nep-dev New Economics Papers
on Development
Issue of 2009‒03‒14
thirty papers chosen by
Jeong-Joon Lee
Towson University

  1. Effective Schools for Low Income Children: a Study of Chile’s Sociedad de Instrucción Primaria By Francisco Henríquez; Alejandra Mizala; Andrea Repetto
  2. Access to Higher Education and Inequality: The Chinese Experiment By Wang, Xiaojun; Fleisher, Belton M.; Li, Haizheng; Li, Shi
  3. Democracy and Reforms By Giuliano, Paola; Mishra, Prachi; Spilimbergo, Antonio
  4. China’s Energy Economy: A Survey of the Literature By Hengyun Ma; Les Oxley
  5. Inclusive growth analytics : framework and application By Ianchovichina, Elena; Lundstrom, Susanna
  6. Democracy and reforms By Amin, Mohammad; Djankov, Simeon
  7. Transforming natural resource wealth into sustained growth and poverty reduction : a conceptual framework for Sub-Saharan African oil exporting countries By Toto Same, Achille
  8. Assessing the impact of political economy factors on rules of origin under NAFTA By Portugal-Perez, Alberto
  9. The use and misuse of computers in education : evidence from a randomized experiment in Colombia By Barrera-Osorio, Felipe; Linden, Leigh L.
  10. No more cutting class ? reducing teacher absence and providing incentives for performance By Rogers, F. Halsey; Vegas, Emiliana
  11. Global income distribution and poverty in the absence of agricultural distortions By Bussolo, Maurizio; De Hoyos, Rafael; Medvedev, Denis
  12. Weakly relative poverty By Ravallion, Martin; Chen, Shaohua
  13. (UN)Bundling infrastructure procurement : evidence from water supply and sewage projects By Estache, Antonio; Iimi, Atsushi
  14. Age at first child : does education delay fertility timing ? the case of Kenya By Ferre, Celine
  15. Is there an incipient turnaround in Asia's"missing girls"phenomenon ? By Das Gupta, Monica; Chung, Woojin; Shuzhuo, Li
  16. Structural Gravity Equations with Intensive and Extensive Margins By Matthieu Crozet; Pamina Koenig
  17. Vietnam's Accession to the WTO: Ex-Post Evaluation in a Dynamic Perspective By Houssein Boumellassa; Hugo Valin
  18. Does fast Growth in India and China harm U.S. Workers? Insights from Simulation Evidence By Alex Izurieta; Ajit Singh
  19. Spatial inequalities explained: evidence from Burkina Faso By Johannes Gräb; Michael Grimm
  20. The Relationship Between Unemployment and Earnings Inequality in South Africa By Tregenna, F.
  21. Contracting Out of Service Activities and the Effects on Sectoral Employment Patterns in South Africa By Tregenna, F.
  22. Human Capital vs Physical Capital: A cross country analysis of human development strategies By Siddiqui, Rizwana
  23. Impact of Foreign Direct Investments on Industrial Productivity: A Subnational Study of India By Vadlamannati, Krishna Chaitanya
  24. Legal enforcement, public supply of liquidity and sovereign risk By Brutti, Filippo
  25. Wissensbasierte Entwicklung in Singapur und Malaysia By Menkhoff, Thomas; Gerke, Solvay; Evers, Hans-Dieter; Chay, Yue Wah
  26. Reading between the lines: A closer look at the effectiveness of early childhood education policy to reduce inequality in Argentina By Paglayan, Agustina
  27. Agglomeration economies and the location of Taiwanese investment in China By Chen, George Shih-Ku
  28. The impact of a common currency on East Asian production networks and China's exports behvior By Rahman, Mizanur
  29. Child Care Provision: Semiparametric Evidence from a Randomized Experiment in Mexico. By Dubois, Pierre; Rubio-Codina, Marta
  30. The Slave Trade and the Origins of Mistrust in Africa By Nathan Nunn; Leonard Wantchekon

  1. By: Francisco Henríquez; Alejandra Mizala; Andrea Repetto
    Abstract: This paper analyzes the success of Chile’s Sociedad de Instrucción Primaria (SIP) in providing high quality primary school education to low income children. The paper shows that SIP students’ results in national standardized tests are not due to selection or observables. Interviews with principals of SIP schools and of schools that compete with them suggest that differences may be related to having student achievement as the primary goal, a clear and shared methodology, the systematic use of the information provided by teachers’ and students’ evaluations, the selection of directors and teachers through competition, and the assignment of resources to leveling children that lag behind, among other factors.
    Date: 2009
  2. By: Wang, Xiaojun (University of Hawaii at Manoa); Fleisher, Belton M. (Ohio State University); Li, Haizheng (Georgia Tech); Li, Shi (Beijing Normal University)
    Abstract: We apply a semi-parametric latent variable model to estimate selection and sorting effects on the evolution of private returns to schooling for college graduates during China's reform between 1988 and 2002. We find that there were substantial sorting gains under the traditional system, but they have decreased drastically and are negligible in the most recent data. We take this as evidence of growing influence of private financial constraints on decisions to attend college as tuition costs have risen and the relative importance of government subsidies has declined. The main policy implication of our results is that labor and education reform without concomitant capital market reform and government support for the financially disadvantaged exacerbates increases in inequality inherent in elimination of the traditional "wage-grid."
    Keywords: return to schooling, selection bias, sorting gains, heterogeneity, financial constraints, comparative advantage, China
    JEL: J31 J24 O15
    Date: 2009–02
  3. By: Giuliano, Paola (University of California, Los Angeles); Mishra, Prachi (International Monetary Fund); Spilimbergo, Antonio (International Monetary Fund)
    Abstract: Empirical evidence on the relationship between democracy and economic reforms is scarce, limited to few reforms and countries and for few years. This paper studies the impact of democracy on the adoption of economic reforms using a new dataset on reforms in the financial, capital, public, and banking sectors, product and labor markets, agriculture, and trade for 150 countries over the period 1960-2004. Democracy has a positive and significant impact on the adoption of economic reforms but there is no evidence that economic reforms foster democracy. Our results are robust to the inclusion of a large variety of controls and estimation strategies.
    Keywords: economic liberalization, transition, political economy
    JEL: O57 E6
    Date: 2009–02
  4. By: Hengyun Ma; Les Oxley (University of Canterbury)
    Abstract: This paper reviews literature on China’s energy economics, focusing especially on: i) the relationship between energy consumption and economic growth, ii) China’s changing energy intensity, iii) energy demand and energy -capital and -labor substitution, iv) the emergence of energy markets in China, vi) and policy reforms in the energy industry. After reviewing the literature, the study presents the main findings and suggests some topics for further study.
    Keywords: China; Energy; Literature
    JEL: D24 O33 Q41
    Date: 2009–02–16
  5. By: Ianchovichina, Elena; Lundstrom, Susanna
    Abstract: This paper argues that inclusive growth analytics has a distinct character focusing on both the pace and pattern of growth. Traditionally, applied country-specific poverty and growth analyses have been done separately. This paper describes the conceptual elements for an analytical strategy aimed to integrate these two strands of analyses, and to identify and prioritize country-specific constraints to sustained and inclusive growth. The authors apply the framework to the case of Zambia. The analysis suggests that income growth in Zambia is constrained by poor access to domestic and international markets, inputs, extension services, and information. High indirect costs - mostly attributable to infrastructure service-related inputs in production including energy, transport, telecom, water, but also insurance, marketing, and professional services - undermine Zambia's competitiveness, limit job creation, and therefore serve as a major constraint to inclusive growth. Improving the quality and access to secondary and tertiary education is essential if the poor are to benefit from future growth of the non-farm economy. Weak governance and, in particular, poor government effectiveness are factors behind the market coordination failures and the identified government failures, and are as such major obstacles to inclusive growth in Zambia.
    Keywords: Rural Poverty Reduction,Achieving Shared Growth,,Access to Finance,Economic Theory&Research
    Date: 2009–03–01
  6. By: Amin, Mohammad; Djankov, Simeon
    Abstract: The authors use a sample of 147 countries to investigate the link between democracy and reforms. Democracy may be conducive to reforms, because politicians have the incentive to embrace growth-enhancing reforms to win elections. By contrast, authoritarian regimes do not have to worry as much about public opinion and may undertake reforms that are painful in the short run but bring future prosperity. This paper tests these hypotheses, using data on micro-economic reforms from the World Bank's Doing Business database. These data do not suffer the endogeneity issues associated with other datasets on changes in economic institutions. The results provide robust support for the claim that democracy is good for growth-enhancing reforms.
    Keywords: Parliamentary Government,Legal Products,Labor Policies,Public Sector Corruption&Anticorruption Measures,Emerging Markets
    Date: 2009–02–01
  7. By: Toto Same, Achille
    Abstract: Oil and mineral revenues raise national savings and hence facilitate investment, capital accumulation, and sustained growth; thus, there are benefits of owning large natural resources. There can be a significant spillover effect from the oil sector to the non-oil sector particularly if governments are committed to bridge the infrastructure gap and promote the non-oil economy and foremost the non-oil tradable sector. Consequently, the capacity for coordinated policy formulation and execution is fundamental as well as sound windfall management mechanisms and institutions. This conceptual framework uses the case of Indonesia and the example of Norway to argue that the resource paradox is avoidable. Abundance should not be a curse, but rather a blessing for Sub-Saharan Africa's oil and mineral exporting countries. The country context and political economy matter a great deal but should not be the main driving forces behind windfall management, to avoid excessive rent-seeking activities, inefficiency, and wasteful spending. The EITI++ implementation can contribute to make a difference, mostly through capacity building, implementation assistance, and coordination support.
    Keywords: Economic Theory&Research,Debt Markets,Currencies and Exchange Rates,,Access to Finance
    Date: 2009–03–01
  8. By: Portugal-Perez, Alberto
    Abstract: Rules of origin are legitimate policy instruments to prevent trade deflection in a preferential trade agreement short of a customs union. Trade deflection takes place when a product imported into the preferential trade agreement through the member with the lowest external tariff is transhipped to a higher-tariff member, while yielding a benefit for the re-exporter. Yet, when captured by special interest groups, rules of origin can restrict trade beyond what is needed to prevent trade deflection. By how much do political economy factors account for the stringency of rules of origin? This study quantifies the impact of both determinants - those considered"justifiable"because they prevent trade deflection and those deemed to arise from"political economy"forces - on the restrictiveness of rules of origin under the North American Free Trade Agreement, approximated by a restrictiveness index. The main finding is that political economy forces, especially from the United States, raised significantly the restrictiveness of the rules of origin. Indeed, in industries where political-economy forces were strong prior to the North American Free Trade Agreement, as when the U.S. Most Favored Nation tariff was high or the revealed comparative advantage of Mexico (the United States) was strong (weak), more stringent rules of origin were introduced. Thus, stricter rules of origin are associated with higher production costs reducing the potential benefits of enhanced market access that is initially pursued by this type of agreement.
    Keywords: Free Trade,Economic Theory&Research,Trade Policy,Trade Law,Debt Markets
    Date: 2009–02–01
  9. By: Barrera-Osorio, Felipe; Linden, Leigh L.
    Abstract: This paper presents the evaluation of the program Computers for Education. The program aims to integrate computers, donated by the private sector, into the teaching of language in public schools. The authors conduct a two-year randomized evaluation of the program using a sample of 97 schools and 5,201 children. Overall, the program seems to have had little effect on students'test scores and other outcomes. These results are consistent across grade levels, subjects, and gender. The main reason for these results seems to be the failure to incorporate the computers into the educational process. Although the program increased the number of computers in the treatment schools and provided training to the teachers on how to use the computers in their classrooms, surveys of both teachers and students suggest that teachers did not incorporate the computers into their curriculum.
    Keywords: Tertiary Education,Primary Education,Secondary Education,Teaching and Learning,Education For All
    Date: 2009–02–01
  10. By: Rogers, F. Halsey; Vegas, Emiliana
    Abstract: Expanding and improving basic education in developing countries requires, at a minimum, teachers who are present in the classroom and motivated to teach, but this essential input is often missing. This paper describes the findings of a series of recent World Bank and other studies on teacher absence and incentives for performance. Surprise school visits reveal that teachers are absent at high rates in countries such as India, Indonesia, Uganda, Ecuador, and Zambia, reducing the quality of schooling for children, especially in rural, remote, and poor areas. More broadly, poor teacher management and low levels of teacher accountability afflict many developing-country education systems. The paper presents evidence on these shortcomings, but also on the types of incentives, management, and support structures that can improve motivation and performance and reduce avoidable absenteeism. It concludes with policy options for developing countries to explore as they work to meet Education for All goals and improve quality.
    Keywords: Tertiary Education,Primary Education,Education For All,Teaching and Learning,Secondary Education
    Date: 2009–02–01
  11. By: Bussolo, Maurizio; De Hoyos, Rafael; Medvedev, Denis
    Abstract: This paper assesses the potential impacts of the removal of agriculture trade distortions using a newly developed dataset and methodological approach for evaluating the global poverty and inequality effects of policy reforms. It finds that liberalization of agriculture and food could increase global extreme poverty (US$1 a day) by 0.2 percent and lower moderate poverty (US$2 a day) by 0.3 percent. Beneath these small aggregate changes, most countries witness a substantial reduction in poverty while South Asia-where half of the world's poor reside-experiences an increase in extreme poverty incidence due to high rates of protection afforded to unskilled-intensive agricultural sectors. The distributional changes are likely to be mild, but exhibit a strong regional pattern. Inequality is likely to fall in regions such as Latin America, which are characterized by high initial inequality, and rise in regions like South Asia, characterized by low initial inequality.
    Keywords: Economic Theory&Research,Rural Poverty Reduction,Population Policies,Inequality,Achieving Shared Growth
    Date: 2009–03–01
  12. By: Ravallion, Martin; Chen, Shaohua
    Abstract: Prevailing measures of relative poverty put an implausibly high weight on relative deprivation, such that measured poverty does not fall when all incomes grow at the same rate. This stems from the (implicit) assumption in past measures that very poor people incur a negligible cost of social inclusion. That assumption is inconsistent with evidence on the social roles of certain private expenditures in poor settings and with data on national poverty lines. The authors propose a new schedule of"weakly relative"lines that relax this assumption and estimate the implied poverty measures for 116 developing countries. The authors find that there is more relative poverty than past estimates have suggested. In 2005, one half of the population of the developing world lived in relative poverty, half of whom were absolutely poor. The total number of relatively poor rose over 1981-2005, despite falling numbers of absolutely poor. With sustained economic growth, the incidence of relative poverty becomes less responsive to further growth. Slower progress against relative poverty can thus be seen as the"other side of the coin"to success against absolute poverty.
    Keywords: Rural Poverty Reduction,Population Policies,Achieving Shared Growth,Inequality
    Date: 2009–02–01
  13. By: Estache, Antonio; Iimi, Atsushi
    Abstract: Competition in public procurement auctions in the water supply and sanitation sector is largely limited. This is partly because of high technical complexity and partly because of auction design flaws. The division of lot contracts is an important policy choice for auctioneers to achieve efficiency. In general, there is a tradeoff between competition in auctions and size of contracts. Larger works could benefit from economies of scale and scope, but large contracts might undermine competition. Using data on public procurement auctions for water and sewage projects in developing countries, this paper shows that bidder entry is crucially endogenous, especially because it is determined by the auctioneer's bundling and unbundling strategy. If water treatment plant and distribution network works are bundled in a single lot package, competition would be significantly reduced, and this adverse entry effect would in turn raise the public procurement costs of infrastructure. There is no evidence of positive scope economies in the bidder cost structure. It is important to account for the underlying cost structure for designing efficient auction mechanisms.
    Keywords: Investment and Investment Climate,Government Procurement,E-Business,Debt Markets,Markets and Market Access
    Date: 2009–03–01
  14. By: Ferre, Celine
    Abstract: Completing additional years of education necessarily entails spending more time in school. There is naturally a rather mechanical effect of schooling on fertility if women tend not to have children while continuing to attend high school or college, thus delaying the beginning of and shortening their reproductive life. This paper uses data from the Kenyan Demographic and Health Surveys of 1989, 1993, 1998, and 2003 to uncover the impact of staying one more year in school on teenage fertility. To get around the endogeneity issue between schooling and fertility preferences, the analysis uses the 1985 Kenyan education reform as an instrument for years of education. The authors find that adding one more year of education decreases by at least 10 percentage points the probability of giving birth when still a teenager. The probability of having one's first child before age 20, when having at least completed primary education, is about 65 percent; therefore, for this means a reduction of about 15 percent in teenage fertility rates for this group. One additional year of school curbs the probability of becoming a mother each year by 7.3 percent for women who have completed at least primary education, and 5.6 percent for women with at least a secondary degree. These results (robust to a wide array of specifications) are of crucial interest to policy and decision makers who set up health and educational policies. This paper shows that investing in education can have positive spillovers on health.
    Keywords: Population Policies,Health Monitoring&Evaluation,Adolescent Health,Primary Education,Education For All
    Date: 2009–02–01
  15. By: Das Gupta, Monica; Chung, Woojin; Shuzhuo, Li
    Abstract: The apparently inexorable rise in the proportion of"missing girls"in much of East and South Asia has attracted much attention amongst researchers and policy-makers. An encouraging trend was suggested by the case of South Korea, where child sex ratios were the highest in Asia but peaked in the mid-1990s and normalized thereafter. Using census data, we examine whether similar trends have begun to manifest themselves in the two large populous countries of this region, China and India. The data indicate that child sex ratios are peaking in these countries, and in many sub-national regions are beginning to trend towards less masculinization. This suggests that, with continuing vigorous efforts to reduce son preference, the"missing girls"phenomenon could be addressed in Asia.
    Keywords: Population Policies,Gender and Law,Gender and Health,Adolescent Health,Disease Control&Prevention
    Date: 2009–02–01
  16. By: Matthieu Crozet; Pamina Koenig
    Abstract: Recent trade models with heterogenous firms have considerable consequences on the interpretation of gravity equations. Chaney (2008) shows that the effect of distance on trade margins incorporates three parameters: the elasticity of substitution between goods, the elasticity of trade costs with respect to distance, and the degree of firm heterogeneity. We structurally estimate the parameters of trade flows in Chaney’s model using French firm-level export data for 1986-1992, and controlling for the fixed costs of exporting. Our estimated parameters are consistent, for 27 out of 34 industries, with the theoretical model. They also allow us to evaluate the effects of transport cost separately from the effects of tarifs, without having to resort to detailed data on trade frictions.
    Keywords: Gravity equations; international trade; firm heterogeneity
    JEL: F12
    Date: 2008–12
  17. By: Houssein Boumellassa; Hugo Valin
    Abstract: Vietnam’s accession to the World Trade Organisation (WTO) on January 11, 2007 has represented the outcome of decades of efforts to modernise its economy. In this paper, we propose a new general equilibrium assessment of Vietnam’s accession to WTO using a dynamic approach and benefiting from the ex-post perspective offered one year after the membership acceptation. We rely on a dynamic global model incorporating duty-drawbacks and taking into account tariff changes at the HS6 level. A particular attention is paid on the sensitivity to dynamics assumptions and labour market closure. Our results show that gains for Vietnam linked to WTO accession are positive for trade in merchandises, but highly dependent on the evolution of textile and apparel sectors, whose exports were boosted by the commitments.
    Keywords: Computable general equilibrium model; trade policy; world trade organisation; Vietnam
    JEL: D58 F13 F15
    Date: 2008–12
  18. By: Alex Izurieta; Ajit Singh
    Abstract: A major political and policy issue today is whether globalisation and rapid economic growth in India and China would have an adverse affect on labour markets in the U.S. and other advanced countries. Some leading economists have argued that even though the recent integration of India and China with the liberalised global economy has not so far had a serious negative impact on wages and employment in advanced countries, it is most likely to do so in the future in view of the growing technological and scientific capabilities in the two developing countries. This is also because it is suggested that this integration represents a sudden doubling of the world labour force without a concomitant increase in capital. The present paper argues against this plausible thesis, essentially on two grounds: (a) it does not take into account the demand side effects of fast growth in India and China; and (b) it abstracts from the dynamism of the U.S. real economy and its innovative large corporations. However, simulations of different scenarios on the CAM world econometric model indicate that at a disaggregated level there are severe supply side constraints on energy, raw materials and food which thwart the expansionary demand side effects of fast growth in India and China.
    Keywords: Globalisation; China and India; Simulation; U.S. Workers; Economic integration
    JEL: J20 J21 F01
    Date: 2008–12
  19. By: Johannes Gräb; Michael Grimm
    Abstract: Empirical evidence suggests that regional disparities in incomes are often very high, that these disparities do not necessarily disappear as economies grow and that these disparities are itself an important driver of growth. We use a novel approach based on multilevel modeling to decompose the sources of spatial disparities in incomes among households in Burkina Faso. We show that spatial disparities are not only driven by the spatial concentration of households with particular endowments but to a large extent also by disparities in community endowments. Climatic differences across regions do also matter, but to a much smaller extent.
    Keywords: spatial inequality, poverty, multilevel modeling, decomposition, Sub-Saharan Africa
    JEL: C21 I32 O12 R12
    Date: 2009
  20. By: Tregenna, F.
    Abstract: Unemployment and earnings inequality have moved closely together in South Africa in recent years, suggesting that there may not be a trade-off between them as the literature generally suggests. This article explores the relationship between unemployment and earnings inequality in South Africa, specifically investigating the extent to which changes in unemployment can account for changes in earnings inequality. Decomposing overall income inequality by factor source shows the overwhelming importance of earnings in income inequality more generally. Decomposing earnings inequality by employment status reveals the centrality of unemployment in accounting for the level and trend of earnings inequality. The distribution of employment in the formal and informal sectors is found to be of lesser importance in explaining earnings inequality, as is wage dispersion within each of these categories. The findings point to the critical importance of reducing unemployment in South Africa if the extremely high levels of inequality are to be addressed.
    Keywords: Inequality, earnings distribution, unemployment, labour market, South Africa.
    JEL: D30 E24 J31
    Date: 2009–02
  21. By: Tregenna, F.
    Abstract: This paper develops a methodology and uses household and labour survey data to analyse the extent of intersectoral outsourcing of the employment of specific labour-intensive activities in South Africa from 1997-2007. It is shown that the relatively high growth in services employment is driven by an expansion of employment of cleaners and security guards and an outsourcing-type reallocation of these activities from manufacturing and the public sector towards private services. These activities have limited scope for cumulative productivity increases. The analysis has implications for understanding changes in the sectoral structure of middle income economies.
    Keywords: Outsourcing, employment, manufacturing, services, public sector, South Africa
    JEL: J21 L24 L33 L60 L80 M55
    Date: 2009–02
  22. By: Siddiqui, Rizwana
    Abstract: This study estimates a small simultaneous equation model using panel data from sixty-four countries for the years, 1996 and 2004. The model is estimated by various techniques - OLS, TSLS, dummy variable approach introducing variation at the regional level and fixed and random effect approaches introducing variation at the individual country level. The objective is to identify the importance of basic needs in human development strategies in Asia, Africa and rest of the world (ROW). The results show that income per capita has priority over basic need expenditure in development strategies of all regions despite quantitatively different. However, the importance of basic need expenditure cannot be denied in terms of capabilities development (improvement in health) that ultimately increases productivity.
    Keywords: Human capital; Physical capital; Income per capita; Basic needs Expenditures; Human Development
    JEL: O1 O15
    Date: 2008–08–05
  23. By: Vadlamannati, Krishna Chaitanya
    Abstract: The paper uses unique aggregate industry-level dataset at subnational level from India to measure the effects of foreign investments on the productivity of domestic firms. Using pooled regression analysis with fixed effects for the period 2002 – 2005, we find that: (a) foreign investments have significant positive effect on productivity of domestic firms. However, the coefficient values of FDI are smaller, suggesting that the positive effects are marginal. (b) When FDI inflows are controlled for in the cross-section productivity regression, the relationship between the share of foreign technical collaborations and productivity of domestic firms increases significantly. This supports the argument that foreign technical collaborations increase productivity in part through its effect on the FDI inflows. (c) Another interesting finding is that there is no strong evidence to show that this positive effect is state-heterogeneous. In turn, we find partial effects of FDI are marginally higher in non-industrial states. Thus, we suggest that domestic firms can reap rich dividends if the FDI inflows are evenly distributed across the regions, particularly concentrating the efforts on attracting FDI into non-industrial states.
    Keywords: FDI; Productivity; India
    JEL: O1 O4
    Date: 2009–03–03
  24. By: Brutti, Filippo
    Abstract: Sovereign debt crises in emerging markets are usually associated with liquidity and banking crises within the economy. This connection is suggested by both anecdotical and empirical evidence. The conventional view is that the domestic financial turmoil is caused by foreign creditors' retaliation. Yet, there is no clear-cut evidence supporting the existence of ``classic" default penalties (e.g., trade sanctions or exclusion from international capital markets). This paper then proposes a novel mechanism linking sovereign defaults with liquidity and banking crises without any intervention of foreign creditors. The model considers a standard unwillingness-to-pay problem assuming that: (i) the enforcement of private contracts is limited and, as a result, public debt represents a source of liquidity; (ii) the government cannot discriminate between domestic and foreign agents. In this setting, the prospect of drying up the private sector's liquidity restores the ex-post incentive to pay of the government without any need to assume foreign penalties. Nonetheless, liquidity crises might arise when economic conditions deteriorate and the government chooses opportunistically to default in order to avoid the repayment of foreign agents. The interaction between the enforcement friction and sovereign risk is then exploited to study the implications on international capital flows and legal and institutional domestic reforms.
    Keywords: Legal institutions; liquidity; sovereign risk; financial dependence.
    JEL: F34 O16
    Date: 2008–11
  25. By: Menkhoff, Thomas; Gerke, Solvay; Evers, Hans-Dieter; Chay, Yue Wah
    Abstract: This paper addresses the question how knowledge is used to benefit the economic development of Singapore and Malaysia. Both countries have followed strict science policies to establish knowledge governance regimes for a knowledge-based economy. On the basis of empirical studies in both countries we show, how ethnic and religious diversity impact on the ability to develop an epistemic culture of knowledge sharing and ultimately an innovative knowledge-based economy.
    Keywords: knowledge management; knowledge governance; development; ethnic diversity; Southeast Asia; Singapore; Malaysia
    JEL: R58 O2 D8
    Date: 2009–03–05
  26. By: Paglayan, Agustina
    Abstract: This study looks more closely at Argentina’s early childhood education policy, to determine whether it “ensures quality education and equal opportunities, without regional disparities and socio-economic inequities” –the main purpose of education policy in that country. In particular, the study examines how public kindergartens’ effect on children’s early literacy development compares to the effect of their alternative, private kindergartens. Panel data collected between 2004 and 2006 by Argentina’s urban household survey is used to estimate a logit model for the probability of knowing how to read and write by the end of first grade. Estimations take into consideration the complex design of the survey data employed. The validity of the results obtained is further checked by the use of quasi-experimental econometric techniques. The study finds that, net of important individual, family, community and geographic characteristics, attending a public kindergarten has some effect on the probability that a child will know how to read and write by the end of first grade, but attending a private kindergarten has a more substantial effect on this probability. In turn, the analysis finds that knowing how to read and write by the end of first grade reduces the probability of repeating that grade. Perhaps more worryingly, the quality gap between public and private kindergartens is found to be larger in the poorest regions of the country, as well as among the poorest families. These findings are relevant to education policymaking in Argentina, where efforts have focused on expanding the coverage of preschool services, largely disregarding that there is a fundamental problem of unequal opportunities among children in terms of access to high-quality early childhood education. Specific policy recommendations that could improve the quality of public preschools are suggested, taking into account the political difficulty to introduce profound reforms in the education system.
    Keywords: early childhood education; Argentina; education quality; public preschool; private preschool; education inequality
    JEL: I2 I21 I28
    Date: 2008–05
  27. By: Chen, George Shih-Ku
    Abstract: We investigate the effect of agglomeration economies on Taiwanese greenfield investors' location choice in China from 1996 to 2005. Using a nested logit model, we find that Taiwanese investors first select a region in China where he or she wants to invest, before selecting the best province within that region. Furthermore, we find evidence that, since 2000, market access, industrial linkages and monitoring costs have become important agglomeration forces driving Taiwanese investors' location choice in China. Finally, we discover that the nature of agglomeration economies varies extensively for Taiwanese investors across different industries. Taken together, these findings suggest that the Chinese government must formulate region-wide development strategies and industry-specific policies if it wants to attract more Taiwanese investment in the near future.
    Keywords: Agglomeration economies; China; Nested logit model; Taiwanese investment
    JEL: F23
    Date: 2009–01–05
  28. By: Rahman, Mizanur
    Abstract: Vertical fragmentation of product value chain across borders is the driving force of growing economic interdependency in East Asia. A common currency, not flexible exchange rates between national currencies, would reduce flexibility in relative prices within East Asia. Its impact would be far greater for exports that have stronger production network linkage. In order to test the hypothesis, the paper estimates the effect of a common currency on China’s processing and ordinary exports separately. The distinction is necessary because the processing exports, unlike the ordinary exports, are produced along the regional production networks, with final stages of assembly and exporting being increasingly concentrated in China. The short-run dynamics indicate that the effect on China’s processing exports is more than double the corresponding effect on China’s ordinary exports. The long-run effect on the processing exports of intra-regional RER flexibility, which is otherwise the lack of a regional currency, is almost nine times as large as the long-run effect of a unilateral RMB appreciation. By contrast, the corresponding long-run effect is statistically insignificant for the case of ordinary exports that are produced primarily by using local inputs. The long-run coefficient of this intra-regional RER flexibility implies that the actual volume of processing exports is 20 percent below the potential. The magnitudes of these effects are consistent with the hypothesis that a common currency would further integrate East Asian production networks and promote regional economic integration.
    Keywords: Production networks; fragmentation of value chain; optimum currency area; common currency; exchange rate flexibility; China
    JEL: F15 F42 F32 F14 F33 C33
    Date: 2008–03–17
  29. By: Dubois, Pierre; Rubio-Codina, Marta
    Abstract: We semiparametrically estimate the impact of the Mexican conditional cash transfer program Oportunidades on the time mothers and older sisters spend taking care of children aged under 3, using the randomization of the program placement and the methodology in Lewbel (2000). Results support the existence of substitution effects: mothers in treatment households are more likely to substitute for their older daughters’ time to child care. As a result, daughters devote more time to schooling and less taking care of their younger siblings. Overall, total household time allocated to child care increases. These findings indicate that Oportunidades not only fosters human capital accumulation through keeping teenage girls in school but also through more and arguably better (mother provided) child care.
    Keywords: Child Care Provision; Conditional Cash Transfer Programs; Semiparametric Estimation; Substitution Effects
    JEL: D10 I00 J13 J22
    Date: 2009–03
  30. By: Nathan Nunn; Leonard Wantchekon
    Abstract: We investigate the historical origins of mistrust within Africa. Combining contemporary household survey data with historic data on slave shipments, we show that individuals whose ancestors were heavily raided during the slave trade today exhibit less trust in neighbors, relatives, and their local government. We confirm that the relationship is causal by using the historic distance from the coast of a respondent's ancestors as an instrument for the intensity of the slave trade, while controlling for the individual's current distance from the coast. We undertake a number of falsification tests, all of which suggest that the necessary exclusion restriction is satisfied. Exploiting variation among individuals who live in locations different from their ancestors, we show that most of the impact of the slave trade works through factors that are internal to the individual, such as cultural norms, beliefs, and values.
    JEL: N00 O1
    Date: 2009–03

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