nep-dev New Economics Papers
on Development
Issue of 2008‒12‒14
seventeen papers chosen by
Jeong-Joon Lee
Towson University

  1. Gender Inequality, Endogenous Cultural Norms and Economic Development By Victor Hiller
  2. Estimation of Missing Intra-African Trade By Villoria, Nelson
  3. Corruption and trust in political institutions in sub-Saharan Africa By Emmanuelle Lavallée; Mireille Razafindrakoto; François Roubaud
  5. India and the Global Demand for Commodities: Is There an Elephant in the Room? By Michael Francis; Corinne Winters
  6. Conditional Corruption By Bin Dong; Uwe Dulleck; Benno Torgler
  7. Export Demand Elasticities as Determinants of Growth: Estimates for Mauritius By Habiyaremye, Alexis; Ziesemer, Thomas
  8. The Intergenerational Content of Social Spending: Health Care and Sustainable Growth in China By Jean-Paul Fitoussi; Francesco Saraceno
  9. Did PROGRESA send drop-outs back to school? By Maria Nieves Valdes
  10. The sources of long-term economic growth in Indonesia, 1880-2007 By Pierre van der Eng
  11. Immigration and the macroeconomy By Federico S. Mandelman; Andrei Zlate
  12. Financial Development, Technological Change in Emerging Countries and Global Imbalances By Kenza Benhima
  13. Dynamic Globalization and Its Potentially Alarming Prospects for Low-Wage Workers By Hans Fehr; Sabine Jokisch; Laurence J. Kotlikoff
  14. Assessing the Emerging Global Financial Architecture: Measuring the Trilemma's Configurations over Time By Joshua Aizenman; Menzie D. Chinn; Hiro Ito
  15. Financial Literacy, Information, and Demand Elasticity: Survey and Experimental Evidence from Mexico By Justine S. Hastings; Lydia Tejeda-Ashton
  16. More Women Missing, Fewer Girls Dying: The Impact of Abortion on Sex Ratios at Birth and Excess Female Mortality in Taiwan By Ming-Jen Lin; Nancy Qian; Jin-Tan Liu
  17. Why are Saving Rates of Urban Households in China Rising? By Marcos Chamon; Eswar Prasad

  1. By: Victor Hiller (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This research focuses on the role played by cultural norms in the long run persistence of gender inequalities. Cultural norms about gender roles are considered to be endogenous and can generate gender inequality and low development traps. Indeed, when the gender gap is internalized, it leads to inegalitarian views about gender roles. Due to these inegalitarian beliefs, boys receive more education and the initial gender gap is reinforced. The existence of gender inequality traps is pointed out by the World Bank as a major obstacle for economic development (WDR 2006). The present article allows for a better understanding of the persistence of such traps and the means to escape.
    Keywords: Gender equality ; endogenous cultural norms ; economics development ; inequality traps
    Date: 2008–11
  2. By: Villoria, Nelson
    Abstract: Missing trade is defined as the exports and imports that may have taken place between two potential trading partners, but which are unknown to the researcher because neither partner reported them to the United Nation’s COMTRADE, the official global repository of trade statistics. In a comprehensive sample of African countries, over 40% of the potential trade flows fit this definition. For a continent whose trade integration remains an important avenue for development, this lack of information hinders the analysis of policy mechanisms -- such as the Economic Partnership Agreements with the EU -- that influence intra-regional trade patterns. This paper estimates the likely magnitude of the missing trade by modeling the manufacturing trade data in the GTAP Data Base using a gravity approach. The gravity approach employed here relates bilateral trade to country size, distance, and other trade costs while explicitly considering that high fixed costs can totally inhibit trade. This last feature provides an adequate framework to explain the numerous zero-valued flows that characterize intra-African trade. The predicted missing exports are valued at approximately 300 million USD. The incidence of missing trade is highest in the lowest income countries of Central and West Africa.
    Date: 2008
  3. By: Emmanuelle Lavallée (DIAL, Paris); Mireille Razafindrakoto (DIAL, IRD, Paris); François Roubaud (DIAL, IRD, Paris)
    Abstract: (english) This paper analyzes the impact of corruption on the extent of trust in political institutions using a rich collection of comparable data provided by the Afrobarometer surveys conducted in 18 sub-Saharan African countries. More specifically, we set out to test the “efficient grease” hypothesis that corruption can strengthen citizens’ trust since bribe paying and clientelism open the door to otherwise scarce and inaccessible services and subsidies, and that this increases institutional trust. Our findings reject this theoretical argument. We show that corruption never produces trust-enhancing effects regardless of the evaluation of public service quality. The results reveal how perceived and experienced corruption impact negatively, but differently, on citizens’ trust in political institutions. The adverse effect of perceived corruption decreases with the fall in public service quality, whereas the negative effect of experienced corruption decreases as public service quality increases. _________________________________ (français) Cet article explore les interactions entre la confiance institutionnelle et la corruption à partir d’un riche corpus d’enquêtes-ménages comparables : les enquêtes Afrobaromètre réalisées dans 18 pays d’Afrique sub-saharienne. Plus précisément, il teste les théories de l’ « huile dans les rouages » selon lesquelles la corruption peut renforcer la confiance des citoyens en leur permettant d’accéder à des services publics autrement inaccessibles. Nos résultats infirment clairement ces théories. Nous montrons que la corruption réduit clairement la confiance et ce quelque soit la qualité des services gouvernementaux. Ils suggèrent toutefois que l’expérience et la perception de la corruption ont des effets distincts sur la confiance institutionnelle.
    Keywords: Corruption, Institutions.
    JEL: D73 P48
    Date: 2008–09
  4. By: Ljungwall, Christer (China Economic Research Center); Gustavsson Tingvall, Patrik (China Economic Research Center)
    Abstract: Empirical evidence suggests that China has benefited from foreign direct investment (FDI). However, an important question that remains unanswered is whether China has benefited more from FDI than other countries in general and other transition and developing countries in particular. This paper investigates this issue by performing a Meta-analysis on a sample of 67 country-specific studies yielding 125 observations that have gauged the nexus between FDI and measures of income growth. The results show that studies on China report relatively high t-values and thus indicate that China may have benefited more than other countries from FDI.
    Keywords: Meta-analysis; Foreign direct investment; Economic growth; China
    JEL: F21 F23
    Date: 2008–11–01
  5. By: Michael Francis; Corinne Winters
    Abstract: After 10 years of impressive growth, India is now the fourth largest economy in the world. Yet, to date, India's impact on global commodity markets has been muted. The authors examine how India's domestic and trade policies have distorted and constrained its demand for commodities. They find that India's industrial policies have altered the expansion path of its economy, putting the service sector to the forefront and likely reducing India's demand for metals. Sector-specific policies, such as those promoting self-sufficiency in agriculture, have altered India's demand for food commodities and its supplies of those commodities to international markets. Recent policy reforms in manufacturing have boosted output, which coincides well with an increase in India's demand for metals over the past 4–5 years. Continued policy reforms are likely to diminish the distorting influence of India's domestic and trade policies. India's demand for energy and metals should rise as some rebalancing occurs in its economic structure.
    Keywords: Development economics; International topics
    JEL: F14 O13 O53
    Date: 2008
  6. By: Bin Dong; Uwe Dulleck; Benno Torgler
    Abstract: We argue that the decision to bribe bureaucrats depends on the frequency of corruption within a society. We provide a behavioral model to explain this conduct: engaging in corruption results in a disutility of guilt. This implies that people observe a lower probability to be involved in corruption if on average the guilt level of others within a country is higher. We also explore whether - and to what extent - group dynamics or socialization and past experiences affect corruption. In other words, we explore theoretically and empirically whether corruption is contagious and whether conditional cooperation matters. We use the notion of “conditional corruption” for these effects. The empirical section presents evidence using two data sets at the micro level and a large macro level international panel data set covering almost 20 years. The results indicate that the willingness to engage in corruption is influenced by the perceived activities of peers and other individuals. Moreover, the panel data set at the macro level indicates that the past level of corruption has a strong impact on the current corruption level.
    Keywords: corruption; contagion effect; conditional cooperation; interdependent preferences
    JEL: K42 D72 D64 O17 J24
    Date: 2008–11
  7. By: Habiyaremye, Alexis (UNU-MERIT); Ziesemer, Thomas (UNU-MERIT, and Maastricht University)
    Abstract: In this paper, we combine the export-led and import-led growth hypotheses in a growth model in which the importation of foreign capital goods and the demand elasticities of own export products explain the growth opportunities and the technical progress of developing countries. This model, based on imported capital goods uses Mauritius’ data on capital investment, employment, export partners’ growth and terms of trade to estimate price and income elasticities of export demand, total-factor productivity growth and economies of scale. These elasticities are then used to assess how the growth in export partners’ income is converted into domestic growth. The implications of the presence of low or high export demand elasticities are discussed by relating them to various strands of trade and growth literature. Based on the results of this estimation, we also calculate steady-state growth rates, engine and handmaiden effects of growth as well as the dynamic steady-state gains from trade for this latecomer export economy. The implications of steady state results are also discussed in the light of the Mauritian employment and growth perspectives.
    Keywords: growth models, trade, capital goods, exports, total factor productivity
    JEL: O11 O19 O41 F43
    Date: 2008
  8. By: Jean-Paul Fitoussi (Observatoire Français des Conjonctures Économiques); Francesco Saraceno (Observatoire Français des Conjonctures Économiques)
    Abstract: The paper endorses the thesis that current macro imbalances are partly due to an excess of household savings in China, whose origin is to be found among other things in household uncertainty about the provision of public services like health care, pensions and education. Focusing on health services, because of their priority in the concerns of the Chinese people, we describe the recent trends in the provision of health care. We then argue that social spending by the government may have important intergenerational content, in that it allows higher private spending, lower inequality, higher levels of human capital and the like. All these factors are related to the potential growth rate of the economy. We conclude that a more important role of the government in the sector of public services, and in particular of health care, may help reduce the possibility of future bottlenecks, and hence help keeping the Chinese economy on a sustainable growth path. We conclude the paper by an assessment of the current debate on how to reform the system, and we advocate universal publicly funded basic health coverage.
    Keywords: Social Spending, Health Care, Sustainable Growth, Chinese Economy, Savings Glut
    JEL: I11 I18 N35
    Date: 2008
  9. By: Maria Nieves Valdes
    Abstract: This paper analyzes the effect of PROGRESA education grants on school enrollment. It looks at its effect on total school enrollment and in particular on school enrollment of drop-outs, i.e. those children who face a re-enrollment decision since they were not enrolled in school the year prior to the implementation of the PROGRESA program. Estimates of the impact of PROGRESA education grants on drop-outs and non-drop-outs are obtained applying difference estimation and maximum likelihood estimation of a reduced form equation for schooling decision. Differences in results between both groups of children are discussed looking at the distribution of marginal effects. PROGRESA did send drop-outs back to school. It had a larger effect on drop-outs than on non-drop-outs. However, for the particular group of girls who dropped out of school just before attending secondary school PROGRESA grants only had a minor effect. This last finding highlights the fact that determinants of the schooling decision are different for young girls and that PROGRESA grants do not provide a strong enough incentive to send them back to school.
    Keywords: Anti-poverty program evaluation, School enrollment, Re-enrollment decision, Heterogeneous program effects, Correlated random effects model
    JEL: C21 C23 I28 I38
    Date: 2008–06
  10. By: Pierre van der Eng
    Abstract: This paper initiates discussion about the contribution of Total Factor Productivity (TFP) growth to Indonesia’s long-term economic growth. It presents new time series estimates of GDP, capital stock and education-adjusted employment, and offers a growth accounting approach that estimates the contribution of conventional factor inputs to GDP growth during 1880-2007. For most of the period, the growth of employment, educational attainment and particularly capital stock explained almost all of long-term output growth, and TFP growth was marginal. During the key growth periods 1900-29 and 1967-97, TFP growth was on balance negative, respectively marginally positive. However, the contribution of TFP growth was substantial during some sub-periods, particularly 1933-41, 1951-61, 1967-73 and 2000-07. Each of these followed a major economic downturn that slowed capital stock growth and required a more efficient use of productive resources, assisted by changes in economic policy and institutions that enhanced productivity and efficiency.
    JEL: N15 O11 O47 O53
    Date: 2008–12
  11. By: Federico S. Mandelman; Andrei Zlate
    Abstract: We analyze the dynamics of labor migration and the insurance role of remittances in a two-country, real business cycle framework. Emigration increases with the expected stream of future wage gains but is dampened by the sunk cost reflecting border enforcement. During booms in the destination economy, the scarcity of established immigrants lessens capital accumulation, labor productivity, and the native wage. The welfare gain from the inflow of unskilled labor increases with the complementarity between skilled and unskilled labor and the share of the skilled among native labor. The model matches the cyclical dynamics of the unskilled immigration from Mexico.
    Date: 2008
  12. By: Kenza Benhima
    Abstract: The paper shows that in a general equilibrium model with two countries, characterized by different levels of financial development, and two technologies, one more productive and more financially demanding than the other, the following stylized facts can be replicated: 1) the persistent US current account deficits since the beginning of the 90’s; 2) growth of output per worker in developing countries in relative terms with the US during the same period; 3) relative capital accumulation and 4) TFP growth in these countries, also relative to the US. The more productive technology takes more time to implement and is subject to liquidity shocks, while the less productive one, along with external bond assets, can be used as a hoard to finance those liquidity shocks. As a result, after financial globalization, if the emerging economy is capital scarce and if its financial market is sufficiently incomplete, it experiences an increase in net foreign assets that coincides with a fall in the less productive investment and a rise in the more productive one. Convergence towards the steady state implies then both a better allocation of capital that generates endogenous aggregate TFP gains and a rise in aggregate investment that translates into higher growth.
    Keywords: Growth, Capital flows, Credit constraints, financial globalization, technological change
    JEL: F36 F43 O16 O33
    Date: 2008
  13. By: Hans Fehr; Sabine Jokisch; Laurence J. Kotlikoff
    Abstract: Will incomes of low and high skilled workers continue to diverge? Yes says our paper's dynamic, six-good, five-region -- U.S., Europe, N.E. Asia (Japan, Korea, Taiwan, Hong Kong), China, and India -- general equilibrium, life-cycle model. The model predicts a near doubling of the ratio of high- to low-skilled wages over the century. Increasing wage inequality arises from a traditional source -- a rising worldwide relative supply of unskilled labor, reflecting Chinese and Indian productivity improvements. But China's and India's education policies matter. If successive Chinese and Indian cohorts become more skilled, major exacerbation of inequality will be precluded.
    JEL: F0 F20 H0 H3 J20 O0 O23
    Date: 2008–12
  14. By: Joshua Aizenman; Menzie D. Chinn; Hiro Ito
    Abstract: We develop a methodology that allows us to characterize in an intuitive manner the choices countries have made with respect to the trilemma during the post Bretton-Woods period. The first part of the paper deals with positive aspects of the trilemma, outlining new metrics for measuring the degree of exchange rate flexibility, monetary independence, and capital account openness. The evolution of our "trilemma indexes" illustrates that after the early 1990s, industrialized countries accelerated financial openness, but reduced the extent of monetary independence while sharply increasing exchange rate stability. This process culminated at the end of the 1990s with the introduction of the euro. In contrast, the group of developing countries pursued exchange rate stability as their key priority up to 1990, although many countries moved toward greater exchange rate flexibility from the early 1970s onward. Since 2000, measures of the three trilemma variables have converged towards intermediate levels characterizing managed flexibility, using sizable international reserves as a buffer, thus retaining some degree of monetary autonomy. Using these indexes, we also test the linearity of the three aspects of the trilemma: monetary independence, exchange rate stability, and financial openness. We confirm that the weighted sum of the three trilemma policy variables adds up to a constant, validating the notion that a rise in one trilemma variable should be traded-off with a drop of the weighted sum of the other two. The second part of the paper deals with normative aspects of the trilemma, relating the policy choices to macroeconomic outcomes such as the volatility of output growth and inflation, and medium term inflation rates. Some key findings for developing countries include: (i) greater exchange rate stability implies greater output volatility, which can only be slightly mitigated by reserve accumulation; (ii) somewhat counter to previous findings, greater exchange rate stability is also associated with greater inflation volatility, and (iii) greater monetary autonomy is associated with a higher level of inflation. We believe these results differ from those identified in previous studies due to the comprehensive nature of our analysis, which encompasses more than 100 countries and 37 years, as well as the inclusion of a number of additional structural and policy variables in the regressions.
    JEL: F15 F21 F31 F36 F41 O24
    Date: 2008–12
  15. By: Justine S. Hastings; Lydia Tejeda-Ashton
    Abstract: We use responses to a survey and experiment with participants in Mexico’s privatized social security system to examine how financial literacy impacts workers’ choice behavior and how simplifying information on management fees may increase measures of price elasticity sensitivity among the financially illiterate. We find that by presenting fees in pesos instead of annual percentage rates, financially illiterate workers focus much more on fees when choosing between investment funds, selecting funds with lower average fees in hypothetical choice settings. Even though changes in information have small impacts on fees of the selected fund, holding fees constant, we show that changes in choice behavior imply a substantial increase in price sensitivity. Hence, the way in which information is presented to workers can have a substantial impact on optimal fees that firms can charge in the marketplace.
    JEL: H0 H55 L10
    Date: 2008–12
  16. By: Ming-Jen Lin; Nancy Qian; Jin-Tan Liu
    Abstract: Many countries with "deficits" in their female population see banning sex-selective abortion as a way to curb the observed sex imbalance. However, they rarely discuss the potentially negative unintended consequences of this ban on female survival rates as parents may be forced to substitute post-natal for pre-natal sex-selection. This paper presents novel empirical evidence on the impact of access to abortion on sex ratios at birth and relative female infant mortality. We use the universe of birth and death registry data from Taiwan and exploit plausibly exogenous variation in the availability of sex-selective abortion caused legislative changes to identify the causal effects of sex-selective abortion on sex ratios at birth and excess female mortality. We find that sex-selective abortion increased the fraction of males at birth by approximately 0.7 percentage-points, accounting for approximately 100% of the observed increase in sex ratios at birth during the 1980s; and it decreased relative female neo-natal mortality by approximately 61%. We estimate that approximately 13 more female infants survived for every 100 aborted female fetuses.
    JEL: J1
    Date: 2008–12
  17. By: Marcos Chamon; Eswar Prasad
    Abstract: From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to about one quarter of disposable income. We use household-level data to explain why households are postponing consumption despite rapid income growth. Tracing cohorts over time indicates a virtual absence of consumption smoothing over the life cycle. Saving rates have increased across all demographic groups although the age profile of savings has an unusual pattern in recent years, with younger and older households having relatively high saving rates. We argue that these patterns are best explained by the rising private burden of expenditures on housing, education, and health care. These effects and precautionary motives may have been amplified by financial underdevelopment, as reflected in constraints on borrowing against future income and low returns on financial assets.
    JEL: D12 E21 O16
    Date: 2008–12

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