nep-dev New Economics Papers
on Development
Issue of 2010‒08‒28
twenty papers chosen by
Mark Lee
Towson University

  1. Do remittances affect poverty and inequality? Evidence from Mali By Flore Gubert; Thomas Lassourd; Sandrine Mesplé-Somps
  2. Who Engages in Water Scarcity Conflicts? A Field Experiment with Irrigators in Semi-arid Africa By Els Lecoutere; Ben D’Exelle; Bjorn Van Campenhout
  3. A Distributional Analysis of the Public-Private Wage Differential in India By Azam, Mehtabul; Prakash, Nishith
  4. Does Culture Matter? By Fernández, Raquel
  5. The Economic Consequences of "Brain Drain" of the Best and Brightest: Microeconomic Evidence from Five Countries By Gibson, John; McKenzie, David
  6. The (Indispensable) Middle Class in Developing Countries; or, The Rich and the Rest, Not the Poor and the Rest By Nancy Birdsall
  7. The Roots of Global Wage Gaps: Evidence from Randomized Processing of U.S. Visas By Michael Clemens
  8. The U.S. Aid “Surge” to Pakistan: Repeating a Failed Experiment? By Nancy Birdsall and Molly Kinder
  9. Mobile Phones and Economic Development in Africa By Jenny Aker and Isaac M. Mbiti
  10. Are Borders Barriers? The Impact of International and Internal Ethnic Borders on Agricultural Markets in West Africa By Jenny C. Aker, Michael W. Klein, Stephen A. O’Connell and Muzhe Yang
  11. Leveraging World Bank Resources for the Poorest: IDA Blended Financing Facility Proposal - Working Paper 214 By Benjamin Leo
  12. How to Pay “Cash-on-Delivery” for HIV Infections Averted: Two Measurement Approaches and Ten Payout Functions By Timothy B. Hallett and Mead Over
  13. Is tolerance good or bad for growth? By Berggren, Niclas; Elinder, Mikael
  14. Distributional and Poverty Consequences of Globalization: A Dynamic Comparative Analysis for Developing Countries By Muhammad Tariq Majeed; Ronald MacDonald
  15. "As You Sow So Shall You Reap: From Capabilities to Opportunities" By Jesus Felipe; Utsav Kumar; Arnelyn Abdon
  16. The Dynamics and Status of India’s Economic Reforms By Singh, Nirvikar
  17. The Welfare Impacts of Commodity Price Fluctuations: Evidence from Rural Ethiopia By Bellemare, Marc F.; Barrett, Christopher B.; Just, David R.
  18. Education Performance: Was It All Determined 100 Years Ago? Evidence From São Paulo, Brazil By de Carvalho Filho, Irineu; Colistete, Renato P.
  19. Trade Openness and Growth: An Analysis of Transmission Mechanism in Pakistan By Siddiqui, Aamir Hussain; Iqbal, Javed
  20. Poverty and Inequality in Standards of Living in Malawi: Does Religious Affiliation Matter? By Mussa, Richard

  1. By: Flore Gubert (IRD, UMR 225 DIAL, Université Paris Dauphine,Paris School of Economics); Thomas Lassourd (DIFID); Sandrine Mesplé-Somps (IRD, UMR 225 DIAL, Université Paris Dauphine)
    Abstract: Using a 2006 household survey in Mali, we compare current poverty rates and inequality levels with counterfactual ones in the absence of migration and remittances. With proper hypotheses on migrants and a selection model, we are able to impute a counterfactual income for households currently receiving remittances. We show that remittances reduce poverty rates by 5% to 11% and the Gini coefficient by about 5%. Households in the bottom quintiles are more dependent on remittances, which are less substitutable by additional workforce.________________________________ Cet article examine l’impact distributif des transferts des migrants au Mali, à partir de l’enquête sur les niveaux de vie ELIM 2006. Nous construisons différents scénarii contrefactuels qui corrigent du biais de sélection des ménages avec migrants. Nous montrons que les transferts des migrants internationaux réduisent la pauvreté de 5 à 11% au niveau national et l’indice de Gini d’environ 5%. Les niveaux de consommation des ménages appartenant aux quintiles les plus pauvres sont plus dépendants des transferts, ménages dont les revenus de substitution aux transferts restent faibles du fait de dotations en capital physique et humain insuffisants.
    Keywords: Remittances, Migration, Poverty, Inequality, Africa, Transferts, Migration, Pauvreté, Inégalité, Afrique.
    JEL: F24 O15 O55
    Date: 2010–07
  2. By: Els Lecoutere (Ghent University); Ben D’Exelle (University of East Anglia); Bjorn Van Campenhout (University of Antwerp)
    Abstract: Does water scarcity induce conflict? And who would engage in a water scarcity conflict? In this paper we look for evidence of the relation between water scarcity and conflictive behavior. With a framed field experiment conducted with smallholder irrigators from semi-arid Tanzania that replicates appropriation from an occasionally scarce common water flow we assess what type of water users is more inclined to react in conflictive way to scarcity. On average, water scarcity induces selfish appropriation behavior in the experiment which is regarded conflictive in the Tanzanian irrigator communities where strong noncompetition norms regulate irrigation water distribution. But not all react to water scarcity in the same way. Poor, marginalized, dissocialized irrigators with low human capital and with higher stakes are most likely to react with conflictive appropriation behavior to water scarcity. Viewed a political ecology perspective we conclude that circumstances in Tanzania are conducive to resource scarcity conflicts. Water scarcity and water values are increasing. Water governance institutions entail exclusionary elements. Moreover, a higher likelihood to react in a conflictive way to water scarcity coincides with real economic and political inequalities which could form a basis for mobilization for more violent ways of competing for scarce resources.
    Date: 2010
  3. By: Azam, Mehtabul (World Bank); Prakash, Nishith (Cornell University)
    Abstract: We investigate the public-private wage differential in India using nationally representative micro data. While the existing literature focuses on average wage differential, we study the differences in the wage distributions. The raw wage differential between public and private sector is positive across the entire distribution for both genders irrespective of area of residence. A quantile regression based decomposition analysis reveals that the differences in observed characteristics (covariate effect) account for only a small part of the wage differential at lower quantiles, but a larger part at higher quantiles. At the very top of the distribution, covariate effect account for a majority of the observed wage differential.
    Keywords: quantile regression, public-private wage differential, India
    JEL: J3 J45
    Date: 2010–08
  4. By: Fernández, Raquel (New York University)
    Abstract: This paper reviews the literature on culture and economics, focusing primarily on the epidemiological approach. The epidemiological approach studies the variation in outcomes across different immigrant groups residing in the same country. Immigrants presumably differ in their cultures but share a common institutional and economic environment. This allows one to separate the effect of culture from the original economic and institutional environment. This approach has been used to study a variety of issues, including female labor force participation, fertility, labor market regulation, redistribution, growth, and financial development among others.
    Keywords: culture, beliefs, preferences, norms
    JEL: O10 Z1 D01 D1
    Date: 2010–08
  5. By: Gibson, John (University of Waikato); McKenzie, David (World Bank)
    Abstract: Brain drain has long been a common concern for migrant-sending countries, particularly for small countries where high-skilled emigration rates are highest. However, while economic theory suggests a number of possible benefits, in addition to costs, from skilled emigration, the evidence base on many of these is very limited. Moreover, the lessons from case studies of benefits to China and India from skilled emigration may not be relevant to much smaller countries. This paper presents the results of innovative surveys which tracked academic high-achievers from five countries to wherever they moved in the world in order to directly measure at the micro level the channels through which high-skilled emigration affects the sending country. The results show that there are very high levels of emigration and of return migration among the very highly skilled; the income gains to the best and brightest from migrating are very large, and an order of magnitude or more greater than any other effect; there are large benefits from migration in terms of postgraduate education; most high-skilled migrants from poorer countries send remittances; but that involvement in trade and foreign direct investment is a rare occurrence. There is considerable knowledge flow from both current and return migrants about job and study opportunities abroad, but little net knowledge sharing from current migrants to home country governments or businesses. Finally, the fiscal costs vary considerably across countries, and depend on the extent to which governments rely on progressive income taxation.
    Keywords: brain drain, brain gain, highly skilled migration
    JEL: O15 F22 J61
    Date: 2010–08
  6. By: Nancy Birdsall
    Abstract: Inclusive growth is widely embraced as the central economic goal for developing countries, but the concept is not well defined in the development economics literature. Since the early 1990s, the focus has been primarily on pro-poor growth, with the “poor” being people living on less than $1 day, or in some regions $2 day. The idea of pro-poor growth emerged in the early 1990s as a counterpoint to a concern with growth alone (measured in per-capita income) and is generally defined as growth which benefits the poor as much or more than the rest of the population. Examples include conditional cash transfers, which target the poor while minimizing the fiscal burden on the public sector, and donors’ emphasizing primary over higher education as an assured way to benefit the poor while investing in long-term growth through increases in human capital. Yet these pro-poor, inclusive policies are not necessarily without tradeoffs in fostering long-run growth. In this paper I argue that the concept of inclusive growth should go beyond the traditional emphasis on the poor (and the rest) and take into account changes in the size and economic command of the group conventionally defined as neither poor nor rich, i.e., the middle class.
    Keywords: middle class, developing countries, growth, economics, development, poverty, human capital
    Date: 2010–03
  7. By: Michael Clemens
    Abstract: This study uses a unique natural experiment to test a simple model of international differences in workers’ wages and productivity. Large differences in wages across countries could arise from several sources. These include barriers to trade in outputs, differences in technology, differences in workers, or differences in the other factors of production accessible in different countries. To measure the relative importance of these sources in one setting, this study exploits the randomized processing of U.S. visas for a group of Indian workers who produce software within a single multinational firm. In this setting, international barriers to trade in outputs, barriers to technology transfer, and all observable or unobservable differences between workers are extremely low. The results indicate that location outside of India causes a sixfold increase in the wages of the same worker using the same technology to produce a highly tradable good. Under plausible assumptions about competition in the industry, this suggests that country-of-work by itself is responsible—in this industry—for roughly three-quarters of the gap in productivity between workers in India and workers in the richest countries. These findings have implications for open questions in labor, growth, international, and development economics.
    Keywords: growth, economic development, wealth of nations, productivity, migration, lottery, information technology, wage differences, poverty, income distribution, human capital, spatial differences, agglomeration, price equivalent, tariff equivalent, labor mobility, location, high tech, software, technology
    JEL: O15 F22 J61
    Date: 2010–06
  8. By: Nancy Birdsall and Molly Kinder
    Abstract: During the 1990s, the World Bank and several donor partners provided a “surge” in external aid to support Pakistan’s social sectors. Despite the millions of donor dollars spent, the program failed. Poverty was higher in Pakistan in 2004 than it was a decade earlier when the antipoverty program began. This working paper re-releases a CGD analysis of the World Bank’s program, which was prepared in 2005 by CGD researchers Nancy Birdsall, Milan Vaishnav, and Adeel Malik. The analysis reports the many problems donors faced while working with Pakistan’s government to improve health and education outcomes. A new preface by Nancy Birdsall and Molly Kinder identifies the key lessons from this massive donor experiment that are relevant today, as the United States and other donors prepare to increase their assistance to Pakistan to historic levels.
    Keywords: Pakistan, World Bank, aid, foreign assistance, growth, development, economics
    Date: 2010–03
  9. By: Jenny Aker and Isaac M. Mbiti
    Abstract: We examine the growth of mobile phone technology over the past decade and consider its potential impacts upon quality of life in low-income countries, with a particular focus on sub-Saharan Africa. We first provide an overview of the patterns and determinants of mobile phone coverage in sub-Saharan Africa before describing the characteristics of primary and secondary mobile phone adopters on the continent. We then discuss the channels through which mobile phone technology can impact development outcomes, both as a positive externality of the communication sector and as part of mobile phone-based development projects, and analyze existing evidence. While current research suggests that mobile phone coverage and adoption have had positive impacts on agricultural and labor market efficiency and welfare in certain countries, empirical evidence is still somewhat limited. In addition, mobile phone technology cannot serve as the “silver bullet” for development in sub-Saharan Africa. Careful impact evaluations of mobile phone development projects are required to better understand their impacts upon economic and social outcomes, and mobile phone technology must work in partnership with other public good provision and investment.
    Keywords: growth, economic development, poverty, income distribution, mobile phones, technology, sub-Saharan Africa
    Date: 2010–06
  10. By: Jenny C. Aker, Michael W. Klein, Stephen A. O’Connell and Muzhe Yang
    Abstract: This paper addresses two important economic issues for Africa: the contribution of national borders and ethnicity to market segmentation and integration between and within countries. Market pair regression analysis provides evidence of higher conditional price dispersion for both a grain and a cash crop between markets separated by the Niger-Nigeria border than between two markets located in the same country. A regressiondiscontinuity analysis also confirms a significant price change at the international border. The international border effect is lower, however, if the cross-border markets share a common ethnicity. Ethnicity is also linked to higher price dispersion within Niger; we find a significant intranational border effect between markets in different ethnic regions of the country. This suggests that ethnic similarities diminishing international border effects could enhance international market integration, and ethnic differences could contribute to intranational market segmentation in sub-Saharan Africa. We provide suggestive evidence that the primary mechanism behind the internal border effect is related to the role of ethnicity in facilitating access to credit in agricultural markets. We argue that the results are not driven by differences in price volatility or observables across borders.
    Keywords: Africa, border effects, agriculture, regression discontinuity design
    JEL: O1 Q1
    Date: 2010–04
  11. By: Benjamin Leo
    Abstract: With the Millennium Development Goals deadline only five years away, the international donor community faces significant challenges due to the global economic crisis, record government deficits, and simultaneous funding requests from nearly every multilateral development institution. This paper proposes a new World Bank financing model for creditworthy emerging economies, such as India and Vietnam, which currently receive billions of dollars in IDA assistance. In contrast to the current IDA-centric financing model, the IBRD would provide the same loan volumes to qualifying emerging economies while IDA would provide grant subsidies to buy down the concessionality level of these IBRD loans. As such, these countries would be held harmless both in terms of aid volumes and lending terms. By better leveraging the IBRD’s balance sheet for loan capital, IDA then could re-allocate what it otherwise would have provided to emerging economies. For the current IDA-15 replenishment period, this would mean up to $7.5 billion in additional assistance for the world’s poorest, most vulnerable countries. In relative terms, this would entail a 30 percent increase over existing levels. Of this, African countries would have received an additional $5.5 billion in IDA assistance. If donor governments find a way to scrape together increased contributions to IDA, then the allocation pie would grow by an even larger margin. The Inter-American Development Bank already successfully utilizes a similar approach for its lower middle-income and low-income country clients. It is time for World Bank shareholders to seriously consider the same resource-maximizing model. With the IDA-16 replenishment and IBRD general capital increase negotiations currently underway, they have an excellent window of opportunity to implement this win-win-win approach.
    Keywords: IDA, global finance, World Bank
    Date: 2010–06
  12. By: Timothy B. Hallett and Mead Over
    Abstract: In contrast to current donor policy, which funds a recipient country’s national AIDS control program, this paper proposes a measurement strategy to enable a donor to reward a recipient country’s success at HIV prevention, irrespective of the inputs, activities, or who gets the credit. In accordance with the “cash-on-delivery” model of foreign assistance, the objective is not to replace traditional input- or activity-oriented aid, but to complement it by enhancing the motivation for local actors and their partners (including the traditional bilateral and multilateral funding agencies and their agents) to achieve measurable reductions in the rate of new HIV infections. This paper proposes two approaches to measuring the number of HIV infections averted between a baseline survey and a follow-up survey and explores the properties of ten alternative “payout functions” which would link measured epidemic changes to the size of the reward to be paid. All measurement approaches include the possibility of statistical error and thus a risk of rewarding the country too little or too much. This risk depends on the initial rate of infection and on HIV prevention success and can be reduced by either increasing the survey sample size or increasing the interval between surveys. By negotiating in advance the choice of one of these measurement approaches and one of a menu of payout functions, the donor and recipient agree on the recipient’s incentive structure with respect to the magnitude and precision of the estimated reduction in the rate of new infection.
    Keywords: HIV, AIDS, cash-on-delivery, foreign assistance, outputs, payout functions
    Date: 2010–04
  13. By: Berggren, Niclas (The Ratio Institute,); Elinder, Mikael (Department of Economics)
    Abstract: We investigate to what extent tolerance, as measured by attitudes toward different types of neighbors, affects economic growth. Data from the World Values Survey enable us to investigate tolerance–growth relationships for 54 countries. We provide estimates based on cross-sectional as well as panel-data regressions. In addition we test for robustness with respect to model specification and sample composition. Unlike previous studies, by Richard Florida and others, we find that tolerance toward homosexuals is negatively related to growth. For tolerance toward people of a different race, we do not find robust results, but the sign of the estimated coefficients is positive, suggesting that inclusion of people irrespective of race makes good use of productive capacity. We propose mechanisms to explain these divergent findings, which clarify why different kinds of tolerance may be of different economic importance.
    Keywords: Tolerance; Growth; Diversity; Human Capital; Creativity; Innovation
    JEL: O40 Z13
    Date: 2010–08–17
  14. By: Muhammad Tariq Majeed; Ronald MacDonald
    Abstract: This study examines the impact of globalization on cross-country inequality and poverty using a panel data set for 65 developing counties, over the period 1970-2008. With separate modelling for poverty and inequality, explicit control for financial intermediation, and comparative analysis for developing countries, the study attempts to provide a deeper understanding of cross country variations in income inequality and poverty. The major findings of the study are five fold. First, a non-monotonic relationship between income distribution and the level of economic development holds in all samples of countries. Second, both openness to trade and FDI do not have a favourable effect on income distribution in developing countries. Third, high financial liberalization exerts a negative and significant influence on income distribution in developing countries. Fourth, inflation seems to distort income distribution in all sets of countries. Finally, the government emerges as a major player in impacting income distribution in developing countries.
    Keywords: Globalization; Poverty; Inequality; FDI; Developing Countries.
    JEL: F21 F41 J24
    Date: 2010–06
  15. By: Jesus Felipe; Utsav Kumar; Arnelyn Abdon
    Abstract: We develop an Index of Opportunities for 130 countries based on their capabilities to undergo structural transformation. The Index of Opportunities has four dimensions, all of them characteristic of a country’s export basket: (1) sophistication; (2) diversification; (3) standardness; and (4) possibilities for exporting with comparative advantage over other products. The rationale underlying the index is that, in the long run, a country’s income is determined by the variety and sophistication of the products it makes and exports, which reflect its accumulated capabilities. We find that countries like China, India, Poland, Thailand, Mexico, and Brazil have accumulated a significant number of capabilities that will allow them to do well in the long run. These countries have diversified and increased the level of sophistication of their export structures. At the other extreme, countries like Papua New Guinea, Malawi, Benin, Mauritania, and Haiti score very poorly in the Index of Opportunities because their export structures are neither diversified nor sophisticated, and they have accumulated very few and unsophisticated capabilities. These countries are in urgent need of implementing policies that lead to the accumulation of capabilities.
    Keywords: Capabilities; Index of Opportunities; Diversification; Open Forest; Product Space; Sophistication; Standardness
    JEL: O10 O57
    Date: 2010–08
  16. By: Singh, Nirvikar
    Abstract: This paper considers the status of economic reform in India, to understand which further reforms might be desirable, and why they have not been successfully introduced or implemented. Rather than provide a list of reforms that “should” be undertaken, the paper attempts to understand the political economy of the process of economic reform in India, and how that process plays out with respect to different sectors of the economy, or different areas of potential economic reform. The discussion includes the roles of institutions, interest groups and ideas in driving reform.
    Keywords: India; economic reform; political economy; interest groups; rent-seeking; institutions
    JEL: O53 P26
    Date: 2010–08
  17. By: Bellemare, Marc F.; Barrett, Christopher B.; Just, David R.
    Abstract: Many governments try to stabilize commodity prices based on the widespread belief that households value price stability and that the poor especially benefit from food price stabilization. We derive an exact measure of multivariate price risk aversion and of associated household willingness to pay for price stabilization across multiple commodities. Using data from a panel of Ethiopian households, we estimate that the average household would be willing to pay 6-32 percent of its income to eliminate fluctuations in the prices of the seven primary food commodities. But not everyone benefits from price stabilization. Contrary to conventional wisdom, the welfare gains from eliminating price fluctuations would be concentrated in the upper 40 percent of the income distribution, making food price stabilization a distributionally regressive policy in this context.
    Keywords: Price Fluctuations; Price Stabilization; Price Risk; Risk and Uncertainty
    JEL: D13 E64 D80 Q12 O12
    Date: 2010–08–16
  18. By: de Carvalho Filho, Irineu; Colistete, Renato P.
    Abstract: This paper deals with institutional persistence in long-term economic development. We investigate the historical record of education in one of the fastest growing and most unequal societies in the twentieth century – the state of São Paulo, Brazil. Based on historical data from an agricultural census and education statistics, we assess the role played by factors such as land concentration, immigration and type of economic activity in determining supply and demand of education during the early twentieth century, and to what degree these factors help explain current educational performance and income levels. We find a positive and enduring effect of the presence of foreign-born immigrants on the supply of public instruction, as well as a negative effect of land concentration. Immigrant farm-laborers established their own community schools, and pressured for public funding for those schools or for public schools. The effects of early adoption of public instruction can be detected more than one hundred years later in the form of better test scores and higher income per capita. These results are suggestive of an additional mechanism generating inequality across regions: the places that received immigration from countries with an established public education system benefited from an earlier adoption of the revolutionary idea of public education.
    Keywords: Public education; Brazil; Economic History; Economic Development; Coffee; Immigration; Land Inequality; Toryism
    JEL: N16 H75 O4
    Date: 2010–08–18
  19. By: Siddiqui, Aamir Hussain; Iqbal, Javed
    Abstract: This paper investigates the linkages between trade policy openness and economic growth for Pakistan for the period 1973 to 2008. The paper tests the hypothesis that trade policy does not affect economic growth directly rather it affects through some growth determining economic variables, which then effect economic growth. For this purpose a simultaneous system of equations is estimated through the Three Stage Least Squares. The results suggest a positive impact of trade policy openness on Black Market Premium, Domestic Investment and Foreign Direct Investment (FDI) and negative impact on Macro Policy Index. However, Black Market Premium and FDI show negative and Domestic Investment shows positive impact on economic growth.
    Keywords: Openness; Growth; Transmission Mechanism; Pakistan
    JEL: F10 C30
    Date: 2010–08–18
  20. By: Mussa, Richard
    Abstract: This paper looks at whether or not there are differences in consumption, health, and education poverty and inequality among Catholics, Protestants, Muslims, and followers of indigenous religions in Malawi. Poverty dominance tests show that Catholics have the lowest levels of consumption and education poverty. Inequality dominance tests indicate that Muslims are more equal in terms of consumption than Catholics, however, Catholics are more health equal than Protestants. Protestants are found to be the largest contributors to national poverty and inequality in the three dimensions of well being. Within religious grouping inequalities (vertical inequalities) are the major driver of national consumption and health inequality. In contrast, most of the national education inequality is due to between religious grouping inequalities (horizontal inequalities).
    Keywords: Stochastic dominance; vertical and horizontal inequalities; Malawi
    JEL: D30
    Date: 2010–08–15

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