nep-dev New Economics Papers
on Development
Issue of 2010‒12‒11
ten papers chosen by
Mark Lee
Towson University

  1. Does relative income matter for the very poor? - Evidence from rural Ethiopia By Akay, Alpaslan; Martinsson, Peter
  2. Remittances and Financial Openness By Michel Beine; Elisabetta Lodigiani; Robert Vermuelen
  3. Total Public Debt and Growth in Developing Countries By Andrea F. Presbitero
  4. Natural disasters and household welfare : evidence from Vietnam By Thomas, Timothy; Christiaensen, Luc; Do, Quy Toan; Trung, Le Dang
  5. Antiretroviral therapy awareness and risky sexual behaviors : evidence from Mozambique By de Walque, Damien; Kazianga, Harounan; Over, Mead
  6. Productive Development Policies in Latin America and the Caribbean: The Case of Mexico By Veronica Baz; Maria Cristina Capelo; Rodrigo Centeno; Ricardo Estrada
  7. Assets, Shocks, and Poverty Traps in Rural Mozambique By Lena Giesbert; Kati Schindler
  8. Attitudes to Chronic Poverty in the “Global Village” By Armando Barrientos; Daniel Neff
  9. Income Uncertainty and Household Savings in China By Marcos Chamon; Kai Liu; Eswar S. Prasad
  10. Why Have Economic Reforms in Mexico Not Generated Growth? By Timothy J. Kehoe; Kim J. Ruhl

  1. By: Akay, Alpaslan (IZA (Institute for the Study of Labor), 53113, Bonn, Germany); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We studied whether relative income has an impact on subjective well-being among extremely poor people. Contrary to the findings in developed countries, we cannot reject the hypothesis that relative income has no impact on subjective well-being in rural areas of northern Ethiopia.<p>
    Keywords: Absolute income; relative income; subjective well-being
    JEL: D10 I31 I32
    Date: 2010–12–02
  2. By: Michel Beine (CREA, University of Luxembourg and CES-Ifo); Elisabetta Lodigiani (CREA, University of Luxembourg and Centro Studi Luca d’Agliano); Robert Vermuelen (CREA, University of Luxembourg and Maastricht University)
    Abstract: Remittances have greatly increased during recent years, becoming an important and reliable source of funds for many developing countries. Therefore, there is a strong incentive for receiving countries to attract more remittances, especially through formal channels that turn to be either less expensive or less risky. One way of doing so is to increase their financial openness, but this policy option might generate additional costs in terms of macroeconomic volatility. In this paper we investigate the link between remittance receipts and financial openness. We develop a small model and statistically test for the existence of such a relationship with a sample of 66 mostly developing countries from 1980-2005. Empirically we use a dynamic generalized ordered logit model to deal with the categorical nature of the financial openness policy. We apply a two-step method akin to two stage least squares to deal with the endogeneity of remittances and potential measurement errors. We find a strong positive statistical and economic effect of remittances on financial openness.
    Keywords: remittances, nancial openness, government policy
    JEL: E60 F24 F41 O10
    Date: 2010–11–30
  3. By: Andrea F. Presbitero (Università Politecnica delle Marche)
    Abstract: The global crisis and the expansionary government reaction in many countries has revamped the at-tention of policy makers and academics on the growth effects of large public debts. Recent empiri-cal studies investigate the impact of public debt on growth in advanced and emerging countries. This paper aims at complementing the existing evidence focusing on developing countries, where the increase in domestic borrowing, already started before the crisis, requires a more comprehensive analysis, based not only on external debt, but on total public debt. Results on a panel of low- and middle-income countries over the period 1990-2007 show that public debt has a negative impact on output growth up to a threshold of 90 percent of GDP, beyond which its effect becomes irrelevant. This non-linear effect can be explained by country-specific factors since debt overhang is a growth constraint only in countries with sound macroeconomic policies and stable institutions.
    Keywords: Domestic debt, Public debt, growth
    JEL: F33 F34 F35 O11
    Date: 2010–11–30
  4. By: Thomas, Timothy; Christiaensen, Luc; Do, Quy Toan; Trung, Le Dang
    Abstract: As natural disasters hit with increasing frequency, especially in coastal areas, it is imperative to better understand how much natural disasters affect economies and their people. This requires disaggregated measures of natural disasters that can be reliably linked to households, the first challenge this paper tackles. In particular, a methodology is illustrated to create natural disaster and hazard maps from first hand, geo-referenced meteorological data. In a second step, the repeated cross-sectional national living standard measurement surveys (2002, 2004, and 2006) from Vietnam are augmented with the natural disaster measures derived in the first phase, to estimate the welfare effects associated with natural disasters. The results indicate that short-run losses from natural disasters can be substantial, with riverine floods causing welfare losses of up to 23 percent and hurricanes reducing welfare by up to 52 percent inside cities with a population over 500,000. Households are better able to cope with the short-run effects of droughts, largely due to irrigation. There are also important long-run negative effects, in Vietnam mostly so for droughts, flash floods, and hurricanes. Geographical differentiation in the welfare effects across space and disaster appears partly linked to the functioning of the disaster relief system, which has so far largely eluded households in areas regularly affected by hurricane force winds.
    Keywords: Natural Disasters,Hazard Risk Management,Disaster Management,Climate Change Mitigation and Green House Gases,Adaptation to Climate Change
    Date: 2010–12–01
  5. By: de Walque, Damien; Kazianga, Harounan; Over, Mead
    Abstract: This paper studies the effect of increased access to antiretroviral therapy on risky sexual behavior, using data collected in Mozambique in 2007 and 2008. The survey sampled both households of randomly selected HIV positive individuals and households from the general population. Controlling for unobserved individual characteristics, the findings support the hypothesis of disinhibition behaviors, whereby risky sexual behaviors increase in response to the perceived changes in risk associated with increased access to antiretroviral therapy. Furthermore, men and women respond differently to the perceived changes in risk. In particular, risky behaviors increase for men who believe, wrongly, that AIDS can be cured, while risky behaviors increase for women who believe, correctly, that antiretroviral therapy can treat AIDS but cannot cure it. The findings suggest that scaling up access to antiretroviral therapy without prevention programs may not be optimal if the objective is to contain the disease, since people would adjust their sexual behavior in response to the perceived changes in risk. Therefore, prevention programs need to include educational messages about antiretroviral therapy, and address the changing beliefs about HIV in the era of increasing antiretroviral therapy availability.
    Keywords: Population Policies,HIV AIDS,Disease Control&Prevention,Gender and Health,Adolescent Health
    Date: 2010–11–01
  6. By: Veronica Baz; Maria Cristina Capelo; Rodrigo Centeno; Ricardo Estrada
    Abstract: While Mexico has potential to grow rapidly, its economic growth has remained low for the past three decades. There is no consensus on the country’s development path or on how to achieve specific goals. Since the policy debate remains ideological and lacks pragmatism, productive development policies (PDPs) are often uncoordinated, redundant or even incongruent with each other. It is therefore important to understand the process whereby PDPs are designed and the institutional setting in which they are are implemented. This paper consequently examines whether PDPs respond to market failures and/or government failures. When PDPs are not designed to address specific market failures they can produce unwanted results or prove completely ineffective. When PDPs do address government failures, it is important to determine the reasons why the failure cannot be corrected in the first place and whether PDPs will be effective at addressing the problem in a second-best manner.
    Keywords: Industrial Policy, Institutions, Policymaking, Mexico
    JEL: O25 O43
    Date: 2010–11
  7. By: Lena Giesbert; Kati Schindler
    Abstract: Using a micro-level approach to poverty traps, this paper explores welfare dynamics among households in post-war rural Mozambique. Conceptually, the paper builds on an asset-based approach to poverty and tests empirically, with household panel data, for the existence of a poverty trap. Findings indicate that there is little differentiation in productive asset endow-ments over time and that rural households gravitate towards a single equilibrium, which is at a surprisingly low level. The analysis shows that shocks and household coping behavior help to explain the observed poverty dynamics. The single low-level equilibrium points to an overall development trap in the rural farm-based economy. This is attributed to the long-term impact of the civil war, which has consolidated unfavorable economic conditions in ru-ral areas and limited new economic opportunities outside of the agricultural sector.
    Keywords: poverty trap, shocks, asset-based approach, violent conflict, Mozambique
    JEL: D31 I32 O12 O18
    Date: 2010–11
  8. By: Armando Barrientos; Daniel Neff (GIGA German Institute of Global and Area Studies)
    Abstract: The paper explores attitudes to chronic poverty in a cross-section of developed and developing countries based on data from the World Values Survey Wave Three (1994-1998). The analysis finds a consistent belief among a majority of respondents that poverty is chronic. This paper also explores the factors that influence public attitudes to chronic poverty and finds that interests, position, knowledge, and shared values relating to social justice are important.
    Keywords: attitudes, chronic poverty
    JEL: I30 I32 I38
    Date: 2010–05
  9. By: Marcos Chamon; Kai Liu; Eswar S. Prasad
    Abstract: China’s household saving rate has increased markedly since the mid-1990s and the age-savings profile has become U-shaped during the 2000s. We find that rising income uncertainty and pension reforms help explain both of these phenomena. Using a panel of Chinese households covering the period 1989-2006, we document that strong average income growth has been accompanied by a substantial increase in income uncertainty. Interestingly, the permanent variance of household income remains stable while it is the transitory variance that rises sharply. A calibration of a buffer-stock savings model indicates that rising savings rates among younger households are consistent with rising income uncertainty and higher saving rates among older households are consistent with a decline in the pension replacement ratio for those retiring after 1997. We conclude that rising income uncertainty and pension reforms can account for over half of the increase in the urban household savings rate in China since the mid-1990s as well as the U-shaped age-saving profile.
    JEL: D91 E21 J3
    Date: 2010–12
  10. By: Timothy J. Kehoe; Kim J. Ruhl
    Abstract: Following its opening to trade and foreign investment in the mid-1980s, Mexico’s economic growth has been modest at best, particularly in comparison with that of China. Comparing these countries and reviewing the literature, we conclude that the relation between openness and growth is not a simple one. Using standard trade theory, we find that Mexico has gained from trade, and by some measures, more so than China. We sketch out a theory in which developing countries can grow faster than the United States by reforming. As a country becomes richer, this sort of catch-up becomes more difficult. Absent continuing reforms, Chinese growth is likely to slow down sharply, perhaps leaving China at a level less than Mexico’s real GDP per working-age person.
    JEL: F43 O47 P52
    Date: 2010–12

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