nep-dev New Economics Papers
on Development
Issue of 2010‒10‒16
25 papers chosen by
Mark Lee
Towson University

  1. Inequality and Aggregate Savings in the Neoclassical Growth Model By Reto Foellmi
  2. Growth and Welfare under Endogenous Lifetime By Maik T. Schneider; Ralph Winkler
  3. On Tax Efforts and Colonial Heritage in Africa By Mkandawire, Thandika
  4. Mortality, fertility and elderly care in a gendered growth model By Andreassen Leif
  5. Remittances and competitiveness: the case of the Philippines By Bayangos, V.B.; Jansen, K.
  6. Child labor, agricultural shocks and labor sharing in rural Ethiopia By Debebe, Z.Y.
  7. An assessment of the effects of the 2002 food crisis on children's health in Malawi By Hartwig, R.; Grimm, M.
  8. Determinants of urban job attainment in Kenya across time: education and quality of jobs by gender By Wamuthenya, W.R.
  9. Economic crisis and women’s employment rate in a Sub-Saharan African country: explaining the rise in women’s employment rate in the urban areas of Kenya By Wamuthenya, W.R.
  10. Does inequality in health impede growth? By Grimm, M.
  11. Evaluating India's national rural employment guarantee scheme: the case of Birbhum districts, West Bengal By Dey, S.
  12. Chinese Saving Dynamics: The Impact of GDP Growth and the Dependent Share By Carl Bonham; Call Wiemer
  13. In the Aftermath of Large Natural Disasters, what happens to foreign aid? By Oscar Becerra; Eduardo Cavallo; Ilan Noy
  14. The End of an Era? The Medium- and Long-term Effects of the Global Crisis on Growth in Low-Income Countries By Chris Papageorgiou; Catherine A. Pattillo; Nicola Spatafora; Andrew Berg
  15. Factor Immobility and Regional Impacts of Trade Liberalization Evidence on Poverty from India By Petia Topalova
  16. Does Microfinance Reduce Poverty in Bangladesh? New Evidence from Household Panel Data By Katsushi Imai; Md. Shafiul Azam
  17. In aid we trust : hearts and minds and the Pakistan earthquake of 2005 By Andrabi, Tahir; Das, Jishnu
  18. Identification strategy : a field experiment on dynamic incentives in rural credit markets By Gine, Xavier; Goldberg, Jessica; Yang, Dean
  19. Openness and technological innovation in East Asia : have they increased the demand for skills? By Almeida, Rita K.
  20. Key characteristics of employment regulation in the Middle Eastand North Africa By Angel-Urdinola, Diego F.; Kuddo, Arvo
  21. Quality and quantity of education in the process of development By Amparo Castelló-Climent; Ana Hidalgo-Cabrillana
  22. Skill Premium in Chile: Studying Skill Upgrading in the South By Francisco Gallego
  23. Sudden Stops, Financial Frictions, and Labor Market Flows: Evidence from Latin America By Francisco Gallego; José Tessada
  24. Subjective well-being, income, economic development and growth By Daniel W. Sacks; Betsey Stevenson; Justin Wolfers
  25. Orphanhood and Critical Periods in Children’s Human Capital Formation: Long-Run Evidence from North-Western Tanzania By Jens Hagen; Toman Omar Mahmoud; Natalia Trofimenko

  1. By: Reto Foellmi
    Abstract: Within the context of the neoclassical growth model I investigate the implications of (initial) endowment inequality when the rich have a higher marginal savings rate than the poor. More unequal societies grow faster in the transition process, and therefore exhibit a higher speed of convergence. Furthermore, there is divergence in consumption and lifetime wealth if the rich exhibit a higher intertemporal elasticity of substitution. Unlike the Solow-Stiglitz model, the steady state is always unique although the consumption function is concave.
    Keywords: Marginal propensity to consume; income distribution; growth; concave consumption funktion
    JEL: O40 D30 O10
    Date: 2010–08
  2. By: Maik T. Schneider; Ralph Winkler
    Abstract: We develop a perpetual youth model to investigate how longevity affects economic growth and welfare. Life expectancy is determined by individuals' investments in healthcare. We find that improvements in the healthcare technology always increase the steady state growth rate. Although the effect is small, even for large increases in longevity, welfare gains may be substantial depending on the type of the technological improvement. We identify two externalities associated with healthcare investments and provide a condition when healthcare expenditures are inefficiently low in the market equilibrium. Finally, we discuss our results with respect to alternative spillover specifications in the production sector.
    Keywords: economic growth; endogenous longevity; healthcare expenditures; healthcare technology; quality-quantity trade-off
    JEL: O40 I10 J10
    Date: 2010–09
  3. By: Mkandawire, Thandika (London School of Economics and Political Science. Department of International Development)
    Abstract: <p> One commonly observed phenomena about taxation in Africa are regional differences and the fact that southern African countries have higher levels of shares of taxation in GDP. This article argues that the major source of differences in ‘tax effort’ is the colonial histories of various countries. Using standard measures of ‘tax effort in a panel data framework and dividing colonial Africa along forms of incorporation into the colonial system, it shows that African countries and others with similar colonial histories have higher levels of ‘tax effort’. However, the difference disappears when we control for the colonial factor. These results hold under different model specifications. <p>
    Keywords: taxation; GDP; regional differences; colonial histories; tax effort;
    JEL: O20 O40 O55
    Date: 2010–10–05
  4. By: Andreassen Leif (University of Turin)
    Abstract: The paper studies the interaction of publicly provided care for the elderly on demographic developments. A two-sex OLG model is used to examines how exogenous changes in mortality, the cost of children and the bargaining power of women influence fertility, public and private care for the elderly, and the length of education taken by women and men. The paper focuses especially on the interaction between declining mortality and the expansion of care for the elderly. In the model declining mortality can affect fertility differently according to how developed the economy is. At an early development stage, when public care is little developed, the effect of decreasing mortality on fertility can be positive, while at a later stage with higher levels of public care, the effect can be negative. The model is consistent with observed developments over the last century including fluctuations and decline in fertility, increases in the average age of giving birth, increasing levels of education with lessening differences in the education levels of women and men, increasing incomes, and increased public care for the elderly. In a small open economy where individuals live for five periods with uncertain lifetimes, the choices made by males and females are the result of a combination of utility maximization and negotiation. First, bargaining positions are formed through utility maximization given individual budget constraints, then the Nash bargaining solution determines the number of children and voting determines the level of public care for the elderly, and finally couples maximize a joint household welfare function to determine education, private care for the elderly and consumption. The only exogenous differences between women and men concern mortality, bargaining power and required time devoted to raising young children; otherwise women and men have identical utility functions and opportunities. Functional forms are chosen so that the model has a recursive nature with simple closed form solutions.
    Date: 2010–07
  5. By: Bayangos, V.B.; Jansen, K.
    Abstract: The paper looks at the impact of workersÂ’ remittances on the competitiveness of the receiving economy. It extends existing research that concentrated on the exchange rate effects of remittances, the so-called Dutch disease effect, by adding labour market effects. The results show that the labour market effects of emigration and remittances have a significant impact on competitiveness that goes beyond the traditional exchange rate effect.
    Keywords: remittances;Dutch disease;competitiveness;exchange rate;monetary policy;Philippines
    Date: 2010–02–01
  6. By: Debebe, Z.Y.
    Abstract: The author studies the effect of an agricultural shock and a labor sharing arrangement (informal social network) on child labor. Albeit bad parental preference to child labor (as the strand of literature claims), poor households face compelling situations to send their child to work. This is, especially, true when they are hit by an income shock and face a binding adult labor constraint. The author used panel data from the ERHS and employed a fixed effects model to pin down causal relation between shocks, membership in a labor sharing arrangement and child labor. It was found that child labor is, indeed, a buffer stock. Though a labor sharing arrangement doesnÂ’t affect child labor at normal times, it helps households to lessen the pressure to rely on it when hit by idiosyncratic shocks. While almost the whole effect of these shocks is offset by participation in a labor sharing arrangement, the covariate shock is not. Even if this may well affect a childÂ’s academic performance, school attendance doesnÂ’t decrease. This differential effect of shocks on child labor in participant households might be because of the extra adult labor made available or due to mutual support that comes with these social networks. This paper is indicative of the importance of considering social networks in smoothing out consumption. Further, it highlights the difficulty to cope up with covariate shocks and hence, calls for development interventions that are particularly meant to address their impact.
    Keywords: child labor;shocks;labor sharing;social networks;Ethiopia
    Date: 2010–01–01
  7. By: Hartwig, R.; Grimm, M.
    Abstract: In 2002 Malawi experienced a serious shortage of cereals due to adverse climatic conditions. The World Food Programme assumed that about 2.1 to 3.2 million people were threatened of starvation at that time. However, not much research has been undertaken to investigate the actual consequences of this crisis. In particular, little is known about how the crisis affected the health status of children. Obviously, quantifying the health impact of such a crisis is a serious task given the lack of data and the more general problem of relating outcomes to specific shocks and policies. In this paper a difference-in-difference estimator is used to quantify the impact of the food crisis on the health status of children. The findings suggest that at least in the short run, there was neither a significant impact on child mortality nor on malnutrition. This would suggest that the shock might have been less severe than initially assumed and that the various policy interventions undertaken at the time have been effective or at least sufficient to counteract the immediate effects of the crisis.
    Keywords: child mortality;malnutrition;food crisis;Malawi
    Date: 2010–01–01
  8. By: Wamuthenya, W.R.
    Abstract: Kenya has experienced a sharp decline in formal sector employment and a corresponding increase in informal sector employment. This paper examines the role played by various factors in influencing the sorting of individuals into different sectors of employment in urban Kenya. It examines whether factors influencing the location of individuals in different sectors change over time and differ across gender and thus contributes to an understanding of gender differences in job attainment. The paper complements the issues addressed in two other studies by the author on the remarkable rise in female Labour Force Participation Rate (LFPR) and on the gender gap in the incidence of unemployment. As may be expected, in both periods, experience and education are highly valued in the formal sector. Over time, the importance of education in securing labour market access increases by about 5 and 16 percentage points for primary and secondary education levels respectively. However, there are sharp gender differences. For men, the importance of education increases while for women it declines suggesting the presence of labour market segregation. Over time, the negative effect of marital status on female formal sector participation declines reflecting the increasing insertion of married women in the labour market. Underscoring the use of the informal sector as a last resort option, I find that declines in husbands’ real earnings are associated with a sharp increase in women’s participation in the informal sector. The increasing participation of women in the vulnerable informal sector is consistent with the feminist version of the structuralist characterisation of the informal sector.
    Keywords: formal sector;informal sector;education;gender;labour market segregation;feminist dualist and structuralist views
    Date: 2010–06–01
  9. By: Wamuthenya, W.R.
    Abstract: Focusing on urban Kenya, this paper attempts to identify the sources of the temporal increase in women’s employment rate between 1986 and 1998. The paper relies on labour survey data, household responses to coping strategies and case studies. The analysis presented in the paper shows that the bulk of the increase in women’s insertion into the labour market comes from an increase in the work participation of married women. While women’s higher educational endowments, particularly the increase in secondary education, account for an improvement in their employment prospects, the period also witnesses a sharp decline in the importance given to education in determining employment and by 1998, university graduates were just as likely to be employed as individuals with no education. The period between 1986 and 1998 witnessed civil service reforms, restructuring of the private sector, firm closures and increasing job insecurity. Notwithstanding the role of education, declining opportunities for males, who in 1986 were the primary breadwinners and the accompanying income and employment insecurities within households seem to be the key factors prompting the sharp increase in the labour supply of (married) women. The analysis presented in this paper focused mainly on the period 1986 and 1998 and while more recent data would have provided an updated picture of the issues discussed in this paper, there is little evidence to suggest that the situation of women in Kenya’s labour market has changed substantially in recent years.
    Keywords: deteriorating economic conditions;urban households;coping strategies;women;employment rate;decomposition: composition and structural effects
    Date: 2010–04–01
  10. By: Grimm, M.
    Abstract: This paper investigates the effects of inequality in health on economic growth in low and middle income countries. The empirical part of the paper uses an original cross-national panel data set covering 62 low and middle income countries over the period 1985 to 2007. I find a substantial and relatively robust negative effect of health inequality on income levels and income growth controlling for life expectancy, country and time fixed-effects and a large number of other effects that have been shown to matter for growth. The effect also holds if health inequality is instrumented to circumvent a potential problem of reverse causality. Hence, increasing access to health care for the poor can make a substantial contribution to economic growth not only through its effect on life expectancy but also through its effect on reduced health inequality.
    Keywords: health inequality;health gradient;economic growth
    Date: 2010–05–01
  11. By: Dey, S.
    Abstract: The worldÂ’s biggest Employment Guarantee Programme, IndiaÂ’s National Rural Employment Guarantee Scheme (NREGS) has been in operation in rural India since February 2006. In principle, the scheme is a self-targeted programme designed to provide 100 days of employment to rural households and to serve as a safety net. More broadly its aim is to reduce rural poverty through the creation of sustainable rural infrastructure which is expected to foster rural economic growth. This study looks at the performance of the NREGS from three perspectives - it examines the targeting aspect of the programme, the efficiency of the implementing PRI bodies and the impact of the program on various outcomes at household level. The study is based on primary data collected from 500 randomly selected households, 2249 individuals and 70 schemes located in 13 Gram Panchayats in Birbhum District of West Bengal, India. On the basis of this primary data, the study reveals that at least in Birbhum District the programme is far more likely to be accessed by poorer households (defined in terms of land holding, monthly per-capita income and other household related characteristics). At the same time there is a clear and substantial impact of left political inclination in terms of enabling access to a greater number of days of work under the scheme. In terms of the efficiency impact, the analysis reveals a clear violation of the formal clauses and the spirit of the NREG Act and thereby undermining the potential of the programme in terms of providing a safety net. In terms of the impact, the study finds no statistically significant impact on economic outcomes at household level but does find a statistically significant and substantial relation between reduction of stress related to joblessness and access to the NREGS. The estimates suggest that while the NREGS may not be creating any new employment, and may indeed be substituting for existing employment opportunities, the scheme is still considered valuable as it offers better working conditions.
    Keywords: NREGS;targeting;efficiency;impact;labour-substitution;Birbhum;West Bengal
    Date: 2010–01–01
  12. By: Carl Bonham (University of Hawaii at Manoa, Department of Economics; University of Hawaii Economic Research Organization (UHERO)); Call Wiemer (University of California, Los Angeles, Center for Chinese Studies)
    Abstract: China’s national saving rate rose rapidly in the 2000s after declining through the late 1990s. These dynamics are not explained by precautionary motives, the institutional distribution of income, or reform related processes in general. Rather, we find a compelling explanation lies with GDP growth fluctuations and movement in the dependent share in population. We estimate a vector autoregressive model for the period 1978-2008, then generate in-sample simulations that successfully replicate the 2000s runup in the saving rate. Our out of sample forecasts show the saving rate dropping in the 2010s as the dependency share falls and GDP growth moderates.
    JEL: C32 E21 O11 O53
    Date: 2010–07–29
  13. By: Oscar Becerra (Inter-American Development Bank); Eduardo Cavallo (Inter-American Development Bank); Ilan Noy (University of Hawaii at Manoa, Department of Economics)
    Abstract: We examine Official Development Assistance (ODA) in the aftermath of large natural disasters in developing countries between 1970 and 2008. We find that while ODA increases significantly compared to pre-disaster flows, the typical surges are small in relation to the size of the affected economies or the estimated economic damages. Moreover, we find that the size of the surges is related to the catastrophic nature of the event itself and the lack of other resources available to the affected countries. However, we do not find robust evidence that political affinity between donors and affected countries, and common geo-strategic interests, matter for the allocation of post disaster aid.
    Keywords: Natural Disasters, Foreign Aid, Official Development Assistance (ODA), event study.
    JEL: Q54 F35
    Date: 2010–09–15
  14. By: Chris Papageorgiou; Catherine A. Pattillo; Nicola Spatafora; Andrew Berg
    Abstract: This paper investigates the medium- and long-term growth effects of the global financial crises on Low-Income Countries (LICs). Using several methodological approaches, including impulse response function analysis, growth spells techniques and panel regressions, we show that external demand (ED) shocks are not historically associated with sharp declines in output growth. Given existing evidence that LICs were primarily impacted by such a shock in the global financial crisis, our analysis provides some optimism on the chances that LICs will avoid a protracted period of slow growth. However, we also show that there seem to be persistent output losses associated with ED shocks in the medium-run. In terms of policy implications, our analysis provides evidence that countries with lower deficits, lower debt, more flexible exchange rate regimes, and a higher stock of international reserves are more likely to dampen the effects of an ED shock on growth.
    Keywords: Demand , Economic growth , External shocks , Financial crisis , Global Financial Crisis 2008-2009 , Low-income developing countries ,
    Date: 2010–09–07
  15. By: Petia Topalova
    Abstract: This paper uses the 1991 Indian trade liberalization to measure the impact of trade liberalization on poverty, and to examine the mechanisms underpinning this impact. Variation in sectoral composition across districts and liberalization intensity across production sectors allows a difference-in-difference approach. Rural districts, in which production sectors more exposed to liberalization were concentrated, experienced slower decline in poverty and lower consumption growth. The impact of liberalization was most pronounced among the least geographically mobile, at the bottom of the income distribution, and in Indian states where inflexible labor laws impeded factor reallocation across sectors.
    Keywords: Fiscal reforms , Income distribution , India , International trade , Nontariff barriers , Poverty , Private consumption , Protectionism , Tariffs , Trade liberalization , Trade policy ,
    Date: 2010–09–22
  16. By: Katsushi Imai; Md. Shafiul Azam
    Date: 2010
  17. By: Andrabi, Tahir; Das, Jishnu
    Abstract: Winning"hearts and minds"inthe Muslim world is an explicitly acknowledged aim of U.S. foreign policy and increasingly, bilateral foreign aid is recognized as a vehicle towards this end. The authors examine the effect of aid from foreign organizations and on-the-ground presence of foreigners following the 2005 earthquake in Northern Pakistan on local attitudes. They show that four years after the earthquake, humanitarian assistance by foreigners and foreign organizations has left a lasting imprint on population attitudes. Measured in three different ways those living closer to the fault-line report more positive attitudes towards foreigners, including Europeans and Americans; trust in foreigners decreases 6 percentage points for every 10 Kilometers distance from the fault-line. In contrast, there is no association between distance to the fault-line and trust in local populations. Pre-existing differences in socioeconomic characteristics or population attitudes do not account for this finding. Instead, the relationship between trust in foreigners and proximity to the fault-line mirrors the greater provision of foreign aid and foreign presence in these villages. In villages closest to the fault-line, foreign organizations were the second largest providers of aid after the Pakistan army (despite reports to the contrary aid provision by militant organizations was extremely limited, with less than 1 percent of all respondents reporting any help from such organizations). The results provide a compelling case that trust in foreigners is malleable, responds to humanitarian actions by foreigners and is not a deep-rooted function of local preferences.
    Keywords: Post Conflict Reconstruction,Corporate Law,Population Policies,Hazard Risk Management,Statistical&Mathematical Sciences
    Date: 2010–10–01
  18. By: Gine, Xavier; Goldberg, Jessica; Yang, Dean
    Abstract: How do borrowers respond to improvements in a lender's ability to punish defaulters? This paper reports the results of a randomized field experiment in rural Malawi that examines the impact of fingerprinting borrowers in a context where a unique identification system is absent. Fingerprinting allows the lender to more effectively use dynamic repayment incentives: withholding future loans from past defaulters while rewarding good borrowers with better loan terms. Consistent with a simple model of borrower heterogeneity and information asymmetries, fingerprinting led to substantially higher repayment rates for borrowers with the highest ex ante default risk, but had no effect for the rest of the borrowers. The change in repayment rates is driven by reductions in adverse selection (smaller loan sizes) and lower moral hazard (for example, less diversion of loan-financed fertilizer from its intended use on the cash crop).
    Keywords: Access to Finance,Debt Markets,Bankruptcy and Resolution of Financial Distress,Microfinance,Economic Theory&Research
    Date: 2010–10–01
  19. By: Almeida, Rita K.
    Abstract: This paper asks whether the increased openness and technological innovation in East Asia have contributed to an increased demand for skills in the region. The author explores a unique firm level data set across eight countries. Results strongly support the idea that greater openness and technology adoption have increased the demand for skills, especially in middle income countries. Moreover, while the presence in international markets has been skill enhancing for most middle income countries, this has not been the case for manufacturing firms operating in China and in low-income countries. If international integration in the region intensifies further and technology continues to be skilled biased, policies aimed at mitigating skills shortages in the region should produce continual and persistent increases in skills.
    Keywords: Labor Markets,Labor Policies,Technology Industry,Emerging Markets,Economic Theory&Research
    Date: 2009–10–01
  20. By: Angel-Urdinola, Diego F.; Kuddo, Arvo
    Abstract: This note provides a general background of the main features of labor regulation in the Middle East and North Africa (MENA) and benchmarks them against international best practices. The note compiles information on available labor laws and other legal acts concerning employment protection regulation. Within the broader scope of labor regulation, and in order to assure regional comparability, information collected focuses on key issues in the labor law associated with commencing or terminating employment and during the period of employment (including maternity benefits). The main sources the data are the World Bank doing business 2010 and International Labour Organisation (ILO) databank. This note is a tool to provide policymakers and international organizations with a regional diagnose of how labor regulation affects labor market outcomes in MENA and inform client governments about strategic approaches to employment creation through labor policy and reform. This activity comes as a response to regional priorities in the context of the Arab World Initiative (AWI). One of the six strategic themes of the AWI focuses explicitly on employment creation as a top priority. Part of the World Bank's mandate under the AWI is to inform client governments about strategic approaches to employment creation through labor policy and reform.
    Keywords: Labor Markets,Labor Policies,Labor Standards,Work&Working Conditions,Labor Management and Relations
    Date: 2010–07–01
  21. By: Amparo Castelló-Climent; Ana Hidalgo-Cabrillana
    Abstract: We develop a theory of human capital investment to study through which channels students react to school quality when deciding about their investment in higher education (secondary and above) and how educational quality affects the growth process of an economy. In a dynamic general equilibrium closed economy. higher education requires an extra investment of private resources. whereas primary education is mandatory. The theory states that human capital accumulation raises with quality through two main effects: larger quality increases the number ofpeople with higher education (extensive channel). and it increases the volume of investment in higher schooling per individual (intensive channel). That is. even with perfect capital markets. relatively low quality could discourage opportunities to pursue education beyond primary school. since low quality decreases the returns from higher education. As a result, agents could get stuck at primary levels. The intensive channel establishes that once individuals decide to participate in higher schooling. the larger the quality of educational system. the larger the investment made by each agent. Educational quality may allow for different steps of development and that depending on quality the economy may follow different paths, Using cross-country data, empirical evidence shows that the proposed channels seem to be quantitatively important and that the effect of quality and quantity of education on growth depends on the stage of development.
    Keywords: Quality of education, Human capital composition, Economic growth
    JEL: I21 O11 O15 O4
    Date: 2010–09
  22. By: Francisco Gallego (Instituto de Economía. Pontificia Universidad Católica de Chile.)
    Abstract: The evolution of the skill premium (i.e., the wage differential between skilled and unskilled workers) has interest from at least two perspectives: it is a rough measure of inequality among workers of different qualifications and provides information on the characteristics of the development process of the economy. In this paper, I investigate empirically the evolution of the skill premium in Chile over the last 40 years. After some fluctuations in the 1960s and 1970s, the skill premium increased in the 1980s and has remained roughly constant since then. The data suggest that this evolution is an outcome of a significant increase in relative demand for skilled workers in the 1980s and 1990s and a sizeable increase in the relative supply in the 1990s. Sectoral evidence shows that, after controlling for sector and time effects, (i) the relative demand increased faster in the same industries in Chile than in the US and (ii) the correlation is stronger for tradable industries and non-tradable industries that are intensive in imported capital, as expected. This result is consistent with a number of theories that link skill up- grading in developed and developing countries. To try to disentangle among these theories, I present time series evidence suggesting that, after controlling for other determinants of skill premium, not only there is a positive correlation between skill premium in Chile and in the US but also the size of the correlation is consistent with the Acemoglu (2003a) model of endogenous technological choice in which new technologies are produced in developed countries (like the US) and adopted in developing economies (like Chile).
    Date: 2010
  23. By: Francisco Gallego (Instituto de Economía. Pontificia Universidad Católica de Chile.); José Tessada
    Abstract: Sudden stops and international financial crises have been a main feature of developing countries in the last three decades. While their aggregate effects are well known, the disaggregated channels through which they work are not well explored yet. In this paper, we study the sectoral responses that take place over episodes of sudden stops. Using job flows from a sectoral panel dataset for four Latin American countries, we find that sudden stops are characterized as periods of lower job creation and increased job destruction. Moreover, these effects are heterogeneous across sectors: we find that when a sudden stop occurs, sectors with higher dependence on external financing experience lower job creation. In turn, sectors with higher liquidity needs experience significantly larger job destruction. This evidence is consistent with the idea that dependence on external financing affects mainly the creation margin and that exposure to liquidity conditions affects mainly the destruction margin. Overall, our results confirm the large labor market effects of sudden stops, and provide evidence of financial conditions being an important transmission channel of sudden stops within a country, highlighting the role of financial frictions in the restructuring process in general.
    Date: 2010
  24. By: Daniel W. Sacks; Betsey Stevenson; Justin Wolfers
    Abstract: We explore the relationships between subjective well-being and income, as seen across individuals within a given country, between countries in a given year, and as a country grows through time. We show that richer individuals in a given country are more satisfied with their lives than are poorer individuals, and establish that this relationship is similar in most countries around the world. Turning to the relationship between countries, we show that average life satisfaction is higher in countries with greater GDP per capita. The magnitude of the satisfaction-income gradient is roughly the same whether we compare individuals or countries, suggesting that absolute income plays an important role in influencing well-being. Finally, studying changes in satisfaction over time, we find that as countries experience economic growth, their citizens‘ life satisfaction typically grows, and that those countries experiencing more rapid economic growth also tend to experience more rapid growth in life satisfaction. These results together suggest that measured subjective well-being grows hand in hand with material living standards.>
    Keywords: Well-being - Economic aspects
    Date: 2010
  25. By: Jens Hagen; Toman Omar Mahmoud; Natalia Trofimenko
    Abstract: Losing a parent is a trauma that has consequences for human capital formation. Does it matter at what age this trauma occurs? Using longitudinal data from the Kagera region in Tanzania that span thirteen years from 1991-2004, we find considerable impact heterogeneity across age at bereavement, but less so for the death of opposite-sex parents. In terms of long-term health status as measured by body height, children who lose their same-sex parent before teenage years are hit hardest. Regarding years of formal education attained in young adulthood, boys whose fathers die before adolescence suffer the most. Maternal bereavement does not fit into this pattern as it affects educational attainment of younger and older children in a similar way. The generally strong interaction between age at parental death and sex of the late parent suggests that the preferences of the surviving parent partly protect same-sex children from orphanhood’s detrimental effects on human capital accumulation
    Keywords: orphans, health, education, timing of parental death, child development, Tanzania
    JEL: I10 I21 J19 C23
    Date: 2010–09

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