nep-dev New Economics Papers
on Development
Issue of 2010‒12‒18
sixteen papers chosen by
Mark Lee
Towson University

  1. How does political instability affect economic growth? By Ari Aisen; Francisco J. Veiga
  2. Will GDP growth increase happiness in developing countries? By Andrew E. Clark; Claudia Senik
  3. Alternative Education Spaces in Mexico By Chloe Gray
  4. International Migrants in Developed, Emerging and Developing Countries: An Extended Profile By Jean-Christophe Dumont; Gilles Spielvogel; Sarah Widmaier
  5. The Impact of Governance on Economic Growth: Further Evidence for Africa. By Bichaka Fayissa; Christian Nsiah
  6. The dynamics of spending and absorption of aid : panel data analysis By Shonchoy, Abu S
  7. Determinants of government consumption expenditure in developing countries : a panel data analysis By Shonchoy, Abu S
  8. How has financial deepening affected poverty reduction in India? : empirical analysis using state-level panel data By Inoue, Takeshi; Hamori, Shigeyuki
  9. Infrastructure development and economic growth in China By Sahoo, Pravakar; Dash, Ranjan Kumar; Nataraj, Geethanjali
  10. The size distribution of all Cambodian establishments By Tanaka, Kiyoyasu; Hatsukano, Naomi
  11. Myanmar migrant laborers in Ranong, Thailand By Fujita, Koichi; Endo, Tamaki; Okamoto, Ikuko; Nakanishi, Yoshihiro; Yamada, Miwa
  12. Who Gets to Stay in School? Long-run Impact of Income Shocks on Schooling in Rural Tanzania By Sofya Krutikova
  13. Heterogeneous returns and the persistence of agricultural technology adoption By Andrew Zeitlin; Stefano Caria; Richman Dzene; Petr Janský; Emmanuel Opoku; Francis Teal
  14. "Exports, Capabilities, and Industrial Policy in India" By Jesus Felipe; Utsav Kumar; Arnelyn Abdon
  15. Sectoral Location of FDI in China By Lin, Mi; Kwan, Yum K.
  16. Health Shocks and Natural Resource Management: Evidence from Western Kenya By Joshua Graff Zivin; Maria Damon; Harsha Thirumurthy

  1. By: Ari Aisen; Francisco J. Veiga
    Abstract: The purpose of this paper is to empirically determine the effects of political instability on economic growth. Using the system-GMM estimator for linear dynamic panel data models on a sample covering up to 169 countries, and 5-year periods from 1960 to 2004, we find that higher degrees of political instability are associated with lower growth rates of GDP per capita. Regarding the channels of transmission, we find that political instability adversely affects growth by lowering the rates of productivity growth and, to a smaller degree, physical and human capital accumulation. Finally, economic freedom and ethnic homogeneity are beneficial to growth, while democracy may have a small negative effect.
    Keywords: Economic growth; Political instability; Growth accounting; Productivity
    JEL: O43 O47
    Date: 2010–10
  2. By: Andrew E. Clark; Claudia Senik
    Abstract: This paper asks what low-income countries can expect from growth in terms of happiness. It interprets the set of available international evidence pertaining to the relationship between income growth and subjective well-being. Conforming to the Easterlin paradox, higher income always correlates with higher happiness, except in one case: whether national income growth yields higher well-being is still hotly debated; essentially, the question is whether the correlation coefficient is "too small to matter". The explanations for the small correlation between income growth and subjective well-being over time appeal to the nature of growth itself (e.g. negative side-effects such as pollution), and to the psychological importance of relative concerns and adaptation. The available evidence contains two important lessons: income comparisons do seem to affect subjective well-being even in very poor countries; however, adaptation may be more of a rich country phenomenon. Our stand is that the idea that growth will increase happiness in low-income countries cannot be rejected on the basis of the available evidence. First, cross-country time-series analyses are based on aggregate measures, which are less reliable than individual ones. Second, development is a qualitative process that involves take-offs and thresholds. Such regime changes are eye-visible through the lens of subjective satisfaction measures. The case of Transition countries is particularly impressive in this respect: average life satisfaction scores closely mirror changes in GDP for about the first ten years of the transition process, until the regime becomes more stable. If subjective measures of well-being were made available in low-income countries, they would certainly help measuring and monitoring the different stages and dimensions of the development process.
    Date: 2010
  3. By: Chloe Gray
    Abstract: This article explores the architecture of a network of education centres located in underprivileged communities in Mexico. The centres provide an environment conducive to learning through spaces that are sustainable, comfortable and secure...
    Keywords: education centres, low-income communities, alternative education model, Environmental low-impact materials
    Date: 2010–11
  4. By: Jean-Christophe Dumont; Gilles Spielvogel; Sarah Widmaier
    Abstract: Increasing international mobility makes international comparable data even more important, to depict global migration patterns and its characteristics, not only in receiving countries but also in origin countries. This paper provides a detailed picture of immigrant and emigrant populations around the year 2000 based on the new global bilateral migration database DIOC-E. DIOC-E gives the opportunity to investigate various aspects of South-South migration and to make reliable comparisons with South-North migration. In particular, emigration rates for different skill levels can be computed, including many key destination countries outside the OECD area, based on more accurate education data in origin countries. This refines and challenges previous conclusions regarding the relative importance of migration in different regions of the world, main characteristics of emigrants, and sheds light on such key issues as the gender dimension of international migration and the selectivity of migration flows. DIOC-E (release 2.0) covers 89 destination countries, of which 61 are outside the OECD area. It includes information on 110 million migrants aged 15 and over by skill level, age, gender and labour market outcomes, which represents around 72% of the estimated number of international migrants worldwide. In total there are 46.8 million low-skilled migrants (43.6%), 37.5 million migrants with intermediate skill level (35%) and 23 million highly skilled migrants (21.5%). Although low-skilled migration still dominates in absolute terms both to the OECD and to non-OECD countries, emigration rates for highly skilled persons exceed total emigration rates in all regions, which reflect the selective nature of migration. The econometric analyses of bilateral determinants of migration of the high-skilled distinguish South-North and South-South migration. Regarding migration to OECD countries, the relationship between the emigration rate of the highly skilled and the income level of origin countries follows an inverted U-shape relationship. But this is not the case for migration to non-OECD countries. Both total and high-skilled emigration rates to non-OECD countries steadily increase as the level of income of the origin countries decreases.<BR>La croissance de la mobilité internationale souligne l’importance de données internationales comparables pour décrire la migration mondiale et ses caractéristiques, non seulement dans les pays de destination mais aussi dans les pays d’origine. Ce document donne une image détaillée des populations émigrée et immigrée dans les années 2000 à partir de la nouvelle base de données bilatérale mondiale DIOC-E. DIOC-E offre la possibilité d’étudier différents aspects de la migration sud-sud et de réaliser des comparaisons fiables avec la migration sud-nord. En particulier, des données fiables dans les pays d’origine permettent de calculer des taux d’expatriation par niveaux d’éducation en incluant les grands pays de destination hors de la zone OCDE. Cela remet en question des conclusions établies précédemment sur l’importance relative de la migration dans différentes régions du monde, affine les caractéristiques principales des émigrés et donne un éclairage sur des questions clés comme la dimension « genre » de la migration internationale et la sélectivité des mouvements migratoires. DIOC-E (release 2.0) contient des données pour 89 pays de destination, dont 61 sont en dehors de la zone OCDE. La base de données contient des informations par niveaux d’éducation, âge, genre et des résultats sur le marché du travail pour 110 millions de migrants âgés de 15 ans et plus, soit environ 72% de l’estimation mondiale des migrants internationaux. Au total, 46.8 millions de migrants (43.6%) sont faiblement qualifiés, 37.5 millions (35%) ont un niveau d’éducation intermédiaire et 23 millions (21.5%) sont hautement qualifiés. Bien que la migration faiblement qualifiée prédomine en termes absolus, tant vers les pays de l’OCDE que vers les pays non-OCDE, les taux d’expatriation des migrants hautement qualifiés dépassent les taux d’expatriation globaux dans toutes les régions, reflétant ainsi la sélectivité de la migration. Les analyses économétriques des déterminants bilatéraux de la migration des personnes hautement qualifiées distinguent la migration sud-nord des migrations sud-sud. En ce qui concerne la migration vers les pays de l’OCDE, la relation entre le taux d’expatriation des personnes hautement qualifiées et le niveau de revenus des pays d’origine suit une courbe en U inversée. Cela n’est pas le cas pour la migration vers les pays non-OCDE. Les taux d’expatriation globaux ainsi que ceux des personnes hautement qualifiées vers les pays non-OCDE augmentent lorsque le niveau de revenu des pays d’origine diminue.
    Keywords: education, development, skills, immigrants, international migration, database, DIOC-E, DIOC, migrant stocks, emigration rates, emigrants, développement, éducation, migration internationale, base de données, DIOC-E, DIOC, stock de migrants, taux d’expatriation, qualification, immigrés, émigrés
    JEL: F22 I23 J24 J61 O15
    Date: 2010–12–09
  5. By: Bichaka Fayissa; Christian Nsiah
    Abstract: Sub-Sahara African countries have had a checkered past when it comes to good governance and good institutions. Increasingly, economists and policy makers are recognizing the importance of good governance and institutions for economic growth and development. The New Partnership for Africa’s Development (NEPAD) which was initiated by the African Heads of State and endorsed by the G8 countries including the European Union, Japan, and China in October 2001 has four main goals: eradicating poverty, promoting sustainable growth and development, integrating Africa into the world economy, and accelerating the empowerment of women. The NEPAD objectives are based on the underlying principles of a commitment to good governance, democracy, human rights and conflict resolution, and the recognition that the maintenance of these standards is fundamental to the creation of an environment conducive to investment and long-term economic growth. The objective of this paper is to investigate the role of governance in explaining the sub-optimal economic growth performance of African economies while controlling for the conventional sources of growth. Our results suggest that good governance or lack thereof contributes to the gaps in income per capita between richer and poorer African countries. Furthermore, our results indicate that the role of governance on economic growth depends on the type and the level of income growth of countries under consideration.
    Keywords: Workers’ Remittances, Economic Growth, Panel Data, Arellano-Bond, Quantile Regression, Sub-Saharan Africa
    JEL: E21 F21 G22 J61 O16
    Date: 2010–12
  6. By: Shonchoy, Abu S
    Abstract: In September 1999, the International Monetary Fund (IMF) established the Poverty Reduction and Growth Facility (PRGF) to make the reduction of poverty and the enhancement of economic growth the fundamental objectives of lending operations in its poorest member countries. This paper studies the spending and absorption of aid in PRGF-supported programs, verifies whether the use of aid is programmed to be smoothed over time, and analyzes how considerations about macroeconomic stability influence the programmed use of aid. The paper shows that PRGF-supported programs permit countries to utilize all increases in aid within a few years, showing smoothed use of aid inflows over time. Our results reveal that spending is higher than absorption in both the long-run and short-run use of aid, which is a robust finding of the study. Furthermore, the paper demonstrates that the long-run spending exceeds the injected increase of aid inflows in the economy. In addition, the paper finds that the presence of a PRGF-supported program does not influence the actual absorption or spending of aid.
    Keywords: Developing countries, Development aid, Poverty, International organization, Aid, Spending and Absorption, PRGF, Dynamic Panel Estimations, PRGF(Poverty Reduction and Growth Facility)
    JEL: F35 I32 F34
    Date: 2010–08
  7. By: Shonchoy, Abu S
    Abstract: The paper focuses on the recent pattern of government consumption expenditure in developing countries and estimates the determinants which have influenced government expenditure. Using a panel data set for 111 developing countries from 1984 to 2004, this study finds evidence that political and institutional variables as well as governance variables significantly influence government expenditure. Among other results, the paper finds new evidence of Wagner's law which states that peoples' demand for service and willingness to pay is income-elastic hence the expansion of public economy is influenced by the greater economic affluence of a nation (Cameron1978). Corruption is found to be influential in explaining the public expenditure of developing countries. On the contrary, size of the economy and fractionalization are found to have significant negative association with government expenditure. In addition, the study finds evidence that public expenditure significantly shrinks under military dictatorship compared with other form of governance.
    Keywords: Developing countries, Public expenditures, Corruption, Government expenditure, Fractionalization, Governance, Political institutions and Extreme bound analysis
    JEL: E01 E2 E61 E62 H50 H60 O11 O5 H2 H4 H5 H6
    Date: 2010–12
  8. By: Inoue, Takeshi; Hamori, Shigeyuki
    Abstract: This paper examines empirically whether financial deepening has contributed to poverty reduction in India. Using unbalanced panel data for 28 states and union territories between 1973 and 2004, we estimate models in which the poverty ratio is explained by financial deepening, controlling for international openness, inflation rate, and economic growth. From the dynamic generalised method of moments (GMM) estimation, we find that financial deepening and economic growth alleviate poverty, while international openness and the inflation rate have the opposite effect. These results are robust to changes in the poverty ratios in rural areas, urban areas, and the whole economy.
    Keywords: India, Finance, Poverty, Poverty Reduction, GMM, Financial Deepening
    JEL: G20 J30 O11
    Date: 2010–08
  9. By: Sahoo, Pravakar; Dash, Ranjan Kumar; Nataraj, Geethanjali
    Abstract: China is the fastest growing country in the world for last few decades and one of the defining features of China's growth has been investment-led growth. China's sustained high economic growth and increased competitiveness in manufacturing has been underpinned by a massive development of physical infrastructure. In this context, we investigate the role of infrastructure in promoting economic growth in China for the period 1975 to 2007. Overall, the results reveal that infrastructure stock, labour force, public and private investments have played an important role in economic growth in China. More importantly, we find that Infrastructure development in China has significant positive contribution to growth than both private and public investment. Further, there is unidirectional causality from infrastructure development to output growth justifying China's high spending on infrastructure development since the early nineties. The experience from China suggests that it is necessary to design an economic policy that improves the physical infrastructure as well as human capital formation for sustainable economic growth in developing countries.
    Keywords: China, Infrastructure, Economic development, Investments, China, Investment, L9 - Industry Studies: Transportation and Utilities, H4 - Publicly provided goods, O1 - Economic development
    JEL: H54 L90 O10
    Date: 2010–10
  10. By: Tanaka, Kiyoyasu; Hatsukano, Naomi
    Abstract: This paper presents empirical evidence on the size distribution of all Cambodian establishments in the nonfarm sector for 2009. Small- and large-scale establishments account for the largest share of employment, pointing to a “missing middle†that is commonly observed in developing countries. The analysis provides little evidence for Zipf’s law because Cambodian industry is characterized by a more dense mass of small establishments than the Zipf distribution would predict.
    Keywords: Cambodia, Industry, Small and medium-scale enterprises, Employment, Size distribution, Establishments
    JEL: L11 L25 O53 O17
    Date: 2010–09
  11. By: Fujita, Koichi; Endo, Tamaki; Okamoto, Ikuko; Nakanishi, Yoshihiro; Yamada, Miwa
    Abstract: Thailand is the major destination for migrants in mainland Southeast Asia, and Myanmar (Burmese) migrants account for the dominant share. This paper sheds light on the actual working conditions and the life of Myanmar migrants in Thailand, based on our intensive survey in Ranong in southern Thailand in 2009. We found a wide range of serious problems that Myanmar migrants face in everyday life: very harsh working conditions, low income, heavy indebtedness, risk of being human-trafficking victims, harassment by the police and military (especially of sex workers), high risk of illness including malaria and HIV/AIDS and limited access to affordable medical facilities, and a poor educational environment for their children.
    Keywords: Myanmar, Thailand, Migrant labor, Migration, Household
    JEL: E24 E26 J61 R23 E22
    Date: 2010
  12. By: Sofya Krutikova
    Abstract: This paper shows that income shocks to rural households have permanent effects on the educational attainment of 7-15 year old children within the household. Using a 13 year panel survey of households in rural Tanzania, I find that idiosyncratic crop shocks such as pests, theft and fire cause changes in the distribution of schooling among children within the household that persist 10-13 years after the shock. They affect older (12-15) girls and younger (7-11) boys most adversely. The effects are remarkably persistent in households affected by shocks of varying magnitudes. An investigation of plausible channels for these effects suggests that an increase in the chore burden of older girls within the household in response to a crop shock is likely to be part of the explanation for the adverse effect of shocks on this cohort.
    Date: 2010
  13. By: Andrew Zeitlin; Stefano Caria; Richman Dzene; Petr Janský; Emmanuel Opoku; Francis Teal
    Abstract: In this paper we explore whether low rates of sustained technology use can be explained by heterogeneity in returns to adoption. To do so we evaluate impacts of the Cocoa Abrabopa Association,which provideda packageof fertilizerand other inputson credit to cocoa farmers in Ghana.Highestimatedaverageproductiveimpactsfortreatedfarmersarefoundtobeconsistent with negative economic profits for a substantial proportion of the treated population. By constructing an individualspecific measure of returns,we demonstrate that low realized returns amongadopters are associatedwith low retention rates, even after conditioningonoutput levels andsuccessfulrepayment.Theresultsareconsistentwiththehypothesisthathighaveragereturns masksubstantialandpersistentheterogeneity,andthatfarmersexperimentinordertolearnabout theiridiosyncraticreturns.
    JEL: O13 O33 Q12 Q16
    Date: 2010
  14. By: Jesus Felipe; Utsav Kumar; Arnelyn Abdon
    Abstract: An extensive literature argues that India's manufacturing sector has underperformed, and that the country has failed to industrialize; in particular, it has failed to take advantage of its labor-abundant comparative advantage. India's manufacturing sector is smaller as a share of GDP than that of East Asian countries, even after controlling for GDP per capita. Hence, its contribution to overall GDP growth is modest. Without greater participation of the secondary sector, the argument goes, the country will not be able to develop and become a modern economy. Standard arguments blame the "license-permit raj," the small-scale industrial policy, and the supposedly stringent laws. All these were part of the industrial policy regime instituted after independence, which favored the heavy-machinery subsector. We show that this policy bias negatively affected the development of India’s labor-intensive sector, as the country should export with comparative advantage a larger number of these products, given its income per capita. However, India's manufacturing sector is relatively well diversified and sophisticated, given also the country’s income per capita. In particular, India’s inroads into machinery, metals, chemicals, and other capital- and skilled labor–intensive products has allowed the country to accumulate a large number of capabilities. This positions India well to expand its exports of other sophisticated products.
    Keywords: Capabilities; Diversification; India; Industrial Policy; Revealed Comparative Advantage; Sophistication
    JEL: O20 O25 O53
    Date: 2010–11
  15. By: Lin, Mi; Kwan, Yum K.
    Abstract: This paper investigates the determinants of FDI sectoral allocation in 29 China’s manufacturing sectors from 2000 to 2007. We find that FDI sectoral allocation has a strong self-reinforcing effect. MNCs with ownership advantages tend to invest more in local high productivity sectors. The FDI presence, however, is discouraged in China’s high productivity sectors in which the major market share is dominated by SOEs. We also find that the degree of FDI penetration is higher in sectors that are producing labor-intensive goods and also export-oriented.
    Keywords: Foreign Direct Investment; Dynamic Panel Regression
    JEL: F23 O53 F21
    Date: 2010–08–20
  16. By: Joshua Graff Zivin; Maria Damon; Harsha Thirumurthy
    Abstract: Poverty and altered planning horizons brought on by the HIV/AIDS epidemic can change individual discount rates, altering incentives to conserve natural resources. Using longitudinal data from household surveys in western Kenya, we estimate impacts of health status on labor productivity and discount rates. We find that household size and composition are predictors of whether the effect on productivity dominates the discount rate effect, or vice-versa. Since households with more and younger members are better able to reallocate labor to cope with productivity shocks, the discount rate impact dominates for these households and health improvements lead to greater levels of conservation. In smaller families with less substitutable labor, the productivity impact dominates and health improvements lead to greater environmental degradation.
    JEL: I1 O13 O55 Q27 Q5 Q56
    Date: 2010–12

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