nep-dev New Economics Papers
on Development
Issue of 2011‒01‒03
seventeen papers chosen by
Mark Lee
Towson University

  1. African Leaders: Their Education Abroad and FDI Flows By Amelie Constant; Bienvenue N. Tien
  2. Can combining credit with insurance or savings enhance the sustainability of microfinance institutions? By Koen Rossel-Cambier
  3. Informality, Corruption, and Inequality By Mishra, Ajit; Ray, R.
  4. Where Have All the Young Girls Gone? Identification of Sex Selection in India By Bhalotra, Sonia R.; Cochrane, Tom
  5. New Technology, Human Capital and Growth for a Developing Country By Le Van, Cuong; Luong, Thai Bao; Nguyen, Manh-Hung; Nguyen, Tu-Anh
  6. The Chinese Corporate Savings Puzzle: A Firm-level Cross-country Perspective By Hui Tong; Tamim Bayoumi; Shang-Jin Wei
  7. Income Uncertainty and Household Savings in China By Marcos Chamon; Kai Liu; Eswar Prasad
  8. Empirical analysis of school attainment/progression in Cameroon. By TENIKUE Michel
  9. Learning about Schools in Development By Charles Kenny
  10. Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization By Asuyama, Yoko; Chhun, Dalin; Fukunishi, Takahiro; Neou, Seiha; Yamagata, Tatsufumi
  11. The Philippines' Absorptive Capacity for Foreign Aid By Hyewon Kang
  12. Corruption and Development, Revisited By Jenny D. Balboa; Shinji Takenaka
  13. Global Burden of Disease and Economic Growth By Martine AUDIBERT; Pascale COMBES MOTEL; Alassane DRABO
  14. What determines credit participation and credit constraints of the poor in peri-urban areas, Vietnam? By Doan, Tinh; Gibson, John; Holmes, Mark
  15. After the reforms: Determinants of wage growth and change in wage inequality in Vietnam: 1998-2008 By Sakellariou, Chris; Fang, Zheng
  16. How Does Corruption Influence the Effect of Foreign Direct Investment on Economic Growth? By Okada, Keisuke; Samreth, Sovannroeun
  17. Adolescent childbearing experiences in Kenya: geographical and socioeconomic determinants By Aurora Angeli; Rosella Rettaroli; Angelina Mazzocchetti; Carla Pezzulo

  1. By: Amelie Constant; Bienvenue N. Tien
    Abstract: Leaders are critical to a country's success. They can influence domestic policy via specific measures that they enforce, and they can also influence international public opinion towards their country. Foreign Direct Investments are also essential for a country's economic growth. Our hypothesis is that foreign-educated leaders attract more FDI to their country. Our rationale is that education obtained abroad encompasses a whole slew of factors that can make a difference in FDI flows when this foreign-educated individual becomes a leader. We test this hypothesis empirically with a unique dataset that we constructed from several sources, including the Library of Congress and the World Bank. Our analysis of 40 African countries employs the robust technique of conditional quantile regression. Our results reveal that foreign education is a significant determinant of FDI inflows, beyond other standard characteristics. While intuitive, this result does not necessarily indicate sheepskin effects or superior human capital obtained abroad. Rather, it indicates the powerful role of the social capital, networks, and connections that these leaders built while they were abroad that they in turn mobilize and utilize when they become leaders.
    Keywords: FDI, Leaders' Educational level, return migration, Africa
    JEL: C31 C33 F21 I21
    Date: 2010
  2. By: Koen Rossel-Cambier
    Abstract: Worldwide, microcredit organizations are gradually transforming to multi-servicing organizations offering additional financial services. This paper examines whether combining microcredit with insurance and/or savings enhances their economic performance by increasing their efficiency, productivity, sustainability or portfolio quality indicators. Using cross-sectional data from 250 microfinance institutions (MFIs) from Latin America and the Caribbean, it compares MFIs offering credit only with those combining credit with respectively savings and insurance. By using multiple regression analysis, this research finds positive effects of both savings and insurance on the efficiency and productivity of MFIs. Still, this research didn't find significant results with relation to the sustainability and portfolio quality of MFIs. Overall, taking into account various risks, combined microfinance can enhance organisational efficiency and productivity because of the different economies of scope which can be achieved. This reveals especially for large and mature MFIs which already exhibit readiness in terms of human, financial, and organizational resources to deal with the complexity of delivering multiple financial services.
    Keywords: performance; microfinance; combined microfinance; microinsurance; microcredit; microsavings; Latin America and the Caribbean
    JEL: G21 G22 L31 O54
    Date: 2010–12
  3. By: Mishra, Ajit; Ray, R.
    Abstract: The paper looks at the determinants of the size of the informal sector. We argue that corruption and informality complement each other and are jointly determined by various market and non-market variables. Our theoretical model as well empirical exercises focus on wealth and income inequality as a key determinant. High degree of inequality leads to bigger informal sector. We offer several plausible channels through inequality can impact the size of the informal sector.
    Keywords: informal sector; corruption; inequality; credit market; product differentiation
    Date: 2010–12
  4. By: Bhalotra, Sonia R. (University of Bristol); Cochrane, Tom (Cambridge Economic Policy Associates)
    Abstract: This paper presents the first estimates of the causal effect of facilities for prenatal sex diagnosis on the sex ratio at birth in India. It conducts a triple difference analysis across cohort, birth order and sex of previous births. Treated births are those that occur after prenatal sex detection becomes available at birth order two or more in families that have not yet had their desired number of sons (or daughters). The three implied control groups are births that occur pre-ultrasound, births of first order and births that occur after the family has achieved its desired sex mix of births. We identify a significant divergence between the treated and control groups. We consider alternative hypotheses and conduct an array of robustness checks to show that the divergence of the sex ratio of the treated group from the normal biological range that characterizes the control groups is on account of female foeticide. We estimate that as many as 0.48 million girls p.a. were selectively aborted during 1995-2005, which is more than the number of girls born in the UK each year. The estimates suggest that Indian families desire two boys and a girl; previous studies often assume that the desire is for at least one boy. The incentive to conduct sex selection is increasing in birth order and family socioeconomic status, both consistent with stronger incentives to sex-select as fertility approaches its target.
    Keywords: sex selection, abortion, sex ratio, son preference, prenatal sex diagnosis, ultrasound, gender, India, triple difference estimator, differences in differences
    JEL: J13 J16 I18 I38 H40
    Date: 2010–12
  5. By: Le Van, Cuong; Luong, Thai Bao; Nguyen, Manh-Hung; Nguyen, Tu-Anh
    Date: 2010–12
  6. By: Hui Tong; Tamim Bayoumi; Shang-Jin Wei
    Abstract: China’s high corporate savings rate is commonly claimed to be a key driver for the country’s large current account surplus. The mainstream explanation for high corporate savings is a combination of windfall profits in state-owned firms, especially in resource sectors, and mis-governance of state-owned firms represented by their low dividend payout. The paper casts doubt on these views by comparing the savings of 1557 Chinese listed firms with those of 29330 listed firms from 51 other countries over 2002-07. First, Chinese firms do not have a significantly higher savings rate (as a share of total assets) than the global average because corporations in most countries have a high savings rate. The rising corporate savings rate is also consistent with a global trend. Second, there is no significant difference in the savings behavior and dividend patterns between Chinese majority state-owned and private listed firms, contrary to the received wisdom.
    Keywords: China, People's Republic of , Corporate sector , Cross country analysis , Current account surpluses , Economic models , Investment , Private savings , Public enterprises , Savings ,
    Date: 2010–12–02
  7. By: Marcos Chamon; Kai Liu; Eswar Prasad
    Abstract: China’s household saving rate has increased markedly since the mid-1990s and the age-savings profile has become U-shaped. 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-profile of savings.
    Keywords: Aging , China, People's Republic of , Economic models , External shocks , Income distribution , Pension reforms , Private savings , Private sector , Wages ,
    Date: 2010–12–13
  8. By: TENIKUE Michel
    Abstract: In Cameroon, only 1/3 of children progress to secondary education. This paper estimates a sequential model of school attainment to investigate the role played by family background and individual characteristics in keeping children at school up to the end of secondary school. Using data of the 2001 Cameroon Household survey, we find that while parental wealth has no effect on the probability to enter primary school. It is however a good predictor of completing primary and secondary education. The lack of schools supply reduces school progression, particularly the lack of secondary schools hinders primary school entry. Finally, we find that male children are more likely to stay at school up to the end of secondary education.
    Keywords: Schooling; Sequential
    Date: 2010–12
  9. By: Charles Kenny
    Abstract: There has been considerable progress in school construction and enrollment worldwide. Paying kids to go to school can help overcome remaining demand-side barriers to enrollment. Nonetheless, the quality of education appears very poor across the developing world, limiting development impact. Thus we should measure and promote learning not schooling. Conditional cash transfers to students on the basis of attendance and scores, school choice, decentralization combined with published test results, and teacher pay based on attendance and performance may help. But learning outcomes are primarily affected by the broader environment in which students live, suggesting a learning agenda that stretches far beyond education ministries. [Working paper no. 236].
    Keywords: teachers, enrollment, conditional transfers, developing world, ministries, performance, students, education, decentralization, learning, schooling, attendance, environment, Education policy, development,
    Date: 2010
  10. By: Asuyama, Yoko; Chhun, Dalin; Fukunishi, Takahiro; Neou, Seiha; Yamagata, Tatsufumi
    Abstract: The international garment trade was liberalized in 2005 following the termination of the MFA (Multifibre Arrangement) and ever since then, price competition has intensified. Employing a unique firm dataset collected by the authors, this paper examines the changes in the performance of Cambodian garment firms between 2002/03 and 2008/09. During the period concerned, frequent firm turnover led to an improvement of the industry’s productivity, and the study found that the average total-factor productivity (TFP) of new entrants was substantially higher than that of exiting firms. Furthermore, we observed that thanks to productivity growth, an improvement in workers’ welfare, including a rise in the relative wages of the low-skilled, was taking place. These industrial dynamics differ considerably from those indicated by the “race to the bottom†argument as applied to labor-intensive industrialization in low income countries.
    Keywords: Cambodia, Firm turnover, Garments, Labor-intensive industrialization, Multifibre arrangement, Race to the bottom, Total factor productivity, Apparel industry, Productivity, Wages, Employment
    JEL: D24 J31 L67 O14 O53
    Date: 2010–12
  11. By: Hyewon Kang (Philippine Institute for Development Studies)
    Abstract: This study evaluates the Philippines’ absorptive performance for foreign aid, particularly during the six-year period 2003 to 2008, and compare this to that of the previous period, 1986 to 1988. We observe that the country’s capacity to absorb foreign aid has declined during the period under study compared to that of the previous period. The study traces the causes of the reduction in aid absorptive capacity to several factors -- both from the side of the recipient and donor country behavior -- which negatively affected the aid absorptive capacity. The study discusses in detail these bottlenecks to aid absorption and provides policy recommendations to improve the country’s capacity for foreign aid absorption.
    Keywords: official development assistance, Philippines, absorptive capacity for foreign aid, remittances, “Divide-by-N” syndrome, Donor’s motivation
    JEL: I38 P33
    Date: 2010
  12. By: Jenny D. Balboa; Shinji Takenaka (Philippine Institute for Development Studies)
    Abstract: Graft and corruption is considered to be one of the biggest threat to development. Several studies had shown the tremendous impact of corruption in the economy. For a number of developing countries, a huge portion of government resources are lost and wasted due to corrupt activities, further plunging the country to poverty and underdevelopment. Various efforts to combat this social ill have been explored. However, the problem continues to persist. This short paper revisits the issue and aims to contribute to the growing literature of understanding corruption in developing economies and creating the necessary policy response. It answers the following questions: What are the different forms of corruption? What drives corruption? What has been done to address the issue? The Philippine case is also briefly discussed.
    Keywords: political economy, corruption, development
    JEL: F5
    Date: 2010
  13. By: Martine AUDIBERT (Centre d'Etudes et de Recherches sur le Développement International); Pascale COMBES MOTEL (Centre d'Etudes et de Recherches sur le Développement International); Alassane DRABO
    Abstract: Relationships between health and economic prosperity or economic growth are difficult to assess. The direction of the causality is often questioned and the subject of a vigorous debate. For some authors, diseases or poor health had contributed to poor growth performances especially in low-income countries. For other authors, the effect of health on growth is relatively small, even if one considers that investments which could improve health should be done. It is argued in this paper that commonly used health indicators in macroeconomic studies (e. g. life expectancy, infant mortality or prevalence rates for specific diseases such as malaria or HIV/AIDS) imperfectly represent the global health status of population. Health is rather a complex notion and includes several dimensions which concern fatal (deaths) and non-fatal issues (prevalence and severity of cases) of illness. The reported effects of health on economic growth vary accordingly with health indicators and countries included in the analyses. The purpose of the paper is to assess the effect of a global health indicator on growth, the so-called disability-adjusted life year (DALY) that was proposed by the World Bank and the WHO in 1993. Growth convergence equations are run on 159 countries over the 1999-2004's period, where the potential endogeneity of the health indicator is dealt for. The negative effect of poor health on economic growth is not rejected thus reinforcing the importance of achieving MDGs.
    Keywords: Disease Global Burden, DALYs, economic growth, macroeconomic health impact, cross-country analysis
    JEL: E22 E24 I10 I18 O47
    Date: 2010
  14. By: Doan, Tinh; Gibson, John; Holmes, Mark
    Abstract: This paper uses a novel dataset collected by the first author from peri-urban areas of Ho Chi Minh City, Vietnam in 2008 to examine how the poor use their loans, and factors affecting their credit participation and credit constraints. The paper finds the presence of many commercial banks in the areas does not help the poor, but the poor rely heavily on informal credit. Loans in the peri-urban areas are mainly used for non-productive purposes, which stresses the importance of consumption smoothing motives. Further, households in more rural wards have a higher probability of borrowing than more urban households, thanks to better community relationships and higher interpersonal trust. Competition by borrowing neighbours adversely affects the opportunity for borrowing in urban wards where the poor households’ borrowings rely much more on subsidized credit funds. A closer look at specified microcredit sources reveals that household behaviours differ in each market segment. Furthermore, the poor are highly credit-constrained. Wealthier households, in terms of asset holdings and phone possession, among the poor group appear less credit-constrained. However, except in the most rural part of the study area, the likelihood of credit constraints increases with distance to the nearest banks, which suggests that supply-side intervention could help in overcoming credit constraints. Overall, the poor in urban wards are more credit-constrained because of exclusion by commercial banks and weak interpersonal trust.
    Keywords: Credit participation; credit constraints; the poor; peri-urban; Vietnam
    JEL: R22 C24 H81 C25
    Date: 2010–12–10
  15. By: Sakellariou, Chris; Fang, Zheng
    Abstract: The Vietnam ―renovation‖ reforms were implemented during the 1990s, but their full effect was only felt many years later. We present evidence on the developments in real wage growth and inequality in Vietnam from 1998 to 2008. For men, wage growth was underpinned by both increases in endowments of productive characteristics (mainly education) as well as changes in the wage structure (mainly associated with experience) and residual changes. For women, the wage structure effect was the main contributor to wage growth and the most important determinant was the change in the pattern of the returns to experience: younger, less experienced workers enjoyed a premium compared to more experience workers, reversing the previous, opposite pattern. Conventional measures of inequality as well as background analysis show that wage inequality decreased sharply through the 1990s until 2006, but increased subsequently. Over the entire 10-year period, wage inequality increased slightly and more so for women.
    Keywords: Wage inequality; counterfactual decompositions; Asia; Vietnam
    JEL: D31 J31
    Date: 2010–09
  16. By: Okada, Keisuke; Samreth, Sovannroeun
    Abstract: We investigate the effect of Foreign Direct Investment (FDI) on economic growth by employing the data of 132 countries for the period from 1995 to 2008, considering the role of corruption in each country as an absorptive factor. The estimation results indicate that, although FDI alone does not promote economic growth, it has a significant effect on economic growth if the interaction term between FDI and corruption is considered. The threshold level of corruption separating the negative and positive effects of FDI on economic growth is approximately in the 10th percentile from the least corrupt countries. The existence of a corruption threshold implies a counter-intuitive proposition: that FDI inhibits economic growth in countries where corruption is below a corruption threshold, and promotes economic growth in countries where corruption is above the threshold. Our results are robust even if we use different corruption indices and conduct the instrumental variable estimation to address endogeneity problems.
    Keywords: Foreign Direct Investment; Economic Growth; Corruption
    JEL: D73 F23 F43
    Date: 2010–12
  17. By: Aurora Angeli (Università di Bologna); Rosella Rettaroli (Università di Bologna); Angelina Mazzocchetti (Regione Emilia Romagna); Carla Pezzulo
    Abstract: Sub-Saharan Africa has one of the highest level of teenage pregnancies in the world. Some studies on this topic highlight the presence of unmet reproductive health needs of adolescent in different regions. Improving maternal health has been established as a key development priority among the Millennium Development Goals, and upgrading reproductive and maternal health is usually associated with the eradication of inequality and poverty and with the presence of health care programs and services devoted to girls’ education. We attempt to investigate the geographical and socioeconomic determinants of both teenage pregnancies and maternal health behaviours among adolescent women in Kenya. We ascertain the influence of the availability of health care facilities mainly oriented to the specific needs of reproductive health. Main data are represented by 2003 Kenyan Demographic and Health Survey. In addition, the DHS data set collects Global Positioning System locators for each of the primary sampling units included in the samples that enable a deep geographical analysis. We perform a multivariate multilevel analysis to estimate the influence that individual, household, and community-level factors have on the risk of adolescent childbearing. Additionally, a spatial component allows for the presence and proximity of maternal health services. We expect that the availability of reproductive health facilities acts together with levels of socio-economic development, individual and household characteristics and community fertility norms, in influencing individual reproductive behavior at very young ages.
    Keywords: Kenya, gravidanze adolescenziali, salute materna, strutture sanitarie, modelli multilivello Kenya, teenage pregnancy, maternal health, health facilities, multilevel modelling, millennium development goals
    Date: 2010

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