nep-dev New Economics Papers
on Development
Issue of 2011‒02‒05
twenty-one papers chosen by
Mark Lee
Towson University

  1. The Returning Diaspora: Analyzing overseas Vietnamese (Viet Kieu) Contributions toward Vietnam’s Economic Growth By Andrew T. Pham
  2. Education and Household Welfare in Sri Lanka from 1985 to 2006 By Rozana Himaz; Harsha Aturupane
  3. Does the dual-citizenship recognition determine the level and the utilization of international remittances? Cross-Country Evidence By Christian Ebeke
  4. Social-Family Network and Self-Employment: Evidence from Temporary Rural-Urban Migrants in China By Zhang, Junfu; Zhao, Zhong
  5. Using Pseudo-Panels to Measure Income Mobility in Latin America By Cuesta, Jose; Nopo, Hugo; Pizzolitto, Georgina
  6. Civil War, Sexual Violence and HIV Infections: Evidence from the Democratic Republic of the Congo By Isaac Kalonda-Kanyama
  7. Caste, local networks and lucrative jobs: Evidence from rural Nepal By Magnus Hatlebakk; Vegard Iversen; Gaute Torsvik
  8. Education, Migration and Source Community Incomes in Rural China By Karpestam, Peter
  9. International Remittances – A proposal how to test hypotheses about determinants of remittances with macroeconomic time series By Karpestam, Peter; Andersson, Fredrik N G
  10. Child labor, school attendance and access to health care services by children: evidence from Ghana By Vincenzo Atella; Mariacristina Rossi
  11. Can we rely on cash transfers to protect dietary diversity during food crises ? estimates from Indonesia By Skoufias, Emmanuel; Tiwari, Sailesh; Zaman, Hassan
  12. Institutions and economic performance: What can be explained? By Simon Commander; Zlatko Nikoloski
  13. Infrastructure finance in developing countries: An overview By Estache, Antonio
  14. The Impact of Improving Access to Justice on Conflict Resolution: Evidence from Peru By Yuri Suarez Dillon Soares; Maria Michaela Sviatschi; Raul Andrade; Jimena Montenegro
  15. Local and Personal Networks in Employment and the Development of Labor Markets:Evidence from the Cut Flower Industry in Ethiopia By Yukichi Mano; Takashi Yamano; Aya Suzuki; Tomoya Matsumoto
  16. Signaling Credit-Worthiness: Land Titles, Banking Practices and Access to Formal Credit in Indonesia By Paul Dower; Elizabeth Potamites
  17. Financial Development and Innovation in China: Evidence from the Provincial Data By Aoife Hanley; Wan-Hsin LIU; Andrea Vaona
  18. Labour Market Returns to Higher Education in Vietnam By Doan, Tinh
  19. Corporate governance, market competition and investment decisions in Mexican manufacturing firms By Ruiz-Porras, Antonio; Lopez-Mateo, Celina
  20. A new panel dataset for cross-country analyses of national systems, growth and development (CANA) By Castellacci, Fulvio; Natera, Jose Miguel
  21. Contract Law and Development By Aristotelis Boukouras

  1. By: Andrew T. Pham (London School of Economics Development Management MSc)
    Abstract: This paper focuses on the contributions of the Vietnamese Diaspora to Vietnam’s economic growth by examining its unique formation and subsequent actual and potential impact on the emerging economy. A review of recent government policy toward the Vietnamese Diaspora and their official contributions reveal that the Diaspora has used informal networks as their primary route to make investments. This paper seeks to establish that there is the emergence of an integrated Vietnamese Diaspora network—a combination of formal organizations and the existing informal networks—facilitating the greater investment, flow and knowledge exchange between the Vietnamese Diaspora and Vietnam increasing the overall Diaspora contribution to Vietnam’s economic growth.
    Date: 2011
  2. By: Rozana Himaz; Harsha Aturupane
    Abstract: This paper looks at the impact of education on household economic welfare in Sri Lanka over twenty years from 1985 to 2006 using five cross section household survey datasets. Applying quantile regression techniques the analysis finds that the incremental value to household welfare shows a distinct jump for an extra year of education at levels where important national examinations are completed. Moreover, higher quantiles systematically enjoy greater incremental welfare to education levels between Grade 8 to completed Advanced level examinations. Both these effects happen partly via the labour market, as labour market returns to employment display similar trends. The first finding suggests that credentials are important in the labour market. The second finding suggests that individuals in the upper quantiles probably have better quality education as well as social and analytical skills that complement formal education, enabling them to earn higher returns for their education.
    Keywords: Sri Lanka, education, welfare, quantile regression, returns
    JEL: I00 I20 I21 O53
    Date: 2011
  3. By: Christian Ebeke (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper shows that countries which allow a dual citizenship status for their international migrants receive on average more remittances than others. Using a cross-section of 104 developing countries with data averaged over the period 2000-2008, I distinguish between the direct effect of the dual citizenship status (incentive to remit more) and an indirect effect which passes through migration incentives. Results indicate that the direct effect of the recognition of the dual-citizenship is higher. Finally, the paper shows that remittance inflows are more likely to foster private investment in receiving countries which recognize a dual citizenship status for their migrants. These results are robust to alternative uses of datasets on dual-citizenship codification and to the instrumentation of remittances in the private investment model.
    Keywords: Dual-citizenship;Remittances;investment;developing countries
    Date: 2011–01–25
  4. By: Zhang, Junfu (Clark University); Zhao, Zhong (Renmin University of China)
    Abstract: We hypothesize that individuals with a larger social-family network are more likely to choose self-employment. We test this hypothesis using data on temporary rural-urban migrants in China. The size of a migrant’s social-family network is measured by the number of relatives and friends this migrant greeted during the past Spring Festival. Our empirical analysis faces two challenges. First, there is an endogeneity problem in that a migrant may want to develop and maintain a large social-family network exactly because he is self-employed. For this reason, a simple correlation between the probability of being self-employed and the size of the migrant’s social-family network cannot be interpreted as causal. Second, the size of the social-family network is measured using survey data, which is subject to measurement error. To overcome these problems, we take an instrumental variable (IV) approach. More specifically, we examine the distance an individual migrated when he first moved to a city and use this variable to instrument for the current size of the social-family network. We establish the credibility of the IV by emphasizing the unique institutional context of rural-urban migration in China and focusing on the sample of migrants who originally started as wage workers in urban areas and currently are not in their first jobs. Our IV results indeed show that a rural-urban migrant with a larger social-family network is more likely to be self-employed in the city. This finding is robust to alternative model specifications and various restrictions on the sample used in estimation.
    Keywords: social-family network, self-employment, rural-urban migrants
    JEL: J23 J61 D85
    Date: 2011–01
  5. By: Cuesta, Jose (Inter-American Development Bank); Nopo, Hugo (Inter-American Development Bank); Pizzolitto, Georgina (World Bank)
    Abstract: This paper presents a comparative overview of mobility patterns in 14 Latin American countries between 1992 and 2003. Using three alternative econometric techniques on constructed pseudo-panels, the paper provides a set of estimators for the traditional notion of income mobility as well as for mobility around extreme and moderate poverty lines. The estimates suggest very high levels of time-dependent unconditional immobility for the Region. However, the introduction of socioeconomic and personal factors reduces the estimate of income immobility by around 30 percent. There are also large variations in country-specific income mobility (estimated to explain some additional 10 percent of inter-temporal income variation). Analyzing the determinants of changes in poverty incidence within cohorts revealed statistically significant roles for age, gender and education of the household head, the latter subject to distinctive effects across levels of attainment and transition in and out of poverty.
    Keywords: income mobility, poverty, pseudo-panels, Latin America
    JEL: D3 I3 O1
    Date: 2011–01
  6. By: Isaac Kalonda-Kanyama (Department of Economics, The University of Kansas)
    Abstract: This paper estimates the effect of conflict and conflict-related vulnerability factors, namely sexual violence and economic vulnerability, on HIV prevalence rates. We find that HIV prevalence rates are higher in conflict-affected regions of the Democratic Republic of the Congo (DRC) than in non-conflict regions, and that sexual violence and economic vulnerability significantly affect HIV prevalence rates. Specifically we find that (i) HIV prevalence is 1.64 % higher in war-affected zones than elsewhere in the DRC; (ii) the impact of sexual violence in conflict-affected regions is 55 times greater than on average (1.10 % versus 0.02 %); (iii) Civil war and sexual violence jointly increase HIV infection rates by 1.45 %; (iv) Finally, economic conflict-related vulnerability does not explain HIV infection rates. In contrast, a one percent point decrease in the poverty incidence, that is a reduction in economic vulnerability, increases HIV prevalence rates by 0.048 % regardless of the situation of conflict.
    Keywords: AIDS, HIV, Civil war, sexual violence, DRC, Sub-Saharan Africa.
    Date: 2011–01
  7. By: Magnus Hatlebakk; Vegard Iversen; Gaute Torsvik
    Abstract: We study how local connections to persons in influential positions affect access to lucrative international migrant jobs and attractive government employment. In rural Nepal, it would not be surprising if social status, captured by a household’s caste but also by wealth or education, strongly influenced or perhaps even exclusively determined the access to attractive labour market opportunities.  This is not the case. Although much of the variation in migration can be attributed to wealth, education and social identity, household networks have a separate impact on external employment. Well-connected households are more likely to get government jobs and appear to have favorable access to the manpower agencies and the informal loans required to finance migration to the Persian Gulf or Malaysia.  
    Date: 2010
  8. By: Karpestam, Peter (Department of Economics, Lund University)
    Abstract: Residents in rural China doubt the benefits from education, yet there is empirical evidence supporting positive effects in urban and rural areas. This paper investigates whether education affects a variety of income attainment indicators for households in rural China, using a household survey from the provinces of Hebei and Liaoning. The analysis estimates education effects for household residents, but also for temporary migrants (rural-urban migrants) and children who have moved permanently (rural-rural migrants). This can help to answer a set of three related questions: 1) Does household welfare in rural China depend on education? 2) Is the effect of education contingent on the decision to migrate? and 3) Does education have dissimilar effect for rural-urban and rural-rural migrants? The results support that education has positive income effects and that migration yields no additional payoffs. However, there is no evidence that households benefit from higher education if migration is only temporary. Altogether, this signals positive payoffs of educational expenses to rural households but households which consider sending a migrant into the urban labor force are better off if the more educated stay at home.
    Keywords: East Asia; China; Education; Migration; Remittances; Non-Farm Incomes;
    JEL: D13 F24 I20 J60 R23
    Date: 2011–01–18
  9. By: Karpestam, Peter (Department of Economics, Lund University); Andersson, Fredrik N G (Department of Economics, Lund University)
    Abstract: We study the determinants of remittances to developing countries at different time horizons. Remittances to developing countries nowadays exceed official development assistance and constitute a significant fraction of the disposable income of many households in developing countries. Different hypotheses suggest that remittances are often sent to compensate for low incomes, which may impose a downward bias when estimating their effects on the economic development (e.g. growth, poverty and consumption) in recipient countries. Two popular hypotheses about the causes of remittances are the altruism and insurance hypothesis. Both hypotheses suggest that remittances are sent to compensate for short-run economic declines, but the altruism hypotheses also predict that remittances should diminish gradually over time as the economic development in the receiving countries proceeds and the need for outside assistance decreases. Hence, the altruism hypothesis predicts a negative correlation between the economic conditions in the receiving countries and remittances in the long-run and the short-run, while the insurance hypothesis only predicts a negative relationship in the short run. We can thus test which hypothesis that is best supported the data by studying the correlation between remittances and consumption in receiving countries at different time horizons. For this purpose we use a macroeconomic panel with consumption and remittances data from 50 low and middle income economies between 1980 and 2006. We estimate Keynesian consumption functions with GDP and remittances per capita as explanatory variables for the full panel and for different subpanels. The data is decomposed into different time horizons using a maximal overlap discrete wavelet transform. We are not aware of any study which uses similar econometric techniques to test different hypotheses about the underlying causes of remittances. Our evidence predominantly supports a negative long-run relationship, which favours the altruism over the insurance hypothesis.
    Keywords: Remittances; Altruism; Insurance Hypothesis
    JEL: C23 C33 E27 F24
    Date: 2011–01–18
  10. By: Vincenzo Atella; Mariacristina Rossi
    Abstract: The paper develops a simple two-period model relating child labor, child school attendance and child health care access in LDCs showing that child labor is positively correlated to access to health care services. In fact, higher medical expenditure generates better health and, therefore, higher child productivity. Accumulation of human capital, which generates higher future utility, comes at the expense of current productivity and consumption. The optimal choice of child labor is such that the marginal benefit of schooling is equal to the marginal productivity of child labor, which is enhanced by additional medical expenditure. Under this theoretical set-up we expect medical expenditure and child labor to be positively correlated, with parents caring more for their children if they contribute to household income. We explore these relationships using a micro data set from Ghana LSS for the year 1999. Empirical results confirm the model theoretical predictions.
    Keywords: Child labor; Health care demand; Human capital; Latent variables; multivariate Probit; Unobserved heterogeneity; LDCs
    JEL: I12 J13 J22 J28 J43
    Date: 2010
  11. By: Skoufias, Emmanuel; Tiwari, Sailesh; Zaman, Hassan
    Abstract: The 2008"food price crisis"and more recent spikes in food prices have led to a greater focus on policies and programs to cushion their impact on poverty and malnutrition. Estimating the income elasticity of micro-nutrients and assessing how they change during such crises is an important part of the policy debate as it affects the effectiveness of cash transfer and nutritional supplementation programs. This paper assesses these issues using data from two cross-sectional household surveys in Indonesia carried out before and soon after the 1997/98 economic crisis, which led to a sharp increase in food prices. First, the authors examine how the income elasticity of the starchy staple ratio differs between the two survey rounds using non-parametric as well as regression methods. Second, they provide updated estimates of the income elasticity for important nutrients in Indonesia. The analysis finds that (i) summary measures such as the income elasticity of the starchy staple ratio may not change during crises but this masks important differences across specific nutrients; (ii) methods matter -- the ordinary least squares estimates for the income elasticity of micro-nutrients are likely to be misleading due to measurement error bias; (iii) controlling for measurement error, the income elasticity of some key micro-nutrients, such as iron, calcium, and vitamin B1, is significantly higher in the crisis year compared with a normal year; and (iv) the income elasticity for certain micro-nutrients -- vitamin C in this case -- remains close to zero. These results suggest that cash transfer programs may be even more effective during crises to protect the consumption of many essential micro-nutrients compared with non-crisis periods but in order to ensure that all micro-nutrients are consumed, specific nutritional supplementation programs are also likely to be required.
    Keywords: Food&Beverage Industry,Nutrition,Rural Poverty Reduction,Economic Theory&Research,Inequality
    Date: 2011–01–01
  12. By: Simon Commander (IE Business School, EBRD); Zlatko Nikoloski (University College London)
    Abstract: Institutions are now widely believed to be important in explaining performance. In this paper, we analyse whether commonly used measures of institutions have any significant, measurable impact on performance, whether of countries or firms. We look at three ‘levels’ of institutions and associated conjectures. The first concerns whether the political system affects performance. The second concerns whether the business and investment environment affects the performance of countries and the third concerns whether perceived business constraints directly affect the performance of firms. In all instances, we find little evidence of a robust link between widely used measures of institutions and our indicators of performance. We consider why this might be the case and argue that mis-measurement, mis-specification, complexity and non-linearity are all relevant factors.
    JEL: O1 P2 P5
    Date: 2010–12
  13. By: Estache, Antonio (Université libre de Bruxelles)
    Abstract: This study analyzes the main approaches to infrastructure financing in developing countries and their evolution. It places the discussion in the context of the importance of infrastructure investment and maintenance needs to achieve growth and borader social objectives. It summarizes the evidence on the efficiency, equity and fiscal consequences of the main public and private financing options commonly used to achieve these goals in these countries. It shows the limits of the role of the private sector as a source of financing of infrastructure and the wide underestimation of public-sector financing support needed to serve the poorest and ensure that services are offered at prices consistent with their ability to pay. It concludes with forward-looking lessons from roughly 20 years of efforts to diversify the sources of infrastructure finance in developing countries.
    Keywords: Infrastructure finance; Poverty; Developing countries
    JEL: H54 H81
    Date: 2010–12–17
  14. By: Yuri Suarez Dillon Soares (Interamerican Development Bank, Washington, DC); Maria Michaela Sviatschi (Interamerican Development Bank, Washington, DC); Raul Andrade (GRADE, Lima, Peru); Jimena Montenegro
    Abstract: During the 1990s Peru greatly expanded access to formal judicial services in underserved districts through the construction and staffing of justice modules—physical structures which housed courts, prosecutors and public defenders. The intervention was designed to improve judicial coverage for populations located far from important urban centers where most of the courts are located. Using a specialized survey and matching techniques, we find that improving access to formal justice significantly shifts the resolution of conflicts away from informal mechanisms and toward the newly provided formal mechanisms; increases the use of complementary services, such as the use of lawyers; improves the perception of residents regarding social mores and the law; and ultimately marginally reduces the incidence of self-reported conflicts. We find evidence that the treatment also improves outcomes for residents in the area of child support conflicts, although in other types of conflicts we find no impact on outcomes.
    Keywords: Public Policy Evaluation, Justice, Court Efficiency, Difference in Differences, Propensity Score Matching, Peru
    JEL: O1 C1
    Date: 2010–12
  15. By: Yukichi Mano (Foundation for Advanced Studies on International Development; National Graduate Institute for Policy Studies); Takashi Yamano (Foundation for Advanced Studies on International Development; National Graduate Institute for Policy Studies); Aya Suzuki (Foundation for Advanced Studies on International Development; National Graduate Institute for Policy Studies); Tomoya Matsumoto (National Graduate Institute for Policy Studies)
    Abstract: We examine the roles of local and personal networks in the employment process and the emergence and development of the labor market in Ethiopia’s growing cut flower industry. Using primary survey data of 320 workers randomly sampled from all 64 farms, we find that workers who were recruited informally using the social ties were paid less than the formally-recruited workers at hiring. However, these workers quickly increased their productivity, and the effect of social ties on wages disappeared over time. Further, we find that the development of labor market for this newly-emerged industry took place particularly within the industrial clusters (100 words).
    Keywords: Labor, Market, Cluster, Cut Flower, Ethiopia, Africa
    Date: 2011–01
  16. By: Paul Dower (New Economic School and the Center for Economic and Financial Research); Elizabeth Potamites
    Abstract: Many land titling programs have produced lackluster results in terms of achieving access to credit for the poor. This may re ect insucient empha- sis on local banking practices. Bankers commonly use sophisticated methods other than collateral to ensure repayment. Some methods rely on ex-ante in- formation ows and formal land titles can improve these ows by signaling to the bank important characteristics about borrowers. Using a household survey from Indonesia, we provide evidence that formal land titles do have a positive and significant eect on access to credit and at least part of this effect is best interpreted as an improvement in ex-ante information ows. This result stands in contrast to the prevailing notion that land titles only function as collateral. Analysts who neglect local banking practices may misinterpret the observed effect of systematic land titling programs on credit access because these programs tend to dampen the signaling value of formal land titles.
    Date: 2010–12
  17. By: Aoife Hanley; Wan-Hsin LIU; Andrea Vaona
    Abstract: This paper investigates the role of regional financial development, in addition to FDI, for regional innovation in China, using a more recent provincial dataset and more sophisticated panel data estimation techniques than previous studies. Two aspects of regional financial system development are considered: its financial depth and government intervention in the financial system. Estimation results show that the financial depth of a region has a significantly positive effect on regional innovation (patenting) performance. This positive effect is found to be higher for minor innovations such as external design patents than for more complicated innovations such as utility model patents and invention patents. Surprisingly, estimation results do not show that government financial system intervention reduces allocative efficiency of resources which would otherwise impede regional innovation performance
    Keywords: regional financial system, FDI, innovation, patent, regional study, China
    JEL: G20 O30 O53 R10
    Date: 2011–01
  18. By: Doan, Tinh
    Abstract: This paper employs the Ordinary Least Squares, Instrumental Variables and Treatment Effect models to a new dataset from the Vietnam Household Living Standards Survey (VHLSS) to estimate return to the four-year university education in 2008. Our estimates reveal that the return to university education is about 17% (annualized) and robust to the various estimators. The return to higher education has significantly increased since the economic reform in late 1980s.
    Keywords: economic transition; returns to higher education; IV model; Vietnam
    JEL: J31 O15 C31
    Date: 2011–01–26
  19. By: Ruiz-Porras, Antonio; Lopez-Mateo, Celina
    Abstract: We study how competition and corporate governance may explain investment decisions of Mexican manufacturing firms. We develop the study with indexes of market concentration and agency costs and OLS regressions. The analysis uses longitudinal census data. Our results suggest that investment is better explained by the Dominance Index, a Mexican measure of concentration, than by the Herfindahl-Hirschman one. They also suggest that agency costs (proxy for the degree of separation of ownership and control), and market competition may encourage investment decisions. Furthermore they suggest an inverse relationship between market competition and agency costs. We believe that our findings support the hypothesis that competition may be an alternative mechanism to encourage corporate practices in emerging economies.
    Keywords: Corporate governance; competition; investment; Mexico; manufacturing; economic development
    JEL: G34 O16 L22 L60
    Date: 2011–01–27
  20. By: Castellacci, Fulvio; Natera, Jose Miguel
    Abstract: Missing data represent an important limitation for cross-country analyses of national systems, growth and development. This paper presents a new cross-country panel dataset with no missing value. We make use of a new method of multiple imputation that has recently been developed by Honaker and King (2010) to deal specifically with time-series cross-section data at the country-level. We apply this method to construct a large dataset containing a great number of indicators measuring six key country-specific dimensions: innovation and technological capabilities, education system and human capital, infrastructures, economic competitiveness, political-institutional factors, and social capital. The CANA panel dataset thus obtained provides a rich and complete set of 41 indicators for 134 countries in the period 1980-2008 (for a total of 3886 country-year observations). The empirical analysis shows the reliability of the dataset and its usefulness for cross-country analyses of national systems, growth and development. The new dataset is publicly available.
    Keywords: Missing data; multiple imputation methods; national systems of innovation; social capabilities; economic growth and development; composite indicators.
    JEL: P5 F0 C33 I32 O11 F5 O20 C8 O4 O3
    Date: 2011–01
  21. By: Aristotelis Boukouras (Georg-August-University Göttingen)
    Abstract: We relate the design of contract law to the process of development. In this paper, contract law defines which private agreements are enforceable (i.e. are binding and enforced by courts) and which are not. Specically, we consider an economy where agents face a hold-up problem (moral hazard in teams). The resulting time-inconsistency problem leads to inefficiently low levels of effort and trading among agents. The solution to this problem requires a social contract which meets two conditions: (i) an economywide delegate (judge) responsible for the enforcement of the social contract and (ii) a set of non-enforceable private contracts (regulation). However, because this mechanism is costly, its effectiveness depends on the aggregate production of the economy. To capture the interaction between contract enforcement and development, we introduce a multiperiod economy and show that, in the early stages of development, the mechanism is infeasible. The appearance of enforcement institutions and regulation is delayed for the later stages. At this point of time, the hold-up problem is solved and this spurs economic growth further. Finally, the relationship between economic development and the evolution of contract law may be non-monotonic, which may explain why empirical studies fail to find a robust relationship between the two.
    Keywords: contract law; development; enforcement institutions; hold-up; institutional agent; regulation; social contract
    JEL: D02 D82 D86 K12 O12 O31 O43
    Date: 2011–01–20

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