nep-dev New Economics Papers
on Development
Issue of 2010‒09‒11
33 papers chosen by
Mark Lee
Towson University

  1. Migration, Skill Composition and Growth By Lotti, E.; Young-Bae, K.; , Levine; P.,
  2. Foreign Interventions and Abuse of Civilians during the Peruvian Civil War By David Fielding; Anja Shortland
  3. Microfinance Institutions Performance. What Matters about the Interaction of Location and Legal Status? By Hubert Tchakoute Tchuigoua
  4. Diversification of Microfinance Institutions: Determinants for Entering the Remittances Market By Ritha Sukadi Mata
  5. Foreign Direct Investment and Economic Growth: A real relationship or wishful thinking? By Hristos Doucouliagos; Sasi Iamsiraroj; Mehmet Ali Ulubasoglu
  6. Assessing the Parfit's Repugnant Conclusion within a canonical endogenous growth set-up By Raouf BOUCEKKINE; Giorgio FABBRI
  7. The Economic Legacy of Civil War: Firm Level Evidence from Sierra Leone By Collier,Paul; Duponche, Marguerite
  8. Health Outcomes and Socio-Economic Status among the Elderly in China: Evidence from the CHARLS Pilot By Strauss, John; Lei, Xiaoyan; Park, Albert; Shen, Yan; Smith, James P.; Yang, Zhe; Zhao, Yaohui
  9. International Trade and its Effects on Economic Growth in China By Sun, Peng; Heshmati, Almas
  10. New Evidence on the Role of Cognitive Skill in Economic Development By Eduardo de Carvalho Andrade; Márcio Laurini
  11. Identifying Conflict and Violence in Micro-Level Surveys By Tilman Brück; Patricia Justino; Philip Verwimp; Alexandra Avdeenko
  12. Natural Resource Distribution and Multiple Forms of Civil War By Massimo Morelli; Dominic Rohner
  13. The Industrial Organization of Rebellion: The Logic of Forced Labor and Child Soldiering By Bernd Beber; Christopher Blattman
  14. A Phoenix in Flames? Portfolio Choice and Violence in Civil War in rural Burundi By Eleonora Nillesen; Philip Verwimp
  15. Violent Conflict and Inequality By Cagatay Bircan; Tilman Brück; Marc Vothknecht
  16. War and Poverty By Patricia Justino
  17. Legal Institutions and Economic Development By Beck, T.H.L.
  18. Credit constraints and the north-south transmission of crises By Nguyen, Ha
  19. Economic freedom, human rights, and the returns to human capital : an evaluation of the Schultz hypothesis By King, Elizabeth M.; Montenegro, Claudio E.; Orazem, Peter F.
  20. Export entrepreneurs : evidence from Peru By Freund, Caroline; Pierola, Martha Denisse
  21. Public procurement as an industrial policy tool an option for developing countries? By Rainer Kattel; Vaiko Lember
  22. Dynamics of health insurance ownership in Vietnam, 2004 – 06 By Trong-Ha Nguyen; Suiwah Leung
  23. International Remittances, Domestic Remittances, and Income Inequality in the Dominican Republic By Kimhi, Ayal
  24. The Financial Crisis, Rethinking of the Global Financial Architecture, and the Trilemma By Joshua Aizenman; Menzie D. Chinna; Hiro Ito
  25. Multi-level Governance and Security: The Security Sector Reform Process in the Central African Republic By Niagalé Bagayoko-Penone
  26. Institution [Un]Building: Decentralising Government and the Case of Rwanda By Jesse McConnell
  27. Natural Resources and State Fragility By Paul Collier and Anthony J. Venables
  28. Regional Integration, Fragility and Institution Building: An Analytical Framework Applied to the African Context By Thierry Verdier
  29. EU Policies and African Human Capital Development By Yaw Nyarko
  30. Trade Regionalisation and Openness in Africa By Lelio Iapadre and Francesca Luchetti
  31. Higher Education and Economic Development in Africa: a Review of Channels and Interactions. By Francis Teal
  32. Household-Level Consumption in Urban Ethiopia: The Impact of Food Price Inflation and Idiosyncratic Shocks. By Yonas Alem; Måns Söderbom
  33. Remittances and their Response to Portfolio Variables By Catalina Amuedo-Dorantes; Susan Pozo

  1. By: Lotti, E.; Young-Bae, K.; , Levine; P.,
    Abstract: The UK, with its relatively liberal immigration policies following recent enlargements, has been one of the main recipients of migrants from new EU member states. This paper poses the questions: what is the effect of immigration on a receiving economy such as the UK? Is the effect beneficial or adverse for growth? How differently would skilled (or unskilled) migration affect both receiving and sending economies? What factors would contribute to immigration/emigration benefits/costs and economic growth driven by migration? Who are the winners and losers in both the sending and host regions? We utilize an endogenous growth two-bloc model with labour mobility of different skill compositions to address these questions. We show that migration, in general, is beneficial to the receiving country and increases the world growth rate. With remittances, the sending country in aggregate can also benefit. The only exception is in the case of unskilled migration, which can actually have a detrimental impact on the world growth rate. Winners are migrants, and the skill group in the region that sees its relative size decrease. <br><br> Keywords; Migration, Labour mobility, Skill composition, Economic growth. <br><br> JEL Classification: F22, F43, J24, J61, O41
    Date: 2010–08–01
  2. By: David Fielding; Anja Shortland
    Abstract: The international community has a declared intention to protect innocent civilians from direct and deliberate violence in civil conflicts, but its track record of actually doing so is mixed. Using a new monthly time-series data set, we explore the factors associated with variations in the number of civilians killed or wounded by participants in the civil war in Peru during the 1980s and 1990s. We find that an increase in the level of abuse by one side is strongly associated with subsequent increases in the level of abuse by the other. Certain types of foreign intervention had a large and statistically significant impact on the level of abuse; some types of intervention raised the level of violence, but others reduced it.
    Keywords: Peru, civil war, conflict, abuse against civilians
    Date: 2010
  3. By: Hubert Tchakoute Tchuigoua
    Abstract: The question this article seeks to answer is whether the relationship between legal status and performance is influenced by the geographical area to which the MFI belongs, as postulated in some work. To this end, we study a sample of 202 MFIs in the period 2001 to 2006. The results show that in Latin America and Eastern Europe, there is no significant difference in profitability between private companies and NGOs. In addition, the commercial approach to microfinance does not seem incompatible with the social mission of MFIs, irrespective of geographical location.
    Keywords: microfinance; efficiency; interaction effect; legal form; governance; region
    JEL: G21 G30 L31
    Date: 2010–08
  4. By: Ritha Sukadi Mata
    Abstract: As financial intermediaries, microfinance institutions (MFIs) contribute to integrate remittances into the formal financial system. Using a database including 225 MFIs from Latin America and the Caribbean, this paper investigates the institutional factors that influence the MFI decision-making process of entering the remittances market. Operational, managerial, and financial performances are considered as potential explanatory factors. Results exhibit that financial performance has the highest impact on the MFIs’ decision to diversify by offering a remittances service.
    Keywords: microfinance; remittances; money transfer activity; diversification
    JEL: G21 L25 O15 O16
    Date: 2010–09
  5. By: Hristos Doucouliagos; Sasi Iamsiraroj; Mehmet Ali Ulubasoglu
    Abstract: The macroeconomic impact of FDI has been a longstanding source of debate. This paper provides a comprehensive assessment of the empirical evidence accumulated over the past three decades on the effects of FDI on economic growth. Meta-regression analysis is applied to 880 estimates of this effect from 108 empirical studies. This analysis reveals that FDI has overall a positive effect on growth. Compared to North America, the growth effect of FDI is larger in Western Europe and is weaker in the Middle East and South East Asia. The positive effect of FDI on growth is amplified when FDI interacts with financial development, trade, and human capital. Finally, higher levels of FDI are associated with larger governments, more developed financial markets, lower inflation, higher levels of schooling, and higher levels of foreign aid.
    Keywords: FDI, economic growth, meta-regression analysis
    JEL: F21 F4
    Date: 2010–08–25
  6. By: Raouf BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), CORE and University of Glasgow, Scotland); Giorgio FABBRI (Dipartimento di Studi Economici S. Vinci, Universita di Napoli Parthenope)
    Abstract: Parfit's Repugnant Conclusion stipulates that under total utilitarianism, it might be optimal to choose increasing population size while consumption per capita goes to zero. We evaluate this claim within a canonical AK model with endogenous fertility and a reduced form relationship between demographic growth and economic growth. While in the traditional linear dilution model, the Parfit Repugnant Conclusion can never occur for realistic values of intertemporal substitution, we show that it occurs when population growth is linked to economic growth via an inverted U-shaped relationship. Finally, we find moving from the Benthamite to the Millian social welfare function may not only cause optimal population size to go up and consumption to go down, it may also favor the realization of the Repugnant Conclusion.
    Keywords: Parfit's Repugnant Conclusion, AK models, endogenous fertility, intertemporal altruism
    JEL: O41 I20 J10
    Date: 2010–07–13
  7. By: Collier,Paul; Duponche, Marguerite
    Abstract: This paper positions itself among the very rare microeconomic analyses on the consequences of civil war. Up to now, most analyses on this topic are based upon household surveys. The originality of the present study is that it investigates for the first time the likely predominant route by which civil conflict affects the economy, namely through firms. The context of the study is Sierra Leone, a country that was ravaged by a violent conflict from 1991 to 2002. The approach is to use geographical variations in the intensity of conflict to estimate the impact of violence on firms, on which we have data from the World Bank 2007 Employers Survey. The proposed theory is that during the conflict, violence affects production through a form of technical regress and demand through a reduction in income. The persistent post-conflict effects are yet less obvious We assume that war forces a prolonged contraction in output skills, which slows the pace of recovery. We termed this phenomenon ‘forgetting by not doing’. The results confirm our theory. Civil war negatively impacts the existence of firms and employment, but there is no distinction between regions. However, the size of firms in 2006 is negatively affected by the intensity of the war in the area it operates. Yet, firms tend to grow twice faster in more affected areas, strikingly matching the macroeconomic rate of recovery post-conflict environments (Collier and Hoeffler, 2004). The analysis of training patterns clearly confirms the long lasting lack of skills experienced as a result of the war in areas where the conflict was more intense.
    Keywords: entrepreneurship, national systems of innovation, SMEs, innovative capabilities, emerging economies
    Date: 2010
  8. By: Strauss, John (University of Southern California); Lei, Xiaoyan (Peking University); Park, Albert (University of Oxford); Shen, Yan (Peking University); Smith, James P. (RAND); Yang, Zhe (Peking University); Zhao, Yaohui (Peking University)
    Abstract: We are concerned in this paper with measuring health outcomes among the elderly in Zhejiang and Gansu provinces, China, and examining the relationships between different dimensions of health status and measures of socio-economic status (SES). We use the China Health and Retirement Longitudinal Study (CHARLS) pilot data to document health conditions among the elderly in Gansu and Zhejiang provinces, where the survey was fielded. We use a very rich set of health indicators that include both self-reported measures and biomarkers. We also examine correlations between these health outcomes and two important indicators of socioeconomic status (SES): education and log of per capita expenditure (log pce), our preferred measure of household resources. While there exists a very large literature that examines the relationships between SES and health measures, little has been done on Chinese data to see whether correlations reported in many other countries are replicated in China, particularly so for the aged. In general education tends to be positively correlated with better health outcomes, as it is in other countries. However, unmeasured community influences turn out to be highly important, much more so than one usually finds in other countries. While it is not yet clear which aspects of communities matter and why they matter, we set up an agenda for future research on this topic. We also find a large degree of under-diagnosis of hypertension, a major health problems that afflicts the aged. This implies that the current health system is not well prepared to address the rapid aging of the Chinese population, at least not in Gansu and Zhejiang.
    Keywords: health, China
    JEL: I10
    Date: 2010–08
  9. By: Sun, Peng (affiliation not available); Heshmati, Almas (Korea University)
    Abstract: International trade, as a major factor of openness, has made an increasingly significant contribution to economic growth. Chinese international trade has experienced rapid expansion together with its dramatic economic growth which has made the country to target the world as its market. This research discusses the role of international trade in China's economic growth. It starts with a review of conceptions as well as the evolution of China's international trade regime and the policy that China has taken in favor of trade sectors. In addition, China's international trade performance is analyzed extensively. This research then evaluates the effects of international trade on China's economic growth through examining improvement in productivity. Both econometric and non-parametric approaches are applied based on a 6-year balanced panel data of 31 provinces of China from 2002 to 2007. For the econometric approach, a stochastic frontier production function is estimated and province specific determinants of inefficiency in trade identified. For the non-parametric approach, the Divisia index of each province/region is calculated to be used as the benchmark. The study demonstrates that increasing participation in the global trade helps China reap the static and dynamic benefits, stimulating rapid national economic growth. Both international trade volume and trade structure towards high-tech exports result in positive effects on China's regional productivity. The eastern region of China has been developing most rapidly while the central and western provinces have been lagging behind in terms of both economic growth and participation in international trade. Policy implications are drawn from the empirical results accordingly.
    Keywords: international trade, economic growth, China, panel data, stochastic frontier
    JEL: C23 D24 F10 O24 R58
    Date: 2010–08
  10. By: Eduardo de Carvalho Andrade (Insper Institute of Education and Research); Márcio Laurini (IBMEC Business School)
    Abstract: This paper presents new evidence on the role of cognitive skills in promoting economic growth rate. The novelties in this paper are that we use a within country dataset (Brazilian state and municipality levels data) and a new methodology, a nonparametric kernel regression estimation with mixed data. The main findings are the following: (i) there is strong evidence that the cognitive skill explains growth, but its relationship with growth appears to be non-linear, (ii) the quantity of schooling remains significant even after controlling for the quality of schooling, and (iii) there is support to the hypothesis that the effect of the cognitive skill on growth is important in an open environment.
    Keywords: Cognitive Skill, Nonparametric Kernel Regression
    Date: 2010–09–01
  11. By: Tilman Brück (DIW Berlin); Patricia Justino (Institute of Development Studies); Philip Verwimp; Alexandra Avdeenko (DIW Berlin)
    Abstract: The overall goal of the report is to increase the capacity of researchers and policy makers to identify comparatively, and across time, how individuals, households and communities are affected by violent conflict. The report provides an extensive overview of existing practices and datasets used in this field of research. We investigate existing methodologies and data-bases used to operationalize the variables of interest and discuss the channels linking violent conflict to individual and household welfare. Special attention is paid to methodological issues on how to design a module and operationalize variables that allow researchers to analyze the welfare effects of violent conflict across countries and across time. We develop and discuss a generic household module that can be easily inserted into future socio-economic surveys implemented in conflict-affected countries. This module will enable researchers to address specific violence-related issues comparatively across different conflict settings and systematically across time. The module proposed builds on previous experiences on survey designs in conflict-affected areas. We review existing conflict- and violence-related questionnaires, with a special focus on World Bank’s Living Standard Measurement Surveys (LSMS), and propose suggestions on how to improve questionnaires in order to deepen the understanding of the nature of violent conflict and the channels whereby conflict and violence affect the welfare characteristics and choices of individuals and households in conflict areas.
    Keywords: Conflict, Violence, War, Individuals, Households, Survey, Questionnaire, Methodology
    JEL: C81 D74 F52 O12
    Date: 2010–07
  12. By: Massimo Morelli (Columbia University); Dominic Rohner (University of Zurich)
    Abstract: We examine how natural resource location, rent sharing and fighting capacities of different groups matter for ethnic conflict. A new type of bargaining failure due to multiple types of potential conflicts (and hence multiple threat points) is identified. The theory predicts conflict to be more likely when the geographical distribution of natural resources is uneven and when a minority group has better chances to win a secessionist rather than a centrist conflict. For sharing rents, resource proportionality is salient in avoiding secessions and strength proportionality in avoiding centrist civil wars. We present empirical evidence that is consistent with the model.
    Keywords: Natural Resources, Conflict, Strength Proportionality, Resource Proportionality, Secession, Bargaining Failure
    JEL: C72 D74 Q34
    Date: 2010–08
  13. By: Bernd Beber (New York University); Christopher Blattman (Yale University)
    Abstract: We investigate one of the world’s most pernicious forms of exploitation: child soldiering. Most theories can be captured by a principal-agent model that incorporates punishments, indoctrination, and age-varying productivity. For rebel leaders, we show it is almost always optimal to coerce rather than reward children, and that leaders will tend to forcibly recruit children when punishment and supervision are cheap, when children’s outside options are poor, and when rebel leaders are resource-constrained. To see which mechanisms dominate in practice, we interview and survey former members of Uganda’s Lord’s Resistance Army, who provide a cruel natural experiment that reveals how children and adults respond to coercive incentives. The evidence suggests that children are more easily indoctrinated and disoriented than adults, but are less effective guerrillas; hence the optimal targets of coercion are young adolescents. We confirm predications of the model on a new “cross-rebel” dataset and suggest policy solutions.
    Date: 2010–01
  14. By: Eleonora Nillesen (Wageningen University); Philip Verwimp (Fund for Scientific Research – Flanders, University of Antwerp)
    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: 2010–05
  15. By: Cagatay Bircan (University of Michigan); Tilman Brück (German Institute for Economic Research); Marc Vothknecht (German Institute for Economic Research)
    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: 2010–05
  16. By: Patricia Justino (Institute of Development Studies)
    Abstract: The main objective of this paper is to systematically identify potential channels of transmission linking civil war and poverty that may lead to the persistence of cycles of poverty and war. A particular focus of the paper is the notion of individual (and group) agency during civil wars, as well as agency constraints faced by populations affected by violence. Although the outbreak and impact of war is known to depend on several financial and political factors, the onset, duration and magnitude of the impact of civil wars are also closely related to what happens to people during violent conflicts and to what people do in areas of violence to secure livelihoods, economic survival, physical security and their social networks. The nature and extent of these choices depends in turn on how individuals and households relate to changes in social norms and forms of institutional organisation during civil wars. The paper explores the economic channels through which war may simultaneously affect and be affected by the economic status and responses of individuals and their immediate relations in areas of violent conflict to cope with and adapt to changes to livelihoods and economic status during civil wars. This analysis focuses in particular on the important but under-researched role of social and political institutional transformation during civil war on individual and household poverty.
    Date: 2010–07
  17. By: Beck, T.H.L. (Tilburg University, Center for Economic Research)
    Abstract: Legal institutions are critical for the development of market-based economies. This paper defines legal institutions and discusses different indicators to measure their quality and efficiency. It surveys a large historical and empirical literature showing the importance of legal institutions in explaining cross-country variation in economic development. Finally, it presents and discusses three different views of why we can observe the large cross-country variation in legal institutions, the social conflict, the legal origin and the culture and religion hypotheses.
    Keywords: Legal institutions;economic development;legal system indicators;property rights
    JEL: K1 K4 O16 O43 P14
    Date: 2010
  18. By: Nguyen, Ha
    Abstract: Adverse shocks to rich countries often have a large and persistent negative impact on investment and output in developing countries. This paper examines a transmission mechanism that can account for this stylized fact. The mechanism is based on the existence of international financial frictions. Specifically, if a small, developing country has to collateralize its assets to borrow funds to invest, falling asset prices caused by a negative shock in an advanced economy worsen the developing country's collateral value and reduce its ability to borrow and reinvest. Hence, investment in the developing country declines, and international investors repatriate capital to the advanced country. As less capital now can be pledged as collateral, the developing country's credit constraint is further tightened, which leads to another round of decline in investment. This generates a downward spiral that may cause large output losses to the developing country. The mechanism finds empirical support in the 2008-2009 crisis data.
    Keywords: Debt Markets,Emerging Markets,Economic Theory&Research,Investment and Investment Climate,Country Strategy&Performance
    Date: 2010–08–01
  19. By: King, Elizabeth M.; Montenegro, Claudio E.; Orazem, Peter F.
    Abstract: According to T.W. Schultz, the returns to human capital are highest in economic environments experiencing unexpected price, productivity, and technology shocks that create"disequilibria."In such environments, the ability of firms and individuals to adapt their resource allocations to shocks becomes most valuable. In the case of negative shocks, government policies that mitigate the impact of the shock will also limit the returns to the skills of managing risk or adapting resources to changing market forces. In the case of positive shocks, government policies may restrict access to credit, labor, or financial markets in ways that limit reallocation of resources toward newly emerging profitable sectors. This paper tests the hypothesis that the returns to skills are highest in countries that allow individuals to respond to shocks. Using estimated returns to schooling and work experience from 122 household surveys in 86 developing countries, this paper demonstrates a strong positive correlation between the returns to human capital and economic freedom, an effect that is observed throughout the wage distribution. Economic freedom benefits those workers who have attained the most schooling as well as those who have accumulated the most work experience.
    Keywords: Debt Markets,Political Economy,Economic Theory&Research,Labor Policies,Population Policies
    Date: 2010–08–01
  20. By: Freund, Caroline; Pierola, Martha Denisse
    Abstract: This paper examines firm entry and survival in exporting, and in products and markets not previously served by any domestic exporters. The authors use data on the nontraditional agriculture sector in Peru, which grew seven-fold from 1994 to 2007. They find tremendous firm entry and exit in the export sector, with exits more likely after one year and among firms that start small. There is also significant entry and exit in new markets. In contrast, such trial and error in new products is rare. New products are typically discovered by large experienced exporters and there is increased entry after products are discovered. The results imply that high sunk costs of entry are of concern for product discovery, especially for products that are not consumed domestically. In contrast, the tremendous entry and exit in exporting and in new markets suggests that initial sunk costs are relatively low. The authors develop a model that explains how entrepreneurs decide to export and to develop new export products and markets when there are sunk costs of discovery and uncertainty about idiosyncratic costs. The model explains many features of the data.
    Keywords: Markets and Market Access,Microfinance,Access to Markets,Economic Theory&Research,Debt Markets
    Date: 2010–08–01
  21. By: Rainer Kattel; Vaiko Lember
    Abstract: So far, only 40 countries have joined WTOÿs Government Procurement Agreement (GPA), from the developing world only some East Asian (Hong Kong [China], South Korea, Singapore) economies and ten Eastern European countries are parties to the agreement. This article sets out to answer two interrelated questions: is it advisable for developing countries to use public procurement efforts for development, and should more developing countries join the GPA? We survey key arguments for and against joining the GPA, and by adopting the framework of public procurement for innovation, we argue that government procurement should not be seen only as an indirect support measure for development, but also as a direct vehicle for promoting innovation and industries and, thus, growth and development. We also show that using public procurement for development assumes high levels of policy capacity, which most developing countries lack. In addition, we show how the GPA as well as other WTO agreements make it complicated for the developing countries to benefit from public procurement for innovation. As a result, the article suggests that the developing countries could apply a mix of direct and indirect (so-called soft) publicprocurement- for-innovation measures. In order to do this, developing countries need to develop the policy capacity to take advantage of the complex and multi-layered industrial policy space still available under WTO rules.
    Date: 2010–05
  22. By: Trong-Ha Nguyen; Suiwah Leung
    Abstract: Vietnam is undertaking health financing reform in an attempt to achieve universal health insurance coverage by 2014. Changes in health insurance policies have doubled the overall coverage between 2004 and 2006. However, close examination of Vietnam Living Standard Surveys during this period reveals that about one fifth of the insured in 2004 dropped out of the health insurance system by 2006. This paper uses longitudinal data from VHLSS 2004 and 2006 to investigate the characteristics of those who joined and those who left the health insurance system. We model the static and dynamic health insurance choices allowing for heterogeneity of choices. The results from both static and dynamic models highlight the importance of income and education in determining the movement in or out of a particular scheme. The results from the static models of health insurance determinants show significant adverse selection in the current health insurance system where individuals with bad health are more likely to be insured. The findings from the dynamic models of health insurance ownership also suggest that the current health insurance system entails significant adverse selection where people with worse health are more likely to join or stay in and less likely to move out of the system. Some policy implications to increase coverage and to maintain financial sustainability of the health insurance system are drawn.
    Keywords: health insurance, adverse selection, Vietnam
    JEL: I11 D12 O12
    Date: 2010–08
  23. By: Kimhi, Ayal
    Abstract: Inequality decomposition techniques are used to analyze the different impacts of domestic and international remittances on household income inequality in the Dominican Republic. Domestic remittances seem more likely to be equalizing than international remittances. The negative marginal effect on inequality of domestic remittances is more prominent among rural households, and in particular among landless rural households, while the negative marginal effect on inequality of international remittances is more prominent among urban households, and in particular outside of the Santo Domingo area. Stronger marginal effects of remittances were found among female-headed households, the elderly and the less educated. Both domestic and international remittances are higher among female-headed households and the elderly. Education is associated with lower domestic remittances and higher international remittances, probably reflecting the role of education in promoting international versus domestic migration. An increase in schooling increases inequality through domestic remittances and decreases inequality through international remittances, while a reduction in household size reduces inequality through both domestic and international remittances. This analysis highlights the importance of the distinction between domestic and international remittances as drivers of inequality as well as the importance of identifying and quantifying the determinants of remittances and their subsequent impact on inequality.
    Keywords: Demand and Price Analysis, International Development, Public Economics,
    Date: 2010
  24. By: Joshua Aizenman; Menzie D. Chinna; Hiro Ito (Asian Development Bank Institute)
    Abstract: This paper extends our previous paper (Aizenman, Chinn, and Ito 2008) and explores some of the unexplored questions. First, we examine the channels through which the trilemma policy configurations affect output volatility. Secondly, we investigate how trilemma policy configurations affect the output performance of the economies under severe crisis situations. Thirdly, we look into how trilemma configurations have evolved in the aftermath of economic crises in the past. We find that trilemma policy configurations and external finances affect output volatility mainly through the investment channel. While a higher degree of exchange rate stability could stabilize the real exchange rate movement, it could also make investment volatile, though the volatility-enhancing effect of exchange rate stability on investment can be cancelled by holding higher levels of international reserves (IR). Greater financial openness helps reduce real exchange rate volatility. These results indicate that policymakers in a more open economy would prefer pursuing greater exchange rate stability and greater financial openness while holding a massive amount of IR. We also find that the “crisis economies” could end up with smaller output losses if they entered the crisis situation with more stable exchange rates or if they continue to hold a high level of IR and maintain greater exchange rate stability during the crisis period. Lastly, we find that developing countries are often found to have decreased the level of monetary independence and financial openness, but increased the level of exchange rate stability in the aftermath of a crisis, especially for the last two decades. This finding indicates how vulnerable developing countries, especially emerging market ones, are to volatile capital flows as a result of global financial liberalization.
    Keywords: economic crisis, financial crisis, trilemma, financial openess, exchange rate stability
    JEL: F15 F21 F31 F36 F41 O24
    Date: 2010
  25. By: Niagalé Bagayoko-Penone
    Abstract: Analysing how the SSR process in CAR has been defined and then implemented, this article puts emphasis on the international interactions between institutional actors who may be geographically/territorially situated at different levels of the policy-making process in different places around the world, thus suggesting ways to grasp multi-actor and multi-sited governance. Therefore, it advocates an approach which consists of expanding the agenda of the traditional multi-level governance approach. The issue at stake here is to capture the interactive institutional dynamic at an international level, thus developing a methodological framework that is likely to seize both the topdown and the bottom-up dynamics of decision-making processes. The first objective is to capture the sets of actors and procedures which drive the process, and to map out the various levels of government at which decisions are made, either the more top-down, or the more bottom-up oriented ones, answering two sets of questions: How is security governance organised? Who decides, and on which matters? Secondly – and more fundamentally – is to capture the intermingling of domestic and international decision-making processes which increasingly overlap and interfere with each other in Southern countries.
    Keywords: multilevel governance
    Date: 2010–05–15
  26. By: Jesse McConnell
    Abstract: The challenge of institution building in African countries remains a major threat to the establishment of peace and justice, and the entrenchment of sustainable social and economic development. This may be attributed largely to the dynamic and complex social landscape of most African countries. While single borders bring political definition to post-independent countries, such countries often struggle to find a single national identity that transcends numerous tribal, ethnic or historic identities. The role of central government in creating an effective structure of governance is crucial in the steps towards postconflict nation-building. However, national institution building is not necessarily the right answer, especially in contexts difficult to govern, such as vast geographic areas or complex social and ethnic realities. It is in this sense that this paper – and the initial states of this research – seeks to find an alternative to ‘institution building’ as a way forward in good governance practices, suggesting rather a decentralised and localised approach. The case study that will be brought to be bear as an example of this is Rwanda and a recent governance mechanism – Imihigo – as an approach that has helped create a new national identity while instilling a culture of service delivery and accountability amongst its public servants and political leadership. What this paper will seek to argue – in looking at the approach by Rwanda in decentralising its government – is that institution building is not necessarily the way forward in Africa’s ‘good governance’ discourse. Instead, this paper – and the broader borders of what my research is seeking to explore and understand – seeks to present a reformed approach to good governance in Africa, especially contexts that have been divided along complex lines such as ethnicity, geography, national identity, or the competition for natural resources. Though it will be beyond the scope of this research paper specifically, intended environments that this research is hoped to be applicable – and will therefore involve further research around the applicability of such – include the Democratic Republic of Congo, Cote d’Ivoire, Burundi and Sudan.
    Keywords: governance; decentralisation
    Date: 2010–05–15
  27. By: Paul Collier and Anthony J. Venables
    Abstract: This paper provides an overview of the relationships between natural resources, governance, and economic performance. The relationships run in both directions, with re-sources potentially altering the quality of governance, and governance being particularly important for resource poor countries. Both these relationships have threshold effects; if governance quality is above a certain level, then natural resources can lead to further improvement, while, below the threshold, further deterioration may take place. Theoretical and empirical work is reviewed, the interactions between the relationships discussed, and policy implications outlined.
    Date: 2010–04–15
  28. By: Thierry Verdier
    Abstract: The purpose of this paper is to discuss how regional integration processes may contribute to statebuilding and promote exit from fragility for countries characterised by weak state institutions. After presenting a simple conceptual framework to discuss the effects of external and regional integration on fragile states, we analyse the policy trade-offs that may arise in such contexts. The paper then reviews the specific regional experiences of Sub-Saharan countries and their inter-actions with fragility issues. Finally, we discuss policy implications for the EU in the context of its regional trade and development policies with African fragile countries. The central conclusions of the analysis are the following: I) a two-tier approach to regional integration, which combines both top-down and bottom-up processes, is necessary; 2) the EU approach to regional integration in Africa should promote Building-Blocks and not Stumbling-Blocks; and 3) specific considerations should be given to make the trade integration strategy fragility responsive.
    Keywords: state building
    Date: 2010–06–15
  29. By: Yaw Nyarko
    Abstract: Brain Circulation between the European Union (EU) and Sub-Saharan Africa is a crucial ingredient in Human Capital formation in the latter. A major constraint to African development is the very low base of skilled and highly educated workers and professionals. The production of skilled workers has been low, and only recently has seen a dramatic increase. Recent papers by many authors have indicated that a channel for human capital growth has been, paradoxically, the possibility of the brain drain which serves as both an incentive mechanism and which results in higher human capital when the drainers return. After a review of some of the literature, these insights are applied to the debates raging today on European Union migration policy: the Blue Card, Migration Con-tracts, anti-Brain Drain legislation, etc. This paper argues that a careful calibration of the EU policies may enable faster Human Capital growth in Africa, while, at the same time, being beneficial to the EU by supplying critically needed skills into the EU economy. By carefully planning the production of human capital and the consequent flow of skilled migrants into Europe, the EU can assist in the development of vitally needed numbers of trained or skilled workers in Africa.
    Date: 2010–04–15
  30. By: Lelio Iapadre and Francesca Luchetti
    Abstract: The intensity of trade among countries belonging to the same region depends not only on the existence and effectiveness of a regional integration agreement, but also on other factors, which include the overall trade policy orientation and the relative level of geo-graphic and economic barriers affecting intra- and extra-regional trade. After presenting a set of indicators aimed at measuring correctly the intensity of bi-lateral trade preferences, this paper shows that most African countries tend to trade more intensely with partners belonging to the same region than with the rest of the world. However, this is not so much the result of the weak regional integration agreements that are in force in Africa, as a consequence of the manifold barriers limiting the degree of international openness of African countries. Under this perspective, a relatively high level of intra-regional trade, far from revealing the success of preferential integration policies, confirms that Africa’s participation in the process of globalisation is still very limited.
    Date: 2010–06–15
  31. By: Francis Teal
    Abstract: While the numbers with completed tertiary level education are low in Africa, both relative to other countries and in absolute terms, they have been growing very rapidly. Three questions are addressed in this paper. The first is how higher education links to other forms of capital accumulation in a process that leads to economic growth. The second is how higher education links to job outcomes in particular the role of the public sector and self-employment as outcomes for graduates. The third is whether and how an expansion of skilled jobs can create its own demand. The paper draws on both macro and micro evidence to answer those questions which are placed in a long run historical context. It is argued that growth has been more closely linked to investment in physical capital than in education and this may well reflect the fact that education is most valuable when it is linked to technology which requires higher skills. Data from thirty two African countries are used to show that the returns to education, measured both by macro production functions and by micro earning functions, are highest for those with higher levels of education. A contrast is drawn between the role of higher education in providing access to public sector employment and the increasing importance of self-employment in Africa. The paper concludes by asking whether Africa can use its investment in higher skilled labour to effect a service based growth revolution.
    Date: 2010
  32. By: Yonas Alem; Måns Söderbom
    Abstract: We use survey data to investigate how urban households in Ethiopia coped with the food price shock in 2008 and idiosyncratic shocks. Qualitative data indicate that the high food price inflation was by far the most adverse economic shock between 2004 and 2008, and that a significant proportion of households had to adjust food consumption in response. Regression results indicate that households with low asset levels, and casual workers, were particularly adversely affected by high food prices. In contrast, we find that household demographics and education matter little for the impact of the shock. Our analysis of idiosyncratic shocks indicates that losing one’s job is a serious, uninsurable shock. We interpret the results as pointing to the importance of growth in the formal sector so as to generate more well-paid and stable jobs. Our results also imply that aid programs responding to food price shocks can be made more efficient by targeting low-asset households with members on the fringe of the labor market.
    Keywords: consumption; food price inflation; shocks; Africa; urban Ethiopia
    JEL: O12 O18 D12
    Date: 2010
  33. By: Catalina Amuedo-Dorantes (Department of Economics, San Diego State University); Susan Pozo (Department of Economics, Western Michigan University)
    Abstract: Using a recent Spanish database on immigrants from all across the globe, we show that remittances respond to differences in macroeconomic conditions at home and abroad. This behavior suggests that immigrants are sophisticated economic optimizers who take advantage of differential returns when accumulating assets. Immigrants remit more when per capita GDP growth rates at home are greater than in Spain, when the home-host real interest-rate differential increases, and when real exchange-rate uncertainty is higher. These patterns differ with ownership of home country assets and with the area of the globe from which immigrants originate, whether it is Africa, the Americas, Europe or Asia. The response of remittances to cross-country differences in portfolio variables suggests that remittances may not be counter-cyclical as often claimed. Hence, paradoxically, while remittances may promote consumption-smoothing at the individual or household level, remittances cannot be relied upon to shore up migrant- sending economies in times of need.
    Date: 2010–09

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