nep-dev New Economics Papers
on Development
Issue of 2010‒05‒29
sixteen papers chosen by
Mark Lee
Towson University

  1. Is Rural Child Labour Declining in India? By Uma Kambhampati
  2. Growth and Inverted U in Child Labour: A Dual Economy Approach By Nigar Hashimzade; Uma Kambhampati
  3. Social Capital and Economic Development By Marina Della Giusta
  4. Evaluating the Health Effects of Micro Health Insurance Placement: Evidence from Bangladesh By Jennifer Roberts; Paul Mosley; Syed Abdul Hammid
  5. Changing the Risk at the Margin Smallholder Farming and Public Policy in Developing Countries By Mannberg, Camilla
  6. Can a Social Safety Net Affect Farmers’ Crop Portfolios? A Study of the Productive Safety Net Programme in Ethiopia By Andersson, Camilla
  7. Development as Leadership-Led Change--A Report for the Global Leadership Initiative and the World Bank Institute (WBI) By Andrews, Matt; McConnell, Jesse; Wescott, Alison
  8. Can Social Security Boost Domestic Consumption in the People’s Republic of China? By Wang Dewen
  9. The Size of Informal Economy in Pakistan By Muhammad Farooq Arby; Muhammad Jahanzeb Malik; Muhammad Nadim Hanif
  10. Information, direct access to farmers, andrural market performance in central India By Goyal, Aparajita
  11. Growth identification and facilitation : the role of the state in the dynamics of structural change By Lin, Justin Yifu; Monga, Celestin
  12. Economic Reform, Education Expansion, and Earnings Inequality for Urban Males in China, 1988-2007 By Xin Meng; Kailing Shen; Sen Xue
  13. Effects of state-level public spending on health on the mortality probability in India By Mansour Farahani; S. V. Subramanian; David Canning
  14. A Phoenix in Flame ? Portfolio Choice and Violence in Civil War in Rural Burundi By Eleonora Nillesen; Philip Verwimp
  15. The Uncertain Relationship between Corruption and Growth in Developing Countries: Threshold Effects and State Effectiveness By Alice N. Sindzingre; Christian Milelli
  16. Remittances and Household Consumption Instability in Developing Countries By Jean-Louis COMBES; Christian EBEKE

  1. By: Uma Kambhampati (School of Economics, University of Reading)
    Abstract: This paper will look at the patterns of child work, schooling and ‘idleness’ across the major states of India and over two years - 1993 and 2004. We analyse two rounds of the NSS dataset to see whether the patterns of schooling and child work have changed over this period or not. The analysis concentrates on the rural sector and finds that the proportion of children in work has increased between 1993 and 2004. While current attendance at school has increased, the proportion of children whose primary activity is schooling has decreased. We hypothesise that this may be because, in a growing economy, there are more opportunities for employment and therefore a larger number of children are likely to combine work and schooling.
    Date: 2010–05–02
  2. By: Nigar Hashimzade (School of Economics, University of Reading); Uma Kambhampati (School of Economics, University of Reading)
    Abstract: While it is commonly accepted that the main cause of child labour is poverty, empirical observations suggest that economic growth is not always associated with the reduction in child labour. We show, in a dual economy framework, that the e¤ect of productivity growth upon child labour may be positive or negative. In particular, changes in the productivity gap between the modern and the traditional sectors, due to the technological progress, can generate an increase in child labour. In a dynamic version of the model we also investigate how this e¤ect depends on the quality of schooling.
    Date: 2010–05–03
  3. By: Marina Della Giusta (School of Economics, University of Reading)
    Abstract: The paper reviews the literature on social capital and development and identifies key properties of this concept that are then used in a model illustrating the potential welfare effects from social capital, in terms of both wellbeing and economic benefits. The model focuses on access to inputs into the growth process and identifies necessary conditions for benefits from social capital in terms of the availability of the right kind of intermediary making access to capital resources possible, and the presence of supportive institutions which make minimum human capital and complementary goods available.
    Keywords: social capital, institutions, group lending, development
    JEL: O16 O43 Z13
    Date: 2010–05–07
  4. By: Jennifer Roberts (Department of Economics, The University of Sheffield Author-Person=pro228); Paul Mosley (Department of Economics, The University of Sheffield); Syed Abdul Hammid
    Abstract: We examine the impact of micro health insurance placement on health awareness, healthcare utilization and health status of microcredit members in rural Bangladesh, using data from 329 households in the operating areas of Grameen Bank. The results are based on econometric analysis conditioned on placement of the scheme, and show that placement has a positive association with all of the outcomes. The results are statistically significant for health awareness and healthcare utilization, but not for heath status. Our study makes an important contribution to the literature as it provides evidence on the impact of MHI on a broad set of health outcomes.
    Keywords: Microcredit, Micro Health Insurance, Grameen Bank, Bangladesh
    JEL: O12
    Date: 2010–04
  5. By: Mannberg, Camilla (Department of Economics, Umeå University)
    Abstract: This thesis consists of a summary and four self-contained papers. Paper [I] examines whether the implementation of a social safety net programme in Ethiopia has affected the value, risk and composition of farmers’ crop portfolios. The empirical analysis suggests that the value and risk of the crop portfolio have not been altered due to the programme. However, the programme seems to have brought about some changes in the land allocated to different crops. Paper [II] studies how a social safety net affects farmers’ (dis)investments in productive assets. More specifically, it studies how the Productive Safety Net Programme in Ethiopia has changed livestock and tree holdings. The results indicate no significant effect on livestock holdings, but a significant increase in tree holdings. Paper [III] investigates if there is a problem of adverse selection in formal microlending in rural Bangladesh. The results indicate that farmers who only borrow formally have a shadow price of capital that is substantially higher than the average informal interest rate. This suggests that farmers that only borrow formally are perceived as poor credit risks by informal lenders. Paper [IV] explores the economic incentives surrounding the cultivation of opium poppy in Afghanistan. Specifically, it examines the impact of eradication policies when opium is used as a means of obtaining credit, and when the crops are produced in sharecropping arrangements. The results indicate that both these features are likely to affect the outcome of eradication policies.
    Keywords: Smallholder farming; Public policy; Informal risk strategies; Microcredit; Opium eradication; Development economics; Food policy
    JEL: O22 Q12 Q18 Q18 Q28
    Date: 2010–05–19
  6. By: Andersson, Camilla (Department of Economics, Umeå University)
    Abstract: In this paper, we examine whether a minimum level of ensured consumption from a social safety net has the potential of breaking the vicious circle of risk avoidance and low return in African agriculture. We study how the implementation of a social safety net programme in Ethiopia has affected the value, risk and composition of farmers’ crop portfolios. The effects of programme participation on the value and risk of the crop portfolio are examined in a Just-Pope production function, and the effects of programme participation on composition of the crop portfolio are tested in a set of acreage response models. The empirical analysis is based on unique household panel data that allow us to control for unobserved heterogeneity. No significant effect on the value and risk of the crop portfolio could be found. However, the programme seems to have brought about some changes in the land allocated to different crops. The greatest effect is towards increased cultivation of perennials, which are high-value, high-risk crops in this part of Ethiopia.
    Keywords: Crop choice; Social safety nets; Food-for-work programmes; PSNP; Ethiopia
    JEL: O22 Q12 Q18
    Date: 2010–05–19
  7. By: Andrews, Matt (Harvard University); McConnell, Jesse (Reform Development Consulting); Wescott, Alison (World Bank Institute)
    Abstract: Development involves change, but many development initiatives produce unimpressive results. The authors ask why and consider how to close the gap between the intended change and what we actually see in the evidence. This paper presents the findings of a study, initiated by the multi-donor Global Leadership Initiative and led by the World Bank Institute (WBI), to examine leadership in the change processes of fourteen capacity development interventions in eight developing countries, through 140 in-depth structured interviews. It explores what it takes to make change happen and in particular, the role leadership plays in effecting change. The authors propose that leadership contributes to change when it builds "change space" by fostering acceptance for change, granting authority for change, introducing or freeing the abilities necessary to achieve change. This "change space" is required to ensure contextual readiness for change and foster progress through the difficult stages of the change process. An analytical framework is introduced to illustrate the dimensions of this "change space" and its limits in organizational and social change. The authors argue that a lack of "change space" in many development contexts may be overlooked, contributing to failure. The paper concludes that leadership manifests in different ways in different contexts, depending on the contextual readiness and factors that shape change and leadership opportunities; but the key characteristics of plurality, functionality, problem orientation and "change space" creation are likely to be common to all successful leadership-led change events.
    Date: 2010–03
  8. By: Wang Dewen
    Abstract: This paper reviews the development of the social security system and trends in the urban labor market in the People’s Republic of China (PRC). Despite its remarkable economic achievement, the PRC faces a difficult path before it can reform and improve its social security system and provide basic support for all of its people. The unemployment shock has caused rural and urban household income to decrease and has thus slowed down household consumption growth. The provision of broader social security would not only mitigate unemployment shocks in the short term, but it would also guarantee individuals and households more security for spending that could reduce the high savings rate and help achieve a balanced growth path in the long run. [ADBI WP 215].
    Keywords: people, unemployment, households, income inequality, children, insurance, medial, injury, Housing Security, consumption, growth, rural, individuals, savings rate, spending, public transfers, income distribution, development, social security system, urban labour market, China, PRC, economic, reform,
    Date: 2010
  9. By: Muhammad Farooq Arby; Muhammad Jahanzeb Malik; Muhammad Nadim Hanif
    Abstract: This paper estimates the size of informal economy in Pakistan by using monetary approach with some modifications, electricity consumption approach and MIMIC model. Under monetary approach, we take care of the issue of the stationarity of variables and use autoregressive distributed lag (ARDL) model instead of simple OLS and add education as an additional factor affecting the size of informal economy along with some other technical improvements in the standard monetary models. The electricity consumption approach and MIMIC models are used for the first time in case of Pakistan. The results show that the informal economy in Pakistan has been about 30 percent of the total economy which declined considerably in 2000s. Currently, about 20 percent of the economic transactions are taking place in the informal sector. Key Words: Informal Economy, ARDL, MIMIC Acknowledgment We appreciate the comments and feedback given by Ali Choudhary, Moinuddin, Amin Lodhi and participants of a seminar in which this paper was presented.
    Keywords: informal economy, Pakistan, South Asia, ARDL, MIMIC
    Date: 2010
  10. By: Goyal, Aparajita
    Abstract: This paper estimates the impact of a change in procurement strategy of a private buyer in the central Indian state of Madhya Pradesh. Beginning in October 2000, internet kiosks and warehouses were established that provide wholesale price information and an alternative marketing channel to soy farmers in the state. Using a new market-level dataset, the estimates suggest a significant increase in soy price after the introduction of kiosks, supporting the predictions of the theoretical model. Moreover, there is a robust increase in area under soy cultivation. The results point towards an improvement in the functioning of rural agricultural markets.
    Keywords: Markets and Market Access,E-Business,Agribusiness,Crops&Crop Management Systems,Access to Markets
    Date: 2010–05–01
  11. By: Lin, Justin Yifu; Monga, Celestin
    Abstract: Active economic policies by developing countries’ governments to promote growth and industrialization have generally been viewed with suspicion by economists, and for good reasons: past experiences show that such policies have too often failed to achieve their stated objectives. But the historical record also indicates that in all successful economies, the state has alwaysplayed an important role in facilitating structural change and helping the private sector sustain it across time. This paper proposes a new approach to help policymakers in developing countries identify those industries that may hold latent comparative advantage. It also recommends ways of removing binding constraints to facilitate private firms’ entry into those industries. The paper introduces an important distinction between two types of government interventions. First are policies that facilitate structural change by overcoming information and coordination and externality issues, which are intrinsic to industrial upgrading and diversification. Such interventions aim to provide information, compensate for externalities, and coordinate improvements in the"hard"and"soft"infrastructure that are needed for the private sector to grow in sync with the dynamic change in the economy’s comparative advantage. Second are those policies aimed at protecting some selected firms and industries that defy the comparative advantage determined by the existing endowment structure—either in new sectors that are too advanced or in old sectors that have lost comparative advantage.
    Keywords: Economic Theory&Research,Environmental Economics&Policies,Achieving Shared Growth,Emerging Markets,Debt Markets
    Date: 2010–05–01
  12. By: Xin Meng; Kailing Shen; Sen Xue
    Abstract: In the past 20 years the average real earnings of Chinese urban male workers have increased by 350 per cent. Accompanying this unprecedented growth is a considerable increase in earnings inequality. Between 1988 and 2007 the variance of log earnings increased from 0.27 to 0.48, a 78 per cent increase. Using a unique set of repeated cross-sectional data this paper examines the causes of this increase in earnings inequality. We find that the major changes occurred in the 1990s when the labour market moved from a centrally planned system to a market oriented system. The decomposition exercise conducted in the paper identifies the factor that drives the significant increase in the earnings variance in the 1990s to be an increase in the within-education-experience cell residual variances. Such an increase may be explained mainly by the increase in the price of unobserved skills. When an economy shifts from an administratively determined wage system to a market-oriented one, rewards to both observed and unobserved skills increase. The turn of the century saw a slowing down of the reward to both the observed and unobserved skills, due largely to the college expansion program that occurred at the end of the 1990s.
    Keywords: Earnings inequality, China
    JEL: J31 P2 P3
    Date: 2010–04
  13. By: Mansour Farahani (Harvard School of Public Health); S. V. Subramanian (Harvard School of Public Health); David Canning (Harvard School of Public Health)
    Abstract: This study uses the second National Family Health Survey (NFHS-2) of India to estimate the effect of state public health spending on mortality across all age groups, controlling for individual, household, and state-level covariates. We use a state’s gross fiscal deficit as an instrument for its health spending. Our study shows a 10 % increase in public spending on health in India decreases the average probability of death by about 2%, with effects mainly on the young, the elderly, and women. Other major factors affecting mortality are rural residence, household poverty, and access to toilet facilities.
    Keywords: Public spending, health, mortality probability, India
    Date: 2009–06
  14. By: Eleonora Nillesen; Philip Verwimp
    Abstract: This paper challenges the idea that farmers revert to subsistence farming when confronted with violence from civil war. While there is an emerging macroeconomic consensus that wars are detrimental to development, we find contrasting microeconomic evidence. Using several rounds of (panel) data at the farm and community level, we find that farmers in Burundi who are confronted with civil war violence in their home communities increase export and cash crop growing activities, invest more in public goods and reveal higher levels subjective welfare evaluations. We interpret this in the light of similar recent micro-level evidence that points to post-traumatic growth effects after (civil) warfare. Our results are confirmed across specifications as well as in robustness analyses.
    Keywords: Civil war, investment, post-traumatic growth.
    Date: 2010
  15. By: Alice N. Sindzingre; Christian Milelli
    Abstract: In the literature of development economics, corruption is usually conceived as detrimental to economic growth. This conventional wisdom, however, may be called into question. Many countries witnessed growth despite corruption, e.g., commodity-dependent and high-growth East Asian countries. The paper argues, through a comparison of Sub-Saharan Africa and East Asia, that the relationships between corruption and economic growth are difficult to demonstrate. It highlights two crucial factors that explain the lack of robustness of this relationship. Firstly, this lack of robustness stems from the methods of measurement, which are usually based on the building of indices, modelling and econometric techniques. These methods are inappropriate for a concept such as ‘corruption’, which refers to complex and heterogeneous phenomena that are difficult to subsume in a single and stable definition. A second set of factors underlying the weakness of the relationship between corruption and growth is the dependence of causal processes on specific contexts. The effects of corrupt practices on an economy depend on its particular history, its economic structures, its political economy and types of institutions: for these reasons, they vary across countries and regions. Causal links between corruption and growth may exist, but they are non-linear and subject to threshold effects. Beyond certain thresholds, which are built by specific contexts (i.e., the combination of many contextual factors, political, economic, institutional), corruption phenomena can be detrimental to growth; before reaching these thresholds, the impact of corruption on growth may be limited. These thresholds can be assessed only ex post: they cannot be measured ex ante, as they precisely depend on contexts that vary across space, countries and history. In some contexts, economic and political factors may reinforce each other, e.g. corruption, political instability, economic distortions and vulnerability, such as commodity-based market structures. This results in ‘low equilibria’ that combine low growth and pervasive corruption, and thresholds, which, once low equilibria are stabilised, it is very difficult to get out from under (‘poverty traps’). In other contexts, these factors may all exist. They remain separated, however; corruption does not combine with other economic and political factors and is contained, which makes it possible for countries not to fall into ‘lower’ equilibria. The state is here the core entity able to prevent the reciprocal reinforcement of corruption and other economic or political structures - and hence the formation of poverty traps -, and to make corruption subservient to growth objectives. This state capacity that can confine and control corruption, which exists in some countries but not in others, is a key factor in the differences in impacts of corruption on growth.
    Keywords: corruption, growth, political economy, Sub-Saharan Africa, East Asia
    JEL: O10 O43 K40
    Date: 2010
  16. By: Jean-Louis COMBES (Centre d'Etudes et de Recherches sur le Développement International); Christian EBEKE
    Abstract: This paper analyzes the impact of remittances on household consumption instability in developing countries on a large panel of developing countries. The four main results are the following: Firstly, remittances significantly reduce household consumption instability. Secondly, the insurance role played by remittances is highlighted: remittances dampen the effect of various sources of consumption instability in developing countries (natural disasters, agricultural shocks, discretionary fiscal policy). Thirdly, the insurance role played by remittances is more important in less financially developed countries. Fourthly, the overall stabilizing effect of remittances is mitigated when remittances over GDP exceed 8.5%.
    Keywords: Remittances, consumption instability, Financial Development, shocks, threshold effects
    JEL: F29 F22 F02 D64 D02
    Date: 2010

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