nep-dev New Economics Papers
on Development
Issue of 2011‒03‒05
fourteen papers chosen by
Mark Lee
Towson University

  1. Remittances: Dutch disease or export-led growth? By Ghada Fayad
  2. Beyond the Overall Economic Downturn: Evidence on Sector-specific Effects of Violent Conflict from Indonesia By Marc Vothknecht; Sudarno Sumarto
  3. Do Worker Remittances Reduce Output Volatility in Developing Countries? By Ralph Chami; Dalia Hakura; Peter Montiel
  4. The "Out of Africa" Hypothesis, Human Genetic Diversity, and Comparative Economic Development By Quamrul Ashraf; Oded Galor
  5. Commitment and Conquest: The Case of British Rule in India By Mandar Oak; Anand Swamy
  6. Capital Accumulation, External Restriction, Technology Gap and Structural Change: Theory and the Brazilian Experience By José Luis Oreiro; Marcos Tostes Lamônica; Carmem Aparecida Feijo
  7. Economic Development, Rural Zones and Farms in China By Fanfani, Roberto
  8. Role of agriculture in the livelihoods of farm households in Tibet By Brown, Colin; Waldron, Scott
  9. Accounting for the Effects of AIDS on Growth in Sub-Saharan Africa. By Paul Cahu; Falilou Fall
  10. Skill sorting, inter-industry skill wage premium, and production chains: evidence from India 1999-2000 By Asuyama, Yoko
  11. Skill distribution and comparative advantage: a comparison of China and India By Asuyama, Yoko
  12. Migration and Education By Christian Dustmann; Albrecht Glitz
  13. Is the Informal Sector Constrained from the Demand Side? Evidence for Six West African Capitals By Marcus Böhme; Rainer Thiele
  14. Cultural preference on fertility and the long-run growth effects of intellectual property rights By Chu, Angus C.; Cozzi, Guido

  1. By: Ghada Fayad
    Abstract: The literature on remittances and growth has thus far established a positive link between remittances and overall economic growth in recipient countries using standard growth regressions.In this paper, we identify the main transmission channel through which remittance transfers seem to exert their growth-enhancing effects: the 'export-led growth' channel. We do so by using a methodology that exploits both cross-country and within-country cross-industry variation in data averaged over the 1980s and the 1990s decades and correcting for the endogeneity of remittances by reverting to a set of external instruments, most of which we construct for this purpose. For both decades, we find that remittances are conducive to the relative growth of exporting industries within the manufacturing sector in a large set of remittance recipient countries. We also identify an alternative channel through which remittances affect growth: the financial development channel, where remittances are found to favor growth in industries that are less in need of external financing. In this paper, we give special attention to the potential migrant network complementarity effect with international trade and show in a number of ways that such background e¤ect is not driving our results. Instead, our findings strongly suggest an investment channel through which remittances as financial transfers are, either directly as capital investment transfers or indirectly through their economy-wide investment-enhancing effects,boosting export sector growth in recipient economies.
    Keywords: Remittances, manufacturing, export-led growth, Dutch disease, migrant networks
    JEL: F2 F4 O1 Q3
    Date: 2011
  2. By: Marc Vothknecht; Sudarno Sumarto
    Abstract: This paper analyses the impact of violent conflict on economic growth using micro-level data from Indonesia. We compile a panel dataset at district level for the period 2002-2008, and disentangle the overall negative economic effect of violent conflict into its sectoral components. Our results reveal substantial differences across sectors, with the most detrimental impact evident in manufacturing industries and the service sectors. Further, the short-run impacts on growth appear to be only temporal, and some evidence for the 'phoenix effect' in the early post-conflict period is found. The construction sector, in particular, recovers soon once conflict ends, while manufacturing industries and the finance sector appear especially reliant on a lasting peace. A series of alternative specifications confirm the main findings of the analysis.
    Keywords: Violent conflict, economic growth, Indonesia
    JEL: O11 F51
    Date: 2011
  3. By: Ralph Chami (International Monetary Fund); Dalia Hakura (International Monetary Fund); Peter Montiel (Williams College)
    Abstract: Remittance inflows have increased considerably in recent years and are large relative to the size of many recipient economies. The theoretical and empirical effects of remittance inflows on output growth volatility are, however, ambiguous. On the one hand, remittances have been a remarkably stable source of income, relative to other private and public flows, and they seem to be compensatory in nature, rising when the home country’s economy suffers a downturn. On the other hand, the labor supply effects induced by altruistic remittances could cause the output effects associated with technology shocks to be magnified. This paper finds robust evidence for a sample of 70 remittance-recipient countries, including 16 advanced economies and 54 developing countries that remittances have a negative effect on output growth volatility, thereby supporting the notion that remittance flows are a stabilizing influence on output.
    Keywords: Remittances, output volatility, developing countries
    JEL: D02 D64 F02 F22 F24
    Date: 2010–10
  4. By: Quamrul Ashraf (Williams College); Oded Galor
    Abstract: This research argues that deep-rooted factors, determined tens of thousands of years ago, had a significant effect on the course of economic development from the dawn of human civilization to the contemporary era. It advances and empirically establishes the hypothesis that, in the course of the exodus of Homo sapiens out of Africa, variation in migratory distance from the cradle of humankind to various settlements across the globe affected genetic diversity and has had a long-lasting effect on the pattern of comparative economic development that is not captured by geographical, institutional, and cultural factors. In particular, the level of genetic diversity within a society is found to have a hump-shaped effect on development outcomes in both the pre-colonial and the modern era, reflecting the trade-off between the beneficial and the detrimental effects of diversity on productivity. While the intermediate level of genetic diversity prevalent among Asian and European populations has been conducive for development, the high degree of diversity among African populations and the low degree of diversity among Native American populations have been a detrimental force in the development of these regions. Further, the optimal level of diversity has increased in the process of industrialization, as the beneficial forces associated with greater diversity have intensified in an environment characterized by more rapid technological progress.
    Keywords: The "Out of Africa" hypothesis, Human genetic diversity, Comparative development, Income per capita, Population density, Neolithic Revolution, Land productivity
    JEL: N10 N30 N50 O10 O50 Z10
    Date: 2010–08
  5. By: Mandar Oak (University of Adelaide); Anand Swamy (Williams College)
    Abstract: Contemporary historians usually attribute the East India Company's military success in India to its military strength, and to the mutual distrust of Indian regimes. We argue these explanations, though correct, are incomplete. The credibility of the Company's commitments, even though imperfect, was essential to its success.
    Keywords: War, Colonialism, India
    JEL: N45 N40
    Date: 2010–07
  6. By: José Luis Oreiro (Departamento de Economia (Department of Economics) Faculdade de Economia, Administração, Contabilidade e Ciência da Informação e Documentação (FACE) (Faculty of Economics, Administration, Accounting and Information Science) Universidade de Brasília); Marcos Tostes Lamônica (Economics Department, Fluminense Federal University (UFF).); Carmem Aparecida Feijo (Economics Department, Fluminense Federal University (UFF).)
    Abstract: Brazilian economy was the most dynamic in terms of growth among developed and developing economies from post-War until 1980, when a severe external constraint interrupted this trend. We propose in this paper a model, based on Kaldor, where capital accumulation, technological gap and long run external constraint are connected. Our hypothesis is that capital accumulation, under certain circumstances, can overcome external constraint if the accumulation effort promotes structural change increasing the importance of sectors more technological-intensive. It is expected that the structural change in this direction will contribute to an increase in the income-elasticity of exports and to a decrease in income-elasticity of imports, resulting in the increase in the growth rate of real product compatible with the balance of payments equilibrium in the long period. The last part of the paper shows that the high investment rate observed in the Brazilian economy from the post-War until the end of the 1970s resulted in the deepening of the import substitution process, what, in our interpretation, contributed to partially increase the long run growth rate of the Brazilian economy compatible with the balance of payment equilibrium.
    Keywords: structural change, technological progress, industrialization, external restriction
    JEL: O11 F43
    Date: 2011–02
  7. By: Fanfani, Roberto
    Abstract: Because of the growing influence of China, the rapid economic development and the transformation of Chinese society have attracted the attention of analysts, politicians and mass media. There are, however, many aspects of these changes that are less well known. This is not only because of the sheer size of China â with a population of more than 1.3 billion â but also because of the lack of information on the enormously large and varied rural areas, where still now more than 55% of the Chinese population lives. The great reform of the Chinese economy began 30 years ago in 1978. The basic change was liberalization of foreign trade, the soâcalled âOpen Door Policyâ. This involved a deep reform of the economy and in particular of agriculture, which entailed the dismantling of the collectives and the establishment of a familyâbased farming structure, the soâcalled âHousehold Responsibility Systemâ. The rapid development of the Chinese economy in recent decades is the result of the combined effect of these reforms. However the role that reforms in agriculture and rural areas have played in this transformation have often been overlooked, and in particular the effect of reliable food supplies on a continually growing population, such as the Chinese one. The great reduction in hunger and malnutrition, which in the past affected millions of Chinese citizens, has had a decisive impact on the reduction of poverty, thus increasing the social stability of the whole country.
    Keywords: Agribusiness, Agricultural and Food Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Production Economics,
    Date: 2010–10
  8. By: Brown, Colin; Waldron, Scott
    Abstract: In its ongoing efforts to identify more socially inclusive forms of development that target households in rural areas of Tibet, the Chinese central government has begun to focus more attention and resources on agricultural modernisation and development. Although agriculture continues to play a pivotal role in rural areas of Tibet, the nature of agriculture and rural society is changing.3 This paper first highlights some of the macroâlevel changes that are occurring and some of the underlying drivers behind these changes. It then describes a model used to understand farm household systems at a microâlevel for the main agricultural areas of the Yalong river and its tributaries . The models explore the impact of agricultural innovations and changing agricultural practices on household consumption, resources, and economic returns. Although the model and analysis are still in a preliminary stage, they reveal detailed insights about the role of agriculture in the livelihoods of Tibetan farm households.
    Keywords: Community/Rural/Urban Development, International Development,
    Date: 2011
  9. By: Paul Cahu (The World Bank); Falilou Fall (Centre d'Economie de la Sorbonne)
    Abstract: In this paper, we first, perform a quantitative assessment of the impact of the HIV/AIDS epidemic on growth. Second, we precisely account for the effects of the epidemic on income per capita through human and physical capital accumulations, population and labor force. That is, we disentangle the effect on the different sources of short and long run growth. Using a dynamic panel of 46 Sub-Saharan African countries over the period 1981-2007, we show that HIV/AIDS has negative, significant and long-lasting effects on demography and growth. According to the estimates presented, GDP per working age population will be 12% lower in the long-run for the average African country than it should be if the epidemic had not spread out. However, the impact is huge for the countries experiencing a high prevalence rate. To tackle the endogeneity issue of HIV/AIDS, we provide a new series of HIV prevalence rate build from the estimation of the propagation dynamic of the epidemic.
    Keywords: Health, AIDS epidemic, human capital, growth, Sub-Saharan Africa.
    JEL: I10 J11 O15 O40 O55
    Date: 2011–01
  10. By: Asuyama, Yoko
    Abstract: This paper proposes a mechanism that links industry’s technological characteristics (i.e. quality of non-labor inputs, which is proxied by the length of industry production chains), industry-specific skill wage premium, and skill sorting across industries. It is hypothesized that high-skilled workers are sorted into industries where they can receive a higher skill wage premium, by working with better quality non-labor input. The quality of non-labor inputs is assumed to be worse in industries with longer production chains due to the increased involvement of low-skilled labor and poor infrastructure over the sequential production. By examining Indian wage and employment data for 1999-2000, empirical evidence to support this mechanism can be obtained: First, the skill wage premium is lower [higher] in industries with longer [shorter] production chains. Second, the skill wage premium is lower [higher] in industries with a higher [lower] proportion of low-skilled workers producing inputs outside their own industry. Third, the proportion of high-skilled workers is larger in industries with shorter production chains and lower ratio of low-skilled labor involved, i.e., a skill sorting trend can be observed.
    Keywords: India, Labor market, Wages, Manufacturing industries, Employment, Labor conditions, Industry wage, Production chains, Sequential production, Skill wage premium, Skill sorting
    JEL: J24 J31
    Date: 2011–02
  11. By: Asuyama, Yoko
    Abstract: This paper empirically examines the different comparative advantages of two emerging economic giants, China and India, in relation to the different skill distribution patterns in each country. By utilizing industry export data on China and India from 1983 to 2000, we find that a country with a greater dispersion of skills (i.e., India, especially in the earlier years) has higher exports in industries with shorter production chains, whereas a country with a more equal dispersion of skills (i.e., China, especially in the later years) is found to have higher exports in industries with longer production chains. The causal relationship is fairly robust across different specifications. This empirical evidence supports our assumption that the likely mechanism for these results is the negative impact of low-skilled workers on input quality, which accumulates and becomes larger as the length of production chains and the proportion of low-skilled workers in the economy increase.
    Keywords: China, India, Manufacturing industries, Manufactures, Labor productivity, Labor conditions, International competition, Exports, Comparative advantage, Production chains, Sequential production, Skill distribution
    JEL: F14 F16 J2
    Date: 2011–02
  12. By: Christian Dustmann (CReAM, University College London); Albrecht Glitz (CReAM, Universitat Pompeu Fabra)
    Abstract: Sjaastad (1962) viewed migration in the same way as education: as an investment in the human agent. Migration and education are decisions that are indeed intertwined in many dimensions. Education and skill acquisition play an important role at many stages of an individual’s migration. Differential returns to skills in origin- and destination country are a main driver of migration. The economic success of the immigrant in the destination country is to a large extent determined by her educational background, how transferable these skills are to the host country labour market, and how much she invests into further skills after arrival. The desire to acquire skills in the host country that have a high return in the country of origin may also be an important reason for a migration. From an intertemporal point of view, the possibility of a later migration may also affect educational decisions in the home country long before a migration is realised. In addition, the decisions of migrants regarding their own educational investment, and their expectations about future migration plans may also affect the educational attainment of their children. But migration and education are not only related for those who migrate or their descendants. Migrations of some individuals may have consequences for educational decisions of those who do not migrate, both in the home and in the host country. By easing credit constraints through remittances, migration of some may help others to go to school. By changing the skill base of the receiving country, migration may change incentives to invest in certain types of human capital. Migrants and their children may create externalities that influence educational outcomes of non-migrants in the destination country. This chapter will discuss some of the key areas that connect migration and education.
    Keywords: Migration, Education, Human Capital, Return Migration, Immigrant Selection, Second-generation Immigrants.
    Date: 2011–02
  13. By: Marcus Böhme; Rainer Thiele
    Abstract: Employing a unique dataset that covers households from six West African capitals, this paper provides new evidence on the demand for informal sector products and services. We first investigate whether demand linkages exist between formal and informal products and distribution channels, and whether there is an overlapping customer base, which would imply that both formal sector wage earners and informal workers buy both formal and informal products using both formal and informal distribution channels. In a second step, we estimate demand elasticities based on Engel curves. We find a strongly overlapping customer base and strong demand-side linkages between the formal and informal sector, with the exception that informal goods are hardly bought through formal distribution channels. The estimated demand elasticities tend to show that rising incomes are associated with a lower propensity to consume informal sector goods and to use informal distribution channels. We therefore conclude that the informal sector in West Africa is likely to be constrained from the demand side
    Keywords: Informal sector; formal-informal linkages; Engel curve estimates; West Africa
    JEL: D12 O17
    Date: 2011–02
  14. By: Chu, Angus C.; Cozzi, Guido
    Abstract: How does patent policy affect long-run economic growth through the population growth rate? To analyze this question, we develop an R&D-based growth model with endogenous fertility. In recent vintages of R&D-based growth models in which scale effects are absent, the long-run growth rate depends on the population growth rate that is assumed to be exogenous. In this study, we develop a semi-endogenous-growth version of the quality-ladder model with endogenous fertility and human-capital accumulation to analyze an unexplored interaction between intellectual property rights, endogenous fertility and economic growth. We find that strengthening patent protection has a surprisingly negative effect on technological progress in the long run through endogenous fertility. Furthermore, a stronger cultural preference on fertility tends to magnify this negative effect of patent policy on long-run growth.
    Keywords: economic growth; endogenous fertility; patent policy
    JEL: O34 O31 O40
    Date: 2011–02

This nep-dev issue is ©2011 by Mark Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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