nep-dev New Economics Papers
on Development
Issue of 2010‒10‒09
28 papers chosen by
Mark Lee
Towson University

  1. Divergences and Convergences in Human Development By David Mayer-Foulkes
  2. A Household-Based Human Development Index By Kenneth Harttgen; Stephan Klasen
  3. Does Microfinance Reduce Poverty in Bangladesh? New Evidence from Household Panel Data By Katsushi S. Imai; Md. Shafiul Azam
  4. Analysis of Poverty Reducing Effects of Microfinance from a Macro Perspective: Evidence from Cross-Country Data By Katsushi S. Imai; Raghav Gaiha; Ganesh Thapa; Samuel Kobina Annim
  5. Diseases, infection dynamics and development By Chris Papageorgiou; Fidel Pérez Sebastián; Shankha Chakraborty
  6. Indirect Taxation and Gender Equity: Evidence from South Africa By Daniela Casale
  7. China's Overt Economic Rise and Latent Human Capital Investment: Achieving Milestones and Competing for the Top By Constant, Amelie F.; Tien, Bienvenue; Zimmermann, Klaus F.; Meng, Jingzhou
  8. Culture, Institutions and the Wealth of Nations By Gorodnichenko, Yuriy; Roland, Gerald
  9. The Lasting Impact of Mothers' Fetal Malnutrition on Their Offspring: Evidence from the China Great Leap Forward Famine By Kim, Seonghoon; Deng, Quheng; Fleisher, Belton M.; Li, Shi
  10. Assesing the Impact of Remittances on Child Education in Ecuador: The role of educational supply constraints By Benedictis, Geovana; Calfat, Germán; Jara, Karina
  11. FDI and Growth in East Asia: Lessons for Indonesia By Lipsey, Robert E.; Sjöholm, Fredrik
  12. The World Distribution of Productivity: Country TFP Choice in a Nelson-Phelps Economy By Färnstrand Damsgaard, Erika; Krusell, Per
  13. The Renminbi and Poor-Country Growth By Christopher Garroway; Burcu Hacibedel; Helmut Reisen; Edouard Turkisch
  14. Civil War, Climate Change and Development: A Scenario Study for Sub-Saharan Africa By Devitt, Conor; Tol, Richard S. J.
  15. In Search of a Better Life: The Occupational Attainment of Rural and Urban Migrants in China By Ayako Kondo; Dongshu Ou
  16. China : global crisis avoided, robust economic growth sustained By Vincelette, Gallina Andronova; Manoel, Alvaro; Hansson, Ardo; Kuijs, Louis
  17. The financial crisis and its impacts on global agriculture By Lin , Justin Yifu; Martin, Will
  18. Mashup indices of development By Ravallion, Martin
  19. The economic impact of international remittances on poverty and household consumption and investment in Indonesia By Adams, Richard H., Jr.; Cuecuecha, Alfredo
  20. Where to Find Positive Productivity Spillovers from FDI in China: Disaggregated Analysis By Galina Hale; Cheryl Long; Hirotaka Miura
  21. To conquer or compel: war, peace, and economic development By Erik Gartzke; Dominic Rohner
  22. Poverty and firewood consumption : A case study of rural households in northern China By Sylvie Démurger; Martin Fournier
  23. Rule of Law, Legal Development and Economic Growth: Perspectives for Pakistan By Hasan, Lubna
  24. Inequality and fractionalization By Casey, Gregory P.; Owen, Ann L.
  25. Learning the Wealth of Nations By Buera, Francisco; Monge-Naranjo, Alexander; Primiceri, Giorgio E.
  26. Throwing Foreign Aid at HIV/AIDS in Developing Countries: Missing the Target? By Peter Nunnenkamp; Hannes Öhler
  27. Vulnerability to Downside Risk and Poverty in Vietnam By Felix Povel
  28. Short-run and Long-run Dynamics of Growth,Inequality and Poverty in the Developing World By Thomas Gries; Margarete Redlin

  1. By: David Mayer-Foulkes (Division de Economia of the Centro de Investigacion y Docencia Economicas, Mexico City)
    Abstract: I conduct a cross-country analysis of the human development index (HDI) components, income, life expectancy, literacy and gross enrolment ratios, using Gray and PurserÕs 1970-2005 quinquennial database for 111 countries. 1) A descriptive analysis uncovers a complex pattern of divergence and convergence for these componentsÕ evolution. Development is not a smooth process but consists of a series of superposed transitions each taking off with increasing divergence and then converging. 2) Absolute divergence/convergence for the HDI components is decomposed using simultaneous growth regressions including a full set of quadratic interactions between the HDI components, and indicators of urbanization, trade, institutions, foreign direct investment and physical geography. These are implemented, first, using three stage least squares, all of the non-exogenous independent variables fully instrumented, and second, as independent regressions with errors clustered by countries, again all non-exogenous variables instrumented. 3) A set of quantile regressions is run for the HDI component levels on the same variables (just the linear terms), again fully instrumented. Urbanization is a leading significant variable for human development indicators in both sets of estimates, stronger than trade, FDI and institutional indicators. These indicators act with ambiguous signs that may result from their distributive impacts, reducing their effectiveness. The results indicate that improving markets will have smaller returns than complementing them with institutions that can coordinate urbanization as well as investment in human capital. Urbanization itself can provide a concrete agenda for development involving all aspects of economic, political and social life as well as human development.
    Keywords: human development, growth, convergence, divergence, urbanization
    JEL: O11 O20 O47 O15
    Date: 2010–09
  2. By: Kenneth Harttgen (Department of Economics at the University of Gšttingen); Stephan Klasen (Department of Economics at the University of Gšttingen)
    Abstract: One of the most serious weaknesses of the human development index (HDI) is that it considers only average achievements and does not take into account the distribution of human development within a country or by population subgroups. All previous attempts to capture inequality in the HDI have also used aggregate information and there exists no HDI at the household level. This paper provides a method and illustration for calculating the HDI at the household level. This immediately allows the analysis of the HDI by any kind of population subgroups and by household socioeconomic characteristics. Furthermore, it allows to apply any kind of inequality measure to the HDI across population subgroups and over time. We illustrate our approach for 15 developing countries. Inequality in the HDI is largest in poorer countries, particularly in Sub-Saharan Africa. We also Þnd large inequalities within countries between population subgroups, particularly by income, location, and education of the household head. We also Þnd considerable inequality when looking at inequality measures like the Theil or the Gini coefficient; within-group inequality is, however, invariably larger than between-group inequality and inequality in the HDI within countries is of similar order of magnitude of inequality in the HDI between countries.
    Keywords: human development index, income inequality, di_erential mortality, inequality in education.
    JEL: O15 C4 C9 I3
    Date: 2010–09
  3. By: Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester, UK and Research Institute for Economics & Business Administration, Kobe University, Japan); Md. Shafiul Azam (Economics, School of Social Sciences, University of Manchester, UK)
    Abstract: The purpose of the present study is to examine whether microfinance reduces poverty in Bangladesh drawing upon the nationally representative household panel data covering 4 rounds from 1997 to 2005. A special attention was drawn to the issue of endogeneity by applying treatment effects model and propensity score matching (PSM) for the participants and non-participants of microfinance programmes. It has been found by treatment effects model applied to panel data that the simple household access to general loans from microfinance institutions (MFIs) did not increase per capita household income significantly, but household access to loans for productive purposes from MFIs significantly increased per capita household income. This suggests that the purpose and monitoring of how clients use the loans is important for increasing household income, and thus decreasing household poverty. However, the application of treatment effects model and PSM to each cross-sectional component of the panel data shows that the poverty reducing effect of MFI on poverty was significantly reduced over the years. This suggests the importance of more attention to the primary purpose of microcredit, that is, poverty reduction, and also to monitoring loan usages in the situations where the profits of MFIs became increasingly squeezed and their activities became more commercialised under severe competitions among MFIs in recent years.
    Keywords: microfinance, MFI (microfinance institution), microcredit, poverty, Bangladesh
    JEL: C30 C31 G21 I32
    Date: 2010–09
  4. By: Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester, UK and Research Institute for Economics & Business Administration, Kobe University, Japan); Raghav Gaiha (Massachusetts Institute of Technology, USA & Faculty of Management Studies, University of Delhi, India); Ganesh Thapa (International Fund for Agricultural Development, Italy); Samuel Kobina Annim (Economics, School of Social Sciences, University of Manchester, UK)
    Abstract: This paper tests the hypothesis that microfinance reduces poverty at macro level using the cross-country data in 2007. The results of econometric estimation for poverty head count ratio show, taking account of the endogeneity associated with loans from microfinance institutions (MFIs), that microfinance loans significantly reduce poverty. Thus, a country with higher MFI’s gross loan portfolio tends to have lower poverty incidence after controlling the other factors influencing poverty. We also found that poverty reducing effect tends to be larger in Sub Saharan Africa (SSA) as suggested by the negative and significant coefficient estimate of the SSA dummy and gross loan portfolio. From a policy perspective, our results would justify increase in investment from development finance institutions and governments of developing countries into microfinance loans as a means of poverty reduction.
    Date: 2010–09
  5. By: Chris Papageorgiou (Louisiana State University); Fidel Pérez Sebastián (Universidad de Alicante); Shankha Chakraborty (Department of Economics)
    Abstract: We propose an economic theory of infectious disease transmission and rational behavior. Diseases are costly due to mortality (premature death) and morbidity (lower productivity and quality of life). The theory offers three main insights. First, higher disease prevalence implies lower saving-investment propensity. Preventive behavior can partially offset this when the prevalence rate and negative disease externality are relatively low. Secondly, infectious diseases can generate a low-growth trap where income alone cannot push an economy out of underdevelopment, a result that differs from development traps in the existing literature. Since income per se does not cause health in this equilibrium, successful interventions have to be health specific. Thirdly, a more favorable disease ecology propels the economy to a higher growth path where infectious diseases are eradicated. Even so, diseases can significantly slow down convergence to this growth path. Taken together, our results suggest that the empirical relationship between health and income at the aggregate level may be more nuanced than realized.
    Keywords: Infectious Disease, Rational Disease Behavior, Morbidity, Mortality, Productivity, Economic Development
    JEL: O40 O47
    Date: 2010–09
  6. By: Daniela Casale
    Abstract: This paper explores the equity implications of indirect or consumption taxes from a gender perspective, using detailed expenditure data for South Africa. While a growing literature on the incidence of indirect taxes investigates their impact on the income distribution in developing countries, there is little work on whether indirect taxes have differential gender outcomes. Gender bias is likely to exist in taxes that are levied on consumption expenditure, because men and women (and their households) spend their incomes on different types of goods, or on goods that are taxed differently. To estimate the gender incidence of indirect taxes, this study explores differences between households that are classified as more ‘female’ or more ‘male’ according to their demographic and economic attributes. The results suggest that the zero-rating of a selection of basic foodstuffs and fuel for household use is important in protecting ‘female-type’ households, especially those in the lowest expenditure quintiles and with children, from bearing an otherwise disproportionate share of the burden of these taxes. In contrast, high taxes on alcohol, tobacco and fuel for private transport result in a higher incidence on ‘male-type’ households, those in the middle and top quintiles and those without children. The paper also suggests ways in which the indirect tax system could be refined to further reduce the large gender (and income) inequities that exist in South Africa.
    Keywords: indirect taxes, incidence, gender equity, South Africa
    JEL: D63 H22 J16
    Date: 2010
  7. By: Constant, Amelie F. (DIW DC, George Washington University); Tien, Bienvenue (DIW DC); Zimmermann, Klaus F. (IZA, DIW Berlin and Bonn University); Meng, Jingzhou (George Washington University)
    Abstract: We provide an overview of China's economic rise through time. Over the past decade, China has maintained 10% growth in GDP, albeit with a GDP per capita at the low level of a developing country. Its tremendous economic development has overlooked the growing social inequalities and rising resentments of the ‘cheap’ workers and those laid off. The main contributor to its ascension is international trade and investment in physical capital, often at the expense of the environment. The year 1978 was the landmark for the foundation of the Chinese modern higher education system. Since then the number of students enrolled in Chinese higher education institutions has increased dramatically; China is producing serious scholars and a tremendous amount of scholarly output; more and more Chinese students seek higher education abroad; and international students find a rising interest in receiving education in China.
    Keywords: China, human capital, brain drain, higher education
    JEL: F22 J24 N35 O15 O24 O53
    Date: 2010–09
  8. By: Gorodnichenko, Yuriy (University of California, Berkeley); Roland, Gerald (University of California, Berkeley)
    Abstract: We construct an endogenous growth model that includes a cultural variable along the dimension of individualism-collectivism. The model predicts that more individualism leads to more innovation because of the social rewards associated with innovation in an individualist culture. This cultural effect may offset the negative effects of bad institutions on growth. Collectivism leads to efficiency gains relative to individualism, but these gains are static, unlike the dynamic effect of individualism on growth through innovation. Using genetic data as instruments for culture we provide strong evidence of a causal effect of individualism on income per worker and total factor productivity as well as on innovation. The baseline genetic markers we use are interpreted as proxies for cultural transmission but others have a direct effect on individualism and collectivism, in line with recent advances in biology and neuro-science. The effect of culture on long-run growth remains very robust even after controlling for the effect of institutions and other factors. We also provide evidence of a two-way causal effect between culture and institutions.
    Keywords: culture, institutions, development, growth
    JEL: O1 O3 O4 O5
    Date: 2010–09
  9. By: Kim, Seonghoon (Ohio State University); Deng, Quheng (Chinese Academy of Social Sciences); Fleisher, Belton M. (Ohio State University); Li, Shi (Beijing Normal University)
    Abstract: We find that second-generation effects of in utero and early childhood malnutrition on the school participation of the offspring of mothers who experienced the China Great Leap Forward Famine. The direct impact on entrance to senior high school is also negative, but smaller in magnitude than that on entrance to junior high school. Given that entering senior high school is contingent on completion of junior high school, the direct impact on entrance to senior high school obviously understates the total impact on the second generation’s accumulation of human capital. Our estimation results are generally robust to IV estimation.
    Keywords: malnutrition, health, schooling, Barker hypothesis, China Famine
    JEL: I12 J16 P36
    Date: 2010–09
  10. By: Benedictis, Geovana; Calfat, Germán; Jara, Karina
    Abstract: We analyse the links between remittances and child education in Ecuador with special emphasis on the influences in supply conditions at the regional level. Our results point out to the favourable role of remittances on education, suggesting at the same time, the importance of an efficient basic infrastructure in the educational system, as a key element in fostering positive outcomes. The positive effect of remittances on child education is better understood within the context of public policies designed to improve and equalize educational supply conditions among the population.
    Date: 2010–05
  11. By: Lipsey, Robert E. (NBER); Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN))
    Abstract: Foreign direct investment has been important in the economic growth and global economic integration of developing countries over the last decades. Both Northeast and Southeast Asia, especially the latter, have been part of this development with increasing inflows of FDI and greater foreign participation in their economies. However, Indonesia has been an outlier within the region, with lower inflows of FDI than other countries, especially in manufacturing, and with lower inflows than could be expected from its size and other country characteristics. The inflows of FDI that have taken place have benefited Indonesia and we use the Asian experience to provide some suggestions as to what measures would increase FDI. A relatively poor business environment with inefficient institutions seems to be an important explanation behind the low inflows of FDI.
    Keywords: East Asia; Northeast Asia; Southeast Asia; Indonesia; Foreign Direct Investment; Multinational Firms
    JEL: F13 F23 O19
    Date: 2010–09–27
  12. By: Färnstrand Damsgaard, Erika (Research Institute of Industrial Economics (IFN)); Krusell, Per (IIES)
    Abstract: This paper builds a theory of the shape of the distribution of total-factor productivity (TFP) across countries. The data on productivity suggests vast differences across countries, and arguably even has “twin peaks”. The theory proposed here is consistent with vast differences in long-run productivity, and potentially also with a twin-peaks outcome, even under the assumption that all countries are ex-ante identical. It is based on the hypothesis that TFP improvements in a given country follow a Nelson-Phelps specification. Thus, they derive from past investments in the country itself and, through a spillover (or catch-up) term, from past investments in other countries. We then construct a stochastic dynamic general equilibrium model of the world which has externalities: each country invests in TFP and internalizes the dynamic effects of its own investment, while treating other countries' investments as given. Average world growth is endogenous, as is the distribution of TFP across countries. We find that small idiosyncratic TFP shocks can lead to large long-run differences in TFP levels and that, in the long run, the world distribution of TFP across countries may be asymmetric, i.e., twin-peaked, or bimodal. More specifically, twin-peaked world distributions of TFP arise if the catch-up term in the Nelson-Phelps equation has a sufficiently low weight. If, on the other hand, technological catch-up is important, the world distribution of TFP is unimodal, though it may still have large dispersion.
    Keywords: Growth; Inequality
    JEL: F43 O10
    Date: 2010–09–23
  13. By: Christopher Garroway; Burcu Hacibedel; Helmut Reisen; Edouard Turkisch
    Abstract: Discussions on how best to exit from global imbalances to create a more balanced world economy have ignored the impact on poor countries of proposals to redress these imbalances. This paper aims at filling that gap. It gauges the degree of renminbi (RMB) undervaluation; presents evidence on RMB undervaluation and China’s GDP growth rate; surveys the role of the real effective exchange rate – both its level and its stability over time – for underpinning growth in developing countries, especially in large dual economies such as China and India; finally, the paper presents new evidence on growth linkages between China and poor countries for the last two decades and surveys literature on potential displacement effects of RMB appreciation. The analysis allows broad conclusions to be drawn about the potential developing-country beneficiaries and losers from various renminbi adjustment scenarios in the forthcoming years.<BR>Les discussions sur la meilleure façon de sortir des déséquilibres mondiaux afin de créer une économie mondiale plus équilibrée ont ignoré l'impact sur les pays pauvres des propositions visant à corriger ces déséquilibres. Le présent document vise à combler ce manque. Il évalue d’abord le degré de sous-évaluation du renminbi (RMB) ; il décrit ensuite les évolutions simultanées du degré de sous-évaluation du RMB et du taux de croissance du PIB chinois ; puis, il passe en revue le rôle du taux de change effectif réel - à la fois son niveau et sa stabilité au cours du temps – dans la croissance des pays en développement, surtout dans les grandes économies duales comme la Chine et l'Inde ; enfin, le document présente de nouvelles analyses sur les liens, au cours des deux dernières décennies, entre la croissance chinoise et celle des pays pauvres et passe en revue la littérature traitant des effets potentiels de l'appréciation du RMB sur la croissance. L'analyse permet d’identifier parmi les pays en développement, les bénéficiaires et perdants potentiels, en fonction de différents scénarios d'ajustement du renminbi dans les prochaines années.
    Keywords: economic growth, purchasing power parity, real effective exchange rates, croissance économique, théorie de la parité de pouvoir d’achat, taux de change effectifs réels
    JEL: F15 F31 O11 O47
    Date: 2010–09
  14. By: Devitt, Conor; Tol, Richard S. J.
    Abstract: We construct a model of development, civil war, and climate change. There are multiple interactions. Economic growth reduces the probability of civil war and the vulnerability to climate change. Climate change increases the probability of civil war. The impacts of climate change, civil war, and civil war in the neighbouring countries reduce economic growth. The model has two potential poverty traps ? a climate-change-induced one and a civil-war-induced one ? and the two poverty traps may reinforce one another. We calibrate the model to Sub-Saharan Africa and conduct a double Monte Carlo analysis accounting for both parameter uncertainty and stochasticity. We find the following. Although we use the SRES scenarios as our baseline, and thus assume rapid economic growth in Africa and convergence of African living standards to the rest of the world, the impact of civil war and climate change (ignored in SRES) are sufficiently strong to keep a number of countries in Africa in deep poverty with a high probability. Other countries enjoy exponential growth; and some countries may either be trapped in poverty or experience rapid growth. The SRES scenarios were wrong to ignore the impact of climate change and civil war on economic development.
    Keywords: civil war/climate change/economic development/Climate change/growth/Impacts of climate change/poverty/scenarios/uncertainty
    Date: 2010–09
  15. By: Ayako Kondo; Dongshu Ou
    Abstract: This paper investigates the occupational attainment and job mobility of permanent rural-to-urban migrants and compares them with migrants who were born with an urban hukou. Using data from the 2003 China General Social Survey, we examine how much of the gaps in occupational-prestige scores between rural- and urban-born migrants can be explained by differences in observable characteristics up to the time of migration. We find that, with controls for these characteristics, the difference in occupational attainment between rural and urban migrants becomes statistically insignificant or even positive for some subgroups. In contrast, our analysis of job mobility reveals that rural migrants are generally more mobile and also more likely to move to better jobs by changing work units, whereas urban migrants are more likely to be promoted within a work unit.
    Date: 2010–09
  16. By: Vincelette, Gallina Andronova; Manoel, Alvaro; Hansson, Ardo; Kuijs, Louis
    Abstract: This paper explores how the ongoing crisis, the policy responses to it, and the post-crisis global economy will impact China's medium-term prospects for growth, poverty reduction, and development. The paper reviews China's pre-crisis growth experience, including its relationship to global economic developments. It discusses the pace, composition, sources, and financing of growth during 1995-2007, and the impact of key external and domestic influences. The paper also analyzes the immediate impact of the global crisis on China's economic performance in 2009 and its likely impact in the short run. It then discusses the government's policy response, with a particular focus on the fiscal and monetary stimulus measures. Finally, the paper explores China's medium-term growth prospects in light of the crisis and the key policies for moving to a robust and sustainable growth path post-crisis.
    Keywords: Debt Markets,Economic Theory&Research,Emerging Markets,Currencies and Exchange Rates,Access to Finance
    Date: 2010–09–01
  17. By: Lin , Justin Yifu; Martin, Will
    Abstract: The financial crisis arose in the industrial countries, but has affected developing countries through higher interest rates, sharp changes in commodity prices, and reductions in investment, trade, migration and remittances. For most low-income countries, shocks that affect food prices or wage rates for unskilled workers seem likely to have the largest impact on poverty, with the declines in key food prices associated with the crisis helping to reduce poverty, while declining trade, investment, and remittance flows have had adverse impacts on the poor. Policies to address the crisis must include measures to deal with financial sector problems, the resulting reductions in aggregate demand, and the particular vulnerabilities of poor people. Given the complexity of the impacts from financial crises and commodity price shocks, there is a strong case for developing better social safety net policies that can offset the adverse impacts of a wide range of different shocks on poor people without creating costly market distortions.
    Keywords: Emerging Markets,Debt Markets,Economic Theory&Research,Markets and Market Access,Currencies and Exchange Rates
    Date: 2010–09–01
  18. By: Ravallion, Martin
    Abstract: Countries are increasingly being ranked by some new"mashup index of development,"defined as a composite index for which existing theory and practice provides little or no guidance to its design. Thus the index has an unusually large number of moving parts, which the producer is essentially free to set. The parsimony of these indices is often appealing -- collapsing multiple dimensions into just one, yielding unambiguous country rankings, and possibly reducing concerns about measurement errors in the component series. But the meaning, interpretation and robustness of these indices are often unclear. If they are to be properly understood and used, more attention needs to be given to their conceptual foundations, the tradeoffs they embody, the contextual factors relevant to country performance, and the sensitivity of the implied rankings to changing the data and weights. In short, clearer warning signs are needed for users. But even then, nagging doubts remain about the value-added of mashup indices, and their policy relevance, relative to the"dashboard"alternative of monitoring the components separately. Future progress in devising useful new composite indices of development will require that theory catches up with measurement practice.
    Keywords: Economic Theory&Research,Information Security&Privacy,Governance Indicators,Regional Economic Development,Rural Poverty Reduction
    Date: 2010–09–01
  19. By: Adams, Richard H., Jr.; Cuecuecha, Alfredo
    Abstract: This paper analyzes the impact of international remittances on poverty and household consumption and investment using panel data (2000 and 2007) from the Indonesian Family Life Survey. Three key findings emerge. First, using an instrumental variables approach to control for selection and endogeneity, it finds that international remittances have a large statistical effect on reducing poverty in Indonesia. Second, households receiving remittances in 2007 spent more at the margin on one key consumption good -- food -- compared with what they would have spent on this good without the receipt of remittances. Third, households receiving remittances in 2007 spent less at the margin on one important investment good -- housing -- compared with what they would have spent on this good without the receipt of remittances. Households receiving international remittances in Indonesia are poorer than other types of households, and thus they tend to spend their remittances at the margin on consumption rather than investment goods.
    Keywords: Population Policies,Debt Markets,Remittances,Small Area Estimation Poverty Mapping,Rural Poverty Reduction
    Date: 2010–09–01
  20. By: Galina Hale (Federal Reserve Bank of San Francisco and Hong Kong Institute for Monetary Research); Cheryl Long (Colgate University); Hirotaka Miura (Federal Reserve Bank of San Francisco)
    Abstract: Using panel data from Chinese Industrial Surveys of Medium-sized and Large Firms for 2000-06, we show that while there is evidence of positive technological spillovers from FDI, such spillovers are very unevenly distributed. For some industries, there are positive spillovers from FDI presence in the same industry and province, but for others spillovers are negative. There are positive spillovers from FDI presence in upstream and downstream industries, but such spillovers mostly occur in private firms. There are more spillovers from foreign capital that comes from outside the greater China area.
    Keywords: FDI, Spillovers, Forward-Backward Linkages, China
    JEL: L33 F23 O17
    Date: 2010–06
  21. By: Erik Gartzke; Dominic Rohner
    Abstract: Theories of economic development suggest variously that national income increases or decreases the propensity for states to fight, while systematic evidence of the impact of development on warfare is ambiguous or non-existent. The lack of empirical support for nominally opposing claims can be reconciled if elements of both perspectives are partially correct. We use a formal model to construct an explanation linking economic development with interstate conflict that resolves contradictory theories and a relative paucity of evidence. Development increases the ability of states to project power while decreasing the willingness of states to engage in conflict over certain issues. High income states fight less often to conquer tangible assets or territory, but fight more often to compel adherence to preferred policies and to police the global commons.
    Date: 2010–09
  22. By: Sylvie Démurger (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France); Martin Fournier (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France)
    Abstract: This paper discusses the determinants of firewood consumption in a poor township in rural northern China, with a special focus on the relationship between households’ economic wealth and firewood consumption. We find strong support for the poverty-environment hypothesis since household economic wealth is a significant and negative determinant of firewood consumption. Firewood can therefore be considered as an inferior good for the whole population in the rural area under study, although further evidence shows that at the top of the wealth distribution, there might be a floor effect in the decreasing firewood consumption. Besides economic wealth, our analysis also shows that the own-price effect is important in explaining firewood consumption behavior, the price effect gaining importance with rising incomes. Finally, increasing education is also found to be a key factor in energy consumption behavior, especially when dealing with energy source switching behavior.
    Keywords: firewood consumption, poverty, natural resources protection, China
    JEL: Q23 Q28 I31 O12 C3
    Date: 2010
  23. By: Hasan, Lubna
    Abstract: Rule of Law and strong legal systems are considered a pre-condition for sustained development. Their relative weakness in the under-developed world is considered as the main obstacle to growth. Strengthening Rule of Law and legal systems has, therefore, become a standard advice from the developing community. Pakistan, too, has witnessed a surge in demand for Rule of Law in recent years. Capitalizing on this domestically garnered mandate, this paper reviews the legal obstacles to economic growth in Pakistan. It finds significant impediments for growth and market development due to legal shortcomings in the case of Pakistan.
    Keywords: Rule of Law; Legal Development; Economic Growth; Pakistan
    JEL: O43 K10
    Date: 2010–09–30
  24. By: Casey, Gregory P.; Owen, Ann L.
    Abstract: We present evidence that ethnic fragmentation explains variations in per capita income, institutions, and schooling better than income inequality when both are treated as endogenous. To do so, we identify instruments for ethnic fractionalization and income inequality based on historical experience. Using instrumental variables estimation, we find that ethnic fractionalization explains the level of income both when income inequality is included as a control in the estimation and when it is not. However, we find no evidence that income inequality affects the level of income when ethnic fractionalization is properly treated as an endogenous variable. We have similar findings when other development outcomes such as schooling or proxies for institutional quality are used as dependent variables. These results are robust to various controls and changes in the sample size and suggest that some of the previous findings regarding the effect of income inequality on development should be attributed to ethnic fractionalization.
    Keywords: inequality; ethnic fractionalization; colonization
    JEL: O43 O15
    Date: 2010–08
  25. By: Buera, Francisco; Monge-Naranjo, Alexander; Primiceri, Giorgio E.
    Abstract: We study the evolution of market-oriented policies over time and across countries. We consider a model in which own and neighbors' past experiences influence policy choices through their effect on policymakers' beliefs. We estimate the model using a large panel of countries and find that it fits a large fraction of the policy choices observed in the postwar data, including the slow adoption of liberal policies. Our model also predicts that there would be reversals to state intervention if nowadays the world was hit by a shock of the size of the Great Depression.
    Keywords: beliefs; development; growth; market-oriented policy
    JEL: O11 O43 P00
    Date: 2010–09
  26. By: Peter Nunnenkamp (Kiel Institute for the World Economy); Hannes Öhler (Georg-August-University Göttingen)
    Abstract: We assess empirically whether foreign official development assistance (ODA) has been effective in alleviating HIV/AIDS epidemics, which figures prominently among the Millennium Development Goals. We employ a difference-in-difference-in-differences approach to identify the treatment effect of ODA specifically meant to fight sexually transmitted diseases on HIV/AIDS-related outcome variables. We do not find that ODA has prevented new infections to an extent that would have reduced the number of people living with HIV. By contrast, ODA has contributed effectively to the medical care of infected people. However, conclusive evidence on significant treatment effects on AIDS-related deaths only exists for the major bilateral source of ODA, the United States. In particular, targeted US assistance programs appear to be more effective than the activities of multilateral organizations.
    Keywords: HIV prevalence; AIDS-related deaths; official development assistance; aid effectiveness; major donors; difference-in-difference-in-differences
    JEL: F35 I19
    Date: 2010–08–31
  27. By: Felix Povel (Georg-August-University Göttingen)
    Abstract: In this paper we propose a new measure of vulnerability called vulnerability to downside risk. The relevant benchmark for this new measure is the current level of wellbeing of a household as opposed to another benchmark such as the poverty line. We argue that this measure adds complementary information to existing measures such as Calvo and Dercon’s (2007) axiomatic measure of vulnerability to poverty. We apply a measure of both vulnerability to downside risk and to poverty to data from Vietnam. We show that consumption smoothing capacities and the probability to experience an adverse event differ substantially between different wealth groups. Consequently, the relation between initial wealth and vulnerability to downside risk is highly non-linear. While moderately but not extremely poor households are relatively vulnerable to extreme poverty, they are less vulnerable to downside risk than any other group of households.
    Keywords: Vulnerability; Poverty; Shocks; Risk
    JEL: D81 I31 I32 O12
    Date: 2010–09–28
  28. By: Thomas Gries (University of Paderborn); Margarete Redlin (University of Paderborn)
    Abstract: Growth, inequality, and poverty are central elements of the development process. However the mutual effects and directions of causality have been, and remain, one of the most controversial issues. After introducing a simple theoretical framework we derive some fundamental relations between growth, inequality and poverty. In the empirical part we test for unit roots and coin- tegration and apply GMM techniques on an error correction model (ECM) to estimate the pairwise short-run and long-run dynamics for income growth and changes in inequality and poverty in a panel of 114 developing countries and six regional subpanels for 1981 to 2005. The results confirm the relations of the theoretical framework; the evidence shows that in nearly all cases the vari- ables exhibit a short-run and long-run relationship. The findings reveal positive bidirectional causality between growth and inequality as well as between in- equality and poverty, and negative bidirectional causality between growth and poverty. Furthermore, the evidence shows that the level of development affects the poverty-reducing effect of growth, and that growth has benefited the poor regions far less. In summary, we show that growth, income distribution and poverty reduction are strongly inter-related, so a sucessful development strat- egy requires effective, country-specific combinations of growth and distribution policies.
    Keywords: poverty, inequality, growth and development, panel cointegration, panel causality
    JEL: I32 O10 O15
    Date: 2010–09

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