nep-dev New Economics Papers
on Development
Issue of 2010‒01‒10
35 papers chosen by
Mark Lee
Towson University

  1. Creditworthiness as a signal of trustworthiness: field experiment in microfinance and consequences on causality in impact studies. By Leonardo Becchetti; Pierluigi Conzo
  2. Directed technical change, the elasticity of substitution and wage inequality in developing countries By Alberto Behar
  3. Credit risk analysis in microcredit: How does gender matter? By Helena Marrez; Mathias Schmit
  4. The political economy of ethnolinguistic cleavages By Klaus Desmet; Ignacio Ortuño-Ortín; Romain Wacziarg
  5. Investment and Capital Flows: Implications of the ASEAN Economic Community By Aldaba, Rafaelita Mercado; Yap, Josef T.
  6. Global Study on Child Poverty and Disparities: the Case of the Philippines By Philippine Institute for Development Studies
  7. The Social and Economic Impact of Philippine International Labor Migration and Remittances By Zosa, Victorina; Orbeta, Aniceto Jr. C.
  8. The Impact of the Global Financial Crisis on Rural and Microfinance in Asia By Llanto, Gilberto M.; Badiola, Jocelyn Alma R.
  9. Motives and Giving Norms behind Remittances: the Case of Filipino Overseas Workers and their Recipient Households By Alba, Michael M.; Sugui, Jessaine Soraya C.
  10. Impact of the Global Financial and Economic Crisis on the Philippines By Yap, Josef T.; Cuenca, Janet S.; Reyes, Celia M
  11. Toward a Strategic Urban Development and Housing Policy for the Philippines By Carino, Benjamin V.; Corpuz, Arturo G.
  12. Institutions Serving Philippine International Labor Migrants By Orbeta, Aniceto Jr. C.; Cabalfin, Michael R.; Abrigo, Michael Ralph M.
  13. A Documentation of the Philippines’ Family Income and Expenditure Survey By Ericta, Carmelita N.; Fabian, Emma
  14. Social Insurance in the Philippines: Responding to the Global Financial Crisis and Beyond By Manasan, Rosario G.
  15. Remittances and Financial Openness By Michel Beine; Elisabetta Lodigiani; Robert Vermeulen
  16. Migration and human capital in an endogenous fertility model By Luca Marchiori; Patrice Pieretti; Benteng Zou
  17. Does Land Abundance Explain African Institutions? By James Fenske
  18. Rural electrification programmes in Kenya: Policy conclusion from a valuation study By Abdullah, Sabah; Markandya, Anil
  19. Gini’s Transvariation Analysis: An Application on Financial Crises in Developing Countries By Bragoli, D; Ganugi, P; Ianulardo, Giancarlo
  20. Determining the Causes of the Rising South African Unemployment Rate: An Age, Period and Generational Analysis By Rulof Burger; Dieter von Fintel
  21. Measuring the impact of social cash transfers on poverty and inequality in Namibia By Sebastian Levine; Servaas van der Berg; Derek Yu
  22. New Evidence on the Role of Remittances on Health Care Expenditures by Mexican Households By Amuedo-Dorantes, Catalina; Pozo, Susan
  23. On the Contribution of Mother’s Education to Children’s Nutritional Capabilities in Mozambique By Francesco Burchi
  24. Deciding to Peg the Exchange Rate in Developing Countries:The Role of Private-Sector Debt By Philipp Harms; Matthias Hoffmann
  25. The Colonial and Geographic Origins of Comparative Development By Raphael Auer
  26. Ethnic Cleansing or Resource Struggle in Darfur? An empirical analysis By Olsson, Ola; Siba, Eyerusalem
  27. Asian Sovereign Debt and Country Risk By Johansson, Anders C.
  28. Poverty Dynamics in Rural Sindh, Pakistan By Hari Ram Lohano
  29. Corruption and confidence in public institutions : evidence from a global survey By Clausen, Bianca; Kraay, Aart; Nyiri, Zsolt
  30. International growth spillovers, geography and infrastructure By Roberts, Mark; Deichmann, Uwe
  31. Importing, exporting and innovation in developing countries By Seker, Murat
  32. Global Income Distribution and Inequality: 1993 and 2000 By Duangkamon Chotikapanich; William E Griffiths; D.S. Prasada Rao; Vicar Valencia
  33. Future Population Trends in China: 2005-2050 By Chen Wei; Liu Jinju
  34. The Economics of Natural Disasters: A Survey By Eduardo Cavallo; Ilan Noy
  35. The Saving Glut Explanation of Global Imbalances: the Role of Underinvestment By Flavia Corneli

  1. By: Leonardo Becchetti (University of Rome Tor Vergata); Pierluigi Conzo (University of Rome Tor Vergata)
    Abstract: Creditworthiness and trustworthiness are almost synonyms since the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness-trustworthiness nexus in an investment game experiment on a sample of participants/non participants to a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. Trustees’ first and second order beliefs are also consistent with this picture. Our findings identify a “horizontal trustworthiness externality” which creates a direct (loan-performance) causality nexus since the mere loan provision increases the borrower’s attractiveness as a business partner.
    Keywords: field experiment, microfinance, investment game, trust, trustworthiness
    JEL: O16 C93
    Date: 2009–12
  2. By: Alberto Behar
    Abstract: We develop a model of endogenous skill-biased technical change in developing countries. The model reconciles wildly dispersed existing estimates of the elasticity of substitution between more and less educated workers. It also produces an estimating equation for the elasticity, which allow us to produce overdue estimates for developing countries. With four types of data, elasticity estimates for developing countries are consistently about 2. In a skill-biased technical change framework, this estimate makes sense of what appears to be little or no correlation between relative skill supply and wage inequality.
    Keywords: Skill-biased technical change, Elasticity of substitution, Wage premium
    JEL: I20 J23 J24 J31 O15 O33
    Date: 2009
  3. By: Helena Marrez (Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels); Mathias Schmit (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels)
    Abstract: This paper is the first to analyze the credit risk of a microfinance institution based on the loan portfolio of a leading Maghrebian microfinance institution, both in terms of number of clients served and of portfolio size. This allows us to work with a proprietary data set of 1,144,770 contracts issued between 1997 and 2007. Using a resampling technique, we estimate the probability density function of losses and value-at-risk measures for a portfolio of loans granted to female and male microfinance clients separately. Results show that loss rates are higher for a male client population than for a female client population, both on average as for percentiles 95 to 99.99. We find that this difference is due to lower default probabilities for female clients, while recovery rates for male and female clients are similar. We also analyze diversification effects, where we find that the proportion of diversifiable risk in total risk is bigger for portfolios of loans granted to female clients than for portfolios of loans granted to male clients. Finally we show that capital requirements determined by the 99.9 percentile remain below those required by the Basel 2 Accords, which opens perspectives for a specific treatment of microfinance if financial regulation becomes applicable to the sector.
    Keywords: Microfinance; Credit risk; Gender study; Bank regulation; Capital requirement
    JEL: G21 G28 O16
    Date: 2009–04
  4. By: Klaus Desmet (Universidad Carlos III de Madrid and CEPR); Ignacio Ortuño-Ortín (Universidad Carlos III de Madrid); Romain Wacziarg (UCLA, NBER and CEPR)
    Abstract: This paper proposes a new method to measure ethnolinguistic diversity and offers new results linking such diversity with a range of political economy outcomes — civil conflict, redistribution, economic growth and the provision of public goods. We use linguistic trees, describing the genealogical relationship between the entire set of 6, 912 world languages, to compute measures of fractionalization and polarization at different levels of linguistic aggregation. By doing so, we let the data inform us on which linguistic cleavages are most relevant, rather than making ad hoc choices of linguistic classifications. We find drastically different effects of linguistic diversity at different levels of aggregation: deep cleavages, originating thousands of years ago, lead to measures of diversity that are better predictors of civil conflict and redistribution than those that account for more recent and superficial divisions. The opposite pattern holds when it comes to the impact of linguistic diversity on growth and public goods provision, where finer distinctions between languages matter.
    Date: 2009–12–16
  5. By: Aldaba, Rafaelita Mercado; Yap, Josef T.
    Abstract: <p>One of the objectives of the evolving ASEAN Economic Community (AEC) is to promote free investment flows and freer capital flows. By deepening economic integration among them, ASEAN member countries can establish a region-wide production base that will attract more foreign direct investment and strengthen the existing FDI-trade nexus in East Asia. This will increase the opportunities for domestic firms to participate in regional and global production networks. The principal investment cooperation program of the AEC has been the ASEAN Investment Area which is being expanded to the ASEAN Comprehensive Investment Agreement (ACIA).</p> <p>The chapter delineates measures to make the ACIA more effective, examples of which are adoption of a collective approach and common timeframe of trade and investment liberalization; and transferring mode 3 of services (commercial presence) from the ASEAN Framework Agreement on Services to the ACIA. Meanwhile, because of the risks that underlie movement of capital flows, it is recommended that regional financial integration give way to regional financial cooperation. The latter can be an important mechanism to accelerate the development of national financial systems, particularly through a more effective policy dialogue and surveillance process. Since greater global financial integration is a desirable long-term goal, regional financial cooperation can also be geared toward advocating for reform of the international financial architecture and crafting region-wide tools to manage capital flows. These will reduce the risks associated with financial integration. With regard to the issue of optimal sequencing in the process of capital account liberalization, the development of national financial systems remains to be an important component and prerequisite.</p>
    Keywords: foreign direct investment, capital flows, ASEAN economic community
    Date: 2009
  6. By: Philippine Institute for Development Studies
    Abstract: <p>In a country where poverty is prevalent, a significant number of children are likely to be illiterate, malnourished, and prone to abuse and physical violence. The Philippines is no different. Using known indicators on education, social protection, poverty, and health, this report summarizes the Filipino children's welfare and living conditions taking account the disparities in gender, income, and geographic location.</p> <p>This report shows that poverty incidence among children living in rural areas is more than twice that of children living in the urban areas. Looking at the regional patterns, some regions are consistently ranked as being 'worse off' compared to other regions. All these suggest wide disparities in poverty incidence across regions and between urban and rural areas. Chapter 2 of the report describes the many facets of deprivation that could either be severe or less severe. In 2006, 18.6 percent of children or 5.4 million children were deprived of at least one of the three dimensions of well-being covered by the study, namely, shelter, sanitation, and water. The report finds some remarkable improvements in the plight of the children based on recent data and indicator estimates.</p> <p>The five pillars of child well-being are examined more closely in Chapter 3. The first section deals with child nutrition and highlights the fact that malnutrition is one of the underlying causes of child mortality. The section on child health, meanwhile, analyzes trends and issues on infant mortality and child immunization. Compared to its close neighbors in Asia, the Philippines posted a drastic decline in immunization rates in 2003. The section on child protection, on the other hand, cites the Philippine government’s efforts to protect the rights of families and children which began as early as 1935. Another section is devoted to education and highlights various basic education indicators and trends. It narrates how the 2007 level of elementary participation rate became at par with 1990 level, thus, requiring that the 25-year millennium development target be achieved in eight years. Disparities in education outcomes were also observed in different socioeconomic dimensions. In the section for social protection, policies and programs that aim to prevent, manage, and overcome the risks that confront the poor and vulnerable people were presented. The section also suggests critical areas that should be considered in assessing social safety net programs.</p> <p>In conclusion, the report proposes different strategies for action using the rights-based approach. Some specific recommendations include pursuing an effective population management program; stabilizing macroeconomic fundamentals; building up data and giving due consideration to regional disparities in aid of planning, and policy and program formulation; and allocating more financial and rational manpower resources for health, education, and child protection.</p> <p>As regards other government programs, the report finds that it is not sufficient that budget is allocated adequately. What is crucial is proper targeting and making sure that resources are given to that segment of population where interventions are needed the most. Moreover, research works should continue to look for reasons why gaps persist, to analyze the correlation between interventions and outcomes, and to examine the interrelated forces and relationship that would strengthen the pillars of child well-being. The report ends with a view on how the role and active participation of public institutions, private organizations, communities, and individuals must be upheld and coordinated to promote the welfare of the Filipino children.</p>
    Keywords: child labor, millennium development goal (MDG), social protection, child health, child poverty/deprivation, child development/wellbeing, child protection, maternal and child wellbeing, children in conflict, social protection programs, antipoverty program
    Date: 2009
  7. By: Zosa, Victorina; Orbeta, Aniceto Jr. C.
    Abstract: The purpose of the paper was to summarize studies identifying the causes and effects of Philippine international labor migration and remittances and to highlight research gaps. Literature and reliability of findings that explore the many facets and implications of the social and economic impacts of international labor migration and remittances were assessed and reviewed. Impacts on education, health, family cohesion, fertility, and demographic distributions, as well as on consumption and investment, and poverty and inequality, were highlighted. The paper argued that understanding the social and economic impact of international labor migration and remittances is complex and an interdisciplinary research is needed to appropriately define the scope of its impact. To move our understanding of the issues forward, in-depth analyses using better specifications, estimation procedures, and data are necessary.
    Keywords: Philippines, international labor migration, social and economic impact
    Date: 2009
  8. By: Llanto, Gilberto M.; Badiola, Jocelyn Alma R.
    Abstract: Using data from a quick survey of various rural (RFIs) and microfinance institutions (MFIs) in East Asia, the paper tries to find out how those institutions and their clientele have been affected by the global financial crisis, how they have coped with the ongoing crisis, and what they plan to do in the future to ensure the stability of the rural financial system and the continuing access of clients to financial services. The microfinance sector in Asia continues to evolve with emphasis on efficiency and strong growth in outreach. The limited data from the quick survey validate the growth in loan portfolios and increase in the number of clients, with growth varying significantly by country depending on internal and external factors during the period before the global financial crisis. Impacts vary depending on external and internal factors faced by RFIs and MFIs. However, they continue to maintain a positive attitude and expect that business will pick up as a result of an increase in demand for loans to finance livelihood projects and various microenterprises. They are aware of the threats and opportunities brought about by the global financial crisis. The analysis leads to some lessons for policymakers, bank regulators, rural financial institutions, and microfinance institutions that are committed to provide inclusive financial services to member clients.
    Keywords: regulatory framework, global financial crisis, loan portfolio quality, credit crunch, inclusive financial service
    Date: 2009
  9. By: Alba, Michael M.; Sugui, Jessaine Soraya C.
    Abstract: The literature has focused on motives to explain remittance behavior. But as nonanonymous transfers, remittances are apt to be influenced by giving norms as well. We formulate an empirical specification that takes account of remittance motives involving worker-household pairs. We find that altruism dominates the exchange motive among overseas workers who are likely to be the primary breadwinners of their recipient households. We also find that in the subsample in which overseas workers are likely to be secondary breadwinners, (a) household labor income is an endogenous explanatory variable, and (b) the error covariance of the household income and remittance selection equations is positive. A possible reason for (a) is that secondary breadwinners use household income as an imperfect signal of opportunity cost or to detect unobserved effort, i.e., moral hazard, in generating income. As for (b), we surmise that it indicates the presence of incentive-compatible mechanisms against moral hazard. On giving norms, we find that, in samples that include overseas workers who are secondary breadwinners, remittance amounts are afflicted with negative selectivity. We present evidence that this is consistent with Filipino giving practices in which everyone gives but in modest amounts.
    Keywords: remittances, remittance motives, giving norms
    Date: 2009
  10. By: Yap, Josef T.; Cuenca, Janet S.; Reyes, Celia M
    Abstract: <p>The 2008 global economic and financial crisis spawned a synchronized recession among industrialized countries leading to a contraction in world trade. Exports from developing countries fell sharply dragging many of them into the global economic downturn. The Philippines was not spared the fallout from the crisis as GDP growth decelerated considerably in the fourth quarter of 2008 and first half of 2009. Asset prices experienced volatility but unlike the 1997 East Asian crisis, the financial sector remained fairly stable. Unemployment increased moderately, but was more pronounced in the manufacturing sector which felt the brunt of the slowdown mainly through the export channel. Remittances from overseas Filipino workers continued to grow, however, albeit at a lower rate. Foreign exchange reserves therefore maintained an upward trend despite the fall in exports and larger capital outflows.</p> <p>A cause of concern is the widening fiscal deficit, which is largely due to the need to increase government expenditures to offset lower consumption, investment, and exports. The Economic Resiliency Plan is a key component of the government's response to the crisis and 2009 first half data indicate modest success. However, another factor behind the wider fiscal deficit is the weak tax effort and if this persists, the resources to finance achievement of the Millennium Development Goals will likely be reduced. Thus, even if preliminary survey data derived from the Community-based Monitoring System indicate a moderate adverse effect on the income and employment of lower income households, lower economic growth and fiscal troubles imply that the government will not have enough resources to improve their situation in the medium term. This is definitely a problematic scenario given that the poverty situation in the Philippines deteriorated even when economic growth was relatively robust. To its credit, the government embarked on a campaign to increase and expand social protection in response to the deteriorating poverty situation. In the wake of the crisis, resources were increased and programs were improved. However, many social protection programs continue to be hindered by low coverage and inadequate benefits, poor targeting, and operational constraints due to lack of coordination among program implementers. This is a microcosm of the institutional problems that have constrained economic development in the Philippines over many decades.</p>
    Keywords: millennium development goal (MDG), social protection, financial and economic crisis, macroeconomic impact, impact on households, economic resiliency plan
    Date: 2009
  11. By: Carino, Benjamin V.; Corpuz, Arturo G.
    Abstract: Philippine cities provide the highest levels of service and living standards in the country. Much of what happens to the country in terms of production and employment, income and consumption, and access to basic services and amenities will continue to be determined by the performance of its urban system. Overall, however, the Philippines is characterized by its lack of urban competitiveness. Although its urban areas account for an overwhelming majority of national economic growth, they have also been underperforming relative to their potentials and other cities in East Asia. In particular, the urban system is plagued by high transaction costs and production inefficiencies; lack of infrastructure and service facilities; inability to attract significant amounts of investments; outmigration of talent; diminishing competitiveness of its primary international gateway and service center (Metro Manila); lack of financial resources; high poverty incidence; deteriorating urban environment; and weak governance. Addressing these problems is not easy or simple. Invariably, however, it is rooted in (1) improving the competitiveness of the urban system, (2) addressing urban poverty and (3) housing problems, (4) building sustainable communities, and (5) improving governance specifically, strengthening the role of local governments in managing the environment and in ensuring the sustainability of communities.
    Keywords: urban development, Philippines, housing policy
    Date: 2009
  12. By: Orbeta, Aniceto Jr. C.; Cabalfin, Michael R.; Abrigo, Michael Ralph M.
    Abstract: This paper discusses public and private institutions that were established in the Philippines to provide services to Filipino international migrant workers. Thirty years of having explicit policy on international labor migration has resulted to the creation of various public agencies to promote, manage, and protect migrant workers. This paper looks at their evolution and at the letter and application of their mandates as well as how some have become models for many developing countries to follow. It presents how government migration services work together with nongovernment organizations in a complementary manner in order to be able to provide support to Filipinos working and living overseas. It also shows how these institutions cover all aspects of migration including but not limited to predeployment, deployment, onsite support services, and eventual return.
    Keywords: Philippines, international labor migration, institutions
    Date: 2009
  13. By: Ericta, Carmelita N.; Fabian, Emma
    Abstract: The quality of poverty estimates relies heavily on the data sources. One of the sources of data for poverty estimation in the Philippines is the Family Income and Expenditure Survey (FIES). The FIES is the source of detailed information on income and expenditures of Filipino families. Conducted by the National Statistics Office every three years, it is an input to the calculation of critical poverty data necessary to monitor the condition of the poor in the country. In this document, one will be able to look into how the FIES is administered, how it evolved through time, how the concepts of family and income are defined, what the survey covers, how much it costs to conduct the FIES, how detailed the survey questions are, how long it takes to complete the enumeration, and what the issues surrounding it are.
    Keywords: Family Income and Expenditure Survey (FIES), sampling design, 2003 Master Sample, family income, family expenditure, questionnaire, estimation, enumeration
    Date: 2009
  14. By: Manasan, Rosario G.
    Abstract: <p>This paper aims to review and assess protection afforded by the Social Security System and the Government Service Insurance System, two out of the three agencies tasked with administering social insurance in the country. Like social security systems in other countries, the GSIS and SSS provide income support to government/private sector employees and their families in times of contingencies like death, old age, sickness, and disability arising from work, and are financed out of the contribution of members and their employers. The GSIS and SSS are both mandatory, publicly managed, benefit-defined social insurance schemes with funding coming from members and their employers and investment income from reserves. Government guarantees the solvency of both systems and the levels of benefits prescribed.</p> <p>The global economic downturn will tend to reduce the stream of contributions to the social security system as a result of the increase in unemployment and the reduction in the level of earnings on which contributions are based. At the same time, there will be a temptation on the part of policymakers to use the pension funds to partially finance the fiscal stimulus package that has been drawn in response to the crisis. However, using the pension funds for the purpose of pump priming the domestic economy will likely not match the primary objective of the fund to protect old-age income of members.</p> <p>Even without the global financial crisis, reforms aimed at improving the financial viability of and corporate governance in both the GSIS and the SSS have already been started. Some gains have already been achieved in various areas of concern but sustained effort is still needed. The needed reforms have already been articulated by various experts (e.g., Holzmann et al. 2000, Navarro 2004, OECD 2009, Asher 2008) and includes: (i) the broadening of coverage and enhancement of compliance; (ii) greater emphasis on fiduciary responsibility of social security institutions and improve the management of their investment portfolio; and (iii) reduction in administrative cost; and (iv) institution of additional parametric measures to improve sustainability of the social security institutions and reduce the national government’s contingent liability. Prospectively, there is a need to explore the feasibility of a noncontributory social pension for aged poor given the low coverage of the informal sector in the SSS.</p>
    Keywords: defined-benefit social insurance scheme, replacement rate and required contribution rate of social security system
    Date: 2009
  15. By: Michel Beine; Elisabetta Lodigiani; Robert Vermeulen (CREA, University of Luxembourg)
    Abstract: Remittances have greatly increased during recent years, becoming an important and reliable source of funds for many developing countries. Therefore, there is a strong incentive for receiving countries to attract more remittances, especially through formal channels. One way of doing so is to increase their financial openness, but this is not without costs. More specifically for developing countries, governments need to weight the positive effects of remittances with the additional risks in terms of macroeconomic volatility associated to financial openness. In this paper we investigate the link between remittance receipts and financial openness. We develop a small model and statistically test for the existence of such a relationship with a sample of 66 mostly developing countries from 1980-2005. Empirically we use a dynamic generalized ordered logit model to deal with the categorical nature of the financial openness policy. We account for the persistence of financial openness, initial conditions, trade openness, institutional quality and domestic financial development. In addition, we apply a two-step method akin to two stage least squares to deal with the potential endogeneity of remittances. We find a strong positive effect of remittances on financial openness, i.e. the more remittances a country receives, the more likely it will be financially open. This positive effect is both statistically significant and economically large.
    JEL: E60 F24 F41 O10
    Date: 2009
  16. By: Luca Marchiori; Patrice Pieretti; Benteng Zou (CREA, University of Luxembourg)
    Abstract: What is the impact of high-skilled emigration on fertility and human capital in migrants’ origin countries? This question is analyzed within an overlapping generations model where parents choose to finance higher education to a certain number of their children. It follows that families are composed of high- and low-skilled children who may both emigrate with a certain probability when they reach adulthood. It is found that a brain drain leads to a change in children’s skill composition, with parents choosing to provide higher education to a larger number of their children. A calibration of the model suggests that, following a brain drain, the additional children benefiting from higher education might in the long run compensate for the loss of high-educated workers and lead to a brain gain.
    JEL: F22 J13 J24
    Date: 2009
  17. By: James Fenske (Department of Economics, Yale University)
    Abstract: I show how abundant land and scarce labor shaped African institutions before colonial rule. I present a model in which exogenous suitability of the land for agriculture and endogenously evolving population determine the existence of land rights, slavery, and polygyny. I then use cross-sectional data on pre-colonial African societies to demonstrate that, consistent with the model, the existence of land rights, slavery, and polygyny occurred in those parts of Africa that were the most suitable for agriculture, and in which population density was greatest. Next, I use the model to explain institutions among the Egba of southwestern Nigeria from 1830 to 1914. While many Egba institutions were typical of a land-abundant environment, they sold land and had disputes over it. These exceptions were the result of a period of land scarcity when the Egba first arrived at Abeokuta and of heterogeneity in the quality of land.
    Keywords: Africa, institutions, land rights, slavery, polygyny
    JEL: N57 O10
    Date: 2009–11
  18. By: Abdullah, Sabah; Markandya, Anil
    Abstract: Developing countries have struggled with low electrification rates in the rural areas. This study investigates one major issue impeding the rural electrification programmes in rural Kenya: high connection payments. The paper uses estimates obtained from a stated preference study, namely a contingent valuation method completed in 2007, to examine the willingness to pay to connect to grid-electricity and photovoltaic services. Expanding rural electrification will need subsidies, but the study shows that some forms of subsidy are more effective than others. The key findings suggest that the government needs to reform the energy subsidies, increase market ownership and performance of private suppliers, establish financial schemes and create markets that vary according to social-economic and demographic groups.
    Keywords: Sub-Saharan Africa; willingness to pay (WTP); affordability; energy; rural electrification
    Date: 2009–09
  19. By: Bragoli, D; Ganugi, P; Ianulardo, Giancarlo
    Abstract: The damage and the recurrence of financial crises have increased the concern of investors and policymakers on one hand and the interest of macroeconomists on the other. This paper presents an original non parametric methodology, whose aim is to give a very intuitive and rigorous method for variable selection in order to analyze financial crises. The transvariation analysis compares the distributions of two different groups of countries (sound and distressed) with respect to a single macroeconomic variable and selects the indicators on the basis of a low transvariation probability index. The current account deficit to GDP ratio, differently from other studies on financial crises, seems to be a suitable variable in discriminating distressed countries from sound ones, and the case of Argentina and Turkey confirms this finding.
    Date: 2009
  20. By: Rulof Burger (St Anthony's College, Oxford University and Department of Economics, University of Stellenbosch); Dieter von Fintel (Department of Economics, Universty of Stellenbosch)
    Abstract: This paper takes advantage of the wealth of cross-sectional household surveys conducted after South Africa’s political transition, in order to gain insights into the causes of the acceleration in the already high unemployment rate. A synthetic panel dataset is constructed to decompose unemployment and other labour market outcomes into cyclical, generational and life-cycle effects. This dynamic view isolates which groups are at risk across the period and allows a more nuanced understanding of the long-run and short-run impacts. Our results indicate that the higher unemployment rates faced by the young are predominantly due to the disadvantage of entering the labour market more recently, rather than being attributable to their age. We furthermore isolate what has driven this long-run increase in labour market participation. In particular, higher educational attainment and household formation decisions across generations fuel labour supply among the more recent entrants. We find some correspondence between the cyclical variation in unemployment and the business cycle. This suggests that jobless growth is not a relevant feature of the South African labour market. This paper confirms many of the causes of unemployment that are postulated in the literature. The dynamic nature of this study has furthermore allowed the separation of short-run and long-run aspects of unemployment. The decomposition approach adopted here has uncovered the linkages between the schooling system and the labour market across all generations, but, in particular, has isolated why the youngest generations have exhibited such distinct risks. The surge in labour supply amongst most recent generations (those aged 20 in 1995) can be explained by rapid exit rates from the education system resulting from over-age enrolment policies enacted in the post-apartheid period. This has pushed individuals into the labour market prematurely and without the adequate skills to be absorbed into the workplace. The importance of the generational aspects of unemployment relative to life cycle and business cycle impacts suggests that policies should address the structural issues affecting each of these birth cohorts, rather than focussing on age groups per se.
    Keywords: Unemployment, Participation, Feminisation of Labour Force, Education Policy, Birth Cohort Panels, Age-Period-Cohort Decompositions
    JEL: C4 J1 J2 J3
    Date: 2009
  21. By: Sebastian Levine (United Nation Development programme, Namibia); Servaas van der Berg (Department of Economics, University of Stellenbosch); Derek Yu (Department of Economics, University of Stellenbosch)
    Abstract: This paper reviews the system for social cash transfers in Namibia, a middle-income country with a long experience in making available a universal and non-contributory old age pension, child grants using means-testing and quasi-conditionalities and other cash transfers. The paper traces the origins of the cash transfers back to the country’s past annexation into apartheid South Africa and shows how Namibia’s system is now faced with a set of distinct challenges that are particularly pertinent as the authorities are rapidly scaling-up access. Notably, in the years after the remaining elements of racial discrimination were eliminated, and the value of the transfers were equalised across the ethnic groups, new discrepancies have developed in the values of the different grants. Moreover, using newly available household data the paper finds inefficiencies in the means-testing for the child grants – especially when compared to South Africa. In spite of these challenges the paper also shows that social cash transfers have a large effect on poverty reduction and that the effects are particularly positive for the poorest of the poor. The transfers also tend to reduce inequality but this impact is more limited. Simulations indicate the fiscal sustainability of an expanded system of social cash transfers and highlight the potential cost-savings that would accrue from a more effective means-test of the child grants. In the analysis the effects of using income and expenditure data as the basis for the welfare variable are discerned.
    Keywords: Namibia, Sub-Saharan Africa, Social protection, Social transfers, Old age pension, Disability grants, Child grants
    JEL: H55 O1
    Date: 2009
  22. By: Amuedo-Dorantes, Catalina (San Diego State University, California); Pozo, Susan (Western Michigan University)
    Abstract: Using Mexico's 2002 wave of the Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH), we find that international remittances raise health care expenditures. Approximately 6 pesos of every 100 peso increment in remittance income are spent on health. The sensitivity of health care expenditures to variations in the level of international remittances is almost three times greater than its responsiveness to changes in other sources of household income. Furthermore, health care expenditures are less responsive to remittance income among lower-income households. Since the lower responsiveness may be partially due to participation of lower-income households in public programs like PROGRESA (now called Oportunidades), we also analyze the impact of remittances by health care coverage. As expected, we find that households with some kind of health care coverage – either through their jobs or via participation in PROGRESA – spend less of remittance income increments on health care than households lacking any health care coverage. Hence, remittances may help equalize health care expenditures across households with and without health care coverage.
    Keywords: remittances, health care, household expenditures, Mexico
    JEL: F24 I1
    Date: 2009–12
  23. By: Francesco Burchi
    Abstract: This paper examines the role of mother’s education in expanding children’s nutritional capabilities in Mozambique, a country where both educational and nutritional deprivations are dramatic. The econometric results, based on data from the 2003 DHS survey, suggest that mother’s schooling is a key determinant of children’s nutrition, but its direct marginal contribution is declining after completion of primary education. Children whose mothers have completed primary education are far more likely to be well nourished than children whose mothers have lower or no educational attainments. Primary education works through the increase of mother’s general knowledge and, to a less extent, of her nutrition knowledge. Mother’s secondary schooling, instead, contributes only indirectly, by increasing household wealth. A further empirical analysis shows that there is no substantial difference in the benefits of mother’s education depending on whether she resides in urban or rural areas. Finally, the paper provides empirical evidence that female education is essential to improve children’s wellbeing in Mozambique, and that only a small part of this influence works through the traditional economic channel.
    Keywords: Development economics; capability approach; nutrition; women’s education; Mozambique.
    JEL: J13 O15 I20 R20 O55
    Date: 2009
  24. By: Philipp Harms (RWTH Aachen University, Study Center Gerzensee); Matthias Hoffmann (Deutsche Bundesbank)
    Abstract: We argue that a higher share of the private sector in a country’s external debt raises the incentive to stabilize the exchange rate. We present a simple model in which exchange rate volatility does not affect agents’ welfare if all the debt is incurred by the government. Once we introduce private banks who borrow in foreign currency and lend to domestic firms, the monetary authority has an incentive to dampen the distributional consequences of exchange rate fluctuations. Our empirical results support the hypothesis that not only the level, but also the composition of foreign debt matters for exchange-rate policy.
    Date: 2009–12
  25. By: Raphael Auer (Swiss National Bank)
    Abstract: While the direct impact of geographic endowments on prosperity is present in all countries, in former colonies, geography has also affected colonization policies and, therefore, institutional outcomes. Using non-colonized countries as a control group, I develop an empirical strategy that disentangles the partial effects of institutions and of endowments on income. I find that institutions are the main determinant of development, but that endowments have a sizeable direct impact, as well. Last, I apply the empirical strategy to examine the theories put forward by La Porta et al. (1999) and by Acemoglu et al. (2001), finding support for both theories, but also evidence that the authors’ estimates are biased since they mix up the effect of the historical determinants of institutions with the sizeable direct impact of access to trade and of disease environment.
    Date: 2009–06
  26. By: Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University); Siba, Eyerusalem (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The con‡ict in Darfur has been described both as an ethnic cleansing campaign, carried out by the Sudanese government and its allied militias, and as a local struggle over dwindling natural resources between African farmers and Arab herders. In this paper, we construct a theoretical framework for understanding the choice between ethnic cleansing and resource capture and use a previously unexploited data set on 530 villages in Southwestern Darfur to analyze the determinants of attacks in the region. Our results clearly indicate that Janjaweed attacks have been targeted at villages dominated by the major rebel tribes, resulting in a massive displacement of those populations. Resource variables, capturing access to water and land quality, also have some explanatory power but are not consistently significant. These patterns suggest that attacks in the area had ethnic cleansing as a primary objective.<p>
    Keywords: Ethnic cleansing; resource struggle; Darfur
    JEL: O41 P16
    Date: 2009–12–09
  27. By: Johansson, Anders C. (China Economic Research Center)
    Abstract: This paper analyzes systematic risk of sovereign bonds in four East Asian countries: China, Malaysia, Philippines, and Thailand. A bivariate stochastic volatility model that allows for time-varying correlation is estimated with Markov Chain Monte Carlo simulation. The volatilities and correlation are then used to calculate the time-varying betas. The results show that country-specific systematic risk in Asian sovereign bonds varies over time. When adjusting for inherent exchange rate risk, the pattern of systematic risk is similar, even though the level is generally lower. The findings have important implications for international portfolio managers that invest in emerging sovereign bonds and those who need benchmark instruments to analyze risk in assets such as corporate bonds in the emerging Asian financial markets.
    Keywords: Asia; sovereign bonds; systematic risk; stochastic volatility; Markov Chain Monte Carlo
    JEL: C32 F31 G12 G15
    Date: 2009–12–01
  28. By: Hari Ram Lohano
    Abstract: This paper focuses on poverty dynamics and their determinants, using panel survey data for rural Sindh, Pakistan. Households interviewed by the International Food Policy Research Institute (IFPRI) during 1986–91, were resurveyed in 2004–05 with minimal attrition.
    Keywords: food policy, rural, consumption, land ownership, panel data, rural poverty, shocks in agriculture, poverty transitions, Sindh, pakistan, poverty dynamics, panel survey data, households, crop, education, non-farm employment, poverty, farming, income change, econometric analysis,
    Date: 2009
  29. By: Clausen, Bianca; Kraay, Aart; Nyiri, Zsolt
    Abstract: Well-functioning institutions matter for economic development. In order to operate effectively, public institutions must also inspire confidence in those they serve. The authors use data from the Gallup World Poll, a unique and very large global household survey, to document a quantitatively large and statistically significant negative correlation between corruption and confidence in public institutions. This suggests an important channel through which corruption can inhibit development by eroding confidence in public institutions. This correlation is robust to the inclusion of a large set of controls for country and respondent-level characteristics, and they show how it can plausibly be interpreted as reflecting at least in part a causal effect from corruption to confidence. The authors also show that individuals with low confidence in institutions exhibit low levels of political participation, show increased tolerance for violent means to achieve political ends, and have a greater desire to"vote with their feet"through emigration.
    Date: 2009–12–01
  30. By: Roberts, Mark; Deichmann, Uwe
    Abstract: There is significant academic evidence that growth in one country tends to have a positive impact on growth in neighboring countries. This paper contributes to this literature by assessing whether growth spillovers tend to vary significantly across world regions and by investigating the contribution of transport and communication infrastructure in promoting neighborhood effects. The study is global, but the main interest is on Sub-Saharan Africa. The authors define neighborhoods both in geographic terms and by membership in the same regional trade association. The analysis finds significant evidence for heterogeneity in growth spillovers, which are strong between OECD countries and essentially absent in Sub-Saharan Africa. The analysis further finds strong interaction between infrastructure and being a landlocked country. This suggests that growth spillovers from regional"success stories"in Sub-Saharan Africa and other lagging world regions will depend on first strengthening the channels through which such spillovers can spread -- most importantly infrastructure endowments.
    Keywords: Achieving Shared Growth,Transport Economics Policy&Planning,Economic Growth,Economic Theory&Research,Country Strategy&Performance
    Date: 2009–12–01
  31. By: Seker, Murat
    Abstract: Recent studies have shown that not only exporters but also importers perform better than firms that do not trade. Using a detailed firm level dataset from 43 developing countries, I show that there are persistent differences in evolution of firms when they are grouped according to their trade orientation as: two-way traders (both importing and exporting), only exporters, only importers, and non-traders. Extending the existing models of firm evolution in open economies by incorporating importing decision, I show that: i) globally engaged firms are larger, more productive, and grow faster than non-traders; ii) two-way traders are the fastest growing and most innovative group who are followed by only-exporters; iii) estimating export premium without controlling for import status is likely to overestimate the actual value by capturing the import premium; and iv) R&D investment contributes to growth of traders significantly more than to non-traders. Finally I show the robustness of the findings by providing evidence from the panel data constructed from the original dataset and controlling for variables that are likely to affect firm growth.
    Keywords: E-Business,Labor Policies,Microfinance,Economic Theory&Research,Emerging Markets
    Date: 2009–12–01
  32. By: Duangkamon Chotikapanich; William E Griffiths; D.S. Prasada Rao; Vicar Valencia
    Abstract: The nature of global and regional income distributions and the extent of inequality are examined using country-level data on income distributions drawn from World Bank studies and the World Institute for Development Economics Research for the period 1993 - 2000. Beta-2 income distributions are fitted to population and income share data for 91 countries. Regional and global income distributions are obtained as population weighted mixtures of the country-specific income distributions. Gini and Theil inequality measures for countries, regions and the world are expressed in terms of the parameters of the beta-2 distributions, and, for regions and the world, decomposed into their within- and between-country components. Empirical results show a high degree of global inequality, but with some evidence of inequality decreasing between the two years, with the decrease being largely attributable to growth in China.
    Keywords: beta-2 distribution; mixture distribution; Gini coefficient; Theil index;inequality decomposition.
    JEL: C13 C16 D31
    Date: 2009
  33. By: Chen Wei; Liu Jinju
    Abstract: Using China's 2000 census data, this paper conducts population projection under different fertility scenarios to gauge the likely trends in China's future population change. The range of fertility assumptions captures the uncertainty of current fertility estimates as well as the likely trends under the family planning policy and economic development. Only one mortality scenario is applied and net international migration is assumed to be null in the population projection. Future life tables are generated by Brass logit techniques with initial 2000 life tables and assumed annual life expectancy at birth following the United Nations medium improvement model. China is experiencing unprecedented demographic transition together with the radical social and economic transformation. Demographically speaking China is now a developed country. However, China's future population growth is substantial, a solely result of the population momentum built into the age structure by past fertility and mortality. 10 percent or 135 million increase is expected in the next 25 years under the medium fertility scenario. China would reach a maximum population of 1443 million in 2030, followed by a long-term population decline. Two major changes of the future population age structure of China are continuing demographic dividend and rapid population ageing. China's demographic window of opportunity opened at 1990 and will close at 2033. Having a work force of around one billion has many advantages if we consider only the dependency ratio in the population or the labour supply for the development. However, China will be also experiencing a rapid population ageing after 2015. One fifth to one quarter of the Chinese population would be older people at age 65 or over after 2035. The year of 2029 would be a turning point in China's age structure transition, when for the first time in Chinese history the elderly population would exceed the child population.
    Keywords: population projection, Brass logit transformation, life table, China
    JEL: J11
    Date: 2009–09
  34. By: Eduardo Cavallo; Ilan Noy
    Abstract: Catastrophes caused by natural disasters are by no means new, yet the evolving understanding of their relevance to economic development and growth is still in its infancy. In order to facilitate further necessary research on this topic, this paper summarizes the state of the economic literature examining the aggregate impact of disasters. The paper reviews the main disaster data sources available, discusses the determinants of the direct effects of disasters, and distinguishes between short- and long-run indirect effects. The paper then examines some of the relevant policy questions and follows up with projections about the likelihood of future disasters, while paying particular attention to climate change. The paper ends by identifying several significant gaps in the literature.
    Keywords: Natural disasters, Climate change, Growth
    JEL: O11 O40 Q54
    Date: 2009–12
  35. By: Flavia Corneli
    Abstract: According to the “Saving Glut hypothesis”, global imbalances are caused by inefficiently high level of precautionary savings in financially underdeveloped regions, where agents have limited opportunity to diversify idiosyncratic risk. This paper generalizes the approach by modeling idiosyncratic risk in entrepreneurial activities, which can be only partially hedged. As a result, agents save too much and invest too little, relative to the efficient allocation, depressing production activities and the real interest rate. Capital account liberalization towards financially more advanced economies then produces an outflow of capital in search of safer investment, with the effect of further reducing domestic investment in countries with poor financial institutions. The model predicts welfare losses for less financially developed economies, and an increase in wealth inequality for advanced economies. Finally, the present analysis is able to explain the direct link between the financial crisis and global recession and the long run implications of worsening financial conditions on countries’ net external positions.
    Keywords: Current Account, Financial Markets, Heterogeneity, Incomplete Markets, International Capital Movements
    JEL: D52 E44 F32 G11 G15 O16
    Date: 2009

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