nep-dev New Economics Papers
on Development
Issue of 2010‒06‒04
nineteen papers chosen by
Mark Lee
Towson University

  1. Mothers’ Employment and their Children’s Schooling: a Joint Multilevel Analysis for India By F. Francavilla; Gianna Claudia Giannelli; Leonardo Grilli
  2. The state and scope of the economic history of developing regions By Stefan Schirmer; Latika Chaudhary; Metin Coşgel; Jean-Luc Demonsant; Johan Fourie; Ewout Frankema; Giampaolo Garzarelli; John Luiz; Martine Mariotti; Grietjie Verhoef; Se Yan
  3. Child Care Provision: Semiparametric Evidence from a Randomized Experiment in Mexico By Dubois, Pierre; Rubio-Codina, Marta
  4. Urban governance and finance in India. By Rao, M. Govinda; Bird, Richard M.
  5. Catastrophic Natural Disasters and Economic Growth By Eduardo Cavallo; Sebastian Galiani; Ilan Noy; Juan Pantano
  6. Microeconomic Approaches to Development: Schooling, Learning, and Growth By Rosenzweig, Mark R.
  7. Trade, Tastes and Nutrition in India By Atkin, David
  8. Structural Change in Transition Economies: Does Foreign Aid Matter? By Fardmanesh, Mohsen; Tan, Li
  9. Microeconomics of Technology Adoption By Foster, Andrew D.; Rosenzweig, Mark R.
  10. How Far Have Public Financial Management Reforms Come in Africa? By Andrews, Matt
  11. Female Employment and Fertility in Rural China By Fang, Hai; Eggleston, Karen N.; Rizzo, John A.; Zeckhauser, Richard
  12. Endogenous Skill Acquisition and Export Manufacturing in Mexico By David Atkin
  13. Civil Conflict and Human Capital Accumulation: The Long Term Effects of Political Violence in Perú By Gianmarco Leon
  14. Sex Selective Abortions, Fertility and Birth Spacing By Claus C Pörtner
  15. Prospects for Regional Cooperation between Latin America and the Caribbean Region and the Asia and Pacific Region: Perspective from East Asia By Medalla, Erlinda M.; Balboa , Jenny D.
  16. Optimal Farm Size under an Uncertain Land Market: the Case of Kyrgyz Republic By Sara Savastano; Pasquale Lucio Scandizzo
  17. The African Financial Development Gap By Franklin Allen; Elena Carletti; Robert Cull; Jun "QJ" Qian; Lemma Senbet
  18. Cash Crop Choice and Income Dynamics in Rural Areas: Evidence for Post-Crisis Indonesia By Stephan Klasen; Jan Priebe; Robert Rudolf
  19. How Do Chinese Industries Benefit from FDI Spillovers? By ITO Banri; YASHIRO Naomitsu; XU Zhaoyuan; CHEN Xiaohong; WAKASUGI Ryuhei

  1. By: F. Francavilla (Policy Studies Institute at University of Westminster.); Gianna Claudia Giannelli (Università degli Studi di Firenze, Dipartimento di Scienze Economiche); Leonardo Grilli (Università degli Studi di Firenze, Dipartimento di Statistica.)
    Abstract: This paper studies the relation between mothers’ employment and their children’s schooling in India, where a high number of children are not attending school at compulsory school age. Using the second National Family Health Survey, the results of a joint multi-level random effects model show that, controlling for covariates, the correlation between mothers’ employment and children’s schooling is negative. A sensitivity analysis on wealth and education deciles shows that this relation disappears in urban areas and becomes weaker in rural areas only at the top wealth deciles, but persists for the more educated mothers. The last result may be driven by the low number of females with a high level of education in India, but it also seems to envisage that, for mothers with lower education, being literate does not increase pay conditions. These findings suggest that policies aiming at improving both women’s and children’s welfare should not only pursue higher levels of education, but also target improvements in women’s conditions in the labour market.
    Keywords: women’s employment, children’s schooling, household allocation of time, random effects, India, NFHS-2
    JEL: J13 J22 O15 O18
    Date: 2010
  2. By: Stefan Schirmer (University of the Witwatersrand, South Africa); Latika Chaudhary (Scripps College, USA); Metin Coşgel (University of Connecticut, USA); Jean-Luc Demonsant (University Of Guanajuato, Mexico); Johan Fourie (Department of Economics, University of Stellenbosch); Ewout Frankema (Utrecht University, The Netherlands); Giampaolo Garzarelli (University of the Witwatersrand, South Africa); John Luiz (University of the Witwatersrand Business School, South Africa); Martine Mariotti (Australian National University, Australia); Grietjie Verhoef (University of Johannesburg, South Africa); Se Yan (Peking University, China)
    Abstract: This paper examines the state and scope of the study of economic history of developing regions, underlining the importance of knowledge of history for economic development. While the quality of the existing research on developing countries is impressive, the proportion of published research focusing on these regions is low. The dominance of economic history research on the North American and Western European success stories suggests we need a forum for future research that contributes to our understanding of how institutions, path dependency, technological change and evolutionary processes shape economic growth in the developing parts of the world. Many valuable data sets and historical episodes relating to developing regions remain unexplored, and many interesting questions unanswered. This is exciting. Economic historians and other academics interested in the economic past have an opportunity to work to begin to unlock the complex reasons for differences in development, the factors behind economic disasters and the dynamics driving emerging success stories.
    Keywords: Africa, China, Cliometrics, developing countries, development, India, institutions, Latin America, Middle East, new economic history
    JEL: N01
    Date: 2010
  3. By: Dubois, Pierre; Rubio-Codina, Marta
    Date: 2010–04
  4. By: Rao, M. Govinda (National Institute of Public Finance and Policy); Bird, Richard M. (Emeritus of Economics, University of Toronto, Toronto, Canada)
    Abstract: Over 330 million people live in India's cities; 35 cities have a population of over a million and three (Mumbai, Delhi, and Kolkata) of the 10 largest metropolises in the world are in India. India's cities are large, economically important, and growing. However, neither urban infrastructure nor the level of urban public services is adequate for current needs, let alone to meet growing demands. Dealing with this problem is a formidable challenge. Not only must adequate finance for the provision of services be found but it is critical to ensure that the money spent results in desired outputs and outcomes. To do so, local governance structures also need to be reformed and strengthened. This paper attempts to point the way towards some possible solutions by analysing urban governance and finance in India in the context of lessons drawn from fiscal federalism theory and experiences of governance institutions and financing systems both in India and around the world. No one system of urban governance is likely to work equally well for all urban local bodies. However, the paper identifies some key reforms required to realise both the constitutional intent to encourage citizen participation in urban governance and the economic and politically desirable goal of ensuring greater accountability of urban governments. For example, the paper draws attention to existing ambiguities in the assignment system and underlines the need to undertake activity mapping to ensure clarity as well as to make independent agencies significantly accountable to elected governments in urban areas. The paper also discusses a variety of ways of augmenting the resources of the municipal bodies in the country including essential reforms in the property tax system and adequate exploitation of user charges and fees for various services delivered as well as ways of strengthening and improving Central and State transfers to urban local governments. With respect to financing urban infrastructure, development charges should be used more effectively. More should also be done to utilise public lands more effectively. In addition, to a considerable extent capital expenditure requirements will have to be financed through borrowing so further development of the municipal bond market is important, as is more and more effective use of public private partnerships in some areas.
    Keywords: India, Urban public finance, Urban governance, Intergovernmental fiscal relations, Property tax, Metropolitan areas, Infrastructure finance
    JEL: R51 H70
    Date: 2010–03
  5. By: Eduardo Cavallo (Inter-American Development Bank, Research Department); Sebastian Galiani (Washington University in St. Louis); Ilan Noy (University of Hawaii, Department of Economics); Juan Pantano (Washington University in St. Louis)
    Abstract: We examine the short and long run average causal impact of catastrophic natural disasters on economic growth by combining information from comparative case studies. We assess the counterfactual of the cases studied by constructing synthetic control groups taking advantage of the fact that the timing of large sudden natural disasters is an exogenous event. We ?find that only extremely large disasters have a negative effect on output both in the short and long run. However, we also show that this result from two events where radical political revolutions followed the natural disasters. Once we control for these political changes, even extremely large disasters do not display any signi?cant effect on economic growth. We also fi?nd that smaller, but still very large natural disasters, have no discernible effect on output in the short run or in the long run.
    Keywords: Natural Disasters, Political Change, Economic Growth and Causal Effects.
    JEL: O40 O47
    Date: 2010–04–28
  6. By: Rosenzweig, Mark R. (Yale University)
    Abstract: I illustrate the variety of approaches to development issues microeconomists employ, focusing on studies that illuminate and quantify the major mechanisms posited by growth theorists who highlight the role of education in fostering growth. I begin with a basic issue: what are the returns to schooling? I discuss microeconomic studies that estimate schooling returns using alternative approaches to estimating wage equations, which require assumptions that are unlikely to be met in low-income countries, looking at inferences based on how education interacts with policy and technological changes in the labor and marriage markets. I then review research addressing whether schooling facilitates learning, or merely imparts knowledge, and whether there is social learning that gives rise to educational externalities. I next examine studies quantifying the responsiveness of educational investments to changes in schooling returns and assess whether and where there exist important barriers to such investments when returns justify their increase.
    JEL: J24 O11 O15 O33
    Date: 2010–03
  7. By: Atkin, David (Yale University)
    Abstract: This paper introduces habit formation into an otherwise standard model of international trade. Household tastes evolve over time to favor foods consumed as a child. The opening of trade causes preferred goods to rise in price, as these were relatively inexpensive in autarky. Neglecting the correlation between tastes and agro-climatic endowments overstates the short-run nutritional gains from agricultural trade liberalization and masks potential caloric losses for laborers. I examine the predictions of this model of trade with habit formation using household survey data from India, both by looking across Indian regions and by examining the consumption patterns of inter-state migrants.
    JEL: F10 O10 O12 Q17
    Date: 2010–03
  8. By: Fardmanesh, Mohsen (Temple University); Tan, Li (American International Group, New York, NY)
    Abstract: This paper addresses whether the initial declines in the manufacturing and real wages in transition economies were anything unexpected to justify policy reversal, and whether the "often-recommended" foreign aid would have helped them curb these declines in any significant way. It answers these questions with the help of a two-sector three-factor small open economy model and simulation exercises. It concludes that, given the relative price distortions and the market disequilibria that transition economies inherited from their planning era, the initial declines in their manufacturing and real wages are to be mostly expected. Foreign aid, whose impact is noticeable only when it is in excess of 5% of GDP, does not curb the decline in their real wages in any measurable way and exacerbates the decline in their manufacturing by a few percent.
    JEL: R20
    Date: 2009–12
  9. By: Foster, Andrew D. (Brown University); Rosenzweig, Mark R. (Yale University)
    Abstract: There is an emerging consensus among macro-economists that differences in technology across countries account for the major differences in per-capita GDP and the wages of workers with similar skills across countries. Accounting for differences in technology levels across countries thus can go a long way towards understanding global inequality. One mechanism by which poorer countries can catch up with richer countries is through technological diffusion, the adoption by low-income countries of the advanced technologies produced in high-income countries. In this survey, we examine recent micro studies that focus on understanding the adoption process. If technological diffusion is a major channel by which poor countries can develop, it must be the case that technology adoption is incomplete or the inputs associated with the technologies are under-utilized in poor, or slow-growing economies. Thus, obtaining a better understanding of the constraints on adoption is useful in understanding a major component of growth.
    JEL: O10 O13 O33
    Date: 2010–01
  10. By: Andrews, Matt (Harvard University)
    Abstract: This paper asks how strong African Public Financial Management (PFM) has become, after a decade and more of reform. How well do African PFM systems in place now facilitate effective public financial management? Where are the next challenges and how can they be met? It analyzes recent PFM assessments in 31 governments to answer these questions, identifying patterns of strengths and weaknesses across the PFM system and across countries. In respect of the former, the study finds that budgets are made better than they are executed, practice lags behind the creation of processes and laws, and processes are stronger where concentrated actors are engaged. In respect of the latter, the study finds that different countries fall into different 'PFM performance leagues' and countries in the different leagues look very different to each other. A range of factors influence which league a country is associated with; including economic growth, stability, reform tenure and colonial heritage. On the basis of this evidence, the paper argues that existing reforms face limits that can only be overcome with adjustments in reform approach; with less focus on pushing reform technicalities and more on creating 'space' in which reform takes place, less concentration of engagements with small sets of actors and more on expanding engagements, and less emphasis on reproducing the same reform models and more on better understanding what context-appropriate reforms look like.
    Date: 2010–05
  11. By: Fang, Hai (U CO, Denver); Eggleston, Karen N. (Walter H Shorenstein Asia-Pacific Research Center, Stanford U); Rizzo, John A. (Stony Brook U, SUNY); Zeckhauser, Richard (Harvard U)
    Abstract: Data on 2,288 married women from the 2006 China Health and Nutrition Survey are deployed to study how off-farm female employment affects fertility. Such employment reduces a married woman's actual number of children by 0.64, her preferred number by 0.48, and her probability of having more than one child by 54.8 percent. Causality flows in both directions; hence, we use well validated instrumental variables to estimate employment status. China has deep concerns with both female employment and population size. Moreover, female employment is growing quickly. Hence, its implications for fertility must be understood. Ramifications for China's one-child policy are discussed.
    JEL: J13 J18 O15
    Date: 2010–03
  12. By: David Atkin
    Abstract: This paper confi…rms that for Mexico over the period 1986-2000, the export sector pays higher wages than other sectors, but school drop out increases with the arrival of new export jobs. The workers induced to enter export manufacturing eventually earn less than they would have earned had the jobs never appeared and they stayed in school.
    Keywords: higher wages, literature, export, manufacturing fi…rms, jobs, new, o¤ering plenty, skill workers,
    Date: 2010
  13. By: Gianmarco Leon
    Abstract: This paper provides empirical evidence of the long- and short-term effects of political violence exposure on human capital accumulation. Using a novel data set that registers all the violent acts and fatalities during the Peruvian civil conflict, Leon exploit the variation in war location and birth cohorts of children to identify the effect of the civil war on educational attainment. The results show that, conditional on being exposed to violence, the average person accumulates about 0.21 less years of education as an adult. In the short-term, the effects are stronger than in the long run. Further, children are able to catch-up if they experience violence once they have already started their schooling cycle, while if they are affected earlier in life the effect persists in the long run. He explore the potential causal mechanisms, finding that supply shocks delay entrance to school but don't cause lower educational achievement in the long-run. On the demand side, suggestive evidence shows that the effect on mother's health status and the subsequent effect on child health is what drives the long-run results. [Working Paper No. 245]
    Keywords: children, schooling cycle, life, mother's health, child, demand human capital, war location, birth, Civil Conflict, Education, Persistence, Economic shocks, Perú, violence, education, adult, human capital accumulation
    Date: 2010
  14. By: Claus C Pörtner (University of Washington)
    Abstract: This paper presents a novel approach to estimating the determinants of sex selective abortions, using individual level data on fertility, birth spacing and birth outcomes. The decisions on fertility, abortions and birth spacing are closely related but have received little empirical attention. Theory predicts that lower fertility leads to more sex selective abortions, but abortions also increase the space between births and the decision to use sex selection may change with the distance from last birth. Using data from three rounds of the Indian National Family and Health Survey, low fertility women are shown to use sex selective abortions, while households with low cost of children do not. Despite legal efforts to curtail sex selective abortions, use is increasing over time. For women with eight or more years of education, the number of sex selective abortions expected during their childbearing has gone up by six percent from 1985-1994 to 1995-2006 for both urban and rural women. At the same time their predicted fertility has fallen to below replacement level for urban women and only slightly above for rural women. Finally, ignoring birth spacing leads to bias when censoring is important.
    Date: 2010–05
  15. By: Medalla, Erlinda M. (Asian Development Bank Institute); Balboa , Jenny D. (Asian Development Bank Institute)
    Abstract: The Asia and Pacific region and Latin American and Caribbean region are two regions divided not only by vast geographic distance, but also by disparities in economics, politics, culture, and history. Most recently, a number of forums explored the possibility of closing such gaps and linking the two regions through various trade and investment initiatives. The opportunities for cooperation abound and could touch on areas that will improve the regional value chain and enhance the innovation and competitiveness of both regions. Interregional cooperation could also help the two regions seek ways to deal with the current global economic crisis through a range of opportunities to stimulate the economy. This paper explores the potential for regional cooperation between the Asia and Pacific region and Latin America and the Caribbean. It also provides some recommendations to enhance the economic partnership of the two regions.
    Keywords: interregional economic cooperation; asia pacific; latin america caribbean
    JEL: F13 F15 F59
    Date: 2010–05–25
  16. By: Sara Savastano (Faculty of Economics, University of Rome "Tor Vergata"); Pasquale Lucio Scandizzo (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: The paper illustrates a theoretical model of real option value applied to the problem of land development. Making use of the 1998-2001 Kyrgyz Household Budget Survey, we show that when the hypothesis of decreasing return to scale holds, the relation between the threshold value of revenue per hectare and the amount of land cultivated is positive. In addition to that, the relation between the threshold and the amount of land owned is positive in the case of continuous supply of land and negative when there is discontinuous supply of land. The direct consequence is that, in the first case, smaller farms will be more willing to rent land and exercise the option where, in the second case, larger farms will exercise first. The results corroborate the findings of the theoretical model and suggest three main conclusions: (i) the combination of uncertainty and irreversibility is a significant factor in the land development decisions, (ii) farmers’ behaviour is consistent with the continuous profit maximization model, (iii) farming unit revenue tends to be positively related to farm size, once uncertainty is properly accounted for.
    Keywords: Option value theory, Farm size, Uncertainty, irreversibility.
    JEL: O13 Q12 Q15 Q18
    Date: 2010–05–28
  17. By: Franklin Allen; Elena Carletti; Robert Cull; Jun "QJ" Qian; Lemma Senbet
    Abstract: Economic growth in Africa has long been disappointing. We document that the financial sectors of most sub-Saharan African countries remain significantly underdeveloped by the standards of other developing countries. We examine the factors that are associated with financial development in Africa and compare them with those in other developing countries. Population density appears to be considerably more important for banking sector development in Africa than elsewhere. Given the high costs of developing viable banking sectors outside metropolitan areas, technology advances, such as mobile banking, could be a promising way to facilitate African financial development. Similarly to other developing countries, natural resources endowment is associated with a lower level of financial development in Africa, but macro policies do not appear to be an important determinant.
    Keywords: Africa, finance and growth, banks, institutions, population density
    JEL: O5 K0 G0
    Date: 2010
  18. By: Stephan Klasen (Georg-August-University Göttingen); Jan Priebe (Georg-August-University Göttingen); Robert Rudolf (Georg-August-University Göttingen)
    Abstract: In this paper we investigate the factors affecting income levels, income growth, and poverty reduction in rural Indonesia following the crisis of 1997/98. We particu- larly investigate the relative roles of non-farm incomes, productivity improvements achieved via changes in crops versus improvements on the same crops, and demographic changes induced by the crisis on income dynamics in rural Indonesia. Using a unique household panel data set for Central Sulawesi that allows us to control for a large set of household and geographical characteristics, household fixed effects as well as endogeneity issues, we find that falling household size and the adoption and intensification of new cash crop varieties can explain a substantial part of the observed post-crisis developments. Moreover, we compare our results to cross-sectional data from SUSENAS, Indonesia\'s large scale national household survey. While the overall determinants of rural incomes are very similar across both data sets, we find that the importance of agricultural self-employed income seems to be higher in Central Sulawesi than in most other parts of Indonesia. Although several factors could explain these differences, lessons from our Central Sulawesi data suggests that unexploited potentials in the production of cash crops in other areas of Indonesia might contribute to these findings.
    Keywords: Crop choice; Income diversification; non-farm sector; rural development; Indonesia
    JEL: I31 Q12 Q15 R13
    Date: 2010–05–26
  19. By: ITO Banri; YASHIRO Naomitsu; XU Zhaoyuan; CHEN Xiaohong; WAKASUGI Ryuhei
    Abstract: Recently, Foreign Invested Enterprises (FIEs) in China have increased their investment in not only production activity but also R&D activity. This paper examines the impact of spillovers from their activities on two types of innovations by Chinese domestic firms: Total Factor Productivity (TFP) and invention patent application, using comprehensive industry and province-level data. We evaluate such spillovers according to FIEs' ownership structure, the origin of foreign funds, and the type of their activity: R&D, and production. We find an interesting asymmetry between spillovers to TFP and patent application; however, although we do not find significant intra-industry spillovers from FIEs, which is in line with previous studies, we find robust inter-industries spillover on TFP. We also find substantial intra-industry spillovers promoting invention patent application but no evidence of inter-industries spillovers. Furthermore, whereas spillovers from FIEs to Chinese firmsf TFP stem from their production activities, the source of spillovers to invention patent application is mostly through their R&D activity. Our findings indicate a need for multi-dimensional evaluation on the role of FDI in developing countries.
    Date: 2010–05

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