nep-dev New Economics Papers
on Development
Issue of 2010‒02‒05
eighteen papers chosen by
Mark Lee
Towson University

  1. Welfare Effects of Regressive Taxation and Subsidies in China By Xiaobing Wang; Jenifer Piesse
  2. Microeconomics of Technology Adoption By Andrew D. Foster; Mark R. Rosenzweig
  3. Global Wage Inequality and the International Flow of Migrants By Mark R. Rosenzweig
  4. Remittances and the Brain Drain Revisited: The microdata show that more educated migrants remit more By Albert Bollard; David McKenzie; Melanie Morten; Hillel Rapoport
  5. A Labor Mobility Agenda for Development By Michael Clemens
  6. Bases, Bullets, and Ballots: The Effect of U.S. Military Aid on Political Conflict in Colombia By Oeindrila Dube; Suresh Naidu
  7. Aid, Dutch Disease, and Manufacturing Growth By Raghuram G. Rajan; Arvind Subramanian
  8. The Impact of the Economic Crisis on Women's Economic Empowerment By Maria S. Floro; Annika Tornqvist; Emcet Oktay Tas
  9. The Emerging Middle Class in Developing Countries By Homi Kharas
  10. Microfinance and the Millennium Development Goals in Pakistan: Impact Assessment Using Propensity Score Matching By Sununtar Setboonsarng
  11. What constrains Africa's exports ? By Freund, Caroline; Rocha, Nadia
  12. Mexico : impact evaluation of sme programs using panel firm data By Lopez-Acevedo , Gladys; Tinajero, Monica
  13. The determinants of wealth and gender inequity in cognitive skills in Latin America By Macdonald, Kevin; Barrera, Felipe; Guaqueta, Juliana; Patrinos, Harry Anthony; Porta, Emilio
  14. Paying primary health care centers for performance in Rwanda By Basinga, Paulin; Gertler, Paul J.; Binagwaho, Agnes; Soucat, Agnes L.B.; Sturdy, Jennifer R.; Vermeersch, Christel M.J.
  15. Growth Diagnostics and a Multisector Ramsey Model: The Case of Brazil By Vinyes, Cristina; Roe, Terry
  16. Aid Allocation by German NGOs: Does the Degree of Public Refinancing Matter? By Axel Dreher; Peter Nunnenkamp; Susann Thiel; Rainer Thiele
  17. Property Rights Reform and Development: A Critique of the Cross-National Regression Literature By Lawrence King; Osvaldo Gómez Martínez
  18. Globalization, Trade & Wages: What Does History tell us about China? By Kris James Mitchener; Se Yan

  1. By: Xiaobing Wang; Jenifer Piesse
    Abstract: Using three comparable national representative household surveys for China in 1988, 1995 and 2002, this paper provides micro level evidence of a policy of absolute regressive taxation and an inverted welfare system. It reviews the economic effects of taxes and subsides and shows that a dual and regressive taxation system increases the urban rural income gap and enhances overall inequality. The empirical evidence indicates that the relatively poorer rural population pay net tax while those in the richer urban areas receive net subsidies. This biased system of taxes and welfare payments is one of the major causes of the persisting urban-rural income gap and is largely responsible for overall income inequality in China.
    Date: 2009
  2. By: Andrew D. Foster; Mark R. Rosenzweig (Economic Growth Center, Yale University)
    Abstract: There is an emerging consensus among macro-economists that differences in technology across countries accounts for the major differences in per-capita GDP and the wages of workers with similar skills across countries. Accounting for differences in technology levels across countries thus can go a long way towards understanding global inequality. One mechanism by which poorer countries can catch up with richer countries is through technological diffusion, the adoption by low-income countries of the advanced technologies produced in high-income countries. In this survey, we examine recent micro studies that focus on understanding the adoption process. If technological diffusion is a major channel by which poor countries can develop, it must be the case that technology adoption is incomplete or the inputs associated with the technologies are under-utilized in poor, or slow-growing economies. Thus, obtaining a better understanding of the constraints on adoption are useful in understanding a major component of growth.
    Keywords: technology adoption, review
    JEL: O10 O13 O33
    Date: 2010–01
  3. By: Mark R. Rosenzweig (Economic Growth Center, Yale University)
    Abstract: A framework for understanding the determinants in the variation in the pricing of skills across countries and the model underlying the Mincer specification of wages that is used widely to estimate the relationship between schooling and wages are described. A method for identifying skill prices and for testing the Mincer model, using wages and the human capital attributes of workers located around the world, is discussed. A global wage equation that nests the Mincer specification is estimated that provides skill price estimates for 140 countries. The estimates reject the Mincer model. The skill price estimates indicate that variation in skill prices dominates the cross-country variation in schooling levels or rates of return to schooling in accounting for the global inequality in the earnings of workers worldwide. Variation in skill prices and GDP across countries has opposite and significant effects on the number and quality of migrants to the United States.
    Keywords: wage, skill price, international migration, inequality
    JEL: J31 J61
    Date: 2010–01
  4. By: Albert Bollard (Stanford University); David McKenzie (World Bank, BREAD, IZA and CReAM); Melanie Morten (Yale University); Hillel Rapoport (Bar-Ilan University, EQUIPPE and CID, Harvard University)
    Abstract: Two of the most salient trends surrounding the issue of migration and development over the last two decades are the large rise in remittances, and an increased flow of skilled migration. However, recent literature based on cross-country regressions has claimed that more educated migrants remit less, leading to concerns that further increases in skilled migration will hamper remittance growth. We revisit the relationship between education and remitting behavior using microdata from surveys of immigrants in eleven major destination countries. The data show a mixed pattern between education and the likelihood of remitting, and a strong positive relationship between education and the amount remitted conditional on remitting. Combining these intensive and extensive margins gives an overall positive effect of education on the amount remitted. The microdata then allow investigation as to why the more educated remit more. We find the higher income earned by migrants, rather than characteristics of their family situations explains much of the higher remittances.
    Keywords: Remittances, Migration, Brain Drain, Education
    JEL: O15 F22 J61
    Date: 2009–10
  5. By: Michael Clemens
    Abstract: Rich countries have made efforts for half a century to help people in poor countries catch up to rich-country standards of living. Those efforts have included giving foreign aid, encouraging overseas investment, dismantling trade barriers, and spreading ideas and institutions. That is, their international development policy has been to encourage the globalization of almost all factors of production—except labor. So far, this policy has failed to cause the living standards of most people in most developing countries to converge with living standards in rich countries. But the globalization of labor—greater mobility for workers across borders—quickly and massively raises migrants’ living standards toward those of rich countries. This paper argues that every rich country should consider its immigration policy to be part of its international development policy, and vice versa. A development policy that includes migration will be more effective; an immigration policy that includes development will better serve rich countries’ ideals and interests. The paper also gives a non-technical review of new research on several common objections to unifying development policy and migration policy. One concrete way forward is for rich countries to greatly open up legal pathways for temporary labor movement.
    Keywords: international development; immigration policy; labor; migration
    Date: 2010–01
  6. By: Oeindrila Dube; Suresh Naidu
    Abstract: Does foreign military assistance strengthen or further weaken fragile states facing internal confict? We address this question by estimating how U.S. military aid affects violence and electoral participation in Colombia. We exploit the allocation of U.S. military aid to Colombian military bases, and compare how aid affects municipalities with and without bases. Using detailed political violence data, we find that U.S. military aid leads to differential increases in attacks by paramilitaries (who collude with the military), but has no effect on guerilla attacks. Aid increases also result in more paramilitary (but not guerrilla) homicides during election years. Moreover, when military aid rises, voter turnout falls more in base municipalities, especially those that are politically contested. Our results are robust to an instrument based on worldwide increases in U.S. military aid (excluding Latin America). The findings suggest that foreign military assistance may strengthen armed non-state actors, undermining domestic political institutions.
    Keywords: military aid; conflict; democracy; elections
    Date: 2010–01
  7. By: Raghuram G. Rajan; Arvind Subramanian
    Abstract: We examine the effects of aid on the growth of manufacturing, using a methodology that exploits the variation within countries and across manufacturing sectors, and corrects for possible reverse causality. We find that aid inflows have systematic adverse effects on a country’s competitiveness, as reflected in the lower relative growth rate of exportable industries. We provide some evidence suggesting that the channel for these effects is the real exchange rate appreciation caused by aid inflows. We conjecture that this may explain, in part, why it is hard to find robust evidence that foreign aid helps countries grow.
    Keywords: manufacturing; economic development; dutch disease; cgd; center for global development
    Date: 2009–12
  8. By: Maria S. Floro; Annika Tornqvist; Emcet Oktay Tas
    Abstract: This paper argues that a systematic gender analysis of the current crisis is critical to develop viable solutions and for furthering the trend toward gender equality. It analyses the short- and long-term impact of the current economic crisis with a focus on developing countries. It identifies the multiple channels and transmission mechanisms through which the global economic crisis has affected women's lives and explores different areas where the burden of the crisis falls on poor women, using current indications, micro-level evidence and lessons learned from previous crises. The paper shows that the magnitude and types of effects are context-specific: they are likely to vary across countries, sectors, households and among women, depending on the economic, demographic and social circumstances. In the short run, many women are expected to lose their jobs, particularly those working on the export sectors and/or holding flexible jobs. At the same time, a fall in the supply of micro-credit is expected to result in a decrease in earnings among self-employed women workers in trade, agriculture and other sectors. Additionally, there will likely be an increase in the amount of unpaid work that women do to support their families. In the long-run, it is expected that an increase in girls' dropout rate from school to compensate for their families' loss of income will deteriorate women's future socioeconomic opportunities. In addition, an increase in the level of violence against women, combined with limited access to health and other support services as a result of public expenditure cuts and lower aid receipts, complete the dim picture of the gendered impact of the crisis in developing countries. The paper concludes that it is essential to implement mechanisms to mitigate the negative effects of the crisis on women, in order to ensure that the gains in women's empowerment and gender equality in the last few decades are not put in danger. Furthermore, it is argued that the crisis can be used as a unique opportunity to change power structures and make economic and social policies more gender-aware and move toward creating a more gender-equal society and economic system. To that end, civil society involvement to monitor the gender effects of the crisis in the short and medium term, as well as government-led (and donor supported) gender-aware response packages will be essential.
    Date: 2009–12
  9. By: Homi Kharas
    Abstract: The shift in global goods production towards Asia is well documented. But global consumer demand has so far been concentrated in the rich economies of the OECD. Will that also shift towards Asia as these countries get richer? This paper defines a global middle class as all those living in households with daily per capita incomes of between USD10 and USD100 in PPP terms. By combining household survey data with growth projections for 145 countries, it shows that Asia accounts for less than one-quarter of today’s middle class. By 2020, that share could double. More than half the world’s middle class could be in Asia and Asian consumers could account for over 40 per cent of global middle class consumption. This is because a large mass of Asian households have incomes today that position them just below the global middle class threshold and so increasingly large numbers of Asians are expected to become middle class in the next ten years. The paper explores how this can help sustain global growth in the medium term, driven by product differentiation, branding and marketing in the new growth markets of Asia.<BR>La répartition mondiale de la production industrielle en faveur de l’Asie est un phénomène largement démontré. Quant à la demande de consommation mondiale, elle provenait jusqu’ici des économies riches des pays de l’OCDE. Au fur et à mesure que les pays d’Asie s’enrichissent, cette demande de consommation va-t-elle à son tour se déplacer en leur faveur ? Dans ce document de travail, la classe moyenne est définie comme foyers à revenus moyens par tête entre USD10 et USD100, en termes de pouvoir d’achat. En associant des données récoltées lors d’enquêtes auprès de ménages à des projections de croissance dans 145 pays, on s’aperçoit que l’Asie représente moins d’un quart de la classe moyenne d’aujourd’hui. Cette proportion pourrait doubler d’ici 2020. Plus de la moitié de la classe moyenne mondiale se situerait alors en Asie, et les consommateurs asiatiques pourraient représenter plus de 40 pour cent de la consommation mondiale des classes moyennes. Cela est dû au fait qu’un grand nombre de foyers asiatiques perçoive aujourd’hui des revenus les positionnant juste en dessous du seuil de la classe moyenne mondiale. Pour cette raison, il est prévu que, dans les dix prochaines années, de plus en plus d’Asiatiques fassent partie de la classe moyenne. Ce document de travail analyse la manière dont ce phénomène peut contribuer à maintenir, au moyen terme, la croissance globale, qui est provoquée par la différentiation des produits, le marquage et le marketing dans les nouveaux marchés émergents d’Asie.
    Keywords: Chile, firm level data, consommation, classe moyenne, pays asiatiques, croissance globale, centre de gravité
    JEL: F01 O10 O12
    Date: 2010–01–26
  10. By: Sununtar Setboonsarng
    Abstract: Using data from a survey of clients of a microfinance bank, Khushhali Bank, in 2005, the study revisited the survey data and found that despite the Bank’s strict poverty-targeting program used in client selection and despite the survey’s design to address the selectivity bias, the selectivity bias indeed still existed in the sampled households. Propensity Score-Matching Methods (PSM) are used to address the selectivity bias. [DP 104].
    Keywords: hunger, economic activities, microfinance, MDGs, poverty, Pakistan, millennium development goals, banks, policies, selectivity bias, Borrowers,
    Date: 2010
  11. By: Freund, Caroline; Rocha, Nadia
    Abstract: This paper examines the effects of transit, documentation, and ports and customs delays on Africa’s exports. The authors find that transit delays have the most economically and statically significant effect on exports. A one-day reduction in inland travel times leads to a 7 percent increase in exports. Put another way, a one-day reduction in inland travel times translates to a 1.5 percentage point decrease in all importing-country tariffs. By contrast, longer delays in the other areas have a far smaller impact on trade. The analysis controls for the possibility that greater trade leads to shorter delays in three ways. First, it examines the effect of trade times on exports of new products. Second, it evaluates the effect of delays in a transit country on the exports of landlocked countries. Third, it examines whether delays affect time-sensitive goods relatively more. The authors show that large transit delays are relatively more harmful because of high within-country variation.
    Keywords: Transport Economics Policy&Planning,Common Carriers Industry,Transport and Trade Logistics,Trade Policy,Economic Theory&Research
    Date: 2010–01–01
  12. By: Lopez-Acevedo , Gladys; Tinajero, Monica
    Abstract: Unlike social programs targeting individuals, few enterprise support programs have been rigorously evaluated, and existing evaluations have mostly been done in high-income countries such as the United States and Europe. Mexico spends a large share of government resources on small and medium enterprise programs each year. How effective these programs have been in achieving their objectives is unclear. In Mexico, impact evaluations of small and medium enterprise programs are rare, and most are qualitative in nature. This is the first paper evaluating these programs in Mexico using firm-level panel data. The continuous and ten-year panel data -- from the 1994-2005 period -- allow the authors to address selectivity bias and unobserved firm heterogeneity by applying a generalization of differences-in-differences models combined with propensity score matching methods. This study finds evidence that participation in small and medium enterprise programs is associated with improvements in key variables such as value added, gross production, and wages. Furthermore, the study finds evidence that some of the positive effects can take several years to realize. The results also call for streamlining and greater efficiency in Mexico's small and medium enterprise programs.
    Keywords: ICT Policy and Strategies,Poverty Monitoring&Analysis,Poverty Impact Evaluation,Labor Policies,E-Business
    Date: 2010–01–01
  13. By: Macdonald, Kevin; Barrera, Felipe; Guaqueta, Juliana; Patrinos, Harry Anthony; Porta, Emilio
    Abstract: Wealth and gender inequity in the accumulation of cognitive skills is measured as the association between subject competency and wealth and gender using the OECD’s Programme for International Student Assessment. Wealth inequity is found to occur not through disparate household characteristics but rather through disparate school characteristics; little evidence is found of an association between wealth and competency within schools. Weak evidence is found of wealth mitigating gender differences through school characteristics. These findings suggest that wealth inequity in the accumulation of cognitive skills is almost exclusively associated with disparate school characteristics and that disparate school characteristics may play a role in accentuating gender inequity.
    Keywords: Tertiary Education,Education For All,Disability,Primary Education,Secondary Education
    Date: 2010–01–01
  14. By: Basinga, Paulin; Gertler, Paul J.; Binagwaho, Agnes; Soucat, Agnes L.B.; Sturdy, Jennifer R.; Vermeersch, Christel M.J.
    Abstract: Paying for performance (P4P) provides financial incentives for providers to increase the use and quality of care. P4P can affect health care by providing incentives for providers to put more effort into specific activities, and by increasing the amount of resources available to finance the delivery of services. This paper evaluates the impact of P4P on the use and quality of prenatal, institutional delivery, and child preventive care using data produced from a prospective quasi-experimental evaluation nested into the national rollout of P4P in Rwanda. Treatment facilities were enrolled in the P4P scheme in 2006 and comparison facilities were enrolled two years later. The incentive effect is isolated from the resource effect by increasing comparison facilities'input-based budgets by the average P4P payments to the treatment facilities. The data were collected from 166 facilities and a random sample of 2158 households. P4P had a large and significant positive impact on institutional deliveries and preventive care visits by young children, and improved quality of prenatal care. The authors find no effect on the number of prenatal care visits or on immunization rates. P4P had the greatest effect on those services that had the highest payment rates and needed the lowest provider effort. P4P financial performance incentives can improve both the use of and the quality of health services. Because the analysis isolates the incentive effect from the resource effect in P4P, the results indicate that an equal amount of financial resources without the incentives would not have achieved the same gain in outcomes.
    Keywords: Health Monitoring&Evaluation,Population Policies,Health Systems Development&Reform,Disease Control&Prevention,Adolescent Health
    Date: 2010–01–01
  15. By: Vinyes, Cristina; Roe, Terry
    Abstract: Disenchantment with the Washington Consensus has led to an emphasis on growth diagnostics. In the case of Brazil, the literature suggests three main factors impeding growth: low domestic savings, a shortage of skilled workers, and lack of investment in the countryâs transportation infrastructure. The unique contribution of this study is to show the inter-temporal implications of relaxing these constraints. We fit a multi-sector Ramsey model to Brazilian data, validate its fit to times data, and provide empirical insights into the economyâs structural transformation to long-run equilibrium. Then, the sensitivity of these results to relaxing each of these three constraints is investigated in a manner that yields the same long-run level of well- being. Analytical concepts adapted from static trade theory are used to provide a detailed explanation of how the economy responds in transition growth to the relaxation of these impediments. Addressing these factors clearly benefits the economy, but they do not launch the economy on a substantially higher growth path.
    Keywords: International Development, economic growth, Ramsey, growth diagnostics, O11, O41, O54, D58,
    Date: 2010–01
  16. By: Axel Dreher (University of Goettingen, Germany, CESifo, Germany, IZA, Germany, and KOF Swiss Economic Institute, Switzerland); Peter Nunnenkamp (Kiel Institute for the World Economy, Germany); Susann Thiel; Rainer Thiele (Kiel Institute for the World Economy, Germany)
    Abstract: Using a new dataset for 41 German non-governmental organizations (NGOs), we analyze the allocation of NGO aid across recipient countries in a Tobit regression framework. By identifying for each NGO the degree of public refinancing, we address the largely unresolved issue of whether financial dependence on the government impairs the targeting of NGO aid. It turns out that German NGOs are more active in poorer countries, while they do not complement official aid by working under difficult local conditions. Beyond a certain threshold, rising financial dependence weakens their poverty orientation and provides an incentive to engage in “easier” environments. In addition, we find that the NGOs follow the state as well as NGO peers when allocating aid. This herding behavior is, however, hardly affected by the degree of public refinancing.
    Keywords: NGO aid, aid allocation, public refinancing
    JEL: F
    Date: 2010–01
  17. By: Lawrence King; Osvaldo Gómez Martínez
    Abstract: <p> The legal protection of property rights is increasingly viewed as a crucial, if not the crucial, condition for economic growth and pro-poor development. Empirical support is generally based on cross-national correlations between measures of secure property rights and good development outcomes in the long-run. However, whether these associations hold in the short- and medium-run has, to our knowledge, not been studied. In this paper, we evaluate the relationship between the protection of property rights and growth using three property rights indices from the Heritage Foundation, Fraser Institute and World Economic Forum covering the experience of 162 countries between 1995 and 2005. While we find a strong correlation between the <i>level</i> of country property rights protections scores and economic growth, when we evaluate the <i>change</i> and <i>improvement</i> in country ranking scores of property rights, this positive association disappears. These findings could be interpreted as indicating either that there is i) no causal relationship between property rights and growth (at least in the short-run), or that ii) the property rights indices have poor validity. </p><p><span style="font-size: 12pt; font-family: "Times New Roman";" lang="ES-MX"><br /></span></p>
    Keywords: Property rights; Development; Pro-poor
    JEL: O43 P14
    Date: 2010
  18. By: Kris James Mitchener; Se Yan
    Abstract: Chinese imports and exports grew rapidly during the first three decades of the twentieth century as China opened up to global trade. Using a new data set on the factor-intensity of traded goods at the industry level, we show that Chinese exports became more unskilled-intensive and imports became more skill-intensive during these three decades. The exogenous shock of World War I dramatically raised the price of Chinese exports, increased the demand for Chinese goods overseas, and increased the demand for unskilled workers producing these goods. These trends continued even after the war ended. We show that the timing of the rise in export prices is consistent with the observed decline in the skill premium in China. The skill-unskilled wage ratio flattened out during the 1910s and then fell by eight percent during the 1920s. We simulate the price shock of World War I using a general equilibrium factor-endowments model of trade and find evidence consistent with the observed fall in the skill premium in China during the 1920s.
    JEL: F15 F33 N25 N75
    Date: 2010–01

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