Agriculture Sector By Ron Sandrey; Nick Vink
  19. Farmer Participation, the Dairy Industry, and the Rise of Dairy Production in China By Jikun Huang; Yunhua Wu; Zhijian Yang; Jacinto F. Fabiosa; Fengxia Dong
  20. Corruption and the Institutional Environment for Growth By Heckelman, Jac C.; Powell, Benjamin
  21. Interprovincial Migration and Inequality During Vietnam's Transition By Phan, Diep; Coxhead, Ian
  22. Capital Account Liberalization, Real Wages, and Productivity By Henry, Peter B.; Sasson, Diego
  23. Are One-Best-Way Models of Effective Government Suitable for Developing Countries? By Andrews, Matthew
  24. Mosquitoes: The Long-TermEffects of Malaria Eradication in India By Cutler, David; Fung, Winnie; Kremer, Michael; Singhal, Monica
  25. The Big March: Migratory Flows after the Partition of India By Bharadwaj, Prashant; Khwaja, Asim Ijaz; Mian, Atif
  26. Unbundled Institutions, Human Capital and Growth By Sambit Bhattacharyya
  27. Economic Vulnerability and Poverty in Tajikistan By Raghbendra Jha; Tu Dang; Yusuf Tashrifov
  28. Vulnerability to poverty in select Central Asian Countries By Raghbendra Jha; Tu Dang
  29. National Rural Employment Guarantee Programme in India - A Review By Raghbendra Jha; Raghav Gaiha; Shylashri Shankar
  30. China's integration into global production networks and its implications for export-led growth strategy in other countries in the region By Prema-Chandra Athukorala
  31. Root Causes of African Underdevelopment By Sambit Bhattacharyya
  33. Vulnerability and poverty in Timor-Lesté By Raghbendra Jha; Tu Dang
  34. Vulnerability to poverty in Papua New Guinea By Raghbendra Jha; Tu Dang
  35. "Domestic Innovation and Chinese Regional Growth, 1991-2004" By William Latham; Hong Yin
  36. Is the Chinese Investment- and Export-Led Growth Model Sustainable? Some Rising Concerns By Arslan Razmi
  37. Must Improved Labor Standards Hurt Accumulation in an Open Developing Economy? A Structuralist Analysis of the Cambodian Case By Arslan Razmi
  38. A Pecking Order Analysis of Graduate Overeducation and Educational Investment in China By D Mayston; J Yang
  39. Minimum Wages and Earnings Inequality in Urban Mexico. Revisiting the Evidence By Mariano Bosch; Marco Manacorda
  40. Can production subsidies explain China's export performance? Evidence from firm level data By Zhihong Yu; Yundan Gong; Sourafel Girma; Holger Görg
  41. Compensation for Environmental Services and Intergovernmental Fiscal Transfers in India By Kumar, Surender
  42. Is India on a Sustainable Development Path? By Kumar, Surender
  43. Fertility Theories: Can They Explain the Negative Fertility-Income Relationship? By Larry E. Jones; Alice Schoonbroodt; Michèle Tertilt
  44. Financial Deepening, Trade Openness and Economic Growth in Latin America and the Caribbean By Thomas Gries; Manfred Kraft; Daniel Meierrieks
  45. Linkages between Financial Deepening,Trade Openness and Economic Development: Causality Evidence from Sub-Saharan Africa By Thomas Gries; Manfred Kraft; Daniel Meierrieks

  1. By: Günseli Berik; Yana van der Meulen Rodgers
    Abstract: This study examines labor standards enforcement and compliance in two Asian economies (Bangladesh and Cambodia) that have amongst the lowest labor costs in the world but are experiencing strong pressures to improve the price competitiveness of their textile and garment exports. Analysis of survey, focus group, and inspection data indicate differing trajectories in compliance with basic labor standards. While extremely low wages and poor working conditions have persisted in Bangladesh, compliance has begun to improve in Cambodia following a trade agreement with the United States that linked positive trade incentives with labor standards enforcement. These contrasting experiences suggest that in less developed countries governments consider trade-linked schemes to achieve improvements in working conditions without hindering export growth or job growth.
    Keywords: Working conditions, enforcement, labor laws, female workers, gender and trade
    Date: 2008
  2. By: Gurleen Popli (Department of Economics, The University of Sheffield)
    Abstract: This paper examines the observed wage differentials by gender in Mexico over the last two decades (1984 to 2002). To estimate and understand the wage gap the paper uses a nonparametric-distributional approach, and compares the results with the other parametric approaches. The paper finds evidence of labour market discrimination against women. The average discrimination in the first decade fell considerably, but then started to increase again. The distribution of discrimination also changed over time. The average fall in discrimination over time has resulted largely from a fall in the estimated discrimination at the lower tail of the wage distribution, with little to no change at the upper tail.
    Keywords: gender wage gap, nonparametric-distributions, Mexico
    JEL: J16 C14 O15
    Date: 2008–04
  3. By: Ofer Malamud; Abigail Wozniak
    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, college, higher education, vietnam
    Date: 2008–03
  4. By: André Farber (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.); Nguyen Huu Tu (The Bureau of the Central Committee of the Communist Party of Vietnam); Tran Tri Dung (InvestVietnam Corp., Vietnam); Quan-Hoang Vuong (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.)
    Abstract: This study focuses on those substantial changes that characterize the shift of Vietnam’s macroeconomic structures and evolution of micro-structural interaction over an important period of 1991-2008. The results show that these events are completely distinct in terms of (i) Economic nature; (ii) Scale and depth of changes; (iii) Start and end results; and, (iv) Requirement for macroeconomic decisions. The study rejected a suspicion of similarity between the contagion of the Asian financial crisis in 1997-98 and economic chaos in the first half of 2008 (starting from late 2007). The depth, economic settings of, and interconnection between macro choices and micro decisions have all grown up significantly, partly due to a much deeper level of integration of Vietnam into the world’s economy. On the one hand, this phenomenon gives rise to efficiency of macro level policies because the consideration of micro-structural factors within the framework has definitely become increasingly critical. On the other and, this is a unique opportunity for the macroeconomic mechanism of Vietnam to improve vastly, given the context in which the national economy entered an everchanging period under pressures of globalization and re-integration. The authors hope to also open up paths for further empirical verifications and to stress on the fact that macro policies will have, from now on, to be decided in line with changing micro-settings, which specify a market economy and decide the degree of success of any macroeconomic choices.
    Keywords: Financial system; inflation; economic growth; interest rate; exchange rate; FDI; FPI; banking sector; stock markets; monetary and fiscal policy; Vietnam.
    JEL: G10 G18 E22 E31 E44
    Date: 2008–08
  5. By: Vusi Gumede (Chief Policy Analyst,The Presidency, Policy Co-ordination and Advisory Services, South Africa)
    Abstract: Abstract: Given how the South African government conceptualises poverty, the paper argues that it is in the ‘intersection’ between access to income, services and assets that the issue of overall poverty trends and the magnitude of the second economy since 1994 should be examined. This paper reflects on various pertinent issues in relation to South Africa’s poverty dynamics and it attempts to ‘measure’, after clarification of relevant concepts, the ‘second economy’ challenge in South Africa. Using some tentative definition, the total number of people in the second economy is about 9.5 million, of which 31 percent is women. In terms of age profile, it would seem that it is relatively older people that are found in the second economy. Broadly, people in the second economy are relatively widely distributed across South Africa, with the Eastern Cape Province having most of second economy individuals. In brief, the paper firstly summarises old and new theoretical and technical issues on measuring poverty, secondly analyses poverty from different perspectives and highlights various research findings on poverty trends in South Africa and thirdly clarifies the notion of ‘second economy’ and attempts to ‘measure’ it. The analysis, as tentative as it is at this stage, demonstrates why there is an ongoing debate in South Africa about poverty and ‘second economy’. Clearly, the extent and the magnitude of the challenge that South Africa, like many developing countries, is grappling with are vast. As a way forward, a more rigorous analysis of poverty and ‘second economy’, drawing from the methodology used in the paper, could be pursued further. This would hopefully assist the dialogue about poverty and ‘second economy’ in South Africa. More importantly, policy and programmatic responses to poverty and ‘second economy’ could benefit from a systemic enquiry on relevant dynamics.
    Keywords: South Africa: poverty trends, 'second economy', measuring poverty
    JEL: A1
    Date: 2008–06
  6. By: Ponce, Juan (Flasco); Bedi, Arjun S. (Institute of Social Studies)
    Abstract: Throughout Latin America, conditional cash transfer (CCT) programs play an important role in social policy. These programs aim to influence the accumulation of human capital, as well as reduce poverty. In terms of educational outcomes, a number of impact evaluation studies have shown that such programs have led to an increase in school enrollment, ensured regular school attendance and led to a reduction in child labor. Theoretically, such cash transfer programs may also be expected to exert a positive impact on students’ test scores, but related empirical evidence is scarce. Accordingly, this paper evaluates the impact of a cash transfer program, the Bono de Desarrollo Humano of Ecuador, on students’ cognitive achievements. The paper uses a regression discontinuity strategy to identify the impact of the program on second grade cognitive achievement. Regardless of the specification and the sample used, we find that there is no impact of the program on test scores, suggesting that attempts at building human capital, as measured by cognitive achievement, require additional and alternative interventions.
    Keywords: cash transfers, test scores, regression discontinuity
    JEL: I38 I28
    Date: 2008–08
  7. By: Dammert, Ana C. (Carleton University)
    Abstract: In the last decade, the most popular policy tool used to increase human capital in developing countries has been the conditional cash transfer program. A large literature has shown significant mean impacts on schooling, health, and child labor. This paper examines heterogeneous effects using random-assignment data from the Red de Proteccion Social in rural Nicaragua. Using interactions between the targeting criteria and the treatment indicator, estimates suggest that children located in more impoverished localities experienced a larger impact of the program on schooling in 2001, but this finding is reversed in 2002. Estimated quantile treatment effects indicate that there is considerable heterogeneity in the impacts of the program on the distribution of food expenditures, as well as total expenditures. In particular, households at the lower end of the expenditure distribution experienced a smaller increase in expenditures. This paper also presents evidence of the rank invariance assumption to help clarify the interpretation of the quantile treatment effect in the development literature context.
    Keywords: Nicaragua, conditional cash transfers, quantile treatment effect
    JEL: O15 I38
    Date: 2008–08
  8. By: Qu, Zhaopeng (Frank) (Beijing Normal University); Zhao, Zhong (IZA)
    Abstract: One of the most notable social phenomena in China is the large urban-rural disparity. There are many studies of it, but most of them focus on income or earnings inequality. In this paper, we investigate the consumption disparity between urban and rural households in China from 1988 to 2002. Our results suggest that low quantiles are associated with large consumption disparity. The price effect is the dominant factor for the urban-rural consumption disparity. This disparity increased significantly, both at mean and at every quantile, from 1988 to 2002. However, most of the increase happened from 1988 to 1995, and this increase was mainly from the higher growth rate of urban household consumption. Our results also suggest that rural-urban migration and improvement of the rural educational level are very helpful in reducing urban-rural disparity.
    Keywords: inequality, consumption, quantile regression decomposition, China
    JEL: O18 O53 C15
    Date: 2008–08
  9. By: Amuedo-Dorantes, Catalina (San Diego State University, California); Georges, Annie (National Center for Children and Families); Pozo, Susan (Western Michigan University)
    Abstract: In this paper, we focus on the use of remittances to school children remaining in migrant communities in Haiti. After addressing the endogeneity of remittance receipt, we find that remittances raise school attendance for all children in some communities regardless of whether they have household members abroad or not; however, in other communities, we only observe this effect among children living in households that do not experience any family out-migration. Our finding underscores the simultaneous and opposing impacts of household out-migration and remittance receipt on children’s schooling. While the receipt of remittances by the household lifts budget constraints and raises the children’s likelihood of being schooled, the disruptive effect of household out-migration imposes an economic burden on the remaining household members and reduces their likelihood of being schooled. As such, remittances ameliorate the negative disruptive effect of household out-migration on children’s schooling and, given the substantial costs of schooling in Haiti, contribute to the accumulation of human capital in the midst of extreme poverty.
    Keywords: migration, remittances, education, Haiti
    JEL: F22 O54
    Date: 2008–08
  10. By: Imbens, Guido W. (Harvard University); Wooldridge, Jeffrey M. (Michigan State University)
    Abstract: Many empirical questions in economics and other social sciences depend on causal effects of programs or policies. In the last two decades much research has been done on the econometric and statistical analysis of the effects of such programs or treatments. This recent theoretical literature has built on, and combined features of, earlier work in both the statistics and econometrics literatures. It has by now reached a level of maturity that makes it an important tool in many areas of empirical research in economics, including labor economics, public finance, development economics, industrial organization and other areas of empirical micro-economics. In this review we discuss some of the recent developments. We focus primarily on practical issues for empirical researchers, as well as provide a historical overview of the area and give references to more technical research.
    Keywords: program evaluation, causality, unconfoundedness, Rubin Causal Model, potential outcomes, instrumental variables
    JEL: C14 C21 C52
    Date: 2008–08
  11. By: Shah, Ajay (National Institute of Public Finance and Policy); Patnaik, Ila (National Institute of Public Finance and Policy)
    Abstract: From the early 1990s, India embarked on easing capital controls. Liberalization emphasised openness towards equity flows, both FDI and portfolio flows. In particular, there are few barriers in the face of portfolio equity flows. In recent years, a massive increase in the value of foreign ownership of Indian equities has come about, largely reflecting improvements in the size, liquidity and corporate governance of Indian firms. While the system of capital controls appears formidable, the de facto openness on the ground is greater than is apparent, particularly because of the substantial enlargement of the current account. These changes to capital account openness were not accompanied by commensurate monetary policy reform. The monetary policy regime has consisted essentially of a pegged exchange rate to the US dollar throughout. Increasing openness on the capital account, coupled with exchange rate pegging, has led to a substantial loss of monetary policy autonomy. The logical way forward now consists of bringing the de jure capital controls uptodate with the de facto convertibility, and embarking on reforms of the monetary policy framework so as to shift the focus of monetary policy away from the exchange rate to domestic inflation.
    Keywords: International investment ; Long term capital movements ; International lending and debt problems ; Monetary sysytems
    JEL: F21 F34 E42
    Date: 2008–05
  12. By: Simon Deakin; Panicos Demetriades; Gregory James
    Abstract: We use a new legal dataset tracking changes in creditor protection law over several decades to study the impact of legal reforms on banking system development in India. Cointegration analysis is used to show that the strengthening of creditor rights in relation to the enforcement of security interests in the 1990s and 2000s led to an increase in bank credit. We show that the change in the law was not endogenous to trends in stock market development and GDP per capita, and that the direction of causation ran from legal reform to banking development, rather than the reverse.
    Keywords: creditor rights; legal origin; banking development; India
    JEL: G21 G38 K22 O16
    Date: 2008–08
  13. By: Asoni, Andrea (Research Institute of Industrial Economics (IFN))
    Abstract: While the importance of institutions for explaining cross-country income differences is widely recognized, comparatively little is known about the origins of economic institutions. One strand of the literature emphasizes cultural differences while another points at exogenous environmental factors such as mortality and climate. Both are supported by some empirical evidence. I reconcile the two schools of institutional origins by proposing a theory of self-selection of colonists to different geographic destinations. Exogenous characteristics such as climate, mortality and factor differences determine which type of settler decides to move to a particular colony. Settler type, in turn, shapes the institutional quality of the new country. The model is used to confirm observed regularities reported by previous researchers. Furthermore, robust new evidence is presented in support of this selection process. The results suggest that any theory of colonial development that does not take selection into account will be incomplete.
    Keywords: Economic Development; Culture; Origins of Political Institutions
    JEL: N10 O11 O12 P16
    Date: 2008–08–05
  14. By: Ritola, Maria (BOFIT)
    Abstract: This study analyses the level and geographic dimension of China's market integration. The objective is to provide a broad characterization of China's market integration by performing a variety of empirical tests and providing comparisons to other studies on the same topic. The models tested are grounded in the law of one price. Price convergence is analysed with univariate time series methods, where linear and non-linear cointegration models refer to convergence in the short run and in the long run, respectively. The non-linear model is considered a good fit for analysing transitional economies, because the non-linear trend variable in the model indicates whether there is movement towards integration in the long run. Convergence of prices is first analysed by comparing city-level prices with China's national average price level and then by dividing China into three regional clusters. The estimation results suggest that the level of integration across Chinese cities is fairly high by international standards. The great majority of price series trending towards integration are services. The geographic pattern of China's market integration did not turn out as expected. Eastern cities are among the least integrated cities in the nationwide examination. Relatively high levels of integration were detected from several central and south-eastern cities. Furthermore, the cluster convergence approach to analyse China's market integration did not augment the eastern cities' level of convergence.
    Keywords: China; market integration; law of one price; price dispersion; regional clusters; convergence
    JEL: C12 C32 P22 R10
    Date: 2008–08–27
  15. By: Christian Kingombe
    Abstract: More and better data are needed to monitor and evaluate the impact of vocational training on economic growth and poverty reduction. Labour market observatories can help align training systems to labour market needs. Analysis of youth unemployment is essential before investing in expensive training schemes.
    Date: 2008–04
  16. By: Thomas Dickinson
    Abstract: Private equity is the African investment story to watch. African countries have made serious efforts to attract foreign investment. Global downturn may yet put successes at risk.
    Date: 2008–04
  17. By: Janaka Wijayasiri; Jagath Dissanayake
    Abstract: This paper is one of five case studies which is a part of a larger project looking at the various effects that trade and investment can have on innovation. This paper studies the effect of the ending of the Multi-Fibre Agreement (MFA) on innovation in the Sri Lankan textile and clothing sector. The ending of the quota system under the MFA led to an increase in the US and EU markets which has motivated a large number of innovations in the Sri Lankan textile and clothing sector. Some large companies have become a total services provider while some are trying to establish their own brands. Product innovations with foreign partners, process innovations such as introduction of CAD/CAM and various marketing and organisational innovations have been implemented.
    Keywords: competition, innovation, FDI, Multi-Fibre Arrangement (MFA), outsourcing, corporate social responsibility, CSR, textile and clothing industry, brands, fair-trade, garment, joint-ventures, marketing, MFA, Sri Lanka
    Date: 2008–08–06
  18. By: Ron Sandrey; Nick Vink
    Abstract: This paper is one of five case studies which is a part of a larger project looking at the various effects that trade and investment can have on innovation. This paper studies the effect of deregulation and trade reform on South Africa's agriculture sector. South Africa's agriculture sector is highly dualistic consisting of a developed commercial sector and a subsistence farming sector. Deregulation and trade reform has led to substantial changes in innovation in the commercial agriculture sector such as wine and fruit, leading to a large change in composition while innovation seems to have been more limited in subsistence agriculture which lacks absorption capacity. Legal uncertainties related to land reform may also be one factor which can negatively affect innovation in the commercial farming sector.
    Keywords: innovation, agriculture, trade reform, absorption capacity, deregulation, field crops, foreign investment, fruit, South Africa, wine
    Date: 2008–08–06
  19. By: Jikun Huang; Yunhua Wu; Zhijian Yang; Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Fengxia Dong (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI))
    Abstract: With rapid income growth, dairy production and consumption in China have increased significantly. This emergence of the dairy sector will provide opportunities for farmers to participate in a high-value, potentially more lucrative enterprise. The overall goal of this paper is to analyze the major determinants of farmers' participation in dairy production. Our main question is whether or not the pace of the emergence of the dairy processing industry has affected the ability of farmers to participate in dairy production and whether or not it has limited the expansion of their herd size. Based on household, village and processor surveys conducted in the Greater Beijing region, our analysis shows that the location of dairy processing firms is one of the key factors that determines the participation of farmers in dairy production. Although other factors affect participation and herd size—for example, access to roads and the ability to get a job off the farm (which affects the opportunity cost of household members)—access to dairy processors is shown to be the major factor that has encouraged the growth of dairy production over the past decade. The results also show that poor, less educated farmers with relatively less access to land are not excluded from the rapid expansion of the Greater Beijing dairy market.
    Keywords: China, dairy processing, dairy production.
    Date: 2008–08
  20. By: Heckelman, Jac C. (Wake Forest University); Powell, Benjamin (Suffolk University, Department of Economics)
    Abstract: Several cross-country studies have found that corruption is detrimental to economic growth, but the findings are not universally robust. We utilize the economic freedom index to examine if corruption can facilitate growth by allowing entrepreneurs to avoid inefficient policies and regulations when economic freedom is limited. Using regression analysis, we find that corruption is growth enhancing when economic freedom is most limited but the beneficial impact of corruption decreases as economic freedom increases. Not all areas of economic freedom affect the corruption-growth relationship equally. In particular, we find that when we analyze individual areas of economic freedom the beneficial effect of corruption disappears most quickly when the size of government and the extent of regulation decrease.
    Keywords: Corruption; Economic Freedom; Growth
    JEL: D73 H10 O43 O57
    Date: 2008–08–19
  21. By: Phan, Diep (U of Wisconsin); Coxhead, Ian
    Abstract: Vietnam’s economic boom during the transition to a market economy has centered on very rapid growth in some sectors and some provinces, yet poverty has diminished across the entire country. With capital investments highly concentrated by province and sector, geographic labor mobility may be critical in spreading the gains from growth. Conversely, rising income inequality may be attributable in part to impediments to migration. We first use census data to investigate migration patterns and determinants. We then examine the role of migration as an influence on cross-province income differentials. The former analysis robustly confirms economic motives for migration but also suggests the existence of poverty-related labor immobility at the provincial level. Examination of income differentials between pairs of provinces reveals that the impact of migration on inequality can be either negative or positive. A robust inequality-reducing impact of migration is found for migration flows into provinces where most of Vietnam’s trade-oriented industrial investments are located.
    Date: 2008–08
  22. By: Henry, Peter B. (Stanford U); Sasson, Diego
    Abstract: For three years after the typical developing country opens its stock market to inflows of foreign capital, the average annual growth rate of the real wage in the manufacturing sector increases by a factor of seven. No such increase occurs in a control group of developing countries. The temporary increase in the growth rate of the real wage permanently drives up the level of average annual compensation for each worker in the sample by 752 US dollars—an increase equal to more than a quarter of their annual pre-liberalization salary. The increase in the growth rate of labor productivity in the aftermath of liberalization exceeds the increase in the growth rate of the real wage so that the increase in workers’ incomes actually coincides with a rise in manufacturing sector profitability.
    Date: 2008–02
  23. By: Andrews, Matthew (Harvard U)
    Abstract: Effective government matters, but what is it? Good governance indicators go some way to provide a definition, but how much do they say about what effectiveness is, why this is so, and how it matters to development? This is the current article's question. It argues that good governance work suggests a one-best-way model ostensibly of an idyllic, developed country government: Sweden or Denmark on a good day, perhaps. The model lacks consistency, however, seems inappropriate for use in the development dialog and is not easily convey-able, looking more like a set of well meaning but problematic proverbs. The good governance picture of effective government is not only of limited use in development but also constitutes a threat, promoting isomorphism, institutional dualism, and 'flailing states' and imposing an inappropriate model of government that "kicks away the ladder" today's effective governments climbed to reach their current states. The model's major weakness lies in the lack of an effective underlying theoretical framework. A theory of government is needed before we measure government effectiveness or propose specific models of what government should look like. Such theory should address basic questions that center on the fit of different governing systems to different contexts.
    Date: 2008–03
  24. By: Cutler, David (Harvard U); Fung, Winnie; Kremer, Michael; Singhal, Monica
    Abstract: We examine the effects of malaria on educational attainment by exploiting geographic variation in malaria prevalence in India prior to a nationwide eradication program in the 1950s. Malaria eradication resulted in gains in literacy and primary school completion rates of approximately 12 percentage points. These estimates imply that the eradication of malaria can explain about half of the gains in these measures of educational attainment between the pre- and post-eradication periods in areas where malaria was prevalent. The effects are not present in urban areas, where malaria was not considered to be a problem in the pre-eradication period. The results cannot be explained by convergence across areas. We find gains for both men and women as well as for members of scheduled castes and tribes, a traditionally disadvantaged group.
    JEL: H51
    Date: 2007–10
  25. By: Bharadwaj, Prashant (Yale U); Khwaja, Asim Ijaz (Harvard U); Mian, Atif (U of Chicago)
    Abstract: The partition of India in 1947 along ostensibly religious lines into India, Pakistan, and what eventually became Bangladesh resulted in one of the largest and most rapid migrations in human history. We compile district level census data from archives to quantify the scale of migratory flows across the sub-continent. We estimate total migratory inflows of 14.5 million and outflows of 17.9 million, implying 3.4 million "missing" people. We also uncover a substantial degree of regional variability. Flows were much larger along the western border, higher in cities and areas close to the border, and dependent heavily on the size of the "minority" religious group. The migratory flows also display a "relative replacement effect" with in-migrants moving to places that saw greater out-migration.
    Date: 2008–06
  26. By: Sambit Bhattacharyya
    Abstract: We investigate the partial effects of institutions and human capital on growth. We find that cross-country regressions of the log-level of per capita GDP on instrumented measures of institutions and schooling are uninformative about the relative importance of institutions and human capital in the long run because of multicollinearity problems. Using dynamic panel regressions we show that both institutions and human capital have significant effects on growth. Using Rodrik's (2005) four-way partition of institutions, we also unbundle institutions. We show that strong market creating institutions and market stabilising institutions are growth enhancing. Market regulating institutions matter up to a certain extent and market legitimising institutions does not seem to matter.
    Keywords: Institutions; Human Capital; Growth
    JEL: O11 O30 O43 O57
    Date: 2008
  27. By: Raghbendra Jha; Tu Dang; Yusuf Tashrifov
    Abstract: We examine the profile of poverty and vulnerability in Tajikistan using household level panel data for 2004 and 2005. The drop in poverty was largely due to increase in remittances from workers working overseas. People are more likely to be poor if they live in a) rural areas, b) large households, c) households with a large proportion of children; or are pensioners or live in a household whose head is a pensioner. One half of the households observed to be non-poor are vulnerable to poverty. With expected utility approach, our analysis suggests that vulnerability associated with inequality is very large, whereas that from idiosyncratic risk is moderate. Aggregate shocks have been favorable and reduced vulnerability. We advance several policy recommendations.
    Keywords: Poverty, Vulnerability, Panel data, Covariate and idiosyncratic risks.
    JEL: C21 C23 I32
    Date: 2008
  28. By: Raghbendra Jha; Tu Dang
    Abstract: Economists have long recognized that a household's sense of well-being depends not just on its average income or expenditures, but also on the risks it faces. Hence vulnerability is a more satisfactory measure of welfare than poverty. In this paper we measure the extent of vulnerability as expected poverty, examine the importance of its determinants in the following four Central Asian countries: Azerbaijan, Kazakhstan, Kyrgyzstan, and Tajikistan. We find that the fractions of the populations of these countries facing the risk of poverty are considerably different from those observed to be poor. Moreover, the distribution of vulnerability across different segments of the population can differ significantly from the distribution of poverty. In addition, there is a sizable fraction of the population in these countries who were observed to be non-poor but are estimated.
    Keywords: Poverty, Vulnerability, Cross-section data, Central Asia
    JEL: C21 C23 I32 O57
    Date: 2008
  29. By: Raghbendra Jha; Raghav Gaiha; Shylashri Shankar
    Abstract: This paper presents results on the participation of rural workers in the National Rural Employment Guarantee Program based on a pilot survey of three villages in Udaipur district, Rajasthan, India. Three villages (Dhundiya, Karanpur and Prithvisingh Ji Ka Khera) were covered. Total number of households interviewed in December, 2007, was 340. Here the focus is on participation in NREG of different socio-economic groups and the determinants of the participation of these groups. It is discovered that the mean participation was 59 days and that targeting was efficient with other labour, self employed in agriculture, SC and ST as well as those with smaller landholdings benefiting the most from the program. Thus the performance of the National Rural Employment Guarantee program has been far from dismal.
    Keywords: National Rural Employment Guarantee Program
    JEL: C25 C81 D69 I38
    Date: 2008
  30. By: Prema-Chandra Athukorala
    Abstract: TThis paper examines the implications of China's rapid integration into global production networks for export performance of countries in Southeast Asia. In a clear departure from the conventional practice, the trade flow analysis of the paper is based on a careful disaggregation of reported trade data into components and final goods, with a view to delineating supply-side complementarities arising from cross-border production fragmentation. There is clear evidence that network-related trade in components has strengthened Southeast Asia's trade links with China, opening up new opportunities for the expansion of component production/assembly writhing vertically integrated global industries. However, these trade links with China have not lessoned the dependence of growth dynamism of these countries on the global economy; the dynamism of regional cross-border production networks depends inexorably on China's trade in final goods with North America and the European Union.
    Keywords: China, Southeast Asia, production fragmentation, global production networks
    JEL: F14 F23 O53
    Date: 2008
  31. By: Sambit Bhattacharyya
    Abstract: What are the root causes of Africa's current state of under-development? Is it the long history of slave trade, or the legacy of extractive colonial institutions, or the fallout of malaria? We investigate the relative contributions of these factors using an instrumental variable approach. The results show that malaria matters the most and all other factors are statistically insignificant. Malaria also negatively affects savings. Using a two period overlapping generation model we show that malaria impacts economic performance by increasing both mortality and morbidity. Increased mortality increases current household consumption and discourages savings. Increased morbidity adversely affects labour productivity. The combined impact is a slowdown of capital accumulation and economic growth.
    Keywords: Poverty, Vulnerability, Food security, Cross-section data
    JEL: O11 O41 O57 N0
    Date: 2008
  32. By: Sambit Bhattacharyya; Steve Dowrick; Jane Golley
    Abstract: In this paper we contribute to the debate over the empirical relationship between trade openness and economic development. Unlike previous studies which treat trade openness and institutions as competitors in economic development, we find evidence that they are in fact complements. We also find that in order for a country to benefit from trade, its institutional quality has to be above a threshold level. These results are suggestive of a very important complementary role of both trade openness and institutions in economic development.
    Keywords: Trade; Institutions; Economic Development
    JEL: F1 O1
    Date: 2008
  33. By: Raghbendra Jha; Tu Dang
    Abstract: Economists have long recognized that a household's well-being depends not just on its average income or expenditure, but also on the risks it faces. Hence vulnerability is a more satisfactory measure of (inadequate) welfare than poverty. We measure vulnerability as expected poverty and establish the importance of its determinants, for Timor Leste' based on the 2001 Living Standard Measurement Survey. The incidence of inadequate food consumption and vulnerability to food inadequacy are more severe than overall poverty and vulnerability to poverty. Poverty and vulnerability in Timor-Leste' is largely a rural phenomenon. Policy options to reduce vulnerability are also discussed.
    Keywords: Poverty, Vulnerability, Food security, Cross-section data
    JEL: C23 I32
    Date: 2008
  34. By: Raghbendra Jha; Tu Dang
    Abstract: In the extant literature either income or consumption expenditures as measured over short periods of time has been regarded as proxies for the material well-being of households. However, economists have long recognized that a household's sense of well-being depends not just on its average income or expenditures, but also on the risks it faces. Hence vulnerability is a more satisfactory measure of welfare. In this study we measure the extent of vulnerability as expected poverty and examine the importance of its determinants on the basis of an analysis of household survey data for Papua New Guinea (PNG). We find that in PNG, vulnerability and poverty are largely rural phenomena. Moreover, the distribution of vulnerability across different segments of the population can differ significantly from the distribution of poverty. In addition, there is a sizable fraction of the population of PNG who were observed to be non-poor but are estimated to be vulnerable to poverty. Thus, poverty reduction strategies in PNG need to incorporate not just alleviation efforts but also prevention.
    Keywords: Poverty, Vulnerability, Cross-section data, PNG
    JEL: C21 C23 I32
    Date: 2008
  35. By: William Latham (Department of Economics,University of Delaware); Hong Yin (Department of Economics,University of Delaware)
    Abstract: We examine the return to innovation in terms of economic growth at the provincial level to assess whether or not policies that promote R&D, such as China’s Science and Technology Policy, have been productive for all of China’s regions. The return to innovation at the provincial level is estimated using a value-added Cobb-Douglas production function. The measure of the effect of innovation (patenting activity) is valued-added industrial output. The data are a balanced panel for 30 provinces for the period 1991-2004. We find that the production function including innovation fits the Chinese provincial level data well. These estimates indicate that technology plays a positive role in industrial growth at the provincial level; however, the contribution of technology is far too small, which indicates that China’s economic growth is largely driven by the factor inputs. The results support the views that the linkages between innovation activity and commercialization of new technology are weak within Chinese domestic firms which have difficulties in exploiting and adopting the new technologies. The results also indicate that the inter-regional technology spillovers are positive but relatively small and weak, compared to the European regions and the states in the US. The estimated results further confirm that the impact of industrial reforms during the period of 1994-99 on China’s technological development is negative, as there seems to be neither exogenous technical progress nor technology’s contribution to the value-added industrial output during those years.
    Keywords: China, patents, productivity, innovation, regions
    JEL: O33 R11 O47 O55
  36. By: Arslan Razmi (University of Massachusetts Amherst)
    Abstract: China’s rapid growth and success in poverty reduction over the last three decades has inspired world-wide admiration. This paper uses a simple framework with a Kaleckian flavor to analyze structural developments in the Chinese economy, and to understand some of the distributional consequences. Some of the possible sources of these distributional developments are then further analyzed using a trade-theoretic approach. Other aspects of China’s investment- and export-led growth strategy are discussed along with the problems that the focused pursuit of such a strategy has raised. We conclude that China’s growth model may now have outlived its utility, both on economic and socio-political grounds. JEL Categories:
    Date: 2008–08
  37. By: Arslan Razmi (University of Massachusetts Amherst)
    Abstract: Using a modified version of the dependent economy framework, this paper analyzes a stylized small economy that is significantly open to trade and investment flows. The analysis, which is inspired by the structure of Cambodia's economy and ongoing efforts by international organizations to raise labor standards in that country, initially classifies the economy into three sectors: a manufacturing sector that produces tradable goods, a sector that produces (tourism-related) tradable services, and a rural sector that produces non-tradables. By assuming sectoral differences based on stylized facts, we attempt to analyze the consequences of various shocks in a comparative static framework. Furthermore, we evaluate the short- run effects of raising labor standards. Finally, we explore the impact of higher standards in the manufacturing sector on the near- and long-term prospects of the economy using comparative dynamic analysis to analyze changes in output, relative prices, income distribution and accumulation. JEL Categories:
    Date: 2008–08
  38. By: D Mayston; J Yang
    Abstract: Against the background of the recent rate of expansion of China's higher education system that has outstripped even China's own high rate of economic growth, the paper examines evidence of the emerging problem of graduate overeducation within China. Based upon a pecking-order model of employment offers and associated ordered probit model, it analyses the empirical factors which determine the incidence of graduate overeducation across China. The extent to which individual students have an incentive to become overeducated compared to a socially optimal level of their education is also examined in the context of a supporting economic model that compares individual and socially optimal levels of investment in education, in the face of labour market demands. The extent of the divergence between individual and socially optimal levels of investment in education, and of the associated levels of graduate overeducation, is found to depend upon how recent major increases in the supply of graduates within China will interact with the future growth rates in job specifications, in demand variables and in resultant graduate wages within China.
    Keywords: Graduate overeducation. higher education policy. Optimal education investment. Economic growth in China
    Date: 2008–08
  39. By: Mariano Bosch; Marco Manacorda
    Abstract: This paper explores the contribution of the minimum wage to the well documented rise inearnings inequality in Mexico between the late 1980 and the late 1990s. In contrast to theview that sees minimum wages as an ineffective redistributive tool in developing countries,we find that the deterioration in the real bite of the minimum wage is responsible for theentire rise in inequality at the bottom of the distribution. Our result challenges the widespreadperception that trade induced shocks are the single most important factor behind the recentrise in earnings inequality in several less developed economies.
    Keywords: Minimum Wage, Inequality, Informality, Mexico
    JEL: O15
    Date: 2008–07
  40. By: Zhihong Yu; Yundan Gong; Sourafel Girma; Holger Görg
    Abstract: It is widely accepted that China has been experiencing an export-led growth approach. However, the question whether government can reshape industry structure through production subsidies to enhance export performance has not been answered. This paper analyses the impact of production subsidies on firms’ export performance using a very comprehensive and recent firm level database and controlling for the endogeneity of subsidies. It documents robust evidence that production subsidies stimulate export activity, although this effect is conditional on firm characteristics. In particular, the beneficial impact of subsidies is found to be more pronounced amongst profit-making firms, firms in capital intensive industries and those located in non-coastal regions. Compared to firm characteristics, the extent of heterogeneity across ownership structure (SOEs, collectives and privately-owned firms) proves to be relatively less important
    Keywords: Exporting, subsidies, China, endogenous Tobit
    JEL: F1 O2 P3
    Date: 2008–07
  41. By: Kumar, Surender
    Abstract: The paper analyzes the role of intergovernmental fiscal transfers in achieving environmental sustainability. Although the significance of socio-economic functions has a comparably long tradition in federal systems of countries including India, the respective consideration of environmental services is yet to be recognized. Assignment of responsibility for protecting the environment is very much clear in India, the genesis of environmental degradation could be found in the incentive structure of governance. Though environmental services are not directly considered in intergovernmental transfers, they find place in the grants-in-aid. About 35 percent of total grants-in-aid recommended by the 12th Finance Commission are for the provision of environmental services, and are given for developing end-of-pipe infrastructure. Precautionary activities such as nature conservation, landscape protection are never considered. The review of international practices highlights the Brazilian case to learn from. In Paraná (a Brazilian state) the area conserved increased by 165 percent in a span of nine years. The study underscores the need for both, lump-sum and earmarked grants for internalizing the spillover effects. Earmarked grants are better suited for environmental clean up activities, and lump-sum transfers based on a predefined formula are good candidates for precautionary activities. An illustration demonstrates that inclusion of forest cover in the disbursement formula not only help in internalizing the externalities but also make the transfers more progressive. Financial acknowledgment of the environmental services would raise environmental awareness and provide incentives for enhancing environmental services. The inclusion of environmental services in the allocation of fiscal transfers would also help in reducing poverty and regional disparities.
    Keywords: Environmental services; Fiscal federalism; spatial externalities; environmental expenditure; India
    JEL: H77 Q01
    Date: 2008–08–26
  42. By: Kumar, Surender
    Abstract: Sustainability requires that the productive base measured in terms of comprehensive wealth of a society should be increasing on per capita basis. Comprehensive wealth includes manufactured, human and natural capital along with knowledge base and institutions. This study offers methodological improvements and provides estimates of the growth rate of per capita comprehensive wealth over the period 1970-2006 for Indian economy. It considers air, water and soil degradation along with energy, minerals and forests depletion. To measure the value and composition of investment in natural capital, it estimates resource depreciation allowances on the basis of Hotelling rent; it adjusts education expenditure for depreciation in human capital; and uses the estimates of TFP that takes into account natural capital in the production of commodities and services. The empirical application suggests that Indian economy is barely sustainable. Growth rate of per capita comprehensive wealth was virtually near zero, it was only 0.15 percent per year for the study period. The growth rate was negative till 1983. Thereafter it became positive; however it was less than one percent in 1980s and 1990s. In recent years the growth rate was about 4 percent. Despite certain limitations, the study underscores the need for vigorous public policies that help in preventing excessive resource depletion and promoting higher genuine investment.
    Keywords: Sustainability; development; Comprehensive wealth; Hotelling rent; India
    JEL: E01 Q01
    Date: 2008–08–05
  43. By: Larry E. Jones; Alice Schoonbroodt; Michèle Tertilt
    Abstract: In this chapter we revisit the relationship between income and fertility. There is overwhelming empirical evidence that fertility is negatively related to income in most countries at most times. Several theories have been proposed in the literature to explain this somewhat puzzling fact. The most common one is based on the opportunity cost of time being higher for individuals with higher earnings. Alternatively, people might differ in their desire to procreate and accordingly some people invest more in children and less in market-specific human capital and thus have lower earnings. We revisit these and other possible explanations. We find that these theories are not as robust as is commonly believed. That is, several special assumptions are needed to generate the negative relationship. Not all assumptions are equally plausible. Such findings will be useful to distinguish alternative theories. We conclude that further research along these lines is needed.
    JEL: D13 J13
    Date: 2008–08
  44. By: Thomas Gries (University of Paderborn); Manfred Kraft (University of Paderborn); Daniel Meierrieks (University of Paderborn)
    Abstract: This contribution investigates the direct and indirect causal interactions between financial deepening, trade openness and economic growth for 13 Latin American and Caribbean countries. Using a rather general approach to identify indicators for financial deepening and to detect Granger causality within a VAR/VECM framework, we find almost no evidence for the popular hypothesis of finance-led growth. Evidence of bidirectional finance-growth causality is stronger but mostly unstable in the long run. Most results indicate a demand-following or insignificant relationship between finance and growth in Latin America. This finding seems to be consistent with regard to the weakness and deficiencies of the region's financial systems. Further, there is no evidence that finance indirectly and unilaterally induces growth via the channel of trade openness. Thus, policies that prioritize financial and trade liberalization cannot be supported by this study. Instead, a holistic policy approach seems to be preferable that promotes the determinants of both real sector growth and financial development. As a result, financial factors may positively and significantly contribute to economic development in the region.
    Keywords: Financial Markets, Economic Growth, Openness, Hsiao’s Granger Causality, Latin America and Caribbean
    JEL: C32 O16 O55
    Date: 2008–08
  45. By: Thomas Gries (University of Paderborn); Manfred Kraft (University of Paderborn); Daniel Meierrieks (University of Paderborn)
    Abstract: This contribution tests for causality between financial deepening, trade openness and economic development for 16 Sub-Saharan African countries. An advanced econometric methodology is used to add to existing empirical evidence. Only limited support is found for finance promoting regional development. In particular, support for the popular hypothesis of finance-led growth is not substantial. In general, it is found that financial deepening and trade openness have swayed regional development only marginally. Thus, development strategies prioritizing financial sector or trade liberalization cannot be supported. Instead, a holistic policy approach taking into account other fundamental development factors is advocated.
    Keywords: Financial Markets, Economic Growth, Openness, Hsiao’s Granger Causality, Sub- Saharan Africa
    JEL: C32 O16 O55
    Date: 2008–04

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