nep-dev New Economics Papers
on Development
Issue of 2010‒04‒04
twenty-six papers chosen by
Mark Lee
Towson University

  1. An Analysis on the Growth Attributes of Manufacturing Industries in China By Kui-Wai Li; Tung Liu
  2. Estimating the Growth Attributes of Mainland China and Hong Kong SAR By Kui-Wai Li; Tung Liu; Hoi Kuan Lam; Liang Wang
  3. Chinese state’s economic cooperation related investment: An investigation of its direction and some implications for outward investment By Sumon Kumar Bhaumik; Catherine Yap Co
  4. Dar es Salaam as a 'Harbour of Peace' in East Africa: Tracing the Role of Creolized Urban Ethnicity in Nation-State Formation By Fahy Bryceson, Deborah
  5. Urban Myths and the Mis-use of Data that Underpin them By Satterthwaite, David
  6. Suburbanization and Residential Desegregation in South Africa's Cities By Naude, Wim
  7. Infrastructure and City Competitiveness in India By Lall,Somik V.; Gun Wang, Hyoung; Deichmann, Uwe
  8. Parsing the Urban Poverty Puzzle A Multi-generational Panel Study in Rio de Janeiro’s Favelas, 1968–2008 By Perlman, Janice E.
  9. The Face of Urban Poverty Explaining the Prevalence of Slums in Developing Countries By Arimah, C. Ben
  10. The Gendered Nature of Asset Accumulation in Urban Contexts By Moser,Caroline; Felton, Andrew
  11. The Legacy Effect of Squatter Settlements on Urban Redevelopment By A. Navarro, Ignacio; Turnbull, Geoffrey K.
  12. Growth, History, or Institutions? What Explains State Fragility in Sub-Saharan Africa By Bertocchi, Graziella; Guerzoni, Andrea
  13. The Costs of Favoritism: Is Politically-Driven Aid Less Effective? By Dreher, Axel; Klasen, Stephan; Vreeland, James Raymond; Werker, Eric
  14. Who Wants to Work in a Rural Health Post? The Role of Intrinsic Motivation, Rural Background and Faith-Based Institutions in Rwanda and Ethiopia By Serneels, Pieter; Montalvo, Jose G.; Pettersson, Gunilla; Lievens, Tomas; Butera, Jean Damascene; Kidanu, Aklilu
  15. The marginal propensity to earn, consume and save out of unearned income in South Africa By Bengtsson, Niklas
  16. The Causes of Corruption: Evidence from China By Bin Dong; Benno Torgler
  17. Earnings determinants for own-account workers in the urban informal economy: The case of Bogotá, Colombia By Lacey Ann Wrubel
  18. Can donor coordination solve the aid proliferation problem ? By Rahman, Aminur; Sawada, Yasuyuki
  19. A counterfactual analysis of the poverty impact of economic growth in Cameroon By Essama-Nssah, B.; Bassole, Leandre
  20. Trade costs, resource reallocation and productivity in developing countries By Blyde, Juan; Iberti, Gonzalo
  21. Savings Mobilization, Financial Development and Liberalization: The Case of Malaysia By Ang, James
  22. Supermarkets, farm household income, and poverty: Insights from Kenya By Elizaphan J.O. Rao; Matin Qaim
  23. The Economic Benefits of Giving Aid in Terms of Donors` Exports By Inmaculada Martínez-Zarzoso; Felicitas Nowak-Lehmann D.; Stephan Klasen
  24. The Long-Run Relationship between Outward FDI and Total Factor Productivity: Evidence for Developing Countries By Dierk Herzer
  25. The Fertility Transition Around the World - 1950-2005 By Strulik, Holger; Vollmer, Sebastian
  26. School Attendance and Child Labor - A Model of Collective Behavior By Strulik, Holger

  1. By: Kui-Wai Li (City University of Hong Kong, Hong Kong SAR); Tung Liu (Department of Economics, Ball State University)
    Abstract: This paper examines the growth attributes of manufacturing industries in China for the sample period of 1999-2007. A revised Solow’s growth decomposition method is used to consider four growth attributes of input growth, scale effect, technical progress, and technical efficiency change. For the aggregates of all industries, we found no technical efficiency change. The technical progress, input growth, and scale effect explain 45%, 38%, and 17% of output growth, respectively. When all manufacturing industries are disaggregated into four major groups and twenty-nine sub-manufacturing industries, we find that estimates exhibit increasing returns to scale and positive scale effect. When the manufacturing industries data are aggregated in different provinces and regions, we find that input growth is more significant in the Southern region than in other regions. Only the Southern region shows an increase in technical efficiency. Technical progress is more important in the Western and Northeastern regions than the other two regions.
    Keywords: technical progress, technical efficiency, economies of scale, human capital, China economy
    JEL: C2 D24 O4 O53
    Date: 2010–03
  2. By: Kui-Wai Li (City University of Hong Kong, Hong Kong SAR); Tung Liu (Department of Economics, Ball State University); Hoi Kuan Lam (City University of Hong Kong, Hong Kong SAR); Liang Wang (City University of Hong Kong, Hong Kong SAR)
    Abstract: Since Hong Kong’s reversion of political sovereignty to Mainland China in 1997, the pace of economic integration between the two economies has increased. This paper first examines the economic benefits and institutional differences between Mainland China and Hong Kong. The empirical section of the paper used a stochastic frontier model with the incorporation of a human capital variable to decompose the economic and productivity growth of Mainland China and Hong Kong into the four attributes of input growth, adjusted scale effect, technical progress, and efficiency growth.
    Keywords: technical progress, technical efficiency, returns to scale, human capital, China economy, Hong Kong economy
    JEL: O47 R11
    Date: 2010–02
  3. By: Sumon Kumar Bhaumik; Catherine Yap Co
    Abstract: The Chinese state undertakes large scale investments in a number of countries under the auspices of economic cooperation related investment (ECI). While there are suggestions that it is an extension of China‟s soft power aimed at facilitating Chinese FDI in those countries, often for access to natural resources, there is no systematic analysis of this in the literature. In this paper, we examine this investment of the Chinese state over time. Our results suggest that the pattern of investment is indeed explained well by factors that are used in the stylised literature to explain directional patterns of outward FDI. They also demonstrate that the (positive) relationship between Chinese ECI and the recipient countries‟ natural resource richness is not economically meaningful. Finally, while there is some support for the popular wisdom that China‟s willingness to do business with a country is not strongly affected by its level of corruption, there is much weaker support, if any, for the hypotheses that China favours doing business with countries where political rights are limited.
    Keywords: China; Economic cooperation related investment; Foreign direct investment; Natural resources; Institutional quality
    JEL: F21 F23 F59
    Date: 2009–08–01
  4. By: Fahy Bryceson, Deborah
    Abstract: Dar es Salaam is exceptional in East Africa for having a record of relatively little ethnic tension, and remaining tranquil and true to its name, the ‘harbour of peace’. This paper explores the interface between ethnic and national identities in Tanzania’s capital city, focusing on its ethnic foundations and their malleability with regard to nationalism, asking how nationalist identities were negotiated vis-à-vis existing local ethnic identities. How willing were ethnic groups that were indigenous to the locality to ‘share’ the city, its land, and amenities with newcomer compatriots, given that the city was almost as new as the nation-state? How did their modus operandi affect nation-building?
    Keywords: nation-state, Tanzania, nationalism, urbanization
    Date: 2010
  5. By: Satterthwaite, David
    Abstract: This paper describes the gaps and limitations in the data available on urban populations for many low- and middle-income nations and how this limits the accuracy of international comparisons – for instance of levels of urbanization and of the size of city populations. It also discusses how the lack of attention to data limitations has led to many myths and misconceptions in regard to growth rates for city populations and for nations’ levels of urbanization. It ends with some comments on how data limitations distort urban policies.
    Keywords: urbanization, city populations, censuses
    Date: 2010
  6. By: Naude, Wim
    Abstract: Population density gradients for South Africa’s cities are quite small in absolute value, indicating a relatively flat population distribution across the cities. In contrast employment is less flatly distributed than the population. The relationship between employment densities and distance across South African cities has remained constant between 1996 and 2001 whilst there has been on average a slight increase in population density further away from the city centres. As per capita income of the population rises, density in the central city areas decreases. Employment growth has no significant impact on suburbanization indicating that population settlement does not necessarily follow jobs. Finally, it is found that there have been decreases in segregation in South Africa’s metropolitan cities since 1996 especially in the former white group areas, which could suggest that the formerly spatially excluded black population is slowly moving into former white areas, which are also closer to where economic activities are located.
    Keywords: suburbanization, segregation, South Africa
    Date: 2010
  7. By: Lall,Somik V.; Gun Wang, Hyoung; Deichmann, Uwe
    Abstract: Do local improvements in infrastructure provision improve city competitiveness? What public finance mechanisms stimulate local infrastructure supply? And how do local efforts compare with national decisions of placing inter-regional trunk infrastructure? In this paper, we examine how the combination of local and national infrastructure supply improve city competitiveness, measured as the city’s share of national private investment. For the empirical analysis, we collect city-level data for India, and link private investment decisions to infrastructure provision. We find that a city’s proximity to international ports and highways connecting large domestic markets has the largest effect on its attractiveness for private investment. In comparison, the supply of local infrastructure services – such as municipal roads, street lighting, water supply, and drainage – enhance competitiveness, but their impacts are much smaller. Thus, while local efforts are important for competitiveness, they are less likely to be successful in cities distant from the country’s main trunk infrastructure. In terms of financing local infrastructure, we find that a city’s ability to raise its own source revenues by means of local taxes and user fees increases infrastructure supply, whereas as inter governmental transfers do not have statistically significant effects.
    Keywords: urbanization, cities, India, infrastructure
    Date: 2010
  8. By: Perlman, Janice E.
    Abstract: This paper describes the methodology of a longitudinal multi-generational study in the favelas (shantytowns) of Rio de Janeiro from 1968 to 2008. Major political transformations took place in Brazil during this interval: from dictatorship to ‘opening’ to democracy; major economic transformations from ‘miracle’ boom to hyperinflation and crisis, and to relative stability; and major policy changes from the removal of favelas to their upgrading and integration. However, despite the cumulative effects of these contextual changes, poverty programmes and community efforts, the favela population has continued to grow faster than the rest of the city and the number and size of the favelas has consistently increased over these decades.
    Keywords: urbanization, Brazil, poverty, community, slums
    Date: 2010
  9. By: Arimah, C. Ben
    Abstract: One of the most visible and enduring manifestations of urban poverty in developing countries is the formation and proliferation of slums. While attention has focused on the rapid pace of urbanization as the sole or major factor explaining the proliferation of slums and squatter settlements in developing countries, there are other factors whose impacts are not known with much degree of certainty. It is also not clear how the effects of these factors vary across regions of the developing world. This paper accounts for differences in the prevalence of slums among developing countries using data drawn from the recent global assessment of slums undertaken by the United Nations Human Settlements Programme. The empirical analysis identifies substantial inter-country variations in the incidence of slums both within and across the regions of Africa, Asia as well as, Latin America and the Caribbean. Further analysis indicates that higher GDP
    Keywords: urban poverty, slums, developing countries, inter-country differences
    Date: 2010
  10. By: Moser,Caroline; Felton, Andrew
    Abstract: This paper examines the gendered nature of asset accumulation between 1978 and 2004 in Indio Guayas, a low-income community on the periphery of the city of Guayaquil, Ecuador. In so doing, it emphasizes both the importance of combining quantitative and qualitative intra-household data, as well as taking a longitudinal perspective rather than at a single point in time. This paper seeks to examine the relationship not only between gender and urban income poverty but also, more importantly, between gender and urban asset accumulation, illustrating how the combination of quantitative econometric measurement of assets and qualitative in-depth anthropological findings on the complex underlying gender relations both contribute to a far more comprehensive analysis of asset accumulation processes in urban contexts than can be gained from any single methodological approach.
    Keywords: gender, assets, asset accumulation, urban
    Date: 2010
  11. By: A. Navarro, Ignacio; Turnbull, Geoffrey K.
    Abstract: The paper presents a theoretical model that seeks to answer the question of why former squatter settlements tend to upgrade/redevelop at a slower pace than otherwise similar settlements originating in the formal sector. We argue that squatter settlers’ initial strategy to access urban land creates a ‘legacy effect’ that curtails settlement upgrading possibilities even after the settlements are granted property titles. We test our model using the case of Cochabamba, Bolivia and obtain results consistent with our theoretical model prediction. Our results suggest that the commonly used ‘benign neglect while keeping the threat of eviction’ policy has profound impacts on how land is developed in the informal sector and this poses costly consequences for local governments after legalization.
    Keywords: squatters, informal settlements, urban development, neighbourhood upgrading, urban redevelopment
    Date: 2010
  12. By: Bertocchi, Graziella (University of Modena and Reggio Emilia); Guerzoni, Andrea (University of Modena and Reggio Emilia)
    Abstract: We explore the determinants of state fragility in sub-Saharan Africa. Controlling for a wide range of economic, demographic, geographic and istitutional regressors, we find that institutions, and in particular the civil liberties index and the number of revolutions, are the main determinants of fragility, even taking into account their potential endogeneity. Economic factors such as income growth and investment display a non robust impact after controlling for omitted variables and reverse causality. Colonial variables reflecting the history of the region display a marginal impact on fragility once institutions are accounted for.
    Keywords: state fragility, Africa, institutions, colonial history
    JEL: O43 H11 N17
    Date: 2010–03
  13. By: Dreher, Axel (University of Göttingen); Klasen, Stephan (University of Göttingen); Vreeland, James Raymond (Georgetown University); Werker, Eric (Harvard Business School)
    Abstract: As is now well documented, aid is given for both political as well as economic reasons. The conventional wisdom is that politically-motivated aid is less effective in promoting developmental objectives. We examine the ex-post performance ratings of World Bank projects and generally find that projects that are potentially politically motivated – such as those granted to governments holding a non-permanent seat on the United Nations Security Council or an Executive Directorship at the World Bank – are no more likely, on average, to get a negative quality rating than other projects. When aid is given to Security Council members with higher short-term debt, however, a negative quality rating is more likely. So we find evidence that World Bank project quality suffers as a consequence of political influence only when the recipient country is economically vulnerable in the first place.
    Keywords: World Bank, aid effectiveness, political influence, United Nations Security Council
    JEL: O19 O11 F35
    Date: 2010–03
  14. By: Serneels, Pieter (University of East Anglia); Montalvo, Jose G. (Universitat Pompeu Fabra); Pettersson, Gunilla (University of Essex); Lievens, Tomas (Oxford Policy Management); Butera, Jean Damascene (Abt Associates, Inc.); Kidanu, Aklilu (Miz-Hasab Research Center)
    Abstract: Most developing countries face shortages of health workers in rural areas. This has profound consequences for health service delivery, and ultimately for health outcomes. To design policies that rectify these geographic imbalances it is vital to understand what factors determine health workers' choice to work in rural areas. But empirical analysis of health worker preferences has remained limited due to the lack of data. Using unique contingent valuation data from a cohort survey of 412 nursing and medical students in Rwanda, this paper examines the determinants of future health workers' willingness to work in rural areas, as measured by rural reservation wages, using regression analysis. These data are also combined with those from an identical survey in Ethiopia to enable a two-country analysis. We find that health workers with higher intrinsic motivation – measured as the importance attached to helping the poor – as well as those who have grown up in a rural area, and Adventists who participate in a local bonding scheme are all significantly more willing to work in a rural area. The main Rwanda result for intrinsic motivation is strikingly similar to that obtained for Ethiopia and Rwanda together. These results suggest that in addition to economic incentives, intrinsic motivation and rural origin play an important role in health workers' decisions to work in a rural area, and that faith-based institutions matter.
    Keywords: health care delivery, health workers, labour supply, public service
    JEL: J22 I11
    Date: 2010–03
  15. By: Bengtsson, Niklas (Department of Economics)
    Abstract: We use a rapid introduction of an unconditional cash grant (child support) in South Africa to estimate the marginal propensity to consume and earn out of a permanent change in unearned income. We find that the marginal propensity to earn is about to -0.25 for single-adult households, and somewhat lower for households with more than one adult. A very small fraction of the grant is saved. All in all, the marginal propensities estimated here are all similar to those reported in comparable papers using US data. However, they stand in contrast to some results on conditional cash transfers in other developing countries.
    Keywords: Social policy; Poverty reduction; Labor Supply; Earnings; Savings; Expenditure; Stone-Geary utility
    JEL: H31 J22 O23
    Date: 2010–03–24
  16. By: Bin Dong; Benno Torgler
    Abstract: In this study we explore in detail the causes of corruption in China using two different sets of data at the regional level (provinces and cities). We observe that regions with more anti-corruption efforts, histories of British rule, higher openness, more access to media and relatively higher wages of government employees are markedly less corrupt; while social heterogeneity, regulation, abundance of resource and state-owned enterprises substantially breed regional corruption. Moreover, fiscal decentralization is discovered to depress corruption significantly, while administrative decentralization fosters local corruption. We also find that there is currently a positive relationship between corruption and economic development in China that is mainly driven by the transition to a market economy.
    Keywords: Corruption; China; Government; Decentralization; Deterrence; Social Heterogenity
    JEL: D73 H11 K42
    Date: 2010–03
  17. By: Lacey Ann Wrubel
    Abstract: This paper explores earnings determinants for own-account workers in the urban informal economy of Bogotá, Colombia. Descriptive statistics show differences in individual, household and business characteristics when gender and business location are compared. Own-account workers operating in the street, on average, earn less than those in other locations and are the most dissatisfied with their jobs. For all regressions, the dependent variable is the log of hourly earnings. Under the human capital earnings model, women earn statistically significantly less than men for every hour worked. Using an earnings model that includes human, market and social capital factors, there is no gender gap. Education and being married have statistically significant positive returns for men and women. When the data are segmented by gender, age (as a proxy for experience) has no effect on men’s hourly earnings. For women, age and the length of time in business have a statistically significant positive effect on earnings. The number of household members has a significantly negative effect on women’s hourly earnings, but does not affect men’s earnings. Results also show that women in the service sector and men in the sales sector earn significantly less compared to all other sectors.
    Date: 2010–03–23
  18. By: Rahman, Aminur; Sawada, Yasuyuki
    Abstract: The paper augments Holmstrom’s (1982) team production model in the context of aid effectiveness. The analysis shows how donor proliferation leads to inefficient supply of aid in the recipient country because of the free-riding problem faced by the donors. The empirical findings support the theoretical prediction with regard to donor proliferation. However, this raises the question whether the current efforts in the international aid community with regard to donor coordination can in fact solve the aid proliferation problem.
    Date: 2010–03–01
  19. By: Essama-Nssah, B.; Bassole, Leandre
    Abstract: The Government of Cameroon has declared poverty reduction through strong and sustainable economic growth the central objective of its socioeconomic policy. This paper uses available household survey data to assess the performance of the economy with respect to this objective over the period 1996-2007. The authors use counterfactual decompositions based on both the Shapley method and the generalized Oaxaca-Blinder framework to identify proximate factors that might explain differences in observed outcomes over time, across regions and households. The concept of pro-poorness provides a basis for a normative evaluation of these outcomes. The analysis of changes in the size distribution of economic welfare reveals that formal sector employment, access to credit, education, and urban residence are characteristics that bring significantly high returns to households. Employment in smallholder agriculture has a negative impact on welfare across quantiles. Economic growth was accompanied by significant poverty reduction between 1996 and 2001. But poverty barely decreased between 2001 and 2007 due to very weak growth. Over the same period, household investment in human capital took a serious hit. Given the additional finding that the pattern of growth is characterized by urban bias and regional disparity, the overall assessment is that economic growth has been weakly pro-poor in Cameroon. There is therefore a need to re-examine and possibly reform the mechanisms governing the allocation of public resources designed to support individuals'efforts to improve their standard of living.
    Keywords: Rural Poverty Reduction,Achieving Shared Growth,Regional Economic Development,Inequality
    Date: 2010–03–01
  20. By: Blyde, Juan; Iberti, Gonzalo
    Abstract: An increasing body of evidence indicates that an important share of aggregate productivity growth, in both developed and developing countries, arises from the reallocation of resources across plants of different productivity levels. New trade models with heterogeneous firms (Bernard et al., 2003; Melitz, 2003) suggest that international trade plays an important role in this reallocative process. Focusing on a developing country, Chile, we use explicit measures of trade costs to explore the existence of the channels suggested by these new trade models. We provide new key findings for developing countries: first, trade costs affect the reallocative process by protecting inefficient producers, lowering their likelihood to exit, and also by limiting the expansion of efficient plants, lowering their likelihood to export. Second, the reallocative impacts of trade arise not only from tariff barriers but also from transport costs.
    Keywords: Trade costs; productivity; resource reallocation
    JEL: F13 F14 L1
    Date: 2010–02
  21. By: Ang, James
    Abstract: This paper attempts to identify the key factors behind Malaysia’s remarkable savings performance. Drawing on the life cycle theory, the saving function is estimated by incorporating other relevant structural features and institutional settings of the Malaysian economy into the specification. Particular emphasis has been placed on the roles of financial factors in mobilizing funds in the private sector. The results suggest that financial deepening and increased banking density tend to encourage private savings. Development of insurance markets and liberalization of the financial system, however, tend to exert a dampening effect on private savings.
    Keywords: private savings; financial development; Malaysia; ARDL bounds test
    JEL: O53 O16 E21
    Date: 2010
  22. By: Elizaphan J.O. Rao (Georg-August University Goettingen); Matin Qaim (Georg-August University Goettingen)
    Abstract: The expansion of supermarkets in developing countries may have far-reaching consequences for poverty and rural development. While previous studies have compared farm profits between participants and non-participants in supermarket channels, wider household welfare effects have hardly been analyzed. Moreover, structural differences between the two groups have been ignored. We address these issues by using endogenous switching regression and building on a survey of vegetable farmers in Kenya. Participation in supermarket channels is associated with a 50% gain in average household income, leading to significant poverty reduction. To realize these benefits on a larger scale will require institutional and policy support.
    Keywords: supermarkets; household income; sample selection; endogenous switching regression; Kenya; Africa
    Date: 2010–03–24
  23. By: Inmaculada Martínez-Zarzoso (University of Goettingen / Germany); Felicitas Nowak-Lehmann D. (University of Goetingen / Germany); Stephan Klasen (University of Goettingen)
    Abstract: This paper uses the gravity model of trade to investigate the link between bilateral and multilateral foreign aid and exports. There are three primary findings from this approach. First, in the long term, the average return, in terms of an increase in the donor’s level of goods exports, is approximately $ 2.15 US for every aid dollar spent on bilateral aid. Second, multilateral aid has a positive effect on export levels only in the short term, whereas in the long term, the effect is negative. Third, aid from other donors does not give rise to a displacement effect for a given donor-recipient trade relationship. This paper also makes comparisons among donors and finds that aid has a positive and significant effect on most donors’ export levels.
    Keywords: exports, foreign aid, donors, panel data, sample selection, GLM
    JEL: F10 F35
    Date: 2010–03–26
  24. By: Dierk Herzer (Johann Wolfgang Goethe-University, Frankfurt am Main / Germany)
    Abstract: This paper examines the long-run relationship between outward foreign direct investment (FDI) and total factor productivity for a sample of 33 developing countries over the period 1980-2005. Using panel cointegration techniques, we find that: (i) outward FDI has, on average, a positive long-run effect on total factor productivity in developing countries, (ii) increased factor productivity is both consequence and a cause of increased outward FDI, and (iii) there are large differences in the long-run effects of outward FDI on total factor productivity across countries. Cross-sectional regressions indicate that these cross-country differences in the productivity effects of outward FDI are significantly negatively related to cross-country differences in labor market regulation, whereas there is no statistically significant association between the productivity effects of outward FDI and the level of human capital, the level of financial development, or the degree of trade openness in the home country.
    Keywords: Outward FDI; total factor productivity; developing countries; panel cointegration
    JEL: F21 O11 F23 C23
    Date: 2010–02–16
  25. By: Strulik, Holger; Vollmer, Sebastian
    Abstract: In this paper we analyze the distribution of fertility rates across the world using parametric mixture models. We demonstrate the existence of twin peaks and the division of the world's countries in two distinct components: a high-fertility regime and a low fertility regime. Whereas the significance of twin peaks vanishes over time, the two fertility regimes continue to exists over the whole observation period. In 1950 about two thirds of the world's countries belonged to the high-fertility regime and the rest constituted the low-fertility regime. By the year 2005 this picture has reversed. Within both the low- and the high-fertility regime the average fertility rate declined, with a larger absolute decline within the high-fertility regime. Visually, the two peaks moved closer together. For the low fertility-group we find both beta- and sigma- convergence but we cannot establish any convergence pattern for the high fertility regime. Overall our findings are difficult to reconcile with the standard view of a fertility trap but they support the "differentiated take-off" view established in the Unified Growth literature.
    Keywords: Fertility, Convergence, Twin Peaks, Fertility Regimes, Unifed Growth.
    Date: 2010–03
  26. By: Strulik, Holger
    Abstract: This paper theoretically investigates how community approval or disapproval affects school attendance and child labor and how aggregate behavior of the community feeds back towards the formation and persistence of an anti- (or pro-) schooling norm. The proposed community-model continues to take aggregate and idiosyncratic poverty into account as an important driver of low school attendance and child labor. But it provides also an explanation for why equally poor villages or regions can display different attitudes towards schooling. Distinguishing between three different modes of child time allocation, school attendance, work, and leisure, the paper shows how the time costs of schooling and child labor productivity contribute to the existence of a locally stable anti-schooling norm. It proposes policies that effectively exploit the social dynamics and initiate a permanent escape from the anti-schooling equilibrium. An extension of the model explores how an education contingent subsidy paid to the poorest families of a community manages to initiate a bandwagon effect towards "education for all". The optimal mechanism design of such a targeted transfer program is investigated.
    Keywords: School Attendance, Child Labor, Social Norms, Targeted Transfers
    JEL: I20 I29 J13 O12
    Date: 2010–02

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