nep-dev New Economics Papers
on Development
Issue of 2010‒01‒23
nineteen papers chosen by
Mark Lee
Towson University

  1. Philippine agricultural and food policies: Implications for poverty and income distribution By Cororaton, Caesar B.; Corong, Erwin
  2. The Politics of External Debt in Developing Countries By Emilio Colombo
  3. Land Rights Insecurity and Temporary Migration in Rural China By de la Rupelle, Maëlys; Quheng, Deng; Li, Shi; Vendryes, Thomas
  4. Capital-Skill Complimentarity: Evidence from Manufacturing Industries in Ghana By Akay, Gokhan H.; Yuksel, Mutlu
  5. FDI AND SPILLOVERS IN CHINA: NON-LINEARITY AND ABSORPTIVE CAPACITY By Chen , Taotao; Kokko, Ari; Gustavsson Tingvall, Patrik
  6. Crushed Aid: Fragmentation in Sectoral Aid By Emmanuel Frot; Javier Santiso
  7. Economic Importance of Agriculture for Poverty Reduction By Dalila Cervantes-Godoy; Joe Dewbre
  8. Design and Evolution in Institutional Development: The Insignificance of the English Bill of Rights By Peter Murrell
  9. The inter-linkages between rapid growth in livestock production, climate change, and the impacts on water resources, land use, and deforestation By Thornton, Philip K.; Herrero, Mario
  10. Potential benefits and risks of increased aid flows to Burundi By Nielsen, Hannah; Madani, Dorsati
  11. National drought insurance for Malawi By Syroka, Joanna; Nucifora, Antonio
  12. Earthquake propensity and the politics of mortality prevention By Keefer, Philip; Neumayer, Eric; Plumper, Thomas
  13. Do international labor standards contribute to the persistence of the child labor problem? By Matthias Doepke; Fabrizio Zilibotti
  14. Microfinance as a Poverty Reduction Tool—A Critical Assessment By Anis Chowdhury
  15. Capital Controls and 21st Century Financial Crises: Evidence from Colombia and Thailand By Bruno Coelho; Kevin Gallagher
  16. The Dynamics of Self-employment in a Developing Country: Evidence from India By Tamvada, Jagannadha Pawan
  17. Africa and the global economic crisis: A Risk assessment and action guide By Naudé, Wim
  18. Are Managers’ Perceptions of Constraints to Growth Reliable? Evidence from a Natural Experiment in South Africa By Clarke, George
  19. The Determinants of Household Income Mobility in Rural China By Xuehua Shi; Xiaoyun Liu; Alexander Nuetah; Xian Xin

  1. By: Cororaton, Caesar B.; Corong, Erwin
    Abstract: The Philippines has undergone a series of trade reforms since the mid-1980s that have reduced protection on nonagricultural goods. However, protection on key food items is still in effect, and this has led to high domestic food prices. Such high prices have a considerable negative effect on poverty because more than 60 percent of the consumption of poor Filipino households is for food. The special product arguments of the World Trade Organization increase the pressure to maintain the existing high levels of food protection in the country. Special products treatment provides developing countries with the flexibility to implement tariff reduction programs over an extended period for certain self-designated products. These special product discussions are based on food security, livelihood, and rural development arguments. This research report assesses the poverty and income distribution implications of trade reform that is focused on agriculture and major food items (rice, corn, sugar, beef, chicken, pork, processed meat products, fruits and vegetables, and processed fruits) in the Philippines. A dynamic-recursive computable general equilibrium model calibrated to the social accounting matrix for the Philippine economy for the year 2000 and a microsimulation model that uses the 2000 Family Income and Expenditure Survey are used to analyze possible policy shifts. The simulation results indicate that trade reform in agriculture and major food items will have favorable effects on factor prices and bring about a significant reduction in consumer prices. Real household income will increase while poverty and income inequality decline. These findings therefore imply that maintaining existing trade protections on agricultureand major food items—which drive food prices up—will not solve the problem of poverty and income inequality in the Philippines. In the year 2000 the incidence of poverty in the Philippines was 34 percent. In 2003 it declined to 30.4 percent. The incidence of poverty in rural areas is higher than that in urban areas: 48.8 percent and 18.6 percent in 2000, respectively. Over the past two decades, significant structural changes have taken place in the Philippine economy. The share of agriculture in the total gross domestic product has declined. The country has switched from being a net exporter to a net importer of agricultural products and food items. The widening trade gap in agriculture and food has made the Philippines vulnerable to fluctuations in the world market. For example, the international rice crisis in 2008 has adversely affected the domestic market for rice in the Philippines. The deterioration in the net trade position of the country in food has largely been caused by the high growth in domestic food demand relative to production. Domestic food production lags behind demand because of declining productivity. There is increasing demand for food items with higher income elasticities, and there is also increasing pressure from high population growth. To address this growing trade gap in agriculture and food, the government has adopted a strategy to improve rice productivity. This is a step in the right direction: based on our rice productivity simulation results, higher rice productivity will increase domestic production and reduce imports of rice. Most importantly it will reduce consumer prices. Most of the benefits of improved rice productivity would go to the households in the first decile of the population, since rice has the largest share in their consumption basket relative to the rest of the household groups. There is a reduction in poverty incidence and income inequality. However, implementation of the Philippine government’s rice productivity program is costly, inefficient, and ineffective. In 2001 the government introduced a new technology, hybrid rice. Its adoption was aggressively pursued by the government through the Hybrid Rice Commercialization Program (HRCP). Under the HRCP the production of hybrid rice seeds is supported by the government through (1) procurement of seeds at a guaranteed price, (2) distribution of the procured seeds to participating farmers at half the procurement price, and (3) payment of additional money to participating farmers to help defray their fertilizer input costs. The government has devoted significant resources, through a system of subsidies, to supporting the HRCP. However, the results are not encouraging. The adoption rate of hybrid rice is very low. There is a high dropout rate among participating farmers, because hybrid rice seeds are so expensive and farmers have to purchase them every planting season rather than reusing them (which would result in drastically decreased yields). The massive government subsidies have distorted the ability of farmers to make an informed choice between hybrid and inbred rice varieties. Thus instead of supporting the HRCP the government should spend its limited resources on research and development that focuses on improving the yield of inbred rice. Enhancing an inbred-based system that is adapted to farmers’ familiar practice of saving, reusing, and exchanging seeds would be a more responsive approach to improving productivity than promoting such costly technologies as hybrid rice, which has not yet achieved commercially viable levels.
    Keywords: Food prices, Trade reform, Agricultural policies, Computable general equilibrium (CGE) modeling, Social accounting matrix, Microsimulation model, food policies, Income distribution, Poverty reduction,
    Date: 2009
  2. By: Emilio Colombo
    Abstract: We analyse the determinants of long term external debt for a large sample of developing countries. We ¯nd that, in addition to the stan- dard economic variables, institutional and socio-political variables are a key factor in explaining the level of external debt. Overall the re- sults point to an interpretation based on the presence of binding credit constraints. Such constraints are relaxed in the presence of high qual- ity of institutions and low political risk, while they are tightened when socio-political risk is higher.
    JEL: F34
    Date: 2009–12
  3. By: de la Rupelle, Maëlys (Paris School of Economics); Quheng, Deng (Chinese Academy of Social Sciences); Li, Shi (Beijing Normal University); Vendryes, Thomas (Paris School of Economics)
    Abstract: Like most other developing countries, China experiences huge migration outflows from rural areas. Their most striking characteristic is a high geographical and temporal mobility. Rural migrants keep going back and forth between origin villages and destination areas. In this paper, we show that this temporary feature of migration can be linked to land rights insecurity. As village land ownership remains collective and as land use rights can be periodically reallocated, individual out-migration can result in deprivation of those rights. Moreover, the intensity of this insecurity varies according to the village-level management of land and the contractual status of land plots. We use these variations to identify the effect of land rights insecurity on migration behavior. Empirical results based on representative 2002 rural data demonstrate substantial impact.
    Keywords: migration, land rights insecurity, China, semiparametric censored regression models
    JEL: C34 J61 P32 Q15
    Date: 2009–12
  4. By: Akay, Gokhan H. (Trinity University); Yuksel, Mutlu (IZA)
    Abstract: Using U.S. manufacturing data, Griliches (1969) found evidence suggesting that capital equipment was more substitutable for unskilled than skilled labor. Griliches formulated this finding as the capital-skill complementarity hypothesis. The purpose of this study is to determine whether the capital-skill complementarity framework holds for Ghana manufacturing plants in industry and aggregate level. We use an unbalanced panel of plant-level data for manufacturing firms in Ghana during the 1991 and 1997 in four industries (food-bakery, textiles-garments, wood-furniture and metal-machinery). Our findings suggest that capital-skill complimentarity holds in aggregate level and wood-furniture sector in Ghana. However, we reject the capital-skill complementarity hypothesis for food-bakery, textile-garment and metal-machinery sectors.
    Keywords: capital-skill complementarity, elasticity of substitution, translog cost function
    JEL: J30 O55
    Date: 2009–12
  5. By: Chen , Taotao (School of Economics and Management); Kokko, Ari (China Economic Research Center); Gustavsson Tingvall, Patrik (China Economic Research Center)
    Abstract: Using a fixed effect variance decomposition model, we estimate SUR models to analyze FDI spillovers from contagion and spillovers from competition on local firms in China. While the former type of spillover mainly depends on the degree of foreign presence in the local industry, the latter kind is related to how foreign and local firms interact. The main conclusion is that FDI has been beneficial for the Chinese economy, but that spillovers are not evenly distributed across firms and industries. Spillovers from contagion tend to exhibit an inverse U-shaped pattern with respect to the degree of foreign presence at the industry level, whereas spillovers from competition exhibit a more linear pattern with respect to the level of technological sophistication in foreign firms. Industries with high absorptive capacity and/or high efficiency are the ones best equipped to take advantage of spillovers from foreign-owned firms. Moreover, there are signs of substantial competition between foreign-owned firms: an increase in the foreign capital share in an industry seems to have a stronger effect on incumbent foreign-owned firms than on domestic firms.
    Keywords: Spillovers; China; FDI; Fixed effect variance decomposition
    JEL: C33 F21 F23 O53
    Date: 2010–01–01
  6. By: Emmanuel Frot; Javier Santiso
    Abstract: This paper measures and compares fragmentation in aid sectors. Past studies focused on aggregate country data but a sector analysis provides a better picture of fragmentation. We start by counting the number of aid projects in the developing world and find that, in 2007, more than 90 000 projects were running simultaneously. Project proliferation is on a steep upward trend and will certainly be reinforced by the emergence of new donors. Developing countries with the largest numbers of aid projects have more than 2 000 in a single year. In parallel to this boom of aid projects, there has been a major shift towards social sectors and, as a consequence, these are the most fragmented. We quantify fragmentation in each aid sector for donors and recipients and identify which exhibit the highest fragmentation. While fragmentation is usually seen as an issue when it is excessive, we also show that some countries suffer from too little fragmentation. An original contribution of this paper is to develop a monopoly index that identifies countries where a donor enjoys monopoly power. Finally, we characterise countries with high fragmentation levels. Countries that are poor, democratic and have a large population get more fragmented aid. However, this is only because poor and democratic countries attract more donors. Once we control for the number of donors in a country-sector, democratic countries do not appear different from non-democratic ones in any sector and poor countries actually have a slightly less fragmented aid allocation.<BR>Cet article mesure et compare le niveau de fragmentation de l’aide au développement dans différents secteurs d’allocation. Les précédents travaux consacrés au sujet se limitaient à l’analyse de données agrégées au niveau national. Une décomposition sectorielle permet d’appréhender plus précisément le phénomène de fragmentation. On évalue à plus de 90 000 le nombre de projets financés par l’aide en 2007. Cette prolifération est en constante augmentation, et sera certainement renforcée par l’émergence de nouveaux pays donneurs. Les pays en développement qui sont le siège du plus grand nombre de projets en accueillent plus de 2000 par an. Parallèlement à cette explosion du nombre de projets, l’allocation sectorielle de l’aide a été modifiée, avec de plus en plus de projets dans les secteurs à buts sociaux. En conséquence, ces secteurs sont les plus fragmentés. Nous quantifions cette fragmentation pour les pays donneurs et récipiendaires, et établissons une liste de ceux où elle est la plus élevée. Nous étudions aussi le revers du problème de la fragmentation de l’aide : tandis que celle-ci est généralement considérée comme problématique lorsqu’elle est trop élevée, nous montrons que certains pays souffrent de trop peu de fragmentation. Nous créons un indice afin d’identifier les pays en développement où un donneur bénéficie d’une position de monopole. La dernière partie de l’article s’attache à caractériser les pays qui ont des niveaux de fragmentation élevés. Les pays pauvres, démocratiques et avec une importante population, reçoivent une aide plus fragmentée. Mais ces résultats s’expliquent par le fait que les pays pauvres et démocratiques attirent aussi plus de donneurs. Une fois que nous prenons cet effet en compte, il apparaît que le niveau de démocratie n’influence pas la fragmentation de l’aide, et que l’aide aux pays pauvres est en fait légèrement moins fragmentée.
    Keywords: aid, fragmentation, aide, fragmentation
    JEL: F35
    Date: 2010–01–05
  7. By: Dalila Cervantes-Godoy; Joe Dewbre
    Abstract: The Millennium Declaration set 2015 as the target date for halving the number of people living in extreme poverty. Exceptional progress in some developing countries makes achieving that goal globally a realistic possibility. However, many countries will fall far short, and up to 1 billion people are likely to remain destitute by the target date. Why are some countries doing better than others? This paper seeks to answer this question by looking for shared characteristics of twenty-five developing countries posting extraordinary success in reducing extreme poverty over the past twenty to twenty-five years. These countries were compared using indicators of their macro-economic characteristics and, especially, their agricultural economic characteristics. The countries chosen for analysis constitute a highly diverse mix. The group includes some of the poorest and some of the richest developing countries in the world, representing virtually all geographic regions. The countries also differ greatly in their systems of governance and economic management. Yet, they are surprisingly similar in their achievements, not only in reducing poverty, but across the broad range of macroeconomic and agricultural economic performance measures used to compare them. Findings from time-series, cross-section regression analysis reveal that while economic growth generally was an important contributor to poverty reduction, the sector mix of growth mattered substantially, with growth in agricultural incomes being especially important.
    Keywords: agricultural development, Millennium development goals, poverty reduction
    JEL: I32 O10 O13 O40 O57 Q10 Q18
    Date: 2010–01–14
  8. By: Peter Murrell (Department of Economics, University of Maryland)
    Abstract: A fundamental question in economic development is how societies first acquire a successful set of institutions. To examine this question, the paper focuses on a paradigmatic example, England in the years surrounding the Glorious Revolution of 1688. North and Weingast (1989) view the constitutional changes following 1688 as an explicit attempt to design a new polity, having the effect of radically altering the functioning of the English political and economic system. The rise of England as a world economic power followed. In contrast, Hayek (1960) views the late 17th century changes as simply summarizing what was already in existence, a product of experience accumulated through trial and error and selective survival of productive institutions, ideas, and habits. This paper argues that the English experience of institutional development cannot be described as creation by design. The rise of England fits Hayek's evolutionary perspective. This conclusion rests on three composite pieces of evidence. First, a search for structural breaks in myriad data sets reveals that socioeconomic change was under way well before 1688. Second, an examination of the historical context and institutional content of each clause of the critical laws shows either that the clauses were already a part of effective law by 1688 or that they did not survive as viable constitutional measures. Third, an analysis of institutional and administrative innovations shows that many key developments affecting government finance were a product of the era before 1688.
    Keywords: Institutions, institutional development, constitutions, Glorious Revolution, design, evolution, Hayek, Bill of Rights
    JEL: O1 N0 O52 K1 N43 N13 H1 P5 B31
    Date: 2009–12
  9. By: Thornton, Philip K.; Herrero, Mario
    Abstract: Livestock systems globally are changing rapidly in response to human population growth, urbanization, and growing incomes. This paper discusses the linkages between burgeoning demand for livestock products, growth in livestock production, and the impacts this may have on natural resources, and how these may both affect and be affected by climate change in the coming decades. Water and land scarcity will increasingly have the potential to constrain food production growth, with adverse impacts on food security and human well-being. Climate change will exacerbate many of these trends, with direct effects on agricultural yields, water availability, and production risk. In the transition to a carbon-constrained economy, livestock systems will have a key role to play in mitigating future emissions. At the same time, appropriate pricing of greenhouse gas emissions will modify livestock production costs and patterns. Health and ethical considerations can also be expected to play an increasing role in modifying consumption patterns of livestock products, particularly in more developed countries. Livestock systems are heterogeneous, and a highly differentiated approach needs to be taken to assessing impacts and options, particularly as they affect the resource-poor and those vulnerable to global change. Development of comprehensive frameworks that can be used for assessing impacts and analyzing trade-offs at both local and regional levels is needed for identifying and targeting production practices and policies that are locally appropriate and can contribute to environmental sustainability, poverty alleviation, and economic development.
    Keywords: Livestock&Animal Husbandry,Wetlands,Wildlife Resources,Agricultural Knowledge&Information Systems,Rural Development Knowledge&Information Systems
    Date: 2010–01–01
  10. By: Nielsen, Hannah; Madani, Dorsati
    Abstract: Burundi has experienced a significant increase in aid flows in recent years. Currently, about half of the budget is funded by aid, mostly grants. The high external assistance has, however, not yet translated into high and sustainable growth rates. This paper analyzes (i) the policy response of the government to the aid surge and its impact on macroeconomic variables; and (ii) the allocation of external assistance and its implications for growth. Since not all aid affects economic development in the same way, aid disbursements are disaggregated by sector as well as by their lag in impacting growth. The analysis shows that Burundi has mostly spent and absorbed increased aid flows, but has until now not suffered significantly from the possible negative effects of an appreciating exchange rate and the related loss of competitiveness, but the possibility of a Dutch disease effect remains a risk. The country’s low growth performance, despite high aid inflows, is not necessarily a sign that aid is ineffective or exceeding Burundi’s absorptive capacity. It reflects that a large share of aid has been allocated to either humanitarian and emergency aid or long-run growth enhancing sectors. Therefore, the lagged impact of aid on economic growth is not yet visible. Furthermore, the composition of the domestically financed budget is biased toward recurrent spending, and therefore not directly growth enhancing. In addition, low and often unpredictable aid disbursement ratios aggravate the bias away from investment and toward government consumption. To boost short-term growth, the share of aid allocated to productive sectors, such as agriculture and the supporting infrastructure, needs to be increased. Firm commitments and timely disbursements of aid by donors are essential and the Government of Burundi needs to strengthen its capacity and mechanisms for donor coordination.
    Keywords: Debt Markets,Development Economics&Aid Effectiveness,Public Sector Expenditure Policy,Currencies and Exchange Rates,Economic Theory&Research
    Date: 2010–01–01
  11. By: Syroka, Joanna; Nucifora, Antonio
    Abstract: Malawi has experienced several catastrophic droughts over the past few decades. The impact of these shocks has been far reaching, and the resulting macroeconomic instability has been a major constraint to growth and poverty reduction in Malawi. This paper describes a weather risk management tool that has been developed to help the government manage the financial impact of drought-related national maize production shortfalls. The instrument is an index-based weather derivative contract designed to transfer the financial risk of severe and catastrophic national drought that adversely impacts the government's budget to the international risk markets. Because rainfall and maize yields are highly correlated, changes in rainfall -- its timing, cumulative amount, and distribution -- can act as an accurate proxy for maize losses. An index has been constructed using rainfall data from 23 weather stations throughout Malawi and uses daily rainfall as an input to predict maize yields and therefore production throughout the country. The index picks up the well documented historical drought events in 2005, 1995, 1994, and 1992 and a weather derivative contract based on such an index would have triggered timely cash payouts to the government in those years. This innovative risk management instrument was pioneered in 2008/2009 by the Government of Malawi, with the assistance of the World Bank, and was a first for a sovereign entity in Africa. Several piloting seasons will be necessary to understand the scope and limitations of such contracts, and their role in the government's strategy, contingency planning, and operational drought response framework.
    Keywords: Debt Markets,Hazard Risk Management,Banks&Banking Reform,Labor Policies,Insurance&Risk Mitigation
    Date: 2010–01–01
  12. By: Keefer, Philip; Neumayer, Eric; Plumper, Thomas
    Abstract: Governments can significantly reduce earthquake mortality by implementing and enforcing quake-proof construction regulation. The authors examine why many governments do not. Contrary to intuition, controlling for the strength and location of actual earthquakes, mortality is lower in countries with higher earthquake propensity, where the payoffs to mortality prevention are higher. Importantly, however, the government response to earthquake propensity depends on country income and the political incentives of governments to provide public goods to citizens. The opportunity costs of earthquake mortality prevention are higher in poorer countries; rich countries invest more in mortality prevention than poor countries in response to a higher earthquake propensity. Similarly, governments that have fewer incentives to provide public goods, such as younger democracies, autocracies with less institutionalized ruling parties and countries with corrupt regimes, respond less to an elevated quake propensity. They therefore have higher mortality at any level of quake propensity compared to older democracies, autocracies with highly institutionalized parties and non-corrupt regimes, respectively. The authors find robust evidence for these predictions in our analysis of earthquake mortality over the period 1960 to 2005.
    Keywords: Population Policies,Natural Disasters,Hazard Risk Management,Labor Policies,Disaster Management
    Date: 2010–01–01
  13. By: Matthias Doepke; Fabrizio Zilibotti
    Abstract: In recent years, a number of governments and consumer groups in rich countries have tried to discourage the use of child labor in poor countries through measures such as product boycotts and the imposition of international labor standards. The purported objective of such measures is to reduce the incidence of child labor in developing countries and thereby improve children’s welfare. In this paper, we examine the effects of such policies from a political-economy perspective. We show that these types of international action on child labor tend to lower domestic political support within developing countries for banning child labor. Hence, international labor standards and product boycotts may delay the ultimate eradication of child labor.
    Keywords: Child labor, political economy, labor standards, trade sanctions
    JEL: J20 J88 O10
    Date: 2010–01
  14. By: Anis Chowdhury
    Abstract: This paper attempts to provide a critical appraisal of the debate on the effectiveness of microfinance as a universal poverty reduction tool. It argues that while microfinance has developed some innovative management and business strategies, its impact on poverty reduction remains in doubt. Microfinance, however, certainly plays an important role in providing safety-net and consumption smoothening. The borrowers of microfinance possibly also benefit from learning-by-doing and from self-esteem. However, for any significant dent on poverty, the focus of public policy should be on growth-oriented and equity-enhancing programs, such as broad-based productive employment creation.
    Keywords: microfinance, poverty, employment, growth
    JEL: G21 O16 E24
    Date: 2009–12
  15. By: Bruno Coelho; Kevin Gallagher
    Abstract: In the run up to the financial crisis of 2007-2009 many developing nations fell victim to massive inflows of capital, capital that their financial systems found difficult to absorb.  One of a number of policy options to respond to such inflows is unremunerated reserve requirements (URR).  Two countries, Colombia and Thailand, deployed URR in the second half of the decade.  This paper analyses the extent to which those URRs were successful in reducing the overall level and composition of capital inflows, reducing exchange rate appreciation and volatility, stemming asset bubbles, and granting more independence for monetary policy.  We find that URRs were modestly successful in Colombia and Thailand, though Thailand was less of a success than Colombia.  In Colombia the controls were able to reduce the overall volume of inflows and stem asset bubbles.  In Thailand, the URR did reduce the overall volume of flows, and the announcement of the URR caused a sharp drop in asset prices.  However, in both cases the controls were linked to exchange rate volatility and in Thailand asset prices recovered their upward trend the day after the announcement.  The results in this paper demonstrate that on the there is still a role for capital controls in the 21st century, but such controls should be more sophisticated than in years past. 
    Date: 2010
  16. By: Tamvada, Jagannadha Pawan
    Abstract: We examine the spatio-temporal dynamics of self-employment in India using geoadditive models and pseudo panel techniques. We test the claim of Iyigun and Owen (1999) that individuals invest in professional human capital and not in entrepreneurial human capital as an economy develops. The results suggest that in non-agriculture, higher education decreases the likelihood of individuals choosing self-employment over time; however, it has an opposite effect in agriculture. While increases in land possessed increase the likelihood of self-employment choice in agriculture, individuals with small land holdings are more likely to transition into self-employment in non-agriculture. Belonging to a backward class has a negative effect on self-employment choice in both sectors; however, the effect has increased in non-agriculture and remained stable in agriculture. The geoadditive models suggest that the propensity to be self-employed has decreased across most spatial units, although there are few pockets where self-employment is rising again.
    Keywords: Entrepreneurship; Self-employment; Developing Countries; Dynamics; Pseudo Panels
    JEL: J24 L26 J23
    Date: 2010–01
  17. By: Naudé, Wim
    Abstract: It is increasingly apparent that, despite earlier hopes, the global economic crisis will have a significant impact on the economies of Sub-Saharan Africa. In order to co-ordinate and craft the most appropriate responses for African economies to withstand and recover from the crisis, it is necessary to identify the degree to which the continent, as well as the individual African countries, is at risk of being negatively impacted. This depends on both vulnerability to trade and financial shocks, as well as the resilience of countries to cope with these shocks. Accordingly, vulnerability and resilience indices are constructed for the continent and individual countries. It is shown that, of all developing regions, Africa is the most at risk from the crisis: it has higher vulnerability to trade and financial shocks, and it has the least resilience of all regions. Based upon a vulnerability-resilience matrix, the African countries most at risk are the Democratic Republic of the Congo, Burundi, Côte D’Ivoire, Liberia, Angola, the Sudan, Chad, Guinea-Bissau, Guinea, Zimbabwe, Somalia, Kenya, Mali, Nigeria, Ghana, Cape Verde and Mauritania. With a few notable exceptions, such as Kenya and Ghana, these are all ‘fragile states’. Based upon the distinction between vulnerability and resilience, an action guide is proposed. This makes a distinction between short-term and longer-term actions, in particular between actions aimed at mitigating the impact of the external shocks, assisting countries to cope, and actions aimed at reducing risk.
    Keywords: Africa;Global Economic Crisis; Vulnerability
    JEL: O11 O55
    Date: 2010–01–08
  18. By: Clarke, George
    Abstract: Can surveys of what managers see as the biggest problems that their firm faces provide useful information on the main constraints to private sector and economic development and be used to prioritize reforms in these areas? One of many concerns about doing this is that managers’ responses to questions about specific areas of the investment climate might reflect their assessment of overall investment climate or their overall business confidence rather than their views on that specific area of the investment climate. This paper uses a natural experiment in South Africa to assess whether this is the case. When the World Bank’s 2007-2008 Enterprise Survey was being carried out, a major electricity crisis hit South Africa. The crisis resulted in many more managers saying that power was a serious constraint on enterprise operations—the share rose from about 10 percent of managers before the crisis to close to 50 percent after the crisis. But it also resulted in greater concern about most other areas of the investment climate—including areas such as taxation, regulation, and other areas of infrastructure that were unrelated to the crisis. This suggests that managers do not fully compartmentalize their responses. Moreover, the changes were large enough to suggest that cross-time and cross-country comparisons of perception data will be difficult.
    Keywords: Subjective Data; Firm-level Data; Perceptions; South Africa
    JEL: O2 C42 O20 O12
    Date: 2010–01–17
  19. By: Xuehua Shi; Xiaoyun Liu; Alexander Nuetah; Xian Xin (College of Economics and Management, China Agricultural University Center for Rural Development Policy, China Agricultural University)
    Abstract: This article uses multivariate regression and decomposition analyses to assess household income mobility determinants and their contributions to income mobility in rural China from 1989 to 2006 using panel data from the China Health and Nutrition Survey (CHNS) database. The findings indicate that households with low initial income level, high share of wage income, high educational level of household members, high number of non-agricultural employed household members, and younger heads are more mobile. Moreover, besides initial income, change in the share of wage income, change in the share of non-agricultural employed household members, and change in average year of education of household members are the most important factors that account for income mobility. These findings necessitate more emphasis on policies that promote non-agricultural employment and education to enhance household income mobility in rural China.
    Keywords: Income Mobility, Determinants, Rural Household, China
    JEL: D31 O15
    Date: 2010–01

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