nep-dev New Economics Papers
on Development
Issue of 2010‒03‒13
fourteen papers chosen by
Mark Lee
Towson University

  1. The Solaria Syndrome: Social capital in a growing hypertechnological economy By Antoci Angelo; Sabatini Fabio; Sodini Mauro
  2. Remittances and Domestic Investment in Developing Countries: An Analysis of the Role of Financial Sector Development By Laurent Gheeraert; Ritha Sukadi; Daniel Traça
  3. Learning-by-exporting: what we know and what we would like to know By Armando Silva; Ana Paula Africano; Óscar Afonso
  4. Measuring risk by looking at changes in inequality : vulnerability in Ecuador By Ligon, Ethan
  5. Measuring Institutions: Indicators of Political Rights, Property Rights and Political Instability in Malawi By Johannes Fedderke; Julia Garlick
  6. Firm-Level Corruption in Vietnam By Rand, John; Tarp, Finn
  7. The impact of economic shocks on global undernourishment By Tiwari, Sailesh; Zaman, Hassan
  8. A closer look at child mortality among Adivasis in India By Das, Maitreyi Bordia; Kapoor, Soumya; Nikitin, Denis
  9. The impact of the investment climate on employment growth : does Sub-Saharan Africa mirror other low-income regions ? By Aterido, Reyes; Hallward-Driemeier, Mary
  10. Tiny, Poor, Landlocked, Indebted, but Growing: Lessons for Late Reforming Transition Economies from Laos By Kelly Bird; Hal Hill
  11. Macroeconomic Impacts of Foreign Exchange Reserve Accumulation: Theory and International Evidence By Fukuda, Shin-ichi; Kon, Yoshifumi
  12. Infrastructure and productivity in Latin America: Is there a relationship in the long run? By Teles, Vladimir Kuhl; Mussolini, Caio Cesar
  13. The Chinese Economy and Income Inequality among East Asian Countries By Sumie Sato; Mototsugu Fukushige
  14. African Poverty is Falling...Much Faster than You Think! By Xavier Sala-i-Martin; Maxim Pinkovskiy

  1. By: Antoci Angelo; Sabatini Fabio; Sodini Mauro
    Abstract: We develop a dynamic model to analyze the sources and the evolution of social participation and social capital in a growing economy characterized by exogenous technical progress. Starting from the assumption that the well-being of agents basically depends on material and relational goods, we show that the best-case scenarios hold when technology and social capital both support just one of the two productions at the expenses of the other. However, trajectories are possible where technology and social interaction balance one another in fostering the growth of both the social and the private sector of the economy. Along such tracks, technology may play a crucial role in supporting a “socially sustainable” economic growth.
    Keywords: Technology, economic growth, relational goods, social participation, social capital
    JEL: O33 J22 O41 Z13
    Date: 2010–02
  2. By: Laurent Gheeraert (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.); Ritha Sukadi (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.); Daniel Traça (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and Universidade Nova de Lisboa)
    Abstract: This paper addresses the relationship between remittances and home country investment in developing countries. It highlights, through both a theoretical model and an empirical analysis, the role of financial sector development (FSD) in the impact of remittances on home country investment. The key contribution of the paper is to show that different transaction costs traditionally associated with the FSD, namely 'Cost of Bank Depositing' and 'Cost of External Finance', have conflicting effects on the marginal impact of remitances on investment. Our stylized model, which addresses the specificities of remittance flows through the loanable funds market, yields several intuitive results. First, the marginal impacts of remittances on bank-deposits and formal investment are positive. Second, both marginal impacts increase when the Cost of Bank Depositing declines. Third, a decrease in Cost of External Finance lowers the marginal impact on formal investment, and does not affect the marginal impact on bank deposits. Hence, since FSD lowers both transaction costs, it has an ambiguous effect on the marginal impact on investment. The empirical analysis on a sample of 100 developing countries, using both cross-section and panel-data methodologies, confirms our model's predictions.
    Keywords: remittances, investment, growth, financial sector development, transaction cost, openness
    JEL: F24 O16 G2
    Date: 2010–02
  3. By: Armando Silva (Faculdade de Economia, Universidade do Porto); Ana Paula Africano (CEF.UP, Faculdade de Economia, Universidade do Porto); Óscar Afonso (CEF.UP, OBEGEF, Faculdade de Economia, Universidade do Porto)
    Abstract: This paper revises the thesis that exporting firms learn to be more innovative and efficient as they have contact with certain information flows from their foreign activity (e.g., from buyers, suppliers or competitors). The paper begins by exploring the connections between two distinct concepts: Self-Selection (of more efficient firms into exports) and Learning-by-Exporting. The study then proceeds with a comparative analysis of the most recent literature and presents common facts and evidence, as well as key issues still open to debate. Learning-by-Exporting should be measured directly using firms´ innovative performance. However, given the lack of suitable data on firms’ innovative activities most studies have followed an indirect approach, using productivity measures. Several methodologies have been employed to estimate Total Factor Productivity and to test the Learning-by-Exporting hypothesis, but so far no final consensus has been reached on the best way to do it.
    Keywords: Learning-by-exporting, self selection, total factor productivity
    JEL: F10 F20 O47
    Date: 2010–02
  4. By: Ligon, Ethan (University of California, Berkeley. Dept of agricultural and resource economics)
    Date: 2010
  5. By: Johannes Fedderke; Julia Garlick
    Date: 2010
  6. By: Rand, John; Tarp, Finn
    Abstract: This paper uses a unique panel dataset on firm-level corruption. It contains quantitative information on bribe payments by a sample of formal and informal Vietnamese firms. We show that bribe incidence is highly associated with firm-level differences in (i) visibility, (ii) sunk costs, (iii) ability to pay, and (iv) level of interaction with public officials. Moreover, when informal firms become formal the probability of paying bribes increases. Becoming formal is also associated with a revenue growth premium that is not driven by self-selection of well-performing firms. On average, this premium outweighs the additional bribe cost of formalization. Formalization embodies net benefits in spite of the growth hampering effects of bribes.
    Keywords: firm performance, corruption, Vietnam
    Date: 2010
  7. By: Tiwari, Sailesh; Zaman, Hassan
    Abstract: This paper estimates the impact of the 2008 food price spike and the 2009 contraction in global growth on undernourishment rates. The analysis is based on a methodology that uses a calorie-income relationship and income distribution data. The authors find that the 2008 global food price spike may have increased global undernourishment by about 6.8 percent, or 63 million people. Moreover, they show that the sharp slowdown in global growth in 2009 could have contributed to 41 million more undernourished people compared with what would have happened if the economic crisis had not occurred.
    Keywords: Food&Beverage Industry,Markets and Market Access,Emerging Markets,Economic Theory&Research,Regional Economic Development
    Date: 2010–01–01
  8. By: Das, Maitreyi Bordia; Kapoor, Soumya; Nikitin, Denis
    Abstract: The authors use data from the National Family Health Survey 2005 to present age-specific patterns of child mortality among India's tribal (Adivasi) population. The analysis shows three clear findings. First, a disproportionately high number of child deaths are concentrated among Adivasis, especially in the 1-5 age group and in those states and districts where there is a high concentration of Adivasis. Any effort to reduce child morality in the aggregate will have to focus more squarely on lowering mortality among the Adivasis. Second, the gap in mortality between Adivasi children and the rest really appears after the age of one. In fact, before the age of one, tribal children face more or less similar odds of dying as other children. However, these odds significantly reverse later. This calls for a shift in attention from infant mortality or in general under-five mortality to factors that cause a wedge between tribal children and the rest between the ages of one and five. Third, the analysis goes contrary to the conventional narrative of poverty being the primary factor driving differences between mortality outcomes. Instead, the authors find that breaking down child mortality by age leads to a much more refined picture. Tribal status is significant even after controlling for wealth.
    Keywords: Population Policies,Health Monitoring&Evaluation,Early Child and Children's Health,Adolescent Health,Early Childhood Development
    Date: 2010–03–01
  9. By: Aterido, Reyes; Hallward-Driemeier, Mary
    Abstract: Using survey data from 86,000 enterprises in 104 countries, including 17,000 enterprises in 31 Sub-Saharan African countries, this paper finds that average enterprise-level employment growth rates are remarkably similar across regions. This is true despite significant differences in the quality of the investment climate in which these enterprises operate. Objective measures of investment climate conditions (including the number of outages, the share of firms with bank loans, and others) indicate that conditions are most challenging within Sub-Saharan Africa, as well as for smaller enterprises. However, enterprises’ employment in Sub-Saharan Africa is less sensitive to changes in access to infrastructure and finance relative to other low-income regions. This can be understood by looking at non-linear effects by firm size -- and the finding that these size effects are particularly strong within Sub-Saharan Africa. Although unreliable infrastructure services and inadequate access to finance generally hamper growth, in Sub-Saharan Africa they are actually associated with higher employment growth rates among micro enterprises. Although employment growth is good news in Sub-Saharan Africa, that much of the expanded employment is in small, labor-intensive, less productive enterprises raises longer-run concerns about the efficiency of the allocation of resources and aggregate productivity growth in the region.
    Keywords: Access to Finance,Banks&Banking Reform,Microfinance,Labor Policies,Investment and Investment Climate
    Date: 2010–02–01
  10. By: Kelly Bird; Hal Hill
    Abstract: There are few countries where ‘initial conditions’ are as unfavourable as those of Laos. It is a very poor, least developed country. It is landlocked, sharing its international borders with five neighbours. It has the world’s highest per capita stock of unexploded ordinance, a legacy of the Indo China war. It has yet to recover from the loss of most of its entrepreneurial class and over half of its tertiary educated population in the aftermath of that war. It is heavily indebted, with substantial Soviet era obligations still outstanding. Its institutions are weak and property rights ill defined. Yet, its reform efforts over the past two decades have been largely successful, with accelerating growth and the beginnings of a relatively smooth transition from plan to market. Our examination of the Lao reform program and the subsequent outcomes suggests that, contrary to some of the prevailing pessimism, late-comers can engage with the international economy, providing their reforms are reasonably effective and credible. Neighbourhood effects have obviously been supportive in the Lao case, but their importance should not be over-stated.
    Keywords: Laos, latecomers, economic reform, plan to market, transition economies, landlocked states
    JEL: O53 P30
    Date: 2010
  11. By: Fukuda, Shin-ichi (Asian Development Bank Institute); Kon, Yoshifumi (Asian Development Bank Institute)
    Abstract: Recently, a dramatic accumulation in foreign exchange reserves has been widely observed in developing countries. This paper explores the possible long-run impacts of this trend on macroeconomic variables in developing countries. We analyze a simple open economy model where increased foreign exchange reserves reduce the costs of liquidity risk. Given the amount of foreign exchange reserves, utility-maximizing representative agents decide consumption, capital stock, and labor input, as well as the amounts of liquid and illiquid external debt. The equilibrium values of these variables depend on the amount of foreign exchange reserves. A rise in foreign exchange reserves increases both liquid and total debt, while shortening debt maturity. To the extent that interest rates of foreign exchange reserves are low, an increase in foreign reserves also leads to a permanent decline in consumption. However, when the tradable sector is capital intensive, the increase may enhance investment and economic growth. We provide empirical support for our theoretical analysis using panel data from the Penn World Table. The cross-country evidence shows that an increase in foreign exchange reserves raises external debt outstanding and shortens debt maturity. The results also imply that increased foreign exchange reserves may lead to a decline in consumption, but can also enhance investment and economic growth. The positive impact on economic growth, however, disappears when we control the impact through investment.
    Keywords: accumulation foreign exchange reserves; macroeconomic variables; developing countries
    JEL: F21 F32 F34
    Date: 2010–02–19
  12. By: Teles, Vladimir Kuhl; Mussolini, Caio Cesar
    Abstract: This article analyses the relationship between infrastructure and total factor productivity (TFP) in the four major Latin American economies: Argentina, Brazil, Chile and Mexico. We hypothesise that an increase in infrastructure has an indirect effect on long-term economic growth by raising productivity. To assess this theory, we use the traditional Johansen methodology for testing the cointegration between TFP and physical measures of infrastructure stock, such as energy, roads, and telephones. We then apply the Lütkepohl, Saikkonen and Trenkler Test, which considers a possible level shift in the series and has better small sample properties, to the same data set and compare the two tests. The results do not support a robust long-term relationship between the series; we do not find strong evidence that cuts in infrastructure investment in some Latin American countries were the main reason for the fall in TFP during the 1970s and 1980s.
    Date: 2010–02–22
  13. By: Sumie Sato (Graduate School of Economics, Kobe University); Mototsugu Fukushige (Graduate School of Economics, Osaka University)
    Abstract: Using the Atkinson inequality measure of income distribution, we analyze the impact of China as a single country and examine the effect of its domestic income inequality on total income inequality among East Asian countries. First, we find that China's domestic income inequality exacerbated income inequality among East Asian countries from the 1980s, and this effect became even more pronounced from 1990. Second, the growth of China's per capita GDP had an equalizing effect on income distribution in a framework of ASEAN + China, but this effect was reversed around 1997. However, relative to higher income countries such as Japan and South Korea, China's per capita GDP remains low, and although China has contributed to income inequality in the area, it has recently had a more equalizing effect.
    Keywords: East Asia, China, income inequality, free trade agreement, harmonious society
    JEL: O15 D31 F43
    Date: 2010–02
  14. By: Xavier Sala-i-Martin; Maxim Pinkovskiy
    Abstract: The conventional wisdom that Africa is not reducing poverty is wrong. Using the methodology of Pinkovskiy and Sala-i-Martin (2009), we estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970-2006. We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.
    JEL: O0 O1 O55
    Date: 2010–02

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