nep-dev New Economics Papers
on Development
Issue of 2009‒05‒30
twenty-six papers chosen by
Jeong-Joon Lee
Towson University

  1. The agricultural and the democratic transitions - Causality and the Roundup model By Erich Gundlach; Martin Paldam
  2. Trends in geographical mortality differentials in India By Nandita Saikia; Domantas Jasilionis; Faujdar Ram; Vladimir M. Shkolnikov
  3. Empowering the IMF: Should Reform be a Requirement for Increasing the Fund's Resources? By Mark Weisbrot; Jose Cordero; Luis Sandoval
  4. Troubled Assets: The IMF's Latest Projections for Economic Growth in the Western Hemisphere By David Rosnick
  5. European Union preferential trade agreements with developing countries and their impact on Colombian and Kenyan carnation exports to the United Kingdom: By Muhammad, Andrew; Ngeleza, Guyslain K.
  6. The linkages between agriculture and malaria: Issues for policy, research, and capacity strengthening By Asenso-Okyere, Kwadwo; Asante, Felix A.; Tarekegn, Jifar; Andam, Kwaw S.
  7. Blunt Instruments: On Establishing the Causes of Economic Growth By Michael Clemens; Samuel Bazzi
  8. Lessons from Colombian Economic Development By Juan Carlos Echeverry
  9. On the distributional consequences of epidemics By Raouf Boucekkine; Jean-Pierre Laffargue
  10. Bonding and Bridging Social Capital and Economic Growth By Beugelsdijk, S.; Smulders, J.A.
  11. What do we know about adult mortality and data quality in Peru? Mortality coverage levels and trends from recent decades By Mario Piscoya; Bernardo L. Queiroz
  12. Regional Sources of Growth Acceleration in India By Ravindra H Dholakia
  13. PRC-Latin America Economic Cooperation: Going beyond Resource and Manufacturing Complementarity By Masahiro Kawai
  14. Labor Force Participation among Indian Elderly: Does Health Matter? By Manoj K Pandey
  15. How Can Indian Railways Service The Steel Sector Better? By G. Raghuram
  16. Is deliberation equitable ? evidence from transcripts of village meetings in south India By Ban, Radu; Rao, Vijayendra
  17. The better you are the stronger it makes you : evidence on the asymmetric impact of liberalization By Iacovone, Leonardo
  18. When do Legislators pass on"Pork"? the determinants of legislator utilization of a constituency development fund in India By Keefer, Philip; Khemani, Stuti
  19. Household welfare and natural resource management around national parks in Zambia By Bandyopadhyay, Sushenjit; Tembo, Gelson
  20. The impact of drought on household vulnerability: The case of rural Malawi By Makoka, Donald
  21. Burundi’s Growth: The Need for Long-lasting and Stable Performance By Nganou, Jean-Pascal; Wodon, Quentin; Zoyem, Jean-Paul; Mabushi, Eric; Kebede, Ephraim
  22. The Global Financial Crisis, LDC Exports and Welfare: Analysis with a World Trade Model By Willenbockel, Dirk; Robinson, Sherman
  23. Do rural households smooth their consumption? Applying an asset-based approach to the case of Malawi. By Makoka, Donald
  24. Marry for What? Caste and Mate Selection in Modern India By Banerjee, Abhijit; Duflo, Esther; Ghatak, Maitreesh; Lafortune, Jeanne
  25. Village Funds and Access to Finance in Rural Thailand By Menkhoff, Lukas; Rungruxsirivorn, Ornsiri
  26. Consumption Insurance against Unforeseen Epidemics:The Case of Avian Influenza in Vietnam By TAMURA Sakuya; SAWADA Yasuyuki

  1. By: Erich Gundlach (Kiel Institute for the World Economy, Germany); Martin Paldam (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: Long-run development (in income) causes a large fall in the share of agriculture commonly known as the agricultural transition. We confirm that this conventional wisdom is strongly supported by the data. Long-run development (in income) also causes a large increase in democracy known as the democratic transition. Elsewhere we have shown that it is almost as strong as the agricultural transition. Recently, a method has been presented to weed out spuriousness. It makes the democratic transition go away by turning income insignificant, when it is supplemented by a set of formal controls. We show that the same method makes the agricultural transition go away as well. Hence, it seems to be a method that kills far too much, as suggested by the subtitle. This suggestion leads to a discussion of the very meaning of long-run causality.
    Keywords: Long-run growth, transitions, causality and spuriousness
    JEL: O1 P5 H11 O41
    Date: 2009–05–19
  2. By: Nandita Saikia (Max Planck Institute for Demographic Research, Rostock, Germany); Domantas Jasilionis (Max Planck Institute for Demographic Research, Rostock, Germany); Faujdar Ram; Vladimir M. Shkolnikov (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: This study examines the variation in mortality and mortality trends among different regions in India since the 1970s using data from the Sample Registration System (SRS). Evaluation of the SRS data quality confirms reliability for children and adults under the age of 60 years. Analysis of temporary life expectancy between the exact ages of 0 and 60 years shows that, after significant progress during the 1970s and 1980s, improvements in longevity slowed down in the 1990s and 2000s. The Gini coefficient and dispersion measure of mortality confirm the convergence of mortality across the regions in India between 1971–1975 and 2000–2004. In spite of this trend, a substantial difference between higher longevity in the south and lower longevity in the north was noteworthy in 2001–2004. Age decomposition of temporary life expectancy by age group 0–14 years and 15–59 years suggests that the steep longevity increase in the 1970s and 1980s was largely driven by a reduction in mortality in children under the age of 15 years. In the 1990s and early 2000s, the contribution of both young and adult age groups to longevity increase has diminished. India faces difficulties in making progress in further reductions of infant deaths to the minimum levels and also in fighting chronic and man-made diseases in individuals within older age groups.
    Keywords: India, differential mortality, mortality
    JEL: J1 Z0
    Date: 2009–05
  3. By: Mark Weisbrot; Jose Cordero; Luis Sandoval
    Abstract: This paper briefly reviews the IMF’s current practices and policy-making in the context of a proposed quadrupling of IMF resources to $1 trillion dollars, and a consequent increase in the Fund’s influence over economic policy-making in developing countries. It finds that the IMF is still prescribing inappropriate policies that could unnecessarily exacerbate economic downturns in a number of countries. The paper concludes that these pro-cyclical policies can exacerbate the world economic downturn. Perhaps more importantly, the re-establishment of the IMF as a major power in economic and decision-making in low-and-middle income countries, with little or no voice for these countries in the IMF’s decision-making, could have long-term implications for growth, development, and social indicators in many countries. The authors propose some reforms in the areas of governance and accountability to be attached of funding increases, in order to help prevent adverse outcomes.
    Keywords: IMF
    JEL: F F1 F13 F2 F21 F3 F31 F32 F33 F34 F37 F5 F53 F54
    Date: 2009–04
  4. By: David Rosnick
    Abstract: This issue brief examines the International Monetary Fund's (IMF's) economic growth projections for Latin America and the Caribbean through 2014. It finds that for some countries – most notably Venezuela and Argentina – the IMF’s projections inexplicably portend a prolonged negative impact of the current world recession, even as countries harder-hit by the downturn, such as Mexico, recover. In other cases, such as Haiti, the IMF projects a surprisingly big growth spurt.
    JEL: F F33 F34 F37 O O5 O54
    Date: 2009–04
  5. By: Muhammad, Andrew; Ngeleza, Guyslain K.
    Abstract: "United Kingdom (UK) demand for carnations by exporting country was estimated using a production version of the Rotterdam model, and model estimates were used to assess the effects of EU preferential trade agreements on import demand. Of particular importance was how these agreements affected Colombian and Kenyan carnation exports to the UK, the second largest market for Colombian carnations and the largest market for Kenyan carnations. Results showed that Colombia benefited from preferential access to the UK more so than Kenya: the benefit to Colombia was due to both trade creation and diversion, whereas the benefit to Kenya was mostly due to trade diversion. Results further showed that the competition between Colombian and Kenyan carnations was insignificant, and there was no evidence that the preferences given to Colombia harmed Kenya or vice versa." from authors' abstract
    Keywords: Carnations, Preferential trade agreements, Trade diversion, Development strategies,
    Date: 2009
  6. By: Asenso-Okyere, Kwadwo; Asante, Felix A.; Tarekegn, Jifar; Andam, Kwaw S.
    Abstract: "Malaria afflicts many people in the developing world, and due to its direct and indirect costs it has widespread impacts on growth and development. The global impact of malaria on human health, productivity, and general well-being is profound. Human activity, including agriculture, has been recognized as one of the reasons for the increased intensity of malaria around the world, because it supports the breeding of mosquitoes that carry the malaria parasite. Malaria can cause illness (morbidity), disability, or death; and all three effects have direct and indirect costs that can affect productivity. Since agriculture is the main activity of rural people in many endemic areas, it has been suggested that effective malaria control measures can be devised if attention was paid to the two-way effects of agriculture and malaria. There is the need to compute the direct costs of malaria treatment and control and the impacts of those costs on the ability of farm households to adopt new agricultural technology and improved practices, and keep farm and household assets. It is equally important to know the indirect costs of seeking health care and taking care of children and others who are afflicted by malaria and the relationship of the indirect costs to the farm labor supply and productivity. On the other hand, many agricultural activities like irrigation projects, water-harvesting and storage, land and soil management techniques, and farm work sequencing can lead to increase in mosquito populations and therefore increase the incidence of malaria in agricultural regions. This paper has raised issues on the two-way effects of agriculture and malaria and recommended areas that require policy actions and further research. The research findings can then be used in devising effective policies for controlling malaria in endemic areas of the world and assist in preparing a tool kit for capacity development on agriculture and malaria." from authors' abstract
    Keywords: Malaria, Agriculture, Development, technology, Impact, Research, Policy, Capacity strengthening, Innovation, Institutional change, Science and technology,
    Date: 2009
  7. By: Michael Clemens; Samuel Bazzi
    Abstract: Despite intense concern that many instrumental variables used in growth regressions may be weak, invalid, or both, top journals continue to publish studies of economic growth based on problematic instruments. Doing so risks pushing the entire literature closer to irrelevance. We illustrate hidden problems with identification in recent prominently published and widely cited growth studies using their original data. We urge researchers to take three steps to overcome the shortcomings: grounding research in somewhat more generalized theoretical models, deploying the latest methods to test sensitivity to violations of the exclusion restriction, and opening the “black box” of the Generalized Method of Moments (GMM) with supportive evidence of instrument strength.
    Keywords: IV, instrumental variables, , 2SLS, two-stage least squares, Generalized Method of Moments, GMM, Blundell-Bond, Arellano-Bond, exclusion restriction, economic growth, regression, weak instruments, valid instruments, overidentification, underidentification, identification problem, growth determinants, foreign aid, institutions, geography, legal origins, too many instruments.
    JEL: F35 C12 O4
    Date: 2009–05
  8. By: Juan Carlos Echeverry
    Abstract: Colombia is an interesting case study within emerging countries. Through 150 years of democratic tradition and seven decades of sound fiscal and monetary policies, the country has displayed institutional strength and economic growth, in spite of strong external shocks, rent- seeking by sectoral business confederations, and, recently, narco-traffickers and guerrillas. Reforms made during the nineties, just as in other Latin American nations, did not result in the expected take-off in growth. In Colombia, the reason lies partly in the consequences of discovering considerable oil reserves, the escalation of the internal conflict, the fiscal consequences of the 1991 Constitution and huge fiscal commitments related to pensions and social expenditure. In the current decade Colombia has made vast progress in invigorating the sources of economic growth, improving welfare of the poorest strata of population and reinstating the rule of law across the country. The current international crisis poses a considerable challenge in terms of growth and threatens social advancement achieved so far.
    Date: 2009–04–09
  9. By: Raouf Boucekkine; Jean-Pierre Laffargue
    Abstract: We develop a tractable general theory for the study of the economic and demographic impact of epidemics, and notably its distributional consequences. To this end, we develop a three-period overlapping generations model where altruistic parents choose optimal health expenditures for their children and themselves. The survival probability of (junior) adults and children depends on such investments. Agents can be skilled or unskilled. The model emphasizes the role of orphans. Orphans are not only penalized in the face of death, they are also penalized in the access to education. Epidemics are modeled as one period exogenous shocks to the survival rates. We specifically study the consequence of a negative shock on adult survival rates in the first period. We prove that while the epidemic has no permanent effect on income distribution, it can perfectly alter it in the short and medium run. In particular, the epidemic may imply a worsening in the short and medium run of both economic performance and income distribution. Two opposite mechanisms are isolated: first, the survival rate of children at the end of the first period decreases relatively more in poor than in wealthy families. This decreases the proportion of junior adults with a low endowment of human capital in period 2. Secondly, the number of orphans in period 1 increases in both families. This decreases the proportion of junior adults with a low endowment of human capital in period 2. Therefore, the proportion of the unskilled will necessarily increase in the medium run if orphans are too penalized in the access to a high level of education.
    Keywords: Epidemics, orphans, income distribution, endogenous survival, medium-term dynamics
    JEL: O1 D9 I1 I2
    Date: 2009–05
  10. By: Beugelsdijk, S.; Smulders, J.A. (Tilburg University, Center for Economic Research)
    Abstract: In this paper we develop a formal model of economic growth and two types of social capital. Following extant literature, we model social capital as participation in two types of social networks: first, closed networks of family and friends, and, second, open networks that bridge different communities. Higher levels of social capital may crowd out economic growth through a reduction of working time. At the same time, participation in intercommunity networks reduces incentives for rent seeking and cheating, promoting economic growth. We test our hypotheses in a sample of European regions using unique data from the European Value Studies (EVS). Our findings show that it is important to distinguish between the nature of the social interaction.
    Keywords: social capital;economic growth;Europe;regions
    JEL: O40 R11 Z13
    Date: 2009
  11. By: Mario Piscoya (Cedeplar-UFMG); Bernardo L. Queiroz (Cedeplar-UFMG)
    Abstract: Accurate knowledge of adult mortality levels and trends in the developing world is hampered by its widespread lack of complete vital registration systems. Although knowledge of infant and child mortality was once affect by the same problem, survey-based techniques have been more successful in estimating child and infant than adult mortality. The main objective of this paper is to estimate mortality rates for the population aged 5 and above, in Peru by sex. The study evaluates the degree of coverage, and corrects the level of mortality, when necessary, using different methodologies. The literature does not indicate the best method to investigate mortality data problems. Thus, the implementation of alternative methods will improve the understanding of the mortality levels and trends in Peru in recent decades.
    Keywords: Peru, adult mortality, demographic methods
    JEL: J10 J11 J19
    Date: 2009–05
  12. By: Ravindra H Dholakia
    Abstract: Gujarat, West Bengal, Karnataka, Maharashtra, Kerala and Tamil Nadu were the major contributors to the growth acceleration in India after 1991-92. Although the Regional Disparity may increase temporarily, causality test provides support to the hypothesis about spread effects. The Regional growth targets assigned by the 11th Plan in India seem to rely on the spread effects of economic growth acceleration in the better off states to achieve its 9 percent growth target and reduce regional disparity in the long run. To strengthen spread effects, the domestic economy should be further integrated and interlinked with free flow of goods, services and factors of production. [W.P. No. 2009-03-06]
    Keywords: Growth Acceleration; Annualised Growth Rates; Growth Among Regions; Granger-Causality; Wald test; Regional Growth Targets; Policy Implications
    Date: 2009
  13. By: Masahiro Kawai
    Abstract: Despite the rapid development of economic interaction between the People’s Republic of China (PRC) and Latin American and Caribbean (LAC) countries, their trade and investment ties are still in their very early stages, and the complementarily of factor endowments dominates their bilateral trade pattern. By examining the determinants of trade performance of the PRC and LAC economies, and stimulating alternative scenarios for their economic opening and cooperation , the PRC and LAC economies need to move beyond their traditional focus on resource complementarity to more dynamic, foreign direct investment(FDI) based intra-industry trade. Policies that encourage deep economic integration would help Latin America firms integrate into the value chains of global production and enable Chinese and other East Asian firms to have greater and more stable access to resources and markets. Further liberalization of trade, FDI regimes and regulatory policies should be of high priority for most LAC countries, while the PRC and other East Asian economies could make a great contribution to trade ties by investing in manufacturing sectors and infrastructure in Latin America. [WP 137]
    Keywords: People’s Republic of China; Latin America; East Asia; Economic Cooperation;Economic Linkages; Resource; Complementarity; Manufacturing Complementarity; Trade; Trade Development; Trade Linkages; Trade Cooperation; Bilateral Trade; Gravity Analysis
    Date: 2009
  14. By: Manoj K Pandey
    Abstract: The paper analyzes the effect of health status on labour force participation for aged Indians. The potential endogeneity in health and labour force participation has been taken care of by using full information maximum likelihood (FIML) and estimation results are compared with alternative two-stage methods. Results show that health has a significant and positive effect on labour force participation of the aged. In order to keep enough supply of elderly in the labour market, sufficient health care is necessary and hence more investment in this sector is imperative.[MPRA Paper No. 15394]
    Keywords: self-reported health status; labour force participation; elderly; endogeneity; exogeneity; simultaneous equation model
    Date: 2009
  15. By: G. Raghuram
    Abstract: The focus of this paper is on how Indian Railways can service the steel sector better. The steel sector is a core sector, with railways playing a critical role in its logistics. The paper examines the changing industry structure and brings to light the increased need for transportation, as compared to normal planning processes. Traditionally, crude and finished steel making was done in the same location by big producers having integrated plants. Now the industry has a large number of producers who primarily focus on crude steel making or finished steel making, necessitating the need for transporting crude steel to the finished steel makers. Even within finished steel making, there could be levels of value addition where the output of one finished steel maker could become the input for another. [ IIMA WP No 4]
    Keywords: steel sector; Indian Railways; Service; compounded annual growth rate; crude steel; National Steel Policy 2005; crude/liquid steel making; Slag; RINL; SAIL; Tata Steel; Essar Steel; Ispat Industries; JSW Steel; Ministry of Steel annual report; Iron ore; Fluxes; Rail Based Movement; Current Issues; Streamlined Movement; Bypasses and Flyovers; Wagon Loadability; BOXN wagons; Tariff Structure; Rake Availability
    Date: 2009
  16. By: Ban, Radu; Rao, Vijayendra
    Abstract: Deliberative decision-making processes are becoming increasingly important around the world to make important decisions about public and private goods allocation, but there is very little empirical evidence about how they actually work. In this paper the authors use data from India extracted from 131 transcripts of village meetings matched with data from household surveys conducted in the same villages prior to the meetings, to study whose preferences are reflected in the meetings. The meetings are constitutionally empowered to make decisions about public and private goods. The findings show that the more land a person owns, the higher the likelihood her preference is mentioned in the meeting, the longer the amount of time spent discussing this preference, and the higher the likelihood that a decision to provide or repair this public or private good is taken. At the same time, the voices of disadvantaged castes, while not dominating the meeting, are also heard. By contrast, the preferences of Muslims are given less time. High village literacy and the presence of higher level officials during village meetings mitigate the power of the landed, but political reservations for low castes for the post of village president increase the power of the landed.
    Keywords: Access to Finance,Social Accountability,Peri-Urban Communities,Rural Urban Linkages,Anthropology
    Date: 2009–05–01
  17. By: Iacovone, Leonardo
    Abstract: This paper studies how liberalization affects productivity growth using micro-level plant data. While previous studies have already shown the existence of a positive relationship between competition and economic performance, the novelty of this paper is that it analyzes not only the average impact of liberalization, but also goes"beyond the average"and shows how the liberalization can affect dissimilar plants in a different way. The author first develops a model which predicts that, while the impact of liberalization on productivity growth is positive"on average", more advanced firms tend to benefit more. In fact, liberalization generates two competing effects: on one side it spurs more innovative efforts because of the increased entry threat by foreign competitors, on the other side, enhanced competition curtails expected profits and reduces the funds available to finance innovative activities. The pro-competitive effect is weaker for less advanced firms as for them it is harder to catch-up with the"technology frontier". These predictions are then tested focusing on Mexican plants during the NAFTA liberalization. The results show that a 1 percent reduction in tariffs spurred productivity growth between 4 and 8 percent on average. However, for backward firms this effect is much weaker if not close to zero, otherwise for more advanced ones this effect is stronger with productivity growing between 11 and 13 percent. Consistent with the theoretical model the results are stronger in those sectors where the scope for innovative activities is more pronounced. These results are particularly important for policy makers because they suggest that while increasing competition may be good in spurring average productivity, it is also true that this effect does not hold for all type of firms, in particular more backward firms may need some complementary support policy to upgrade their capacities and keep up with the more competitive environment.
    Keywords: Economic Theory&Research,Labor Policies,E-Business,Political Economy,Education for Development (superceded)
    Date: 2009–05–01
  18. By: Keefer, Philip; Khemani, Stuti
    Abstract: The authors examine a unique public spending program that is proliferating across developing countries, the constituency development fund, to investigate when legislators exert more effort on behalf of their constituents. Using data from India, they find that legislator effort is significantly lower in constituencies where voters are more attached to political parties. They are also lower in constituencies that are reserved for members of socially disadvantaged groups (lower castes), specifically in those reserved constituencies that are candidate strongholds. This result is robust to controls for alternate explanations and implies that legislators pass on pork when voters are more attached to political parties or influenced by identity issues. These findings have implications for the evaluation of constituency development funds. They also provide a new answer to a central issue in political economy, the conditions under which legislators seek to"bring home the pork"to constituents, that attaches great importance to the role of political parties.
    Keywords: Parliamentary Government,Microfinance,Political Systems and Analysis,Politics and Government,Government Policies
    Date: 2009–05–01
  19. By: Bandyopadhyay, Sushenjit; Tembo, Gelson
    Abstract: Game management areas in Zambia aim to combine nature conservation with economic empowerment of rural households. By looking at households inside and outside game management areas, this study advances the knowledge of the impact of community based natural resource management on household welfare. The paper focuses on the economic welfare of households living inside game management areas. It tries to answer the question: Do the households in game management areas enjoy higher levels of welfare relative to the conditions they would have been in had the area not been designated as a game management area? Within the game management area, the paper tries to determine the factors that influence household participation in natural resource management, and whether the participating households get any extra benefits. Also of interest is whether such benefits of living in a game management area, and, once in such an area, those of participating accrue more to the poorer segments of the communities. The study finds that the gains from living in a game management area and from active participation in natural resource management are large but unevenly distributed. Only game management areas near Kasanka, Lavushi, Isangano, and South Luangwa national parks in the sample show significant benefits to general and participating households. And in those areas, the poor do not seem to gain even when they participate actively. More even distribution of gains from game management areas across households near different park systems and across the poor and the non-poor should be a continuing goal of national policy makers.
    Keywords: Housing&Human Habitats,Access to Finance,Small Area Estimation Poverty Mapping,Poverty Lines,Community Development and Empowerment
    Date: 2009–05–01
  20. By: Makoka, Donald
    Abstract: Vulnerability to poverty in Malawi is highly associated with risk. Households face multiple shocks, most of which threaten their livelihoods and impact negatively on their welfare. Among the important risks that rural households face is drought, which is exacerbated by environmental change. This study analyzes the impact of drought on household’s vulnerability using a two-period panel dataset of 259 rural households in Malawi. In the framework of vulnerability as expected poverty, the study employs the methodology proposed by Christiaensen and Subbarao (2004). The results show that recurrent drought makes households more vulnerable to the extent that households that were affected by drought in both periods were twice as vulnerable as those who experienced drought in only one period. Policies that are aimed at building poor households’ resilience to recurrent drought hold more promise of enabling the households cope with this livelihood-threatening hazard.
    Keywords: Drought; vulnerability; poverty; rural Malawi
    JEL: B21
    Date: 2008–07–05
  21. By: Nganou, Jean-Pascal; Wodon, Quentin; Zoyem, Jean-Paul; Mabushi, Eric; Kebede, Ephraim
    Abstract: Due in part to 40 years of cyclical violence, economic growth in Burundi has remained well below the sub-Saharan Africa average, and Burundi is now the third poorest country in the world. The status quo is unacceptable, and it is essential that the Government drive the changes needed to achieve sustainable growth. This chapter provides an overview of past and current macroeconomic trends and describes how the poverty profile could influence policy reforms.
    Keywords: Burundi; growth; poverty
    JEL: O4 I32
    Date: 2008–07
  22. By: Willenbockel, Dirk; Robinson, Sherman
    Abstract: Changes in international trade flows and world prices are major channels through which the global financial crisis will hit developing countries. The recession in the ‘global North’ triggered by the financial crisis and the resulting slowdown of growth in China and other major emerging economies will generate declines in demand for exports from developing countries, along with a reversal of the beneficial terms-of-trade trends that have favoured net exporters of primary commodities over the last few years. How these trade shocks and terms-of-trade trends affect economic performance and welfare in low-income countries depends on country-specific characteristics and requires a differentiated analysis across countries. This study uses a multi-region computable general equilibrium (CGE) world trade model to gauge the impact of a slowdown in economic activity in the OECD on trade performance, world prices, and aggregate welfare in the rest of the world with a particular focus on the least developed countries (LDCs) in sub-Saharan Africa and Asia. The results of the simulation analysis indicate the degree of vulnerability of different developing countries and regions distinguished in the model to impacts arising from the recession via the trade channel.
    Keywords: Global financial crisis; terms of trade; recession
    JEL: C68 F17 F47
    Date: 2009–04
  23. By: Makoka, Donald
    Abstract: Smallholder farming households in most of the developing countries, live in environments that are characterized by substantial risk. They consequently develop a range of risk management strategies. However, analyzing household consumption smoothing behaviour requires the availability of both income and consumption data. Since household income data are usually unavailable in many developing countries, including Malawi, this paper develops an asset-based framework to analyze consumption smoothing behaviour at household and community levels using a two-period panel dataset on 259 rural households in Malawi. The results show that while consumption smoothing takes place at the household level, it is not perfect. Food consumption is protected more than non-food consumption. Risk sharing also takes place at the community level. The major policy implication is that social protection programmes should promote household asset accumulation to enable rural households manage livelihood risks better.
    Keywords: Consumption smoothing; risk; rural Malawi
    JEL: B21
    Date: 2009–01–05
  24. By: Banerjee, Abhijit; Duflo, Esther; Ghatak, Maitreesh; Lafortune, Jeanne
    Abstract: This paper studies the role played by caste, education and other social and economic attributes in arranged marriages among middle-class Indians. We use a unique data set on individuals who placed matrimonial advertisements in a major newspaper, the responses they received, how they ranked them, and the eventual matches. We estimate the preferences for caste, education, beauty, and other attributes. We then compute a set of stable matches, which we compare to the actual matches that we observe in the data. We find the stable matches to be quite similar to the actual matches, suggesting a relatively frictionless marriage market. One of our key empirical findings is that there is a very strong preference for within-caste marriage. However, because both sides of the market share this preference and because the groups are fairly homogeneous in terms of the distribution of other attributes, in equilibrium, the cost of wanting to marry within-caste is low. This allows caste to remain a persistent feature of the Indian marriage market.
    Keywords: caste; Gale-Shapley Algorithm; marriage markets
    JEL: D10 J12 O12
    Date: 2009–05
  25. By: Menkhoff, Lukas; Rungruxsirivorn, Ornsiri
    Abstract: This paper examines whether recently introduced "village funds", one of the largest microfinance programs ever implemented, improve access to finance. Village funds are analyzed in a cross-sectional approach in relation to competing financial institutions. We find, first, that they reach the target group of lower income households better than formal financial institutions. Second, village funds provide loans to those kinds of borrowers which tend to be customers of informal financial institutions. Third, village funds help to reduce credit constraints. Thus, village funds provide services in the intended direction. However, they do this to a quite limited degree, questioning their efficiency.
    Keywords: informal financial institutions, microfinance, credit constraint, Thailand, Asia
    JEL: O16 O17 G21
    Date: 2009–05
  26. By: TAMURA Sakuya; SAWADA Yasuyuki
    Abstract: We examine how households protected their livelihood against an unexpected negative shock caused by the highly pathogenic avian influenza (HPAI). We also compare HPAI with other shocks such as sickness, ceremonial events, typhoons, floods, droughts, and unemployment. We apply the augmented testing framework of the canonical consumption risk-sharing hypothesis developed by Fafchamps and Lund (2003) to our unique household panel data that was collected in two Vietnamese villages exclusively for this study. While we reject the full consumption risk-sharing hypothesis strongly, our empirical results reveal that informal credit transactions played an important role for those affected by HPAI in coping with the unforeseen negative asset shock that it created. Moreover, our result suggests that the informal and/or formal insurance network against an unforeseen event has been strengthened after awhile.
    Date: 2009–05

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