nep-dev New Economics Papers
on Development
Issue of 2009‒04‒13
35 papers chosen by
Jeong-Joon Lee
Towson University

  1. Microfinance Mission Drift? By Beatriz Armendariz; Ariane Szafarz
  2. The Impact of Child Labor and School Quality on Academic Achievement in Brazil By Bezerra, Márcio Eduardo G.; Kassouf, Ana Lucia; Arends-Kuenning, Mary P.
  3. Remittances and Chain Migration: Longitudinal Evidence from Bosnia and Herzegovina By Dimova, Ralitza; Wolff, François-Charles
  4. The Role of Gender Inequalities in Explaining Income Growth, Poverty and Inequality: Evidence from Latin American Countries By Joana Costa; Elydia Silva; Fábio Vaz
  5. Supporting the free and competitive market in China and India: differences and evolution over time By Migheli Matteo
  6. The Determinants of Employment and Earnings in Indonesia: A Multinomial Selection Approach By Margherita Coloma; Luiz de Mello
  7. The Impact of Conditional Cash Transfers on Children’s School Achievement: Evidence from Colombia By Sandra García; Jennifer Hill
  8. Armed Conflict Exposure, Human Capital Investments and Child Labor: Evidence from Colombia By Catherine Rodríguez; Fabio Sánchez T.
  9. Decentralization and Access to Social Services in Colombia By Jean-Paul Faguet; Fabio Sánchez
  10. Thinking locally: Exploring the importance of a subsidiary-centered model of FDI-related spillovers in Brazil By Marin, Anabel; Costa, Ionara
  11. Industrialisation as an engine of growth in developing countries By Szirmai, Adam
  12. Fertility response to natural disasters : the case of three high mortality earthquakes By Finlay, Jocelyn E.
  13. Informality in Latin America and the Caribbean By Loayza, Norman V.; Serven, Luis; Sugawara, Naotaka
  14. Poverty effects of higher food prices : a global perspective By De Hoyos, Rafael E.; Medvedev, Denis
  15. Natural resources and reforms By Amin, Mohammad; Djankov, Simeon
  16. Determinants of repayment performance in Indian micro-credit groups By Deininger, Klaus; Liu, Yanyan
  17. Orphanhood and the living arrangements of children in sub-saharan Africa By Beegle, Kathleen; Filmer, Deon; Stokes, Andrew; Tiererova, Lucia
  18. Longer-term economic impacts of self-help groups in india By Deininger, Klaus; Liu, Yanyan
  19. Economic and social impacts of self-help groups in India By Deininger, Klaus; Liu, Yanyan
  20. Foreign Direct Investment, Non-traded Goods and Real Wages By Reza Oladi; John Gilbert; Hamid Beladi
  21. Endogenous growth theory twenty years on: a critical assessment By Sergio Cesaratto
  22. The Structuralist Growth Model By Bill Gibson
  23. A Century of Economic Growth in Latin America By Pablo Astorga
  24. Regional Economic Growth And Human Capital: The Role Of Overeducation By Raul Ramos; Jordi Suriñach; Manuel Artís
  25. Term of Trade Shocks in a Monetary Union: an Application to West-Africa By Loic Batte; Agnes Benassy-Quere; Benjamin Carton; Gilles Dufrenot
  26. The Impact of Aid on Bureaucratic Quality: Does the Mode of Delivery Matter? By Pablo Selaya; Rainer Thiele
  27. Financial Liberalization and Income Inequality By Ang, James
  28. Foreign Direct Investment and Shadow Economy: A Causality Analysis Using Panel Data By Nikopour , Hesam; Shah Habibullah, Muzafar; Schneider, Friedrich; Law, Siong Hook
  29. The Saving-Investment Dynamics And Financial Sector Reforms in India By Ang, James
  30. The Role of the State in China's Industrial Development: a Reassesment By Gabriele, Alberto
  31. Poor’s behaviour and inequality traps: the role of human capital By Lombardo, Vincenzo
  32. The role of religion and political regime for human capital and economic development By Bednarik, Radek; Filipova, Lenka
  33. Menstruation and Education in Nepal By Emily Oster; Rebecca Thornton
  34. Education, Corruption and the Natural Resource Curse By Aldave, Iván; García-Peñalosa, Cecilia
  35. Trade, Development, and the Political Economy of Public Standards By Johan F.M. Swinnen; Thijs Vandemoortele

  1. By: Beatriz Armendariz (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and DULBEA, Université Libre de Bruxelles, Brussels.); Ariane Szafarz (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels, Harvard University and University College London.)
    Abstract: This paper sheds light on a poorly understood phenomenon in microfinance which is often referred to as a “mission drift”: A tendency reviewed by numerous microfinance institutions to extend larger average loan sizes in the process of scaling – up. We argue that this phenomenon is not driven by transaction cost minimization alone. Instead, poverty – oriented microfinance institutions could potentially deviate from their mission by extending larger loan sizes neither because of “progressive lending” nor because of “cross – subsidization” but because of the interplay between their own mission, the cost differentials between poor and unbanked wealthier clients, and region-specific characteristics pertaining the heterogeneity of their clientele. In a simple one-period framework we pin-down the conditions under which mission drift can emerge. Our framework shows that there is a thin line between mission drift and cross-subsidization, which in turn makes it difficult for empirical researchers to establish whether a microfinance institution has deviated from its poverty-reduction mission. This paper also suggests that institutions operating in regions which host a relatively small number of very poor individuals might be misleadingly perceived as deviating from their mission. Because existing empirical studies cannot tear apart between mission drift and cross-subsidization, these studies should not guide donors and socially responsible investors pertaining resource allocation across institutions offering financial services to the poor. The difficulty in tearing apart cross-subsidization and mission drift is discussed in light of the contrasting experiences between microfinance institutions operating in Latin America and South Asia.
    Keywords: microfinance, mission drift, poverty reduction, cross-subsidization
    JEL: F35 G21 G28 O54 O57
    Date: 2009–04
  2. By: Bezerra, Márcio Eduardo G. (University of Sao Paulo); Kassouf, Ana Lucia (University of Sao Paulo); Arends-Kuenning, Mary P. (University of Illinois at Urbana-Champaign)
    Abstract: We analyze the impact of child labor on school achievement using Brazilian school achievement test data from the 2003 Sistema Nacional de Avaliação da Educação Básica (SAEB). We control for the endogeneity of child labor using instrumental variable techniques, where the instrumental variable is the average wage for unskilled male labor in the state. Using our preferred OLS estimates, we find that child labor causes a loss in students' school achievement. Children and adolescents who do not work have better school performance than students who work. Up to two hours of work per day do not have a statistically significant effect on school performance, but additional hours decrease student's achievement. Differences in work conditions affect school performance. For high school students in Portuguese, compared to students who have schooling as their only activity, students who work only at home score 4 percent lower on the tests. Those students who only work outside the house are worse off than those who only work within the house, with test scores decreasing by 5 percent. Students who work both inside and outside the house have the lowest test scores of all the working conditions, decreasing by up to 7 percent.
    Keywords: child labor, school achievement, Brazil
    JEL: I21 J13 J22 O15
    Date: 2009–03
  3. By: Dimova, Ralitza (Brunel University); Wolff, François-Charles (University of Nantes)
    Abstract: Most of the literature on remittances has focused on their implications for the welfare of family members in the country of origin and has disregarded the possibility for remittances to trigger chain migration. In this paper, we address this issue with the use of longitudinal data from Bosnia and Herzegovina, one of the primary exporters of migrants and recipients of remittances in the world. Our panel data estimates indicate that remittances have a significant positive impact on the migration prospects of those remaining in the country of origin. Highly educated, healthy and young individuals are those most likely to migrate, suggesting that the implications of prospective migration on both the labor market and the rest of the economy in the origin country are likely to be negative.
    Keywords: emigration intentions, Bosnia and Herzegovina, remittances
    JEL: J61
    Date: 2009–03
  4. By: Joana Costa (International Poverty Centre); Elydia Silva (International Poverty Centre); Fábio Vaz (Institute for Applied Economic Research)
    Abstract: This Working Paper investigates the possible link between gender inequalities in the labour market and significant economic outcomes such as income growth, poverty and inequality indicators. Our analysis is based on microsimulations for eight Latin American countries. We consider four aspects of gender inequalities: differences in labour market participation, differences in occupational status, wage discrimination and differences in characteristics. Our findings highlight the relevance of gender equality, especially an increase in women?s access to the labour market, in bringing about a reduction in poverty and inequality.
    Keywords: The Role of Gender Inequalities in Explaining Income Growth, Poverty and Inequality: Evidence from Latin American Countries
    Date: 2009–04
  5. By: Migheli Matteo
    Abstract: This paper analyzes the support to market competition by Indian and Chinese citizens. In particular I study the individual preferences with respect to some characteristics of a free and competitive market. The paper aims at establishing whether preferences in these countries are different and their evolution over the time. This is an important issue, as the economic literature shows that people’s preferences and policies tend to go hand in hand. This means that the analysis of today’s preferences and of their evolution over the time can be useful to forecast tomorrow’s policies. The main findings of this paper are that Indians and Chinese are different at supporting competition. The Chinese express preferences that are more in line with a free and competitive market, than Indians do. The detected time path reveals that this support has been decreasing over time during the last two decades. The two populations appear to be in favour of a capitalistic, but strictly regulated market. This can mean that the future economic policies of these Asian giants will tend to this direction. Apparently there are no risks for some form of capitalism, but likely the two countries will not adopt completely free and competitive market institutions.
    Date: 2009–03
  6. By: Margherita Coloma; Luiz de Mello
    Abstract: This paper uses household survey (Sakernas) data from the 1996 and 2004 to estimate the determinants of earnings in Indonesia. The Indonesian labour market is segmented, with a majority of workers engaged in informal-sector occupations, and earnings data are available only for formal-sector workers (salaried employees). This posed problems for the estimation of earnings equations, because selection into different labour market statuses is likely to be non-random. In order to describe selection into different labour market statuses we use the most general version of the method proposed by Dubin and McFadden (1984), which Bourguignon, Fournier and Gurgand (2007) proved to be preferable to other available multinomial selection methods. We also deal with reverse causality between education attainment and earnings by estimating the selection equations using an instrumental variable technique. Our findings cast doubt on the use of a binomial selection rule and suggest that workers with higher levels of educational attainment are most likely to find a job in the formal sector, and that the informal sector is perceived by those workers who cannot obtain a job in the formal sector as an alternative to inactivity. This Working Paper relates to the 2008 OECD Economic Assessment of Indonesia (<P>Les facteurs déterminants de l’emploi et des revenus en Indonésie : Une approche de sélection multinomiale<BR>Ce document estime les revenus en Indonésie sur la base des donnés des enquêtes auprès des ménages (Sakernas) de 1996 et 2004. Le marché du travail indonésien est segmenté, avec une majorité des travailleurs occupée dans le secteur informel, et les données sur les revenus sont disponibles que pour les salariés du secteur formel. Ceci présente des problèmes pour estimer les équations sur les revenus, car la catégorisation en fonction du statut sur le marché du travail doit être non-aléatoire. Pour décrire cette catégorisation, nous utilisons une version plus générale de la méthode proposée par Dubin et McFadden (1984), que Bourguignon, Fournier et Gurgand (2007) ont montré comme préférable à toutes autres méthodes de sélection multinomiale. Nos conclusions mettent en doute l’emploi d’une règle de sélection binomiale, et impliquent que les travailleurs ayant les plus hauts niveaux d’éducation sont les plus susceptibles de trouver un travail dans le secteur formel et que le secteur informel est perçu comme une alternative à l’inactivité par les travailleurs qui n’ont pas eu de travail dans le secteur formel. Ce Document de travail se rapporte à l’Évaluation économique de l’OCDE de l’Indonésie, 2008 (
    Keywords: employment, emploi, earnings, Indonesia, Indonésie, multimonial section, sélection multimoniale, revenus
    JEL: J21 J23 J31
    Date: 2009–04
  7. By: Sandra García; Jennifer Hill
    Abstract: During the last decade, conditional cash transfer programs have expanded in developing countries as a way to increase school enrollment and deter youth from dropping out of school. However, despite evidence of these programs’ positive impact on school enrollment and attendance, little is known about their impact on school achievement. Thus, using data from the Colombian conditional cash transfer program Familias en Acción, this study estimated the effect of the conditional subsidy on school achievement. It found that the program does have a positive effect on school achievement for children aged 7 to 12 living in rural areas but practically no effect for the same population living in urban areas. Moreover, the program may actually have a negative effect on the school achievement of adolescents, particularly those living in rural areas. Possible mechanisms of these effects are explored and discussed.
    Date: 2009–02–26
  8. By: Catherine Rodríguez; Fabio Sánchez T.
    Abstract: Using a unique combination of household and violence data sets and a duration analysis methodology, this paper estimates the effect that exposure to armed conflict has on school drop-out decisions of Colombian children between the ages of six and seventeen. After taking into account the possible endogeneity of municipal conflict related events through the use of instrumental variables, we find that armed conflict reduces the average years of schooling in 8.78% for all Colombian children. This estimate increases to 17.03% for children between sixteen and seventeen years old. We provide evidence that such effect may be induced mainly through higher mortality risks, and to lesser extent due to negative economic shocks and lower school quality; all of which induce a trade-off between schooling and child labor.
    Date: 2009–02–05
  9. By: Jean-Paul Faguet; Fabio Sánchez
    Abstract: A central claim in favor of decentralization is that it will improve access to public services, but few studies examine this question empirically. This paper explores the effects of decentralization on access to health and education in Colombia. We benefit from an original database that includes over 95% of Colombian municipalities. Our results show that decentralization improved enrollment rates in public schools and access of the poor to public health services. In both sectors, improving access was driven by the financial contributions of local governments. Our theoretical findings imply that local governments with better information about local preferences will concentrate their resources in the areas their voters care about most. The combination of empirical and theoretical results implies that decentralization provides local officials with the information and incentives they need to allocate resources in a manner responsive to voters’ needs, and improve the quality of expenditures so as to maximize their impact. The end result is greater usage of local services by citizens.
    Date: 2009–02–12
  10. By: Marin, Anabel (SPRU, University of Sussex); Costa, Ionara (UNU-MERIT)
    Abstract: This paper investigates FDI-related spillovers in Brazil for the period 1996-2005. In contrast to most previous recent studies, which have failed to identify any significant effects in emerging economies, we found that horizontal spillovers did arise in Brazil. However, they did not arise simply as a consequence of general FDI-mediated technology transfer from MNC headquarters, as the standard approach presumes. Nor were they associated with expected inter-industry differences in technological intensity, or with differences in domestic firms’ absorptive capability. Instead, spillovers were associated with the existence of particular kinds of localized knowledge-creation activities undertaken by subsidiaries. We discuss the theory and policy implications that emerge from these results.
    Keywords: FDI spillovers, subsidiaries, heterogeneity, localized innovation, Brazil, productivity, innovation
    JEL: O31 O47 O16
    Date: 2009
  11. By: Szirmai, Adam (UNU-MERIT)
    Abstract: This paper examines the emergence of manufacturing in developing countries in the period 1950-2005. It presents new data on structural change in a sample of 63 developing countries and 16 advanced economies. Industrialisation is seen as a single global process of structural change, in which separate countries follow different paths depending on their initial conditions and moment of their entry into the industrial race. With a few important exceptions such as Mexico, Brazil, India and China, developing countries embarked on industrialisation after 1945. The paper argues that successful catch up in developing countries is associated with industrialisation. It examines the theoretical and empirical for the thesis that industrialisation acts as an engine of growth and attempts to quantify different aspects of this debate. The statistical evidence is not straightforward. Manufacturing has been important for growth in developing countries, but not all expectations of the engine of growth hypothesis are borne out by the data. The more general historical evidence provides more support for the industrialisation thesis.
    Keywords: Structural Change, Manufacturing, Engine of Growth, Catching Up, Economic Growth
    JEL: O14 N60
    Date: 2009
  12. By: Finlay, Jocelyn E.
    Abstract: The event of a natural disaster, and being directly affected by it, brings a large shock to life-cycle outcomes. In addition to the replacement effects of higher fertility following a disaster that caused high mortality, a positive fertility response may be induced as children can be used to supplement household income. This paper analyzes three high mortality earthquakes: Gujarat, India, in 2001; North-West Frontier, Pakistan, in 2005; and Izmit, Turkey, in 1999. There is evidence of a positive fertility response to exposure to these large-scale natural disasters in addition to the response to child mortality. The results in this study are consistent with those of other studies that also find a positive fertility response following exposure to a disaster.
    Keywords: Population Policies,Natural Disasters,Hazard Risk Management,Youth and Governance,Street Children
    Date: 2009–03–01
  13. By: Loayza, Norman V.; Serven, Luis; Sugawara, Naotaka
    Abstract: This paper studies the causes and consequences of informality and applies the analysis to countries in Latin America and the Caribbean. It starts with a discussion on the definition and measures of informality, as well as on the reasons why widespread informality should be of great concern. The paper analyzes informality's main determinants, arguing that informality is not single-caused but results from the combination of poor public services, a burdensome regulatory regime, and weak monitoring and enforcement capacity by the state. This combination is especially explosive when the country suffers from low educational achievement and features demographic pressures and primary production structures. Using cross-country regression analysis, the paper evaluates the empirical relevance of each determinant of informality. It then applies the estimated relationships to most countries in Latin America and the Caribbean in order to assess the country-specific relevance of each proposed mechanism.
    Keywords: Labor Markets,Labor Policies,Population Policies,Economic Theory&Research,Debt Markets
    Date: 2009–03–01
  14. By: De Hoyos, Rafael E.; Medvedev, Denis
    Abstract: The spike in food prices between 2005 and the first half of 2008 has highlighted the vulnerabilities of poor consumers to higher prices of agricultural goods and generated calls for massive policy action. This paper provides a formal assessment of the direct and indirect impacts of higher prices on global poverty using a representative sample of 63 to 93 percent of the population of the developing world. To assess the direct effects, the paper uses domestic food consumer price data between January 2005 and December 2007--when the relative price of food rose by an average of 5.6 percent --to find that the implied increase in the extreme poverty headcount at the global level is 1.7 percentage points, with significant regional variation. To take the second-order effects into account, the paper links household survey data with a global general equilibrium model, finding that a 5.5 percent increase in agricultural prices (due to rising demand for first-generation biofuels) could raise global poverty in 2010 by 0.6 percentage points at the extreme poverty line and 0.9 percentage points at the moderate poverty line. Poverty increases at the regional level vary substantially, with nearly all of the increase in extreme poverty occurring in South Asia and Sub-Saharan Africa.
    Keywords: Rural Poverty Reduction,Food&Beverage Industry,Poverty Lines,Emerging Markets
    Date: 2009–03–01
  15. By: Amin, Mohammad; Djankov, Simeon
    Abstract: The authors use a sample of 133 countries to investigate the link between the abundance of natural resources and micro-economic reforms. Previous studies suggest that natural resource abundance gives rise to governments that are less accountable to the public and states that are oligarchic, and that it leads to the erosion of social capital. These factors are likely to hamper economic reforms. The authors test this hypothesis using data on micro-economic reforms from the World Bank's Doing Business database. The results provide a robust support for the"resource curse"view: a move from the 75th percentile to the 25th percentile on resource abundance equals 10.9 percentage points more reform. This is a large effect given that the mean probability of reform in the sample is 57.1 percent.
    Keywords: Economic Theory&Research,Emerging Markets,E-Business,Achieving Shared Growth,Inequality
    Date: 2009–03–01
  16. By: Deininger, Klaus; Liu, Yanyan
    Abstract: Despite their potential importance and ease of modification, impacts of monitoring and loan recovery arrangements on micro-credit groups'repayment performance have rarely been studied. Data on 3,350 expired group loans in 300 Indian villages highlight that regular monitoring and audits, high repayment frequency, consumption smoothing support through rice credit, and having group savings deposited with the lender all significantly increase repayment rates. Estimated magnitudes of their effects vastly exceed those of members'socio-economic characteristics. Significantly lower repayment on loans originating in externally provided grant resources suggests that stringent monitoring will be essential for these to have a sustainable impact.
    Keywords: Access to Finance,Debt Markets,,Bankruptcy and Resolution of Financial Distress,Strategic Debt Management
    Date: 2009–03–01
  17. By: Beegle, Kathleen; Filmer, Deon; Stokes, Andrew; Tiererova, Lucia
    Abstract: Increasing adult mortality due to HIV/AIDS in Sub-Saharan Africa raises considerable concerns about the welfare of surviving children. Studies have found substantial variability across countries in the negative impacts of orphanhood on child health and education. One hypothesis for this variability is the resilience of the extended family network in some countries to care for orphans-networks under increasing pressure by the sheer number of orphans in many settings. Using household survey data from 21 countries in Africa, this study examines trends in orphanhood and living arrangements, and the links between the two. The findings confirm that orphanhood is increasing, although not all countries are experiencing rapid rises. In many countries, there has been a shift toward grandparents taking on increased childcare responsibility-especially where orphan rates are growing rapidly. This suggests some merit to the claim that the extended network is narrowing, focusing on grandparents who are older and may be less able to financially support orphans than working-age adults. However there are also changes in childcare patterns in countries with stable orphan rates or low HIV prevalence. This suggests future work on living arrangements should not exclude low HIV/AIDS prevalence countries, and explanations for changes should include a broader set of factors.
    Keywords: Street Children,HIV AIDS,Youth and Governance,Primary Education,Population Policies
    Date: 2009–03–01
  18. By: Deininger, Klaus; Liu, Yanyan
    Abstract: Despite the popularity and unique nature of women's self-help groups in India, evidence of their economic impacts is scant. Based on two rounds of a 2,400 household panel, the authors use double differences, propensity score matching, and pipeline comparison to assess economic impacts of longer (2.5-3 years) exposure of a program that promoted and strengthened self-help programs in Andhra Pradesh in India. The analysis finds that longer program exposure has positive impacts on consumption, nutritional intake, and asset accumulation. Investigating heterogeneity of the impacts suggests that even the poorest households were able to benefit from the program. Furthermore, overall benefits would exceed program cost by a significant margin even under conservative assumptions.
    Keywords: Access to Finance,,Rural Poverty Reduction,Poverty Monitoring&Analysis,Debt Markets
    Date: 2009–03–01
  19. By: Deininger, Klaus; Liu, Yanyan
    Abstract: Although there has been considerable recent interest in micro-credit programs, rigorous evidence on the impacts of forming self-help groups to mobilize savings and foster social empowerment at the local level is virtually non-existent, despite a large number of programs following this pattern. The authors use a large household survey to assess the economic and social impacts of the formation of self-help groups in India. They find positive impacts on empowerment and nutritional intake in program areas overall and heterogeneity of impacts between members of pre-existing and newly formed groups, as well as non-participants. Female social and economic empowerment in program areas increased irrespective of participation status, suggesting positive externalities. Nutritional benefit was more pronounced for new participants than for members of pre-existing groups. Evidence of higher consumption - but not income or asset formation - by participants suggests that at the time of the survey, the program's main economic impact had been through consumption smoothing and diversification of income sources rather than exploitation of new income sources. Evaluation of such programs in ways that allow heterogeneity of program impact can yield highly policy-relevant insights.
    Keywords: Access to Finance,Housing&Human Habitats,Social Accountability,Poverty Monitoring&Analysis,
    Date: 2009–03–01
  20. By: Reza Oladi (Department of Applied Economics, Utah State University); John Gilbert (Department of Economics and Finance, Utah State University); Hamid Beladi (Department of Economics, University of Texas - San Antonio)
    Abstract: Using a three-sector general equilibrium model with non-traded goods, we investigate the impact of foreign direct investment on the real wages of skilled and unskilled workers. We show that foreign direct investment increases the real wages of skilled and unskilled workers, but widens the gap between the two under plausible conditions.
    Keywords: Real wages, foreign direct investment, non-traded goods
    JEL: F10 F11 F21
    Date: 2008–12–23
  21. By: Sergio Cesaratto
    Abstract: Endogenous growth literature emerged from dissatisfaction with one result of the neoclassical growth model: the independence of the growth rate from the saving ratio, which is seen as a variable subject to policy influence. There are at least three generations of EGT models: the old one of the sixties; the new one of the late eighties; and the most recent one, from the second half of the nineties. EGT models of any vintage fall into one of two fields: neo-Solowian (or semi-endogenous models) or fully endogenous models. Models from the sixties would generally fall into the first class and for good reasons. Indeed, most of the early generation of fully endogenous models from the late eighties fell under the ‘Jones critique’ (Jones 1995b), which pointed out some of the difficulties of these models. The most recent models have found various ways to avoid those problems. It is shown that these stratagems were anticipated by Marvin Frankel in the sixties and by Lucas in the eighties. One suspects that these devices arose in order to fix the theory rather than from, say, some ex-ante empirical observation (which is often provided ex post). More importantly, this paper indicates some problems common to all vintages of EGT models, beginning with the Cambridge capital theory critique, and suggests some alternative routes for growth analysis outside neoclassical theory.
    JEL: O3 O4
    Date: 2009–03
  22. By: Bill Gibson (University of Vermont, Burlington, VT 05045; University of Massachusetts Amherst)
    Abstract: This paper examines the underlying theory of structuralist growth models in an effort to compare that framework with the standard approach of Solow and others. Both the standard and structuralist models are solved in a common mathematical framework that emphasizes their similarities. It is seen that while the standard model requires the growth rate of the labor force to be taken as exogenously determined, the structuralist growth model must take investment growth to be determined exogenously in the long run. It is further seen that in order for the structuralist model to reliably converge to steady growth, considerable attention must be given to how agents make investment decisions. In many ways the standard model relies less on agency than does the structuralist. While the former requires a small number of plausible assumptions for steady growth to emerge, the structuralist model faces formidable challenges, especially if investment growth is thought to be determined by the rate of capacity utilization.
    Date: 2009–03
  23. By: Pablo Astorga (Abbey House, Carfax, Oxford and Universidad Carlos III, C/ Madrid, 126, 28903 Getafe, Madrid Espana)
    Abstract: This paper makes a contribution to the study of economic growth in developing countries by analysing the six largest Latin American economies over 105 years within a two-equation framework. Confirming previous findings, physical and human capital prove to be key determinants of GDP per capita growth. However, a more controver- sial result is an overall negative conditional correlation between trade openness and GDP per head growth – though openness has a positive link via investment. The evi- dence also shows that macroeconomic instability has been a drag on long-term growth in the region.
    Keywords: Economic Growth; Investment; Openness; Latin America
    JEL: F43 N26 O11
    Date: 2009–01–02
  24. By: Raul Ramos (Faculty of Economics, University of Barcelona); Jordi Suriñach (Faculty of Economics, University of Barcelona); Manuel Artís (Faculty of Economics, University of Barcelona)
    Abstract: The paper analyses the link between human capital and regional economic growth in the European Union. Using different indicators of human capital calculated from census microdata, we conclude that the recent economic performance of European regions is associated to an increase in overeducation. In fact, measures of educational mismatch seem to have a stronger connection to regional economic performance than other traditional measures of human capital stocks.
    Keywords: Regional economic growth, human capital, educational mismatch, overeducation
    Date: 2009–03
  25. By: Loic Batte; Agnes Benassy-Quere; Benjamin Carton; Gilles Dufrenot
    Abstract: We propose a two-country DSGE model of the Dutch disease in a monetary union, calibrated on Nigeria and WAEMU. Three monetary regimes are successively studied at the union level: a flexible exchange rate with constant money supply, a flexible exchange rate with an accommodating monetary policy, and a fixed exchange rate regime. We find that, in the face of oil shocks, the most stabilizing regime for Nigeria is a fixed money supply whereas it is a fixed exchange rate for WAEMU. However, the introduction of an oil stabilization fund can reduce the disagreement on the common policy rule. Furthermore, the two zones may agree on a fixed money-supply rule in the face of both oil and agricultural price shocks.
    Keywords: Dutch disease; DSGE; monetary union; optimal monetary policy
    JEL: E52 F41 Q33
    Date: 2009–04
  26. By: Pablo Selaya; Rainer Thiele
    Abstract: We show that the impact of foreign aid on bureaucratic quality in recipient countries varies with the mode of delivery. Specifically, grants are found to impair the functioning of the bureaucracy, whereas loans are not. The negative impact of grants is larger when they are given as budget support rather than as assistance for specific projects or for programs in general
    Keywords: Foreign aid, bureaucratic quality
    JEL: F35
    Date: 2009–03
  27. By: Ang, James
    Abstract: This paper examines the causal relationship between financial liberalization and income inequality using India as a case study. The results indicate that there exists a robust long-run relationship between financial liberalization and income inequality, and their causal relationship is a bi-directional one.
    Keywords: Financial liberalization; income inequality
    JEL: O53 O16 G28
    Date: 2009
  28. By: Nikopour , Hesam; Shah Habibullah, Muzafar; Schneider, Friedrich; Law, Siong Hook
    Abstract: The present paper investigates the link between the shadow economy and FDI using the Granger panel causality test. For that purpose we use the shadow economy and FDI data for 145 countries of five data points 1999/2000, 2001/2002, 2002/2003, 2003/2004 and 2004/2005. The system GMM estimation results show that FDI causes the shadow economy and vice versa. The empirical evidence supports the hypotheses that higher FDI causes lower shadow economy and higher shadow economy causes higher FDI.
    Keywords: Shadow economy; FDI; panel causality
    JEL: O17 F21 C33
    Date: 2009–03–25
  29. By: Ang, James
    Abstract: While many developing countries have reformed their financial systems over the last few decades, how an increased level of financial liberalization affects the saving-investment relationship remains unclear. This paper examines the dynamic relationship between the domestic saving and investment rates in India by controlling for the level of financial liberalization. Using data over the period 1950-2005, the results indicate that greater financial liberalization enables more domestic resources to be channeled to investment activities.
    Keywords: Saving; Investment; Financial Liberalization; India.
    JEL: O53 O16 F21
    Date: 2009
  30. By: Gabriele, Alberto
    Abstract: In this paper, we argue that the role of the State (to be understood as a holistic term referring to the public sector as whole), far from being withering out, is in fact massive, dominant, and crucial to China's industrial development. Actually, it has been strengthened by the successful implementation of the "keep the big dump the small" policy, which in turn is consistent with a more general strategy shift towards re-centralization in many areas of economic and social policies. This trend that not only is still going on, but is inevitably bound to be further accelerated by the massive package of fiscal and other interventions made necessary as a response to the world financial and economic crisis. State-owned and state-holding enterprises are now less numerous, but much larger, more capital- and knowledge-intensive, more productive and more profitable than in the late 1990s. Contrary to popular belief, especially since the mid-2000s, their performance in terms of efficiency and profitability compares favourably with that of private enterprises. The state-controlled sub-sector constituted by state-holding enterprises, in particular, with at its core the 149 large conglomerates managed by SASAC, is clearly the most advanced component of China's industry and the one where the bulk of in-house R&D activities take place. The role of the public sector, moreover, goes beyond that of those enterprises which are owned or controlled by the State. In the specific Chinese context, many of the most advanced formally private industrial enterprises are in fact related to the public domain by a web of ownership, financial, and other linkages, to an extent that is qualitatively different and deeper than that of their counterparts in capitalist countries. The role public sector is paramount in engineering an extraordinary boom in S&T and R&D activities (both inside the industrial sector and outside, in universities and research centers), and in fuelling a massive investment drive aimed at enhancing China's infrastructural and human capital environment. These processes also generate major systemic external economies, which are reaped by public and private enterprises alike, contributing to abating their operative costs and to sustain their competitiveness and profitability. Contrary to many other analysts, we do not view the dominant role of the state in China's industry (and, more generally, in China's economy) as a possibly necessary - albeit wasteful - evil, which will be superseded once the transition from a centrally-planned to a fully capitalist modern economy will be completed. We rather see it as a primitive, embryonic, ever-evolving but permanent form of strategic planning aimed at fostering industrial development, and as a key distinctive, structural, and pioneering characteristic of market socialism.
    Keywords: market socialism; China's Economy
    JEL: O16 O21 O14
    Date: 2009–04–05
  31. By: Lombardo, Vincenzo
    Abstract: We evaluate whether and how the persistence of inequality and the presence of inequality traps carry over the persistence of poverty and possible aggregate economic inefficiencies. We propose a microeconomic formalization of one possible definition of poverty and of the behaviour of poor and rich agents. Poverty is defined as lack of or low societal participation, which is source of both a direct private benefit and an indirect gain. Analysing poverty under the individual rational choice, we are able to endogeneize the threshold amount of the participation good needed to join the additional indirect benefit as well as the threshold level of income - the poverty line - needed to buy that amount; further we find the conditions for their existence which in turn determine also their level. In an overlapping generation structure we show that in economies starting largely poor two equilibria exist; one low locally stable equilibrium to which low and middle-income class converge and one upper locally unstable over the which richer classes of income enter an explosive path, with unbounded growth rates of personal income. In the rich regime the whole population enter the explosive path, with unbounded growth rates. We are able to enrich the dynamics a là Galor and Zeira (1993) in an economic environment with perfect capital markets, instead of the assumption of markets imperfections, by introducing a methodological innovation which connects the presence of the externality in the human capital accumulation of the children directly to the preference of parents. By further restricting the functional form of the initial income distribution to be lognormal we find that the mean income and the variance (i.e. inequality) of the richer part of the distribution are always higher than the ones of the lower part; moreover, while within the poor class inequality tends to zero in the very long-run, within the richer class inequality is increasing at an increasing rate. Finally, a negative relation between initial inequality and economic growth is observed. The inequality traps which cause the poor regime to emerge are also sources of aggregate economic inefficiencies, which can be eliminated by reducing income disparities accordingly.
    Keywords: Poverty; economic growth; inequality traps; human capital; endogenous preference
    JEL: D31 J24 O40
    Date: 2008–11
  32. By: Bednarik, Radek; Filipova, Lenka
    Abstract: In this paper, we focus on the research of the impact of religion and political regime on human capital and economic development. There is a lot of incentive literature concerning the impact of political regime and religion on the economic development. However, we use different approach to show the mutual dependence of variables and offer another aspect of economic development relating to religion which is secularization and the principle of equal rights. We use three equation model to verify two hypotheses in our paper. The first, that differences in GDP per capita among countries determined by technological progress are influenced by religion and political regime. The second, that there is the interplay between GDP and educational level and education and political regime.
    Keywords: economic development; political regime; religion; human capital
    JEL: O10 C33
    Date: 2009–04–08
  33. By: Emily Oster; Rebecca Thornton
    Abstract: This paper presents the results from a randomized evaluation that distributed menstrual cups (menstrual sanitary products) to adolescent girls in rural Nepal. Girls in the study were randomly allocated a menstrual cup for use during their monthly period and were followed for fifteen months to measure the effects of having modern sanitary products on schooling. While girls were 3 percentage points less likely to attend school on days of their period, we find no significant effect of being allocated a menstrual cup on school attendance. There were also no effects on test scores, self-reported measures of self-esteem or gynecological health. These results suggest that policy claims that barriers to girls' schooling and activities during menstrual periods are due to lack of modern sanitary protection may not be warranted. On the other hand, sanitary products are quickly and widely adopted by girls and are convenient in other ways, unrelated to short-term schooling gains.
    JEL: I21 J13 J16
    Date: 2009–04
  34. By: Aldave, Iván (Central Bank of Peru and GREQAM); García-Peñalosa, Cecilia (GREQAM and CNRS)
    Abstract: The empirical evidence on the determinants of growth across countries has found that growth is lower when natural resources are abundant, corruption widespread and educational attainment low. An extensive literature has examined the way in which these three variables can impact growth, but has tended to address them separately. In this paper we argue that corruption and education are interrelated and that both crucially depend on a country’s endowment of natural resources. The key element is the fact that resources affect the relative returns to investing in human and in political capital, and, through these investments, output levels and growth. In this context, inequality plays a key role both as a determinant of the possible equilibria of the economy and as an outcome of the growth process.
    Keywords: natural resources, corruption, human capital, growth, inequality
    JEL: O11 O13 O15
    Date: 2009–04
  35. By: Johan F.M. Swinnen; Thijs Vandemoortele
    Abstract: This paper presents a political economy model of public standards in an open economy model. We use the model to derive the political optimum and to analyze different factors that have an influence on this political equilibrium. The paper discusses how the level of development influences the political equilibrium. We also analyze the relation between trade and the political equilibrium and compare this political outcome with the social optimum to identify under which cases ‘under-standardization’ or ‘over-standardization’ results, and which standards can be labeled as (producer)protectionist measures.
    Keywords: standards, political economy, trade, development
    JEL: F13 F59 H49 L15 O1
    Date: 2009

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