nep-dev New Economics Papers
on Development
Issue of 2008‒10‒13
twenty-two papers chosen by
Jeong-Joon Lee
Towson University

  1. Policy Study on the National and Local Government Expenditures for Millennium Development Goals, 2000-2005 By Manasan, Rosario G.
  2. Assessing Competition in Philippine Markets By Aldaba, Rafaelita Mercado
  3. Measures for Assessing Basic Education in the Philippines By Maligalig, Dalisay S.; Albert, Jose Ramon G.
  4. SMEs in the Philippine Manufacturing Industry and Globalization: Meeting the Development Challenges By Aldaba, Rafaelita Mercado
  5. Was the Wealth of Nations Determined in 1000 B.C.? By Diego A. Comin; William Easterly; Erick Gong
  6. Human capital investment and long-term poverty reduction in rural Mexico By Paul Winters; Vera Chiodi
  7. Investment Provisions in Regional Integration Agreements for Developing Countries By Oliver Morrissey
  8. Trade Facilitation in Developing Countries By Chris Milner; Oliver Morrissey; Evious Zgovu
  9. Competition Policy and Public Procurement in Developing Countries By Rod Falvey; Annamaria La Chimia; Oliver Morrissey; Evious Zgovu
  10. On the Macroeconomics of Microfi?nance By Soyolmaa Batbekh and; Keith Blackburn
  11. Assessing the potential impact on poverty of rising cereals prices : the case of Mali By Joseph, George; Wodon, Quentin
  12. Are women more credit constrained ? experimental evidence on gender and microenterprise returns By de Mel, Suresh; McKenzie, David; Woodruff, Christopher
  13. Public Education and Growth in Developing Countries By Christiane Schuppert; Nadja Wirz
  14. Industrialization after a Deep Economic Crisis: Indonesia By Haryo Aswicahyono; Dionisius Narjoko; Hal Hill
  15. Cambodia's Persistent Dollarization: Causes and Policy Options By Menon, Jayant
  16. Programmes to Protect the Hungry: Lessons from India By Madhura Swaminathan
  17. Latin America and the Caribbean’s Challenge to Reach the MDGs: Financing Options and Trade-offs By Rob Vos; Marco V. Sánchez; Cornelia Kaldewei
  18. New Methodological Developments for the International Comparison Program By Diewert, Erwin
  19. Demand for Skills, Supply of Skills and Returns to Schooling in Cambodia By Chris SAKELLARIOU
  20. Growth literature and policies for the developing countries By Rao, B. Bhaskara; Cooray, Arusha
  21. The Current Global Financial Turmoil and Asian Developing Countries By Yilmaz Akyuz
  22. Globalization and Poverty in Senegal: A Worst Case Scenario? By Miet Maertens; Liesbeth Colen; Johan F.M. Swinnen

  1. By: Manasan, Rosario G.
    Abstract: <p>In line with the commitment of the Philippine government to adopt the Millennium Declaration, there have been efforts geared toward the achievement of the millennium development goals (MDGs) particularly the specific targets set for each of the eight MDGs. The MDGs include eradication of extreme poverty and hunger; universal primary education; gender equality and women empowerment; reduction of child mortality; improvement of maternal health; control of HIV/AIDS, malaria, and other diseases; environmental sustainability; and global partnership for development.</p> <p>The country has to do better in certain aspects of all of the seven quantifiable goals, namely: Goal 1 (poverty and hunger), Goal 2 (education), Goal 3 (gender equality), Goal 5 (maternal health), Goal 6 (control of communicable diseases), and Goal 7 (environmental sustainability). In this regard, it is critical that the Philippines exercises greater vigilance and exerts increased effort in addressing the requirements of achieving the MDGs. The study aims to support this initiative by tracking and analyzing the trend in MDG expenditures of both the central and local governments. It specifically attempts to analyze trends on MDG expenditures of the national and local governments, including ODA commitments for the period 2000-2005; relate the trends in MDG expenditures with human development outcomes and related outputs/services; and recommend policy actions on how to a) increase government revenues in the aggregate, b) increase the allocation of resources for MDG-related programs and projects by improving both intersectoral and intrasectoral allocation, and c) identify ways of increasing the efficiency and effectiveness of the delivery of MDG-related programs.</p>
    Keywords: education, public expenditures, poverty reduction, human development, health, millennium development goal (MDG), MDG expenditures
    Date: 2008
  2. By: Aldaba, Rafaelita Mercado
    Abstract: <p>This paper reviews the current empirical literature on competition and market structure of Philippine industries. It shows that weak competition is one of the fundamental factors that explain limited growth, productivity, and employment in the economy. Philippine experience has shown that reforms such as trade liberalization, deregulation, and privatization, while necessary, are not sufficient to foster effective competition. The success of these reforms depends on the creation of a competitive domestic market environment, which is in turn determined by the interplay of behavioral, regulatory, and structural constraints along with the broader aspects of competitive infrastructure.</p>
    Keywords: competition, market structure, regulation
    Date: 2008
  3. By: Maligalig, Dalisay S.; Albert, Jose Ramon G.
    Abstract: The second goal of the Millennium Development Goals (MDGs) is to achieve universal primary education. The target is to reach all the MDGs by 2015. Trends in education indicators for monitoring the second MDG suggest that Philippines may probably not meet the target on achieving universal primary education. Indicators that monitor gender disparity in primary and secondary education suggest that females are at an advantage over males. In this paper, various education indicators sourced from administrative reporting systems and surveys are looked into for assessing basic education in the country. Issues on the lack of comparability of figures from reporting systems, on the need to improve dissemination of education statistics, and on the need to properly link data with policy through a systematic monitoring and evaluation system are also discussed.
    Keywords: millennium development goal (MDG), education indicators, monitoring and evaluation
    Date: 2008
  4. By: Aldaba, Rafaelita Mercado
    Abstract: <p>In recognition of their substantial contribution to the economy both in terms of number of enterprises and workers, the Philippine government has put in place a number of policies and programs designed specifically to boost SME productivity and competitiveness in the country. However, the performance of SMEs in the last decade has not been vigorous enough to boost the Philippine manufacturing industry. As such, the deepening of high technology industries in terms of the creation of backward linkages has remained weak. While the country’s exports of high technology products have grown rapidly, the value added of these exports is very low due to the limited links of large domestic and foreign companies to the domestic economy. Rapid changes in the international trade and the growing complexity of global production system, pose a significant challenge to Filipino SMEs.</p> <p>This paper reviews existing government SME policies as well as recent developments in the manufacturing sector, within the context of the emerging global production network. The paper draws on the findings of a survey interview of SMEs in the automotive, electronics, and garments sectors. The paper highlights the importance of creating a separate government office that would coordinate SME policies and programs to support the integration of SMEs in the global production chain.</p>
    Keywords: globalization, small and medium enterprises
    Date: 2008
  5. By: Diego A. Comin (Harvard Business School, Business, Government and the International Economy Unit); William Easterly (Leonard N. Stern School of Business - Department of Economics); Erick Gong (University of California, Berkeley - Department of Agricultural & Resource Economics)
    Abstract: We assemble a dataset on technology adoption in 1000 BC, 0 AD, and 1500 AD for the predecessors to today's nation states. We find that this very old history of technology adoption is surprisingly significant for today's national development outcomes. Our strong and robust results are for 1500 AD determining per capita income today. We find technological persistence across long epochs: from 1000 BC to 0 AD, from 0 AD to 1500 AD, and from 1500 AD to the present. Although the data allow only some suggestive tests of rival hypotheses to explain long?run technological persistence, we find the evidence to be most consistent with a model of endogenous technology adoption where the cost of adopting new technologies declines sufficiently with the current level of adoption. The evidence is less consistent with a dominant role for population as predicted by the semi?endogenous growth models or for country-level factors like culture, genes or institutions.
    Keywords: Technology adoption, technology history, economic development.
    JEL: O3 N7
    Date: 2008–09
  6. By: Paul Winters; Vera Chiodi
    Abstract: By focusing on human capital investment, the Mexican Oportunidades program will inuence the economic choices of the rural poor. To understand how bene_ciaries may alter their behaviour as a result of this intervention, this paper uses administrative data to analyze the economic activities of the Mexican rural poor. Results indicate that investments in education are likely to shift recipients from agricultural wage employment toward non-farm wage employment. The magnitude of this impact will be inuenced by household assets and by the location of the household. The results suggest the need for policies that complement the government's focus on human capital investment.
    Date: 2008
  7. By: Oliver Morrissey
    Abstract: Investment is a major determinant of economic growth, both in reference to the level of the capital stock and its productivity, but has been deficient in poor developing countries. A particular concern for poor countries has been relatively low levels of foreign direct investment (FDI), and a low impact of such investment on growth. The paper focuses on sub-Saharan African (SSA) countries and on FDI to cover four issues related to measures to promote investment: the types of investment measures included in bilateral, regional and multilateral agreements; evidence for effects of provisions on investment, especially FDI; the type of regulatory and business environment most conducive to growth-enhancing investment; and the implications for ‘best practice’ in promoting investment, in particular measures that can be incorporated in regional agreements. Investment provisions can be used to serve a number of purposes - investment promotion and cooperation, liberalisation and market access, and investment protection – and evidence suggests that their incorporation in agreements does increase foreign investment.
    Keywords: Investment Provisions, Regional Integration
  8. By: Chris Milner; Oliver Morrissey; Evious Zgovu
    Abstract: Measures to actively facilitate trade are increasingly seen as essential to assist developing countries in expanding trade and benefiting from globalisation. Although often viewed as narrowly concerned with the ease and speed of Customs procedures, even greater trade cost reductions and trade and welfare benefits may be reaped from a broader view of trade facilitation (TF) that incorporates transportation, distribution and communication issues. A number of TF reforms are particularly beneficial: improving procedures, especially Customs clearance; introducing automation and use of information technology; reducing excessive documentation requirements; addressing lack of transparency in import and export requirements; addressing lack of modernisation of and cooperation between Customs and other government agencies. The review identifies the types of TF reforms that could address these problems and deliver a return in terms of increased revenue collection efficiency, reductions in trade costs and promotion of greater regional cooperation (at least in Customs and transport, especially as many TF measures are appropriate for inclusion in regional integration agreements).
    Keywords: Trade Facilitation, Regional Integration
  9. By: Rod Falvey; Annamaria La Chimia; Oliver Morrissey; Evious Zgovu
    Abstract: Measures to support Competition Policy and enhance the efficiency of Public Procurement can enhance the impact of regional integration agreements. The first part addresses Competition Policy - measures employed by government to ensure a fair competitive market environment. Competition policy aims to ensure that markets remain competitive (through anti-trust or anti-cartel enforcement) or become competitive (through liberalisation). For a variety of reasons, competition is often restricted in developing countries and there are benefits from establishing some level of competition policy. Although the literature does not provide a blueprint, it provides guidance on the most useful ways to incorporate Competition Policy in regional agreements. The second part addresses issues in opening up public procurement and outlines the main potential sources of welfare gains. Open and transparent procurement can bring gains in terms of price reduction, competition and reduced corruption. While developing countries recognize these benefits for domestic policy, they appear opposed to including procurement commitments in international agreements.
    Keywords: Competition Policy, Public Procurement, Regional Integration
  10. By: Soyolmaa Batbekh and; Keith Blackburn
    Abstract: Microfinance (small scale lending to the poor) is integrated into a dynamic macroeconomic model of income distribution. Two-period-lived agents, belonging to overlapping generation of dynastic families, choose between three alternative occupations - subsistence production, small-scale project investment and large-scale project investment. Subsistence activity is costless and riskless, whilst project investment is the opposite and may require external funding from financial institutions with imperfect powers of contract enforcement. In the absence of microfinance, only large-scale, collateralised loans are available through the traditional banking sector. Under such circumstances, initial inequalities persist as only the wealthy are able to acquire these loans, and as the small-scale enterprise is either not feasible or not profitable. With the introduction of microfinance, this venture is made both possible and attractive through the provision of non-collateralised loans and other features of microlending arrangements. Poverty and inequality are reduced as a result.
    Date: 2008
  11. By: Joseph, George; Wodon, Quentin
    Abstract: Concerns have been raised about the impact of rising food prices worldwide on the poor. To assess the (short term) impact of rising food prices in any particular country it is necessary to look at both the impact on food producers (who benefit from an increase in prices) and food consumers (who loose out when the price increases), with a focus on poor producers and consumers. In Mali the impact of a change in the price of rice is not ambiguous because about half of the rice consumed in the country is imported, so that the negative impact for consumers is much larger than the positive impact for producers. By contrast, for millet and sorghum, as well as corn, the impact is more ambiguous since much of the consumption is locally produced. Using a recent and comprehensive household survey, this paper provides an assessment of the potential impact of higher food prices on the poor in Mali using both simple statistical analysis and non-parametric methods. The paper finds that rising food prices for rice, millet and sorghum, corn, as well as wheat and bread could together lead to a substantial increase in poverty, with the increase in the price of rice having by far the largest negative impact.
    Keywords: Rural Poverty Reduction,Population Policies,Achieving Shared Growth,Food&Beverage Industry
    Date: 2008–10–01
  12. By: de Mel, Suresh; McKenzie, David; Woodruff, Christopher
    Abstract: This paper analyzes data from a randomized experiment on mean returns to capital in Sri Lankan micro-enterprises. The findings show greater returns among men than among women; indeed, returns were not different from zero for women. The authors explore different explanations for the lower returns among female owners, and find no evidence that the gender gap is explained by differences in ability, risk aversion, or entrepreneurial attitudes. Differential access to unpaid family labor and social constraints limiting sales to local areas are not important. However, there is evidence that women invested grants differently from men. A smaller share of the smaller grants remained in the female-owned enterprises, and men were more likely to spend the grant on working capital and women on equipment. The gender gap is largest when male-dominated sectors are compared with female-dominated sectors, although female returns are lower than male returns even for females working in the same industries as men. The authors examine the heterogeneity of returns to determine whether any group of businesses owned by women benefit from easing capital constraints. The results suggest there is a large group of high-return male owners and a smaller group of poor, high-ability, female owners who might benefit from more access to capital.
    Keywords: Access to Finance,Debt Markets,Gender and Health,,Economic Theory&Research
    Date: 2008–10–01
  13. By: Christiane Schuppert (University of Dortmund); Nadja Wirz (University of St. Gallen)
    Abstract: Human capital plays a key role in fostering technology adoption, the major source of economic growth in developing countries. Consequently, enhancing the level of human capital should be a matter of public concern. The present paper studies public education incentives in an environment in which governments can invest in human capital to facilitate the adoption of new technologies invented abroad or, instead, focus on consumptive public spending. Although human capital is pivotal for growth, the model reveals that incentives to invest in public education vanish if a country is poorly endowed with human capital. Rather, governments of these poorly-endowed countries focus on consumptive public spending. As a result, while their better-endowed counterparts build up human capital thereby promoting technology adoption and growth, the growth process in poorly-endowed countries stagnates.
    Keywords: growth; public education; human capital; technology adoption
    JEL: O4 H4 F2
    Date: 2008–10
  14. By: Haryo Aswicahyono; Dionisius Narjoko; Hal Hill
    Abstract: Indonesia experienced a deep economic contraction as a result of the 1997-98 Asian crisis. This paper examines trends and patterns in the country’s industrial sector in the wake of the crisis, and against the backdrop of the changed policy and institutional environment. Prior to the crisis Indonesia was one East Asia’s fastest industrializers, whereas its industrial growth is now one of the slowest. Moreover, prior to the crisis, manufacturing was a ‘leading sector’ in the economy, whereas it is now growing at about the average. We examine how and why the record within manufacturing is diverse. Also unit labour costs rose sharply immediately following the crisis. In consequence, industrialization has also become less employment elastic, and employment in the formal sector has hardly increased. Foreign ownership has risen substantially, while concentration levels remain largely unchanged. Industrial exports have performed indifferently, notwithstanding the large boost to competitiveness following the sharp depreciation of the Rupiah in 1997-98. The process of small firms ‘graduating’ to larger units has slowed, and most of the output growth is now coming from existing firms rather than new entrants. We link these outcomes both to general, economy-wide factors as well as a range of particular policy interventions that have had sector-specific effects.
    Keywords: Indonesia, industrialization, economic crises
    JEL: L16 O14
    Date: 2008
  15. By: Menon, Jayant (Asian Development Bank)
    Abstract: Cambodia's economic and social achievements over the past ten years have been the most impressive in its history. Nevertheless, Cambodia today is still as dollarized, if not more so, than it was ten years ago. What is this so, and what, if anything, should the Government do? This paper attempts to answer both these questions, by examining the reasons behind the apparent paradox between a decade of economic and political improvements and continued dollarization, and drawing policy implications from it. We advise against pursuing enforced dedollarization, and advocate a policy option that focuses instead on accelerating accommodative reforms, especially in the financial sector and on legal and institutional reforms. We also identify a host of institutional barriers that need to be overcome to prepare the groundwork for a natural process of de-dollarization.
    Keywords: Cambodia; dollarization; exchange rates; currency board; hysteresis
    JEL: E42 E58 F31 F33
    Date: 2008–09–01
  16. By: Madhura Swaminathan
    Abstract: Evidence on calorie intake and nutritional outcomes establishes that chronic hunger and food insecurity persist today on a mass scale in India. The liberalization-induced policy of narrow targeting of the Public Distribution System (PDS), a programme of food security that provides a minimum quantity of cereals at subsidized prices, has resulted in worsening food insecurity. Recent evidence from the 61st round of the National Sample Survey in 2004-2005 establishes that targeting has led to high rates of exclusion of needy households from the system and clear deterioration of coverage in States like Kerala where the universal PDS was most effective.
    Keywords: food security, targeting errors, India, liberalization, public distribution
    JEL: Q18 I38 O53
    Date: 2008–10
  17. By: Rob Vos; Marco V. Sánchez; Cornelia Kaldewei
    Abstract: The present study analyzes the determinants of improving outcomes in education, health and basic sanitation and the macroeconomic trade-offs caused by scaling up public spending for the Millennium Development Goals (MDGs), using an integrated modelling approach. At variance with other assessments, the analysis shows that most countries in Latin America and the Caribbean are “off track” towards many of the goals. The study shows that while achieving the goals is affordable for most countries in the region, governments will need to put greater emphasis on tax reforms to mobilize resources for increased social spending while avoiding undesirable macroeconomic trade-offs.
    Keywords: Computable General Equilibrium Models; Distribution; Welfare and Poverty; Foreign Aid; Macroeconomic Analyses of Economic Development
    JEL: C68 D3 I3 F35 O11
    Date: 2008–09
  18. By: Diewert, Erwin
    Abstract: The paper explains new methodology that was used in the 2005 International Comparison Program (ICP) that compared the relative price levels and GDP levels across 146 countries. In this round of the ICP, the world was divided into 6 regions: OECD, CIS, Africa, South America, Asia Pacific and West Asia. What is new in this round compared to previous rounds of the ICP is that each region was allowed to develop its own product list and collect prices on this list for countries in the region. The regions were then linked using another separate product list and 18 countries across the 6 regions collected prices for products on this list and this information was used to link prices and quantities across the regions. An additional complication was that the final linking of prices and volumes across regions had to respect the regional price and volume measures that were (separately) constructed by the regions. The paper also studies the properties of the Iklé Dikhanov Balk multilateral system of index numbers which was used by Africa.
    Keywords: Index numbers, multilateral comparison methods, GEKS, EKS, Geary-Khamis, Balk, Dikhanov, Iklé, Country Product Dummy (CPD) method, basic headings, St
    JEL: C43 C81 E31 O57
    Date: 2008–09–25
  19. By: Chris SAKELLARIOU (Division of Economics, Nanyang Technological University, Singapore)
    Abstract: In this paper I take a detailed look into the returns to schooling in Cambodia using the 1997 and 2003-04 Socioeconomic Surveys of Households and alternative estimation techniques (OLS vs. Family Fixed Effects and Instrumental Variables). The main focus of the analysis has to do with differences by sector (public vs. private). In Cambodia, the average educational attainment of workers in the public sector is significantly higher compared to the private sector. Without considering issues of selection into the public vs. the private sector, the wage premium for one additional year of schooling in the private sector is about twice that in the public sector for both men and women. Furthermore, the average return to one additional year of potential labor market experience is higher in the private sector. This raises questions about the reasons for the self-selection of more educated workers in the public sector in Cambodia. The picture changes drastically, especially in the case of female employment, once the assumption that the location of individuals in the public and private sectors is the outcome of a random process. However, after correcting for selection bias using Heckman's correction, one additional year of schooling still increases earnings by more in the private sector for men, but the spread between sectors narrows. However for women, one additional year of schooling increases earnings in the public sector by more than in the private sector. Furthermore, now the return to one additional year of potential labor market experience is significantly higher in the public sector, for both men and women. Other findings indicate that the supply of more educated workers has outstripped demand, resulting in a decline in the return to tertiary education and a stable return to secondary education. The dynamics of the demand and supply of skills and their changes over the time suggest that the supply of post-primary skills is adequate, except perhaps in the private sector.
    Date: 2008–05
  20. By: Rao, B. Bhaskara; Cooray, Arusha
    Abstract: This paper examines a recent view of Pritchett (2006) that there is a wide gap between growth literature and the policy needs of the developing countries. Growth literature has focussed on the long term growth outcomes but policy makers of the developing countries need rapid improvements in the growth rate in the short to medium terms. We take the view that this gap can be reduced if attention is given to the dynamic effects of policies. With data on Singapore, Malaysia and Thailand we argue that an extended version of the Solow (1956) model is well suited for this purpose. We found that the short to medium term growth effects of investment rate are much higher than its long run effects. Dynamic simulations for Singapore showed that these short run growth effects are significantly higher than the steady state growth rate for up to 10 years.
    Keywords: Solow Growth Model; Endogenous Growth; Dynamic Growth Effects of Investment Rate; Policies for Developing Countries.
    JEL: O11
    Date: 2008–10–05
  21. By: Yilmaz Akyuz (Third World Network)
    Date: 2008
  22. By: Miet Maertens; Liesbeth Colen; Johan F.M. Swinnen
    Abstract: There is no consensus about how globalization –trade and foreign investments – affects poverty reduction. Using household survey data, this study contributes to the empirical literature on globalization and poverty by analyzing the household-level implications of increased foreign investments and trade in the horticulture sector in Senegal. In many aspects this represents what many would consider a “worst-case scenario”. Stringent rich country standards are imposed on exports and the supply chain is controlled by a single multinational company with extreme levels of supply base consolidation and vertical integration and complete exclusion of smallholder suppliers. We analyze and quantify income and poverty effects under these “worst-case conditions” and find significant positive welfare impacts through employment creation and labor market participation.
    Keywords: trade, FDI, poverty, vertical coordination, modern supply chains
    JEL: F2 J43 O12 Q12 Q17
    Date: 2008

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