nep-dev New Economics Papers
on Development
Issue of 2010‒05‒15
twenty papers chosen by
Mark Lee
Towson University

  1. How Does Colonial Origin Matter for Economic Performance in sub-Saharan Africa? By J.A. Agbor; J. W. Fedderke; N. Viegi
  2. The Economic Origins of Twentieth Century Decolonisation in West Africa By J.A. Agbor
  3. Urbanization and the South Asian Enigma: A Case Study of India By Guha-Khasnobis, Basudeb; James, K. S.
  4. Public Policies and FDI Location: Differences Between Developing and Developed Countries By Timothy Goodspeed; Jorge Martinez-Vazquez; Li Zhang
  5. Does Fiscal Decentralization Strengthen Social Capital? Cross-Country Evidence and the Experiences of Brazil and Indonesia By Luiz de Mello
  6. How to Deal with Covert Child Labour, and Give Children an Effective Education, in a Poor Developing Country : An Optimal Taxation Problem with Moral Hazard By Cigno, Alessandro
  7. Assessing Administrative Capacity and Costs of Cash Transfer Schemes in Zambia ? Implications for Rollout By Dennis Kaputo Chiwele
  8. Access of the Poor to Water Supply and Sanitation in India: Salient Concepts, Issues and Cases By Nitish Jha
  9. Gender, Wages and Social Security in China’s Industrial Sector By Rickne, Johanna
  10. Kidnaps and Migration: Evidence from Colombia By Catherine Rodríguez; Edgar Villa
  11. Interprovincial disparities in China since the reforms: convergence or divergence? By Farhad Noorbakhsh; Zhikai Wang
  12. Private Capital Flows to Low Income Countries: Country-Specific Effects and the Lucas Paradox By Sweder van Wijnbergen; Corine Franken
  13. Economic Growth and the Volatility of Foreign Aid By Michal Chervin; Sweder van Wijnbergen
  14. The China-US co-dependency and the elusive costs of growth rebalancing By Luigi Bonatti; Andrea Fracasso
  15. The creditworthiness of the poor: a model of the Grameen Bank By Michal Kowalik; David Martinez-Miera
  16. Natural Hazards and Child Health By Claus C Pörtner
  17. Fragmentation and immiserising specialisation : the case of the textile and clothing sector By Céline Gimet; Bernard Guilhon; Nathalie Roux
  18. Return migrants: The rise of new entrepreneurs in rural China By Sylvie Démurger; Hui Xu
  19. Village level inequality, migration and remittances in rural Mexico: How do they change over time? By Aslihan Arslan; J. Edward Taylor
  20. Oil revenues for public investment in Africa: targeting urban or rural areas? By Marcus Böhme; Clemens Breisinger; Rainer Schweickert; Manfred Wiebelt

  1. By: J.A. Agbor; J. W. Fedderke; N. Viegi
    Abstract: This paper investigates the channels through which colonial origin affects economic outcomes in sub-Saharan Africa (SSA). It focuses on four key channels of transmission namely, human capital, trade openness, market distortion and selection bias. In contrast with previous studies where only initial conditions at independence were held to influence the subsequent growth path, the methodology that we apply in this paper combines (1) the pre-colonisation initial conditions, (2) the initial conditions at independence and (3) the subsequent post-colonial changes in explaining income differences amongst former SSA colonies. Our sample comprises of 38 SSA countries studied over the period 1960-2000, and we use pooled OLS and Hausman-Taylor estimation techniques in a panel framework. The results suggest that former British colonies have had marginally higher income levels than former French colonies, and this is attributable to the legacy of British colonisation in trade openness and human capital. We do not find robust evidence in support of the market distortion and selection bias channels. Besides highlighting the importance of the trade openness channel, the study is also the first, to the best of our knowledge, to simultaneously examine a range of feasible transmission channels between colonial origin and economic growth performance.
    Keywords: Colonial Origin, Human Capital, Institutions, Hausman-Taylor, sub-Saharan Africa
    JEL: F54 O47 I20 N17
    Date: 2010
  2. By: J.A. Agbor
    Abstract: This paper argues that the pattern of decolonisation in West Africa was a function of the nature of human capital transfers from the colonisers to the indigenous elites of the former colonies. Underpinning the nature of these human capital transfers is the colonial educational ideology. Where this ideology emphasized the notion of "assimilation", the system generally tended to produce elites that depended highly on the coloniser for their livelihood, hence necessitating a continuation of the imperial relationship even after independence was granted. On the contrary, where the ideology emphasized the "strengthening of the solid elements" of the country-side, the system tended to produce a bunch of elites that were quite independent of the coloniser and consequently had little to lose from a disruption of the imperial relationship at independence. The model raises several predictions based on a single assumption on the nature of the nationalist elite. The paper's contribution, is in providing a framework for understanding the different paths of decolonisation in Africa in general, but more specifically in the British and French West African empires, an approach which unites both the Eurocentric and Afrocentric perspectives.
    Keywords: Decolonisation, Human Capital Transfers, Eurocentrism, Afrocentrism, West Africa
    JEL: I21
    Date: 2010
  3. By: Guha-Khasnobis, Basudeb; James, K. S.
    Abstract: South Asia has the highest rate of child malnutrition in the world, despite rapid economic growth compared to other regions such as sub-Saharan Africa. Known as the ‘South Asian enigma’ this feature is partly attributed to the low status of women in South Asian societies. This paper examines this tenet in the context of India, with particular emphasis on possible differences between rural and urban scenarios. The empirical evidence reveals some important differences, which are relevant for policies relating to women’s empowerment against a backdrop of rapid urbanization.
    Keywords: urbanization, women, malnutrition, slums, India
    Date: 2010
  4. By: Timothy Goodspeed; Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Li Zhang
    Abstract: Host country government officials in developing and developed countries alike would like to know the impact of their public policies on foreign investment in their countries. Unfortunately, the literature does not provide a single view, and there are likely to be differences between developing and developed countries. This paper examines the impact of three host country government policies on the host’s FDI stock: taxation, good governance, and infrastructure. We focus on whether the impact of these factors on FDI differs depending on the level of development of the host country. The regression results indicate that FDI is sensitive to host country taxation in developed countries, but not in developing countries; FDI is sensitive to host country governance measures and corruption in developing countries but not developed; and FDI shows sensitivity to host country infrastructure quality in both developed and developing host countries.
    Keywords: FDI Location, Developing countries, Developed Countries,
    Date: 2010–01–01
  5. By: Luiz de Mello (OECD Economics Department)
    Abstract: This paper tests the hypothesis that, by giving people more voice in the government decision-making process, fiscal decentralisation fosters social capital, measured in terms of interpersonal trust. Empirical evidence based on World Values Survey data and seemingly unrelated probit estimations for a cross-section of countries suggests that people living in federal/decentralised countries find it more important than their counterparts living in unitary/centralised countries to have voice in government decisions, which, in turn, is associated with greater social capital. The cross-country estimations are complemented by country-specific regressions for Brazil and Indonesia on account of these countries’ experiences with fiscal decentralisation. The results show that the cohorts of individuals that have been exposed to decentralisation are in general more pro-voice (and trustful of strangers in the case of Brazil) than their counterparts that have not been exposed to decentralisation. These findings are not driven by the effects of political liberalisation on people’s attitudes towards the importance of having voice in government decisions and interpersonal trust.
    Keywords: Federalism, decentralisation, social capital, Brazil, Indonesia
    Date: 2010–02–01
  6. By: Cigno, Alessandro
    Abstract: As the return to education (and possibly also parental income) is uncertain, and given that the work a child does covertly for his own parents, and transfers between parents and children, are private information, the government should make school enrollment compulsory, set a legal limit (decreasing in parental income) on overt child labour, and redistribute across families using a flat-rate education grant, and a tax on parental income. That done, it should use a scholarship increasing in school results, and a tax on the skill premium, to raise the expected return to educational investment, and make it less uncertain.
    Keywords: child labour, education, uncertainty, moral hazard
    JEL: D82 H21 H31 I28 J24
    Date: 2010–04
  7. By: Dennis Kaputo Chiwele (RuralNet Associates, Limited)
    Abstract: The Ministry of Community Development and Social Services (MCDSS) has taken the decision to rollout in 2009 a national social cash transfer scheme (SCTS) to cover the whole country by 2012. Thus far, social cash transfer schemes are being piloted in five districts in Southern and Eastern Provinces. The schemes are using structures created for the implementation of the Public Welfare Assistance System (PWAS) which rise from community level all the way to the national level. The adoption of pilot SCTS in Zambia follows the growing acceptance of social cash transfers as a means for assisting extremely poor households. Partly, this is due to the positive impact of conditional cash transfers in Latin America with respect to school enrolments, improved health and reduction in poverty levels for participating households. An evaluation of the Kalomo SCTS revealed a number of achievements with respect to impact on the beneficiaries including a rise in self-esteem and confidence among beneficiaries, reduced incidence of begging, increased food consumption, increased asset ownership and positive impacts for the local economy. Field work for this assessment although not focused on assessing impacts noted qualitative evidence of these findings. Implementation of pilot schemes started in 2004 with the Kalomo SCTS followed by one in 2005 in Kazungula, 2006 in Chipata and in 2007 in Monze and Katete. The schemes have been implemented with some variation so that they ?generate information on the feasibility, costs and benefits and negative impacts of a Social Cash Transfer Scheme?? (Zulu and Schuring, May 2007, p.1). Each of the pilot scheme has been designed to form a part of the learning agenda that would utilise lessons towards the design of a national social cash transfer. It is also being assessed as to the extent to which the PWAS structures are able to accommodate social cash transfer along existing social welfare activities.
    Keywords: Assessing Administrative Capacity and Costs of Cash Transfer Schemes in Zambia ? Implications for Rollout
    Date: 2010–02
  8. By: Nitish Jha (Independent researcher and consultant)
    Abstract: Access to safe water is necessary for lives and livelihoods. In India, a mid-term assessment reveals that the country has already met its MDG (Millennium Development Goal) in terms of expanding access to water infrastructure although in the parallel subsector of sanitation progress is falling far short of the mark. In reality, most basic observations indicate that water supply coverage is not as good as the figures show while national sanitation continues to be poor even after almost six decades of efforts to eradicate open defecation. It argues that economic, technical, institutional as well as social factors constrain access to safe drinking water and proper sanitation in India for both the urban and rural poor, and that coverage figures do not reflect this restricted access. It finds that, increasingly, communities are being required to manage their own water and sanitation schemes, not just in rural areas but in urban ones as well. There are definite advantages to such an institutional arrangement if the transition to community management is carried out smoothly. Often, however, the chances of success of community management are vitiated because policy makers misunderstand and misapply three interlinked concepts that are crucial to the success of community-managed water and sanitation schemes?participation; water and sanitation burden; and project ownership. The paper concludes by clarifying these concepts and the implications they have for policy implementation in this sector.
    Keywords: Access of the Poor to Water Supply and Sanitation in India: Salient Concepts, Issues and Cases
    Date: 2010–05
  9. By: Rickne, Johanna (Department of Economics)
    Abstract: This study compares average earnings and productivities for men and women employed in roughly 200,000 Chinese industrial enterprises. Women’s average wages lag behind men’s wages by 11%, and this result is robust to the inclusion of non-wage income in the form of social insurance payments. The gender-wage gap is wider among workers with more than 12 years of education (28%), mainly because of the higher relative wages received by skilled men in foreign-invested firms. Women’s average productivity falls behind men’s productivity by a larger margin than the gap in earnings, and the null-hypothesis of earnings discrimination is thereby rejected. Equal average wages between men and women are found among firms located in China’s Special Economic Zones, and also among some light industrial sectors with high shares of female employees. Market reform hence appears to have improved women’s relative incomes.
    Keywords: China; gender wage gap; non-wage compensation
    JEL: I30 J16 J71 O10
    Date: 2010–05–10
  10. By: Catherine Rodríguez; Edgar Villa
    Abstract: Using a unique data set from the major Colombian cities collected between 2000-2003 and with information on more than 16,000 households, this paper studies the relationship between the kidnap risk a household faces with its migration decisions. We find evidence that exposure to such risk induces households to react sending some of their members to an international destination but not necessarily to a domestic one. This finding is robust to the inclusion of several household characteristics usual in the migration literature and an alternative measure of kidnap risk. The implication of our findings suggest a possible “brain drain” from Colombia.
    Date: 2010–03–16
  11. By: Farhad Noorbakhsh; Zhikai Wang
    Abstract: This paper investigates the extent of disparities amongst the provinces of China since the economic reform in 1978 up to the most recent year for which data is available. After a brief review of theoretical and in particular recent empirical literature on regional inequality in China it investigates whether or not the dynamic economic growth in China has been coupled with increasing disparities amongst the Chinese provinces. The paper utilises a few models of convergence along the lines of those hypothesised by neoclassical economists. It employs per capita income and per capita consumption to identify the possible absolute and conditional convergence since the economic reforms. The coverage and impact of the disparities in terms of the relative size of population affected are then taken into account in the analysis of inequality in income and consumption.
    Keywords: China, Regional disparities, inequality, convergence
    Date: 2010–03
  12. By: Sweder van Wijnbergen (University of Amsterdam); Corine Franken (Nomura)
    Abstract: This paper analyses Net Private Capital Flows to LICs incorporating the recent surge in FDI between 2000 and 2006. We show that including country-specific effects in a paneldata setup resolves the Lucas Paradox, at least for LICs. Our results suggest that openness is among the most important factors explaining country-specific performance in attracting Net Private Capital Flows.
    Keywords: Private capital inflows; Low Income Countries; Lucas Paradox
    JEL: F21 G15
    Date: 2010–01–13
  13. By: Michal Chervin (University of Amsterdam); Sweder van Wijnbergen (University of Amsterdam)
    Abstract: Foreign aid’s effectiveness in promoting economic growth remains mired in controversy.We examine the impact of the volatility of aid on economic growth, controlling for the level of aid. A four-year panel analysis is conducted encompassing 155 countries over the period 1966-2001. We find that once the volatility of aid is controlled for, aid has a positive impact on economic growth. Correspondingly, volatility of aid flows is found to be negatively related to growth. We found no significant link between investment and foreign aid, but a positive correlation between aid and consumption and a negative link between aid volatility and consumption. But our results also indicate that aid has become a source of volatility rather than insuring against it, and in that way may have become inimical to economic growth.
    Keywords: foreign aid; volatility; economic growth
    JEL: O4 O11 O19
    Date: 2010–01–04
  14. By: Luigi Bonatti; Andrea Fracasso
    Abstract: The global crisis burst in 2007 has revived the growth-rebalancing debate and backed the position of those advocating a fast reduction of the global imbalances centered on the symbiotic US-China relationship. In this work, we develop a two-country two-stage growth model reproducing the main features of the Sino-American co-dependency and we analyze alternative (medium- and long-term) scenarios for its evolution. We show that altering the Chinese exchange rate policy and down-sizing the US external deficits with a view to moving the production of tradables toward the US may imply some relevant costs. If exchange rate and fiscal policies are not properly tuned in both countries, the rebalancing process may lead to the emergence of structural unemployment in the US (due to the greater labor intensity of growth recorded in the nontradable sector than in the tradable sector) and to a slow-down in the process whereby the Chinese labor force is gradually absorbed in the modern sectors of the economy
    Keywords: Growth-rebalancing, global imbalances, structural unemployment
    JEL: E42 F33 F41 F43 O41
    Date: 2010
  15. By: Michal Kowalik; David Martinez-Miera
    Abstract: This paper analyzes the role of expected income in entrepreneurial borrowing. We claim that poorer individuals are safer borrowers because they place more value on the relationship with the bank. We study the dynamics of a monopolistic bank granting loans and taking deposits from overlapping generations of entrepreneurs with different levels of expected income. Matching the evidence of the Grameen Bank we show that a bank will focus on individuals with lower expected income, and will not disburse dividends until it reaches all the potential borrowers. We find empirical support for our theoretical results using data from a household survey from Bangladesh. We show that various measures of expected income are positively and signficantly correlated with default probabilities.
    Date: 2010
  16. By: Claus C Pörtner
    Abstract: This paper examines how the occurrence of various natural disasters affect health status of children using data from Guatemala. Despite a large literature on child health there is relatively little work on how shocks from natural hazards affect the health of children and with climate change it is likely that more and more households will experience changes and possible increases in the risk of natural disasters. Using three rounds of DHS data combined with a long time series on hazards the paper controls for both time and area specific effects, while pinpointing when and where particular shocks occurred. This is done for children from birth to 59 months at the time of the survey. Child health is proxied by height for age and weight for height and direct information on recent symptoms of illness. The effect of shocks from these hazards are generally negative and often very large.
    Date: 2010–05
  17. By: Céline Gimet (UMR CNRS 5824 GATE Lyon-Saint-Etienne,93, chemin des Mouilles B.P. 167 69131 Ecully, France); Bernard Guilhon (DEFI EA 4265, Faculty of Economics and Management, University of the Mediterranean, Château Lafarge, route des Milles, 13290 Aix-en-Provence); Nathalie Roux (DEFI EA 4265, Faculty of Economics and Management, University of the Mediterranean, Château Lafarge, route des Milles, 13290 Aix-en-Provence)
    Abstract: With production activity tending rapidly towards international fragmentation, this study examines the consequences for labour countries of the forms of specialisation brought about by fragmentation processes. It further addresses the risk that fragmented sectors may become excluded from greater developments within the manufacturing industry as a whole. An empirical analysis using panel data reveals that, contrary to expectation, the textile and clothing sector in labour countries does not always reap the positive benefits of this form of international trade integration. Rather, we observe a phenomenon of immiserising specialisation, due to a drop in relative wages within this sector.
    Keywords: offshoring, outsourcing, fragmentation, immiserising specialisation, relative wages, textile and clothing sector
    JEL: F14 F16 L23 L67
    Date: 2010
  18. By: Sylvie Démurger (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France ; CNRS, CEFC, USR 3331 Asie Orientale, Hong Kong); Hui Xu (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France ; Center for Modern Chinese City Studies (CCMC), East China Normal University, Shanghai, China)
    Abstract: This paper analyzes return migrants' occupational choice upon their return to their home village, by using an original rural household survey conducted in Wuwei county (Anhui province, China) in 2008. We apply two complementary approaches : a horizontal comparative analysis of occupational choice between non-migrants and return migrants, and a vertical investigation of the impact of migration experience on returnees only. Two main findings are drawn up from the estimation of probit models which account for potential selection bias and endogeneity. First, return migrants are more likely to be self-employed and to opt for higher ability jobs than non-migrants. Second, both return savings and the frequency of job changes during migration increase the likelihood for return migrants to become self-employed. These findings suggest that (a) working experience during migration enhances individual's human capital and entrepreneurial ability, and (b) repatriated migration experience is a key stimulating factor in promoting rural entrepreneur activity.
    Keywords: Return migrants, occupational change, entrepreneurship, Asia, China
    JEL: O15 J62 L26 O53
    Date: 2010
  19. By: Aslihan Arslan; J. Edward Taylor
    Abstract: We analyze how migration prevalence and remittances shape income distribution using novel panel data that is nationally and regionally representative of rural Mexico. Employing a Gini decomposition and controlling for whole household migration (attrition), we find that migration prevalence has increased between 2002 and 2007 reversing the unequalizing effects of international remittances at the national level. We also analyze regional differences in the effects of remittances on inequality, and find that the regions that had the highest increase in international migration are also the regions where the equalizing change in the marginal effects of remittances was the highest. This provides supporting evidence for the migration diffusion hypothesis. A fixed effects analysis of the effects of migration and remittances on in inequality at the village level, however, fails to support this hypothesis, indicating that most changes in inequality have occurred within rather than between villages. We show that income growth has been pro-poor in all villages, but this is offset by significant re-ranking of individuals in the village inequality measure, concealing the effects of migration and remittances on income distribution at the village level
    Keywords: Inequality, Migration, Network effects, Panel Data, Remittances, Mexico
    JEL: O15
    Date: 2010–05
  20. By: Marcus Böhme; Clemens Breisinger; Rainer Schweickert; Manfred Wiebelt
    Abstract: This paper investigates the effects of oil financed public investment on poverty using a dynamic multisectoral general equilibrium model featuring inter-temporal productivity spillovers, which may exhibit a sector-specific and regional bias. In general, the results bear out the expectation that a surge of oil revenues leads to a real appreciation, distorting incentives which favor nontradable activities over export agriculture and manufacturing thereby increasing rural and national poverty. Whereas this result is familiar from other recent studies, the simulations show that beyond the short run, when conventional demand-side Dutch disease effects are present, the relationship between resource-rent flows and real exchange rates, output growth, and poverty is less straightforward than simple models of the "resource curse" suggest. Taking Ghana as a stylized agriculture-based economy with poverty most pronounced in a region with home biased agricultural production, a policy mix of smoothing the real exchange rate shock and an allocation of infrastructure spending in rural areas seems to be the most promising public investment strategy to enhance growth and reduce poverty
    Keywords: oil revenue, public investment, productivity, Africa, agricultural development, poverty
    JEL: H4 O5 Q3
    Date: 2010–05

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