nep-dev New Economics Papers
on Development
Issue of 2009‒01‒03
twenty-one papers chosen by
Jeong-Joon Lee
Towson University

  2. Comparative Output and Labour Productivity in Manufacturing for China, Japan, Korea and the United States in Circa 1935 by a Production PPP Approach By Kyoji Fukao; Harry X. Wu; Tangjun Yuan
  3. Health shocks, household consumption, and child nutrition By Marcos Vera-Hernández; Aida Galiano
  4. The reliability of self-reported home values in a developing country context By Climent Quintana; Marco González
  5. Child Mortality in Eastern and Southern Africa By Sudhanshu Handa; Steven F. Koch; Shu Wen Ng
  7. Tax challenges facing developing countries. By Bird, Richard M.
  8. Goods and services tax for India. By Rao, R. Kavita
  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. Values and Economic Performance: Theory and some Evidence from Kenya By Gilad Aharonovitz; Elizabeth Kabura Nyaga
  11. The law of growth and attraction: an endogenous model of absorptive capacities, FDI and income for MENA countries By Alaya MAROUANE (Université de Tunis); Dalila NICET-CHENAF (GREThA-GRES); Eric ROUGIER (GREThA-GRES)
  12. Maximising Mexico’s Gains from Integration in the World Economy By David Haugh; Roselyne Jamin; Bruno Rocha
  13. Commodity Reform and Extensive Production Growth: Evidence from Burkinabè cotton farmers By KAMINSKI Jonathan; THOMAS Alban
  14. The New Growth Theories and Their Empirics after Twenty Years By Capolupo, Rosa
  15. Finance, growth, inequality and hunger in Asia: Evidence from country panel data in 1960-2006 By Katsushi Imai; Raghav Gaiha; Ganesh Thapa
  16. Birth, Death, and Development: A Simple Unified Growth Theory By Holger Strulik; Jacob Weisdorf
  17. Inequality and aggregate savings in the neoclassical growth model By Reto Foellmi
  18. The Dual Economy in Long-run Development By Vollrath, Dietrich
  19. Federalism and economic development in India: An assessment By Singh, Nirvikar; Srinivasan, T.N.
  20. South-South Investment in Infrastructure: The Operation of Indian Firms in Developing Countries By Pradhan, Jaya Prakash
  21. Learning the Wealth of Nations By Francisco J. Buera; Alexander Monge-Naranjo; Giorgio E. Primiceri

  1. By: Gilles Dufrénot (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579); Valérie Mignon (CEPII - Centre d'études prospectives et d'informations internationales - Université de Paris X - Nanterre); Anne Peguin-Feissolle (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579)
    Abstract: We revisit the evidence of the existence of a long-run link between financial intermediation and economic growth, by testing of cointegration between the growth rate of real GDP, control variables and three series reflecting financial intermediation. We consider a model with a factor structure that allows us to determine whether the finance-growth link is due to cross countries dependence and/or whether it characterises countries with strong heterogeneities. We employ techniques recently proposed in the panel data literature, such as PANIC analysis and cointegration in common factor models. Our results show differences between the developed and developing countries. We run a comparative regression analysis on the 1980-2006 period and find that financial intermediation is a positive determinant of growth in developed countries, while it acts negatively on the economic growth of developing countries.
    Keywords: financial intermediation; growth; common factor; panel data; PANIC analysis
    Date: 2008–12–18
  2. By: Kyoji Fukao; Harry X. Wu; Tangjun Yuan
    Abstract: Following the standard methodology for measuring industry-of-origin or production-side PPPs, this study compares the unit values of manufacturing products in China, Japan, Korea and the US to calculate unit value ratios (UVRs) and hence estimates PPPs for individual manufacturing industries using the US as the base country in circa 1935. Based on the products that could be matched between these countries, the estimated manufacturing production PPPs for China, Japan and Korea are only from half to two thirds of the prevailing market exchange rates, suggesting much lower cost of production in manufacturing in these countries than in the US. The estimated PPPs are used to calculate industry-level output and labour productivity in China, Japan and Korea relative to those of the US in circa 1935. The results show that the size of factory manufacturing in Japan was 12 percent of the US level whereas in China it was only one percent and even lower in Korea. In terms of comparative labour productivity, measured as PPP$ per hour worked with the US as the reference, Japanese and Korean manufacturing was 24 and 23 percent of the US level, whereas Chinese manufacturing was only 7 percent of the US level.
    Keywords: Production (industry-of-origin) purchasing power parity (PPP), unit value ratio, comparative output and labour productivity, comparative advantage, economic development
    JEL: L60 O47 P52
    Date: 2008–12
  3. By: Marcos Vera-Hernández (Institute for Fiscal Studies); Aida Galiano (Universidad de Zaragoza)
    Abstract: This paper investigates the effect of health shocks on household consumption and child nutrition. Using longitudinal data from rural Colombia we find that several items of household consumption, including medical expenditure, food consumption, and total consumption, increase following a recent illness event of an adult usually active in the labour market. In contrast to this, we find that girls¿ weight is negatively affected, as a consequence of the same illness event. The results on nutrition present an interesting gender bias, since we do not find any evidence that boys¿ nutritional status deteriorates. Our conclusion is that households make difficult intrahousehold choices when an illness shock hit them. The results have implications for the literature on testing for full insurance because it usually relies on household consumption net of medical expenditures as a measure of welfare. This fact shows that this literature might has underestimated the effects of health shocks on welfare. Este artículo investiga los efectos de los shock de salud sobre el consumo de los hogares y la nutrición infantil. A partir de una base de datos longitudinal que corresponde a datos del área rural de Colombia encontramos que varios elementos del consumo de los hogares, incluidos gastos médicos, consumo de alimentos y consumo total del hogar, aumentan después de que una reciente enfermedad afecte a un adulto del hogar activo en el mercado de trabajo. En contraposición a este resultado, encontramos que la nutrición de los niños se ve negativamente afectada. En concreto el peso de las niñas se reduce tras este shock de salud. Este resultado sobre nutrición presenta un interesante sesgo de género, ya que no encontramos evidencia de un deterioro nutricional en los niños. Nuestra conclusión es que los hogares tienen difícil elecciones dentro de los hogares cuando un shock de salud les sacude. Este resultado tiene implicaciones para la literatura que prueba la cobertura total de los hogares ya que esta atiende únicamente al consumo de los hogares, neto de los gastos médicos, como medida de bienestar. Este hecho muestra que esta literatura podría estar subestimando los efectos de los shock de salud sobre el bienestar de los hogares.
    Keywords: Riesgo compartido, Nutrición infantil, Consumo del hogar, Shock de salud. Risk sharing, Child nutrition, Household Consumption, Intrahousehold, Health Shocks.
    JEL: C23 C81 D13
    Date: 2008–12
  4. By: Climent Quintana (Universidad de Alicante); Marco González (Princeton University)
    Abstract: We analyze the reliability of homeowners¿ estimates of the value of their houses, in a household survey (of poor suburbs) of a developing country. We show that non-response to the home value question by the owner is uncorrelated with the appraised value of the house and other demographic characteristics of the respondent. We also document that homeowners with long tenure largely overestimate the value of their home. Moreover, both the bias and the lack of precision in homeowners¿ estimates are correlated with tenure, but not with socioeconomic characteristics. However, we also show that self-reported home values from short-tenure homeowners can be used to obtain unbiased and precise estimates of the average house value at the census tract level.
    Keywords: bias, inaccuracy, housing prices, owners¿ estimates, appraised values.
    JEL: R21 R31 R14
    Date: 2008–12
  5. By: Sudhanshu Handa (Public Policy, University of North Carolina at Chapel Hill); Steven F. Koch (Department of Economics, University of Pretoria); Shu Wen Ng (Public Policy, University of North Carolina at Chapel Hill)
    Abstract: High rates of infant mortality in Africa continue to be a major public health concern today, despite the fact that most deaths can be prevented from well known, relatively low cost technologies. Using multiple years of DHS from four countries, we estimate the change in the relative risk of death as well as the main contributions to the change in mortality over time. We find significant declines in the mortality hazard in each of the 4 countries, with the largest declines in Malawi (44 percent) and Tanzania (22 percent) between the mid 1990s to mid 2000s, although there is significant variation by age group in the hazard rate across time. In Zambia for example, the hazard increased for children ages 25-60 months in spite of on overall decline in mortality, while in Mozambique the largest decline in mortality was exactly among this age group. The decomposition analysis illustrates that some of the main correlates of mortality did not contribute to overall declines over time, because the levels of these correlates did not change during the study period. This is particularly true for birth spacing, attended births and breastfeeding. The analysis also demonstrates the overall lack of explanatory power of the individual and household level variables available for use in the DHS, indicating the need to collect complementary supply side information, through community questionnaires for example, that can be linked to DHS households and thus expand the set of covariates available for modeling child survival and other health outcomes.
    Date: 2008–10
  6. By: Olufunke A. Alaba (Department of Economics, University of Pretoria); Steven F. Koch (Department of Economics, University of Pretoria)
    Abstract: A large number of child deaths in developing countries could be averted if ill children received care sooner rather than later. However, analysis in these developing countries rarely considers the pathway, through which, health care is sought at the household level. This paper considers two separate pathways of health-seeking decisions and finds that household controls affect decisions in different ways across the pathway; for example, different measures of female empowerment increase treatment, as well as preferences for private care along the pathway, but not consistently.
    JEL: I12 D13 C35
    Date: 2008–10
  7. By: Bird, Richard M. (National Institute of Public Finance and Policy)
    Date: 2008–03
  8. By: Rao, R. Kavita (National Institute of Public Finance and Policy)
    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: Gilad Aharonovitz; Elizabeth Kabura Nyaga (School of Economic Sciences, Washington State University)
    Abstract: Policy, saving rates, human capital, etc. are possible explanations for poor economic performance, but while these factors are changeable, underdevelopment persists. Looking for an unchangeable factor, we construct a theory for the effect of values, such as moral values, risk-taking, and responsibility to others, on economic performance, and demonstrate it using a model in which responsibility for parents prevents development. We construct data of economic performance and values of seven tribes in Kenya by inferring values from children's stories, and verify the model. Thus, we open a door for the quantitative analysis of the effect of values over the economy.
    Keywords: economic development, values, social norms, Kenya
    JEL: A13 O10 O55 Z10
    Date: 2008–08
  11. By: Alaya MAROUANE (Université de Tunis); Dalila NICET-CHENAF (GREThA-GRES); Eric ROUGIER (GREThA-GRES)
    Abstract: In this paper, we build a structural model of growth and we estimate it on panel data. We go further than the previous studies of Bende et al. (2000, 2003) or Li & Liu (2005), because we not only control for the endogenity of FDI towards growth, but we also control for the endogenity of FDI towards the other variables (trade openness, domestic investment, human development) that are likely to increase the effects of foreign investments on growth through the absorption capacities building. We show that this model brings in new and interesting results about the interactions between attraction, FDI and growth in MENA countries (Middle East and North Africa countries).
    Keywords: FDI, Human capital, Growth, simultaneous equations, MENA
    JEL: F1 O11
    Date: 2008
  12. By: David Haugh; Roselyne Jamin; Bruno Rocha
    Abstract: Considering the costs and risks of inaction, ambitious action to reduce greenhouse gas emissions is economically rational. However, success in abating world emissions will ultimately require a least-cost set of policy instruments that is applied as widely as possible across all emission sources (countries, sectors and greenhouse gases). The main purpose of this paper is to explore feasible ways to meet these two basic requirements for successful future climate policies. Using a range of modelling frameworks, it analyses cost-effective policy mixes to reduce emissions, the implications of incomplete coverage of policies for the costs of mitigation action and carbon leakage, the role of technology-support policies in lowering future emissions and policy costs, as well as the incentives –and possible options to enhance them – for emitting countries to take action against climate change. <P>Tirer profit au maximum de l’intégration du Mexique dans l’économie mondiale <BR>Le présent papier examine les politiques menées par le Mexique dans le domaine des échanges et investissements internationaux, et formule des recommandations spécifiques visant à lui permettre de tirer le meilleur parti possible d’une intégration plus étroite au sein de l’économie mondiale. Au cours des deux dernières décennies, le Mexique a sensiblement progressé dans la réduction des obstacles aux échanges et à l’investissement direct étranger (IDE), ce qui a favorisé l’augmentation du PIB par habitant. Cela étant, des progrès restent à faire sur le plan de la réforme de la politique commerciale, en réduisant encore les obstacles tarifaires et non tarifaires sur une base NPF, de manière à accroître l’efficience de l’économie. Les entraves à l’IDE demeurent nombreuses, notamment dans certains secteurs de services et infrastructures comme les télécommunications et les transports terrestres intérieurs. Il conviendrait d’assouplir les restrictions touchant les intérêts étrangers de manière à attirer davantage d’investissements et à améliorer ainsi la productivité. Pour tirer un plus large profit de l’IDE, il conviendrait de renforcer les liens logistiques entre les investisseurs étrangers et les autres entreprises présentes au Mexique.
    Keywords: trade policy, politique commerciale, Mexico, Mexique, foreign direct investment, investissement direct étranger, trade performance, performance commerciale
    JEL: F14 F21
    Date: 2008–12–17
  13. By: KAMINSKI Jonathan; THOMAS Alban
    Date: 2009–01
  14. By: Capolupo, Rosa
    Abstract: In this work we update the reviews on endogenous growth theories, after two decades of theoretical and empirical contributions in order to explore whether recent empirical studies have become more supportive of their main predictions. Among the core topics studied in the growth econometric framework, namely, convergence, identification of growth determinants and factors responsible for growth differences in the data, the primary focus of this paper is on the last two. We will review, from macro growth regressions, studies that test primarily the performance of endogenous models in terms of significance and robustness of the coefficients of growth determinants. By highlighting methodological issues and critical discussion, we argue that: (i) causal inference drawn from the empirical growth literature remains highly questionable, (ii) there are estimates for a wide range of potential factors but their magnitude and robustness are still under debate. Our conclusion, however, is that, if properly interpreted, the predictions of endogenous growth models are increasingly gathering empirical support.
    Keywords: Endogenos growth, growth regressions, convergence
    JEL: C31 O41 O47
    Date: 2008
  15. By: Katsushi Imai; Raghav Gaiha; Ganesh Thapa
    Date: 2008
  16. By: Holger Strulik (University of Hannover); Jacob Weisdorf (Department of Economics, University of Copenhagen)
    Abstract: This study provides a unified growth theory to correctly predict the initially negative and subsequently positive relationship between child mortality and net reproduction observed in industrialized countries over the course of their demographic transitions. The model captures the intricate interplay between technological progress, mortality, fertility and economic growth in the transition from Malthusian stagnation to modern growth. It identifies a number of structural breaks over the course of development, suggesting a high degree of complexity regarding the relationships between various economic and demographic variables.
    Keywords: economic growth; mortality; fertility; structural change; industrial revolution
    JEL: O11 O14 J10 J13
    Date: 2008–12
  17. By: Reto Foellmi
    Abstract: Within the context of the neoclassical growth model I investigate the implications of (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence. Furthermore, there is divergence in consumption and lifetime wealth if the rich exhibit a higher intertemporal elasticity of substitution. Unlike the Solow-Stiglitz model, the steady state is always unique although the consumption function is concave.
    Keywords: Marginal propensity to consume, income distribution, growth, concave consumption function.
    JEL: O40 D30 O10
    Date: 2008–11
  18. By: Vollrath, Dietrich
    Abstract: This paper provides a dynamic model of the dual economy in which differences in productivity across sectors arise endogenously. Rather than relying on exogenous price distortions, duality arises because of differences between sectors in the separability of their fertility and labor decisions. The model demonstrates how a dual economy will originate, persist, and eventually disappear within a unified growth framework. It is also shown that agricultural productivity growth will exacerbate the inefficiencies of a dual economy and slow down long-run growth.
    Keywords: Dual economy; unified growth; endogenous fertility
    JEL: O11 O41 O17 O13 Q10
    Date: 2008–12–18
  19. By: Singh, Nirvikar; Srinivasan, T.N.
    Abstract: This paper examines India’s federal system in the context of prospects for India’s future economic growth and development. After a brief review of India’s recent policy reforms and economic development outcomes, and of the country’s federal institutions, the analysis focuses on the major issues with respect to India’s federal system in terms of their developmental consequences. We examine the impacts of tax assignments, expenditure authority and the intergovernmental transfer system on the following aspects of India’s economy and economic performance: the quality of governance and government expenditure, the efficiency of the tax system, the fiscal health of different tiers of government, and the impacts on growth and on regional inequality. In each case, we discuss recent and possible policy reforms. We make comparisons with China’s federal system where this is instructive for analyzing the Indian case. Finally, we provide a discussion of potential reforms of aspects of India’s federal institutions.
    Keywords: India; China; federalism; economic development;fiscal federalism; intergovernmental transfers; decentralization
    JEL: H1 H7 P35 H5 H2 P26 H6
    Date: 2006–06
  20. By: Pradhan, Jaya Prakash
    Abstract: Since 1990s South-South investment flows have assumed a considerable significance in the economic relations among developing countries. The host developing countries tend to see the growing FDI flows from co-developing economies as a prospective source of financial capital, skills and technologies useful for their economic development. However, there is clearly a lack of recognition among them about the potential of southern investment in improving their civil, social and industrial infrastructure. A distinction can be made between the two main forms in which developing country firms participate in the infrastructure sector of co-developing countries. The first is the project exports resorted by southern firms in various infrastructure areas like transportation, communication, energy, etc. The second form comprises direct investment operation of southern firms to provide infrastructure services to the end users. India presents a classic example of South-South investment in infrastructure sector with Indian firms consistently expanding their project exports and infrastructure-related FDI activities over the years. In the light of growing size of Indian project exports and infrastructure FDI, this study calls for evolving a holistic policy framework by both home and host developing countries to enhance the potential of such investment for infrastructure development.
    Keywords: FDI; Project Exports; Developing Countries
    JEL: F23 F14 F21 R11
    Date: 2008–08
  21. By: Francisco J. Buera; Alexander Monge-Naranjo; Giorgio E. Primiceri
    Abstract: We study the evolution of market-oriented policies over time and across countries. We consider a model in which own and neighbors' past experiences influence policy choices, through their effect on policymakers' beliefs. We estimate the model using a large panel of countries. We find that there is a strong geographical component to learning, which is crucial to explain the slow adoption of liberal policies during the postwar period. Our model also predicts that there would be a substantial reversal to state intervention if nowadays the world was hit by a shock of the size of the Great Depression.
    JEL: O4 O43 O50
    Date: 2008–12

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