nep-dev New Economics Papers
on Development
Issue of 2010‒11‒20
seventeen papers chosen by
Mark Lee
Towson University

  1. Microfinance and Poverty -A Macro Perspective By Katsushi S. Imai; Raghav Gaiha; Ganesh Thapa; Samuel Kobina Annim
  2. The Dynamic Change in Wage Gap between Urban Residents and Rural Migrants in Chinese Cities By Dandan Zhang; Xin Meng; Dewen Wang
  3. War and Poverty By Patricia Justino
  4. When the remedy is worse than the disease: Adjusting survey income data for price differentials, with special reference to Mozambique By Carlos Maia; Servaas van der Berg
  5. Assessing Corruption: Expert Surveys versus Household Surveys, Filling the Gap By Thomas Roca
  6. China in Africa: A Macroeconomic Perspective By Benedicte Vibe Christensen
  7. Remittances, Schooling, and Child Labor in Mexico By Carlo Alcaraz; Daniel Chiquiar; Alejandrina Salcedo
  8. Protecting child nutritional status in the aftermath of a financial crisis : evidence from Indonesia By Giles, John; Satriawan, Elan
  9. Climate proofing infrastructure in Bangladesh : the incremental cost of limiting future inland monsoon flood damage By Dasgupta, Susmita; Huq, Mainul; Khan, Zahirul Huq; Masud, Md. Sohel; Ahmed, Manjur Murshed Zahid; Mukherjee, Nandan; Pandey, Kiran
  10. Measures of fixed capital in agriculture By Butzer, Rita; Mundlak, Yair; Larson, Donald F.
  11. Who Benefits from Promoting Small Enterprises? Some Empirical Evidence from Ethiopia.. By Rijkers, Bob; Ruggeri Laderchi, Caterina; Teal, Francis
  12. Intrinsic motivations and the non-profit health sector: Evidence from Ethiopia.. By Serra, Danila; Serneels, Pieter; Barr, Abigail
  13. Does the Rotten Child Spoil His Companion? Spatial Peer Effects Among Children in Rural India By Christian Helmers; Manasa Patnam
  14. Towards the Resilient Region?: Policy Activism and Peripheral Region Development By Stuart Dawley; Andy Pike; John Tomaney
  15. Do remittances dampen the effect of natural disasters on output growth volatility in developing countries? By Jean-Louis COMBES; Christian EBEKE
  16. Identifying the Income-Poor: Some Controversies in India and Elsewhere By Sreenivasan Subramanian
  17. Foreign Aid and Recipient Countries` Exports: Does Aid Promote Bilateral Trade? By Felicitas Nowak-Lehmann D.; Inmaculada Martinez-Zarzoso; Adriana Cardozo; Dierk Herzer; Stephan Klasen

  1. 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 cross-country and panel data, based on the Microfinance Information Exchange (MIX) data on MFIs and the new World Bank poverty estimates. Taking account of the endogeneity associated with loans from MFIs, our econometric analysis shows that a country with higher MFIs' gross loan portfolio tends to have lower levels of FGT class of poverty indices. Contrary to recent micro evidence based on randomised evaluations pointing to no or weak effect on poverty, there is robust confirmation of the poverty reducing role of microfinance. Significantly, microfinance loans are negatively associated with not only the poverty headcount ratio, but also with the poverty gap and squared poverty gap, implying that even the poorest benefit from them. The case for channelling funds from development finance institutions and governments of developing countries into MFIs is thus reinforced. Our assessment has added significance as the tide seems to be turning against microfinance as a means of poverty alleviation.
    Date: 2010–10
  2. By: Dandan Zhang; Xin Meng; Dewen Wang
    Abstract: Although a significant wage gap has been found in many previous studies between urban workers and rural migrants in Chinese cities, it is still not clear how such a wage gap may evolve over time. This paper uses both a dynamic wage decomposition method and economic assimilation model with pooled cross-sectional data from the China Household Income Project Survey (CHIPS) of 1999 and 2002 to investigate the change in the wage gap between urban workers and rural migrants over time and its determinants in Chinese cities. The estimation results show that (1) there is a widening on-average wage gap between urban workers and rural migrants across the two surveyed years in Chinese cities, mainly caused by the decline in the return to education for rural migrants; (2) rural migrants can catch up with the wage level of their urban counterparts as the time they reside in the host cities increases, but because of the decline in the speed of catching-up over time, rural migrants cannot obtain wages comparable totheir urban counterparts in their life time, and more importantly well-educated rural migrants do not seem to have a significant advantage in this wage assimilation process than the lowlypoorly-educated ones. Both findings suggest that there might be discrimination against well-educated rural migrants which prevents them from obtaining a fair wage in the Chinese urban labour market.
    Keywords: Wage differential, Migration
    JEL: J31 J61
    Date: 2010
  3. By: Patricia Justino
    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
  4. By: Carlos Maia (Department of Economics, University of Stellenbosch); Servaas van der Berg (Department of Economics, University of Stellenbosch)
    Abstract: In using survey data for money metric analysis of poverty and well-being, it is customary to adjust either the data or the poverty line for spatial prices differentials where data exist to make such adjustment. In developing countries where recorded price differentials between regions or provinces are large, using the remedy of adjusting for price differentials may sometimes lead to very wrong conclusions about the spatial distribution of poverty. This may have severe consequences for policy and may be detrimental to the poor. The paper deals with a specific situation, that of Mozambique, where large price differentials are said to exist between the capital (Maputo City) on the one hand, and the rest of the country. Official data that adjust for this may heavily over-estimate poverty in Maputo City, with consequences for the targeting of poverty. We use an asset index based on Multiple Correspondence Analysis (MCA) to show that the spatial poverty profile derived from the price-adjusted income data exaggerates poverty in Maputo City, and undertake further empirical analysis to show that not adjusting for the estimated spatial price differentials may have given more reliable estimates of well-being, judging by asset holdings.
    Keywords: Mozambique, poverty, prices differentials, multiple correspondence analysis
    JEL: I32
    Date: 2010
  5. By: Thomas Roca (GED, Université Montesquieu Bordeaux IV)
    Abstract: La mesure de la gouvernance est une source d’occupation relativement nouvelle pour les économistes. Le World Bank Institute a ouvert la voie à la fin des années 90 avec la désormais célèbre suite “Governance Matters”, I, II, III, IV… Le peu d’imagination de KKZ1 dans le choix du titre de leurs publications cache, en réalité, les plus populaires des indicateurs de gouvernance. L’accent mis sur la corruption pourrait, lui aussi, revendiquer la paternité de la Banque mondiale dans la mesure où l’on doit la création de Transparency International à Peter Eigen ancien cadre de la Banque, mais également, à James Wolfensohn, premier directeur de la Banque à s’intéresser au fléau de la corruption, dans un contexte de « de-géopolitisation » de l’aide au développement. Avec les prémices de la systématisation des enquêtes ménages, une nouvelle manière de mesurer la gouvernance voit le jour. Si les enquêtes menées auprès de la population peuvent constituer un outil intéressant pour évaluer la qualité des institutions, cette prise en compte de l’opinion des populations introduit de nouveaux écueils. Cette étude vise à analyser l’écart de perception entre experts et populations, en matière de corruption. En effet, les enquêtes d’experts et les enquêtes ménages s’accordent difficilement dans leurs estimations de l’étendue de la corruption. Nous suggérons que la liberté de la presse, la culture, la tolérance et la confiance envers les dirigeants puissent venir fausser les pistes. Governance measurement is a relatively new source of entertainment for economists. The World Bank Institute paved the way in the late 90`s with the now famous suite “Governance Matters”, I, II, III, IV… The little imagination of KKZ, regarding the choice of their publications title, hides the most popular aggregated governance indicators. Corruption focus could also claim World Bank parenthood since Transparency International birth was the fruit of a former “affair” between James Wolfensohn and Peter Eigen. With the prelude to household surveys systematization, a new way to measure governance and corruption saw the day. If household surveys may stand for an interesting tool for institutional assessment, populations’ opinions also introduce new pitfalls. This study aims to investigate the gap between expert and household surveys regarding corruption measurement. Indeed, experts and populations barely agree on their estimations of corruption extent. We suggest that press freedom, culture, permissiveness and leadership approval may cover one’s track.(Full text in french)
    JEL: O11 O17 O19
    Date: 2010–11
  6. By: Benedicte Vibe Christensen
    Abstract: In recent years, China has dramatically expanded its financing and foreign direct investment to Africa. This expansion has served the political and economic interests of China while providing Africa with much-needed technology and financial resources. This paper looks at China’s role in Africa from the Chinese perspective. [Working Paper No. 230].
    Keywords: china, chinese, africa, political, economic, technology, financial resources, macroeconoic, african, global environment, trade,
    Date: 2010
  7. By: Carlo Alcaraz; Daniel Chiquiar; Alejandrina Salcedo
    Abstract: This paper studies the effects of remittances from the U.S. on child labor and school attendance in recipient Mexican households. We identify these effects using the impact of the 2008-2009 U.S. recession on remittance receipts. The methodology employed is a differences-in-differences strategy that compares households that were remittance recipients before the crisis with never-recipient households. To avoid possible selection problems, we instrument for membership in the remittance recipient group. We find that the negative shock on remittance receipts caused a significant increase in child labor and a significant reduction of school attendance.
    Keywords: Child labor, International migration, Remittances, Mexico.
    JEL: J43 J81 O15
    Date: 2010–10
  8. By: Giles, John; Satriawan, Elan
    Abstract: This paper exploits heterogeneity in program exposure to evaluate the effectiveness of a supplementary feeding program implemented in the wake of the 1997-1998 economic crises in Indonesia. The explicit aim of the program was to protect the nutritional status of infants and young children from adverse effects of the crisis. The use of heterogeneity in program exposure has several advantages for identifying the impact of the program. First, the analysis avoids the strong assumption that all targeted children experienced homogenous exposure to the program, and facilitates identification in a setting in which nearly all communities experienced some exposure. Second, by exploiting child age and program eligibility rules, the paper estimates models with community fixed effects and thus avoid bias introduced as a result of endogenous program placement. The analysis finds that the program improved the nutritional status of children 12 to 24 months of age at the time of the survey in 2000, and helped to avoid problems of severe malnutrition among young children.
    Keywords: Health Monitoring&Evaluation,Youth and Governance,Housing&Human Habitats,Population Policies,Social Cohesion
    Date: 2010–11–01
  9. By: Dasgupta, Susmita; Huq, Mainul; Khan, Zahirul Huq; Masud, Md. Sohel; Ahmed, Manjur Murshed Zahid; Mukherjee, Nandan; Pandey, Kiran
    Abstract: Two-thirds of Bangladesh is less than 5 meters above sea level, making it one of the most flood prone countries in the world. Severe flooding during a monsoon causes significant damage to crops and property, with severe adverse impacts on rural livelihoods. Future climate change seems likely to increase the destructive power of monsoon floods. This paper examines the potential cost of offsetting increased flooding risk from climate change, based on simulations from a climate model of extreme floods out to 2050. Using the 1998 flood as a benchmark for evaluating additional protection measures, the authors calculate conservatively that necessary capital investments out to 2050 would total US$2,671 million (at 2009 prices) to protect roads and railways, river embankments surrounding agricultural lands, and drainage systems and erosion control measures for major towns. With gradual climate change, however, required investments would be phased. Beyond these capital-intensive investments, improved policies, planning and institutions are essential to ensure that such investments are used correctly and yield the expected benefits. Particular attention is needed to the robustness of benefits from large-scale fixed capital investments. Investments in increased understanding of risk-mitigation options and in economic mobility will have especially high returns.
    Keywords: Hazard Risk Management,Transport Economics Policy&Planning,Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Economics
    Date: 2010–11–01
  10. By: Butzer, Rita; Mundlak, Yair; Larson, Donald F.
    Abstract: Capital is a fundamental component of agricultural production, and the accumulation of capital is key to growth in agriculture and the process of development. Unfortunately, cross-country data sets on agricultural fixed capital are rare. Using a common methodology that allows comparisons across countries, as well as over time, this paper introduces a data series on fixed capital in agriculture, based on national accounts data. The fixed capital measure differs remarkably from the Food and Agriculture Organization's data series on tractors, which has been widely utilized as a proxy for agricultural fixed capital. The authors construct comparable measures of capital in livestock and tree stock. They examine the evolution of the capital stocks from 1970 to 2000, paying particular attention to the changing composition of agricultural capital, as well as differences in the accumulation of capital for high-income and middle and lower-income countries. Using the capital measures in agricultural productivity analyses, the data yield estimated input elasticities substantially different from those found previously in the literature. The authors show explicitly that this is due to the improved data set on agricultural capital stocks, as well as the methodology used in the study.
    Keywords: Economic Theory&Research,Investment and Investment Climate,Rural Development Knowledge&Information Systems,Economic Growth,Emerging Markets
    Date: 2010–11–01
  11. By: Rijkers, Bob; Ruggeri Laderchi, Caterina; Teal, Francis
    Abstract: The Addis Ababa Integrated Housing Development Program (AAIHDP) aims to tackle the housing shortage and unemployment that prevail in Addis Ababa by deploying and supporting small enterprises to construct low-cost housing using technologies novel for Ethiopia. The motivation for such support is predicated on the view that small firms create more jobs per unit of investment by virtue of being more labor intensive and that the jobs so created are concentrated among the low-skilled and hence the poor. To assess whether the program has succeeded in biasing technology adoption in favor of labor and thereby contributed to poverty reduction, the impact of the program on technology usage, labor intensity, and earnings is investigated using a unique matched workers-firms dataset, the Addis Ababa Construction Enterprise Survey (AACES), collected specifically for the purpose of analyzing the impact of the program. We find that program firms do not adopt different technologies and are not more labor intensive than nonprogram firms. There is an earnings premium for program participants, who tend to be relatively well educated, which is heterogeneous and highest for those at the bottom of the earnings distribution.
    Date: 2010
  12. By: Serra, Danila; Serneels, Pieter; Barr, Abigail
    Abstract: Economists have traditionally assumed that individual behavior is motivated exclusively by extrinsic incentives. Social psychologists, in contrast, stress that intrinsic motivations are also important. In recent work, economic theorists have started to build psychological factors, like intrinsic motivations, into their models. Besley and Ghatak (2005) propose that individuals are differently motivated in that they have different “missions,” and their self-selection into sectors or organizations with matching missions enhances organizational efficiency. We test Besley and Ghatak’s model using data from a unique cohort study. We generate two proxies for intrinsic motivations: a survey-based measure of the health professionals philanthropic motivations and an experimental measure of their pro-social motivations. We find that both proxies predict health professionals’ decision to work in the non-profit sector. We also find that philanthropic health workers employed in the non-profit sector earn lower wages than their colleagues.
    JEL: I11 J24 C93
    Date: 2010
  13. By: Christian Helmers; Manasa Patnam
    Abstract: This paper identifies the effect of neighborhood peer groups on childhood skill acquisitionusing observational data. We incorporate spatial peer interaction, defined as a child's nearestgeographical neighbors, into a production function of child cognitive development in AndhraPradesh, India. Our peer group construction takes the form of directed networks, whosestructure allows us to identify peer effects and enables us to disentangle endogenous effectsfrom contextual effects. We exploit variation over time to avoid confounding correlated withsocial effects. Our results suggest that spatial peer and neighborhood effects are stronglypositively associated with a child's cognitive skill formation. These peer effects hold evenwhen we consider an alternative IV-based identification strategy and different variations tonetwork size. Further, we find that the presence of peer groups helps provide insuranceagainst the negative impact of idiosyncratic shocks to child learning.
    Keywords: Children, peer effects, cognitive skills, India
    JEL: C21 O15 R23
    Date: 2010–10
  14. By: Stuart Dawley; Andy Pike; John Tomaney
    Abstract: Discussions of local and regional development have recently broadened from apreoccupation with growth to one which captures the notion of resilience. This papermakes two main contributions to these debates. First, the paper critiques staticequilibrium-based notions of resilience and instead advances a more dynamicevolutionary approach to explain local and regional resilience. Second, we seek toaddress the widening gap between resilience thinking and its transfer to practical policyprescription. To do this, we explore the notions of adaptability, adaptive capacity andnew path creation in developing local and regional resilience. We then focus upon whatthis might mean for local and regional strategies and draw on the case study of theRenewable Energy sector in North East England to demonstrate the enduring role ofpolicy intervention in stimulating change and building resilience in peripheral regions.
    Keywords: Resilience, adaptability, adaptation
    JEL: O10 R00
    Date: 2010–09
  15. By: Jean-Louis COMBES (Centre d'Etudes et de Recherches sur le Développement International); Christian EBEKE
    Abstract: This paper analyzes the impact of natural disasters on the output growth volatility. Using a large sample of developing countries and mobilizing a dynamic panel data framework, it uncovers a diminishing macroeconomic destabilizing consequence of natural disasters as remittance inflows rise. It appears that the effect of natural disasters disappears for a remittance ratio above 8% of GDP. However, remittances aggravate the destabilizing effects of natural disasters when they exceed 17% of GDP.
    Keywords: Natural disasters, output growth volatility, Remittances
    JEL: Q54 E32 F20
    Date: 2010
  16. By: Sreenivasan Subramanian (Madras Institute of Development Studies)
    Abstract: Conventional approaches to the measurement of income-poverty require the ability to identify the poor by reference to a specified poverty line. On the face of it, it may appear to be unproblematic to specify such a poverty line. There are, however, analytical and conceptual difficulties entailed in the identification exercise of poverty measurement, and many of these difficulties have to do with the determination of the appropriate space in which to seek invariance of the poverty standard in terms of which poverty comparisons can be effected. These conceptual niggles have been a feature of the actual experience of the evolution of money-metric poverty lines in concrete historical settings. This essay reviews and critically interprets the Indian experience of poverty estimation with specific reference to the identification problem as it has been addressed in the country in the last fifty or so years. The essay also briefly engages with aspects of the record, in this regard, of the United States Federal Government’s poverty thresholds and the World Bank’s international poverty lines. An attempt is made to locate the analytical basis of the conceptual difficulties informing the identification exercise, and to relate this to the confusions and controversies that have attended many of the actual efforts in India and elsewhere to assess the magnitudes, spatial distribution, and temporal trends of money-metric poverty. Finally, the essay also advances an alternative practical proposal for the measurement of poverty which avoids the identification exercise altogether, and incorporates within itself aspects of the notions of both relative inequality and inclusive growth. This approach is certainly not exempt from conceptual difficulties of its own. It is, nevertheless, worth asking if the directness and simplicity of this alternative prescription, combined with the conceptual and practical difficulties which also inform the conventional approach to the identification problem, may constitute grounds for submitting the proposal to at least a preliminary consideration. It remains to add that this essay draws very heavily on earlier work done by the author on its subject of enquiry.
    Keywords: money-metric poverty line; resources; capabilities; evolution of Indian poverty line; US poverty thresholds; the World Bank poverty line; alternative approach to measuring poverty; quintile income
    JEL: D30 I30 I32 O15
    Date: 2010–11–11
  17. By: Felicitas Nowak-Lehmann D. (Georg-August-Universität Göttingen, Germany); Inmaculada Martinez-Zarzoso (Georg-August-Universität Göttingen, Germany); Adriana Cardozo; Dierk Herzer (Schumpeter School of Business and Economis, Wuppertal / Germany); Stephan Klasen (Georg-August-Universität Göttingen / Germany)
    Abstract: This paper uses the gravity model of trade to investigate the link between foreign aid and exports in recipient countries. Most of the theoretical work emphasizes the negative impact of aid on recipient countries’ exports primarily due to exchange rate appreciation, disregarding possible positive effects of aid in promoting bilateral trade relations. The empirical findings, in contrast, indicate that the net impact of aid on recipient countries’ exports is positive -even though the macroeconomic impact of aid is rather small- and that the average return for recipients’ exports is about 1.50 US$ for every aid dollar spent. We argue that “bilateral aid” seems to promote good bilateral trade relations, mutual trust and familiarity and that those factors reinforce bilateral trade, including recipient country exports. The paper also estimates the effect of different types of aid (bilateral aid versus multilateral aid flowing to a specific recipient) and studies aid’s contribution to an expansion of exports in different regions of the world. It is found that aid is strongly export-enhancing in Asia and Latin America, but not in Africa.
    Keywords: International trade; foreign aid; recipient exports; bilateral trade relations
    JEL: F10 F35
    Date: 2010–11–10

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