nep-dev New Economics Papers
on Development
Issue of 2009‒10‒10
29 papers chosen by
Mark Lee
Towson University

  1. Remittances matter: Longitudinal evidence from Albania By Laetitia Duval; François-Charles Wolff
  2. Gender differences in pay in African manufacturing firms By Christophe J. Nordman; François-Charles Wolff
  3. Trade Liberalization, Exports and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinean Firms By Paula Bustos
  4. Education and Its Distributional Impacts on Living Standards By Takahiro Ito
  5. Social Networks and Labor Market Entry Barriers: Understanding Inter-industrial Wage Differentials in Urban China By Zhao Chen; Ming Lu; Hiroshi Sato
  6. Child Labor and Trade Liberalization in Indonesia By Kis-Katos, Krisztina; Sparrow, Robert
  7. The Redistributive Effects of Political Reservation for Minorities: Evidence from India By Chin, Aimee; Prakash, Nishith
  8. Liquidity, Innovation and Growth By Aleksander Berentsen; Mariana Rojas Breu; Shouyong Shi
  9. Revenue Mobilization in Sub-Saharan Africa: Challenges from Globalization By Mario Mansour; Michael Keen
  10. Estimating Default Frequencies and Macrofinancial Linkages in the Mexican Banking Sector By Rodolphe Blavy; Marcos Souto
  11. Is China's Export-Oriented Growth Sustainable? By Kai Guo; Papa M'B. P. N'Diaye
  12. Fiscal Vulnerability and Sustainability in Oil-Producing Sub-Saharan African Countries By Robert C. York; Zaijin Zhan
  13. Development Aid and Economic Growth: A Positive Long-Run Relation By Camelia Minoiu; Sanjay Reddy
  14. Sub-Saharan Africa's Integration in the Global Financial Markets By Corinne Deléchat; Smita Wagh; Gustavo Ramirez; John Wakeman-Linn
  15. Credit Growth in Sub-Saharan Africa - Sources, Risks, and Policy Responses By Plamen Iossifov; May Y. Khamis
  16. How Good Are Ex Ante Program Evaluation Techniques? The Case of School Enrollment in PROGRESA By Fabian Bornhorst
  17. Employment Effects of Growth Rebalancing in China By Kai Guo; Papa M'B. P. N'Diaye
  18. The Macroeconomics of Scaling Up Aid: The Gleneagles Initiative for Benin By Issouf Samaké; Joannes Mongardini
  19. Spillovers from the Rest of the World into Sub-Saharan African Countries By Gustavo Ramirez; Paulo Flavio Nacif Drummond
  20. The Forgotten Property Rights: Restrictions on Land Use in Vietnam By Thomas Markussen; Finn Tarp; Katleen Van den Broeck
  21. Aggregate and Sectoral Productivity Growth in Thailand and Indonesia By Peter Warr
  22. School Choice and Earnings: A Case of Indonesia By Mohamad Fahmi
  23. The Effectiveness of Private Versus Public Schools in Indonesia: Comment By Mohamad Fahmi
  24. Does Supply Matter? Initial Supply Conditions and the Effectiveness of Conditional Cash Transfers for Grade Progression in Nicaragua By John A. Maluccio; Alexis Murphy; Ferdinando Regalia
  25. Brains versus Brawn: Labor Market Returns to Intellectual and Health Human Capital in a Poor Developing Country By Jere R. Behrman; John Hoddinott; John A. Maluccio; Reynaldo Martorell
  26. Social Divisions in School Participation and Attainment in India: 1983-2004 By M. Niaz Asadullah; Uma Kambhampati; Florencia Lopez Boo
  27. Choices under Risk in Rural Peru By Galarza, Francisco
  28. Rural to urban migration in China: an overall view. By Paul Frijters; Xin Meng
  29. Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment By Hongbin Cai; Yuyu Chen; Hanming Fang; Li-An Zhou

  1. By: Laetitia Duval (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); François-Charles Wolff (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: Using the LSMS panel data collected by the World Bank in Albania from 2002 to 2004, this paper focuses on the determinants and financial implication of remittances sent by family members and adult children living abroad. Our econometric analysis draws on random and fixed effects discrete choice models. We find that the proportion of households receiving remittances is large. These transfers are negatively correlated with both the donor's and the recipient's level of education. Finally, remittances have a positive impact on economic indicators like satisfaction with current situation, adequateness of food consumption and number of affordable expenditures
    Date: 2009
  2. By: Christophe J. Nordman (DIAL - Développement, institutions et analyses de long terme - IRD : UR047); François-Charles Wolff (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: Using matched employer-employee data collected in seven African countries, we present comparative evidence on the magnitude of the gender wage gap in African manufacturing sectors. Using OLS regressions, differences in male and female earnings are found both in Mauritius and Morocco, while the gender wage gap turns out to be insignificant in Benin, Kenya, Madagascar, Senegal and Uganda. Results from quantile regressions indicate that the wage gap remains not constant across the wage distribution. Finally, we study the role of firm characteristics and job segregation across firms as potential factors explaining the gender wage gaps.
    Date: 2009
  3. By: Paula Bustos
    Abstract: This paper studies the impact of a regional free trade agreement, MERCOSUR, on technology upgrading by Argentinean firms. To guide empirical work, I introduce technology choice in Melitz’s (2003) model of trade with heterogeneous firms. The joint treatment of the technology adoption and exporting choices shows that the increase in revenues produced by trade integration can induce exporters to upgrade technology. An empirical test of the model reveals that firms in industries facing higher reductions in Brazil’s tariffs increase their investment in technology faster. The effect of tariffs on entry in the export market and technology adoption is highest in the upper-middle range of the firm size distribution, as predicted by the model.
    Date: 2009–08
  4. By: Takahiro Ito
    Abstract: This paper investigates the determinants of living standards (measured by per capita consumption expenditure) at the household level, addressing heterogeneity in returns to education and endogeneity of educational status. The estimation results obtained through an instrumental variables quantile regression suggest that the endogeneity of education matters in determining the causal effect of education on living standards, while no evidence of the heterogeneity in the rate of returns to education is found. However, the results also provide evidence that impacts of other determinants vary significantly over the outcome (expenditure) distribution, and consequently a simulation based on the results shows that poverty alleviation impacts of education differs substantially between the instrumental variables quantile regression and standard instrumental variables regression results. The comparison of the two indicates the possibility that the impact on poverty reduction is likely to be overestimated in the standard instrumental variable regression.
    Keywords: poverty, heterogeneous returns to education, instrumental variables quantile regression
    JEL: D12 I21 I32 O15
    Date: 2009–08
  5. By: Zhao Chen; Ming Lu; Hiroshi Sato
    Abstract: An entry barrier in the labor market can be an important source of wage inequality. This paper finds that social networks, father's education and political status, and urban household registration status (hukou identity), as well as their own education, experience, age, and gender, help people enter high-wage industries. When contrasting coastal and inland samples, after instrumenting social networks by household political identity (based on classifications during the land reform in the 1950s), we find that social networks are more helpful for entering high-wage industries. The implication of this paper is: breaking industrial entry barriers in the urban labor market is an essential policy in order to control inter-industrial wage inequality in urban China.
    Keywords: inter-industrial wage differentials, industry monopoly, entry barrier, labor market, social networks, CHIPS data
    JEL: J31 J42 Z1
    Date: 2009–09
  6. By: Kis-Katos, Krisztina (University of Freiburg); Sparrow, Robert (Institute of Social Studies)
    Abstract: We examine the effects of trade liberalization on child work in Indonesia. Our estimation strategy identifies geographical differences in the effects of trade policy through district level exposure to reduction in import tariff barriers. We use a balanced panel of 261 districts, based on four rounds (1993 to 2002) of the Indonesian annual national household survey (Susenas), and relate workforce participation of children aged 10-15 to geographic variation in relative tariff exposure. Our main findings show that increased exposure to trade liberalization is associated with a decrease in child work among the 10 to 15 year olds. The effects of tariff reductions are strongest for children from low skill backgrounds and in rural areas. Favorable income effects for the poor, induced by trade liberalization, are likely to be the dominating effects underlying these results.
    Keywords: poverty, trade liberalization, child labor, Indonesia
    JEL: J13 O24 O15
    Date: 2009–08
  7. By: Chin, Aimee (University of Houston); Prakash, Nishith (Dartmouth College)
    Abstract: We examine the impact of political reservation for disadvantaged minority groups on poverty. To address the concern that political reservation is endogenous in the relationship between poverty and reservation, we take advantage of the state-time variation in reservation in state legislative assemblies in India that arises from national policies that cause reservations to be revised and the time lags with which the revised reservations are implemented due to the timing of state elections. Using data on sixteen major Indian states for the period 1960-1992, we find that increasing the share of seats reserved for Scheduled Tribes significantly reduces poverty while increasing the share of seats reserved for Scheduled Castes has no impact on poverty. Political reservation for Scheduled Tribes has a greater effect on rural poverty than urban poverty, and appears to benefit people near the poverty line as well as those far below it.
    Keywords: affirmative action, poverty, minorities, India
    JEL: I38 J15 J78
    Date: 2009–09
  8. By: Aleksander Berentsen; Mariana Rojas Breu; Shouyong Shi
    Abstract: Many countries simultaneously suffer from high rates of inflation, low growth rates of per capita income and poorly developed financial sectors. In this paper, we integrate a microfounded model of money and finance into a model of endogenous growth to examine the effects of inflation and financial development. A novel feature of the model is that the market for innovation goods is decentralized. Financial intermediaries arise endogenously to provide liquid funds to the innovation sector. We calibrate the model to address two quantitative issues. One is the effects of an exogenous improvement in the productivity of the financial sector on welfare and per capita growth. The other is the effects of inflation on welfare and growth. Consistent with the data but in contrast to previous work, reducing inflation generates large gains in the growth rate of per capita income as well as in welfare. Relative to reducing inflation, improving the efficiency of the financial market increases growth and welfare by much smaller amounts.
    Keywords: Money; Growth; Innovation; Financial intermediation
    JEL: O4 E1 G00
    Date: 2009–09–24
  9. By: Mario Mansour; Michael Keen
    Abstract: This paper evaluates the nature and extent of, and possible responses to, two of the central challenges that globalization poses for revenue mobilization in Sub-Saharan Africa (SSA): from corporate tax competition, and from trade liberalization. It does so using a new dataset with features needed to meaningfully address these issues: a distinction between resourcerelated and other revenues, and a disentangling of tariff from commodity tax revenue. Countries' experiences vary quite widely, nonresource revenues have been essentially stagnant. Corporate tax revenues have held up, despite a reduction in rates and evidence of substantial base-narrowing-something of a puzzle-and trade tax revenue reductions have been largely offset by other measures. Options for dealing with the continuation and intensification of the challenges, which the present crisis is likely to accelerate-including through regional cooperation-are discussed.
    Keywords: Corporate taxes , Cross country analysis , Globalization , International trade , Revenue mobilization , Sub-Saharan Africa , Tax incentives , Tax reforms , Tax revenues , Trade liberalization , Trade policy ,
    Date: 2009–07–28
  10. By: Rodolphe Blavy; Marcos Souto
    Abstract: The credit risk measures we develop in this paper are used to investigate macrofinancial linkages in the Mexican banking system. Domestic and external macro-financial variables are found to be closely associated with banking soundness. At the aggregate level, high external volatility and domestic interest rates are associated with higher expected default probability. Though results vary substantially across individual banks, domestic activity and U.S. growth, and higher asset prices, are generally associated with lower credit risks, while increased volatility worsens credit risks. The expected default probability is also found to be a leading indicator of traditional financial stability indicators.
    Keywords: Bank soundness , Banking sector , Banks , Credit risk , Data analysis , Economic models , Mexico ,
    Date: 2009–05–27
  11. By: Kai Guo; Papa M'B. P. N'Diaye
    Abstract: This paper assesses the sustainability of China's export-oriented growth over the medium to longer term. It shows that maintaining the current export-oriented growth would require significant gains in market share through lower prices in a range of industries. This, in turn, could be achieved through a combination of increases in productivity, lower profits, and higher implicit or explicit subsidies to industry. However, the evidence suggest that it will prove difficult to accommodate such price reductions within existing profit margins or through productivity gains. Moving up the value-added chain, shifting the composition of exports, diversifying the export base, and increasing domestic value added of exports could give room to further export expansion. However, experiences from Asian economies that had similar export-oriented growth suggest there are limits to the global market share a country can occupy. Rebalancing growth toward private consumption would provide a large impetus to output growth and reduce the need for gaining further market share.
    Keywords: China, People's Republic of , Cross country analysis , Economic growth , Export markets , Export performance , Export prices , Export sector , Exports , Fiscal reforms , Global competitiveness , Industrial sector , Private consumption , Productivity ,
    Date: 2009–08–12
  12. By: Robert C. York; Zaijin Zhan
    Abstract: Over many years rises and fall of world oil prices have been repeatedly reflected in the boom-bust cycles in oil-exporting countries the world over. The recent spectacular rise and equally spectacular fall in prices provides an opportunity to inquire whether anything is different this time. In this paper we limit the analysis to the experience, outlook, and longterm fiscal policy considerations for eight of the world's oil-producing countries in sub- Saharan Africa. Because we are interested in gauging their fiscal vulnerability and sustainability from the angle of managing exhaustible oil wealth, we focus on the non-oil primary balance as the relevant indicator of how initial conditions and resource endowments can influence long-term considerations in several different models of fiscal rules.
    Keywords: Cross country analysis , Economic growth , Fiscal policy , Fiscal sustainability , National income , Oil prices , Oil producing countries , Oil production , Oil revenues , Oil sector , Sub-Saharan Africa ,
    Date: 2009–08–13
  13. By: Camelia Minoiu; Sanjay Reddy
    Abstract: We analyze the growth impact of official development assistance to developing countries. Our approach is different from that of previous studies in two major ways. First, we disentangle the effects of two kinds of aid: developmental and non-developmental. Second, our specifications allow for the effect of aid on economic growth to occur over long periods. Our results indicate that developmental aid promotes long-run growth. The effect is significant, large and robust to different specifications and estimation techniques.
    Keywords: Cross country analysis , Developing countries , Development assistance , Economic growth , Economic models , Resource mobilization ,
    Date: 2009–06–01
  14. By: Corinne Deléchat; Smita Wagh; Gustavo Ramirez; John Wakeman-Linn
    Abstract: The paper uses a unique database covering 44 countries in sub-Saharan Africa (SSA) countries between 2000 and 2007 to study the determinants of the allocation and composition of flows across countries, as well as channels through which private capital flows could affect growth. In our sample, the degree of financial market development is an important determinant of the distribution of capital flows across countries as opposed to property rights institutions. The fairly consistent positive association between net capital flows and growth for SSA countries contrasts with the more pessimistic results of recent studies, though our data do not allow us to make conclusive inferences about a causality relationship.
    Keywords: Capital flows , Capital inflows , Cross country analysis , Economic growth , Economic integration , Financial sector , Private sector , Revenue sources , Sub-Saharan Africa ,
    Date: 2009–05–29
  15. By: Plamen Iossifov; May Y. Khamis
    Abstract: In this paper, we analyze credit growth in Sub-Saharan Africa over the past decade focusing on the post-2002 rapid credit growth in select countries. We develop regression models of the fundamental determinants of bank credit and use them to examine whether they can fully explain developments in rapid credit growth countries. We then argue that rapid credit expansion, whether a manifestation of a credit boom or driven by fundamentals, can give rise to prudential and macroeconomic risks. We detail these risks and discuss the choice of policies to mitigate them. We conclude by evaluating the likely impact of the ongoing global recession and financial crisis on credit growth in Sub-Saharan Africa.
    Keywords: Bank credit , Bank supervision , Banking sector , Credit demand , Credit expansion , Credit risk , Cross country analysis , Economic models , Financial crisis , Fiscal policy , Household credit , Private sector , Sub-Saharan Africa , Time series ,
    Date: 2009–08–25
  16. By: Fabian Bornhorst
    Abstract: This paper evaluates a microsimulation technique by comparing the simulated outcome of a program with its actual effect. The ex ante evaluation is carried out for a conditional cash transfer program, where poor households were given money if the children attended school. A model of occupational choice is used to simulate the expected impact of the program. The results suggest that the transfer would indeed increase school attendance and do more so among girls than boys. While the simulated effect tends to be larger than the actual effect, the latter lies within bootstrapped confidence intervals of the simulation.
    Keywords: Economic models , Education , Human capital , Income , Labor markets , Labor productivity , Labor supply , Mexico , Payment systems , Poverty reduction , Private sector , Social policy ,
    Date: 2009–09–02
  17. By: Kai Guo; Papa M'B. P. N'Diaye
    Abstract: This paper gauges the potential effects on employment of rebalancing China's exportoriented growth model toward domestic demand, particularly private consumption. Shifting to a private consumption-led growth likely means more demand for existing and new services as well as reorienting the production of tradable goods toward domestic markets. In China's case, this would also imply moving a large number of less skilled labor from the tradable sector to the nontradable sector. The paper shows that while rebalancing China's growth toward a domestic-demand-led economy would likely raise aggregate employment and employment opportunities in the longer term, there could be employment losses in the short run as the economy moves away from the tradable sector toward the nontradable sector. Mitigating these costs will require active labor market policies to cushion the employment impact in the transition, particularly in meeting the skills gap of associated with this transition.
    Keywords: Agricultural sector , China, People's Republic of , Cross country analysis , Demand , Economic growth , Economic models , Employment , Labor market policy , Manufacturing sector , Private consumption , Services sector ,
    Date: 2009–08–12
  18. By: Issouf Samaké; Joannes Mongardini
    Abstract: This paper assesses the macroeconomic implications of scaling up aid for Benin in line with the Gleneagles commitment to double aid to poor countries over the next three years to reach $85 per capita by 2010 and keep it at that level thereafter. The analysis suggests that the additional aid inflows can be accommodated under Fund-supported programs without major disruptions to macroeconomic stability, provided the inflows are highly concessional and used effectively. There are, however, significant risks that the impact on growth and poverty reduction of the additional aid inflows could fall short of expectations, given Benin's limited absorptive and administrative capacity.
    Keywords: Absorptive capacity , Aid flows , Benin , Concessional aid , Debt sustainability , Domestic investment , Financial assistance , Financial risk , Fiscal sustainability , Infrastructure , Millennium Development Goals ,
    Date: 2009–05–29
  19. By: Gustavo Ramirez; Paulo Flavio Nacif Drummond
    Abstract: This paper investigates the impact of a global slowdown on individual African countries using a series of dynamic panel regressions for countries in the region, relating real growth in domestic output to world growth in trade weighted by partner countries and several control variables: oil prices, non-oil prices, financial variables, and country fixed effects. Estimates are then applied to prepare country-specific simulations. The model, which is shown to estimate well out-of-sample spillover effects in the region, shows that countries in the region are significantly affected by lower external demand for their exports, declines in commodity prices and the terms of trade, and tighter financial conditions abroad. The last, proxied by the spread of three-month Libor to US treasury bills, is to our knowledge one of the first applications of such a measure of financial conditions for countries in the region.
    Keywords: Commodity price fluctuations , Commodity prices , Cross country analysis , Demand , Economic growth , Economic models , Exports , External shocks , Oil prices , Spillovers , Sub-Saharan Africa , Terms of trade ,
    Date: 2009–07–22
  20. By: Thomas Markussen (Department of Economics, University of Copenhagen); Finn Tarp (Department of Economics, University of Copenhagen); Katleen Van den Broeck (Department of Economics, University of Copenhagen)
    Abstract: Studies of land property rights usually focus on tenure security and transfer rights. Rights to determine how to use the land are regularly ignored. However, in transition economies such as Vietnam and China, user rights are often limited. Relying on a unique Vietnamese panel data set at both household and plot level, we show that crop choice restrictions are widespread and prevent crop diversification. Restrictions do not decrease household income, but restricted households work harder, and there are indications that they are supplied with higher quality inputs. Our findings are consistent with the view that the Vietnamese government has managed to intervene effectively in agricultural (rice) production to promote output and food security. At the same time, it is now time to carefully consider the potential benefits of a more diversified crop pattern.
    Keywords: Property rights; restrictions; Vietnam
    JEL: D1 O1 Q1
    Date: 2009–09
  21. By: Peter Warr
    Abstract: Total factor productivity growth is studied in this paper for two countries, Thailand and Indonesia, from 1980 to 2006. The analysis is conducted at both the aggregate and sectoral levels. A feature of the analysis is the decomposition of aggregate total factor productivity growth into two components: productivity growth in individual sectors, and a resource reallocation effect: the movement of resources from low productivity to high productivity sectors. In both countries, virtually all factor productivity growth at the sectoral level derived from agriculture, but the reallocation of resources away from agriculture was a much larger source of aggregate productivity growth.
    Keywords: total factor productivity growth, Thailand, Indonesia
    JEL: O47 Q10 O30
    Date: 2009
  22. By: Mohamad Fahmi (Department of Economics, Padjadjaran University)
    Abstract: Public schools in Indonesia are widely perceived have better inputs and to be superior to private schools. Public schools also benefit advantages of high-scoring peer effect as entry to some junior secondary public schools in urban area is based on national score test in elementary school. In this paper, I attempt to confirm the perception of superiority of public school in Indonesia by comparing the yearly earnings of four types of schools group; Public, Private Secular, Private Islam, and Private Christian. I use a large-scale longitudinal observation of individual and household level on socioeconomic and health survey, Indonesia Family Life Survey (IFLS) 2000 to estimate the effectiveness junior secondary education in Indonesia. To correct for sample selection bias, I use the two-step method proposed by Bourguignon et al. As a result of insignificant all selectivity bias coefficients, I use the OLS estimation to calculate the earnings decompositions. The insignificant selection bias coefficients suggest that the OLS estimation is unbiased. I use the Blinder-Oaxaca decomposition with Reimers’ decomposition technique to estimate earning differential between public and three types of private school graduates. The results of earnings decomposition from OLS estimation, suggest that earning of people who graduate from public school are 25 per cent and 35.2 per cent higher than their counterparts from private nonreligious and private Islam. On the other hand, student who schooled at private Christian school enjoys 0.28 per cents higher earnings that public.
    Keywords: Parent choice, Education, School effectiveness, earnings, Indonesia
    JEL: J31
    Date: 2009–09
  23. By: Mohamad Fahmi (Department of Economics, Padjadjaran University)
    Abstract: I reestimate Bedi and Garg estimation of differential earnings of public-private junior secondary school in Indonesia. I replicate Bedi and Garg method by using Bedi and Garg’s sample data and creating a new sample data base on the original updated IFLS1 data (Indonesia Family Life Survey 1 codename IFLS1-RR). I use the same methodology as Bedi and Garg with the latest Stata command to confirm Bedi and Garg’s major conclusion. Using selmlog and decompose Stata techniques, I find the evidence that contradictive with Bedi and Garg’s conclusion as the public schools graduated earn higher than other graduates from private schools.
    Keywords: School effectiveness, earnings, Indonesia
    JEL: J31
    Date: 2009–09
  24. By: John A. Maluccio; Alexis Murphy; Ferdinando Regalia
    Abstract: We combine administrative and survey data to examine the effect of a conditional cash transfer program on grade progression in Nicaragua from 1999–2003, putting the spotlight on initial supply side conditions and the extent to which they conditioned program effectiveness. Our principal findings are that the program had a substantial effect on grade progression and that these increased over time, even after the original intervention group stopped receiving demand-side transfers. Half of the estimated program effect on progression is accounted for by a reduction in the dropout and repetition rates of beneficiary children who were already in school when the program began. Supply side conditions were important and several of them led to heterogeneous program impacts. The program was more effective in areas with autonomous schools, suggesting flexibility at the school level better enabled schools to respond to changing demand conditions. At the same time, it was also more effective in intervention areas with poor initial supply conditions as measured by indicators of grade availability and distance to school. These were the areas with lower enrollments and grade progression before the program, and thus more room for improvement. With the analysis of child schooling in hand, we then turn to assess the “effect” of the program on school supply conditions. It is precisely in the intervention areas with poor initial school supply conditions, that the program was relatively more effective in improving school supply as measured by grade availability, number of sessions per day and number of teachers. The results suggest that initial school supply conditions do not represent insurmountable obstacles for the implementation of a conditional cash transfer program, as long as these constraints are identified at the planning stage and mechanisms put in place to deal with them during the execution stage. Our results also underscore the importance of carefully considering the integrated (demand and supply) nature of conditional-cash-transfer programs, something often overlooked in the design of these interventions and, particularly, in the impact evaluation literature.
    Keywords: impact evaluation, conditional cash transfer, schooling, supply side
    Date: 2009–08
  25. By: Jere R. Behrman; John Hoddinott; John A. Maluccio; Reynaldo Martorell
    Abstract: Previous studies report that adult height has significant associations with wages even controlling for schooling. But schooling and height are imperfect measures of adult cognitive skills (“brains”) and strength (“brawn”); further they are not exogenous. Analysis of rich Guatemalan longitudinal data over 35 years finds that proximate determinants—adult reading comprehension skills and fat-free body mass—have significantly positive associations with wages, but only brains, and not brawn, is significant when both human capital measures are treated as endogenous. Even in a poor developing economy in which strength plausibly has rewards, labor market returns are increased by brains, not brawn.
    Date: 2009–07
  26. By: M. Niaz Asadullah; Uma Kambhampati; Florencia Lopez Boo
    Abstract: This study documents the size and nature of “boy-girl” and “Hindu-Muslim” gaps in children’s school participation and attainments in India. Individual-level data from two successive rounds of the National Sample Survey suggest that considerable progress has been made in decreasing the Hindu-Muslim gap. Nonetheless, the gap remains sizable even after controlling for numerous socioeconomic and parental covariates, and the Muslim educational disadvantage in India today is greater than that experienced by girls and Scheduled Caste Hindu children. A gender gap still appears within as well as between communities, though it is smaller within Muslim communities. While differences in gender and other demographic and socio-economic covariates have recently become more important in explaining the Hindu-Muslim gap, those differences altogether explain only 25 percent to 45 percent of the observed schooling gap.
    Keywords: gender inequality, India, religion, social disparity
    JEL: I21 J16 Z12
    Date: 2009–08
  27. By: Galarza, Francisco
    Abstract: This paper estimates the risk preferences of cotton farmers in Southern Peru, using the results from a multiple-price-list lottery game. Assuming that preferences conform to two of the leading models of decision under risk--Expected Utility Theory (EUT) and Cumulative Prospect Theory (CPT)--there is strong evidence of moderate risk aversion. Once we include individual characteristics in the estimation of risk parameters, we observe that farmers use subjective nonlinear probability weighting, a behavior consistent with CPT. Interestingly, when we allow for preference heterogeneity via the estimation of mixture models--where the proportion of subjects who behave according to EUT or to CPT is endogenously determined--we see that the majority of farmers’ choices are best explained by CPT. We further hypothesize that the multiple switching behavior observed in our sample can be explained by nonlinear probability weighting made in a context of large random calculation mistakes; the evidence found on this regard is mixed. Finally, we find that attaining higher education is the single most important individual characteristic correlated with risk preferences, a result that suggests a connection between cognitive abilities and behavior towards risk.
    Keywords: risk aversion; probability weighting; mixture models; experimental economics; Peru
    JEL: C9 D81
    Date: 2009–08
  28. By: Paul Frijters; Xin Meng (School of Economics and Finance, Queensland University of Technology)
    Abstract: China is not merely growing at double the rate of the European countries during the Industrial Revolution, it is also urbanising at double the speed. Using a unique dataset of rural-to-urban migrants in 15 major Chinese cities, we give preliminary answers to some of the most pressing policy questions: how many migrants are there and what are their attributes? Are they dissatisfied or are their kids doing worse than the kids of others? Are they discriminated on the labour market and, if so, what are the mechanisms via which this discrimination works and where are the market forces to undo the discrimination?
    Keywords: migration, economic growth, urbanisation, Tiebout, political economy, discrimination
    Date: 2009–09–28
  29. By: Hongbin Cai; Yuyu Chen; Hanming Fang; Li-An Zhou
    Abstract: We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. Our study sheds light on two important questions about microinsurance. First, how does access to formal insurance affect farmers' production decisions? Second, what explains the low takeup rate of formal insurance, despite substantial premium subsidy from the government? We find that providing access to formal insurance significantly increases farmers' tendency to raise sows. We argue that this finding also suggests that farmers are not previously insured efficiently through informal mechanisms. We also provide several pieces of evidence suggesting that trust, or lack thereof, for government-sponsored insurance products is a significant barrier for farmers' willingness to participate in the insurance program.
    JEL: C93 O12 O16
    Date: 2009–10

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