nep-dev New Economics Papers
on Development
Issue of 2011‒02‒26
seventeen papers chosen by
Mark Lee
Towson University

  1. Macroeconomic Analysis of Corruption in Developing Economies By James P. Gander
  2. Microeconomics of Corruption Among Developing Economies By James P. Gander
  3. Social Capital and Savings Behaviour: Evidence from Vietnam By Carol Newman; Finn Tarp; Katleen Van Den Broeck
  4. China in Africa: A Macroeconomic Perspective - Working Paper 230 By Benedicte Vibe Christensen
  5. Selective Secondary Education and School Participation in Sub-Saharan Africa: Evidence from Malawi By Jacobus de Hoop
  6. Herfindahl-Hirschman Meets International Trade and Development Theories By Mitchell H. Kellman; Yochanan Shachmurove
  7. Determinants of Remittances:Evidence from Tonga By Huidan Lin
  8. How Does Political Instability Affect Economic Growth? By Ari Aisen; Francisco José Veiga
  9. Global Shocks and their Impact on Low-Income Countries: Lessons from theGlobal Financial Crisis By Martin Schindler; Chris Papageorgiou; Hans Weisfeld; Catherine A. Pattillo; Nicola Spatafora; Andrew Berg
  10. Classifications of Countries Based on Their Level of Development: How it is Done and How it Could be Done By Lynge Nielsen
  11. Fragile States and Development Policy By Timothy Besley; Torsten Persson
  12. Incentive and crowding out effects of foodassistance: Evidence from randomizedevaluation of food-for-training project inSouthern Sudan By Munshi Sulaiman
  13. Repayment Frequency in Microfinance Contracts with Present-Biased Borrowers By Greg Fischer; Maitreesh Ghatak
  14. Trade and the Skill Premium Puzzle with Capital Market Imperfections By Roberto Bonfatti; Maitreesh Ghatak
  15. Should We Track Migrant Households When Collecting Household Panel Data?:Household Relocation, Economic Mobility and Attrition Biases in the Rural Philippines By Fuwa, Nobuhiko
  16. The Returns to the Brain Drain and Brain Circulation in Sub-Saharan Africa: Some Computations Using Data from Ghana By Yaw Nyarko
  17. Sex Ratios, Entrepreneurship, and Economic Growth in the People’s Republic of China By Shang-Jin Wei; Xiaobo Zhang

  1. By: James P. Gander
    Abstract: Based on empirical data, a two-equation game-type corruption reaction function model was developed. A “data to model” approach was used rather than the usual a priori approach. The general hypothesis tested was the “monkey see, monkey do” principle. The latest data on corruption among developing countries was obtained from the Enterprise Surveys done by the World Bank Group in 2010. The key variables were the percent of domestic firms expecting to make informal payment to public officials to “get things done,” and the percent of foreign firms doing like wise. The time span is from 2002-2010. A variety of econometric methods were used. In general, the statistical results were quite good and supported the hypothesis. Both reaction equations were positively sloped. Time had a reducing effect on the frequency of domestic corruption, yet it had an increasing effect on foreign corruption. Variations in the frequency of corruption across regions of countries were generally not significant.
    Keywords: Firm, Corruption, Game Model, Developing Countries JEL Classification: C51; D81; E60; K49; M29
    Date: 2011
  2. By: James P. Gander
    Abstract: A simple micro model of a firm’s investment decision made under the uncertainty of the success of a bribe of a government official is developed. The probability of success of the bribe is a function of the amount paid to the official to “get things done.” The operational model runs the amount of the bribe on such determinants as firm size, country size, shareholder ownership, political instability, and court system. The data covers the periods 2002-2005 and 2006-2010, includes 150 developing countries and has data on some 72,000 firms. Several econometric estimation methods were used. The findings support earlier studies, to wit, firm size and country size are inversely related to the index of corruption. Political instability and the court system were positively related to corruption. Policy implications of the findings are discussed.
    Keywords: Firm, Corruption, Uncertainty, Developing Countries. JEL Classification:
    Date: 2011
  3. By: Carol Newman (Institute for International Integration Studies, Trinity College Dublin); Finn Tarp (Department of Economics, University of Copenhagen); Katleen Van Den Broeck (Department of Economics, University of Copenhagen)
    Abstract: We explore the extent to which social capital can play a role in imparting information about the returns to saving where potential knowledge gaps and mistrust exists. Using data from Vietnam we find strong evidence to support the hypothesis that information transmitted via reputable social organizations increases the proportion of liquid assets held in the form of deposits that yield a return. Our results imply that targeting information on the benefits of deposit saving through formal networks or groups would be effective in increasing the number of households that save at grassroots level.
    Keywords: Household Savings, Social Capital, Information Failure, Risk Aversion
    JEL: D14 D71 D83 D91 O12 O16
    Date: 2011–01
  4. 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. the main conclusion is that China, as an emerging global player and one of Africa's largest trading and financial partners, can no longer ignore the macroeconomic impact of its operations on African economies. Indeed, it is in China's interest that its engagement leads to sustainable economic development on the contnent. Trade, financing, and technology transfer must continue at a pace that African economies can absorb without running up against institutional constraints, the capacity to service the costs to future budgets, or the balance of payments. A key corollary is that China should show good governance in its own operations in Africa. Finally, macroeconomic analysis needs to be supported by better analytical data and organization of decision making to support China's engagement in Africa.
    Keywords: China and Africa, Foreign Direct Investment
    Date: 2010–11
  5. By: Jacobus de Hoop (VU University Amsterdam)
    Abstract: Large scale tracking policies, allowing academically apt pupils to enter a select group of secondary schools, can be found in many Sub-Saharan countries. However, evidence on the impact of these policies on school outcomes, especially school participation, is limited. This paper fills this gap by providing regression discontinuity evidence on the impact of Malawi's tracking program. The analysis is based on unique institutional data covering an entire cohort of pupils. Estimates show that Malawi's tracking program raises school participation of top students without a reduction in pupil learning. These findings have implications for education policy in Sub-Saharan Africa.
    Keywords: education; Malawi; regression discontinuity; Sub-Saharan Africa; tracking
    JEL: I21 O15
    Date: 2010–04–15
  6. By: Mitchell H. Kellman (Department of Economics, The City College of New York, and the Graduate Center of the City University of New York); Yochanan Shachmurove (Department of Economics, The City College of New York, and the Graduate Center of the City University of New York)
    Abstract: To date there does not exist one a generally acceptable measure or index of Specialization in International Trade. Development Economic Theory embraces the expectation of a direct relationship between economic growth and export diversification. However, International Trade Theory supports the association of export expansion with increased specialization. The paper proposes a Specialization Index and applies it to six small developing countries: Singapore, South Korea, Malaysia, Mexico, Tunisia and Morocco, during the years of their take offs. Additionally, the index is applied to the two large fast growing economies of Chine and India.
    Keywords: Trade Specialization Indices; Development Theory; Developing Country Export Compositions; International Trade Theory; Trade in Manufactures; Trade and Transformation; Singapore; South Korea; Malaysia; Mexico; Tunisia; Morocco; China; India.
    JEL: O1 O14 F1 F14
    Date: 2011–01–23
  7. By: Huidan Lin
    Abstract: This paper analyzes the determinants of remittances to Tonga. The results indicate that macroeconomic conditions in remitting countries and exchange rate fluctuations influence remittances. In particular, remittances growth falls when the Tongan currency appreciates, but increases with higher real GDP growth and lower unemployment in remitting countries. The analysis also finds that the influence of these determinants varies with the recipients of remittances, with remittances to non-profit organizations being more sensitive to an appreciation of the Tongan currency and the interest rate differential between Tonga and remitting countries than remittances to households. However, the analysis does not find evidence of "ÂDutch Disease" in Tonga, as the real exchange rate does not appear to be affected by remittances.
    Keywords: Capital flows , Consumption , Real effective exchange rates , Tonga , Workers remittances ,
    Date: 2011–01–26
  8. By: Ari Aisen; Francisco José 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 , Economic models , Education , Human capital , Political economy , Productivity ,
    Date: 2011–01–13
  9. By: Martin Schindler; Chris Papageorgiou; Hans Weisfeld; Catherine A. Pattillo; Nicola Spatafora; Andrew Berg
    Abstract: This paper investigates the short-run effects of the 2007-09 global financial crisis on growth in (mainly non-fuel exporting) low-income countries (LICs). Four conclusions stand out. First, for many individual LICs, 2009 was not extraordinarily calamitous; however, aggregate LIC output declined sharply because LICs were unusually synchronized. Second, the growth declines are on average well explained by the decline in export demand. Third, if the external environment facing LICs improves as forecast, their growth should rebound sharply. Finally, and contrary to received wisdom, there are few robust relationships between the cross-country growth variation and the policy and structural environment; the main exceptions are reserve coverage and labor-market flexibility.
    Keywords: Cross country analysis , Economic growth , Economic models , External shocks , Financial crisis , Global Financial Crisis 2008-2009 , Low-income developing countries ,
    Date: 2011–02–02
  10. By: Lynge Nielsen
    Abstract: The paper analyzes how the UNDP, the World Bank, and the IMF classify countries based on their level of development. These systems are found lacking in clarity with regard to their underlying rationale. The paper argues that a country classification system based on a transparent, data-driven methodology is preferable to one based on judgment or ad hoc rules. Such an alternative methodology is developed and used to construct classification systems using a variety of proxies for development attainment.
    Keywords: Classification of countries , Developed countries , Developing countries , Development , Emerging markets , International Monetary Fund , UNDP , World Bank ,
    Date: 2011–02–04
  11. By: Timothy Besley; Torsten Persson
    Abstract: It is widely recognized that fragile states are key symptoms of under-development inmany parts of the world. Such states are incapable of delivering basic services totheir citizens and political violence is commonplace. As of yet, mainstreamdevelopment economics has not dealt in any systematic way with such concerns andthe implications for development assistance. This paper puts forward a frame-workfor analyzing fragile states and applies it to a variety of development policies indifferent types of states.9076:
    Keywords: state fragility, development
    JEL: P45
    Date: 2011–01
  12. By: Munshi Sulaiman
    Abstract: Food assistance is one of the most common forms of safety net programs in postconflictsituations. Besides the humanitarian and promotional roles, there arewidespread scepticisms of food assistance regarding its possible influence ondisincentive to work and on crowding out of private transfers. While there is arelatively large amount of empirical research on social protection in stable context, itis less researched in post-conflict situations. Based on randomized evaluation of afood-for-training program implemented in Southern Sudan, this paper estimatesthese effects. We observe a significant negative impact (about 13%) on per capitahousehold income. However, there is no effect on the hours of work or the type ofthe economic activities of the adult members. The decline in income mostlyhappened through a reduction in child labor. There is also a positive effect on schoolenrolment for girls (about 10 percentage points) and an improvement in theirhousing status. We also do not find any indication of crowding out of privatetransfers for the participants. This is most likely due to the extent of private transfersbeing very low to begin with. However, there is a small but significant impact of thetransfers given out by the participants.
    Keywords: food assistance, incentive, crowding-out, Southern Sudan
    JEL: J22 O12 Q18 L
    Date: 2010–12
  13. By: Greg Fischer; Maitreesh Ghatak
    Abstract: This paper analyzes the theoretical underpinnings of high-frequency repayment, afeature in nearly all microfinance contracts that has been largely overlooked bytheorists. The pervasive belief among practitioners that frequent repayment is criticalin achieving high repayment rates is puzzling. Classically rational individualsshould benefit from more flexible repayment schedules, and less frequent repaymentshould increase neither default nor delinquency. This paper proposes a simpleexplanation based on present bias. For such individuals, more frequent repaymentcan increase the maximum incentive compatible loan size. However, the welfareeffects are ambiguous. More frequent repayment can lead to over-borrowing,reducing welfare as it increases loan sizes.4
    Keywords: Microfinance, Repayment Frequency, Present-Bias
    JEL: O12 O16
    Date: 2010–07
  14. By: Roberto Bonfatti; Maitreesh Ghatak
    Abstract: An interesting puzzle is that trade liberalization in the 1980s and 1990s has been associated with a sharp increase in the skill premium in both developed and developing countries. This is in contrast with neoclassical theory, according to which trade should increase the relative return of the relatively abundant factor. We develop a simple model of trade with capital market imperfections, and show that trade can increase the skill premium in both the North and the South, and both in the short run as well as in the long run. We show that trade with a skill-intensive economy has two effects: it reduces the skilled wage, and thus discourages non talented agents out of the skilled labor force; and it reduces the cost of subsistence, thus allowing the talented offspring of unskilled workers to go to school. This compositional effect has a positive effect on the observed skill premium, possibly strong enough to counterweight the decrease in the skilled wage.
    Keywords: Trade Liberalization, Skill Premium, Credit Market Frictions, Latin America
    JEL: F16 O15 O16
    Date: 2010–11
  15. By: Fuwa, Nobuhiko
    Abstract: Based on household panel data that tracked migrant households (with an additional survey cost of 17 percent), this article describes behavior of household relocation and quantifies the extent of attrition biases in estimating the determinants of percapita household consumption and of its growth rate. Many households relocate for non-economic reasons, and to rural destinations, while the small number of urban migrants improved their wellbeing faster than did others. Such heterogeneity among migrants may be a reason behind the negligible attrition biases caused by the omission of migrants, in the inference on the average behavioral coefficients among the original population.
    Keywords: domestic migration; household relocation; panel data analysis; Philippines; poverty dynamics; sample attrition; urbanization
    JEL: O15 C23 J61 C42 O12
    Date: 2010–09–18
  16. By: Yaw Nyarko
    Abstract: We look at the decision of the government or "central planner" in the allocation of scarce governmental resources for tertiary education, as well as that for the individual. We provide estimates of the net present values, or cost and benefits. These include costs of tertiary education; the benefits of improved skills of those who remain in the country; and also takes into account the flows of the skilled out of the country (the brain drain) as well as the remittances they bring into the country. Our results are positive for the net benefits relative to costs. Our results suggest that (i) there may be room for creative thinking about the possibility that the brain drain could provide mechanisms for dramatic increases in education levels within African nations; and (ii) by at least one metric, spending by African nations on higher education in this period yielded positive returns on the investment. Our results on the individual decision problem resolve a paradox in the returns to education literature which finds low returns to tertiary education.
    JEL: F35 F43 O0 O55
    Date: 2011–02
  17. By: Shang-Jin Wei; Xiaobo Zhang
    Abstract: China experiences an increasingly severe relative surplus of men in the pre-marital age cohort. The existing literature on its consequences focuses mostly on negative aspects such as crime. In this paper, we provide evidence that the imbalance may also stimulate economic growth by inducing more entrepreneurship and hard work. First, new domestic private firms – an important engine of growth – are more likely to emerge from regions with a higher sex ratio imbalance. Second, the likelihood for parents with a son to be entrepreneurs rises with the local sex ratio. Third, households with a son in regions with a more skewed sex ratio demonstrate a greater willingness to accept relatively dangerous or unpleasant jobs and supply more work days. In contrast, the labor supply pattern by households with a daughter is unrelated to the sex ratio. Finally, regional GDP tends to grow faster in provinces with a higher sex ratio. Since the sex ratio imbalance will become worse in the near future, this growth effect is likely to persist.
    JEL: E2 F3 F43 J1 J2 O1 O4
    Date: 2011–02

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