nep-dev New Economics Papers
on Development
Issue of 2008‒12‒01
twenty-six papers chosen by
Jeong-Joon Lee
Towson University

  1. What macro factors make microfinance institutions reach out? By Annabel Vanroose
  2. Trade, Remittances, Institutions, and Economic Growth By Thanh Le
  3. Transitory Economic Shocks and Civil Conflict By Antonio Ciccone
  4. Will Formula-Based Funding and Decentralized Management Improve School Level Resources in Sri Lanka? By Nisha Arunatilake; Priyanka Jayawardena
  5. Trade Policy and Poverty in Benin: a General Equilibrium Analysis By Bernard Decaluwé; Epiphane Adjovi; Véronique Robichaud
  6. Trade Liberalization and Poverty in Nepal: an Applied General Equilibrium Analysis By Prakash Raj Sapkota; John Cockburn
  7. Alternative Approaches to the Development of Early Childhood Education in Singapore By Yong Yik Wei; Aekapol Chongvilaivan; Chew Jing Yang
  8. Some New Perspectives on India's Approach to Capital Account Liberalization By Prasad, Eswar
  9. Interface between economic development, health and environment in India: An econometric investigation. By Nagar, A.L.; Shovon Ray, Amit; Sawhney, Aparna; Samanta, Sayan
  10. Goods and services tax for India. By Rao, R. Kavita
  11. Financial crisis in Asia and the Pacific Region: Its genesis, severity and impact on poverty and hunger By Katsushi Imai; Raghav Gaiha; Ganesh Thapa
  12. Height, health, and inequality: the distribution of adult heights in India By Angus Deaton
  13. Price trends in India and their implications for measuring poverty By Angus Deaton
  14. Labor supply responses to large social transfers: Longitudinal evidence from South Africa By Cally Ardington; Anne Case; Victoria Hosegood
  15. Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China By Elaine Meichen Liu
  16. Demographic Change and Economic Growth in Asia By David E. Bloom; David Canning; Jocelyn E. Finlay
  17. Population Aging and Economic Growth in Asia By David E. Bloom; David Canning; Jocelyn Finlay
  18. The Benefits and Costs of Proliferation of Geographical Labelling for Developing Countries By Anders, Sven; Caswell, Julie A.
  19. Does Government Regulation Complement Existing Community Efforts to Support Cooperation? Evidence from Field Experiments in Colombia By Lopez, Maria Claudia; Murphy, James J.; Spraggon, John M.; Stranlund, John K.
  20. The Dynamics of Parallel Economies. Measuring the Informal Sector in México By José Brambila Macias; Guido Cazzavillan
  21. Policy Responses to Sudden Stops in Capital Flows: The Case of Chile in 1998 By Rodrigo O. Valdes
  22. "Impact of Natural Disasters on Industrial Agglomeration: A Case of the 1923 Great Kanto Earthquake" By Asuka Imaizumi; Kaori Ito; Tetsuji Okazaki
  23. The Food Crisis and its Impacts on Poverty in Senegal and Mali: Crossed Destinies By Dorothée Boccanfuso; Luc Savard
  24. Is the risk taking of HIV-infection influenced by income uncertainty? : Empirical Evidence from Sub-Saharan Africa By Djemaï, Elodie
  25. Microfinance, Commercialisation and Ethics By Reinhard H. Schmidt
  26. Aid Allocation across Sectors: Does aid fit well with recipients' development priorities? By KASUGA Hidefumi

  1. By: Annabel Vanroose (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and Section for Economic, Monetary and Financial Policy, Vrije Universiteit Brussel.)
    Abstract: This paper identifies factors that explain why microfinance institutions are reaching more clients in some countries than in others. To that end, the paper applies a cross-country analysis on a unique dataset covering 115 countries. Results indicate that the microfinance sector is more present in the richer countries of the developing world. It also reaches more clients in countries that receive more international support. Population density plays also a positive role, which could explain why the sector is still underdeveloped in rural areas. The level of industrialisation and inflation do not seem to influence microfinance outreach, while regional dummies do.
    Keywords: microfinance, financial sector development, aid, developing world
    JEL: G21 G28 O57
    Date: 2008–10
  2. By: Thanh Le (MRG - School of Economics, The University of Queensland)
    Abstract: This paper empirically investigates the role of trade, remittances, and institutions in economic development in a large sample of developing countries using recently developed instruments for all these variables. Both cross country (over 30 years) and dynamic panel data (over 5-year periods) regressions of growth rates on instrumented trade, remittances, and institutions provide evidence of a significant impact of trade, institutions, and remittances on growth. While institutions foster growth, remittances hamper it. The effect of trade on growth is positive in cross sectional regressions but ambiguous in dynamic panel data regressions. These results are indicative of a more important role for trade in explaining growth in the very long run than over shorter horizons.
  3. By: Antonio Ciccone
    Abstract: I examine whether civil conflict is triggered by transitory negative economic shocks. My approach follows Miguel, Satyanath, and Sergenti (2004) in using rainfall as an exogenous source of economic shocks in Sub-Saharan African countries. The main difference is that my empirical specifications take into account that rainfall shocks are transitory. Failure to do so may, for example, lead to the conclusion that civil conflict is more likely to break out following negative rainfall shocks when conflict is most probable following years with exceptionally high rainfall levels.
    Keywords: Transitory shocks, mean reversion, rainfall, conflict
    JEL: O0 P0 Q0
    Date: 2008–08
  4. By: Nisha Arunatilake; Priyanka Jayawardena
    Abstract: Using the experience of the Educational Quality Inputs (EQI) Scheme in Sri Lanka, the paper examines the distributional aspects of formula-based funding and efficiency of decentralized management of education funds in a developing country setting. The study finds that the EQI fund distribution is largely pro-poor, with the exception of expenditure at the collegial level. The study finds that allocating more funds to more disadvantaged schools alone is insufficient to reduce disparities as the inability of schools to fullly utilize the funds holds back progress. The study findings support the hypothesis that qualified principals, adequate levels of human and physical resources, and state-level monitoring and support is needed for the success of education management at the school level. The study highlights the need to better use information collected from the schools on the EQI scheme to simplify and improve its implementation and effectiveness.
    Keywords: Education finance, Sri Lanka, formula-based funding, decentralized management of schools
    JEL: I20 I21 I22 I28 I38
    Date: 2008
  5. By: Bernard Decaluwé; Epiphane Adjovi; Véronique Robichaud
    Abstract: Economic and financial crisis in Benin since 1980s led the government to embark on a process of economic reforms in 1991. These reforms sought to remedy the fiscal and trade imbalances in order to accelerate economic growth. Trade policy reform was given priority. Import bans and quotas were eliminated, import duties abolished and a compensatory tax on commodities sold in the domestic market instituted. This study analyzes the effects of the trade policy reforms using a computable general equilibrium (CGE) model and household survey data. Results show that these reforms are more beneficial to households in urban areas, but contribute to worsening poverty conditions of the most poor in rural areas. If liberalization policies target better strategies aimed at fighting poverty, or at least not deteriorating the situation, they need to be designed in a way that they do not worsen the poverty conditions of the most destitute in society.
    Keywords: CGE, trade, poverty, Benin
    JEL: D6 F13 F14 H3 I38 O55
    Date: 2008
  6. By: Prakash Raj Sapkota; John Cockburn
    Abstract: Nepal aggressively liberalized its foreign trade during the 1990s. This paper attempts to estimate the impact of trade liberalization on household welfare and poverty in Nepal through the construction of a regional CGE model. The model disaggregates factors of production - capital, land, and labor - by region (urban, Terai and hills/mountains) in order to establish direct links between sector of activity, factor remuneration, and household income. In particular, certain activities are more intensive in factors from a given region (e.g. the manufacturing sector is more intensive in urban factors of production and the agriculture sector is more intensive in Terai factor of production). Regional factor remuneration in turn maps into regional household income. We find that trade liberalization reduces the nominal returns to urban factors of production in comparison with rural factors of production, resulting in a reduction in the relative income of urban households. Rural and urban households consume roughly the same share of industrial goods, but rural households consume relatively more agricultural goods and fewer services. As the fall in consumer prices in the latter two sectors are similar, there is little rural-urban difference in the variation in consumer price indices. Consumer prices generally fall in roughly the same proportion as nominal incomes such that there are negligible welfare changes. However, poverty falls substantially, with the greatest impact in rural Terai, followed by the rural hills and the mountain region, and least in urban areas.
    Keywords: Computable general equilibrium modeling, international trade, poverty, Nepal
    JEL: D33 D58 E27 F13 F14 I32 O15 O53
    Date: 2008
  7. By: Yong Yik Wei; Aekapol Chongvilaivan; Chew Jing Yang
    Abstract: A knowledge-intensive, innovation-driven economy needs innovative and creative individuals in business, government, and the various professions. Singapore’s education system has an important role to play in equipping the young with the right qualities. This could be better achieved by moving away from an overly rigid education system that places undue emphasis on rote learning and examination scores, to an education system that develops students’ creativity and critical thinking abilities, and encourages their innate curiosity and willingness to experiment. We examine, as a backdrop, various economic theories of entrepreneurship and, believing that it is important to begin with a good educational foundation, the features of some alternative approaches to pre-school education. We also examine Singapore’s attempts to promote independent thinking and creativity among Singaporean students, and other countries’ experiences, in particular those of Finland and the Netherlands. Among other issues, emphasis is placed on play and the fostering of students’ love of learning, in less structured settings, as the media of learning during early childhood education.
    Keywords: Entrepreneurship; Pre-school Education; Play-based Learning; Reggio Emilia approach; Montessori Method; Teach Less, Learn More (TLLM) initiative
    JEL: I21 I28 I29
    Date: 2008–11
  8. By: Prasad, Eswar (Cornell University)
    Abstract: In this paper, I analyze India's approach to capital account liberalization through the lens of the new literature on financial globalization. India's authorities have taken a cautious and calibrated path to capital account opening, which has served the economy well in terms of reducing its vulnerability to crises. By now, the capital account has become quite open and reversing this is not a viable option. Moreover, the remaining capital controls are rapidly becoming ineffective, making the debate about capital controls rather moot. Managing de facto financial integration into international capital markets and aligning domestic macroeconomic policies in a manner that maximizes the indirect benefits and reduces the risks is the key challenge now facing India's policymakers on this front.
    Keywords: India, international financial integration, capital flows, capital controls
    JEL: F3 F4 O2
    Date: 2008–11
  9. By: Nagar, A.L. (National Institute of Public Finance and Policy); Shovon Ray, Amit; Sawhney, Aparna; Samanta, Sayan
    Abstract: This paper analyses interrelationships between `economic development', `health', and `environment' in a simultaneous equations framework. Four structural equations have been postulated to explain changes in four endogenous variables in terms of several predetermined variables. The endogenous variables chosen for the model are GDPPC (per capita gross domestic product), LE (life expectancy), NOCRD (number of cases of respiratory diseases) and PM10 (respirable suspended particulate matter). We assume that GDPPC describes economic development prominently and, therefore, use it as one of the endogenous variables in lieu of economic development. LE and NOCRD are assumed to reflect health effects in the economy, and PM10 is used as a proxy of environmental stress. The four endogenous variables are supposed to be jointly determined in terms of several exogenous variables represented through indices of physical infrastructure (PI), social infrastructure (SI) and air pollution index (API). We construct the three indices by the principal components method and thus effectively use only these three predetermined (exogenous) variables to simultaneously determine changes in the four endogenous variables listed above. The model is postulated in loglinear form and estimated by the two-stage least-squares method using data from the Indian economy 1980-81 to 2004-05. It follows from the estimated structural equations that while physical infrastructure is significant in determining GDPPC, the GDPPC is also directly influenced by improved health outcomes like longevity (LE) and lower morbidity from respiratory diseases (NOCRD). The long term health outcome (LE) is determined by the level of per capita GDP and it is positively affected by social infrastructure. The third structural equation shows that the immediate, or short run, health outcomes like morbidity from respiratory disorders are influenced by environmental stress (PM10) besides the level of GDPPC. Finally, the environmental stress (PM10) is determined by the level of per capita GDP and the air pollution index (API) representing various sources of air pollution. It is true that our simplified model illustrates the effects of specific type of air pollutant, viz., respirable particulate matter, however, it is among the most significant environmental problems threatening human health in India. Nevertheless, there is scope to build more comprehensive environmental stress indices which reflect surface water quality, ground water quality, soil pollution etc. which have feedback effects with health and economic development. Also many of the components of PI, SI and API may not be truly exogenous in a larger model (e.g. transport and communication in PI, education and health care systems in SI, and industrial production, vehicular traffic, urbanisation in API.) The two weaknesses of our model stem from data limitation and a concern to simplify the model. Although our model is highly simplified, nonetheless, it provides key insights into the nature of economic development in India during the last 25 years: First, the environmental stress has had a high cost on income and health . from the derived reduced form, a 1 percent increase in the air pollution index leads to a decrease of about 8 percent in the per capita income, a decrease of about 0.7 percent in the life expectancy, and an increase of about 19 percent in the number of cases of respiratory diseases. Second, the social infrastructure plays a more vital role in economic development, health, and environment than the physical infrastructure, since the absolute values of elasticities of endogenous variables with respect to SI are invariably greater than those with respect to PI. Although physical infrastructure is important for economic development, it comes in the last of our preference order. In the final run-up, there is need to pay more attention to provide better social infrastructure and to reduce air pollution.
    Date: 2008–10
  10. By: Rao, R. Kavita (National Institute of Public Finance and Policy)
    Date: 2008–11
  11. By: Katsushi Imai; Raghav Gaiha; Ganesh Thapa
    Date: 2008
  12. By: Angus Deaton (Princeton University)
    Abstract: This paper explores the relationship between adult heights and the distribution of income across populations of individuals. There is a long literature that examines the relationship between mean adult heights and living standards. If adult height is set by the balance between food intake and charges to disease in early childhood, it is informative about economic and epidemiological conditions in childhood. Because taller populations are better-off, more productive, and live longer, the relationship between childhood conditions and adult height has become an important focus in the study of the relationship between health and wealth. Here I follow one of the tributaries of this main stream. A relationship between income and height at the individual level has implications for the effects of income inequality on the distribution of heights. These relationships parallel, but are somewhat more concrete than, the various relationships between income inequality and health that have been debated in the economic and epidemiological literatures, Richard G. Wilkinson (1996), Angus Deaton (2003).
    Date: 2008–01
  13. By: Angus Deaton (Princeton University)
    Abstract: The Indian national sample surveys collect data on the unit values of a large number of foods which can be used to compute price index numbers that can be compared with the official national price indexes, the Consumer Price Index for Agricultural Labourers (CPIAL) for rural India, and the Consumer Price Index for Industrial Workers (CPIIW) for urban India. Over the five years from 1999–2000 to 2004–05, the food component of the CPIAL understated the rate of food price inflation. This overstatement is likely attributable to the use of long outdated weights (from 1983), and the resultant overweighting of cereals, particularly coarse cereals, whose prices fell relative to other foods. The overall weight of food in the CPIAL is also too large, so that the growth in the general CPIAL was understated during this period when food prices fell relative to nonfood prices. Under conservative assumptions, I calculate that the 5 year growth in the reported CPIAL of 10.6 percent should have been 14.3 percent. Indian poverty lines are held constant in real terms and are updated using the food and non-food components of the official indices weighted by the food shares of households near the poverty line. Because these weights come from a 1973–4 survey, food is heavily over weighted for the contemporary poor, and the nominal poverty lines are understated, both because the CPIAL food index is understated, and because too much weight is assigned to food in a period when food prices have been falling relative to nonfood prices. As a result, and ignoring other problems with the counts (doubtful interstate and intersectoral price indexes and the growing discrepancy between surveys and national accounts), the official poverty counts for rural India in 2004–5 are too low; the official headcount ratio of 28.3 percent should be closer to 31 percent; at current rates of rural poverty reduction, this eliminates more than three years of progress. More generally, it is clear that the weights used for price indexes should be updated more frequently than is presently the case, something that could be straightforwardly done using India’s regular system of household expenditure surveys.
    Date: 2008–01
  14. By: Cally Ardington (University of Cape Town); Anne Case (Princeton University); Victoria Hosegood (London School of Hygiene and Tropical Medicine and Africa Centre for Health and Population Studies)
    Abstract: In many parts of the developing world, rural areas exhibit high rates of unemployment and underemployment. Understanding what prevents people from migrating to find better jobs is central to the development process. In this paper, we examine whether binding credit constraints and childcare constraints limit the ability of households to send labor migrants, and whether the arrival of a large, stable source of income – here, the South African old-age pension – helps households to overcome these constraints. Specifically, we quantify the labor supply responses of prime-aged individuals to changes in the presence of pensioners, using longitudinal data collected in KwaZulu-Natal. Our ability to compare households and individuals before and after pension receipt, and pension loss, allows us to control for a host of unobservable household and individual characteristics that may determine labor market behavior. We find that large cash transfers to elderly South Africans lead to increased employment among prime-aged members of their households, a result that is masked in cross-sectional analysis by differences between pension and non-pension households. Pension receipt also influences where this employment takes place. We find large, significant effects on labor migration upon pension arrival. The pension’s impact is attributable both to the increase in household resources it represents, which can be used to stake migrants until they become self-sufficient, and to the presence of pensioners who can care for small children, which allows prime-aged adults to look for work elsewhere.
    JEL: O12 H31 J20
    Date: 2008–01
  15. By: Elaine Meichen Liu (Princeton University)
    Abstract: The slow diffusion of new technology in the agricultural sector of developing countries has long puzzled development economists. While most of the current empirical research on technology adoption focuses on credit constraints and learning spillovers, this paper examines the role of individual risk attitudes in the decision to adopt a new form of agricultural biotechnology in China. I conducted a survey and a field experiment to elicit the risk preferences of 320 Chinese farmers, who faced the decision of whether to adopt genetically modified Bt cotton a decade ago. Bt cotton is more effective in pest prevention and thus requires less pesticides than traditional cotton. In my analysis, I expand the measurement of risk preferences beyond expected utility theory to incorporate prospect theory parameters such as loss aversion and nonlinear probability weighting. Using the parameters elicited from the experiment, I find that farmers who are more risk averse or more loss averse adopt Bt cotton later. Farmers who overweight small probabilities adopt Bt cotton earlier.
    Keywords: Technology Adoption, Risk Preferences, Prospect Theory
    JEL: O14 O33
    Date: 2008–05
  16. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Jocelyn E. Finlay (Harvard School of Public Health)
    Abstract: In 1994 the World Bank called East Asia's strong economic growth performance a "miracle". Trade openness, high savings rates, human capital accumulation, and macroeconomic policy only explained part of this growth performance; the remainder was left unexplained. Research in the ensuing years has shown that when demographic change in East Asia is taken into account, the miracle is explained. These earlier studies used the 1960-1990 sample period, but since 1990 Asia has undergone major economic reforms in response to financial crises and other factors. Moreover, rapid demographic change has continued in East Asia, and in Asia more generally, with fertility rates falling below replacement in many of these countries. In this paper, we re-examine the role of the demographic transition in explaining cross-country differences in economic growth, with a particular focus on East Asia. With the working-age share beginning to decline in many Asian countries, innovation and flexibility in the labor market will be required for them to continue to enjoy the high rates of economic growth they have experienced to date.
    Keywords: Global health, fertility, Asia, labor, Aging, Economics, Demography.
    Date: 2008–11
  17. By: David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Jocelyn Finlay (Harvard School of Public Health)
    Abstract: The decline in the total fertility rate between 1960 and 2005, coupled with an increase in life expectancy and the dynamic evolution of past variation in birth and death rates, is producing a significant shift in age structure in Asia. The age distribution has shifted from one with a high youth-age population share to one with a high old-age population share. We illustrate the role of these separate forces in shaping the age distribution. We also argue that the economic consequences of population aging depend on behavioral responses to the shift in age structure: the female labor force participation response to the decline in fertility, child quality/quantity trade-off in the face of the fertility decline, savings adjustments to an increase in life expectancy, and social security distortions insofar as the pace of life expectancy improvements is faster than the pace of policy adjustments. We estimate the association between old- and youth-age population shares and economic growth. The results suggest that population aging may not significantly impede economic performance in Asia in the long run.
    Keywords: Global health, fertility, Asia, labor, Aging.
    Date: 2008–11
  18. By: Anders, Sven; Caswell, Julie A.
    Abstract: Food product attributes related to geographical origins are a topical issue in global food trade. The provision of geographical labelling may occur through geographical indications under the mandated trade rules of the TRIPS Agreement, trademarks, or country-of-origin labelling. The overall effect of the expansion of geographical labelling on developing countries depends on a complex mix of market opportunities that may yield substantial benefits as well as implementation costs. Increasingly, the analysis of this overall effect will need to evaluate the joint impacts of different forms of geographical labelling on the market position of developing countries.
    Keywords: developing countries, geographical labelling, international trade, TRIPS, Food Consumption/Nutrition/Food Safety, International Development, International Relations/Trade, Marketing, F13, Q13, O19,
    Date: 2008–07
  19. By: Lopez, Maria Claudia; Murphy, James J.; Spraggon, John M.; Stranlund, John K.
    Abstract: In this paper we describe a field experiment conducted among mollusk harvesters in a community on the Pacific Coast of Columbia. The experiment is based on a standard linear public good and consists of two stages. In the first stage we compare the ability of monetary and nonmonetary sanctions among community members to increase contributions to the public good. In the second stage we add a government regulation with either a high or low sanction for noncompliance to community enforcement efforts. The results for the first stage are consistent with other comparisons of monetary and nonmonetary sanctions within groups; both led to higher contributions. The results from the second stage reveal that government regulations always complemented community enforcement efforts. While the subjects tended to reduce their sanctioning efforts under the government regulations, contributions and earnings were significantly higher than without government interventions. In fact, the combination of community and government enforcement efforts generated near-perfect contributions to the public good. However, more research into the combined roles of government intervention and community enforcement efforts is needed because the complementarity we find may be situation-specific.
    Keywords: Field experiments, public goods, government regulation, community enforcement, Environmental Economics and Policy, Institutional and Behavioral Economics, Public Economics, C93, H41, Q2,
    Date: 2008–07
  20. By: José Brambila Macias (Department of Economics, University Of Venice Cà Foscari); Guido Cazzavillan (Department of Economics, University Of Venice Cà Foscari)
    Abstract: The existence of parallel economies that operate in the shadows of informality within most Latin American countries is widely recognized by the economic literature. However, its composition, size and effects on economic growth are still open questions. In this paper, we estimate the size and the evolution of the Mexican informal economy in the last three decades using a vector error correction model. In addition to the standard explanatory variables traditionally used in the currency demand approach, we include remittances given their relevance in the Mexican economic system. The results indicate that informality prior to the late 1980’s accounted for at least two thirds of GDP, while stabilizing around one third of GDP in the last decade. Furthermore, our estimates provide evidence of a positive long run relationship between informality and economic growth.
    Keywords: Informal Sector, currency demand, VEC, Remittances
    JEL: C32 E41 F24 O17
    Date: 2008
  21. By: Rodrigo O. Valdes
    Abstract: This chapter revisits the sudden stop in capital flows episode experienced by Chile in 1998. It documents the macroeconomic environment, the macro framework in place, and the shocks that hit it. The chapter examines the policy reaction to the shocks, evaluating its most likely consequences and analyzing key policy constraints faced at the time. Finally, it describes how the economy adjusted and compares the Chilean episode with a few other recent sudden stop cases.
    Keywords: Sudden Stop, Chile, Capital Flows, Adjustment
    JEL: E58 E63 F32
    Date: 2008–11
  22. By: Asuka Imaizumi (Graduate School of Economics, University of Tokyo); Kaori Ito (Faculty of Science and Technology, Tokyo University of Science); Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: In this paper, the effect of a temporary shock on the industrial agglomeration was investigated, focusing on the case of the 1923 Great Kanto Earthquake. Using the ward and county-level data of Tokyo Prefecture, the persistence of the effect caused by the earthquake was examined. It was confirmed that the effect would finally dissipate, which is consistent with preceding literature. In addition, this paper investigated the persistence differences across industries, specifically the differences between the linkage-intensive industries, and the non-linkage-intensive industries. It was found that the effect of the temporary shock was more persistent in the linkage-intensive industries, which suggests that the there was at least an endogenous portion in the mechanism of industrial agglomeration.
    Date: 2008–11
  23. By: Dorothée Boccanfuso (GREDI, Faculte d'administration, Université de Sherbrooke); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke)
    Abstract: In this paper we use a CGE macro-micro modelling approach to analyse the distributional impact of the food crisis and to examine a couple of policy responses in two neighbouring West African countries. Both countries are strongly dependent on agriculture; both have similar climates and share many other features. However, the approach we use captures structural differences at both the macro level and the micro level for household income and expenditure structures. Our results reveal surprising and significant differences for poverty impact at the national and sub-group levels, as well as for inequality and pro-poor analysis. These differences are present for the world price increase of agricultural goods as well as policy responses to the food crisis. Our results highlight the importance of country-specific analysis and the risk of extrapolating conclusions from one country to another.
    Keywords: Impact analysis, computable general equilibrium modeling, food crisis, Africa
    JEL: D58 I32 O57 Q18 R13
    Date: 2008
  24. By: Djemaï, Elodie
    Abstract: This paper questions the positive relationship between HIV prevalence and income in Sub-Saharan Africa. In this paper, we hypothesize that a greater economic instability would reduce the incentives to engage in self-protective behaviors inducing people to increasingly take the risk of HIV-infection and hence causing a rise in HIV prevalence. We provide a simple model to stress on the effects of an increase in income risk in the incentives for protection. We test the prediction using a panel of Sub-Saharan African countries over the period 1980-2001. It is shown that the epidemic is widespread in countries that experience a great macroeconomic instability over the whole period. When introducing income instability, wealth is devoid of predictive power and the puzzle of the positive relationship between income and prevalence in Africa is lifted. Additional finding states that the risk taking of HIV-infection increases when the individuals are facing frequent and large crop shocks.
    Keywords: HIV/AIDS epidemic; incentives; self-protection; macroeconomic instability; Sub-Saharan Africa
    JEL: J10 I12 C23
    Date: 2008
  25. By: Reinhard H. Schmidt
    Abstract: This paper discusses the so-called commercial approach to microfinance under economic and ethical aspects. It first shows how microfinance has developed from a purely welfare-oriented activity to a commercially relevant line of banking business. The background of this stunning success is the – almost universal – adoption of the so-called commercial approach to microfinance in the course of the last decade. As the author argues, this commercial approach is the only sound approach to adopt if one wanted microfinance to have any social and developmental impact, and therefore the wide-spread “moralistic” criticism of the commercial approach, which has again and again been expressed in the 1990s, is ill-placed from an economic and an ethical perspective. However, some recent events in microfinance raise doubts as to whether the commercial approach has not, in a number of cases, gone too far. The evident example for such a development is the Mexican microfinance institution Compartamos, which recently undertook a financially extremely successful IPO. As it seems, some microfinance institutions have by now become so radically commercial that all of those social and development considerations, which have traditionally motivated work in the field of microfinance, seem to have lost their importance. Thus there is a conflict between commercial and developmental aspirations. However, this conflict is not inevitable. The paper concludes by showing that, and how, a microfinance institution can try to combine using the strengths of the capital market and at the same time maintaining its developmental focus and importance.
    JEL: A13 D63 F35 O16
    Date: 2008–09
  26. By: KASUGA Hidefumi
    Abstract: This paper investigates whether aid flows to developing countries fit well with their development priorities. In particular, we examine aid allocation across sectors in a given recipient country by using sectoral data on aid and indicators that measure the recipient's need for aid in each sector. The data show that inter-recipient aid allocation reflects the recipient's need. However, we found no evidence that inter-sectoral allocation fits with national priorities except in high- and middle-income East Asian countries. Our evidence shows that the quality of bureaucracy and corruption in recipient countries impede efficient inter-sectoral allocation.
    Date: 2008–11

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