nep-dev New Economics Papers
on Development
Issue of 2010‒06‒18
sixteen papers chosen by
Mark Lee
Towson University

  1. Violent Conflict and Inequality By Cagatay Bircan; Tilman Brück; Marc Vothknecht
  2. Moving in – Selling Out: the outcomes of slum rehabilitation in Mumbai By Paula Restrepo Cadavid
  3. Microfinance and development finance in India: research implications By James Copestake
  4. Migration, Self-Selection, and Income Distributions: Evidence from Rural and Urban China By Xing, Chunbing
  5. Mother or Motherland: Can a Government Have an Impact on Educational Attainment of the Population? Preliminary Evidence from India By Bhaumik, Sumon K.; Chakrabarty, Manisha
  6. The African Credit Trap By Svetlana Andrianova; Badi Baltagi; Panicos Demetriades; David Fielding
  7. “Early Warning Indicators for Latin America” By Fernando Tenjo; Martha López
  8. New Developments in Education Demand: International Empirical Evidences By Carlos Giovanni González Espitia
  9. Trade And Inequality With Limited Labor Mobility: Theory And Evidence From China By Muqun Li; Ian Coxhead
  10. Factors that predispose youth to risk in Mexico and Chile By Cunningham, Wendy; Bagby, Emilie
  11. Are health shocks different ? evidence from a multi-shock survey in Laos By Wagstaff, Adam; Lindelow, Magnus
  12. The growth report and new structural economics By Lin, Justin Yifu; Monga, Celestin
  13. Economic Reform and Openness in China: China's Development Policies in the Last 30 Years By Tisdell, Clem
  14. Industrial Policies in Colombia By Marcela Melendez; Guillermo Perry
  15. Market concentration measures and investment decisions in Mexican manufacturing firms. By Lopez-Mateo, Celina; Ruiz-Porras, Antonio
  16. Does land abundance explain African institutions? By Fenske, James

  1. By: Cagatay Bircan; Tilman Brück; Marc Vothknecht
    Abstract: This paper analyzes the distributive impacts of violent conflicts, which is in contrast to previous literature that has focused on the other direction. We use cross-country panel data for the time period 1960-2005 to estimate war-related changes in income inequality. Our results indicate rising levels of inequality during war and especially in the early period of post-war reconstruction. However, we find that this rise in income inequality is not permanent. While inequality peaks around five years after the end of a conflict, it declines again to pre-war levels within the end of the first post-war period. Lagged effects of conflict and only subsequent adjustments of redistributive policies in the period of post-war reconstruction seem to be valid explanations for these patterns of inequality. A series of alternative specifications confirms the main findings of the analysis.
    Keywords: Conflict, Inequality, Reconstruction, Income Distribution
    JEL: O11 O15
    Date: 2010
  2. By: Paula Restrepo Cadavid (CERNA - Centre d'économie industrielle - Mines ParisTech)
    Abstract: Slums have been present in developing cities landscapes for quite some time. And while central and local governments continue their quest for making their cities slum-free, the overall outcome of slum policies is in most cases unknown or unclear. Some studies have revealed that slum policies might have unexpected benefits such as the improvement of children's health or household's access to credit. Yet, others have pointed unforeseen side-effects such as poverty recycling: where poor slum dwellers aren't able to maintain new living conditions and sell/rent their dwelling moving back to the slum. This paper focuses on the effects of slum rehabilitation on residential mobility in order to test the myth of poverty recycling. In order to do so, an exhaustive household survey was carried out in the city of Mumbai, comprising 510 households in 4 rehabilitated sites and 5 to-be-rehabilitated sites. Results show that the magnitude of poverty recycling is small and that in most cases slum rehabilitation actually serves as a platform to attain better living conditions both for those who left as for newcomers.
    Date: 2010
  3. By: James Copestake
    Abstract: This paper appraises options for research relating to microfinance in India, doing so in the broad context of rival macro pressures to accelerate economic growth, maintain political order, reduce poverty and adapt to climate change. This paper first set out a general well-being regime framework that can be used for this analysis and sketch the role microfinance plays within it. Section 2 uses it to inform a brief historical discussion of the evolution of microfinance in India. Section 3 develops the analysis further by considering possible effects of three external drivers of change: rising political aspirations; climate change and food insecurity; and new information and communication technology (ICT). Section 4 uses these examples to discuss methodological options for policy-relevant empirical research. It also suggests that microfinance is an important arena for exploring empirically the tension inherent in the idea of development management. The term microfinance is widely used to refer to institutions governing savings, credit, insurance and monetary payments by relatively poor people, including those regulated by both official laws and informal norms. Analysis of microfinance is widely framed as a purely micro issue, centered on the motivation and behavior of specific users and providers. However, such analysis is almost invariably located - whether explicitly or implicitly - in a wider view of how the state, markets and society institute poverty. In India as elsewhere, for example, private microfinance organizations is viewed positively as a force for promoting financial inclusion by “making markets work for the poor”; and at the same time viewed negatively as a smokescreen behind which the state can retreat from a ‘social banking’ strategy of mobilizing much larger resources to challenge pervasive and chronic indebtedness. Following Brett (2009) this paper regards such seemingly polarized views as jointly contributing also to an intermediate “pluralist liberal orthodoxy” struggling to identify the least worst combination of state, market and civic mechanisms for addressing poverty and oppression in countries where their potential to do so is deeply compromised by capacity constraints and vested interests. Microfinance – along with all potential instruments of development – needs to be appraised against country-specific historical realities. Evaluating it instead in relation to a universal view of its role in some idealized market or state-led view of development can be viewed either as a naïve and idle distraction, or as irresponsible and self-serving.
    Date: 2010–02
  4. By: Xing, Chunbing (Beijing Normal University)
    Abstract: As massive rural residents leave their home countryside for better employment, migration has profound effects on income distributions such as rural-urban income gap and inequalities within rural or urban areas. The nature of the effects depends crucially on who are migrating and their migrating patterns. In this paper, we emphasize two facts. First, rural residents are not homogeneous, they self-select to migrate or not. Second, there are significant differences between migrants who successfully transformed their hukou status (permanent migrants) and those did not (temporary migrants). Using three coordinated CHIP data sets in 2002, we find that permanent migrants are positively selected from rural population especially in terms of education. As permanent migration takes more mass from the upper half of rural income density, both rural income level and inequalities decrease, the urban-rural income ratio increases at the same time. On the contrary, the selection effect of temporary migrants is almost negligible. It does not have obvious effect on rural income level and inequalities.
    Keywords: migration, self-selection, income distribution, China
    JEL: O15
    Date: 2010–05
  5. By: Bhaumik, Sumon K. (Aston University); Chakrabarty, Manisha (Indian Institute of Management)
    Abstract: In this paper, using data from the 61st round of the (Indian) National Sample Survey, we examine the relative impacts of personal-household and state-level characteristics (including government policy) on the likelihood of transition from one educational level to the next. Our analysis suggests that the most important factors driving these transition likelihoods are personal and household characteristics like gender and education of household heads. However, state-level characteristics and government policies have a significant impact on these transition likelihoods as well, especially for transitions from the lowest levels of education to somewhat higher levels. The odds of making the transition to higher education, especially tertiary education, are systematically lower for women than for men, for individuals in rural areas than those in urban areas, and for Muslims than for Hindus. An important conclusion of our analysis is that there is significant scope for government policy to address educational gaps between various demographic and other groups in the country.
    Keywords: educational attainment, likelihood of transition, government policy
    JEL: I21 I28
    Date: 2010–05
  6. By: Svetlana Andrianova; Badi Baltagi; Panicos Demetriades; David Fielding
    Abstract: We put forward a plausible explanation of African financial underdevelopment in the form of a bad credit market equilibrium. Utilising an appropriately modified IO model of banking, we show that the root of the problem could be unchecked moral hazard (strategic loan defaults) or adverse selection (a lack of good projects). We provide empirical evidence from a large panel of African banks which suggests that loan defaults are a major factor inhibiting bank lending when the quality of regulation is poor. We also find that once a threshold level of regulatory quality has been reached, improvements in the default rate or regulatory quality do not matter, providing support for our theoretical predictions.
    Keywords: Dynamic panel data; African financial under-development; African credit markets
    JEL: G21 O16
    Date: 2010–05
  7. By: Fernando Tenjo; Martha López
    Abstract: We explore the performance of a set of early warning indicators for a group of Latin American economies under the endogenous cycle perspective. For this group of countries, the paper confirms the results of work on industrialized countries that a combination of asset prices and credit provides valuable information of probable future financial crises. However, we go a step further in the analysis of emerging economies and find that a combination of capital flows from abroad and credit is an even superior leading indicator of such events.
    Date: 2010–06–08
  8. By: Carlos Giovanni González Espitia
    Abstract: This paper reviews the main economic theories and international empirical applications that analyze demand for education. The document begins with a review of the theoretical background since the appearance of human capital theory proposed by Becker (1964), which made way to the emergence of the Economics of Education in the mid-twentieth century. The other theories that are reviewed have emerged around the proposed by Gary Becker and from them we can mention: the consumption model originally developed by Schaafsma (1976) and Lazear (1977), the current credentialist defended by authors such as Arrow (1973) and Spence (1973), institutionalist theory developed by Doering and Piore (1971) and Thurrow (1975), radical theories written by Bowles and Gintis (1975), the topic of the capabilities proposed by Sen (1999) and modern eclectic vision by Blaug (1976), Moreno (1998) and San Segundo (2001). The review of empirical applications focuses on models that analyze characteristics that influence the demand for post-compulsory education, because it is this demand for education where the person or his family have choice. Some of the characteristics that determine the demand for education are those of the individual, social background factors, the socioeconomic environment, skills and institutional environment, among others. Finally, the methodology commonly used for this kind of empirical studies is the Microeconometrics, especially discrete choice models estimated by the Maximum-Likelihood method.
    Date: 2010–06–12
  9. By: Muqun Li; Ian Coxhead
    Abstract: Does globalization increase inequality in developing countries, and ifso, how? In a theoretical model of a regionally heterogeneous economy, we show how different regional rates of technical progress due to trade and FDI interact with constraints to unskilled labor mobility. As favored regions benefit more from trade, their growing demand for skills drains skilled workers from disadvantaged areas, and average incomes in the former grow faster than in the latter. Moreover, this unbalanced regional growth may also raise inequality within each region. It could even reduce absolute income per capita in the less favored region. We test these predictions with Chinese data from the Open Door era. Results confirm that different regional growth rates have increased both interregional andintraregional inequality. Moreover, growth of skills-based export industries in coastal regions is associated, other things equal, with lower incomes for the poor in inland provinces.
    Date: 2010–06
  10. By: Cunningham, Wendy; Bagby, Emilie
    Abstract: About half of Latin America’s youth are considered"at risk,"meaning that they engage in or are at risk of engaging in risky behaviors that are detrimental to their own development and to the well-being of their societies. While child psychologists identify many factors that may cause some youth to engage in at-risk behaviors and others not to, only empirical evidence can identify the set that is relevant to a particular population. This paper uses youth surveys from Chile and Mexico to test which of a large set of potential factors are correlated with a range of risky behaviors among youth. These factors range from relationships with parents and institutions to household behaviors (abuse, discipline techniques) to social exclusion. The authors use stepwise regressions to sort out which variables best explain the observed variance in seven different risky behaviors. They find that higher socioeconomic status, a good relationship with parents and peers, strong connection with local governmental institutions and schools, urban residence, younger age, and spirituality emerge as key explanatory factors for all seven behaviors for boys and girls in both countries. This points to a wider range of policy entry points than currently used, including targeting parents and the relationship with schools.
    Keywords: Adolescent Health,Youth and Governance,Population Policies,Health Monitoring&Evaluation,Gender and Health
    Date: 2010–06–01
  11. By: Wagstaff, Adam; Lindelow, Magnus
    Abstract: In Laos health shocks are more common than most other shocks and more concentrated among the poor. They tend to be more idiosyncratic than non-health shocks, and are more costly, partly because they lead to high medical expenses, but also because they lead to income losses that are sizeable compared with the income losses associated with non-health shocks. Health shocks also stand out from other shocks in the number of coping strategies they trigger: they are more likely than non-health shocks to trigger assistance from a nongovernmental organization and other households, dis-saving, borrowing, asset sales, an early harvest, the pawning of possessions, and the delaying of plans; by contrast, they are less likely to trigger assistance from government. Consumption regressions point to only limited evidence of households not being able to smooth consumption in the face of any shock. However, these results contrast with households'own assessments of the welfare impacts of shocks. The majority said they had to cut back consumption following a shock and that shocks considerably affected their welfare. Only health shocks are worse than a drought in terms of the likelihood of a family being forced to cut back consumption and in terms of the shock affecting a family's well-being"a lot."The poor are especially disadvantaged in terms of the greater damage that health shocks inflict on household well-being. Health shocks stand out too in leading to a loss of human capital: household members experiencing a health shock did not recover their former subjective health following the health shock, losing, on average, 0.6 points on a 5-point scale. The wealthier and better educated are better able to limit the health impacts of a health shock; the data are consistent with this being due to their greater proximity to a health facility.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Housing&Human Habitats,Rural Poverty Reduction,Economic Theory&Research
    Date: 2010–06–01
  12. By: Lin, Justin Yifu; Monga, Celestin
    Abstract: Despite its heavy human, financial, and economic cost, the recent global recession provides a unique opportunity to reflect on the knowledge from several decades of growth research, draw policy lessons from the experience of successful countries, and explore new approaches going forward. In an increasingly globalized world where fighting poverty is not only a moral responsibility but also a strategy for confronting some of the major problems (diseases, malnutrition, insecurity and violence) that ignore boundaries and contribute to global insecurity, thinking about new ways of generating and sustaining growth is a crucial task for economists. This paper reassesses the evolution of knowledge on growth and suggests a new structural approach to the analysis. It offers a brief, critical review of lessons learned from growth research and examines the remaining challenges -- especially from the policy standpoint. It highlights how the 2008 Growth Commission Report identifies the stylized facts associated with sustained and inclusive growth. And it explains how the new structural economics provides a consistent framework for understanding the key findings of the Report.
    Keywords: Economic Theory&Research,Achieving Shared Growth,Economic Growth,Political Economy,Inequality
    Date: 2010–06–01
  13. By: Tisdell, Clem
    Abstract: This article adopts the point of view that Chinaâs development policies can only be appreciated if they are considered by applying perspectives from institutional economics. This requires attention to be given to the historical, political and cultural context in which its economic development has occurred. Therefore, this article gives attention to the political events leading up to Chinaâs decision in 1978 to begin its economic reforms and the way in which Deng Xiaoping crafted its new development path. It also discusses the subsequent extension of Dengâs development policies by more recent leaders of the Chinese Communist Party. Indicators of Chinaâs economic progress (including its increasing economic openness) since 1978 are given, and its emerging economic issues and concerns are highlighted. The concept of âmarket socialism with Chinese characteristicsâ is analysed and consideration is given to the economic challenges now facing China as a result of the global economic recession and the way it is responding to these challenges. In conclusion, the article touches on Chinaâs economic and political future and its growing international status.
    Keywords: China, developmental states, economic development, economic reforms, institutional economics, market socialism, International Development, Political Economy, P00, P20, P26, P27, P30, O10, O20.,
    Date: 2009–06
  14. By: Marcela Melendez; Guillermo Perry
    Abstract: This paper surveys and analyzes industrial policies in Colombia, finding extensive use of productive development policies (PDPs) and despite claims of only moderate government intervention. Rarely explicitly associated with the need to address market failures, PDPs are instead associated with economic reactivation and vaguely defined “competitiveness.” There are also PDPs that address government failures considered unlikely to be corrected by first-best interventions. Colombia has made progress, however, in structuring an institutional setting for PDP design that is sufficiently linked with private sector groups to elicit information on constraints and opportunities that require government intervention. Nonetheless, the overall set of PDPs in place still lacks coherence and is not always guided by the policy requests of the private sector more widely defined.
    Keywords: Industrial policy, Productive development policy, Colombia
    JEL: L52 L66 L67 L86
    Date: 2010–06
  15. By: Lopez-Mateo, Celina; Ruiz-Porras, Antonio
    Abstract: We study how alternative measures of market concentration may explain investment decisions of Mexican manufacturing firms. The measures include the Herfindahl-Hirschman Index and the Dominance one. The first one is the traditional measure of market structure concentration. The Dominance Index is a competition measure used by Mexican regulators. The econometric assessments suggest that investment decisions of Mexican firms can be better explained by the Dominance Index measure than by the Herfindahl-Hirschman one. Thus our results suggest that the Mexican Dominance Index might be useful as a measure of market structure and competition. Such conclusion is based on several econometric assessments. In all cases we use certain characteristics of the firms (size, cash flows, investment opportunities and capital intensity) as control variables.
    Keywords: Investment; Dominance Index; Herfindahl-Hirschman Index; Manufacturing; Mexico
    JEL: L22 L40 L60
    Date: 2010–02–17
  16. By: Fenske, James
    Abstract: I show how abundant land and scarce labor shaped African institutions before colonial rule. I present a model in which exogenous land quality and endogenously evolving population determine the existence of land rights, slavery, and polygyny. I use cross-sectional data on pre-colonial African societies to demonstrate that, as in the model, the existence of land rights, slavery, and polygyny occurred where land was most suitable for agriculture, and where population density was greatest. These results are robust to alternative measures of institutions and historical population, and better fit the data than alternative theories of slavery.
    Keywords: Land tenure; slavery; polygyny; states; Africa
    JEL: N57 O10
    Date: 2010–06

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