nep-dev New Economics Papers
on Development
Issue of 2011‒03‒19
28 papers chosen by
Mark Lee
Towson University

  1. Income Shocks and Household Risk-Coping Strategies: Evidence from Rural Vietnam By Carol Newman; Fiona Wainwright
  2. Relative Concerns of Rural-to-Urban Migrants in China By Alpaslan Akay; Olivier Bargain; Klaus F Zimmermann
  3. Access to Abortion, Investments in Neonatal Health, and Sex-Selection: Evidence from Nepal By Christine Valente
  4. Braving the waves: The economics of clandestine migration from Africa By Jean-Louis Arcand; Linguère M'Baye
  5. Understanding the Dynamics of Product Diversification on Microfinance Performance Outcomes: A Case Study in Barbados By Koen Rossel-Cambier
  6. Decentralization and rural service delivery in Uganda: By Bashaasha, Bernard; Mangheni, Margaret Najjingo; Nkonya, Ephraim
  7. Foreign aid to agriculture: Review of facts and analysis By Islam, Nurul
  8. The role of elected and appointed village leaders in the allocation of public resources: Evidence from a low-income region in China By Mu, Ren; Zhang, Xiaobo
  9. Social services, human capital, and technical efficiency of smallholders in Burkina Faso: By Wouterse, Fleur
  10. The Power of Political Voice: Women's Political Representation and Crime in India By Lakshmi Iyer; Anandi Mani; Prachi Mishra; Petia Topalova
  11. The Persistent Colombian Conflict: Subnational Analysis of the Duration of Violence By Juan F. Vargas
  12. Conflict Experiences and Expectations on Recovery: Survey Evidence from Northern Uganda By Carlos Bozzoli; Tilman Brück; Tony Muhumuza
  13. Self-Employment and Conflict in Colombia By Carlos Bozzoli; Tilman Brück; Nina Wald
  14. Weapons, Violence and Personal Security in Cape Town By Kai Thaler
  15. Wars and Child Health: Evidence from the Eritrean-Ethiopian Conflict By Richard Akresh; Leonardo Lucchetti; Harsha Thirumurthy
  16. Who Does What in a Household after Genocide? Evidence from Rwanda By Kati Schindler
  17. Conflict, Ideology and Foreign Aid By Jean-Louis Arcand; Adama Bah; Julien Labonne
  18. Sovereign Risk and Armed Conflict: An Event-study for Colombia By Andrés Castañeda; Juan F. Vargas
  19. Remittances and Labor Supply in Post-Conflict Tajikistan By Patricia Justino; Olga Shemyakina
  20. The impact of export tax incentives on export performance : evidence from the automotive sector in South Africa By Madani , Dorsati H.; Mas-Guix, Natalia
  21. Corruption, Military Spending and Growth By Giorgio d'Agostino; Luca Pieroni; J Paul Dunne
  22. Product market regulation, firm size, unemployment and informality in developing economies By Charlot Olivier; Malherbet Franck; Terra Cristina
  23. Remittances and household expenditure patterns in Tajikistan: A propensity score matching analysis By Matthieu CLEMENT (GREThA, CNRS, UMR 5113)
  24. Intra-household efficiency; An experimental study from Ethiopia By Bereket Kebede; Marcela Tarazona; Alistair Munro; Arjan Verschoor
  25. Beyond Fatalism - An empirical exploration of self-efficacy and aspirations failure in Ethiopia By Tanguy Bernard; Stefan Dercon; Alemayehu Seyoum Taffesse
  26. Local Financial Development and Firm Performance: Evidence from Morocco By Marcel Fafchamps; Matthias Schündeln
  27. Remittances and Income Smoothing By Catalina Amuedo-Dorantes; Susan Pozo
  28. Fragile States and Development Policy By Besley, Timothy J.; Persson, Torsten

  1. By: Carol Newman (Institute for International Integration Studies, Trinity College Dublin; Department of Economics, Trinity College Dublin); Fiona Wainwright (Department of Economics, Trinity College Dublin)
    Abstract: This paper considers the various strategies rural households employ to avoid consumption shortfalls caused by realizations of adverse income shocks. First, we develop an ex post theoretical model within an inter-temporal utility maximizing framework which we use to explain households’ decisions to insure against idiosyncratic risk and save to protect against uninsurable spatially covariant risk. In the theoretical model we show that the latter can take a variety of different asset forms depending on the absolute level of risk aversion of the household and the variability in asset returns. Second, using household level panel data from Vietnam we test the extent to which households’ smooth consumption over time and how this depends on the presence of insurance and saving instruments. Third, we consider savings and liquid asset holdings as a form of self-insurance or precautionary savings against spatially covariant shocks. Overall, our results suggest that households deplete their stock of total liquid assets in the event of exposure to both exogenous and idiosyncratic income shocks. The ability of households to cope is also dependent on their receipt of public and private transfers in the event of an exogenous natural shock with insurance claims serving to alleviate the depletion of livestock holdings in the event of insurable idiosyncratic income shocks. These results are particularly pronounced for low and middle wealth groups.
    Keywords: Insurance, precautionary savings, risk-coping, income shocks
    JEL: D14 D91 O12 O16
    Date: 2011–02
  2. By: Alpaslan Akay (IZA and University of Gothenburg); Olivier Bargain (University College Dublin and IZA); Klaus F Zimmermann (IZA and Bonn University)
    Abstract: How the income of "relevant others" affects well-being has received renewed interest in the recent literature using subjective data. Migrants constitutes a par- ticularly interesting group to study this question: as they changed environment, they are likely to be concerned by several potential reference groups including the people "left behind", other migrants and "natives". We focus here on the huge population of rural-to-urban migrants in China. We exploit a novel dataset that comprises samples of migrants and urban people living in the same cities, as well as rural households mostly surveyed in the provinces where migrants are coming from. After establishing these links, we find that the well-being of migrants is largely af- fected by relative concerns: results point to negative relative concerns toward other migrants and workers of home regions - this status effect is particularly strong for migrants who wish to settle permanently in cities. We find in contrast a positive relative income effect vis-à-vis the urban reference group, interpreted as a signal effect - larger urban incomes indicate higher income prospects for the migrants. A richer pattern is obtained when sorting migrants according to the duration of stay, expectations to return to home countries and characteristics related to family cir- cumstances, work conditions and community ties.
    Keywords: china, relative concerns, well-being
    Date: 2011–01–01
  3. By: Christine Valente (Department of Economics, The University of Sheffield)
    Abstract: Every year, over 9 million children die under the age of five in developing countries, where the abortion regime is generally very restrictive. Evidence from the United States suggests that abortion liberalization may be a powerful policy tool in the fight against mortality in early life. In this paper, I consider the impact of providing affordable, legal abortion facilities in the high-fertility, high-mortality context of Nepal, on pregnancy outcomes, antenatal and perinatal health inputs, neonatal mortality, and sex-selection. In order to exploit geographical and time variation in coverage, I combine fertility histories with a unique data set recording geo-referenced coordinates and registration dates of newly introduced legal abortion centers. Consistent with the prediction that proximity to a legal abortion center reduces the cost of abortion, I find that the probability of a pregnancy ending in a live birth decreases by 8.1 percent, for a given mother. However, there is no evidence that improved access to abortion increases observed investments in antenatal and prenatal care or unobserved investments favorable to neonatal survival. Access to these legal, fist-trimester abortion centers does not appear to have led to more sex-selective terminations.
    JEL: I12 J13 J16
    Date: 2011–03
  4. By: Jean-Louis Arcand (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Linguère M'Baye (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Illegal immigration from the developing world to rich countries is one of the most controversial topics today. Using a unique data set on potential illegal migrants collected in Dakar, Senegal, we characterize the preferences and characteristics of illegal migrants, and the manner in which these factors interact so as to yield observed behavior. On the basis of our theoretical model, we evaluate a measure of the time and risk preferences through the individual discount rates and the individual coefficients of absolute risk aversion. Then, we test empirically our theoretical propositions and we show that these variables play a role, in the illegal migration decision, in the willingness to pay a smuggler and in the choice of the method of migration, at least as important as "classical" migration determinants such as the expected wage in the host country.
    Keywords: Illegal Migration; Preferences; Expectations
    Date: 2011–03–10
  5. By: Koen Rossel-Cambier
    Abstract: This paper aims at gaining deeper understanding of the possible effects of combined microfinance (CMF) on social and economic performance outcomes. By means of a case-study on the City of Bridgetown (COB), one of the leading credit unions in Barbados, it explores the possible limits, challenges and economies of scope of CMF. This case-study suggests that CMF, especially the combination credit-savings, may enhance the cost-efficiency of loan delivery and that it can generate economies of scope for marketing purposes. Savings is at the heart of the growth strategy of the credit union and has contributed to its current large breadth of outreach. The paper observes that more female than male clients participate in insurance schemes, highlighting gender differences. The case-study suggests that CMF can also lead to a number of combined and additional costs and financial risks, which need to be taken into account. The nature of product diversification can lead to additional access barriers for unbankable clients, especially related to financial costs and information asymmetry.
    Keywords: microfinance; combined microfinance; microinsurance; microcredit; microsavings; poverty; social inclusion; Caribbean
    JEL: C12 G21 G22 L31 O54
    Date: 2011–03
  6. By: Bashaasha, Bernard; Mangheni, Margaret Najjingo; Nkonya, Ephraim
    Keywords: Decentralization, Development strategies, rural service delivery,
    Date: 2011
  7. By: Islam, Nurul
    Abstract: This paper seeks to provide a consistent and comparable set of data on the trends in the provision of aid to agriculture over time within the framework of changes in the pattern of sectoral distribution of total development aid. Furthermore, it examines the factors, relating both to the agriculture sector itself and to the priorities and allocation processes of the total aid, which may account for the decline in aid to agriculture over the past two decades or more. It analyzes how in recent years the agricultural sector, as conventionally defined, and investments in the sector are increasingly incorporated in the new and wider concepts of food security and rural development as well as investments in them. In the end, the paper evaluates in the foregoing context the various commitments of the quantitative targets of aid made by the donors in the period following the post-2007 food crisis for agricultural development and food security.
    Keywords: OECD/DAC classification, CRS, bilateral, multilateral, total aid, Irrigation, Poverty, aid priorities, food security, Rural development, share of agriculture, share in GDP,
    Date: 2011
  8. By: Mu, Ren; Zhang, Xiaobo
    Keywords: appointed leader, election, Public goods,
    Date: 2011
  9. By: Wouterse, Fleur
    Abstract: This study applies regression analysis as well as a non-parametric method to survey data from Burkina Faso to analyze the role of human capital in explaining technical efficiency in smallholder agricultural production. Exploiting the panel nature of the data and explicitly treating human capital inputs as endogenous, a two-stage estimation method is used for the analysis of determinants of data envelopment analysis (DEA) technical efficiency scores in a double-bootstrap procedure. Findings suggest that the impact of human capital on technical efficiency differs strongly by gender. Strong positive returns exist for education of females, whereas male education is associated with higher inefficiency. Body mass index of adult females also positively relates to technical efficiency. At the community level, presence of a clinic, connection to the electrical grid, presence of a secondary school, and year-round accessibility of the community are found to be vital for human capital formation.
    Keywords: Human capital, non-parametrics, public services, Smallholders,
    Date: 2011
  10. By: Lakshmi Iyer (Harvard Business School, Business, Government and the International Economy Unit); Anandi Mani (University of Warwick); Prachi Mishra (Research Department, IMF); Petia Topalova (Research Department, IMF)
    Abstract: Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, as it is driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation: Large scale membership of women in local councils affects crime against them more than their presence in higher-level leadership positions.
    Keywords: crime, women's empowerment, minority representation, voice
    JEL: J12 J15 J16 P16
    Date: 2011–03
  11. By: Juan F. Vargas (Universidad del Rosario)
    Abstract: The growing empirical literature on the analysis of civil war has recently included the study of conflict duration at the cross-country level. This paper presents, for the first time, a within-country analysis of the determinants of violence duration. I focus on the experience of the Colombian armed conflict. While the conflict has been active for about five decades, local violence ebbs and flows and areas experiencing continuous conflict coexist with places that have been able to resile and where violence is mostly absent. I examine a wide range of factors potentially associated with violence duration at the municipal level, including scale variables, geographical conditions, economic and social variables, institutions and state presence, inequality, government intervention, and victimization variables. I characterize a few variables robustly correlated with the persistence of localized conflict, both across specifications and using different econometric models of duration analysis.
    Date: 2011–01
  12. By: Carlos Bozzoli (German Institute of Economic Research); Tilman Brück (German Institute of Economic Research); Tony Muhumuza (German Institute of Economic Research)
    Abstract: We analyse the role of mass violent conflict in influencing individual expectations. We hypothesise that individuals are likely to report negative expectations if they were exposed to conflict events in the past. We combine individual and household level data from the Northern Uganda Livelihood Survey of 2007 with a disaggregated conflict exposure index based on the Armed Conflict Locations Events Data (ACLED). We run logistic regression models to study the strength of the association between conflict and expectations. Results indicate that conflict intensity is correlated with a decrease in the probability of expecting economic recovery. The effect of conflict on general welfare however is less robust.
    Date: 2010–12
  13. By: Carlos Bozzoli (German Institute of Economic Research); Tilman Brück (German Institute of Economic Research); Nina Wald (German Institute of Economic Research)
    Abstract: Many Colombians are confronted with the ongoing conflict which influences their decision making in everyday life, including their behaviour on labour markets. This study focuses on the impact of violent conflict on self-employment, enlarging the usual determinants by a set of conflict variables. In order to estimate the effect of conflict on selfemployment, we employ fixed effects estimation. Three datasets are combined for estimation: the Familias en Acción dataset delivers information about individuals, a second dataset contains different indicators of the Colombian conflict on the municipality level and the third dataset includes taxes to measure a municipality’s economic situation. Our results show that high homicide and displacement rates at the community of origin reduces self-employment while a high influx of displaced increases the probability of self-employment at the municipality of destination.
    Date: 2010–09
  14. By: Kai Thaler (University of Cape Town)
    Abstract: Given the high levels of crime and violence in South Africa, there may be a temptation for citizens to arm themselves for protection. Using quantitative survey data from the Cape Area Panel Study and qualitative interviews with residents of high-violence neighborhoods, this paper examines the question of who carries weapons outside the home in Cape Town and what the effects of weapon carrying may be. Multiple regression analysis is used to test the significance of possible socioeconomic drivers of weapon carrying and the results are discussed in the South African social context. Weapon carrying is found to be associated with both assault perpetration and victimization, suggesting that it is part of a violent lifestyle in which weapon carriers are likely to use their weapons both offensively and defensively. Possible weaponrelated policies for violence reduction are also discussed.
    Date: 2010–09
  15. By: Richard Akresh (University of Illinois at Urbana-Champaign); Leonardo Lucchetti (University of Illinois at Urbana-Champaign); Harsha Thirumurthy (University of North Carolina at Chapel Hill)
    Abstract: This is the first paper using household survey data from two countries involved in an international war (Eritrea and Ethiopia) to measure the conflict’s impact on children’s health in both nations. The identification strategy uses event data to exploit exogenous variation in the conflict’s geographic extent and timing and the exposure of different children’s birth cohorts to the fighting. The paper uniquely incorporates GPS information on the distance between survey villages and conflict sites to more accurately measure a child’s war exposure. War-exposed children in both countries have lower height-for-age Z-scores, with the children in the warinstigating and losing country (Eritrea) suffering more than the winning nation (Ethiopia). Negative impacts on boys and girls of being born during the conflict are comparable to impacts for children alive at the time of the war. Effects are robust to including region-specific time trends, alternative conflict exposure measures, and an instrumental variables strategy.
    Date: 2010–12
  16. By: Kati Schindler (German Institute for Economic Research)
    Abstract: This paper investigates the determinants of intra-household time allocation in post-war Rwanda. A decade after the 1994 genocide, Rwanda still bears the demographic impact of the war, in which at least 800,000 people died and the majority of casualties were adult males. The paper explores two unique features: exogenous variation in household types and large variation in regional cohort-specific sex ratios. Results indicate that, first, exposure to violence and male death can be a trigger of change in gender roles. Second, there is little flexibility to negotiate responsibilities within the household. Third, the local marriage market impacts the division of labor. Young, unmarried women engage more intensely in typical female activities when the shortage of men is severe. Conforming to the female gender role may be a strategy to improve their chances to marry.
    Date: 2010–12
  17. By: Jean-Louis Arcand (The Graduate Institute, Geneva); Adama Bah (CERDI Université d'Auvergne); Julien Labonne (University of Oxford)
    Abstract: In this paper, we present a rent-seeking model of conflict, which highlights the role of ideology in determining whether the government or the rebels take the initiative. We use the model to interpret the impact of a large-scale Community-Driven Development project on civil conflict in the Philippines. The country is characterized by the presence of two rebel groups, the New People's Army (NPA) and the Moro Islamic Liberation Front (MILF), with two distinct ideologies. We use a unique geo-referenced panel dataset on the occurrence of conflicts in 2003 and 2006 gathered from local newspapers that we match with nationally representative household survey and budget data on all municipalities in the country. Consistent with our model's predictions, using a variety of estimation strategies, we find robust evidence that the project leads to a decline in MILF-related events and to an increase in NPA-related events.
    Date: 2010–12
  18. By: Andrés Castañeda (Universidad del Rosario); Juan F. Vargas (Universidad del Rosario)
    Abstract: We study the relationship between some of the most important recent events of the Colombian armed conflict and the foreign perception of sovereign risk, as measured by the Credit Default Swap (CDS) of the Colombian bonds. Using a recent methodology we estimate the causal effect of conflict events widely publicized by the international media on the price of the CDS. We construct a Synthetic Control Group to use as the non-conflict counterfactual of the Colombian CDS and compare its behavior around relevant conflict-event days with that of the actual (conflict-affected) Colombian CDS. Results suggest that the impact of conflict on the foreign perception of sovereign risk is rather idiosyncratic, and depends on the political context surrounding each event.
    Date: 2011–01
  19. By: Patricia Justino (Institute of Development Studies); Olga Shemyakina (Georgia Institute of Technology)
    Abstract: This paper analyzes the impact of remittances on the labor supply of men and women in post-conflict Tajikistan. We find that on average men and women from remittance-receiving households are less likely to participate in the labor market and supply fewer hours when they do. The negative effect of remittances on labor supply is smaller for women, which is an intriguing result as other studies on remittances and labor supply (primarily focused on Latin America) have shown that female labor supply is more responsive to remittances. The results are robust to using different measures of remittances and inclusion of variables measuring migration of household members. We estimate a joint effect of remittances and an individual’s residence in a conflict-affected area during the Tajik civil war. Remittances had a larger impact on the labor supply of men living in conflict-affected areas compared to men in less conflictaffected areas. The impact of remittances on the labor supply of women does not differ by their residence in both the more or less conflict affected area.
    Date: 2010–10
  20. By: Madani , Dorsati H.; Mas-Guix, Natalia
    Abstract: The original goal of the Motor Industry Development Program was to help the automotive industry in South Africa adjust to trade liberalization and become internationally competitive. In simple terms, it consists of an import/export complementation arrangement, whereby the local value-added of components or built-up vehicles exported earns credits that can be used to rebate import duties on components and vehicles. This study provides a first attempt at a quantitative analysis of the Motor Industry Development Program using the difference-in-difference methodology, in order to assess to what extent the program was effective in improving South Africa's automotive export performance during 1996-2006. The authors take a two-tier approach. First, they perform a comparative study using different manufacturing sectors within South Africa; second, they apply this methodology to analyze South Africa and a number of comparator countries that are automotive producers and exporters. The analysis finds that the impact of the program on automotive exports in South Africa is positive and significant. In particular, (i) the largest response to the program in terms of improved manufacturing exports occurs with a delay after the adoption of the law, suggesting that exports need time to fully react to the incentives; and (ii) in turn, the effectiveness of the tax incentives fades in time, reaffirming the common belief that tax incentives may affect some business decisions particularly in the short run, but they are not a primary consideration for investors in the long run.
    Keywords: Economic Theory&Research,Transport Economics Policy&Planning,Free Trade,Debt Markets,Tax Law
    Date: 2011–03–01
  21. By: Giorgio d'Agostino (Università degli Studi di Roma and UWE, Bristol); Luca Pieroni (University of Perugia and UWE, Bristol); J Paul Dunne (University of the West of England and University of Cape Town)
    Abstract: This paper considers the complementary effect of corruption and military spending on economic growth, analyzing both the direct impact of public spending and effect of allocating resources between categories of public spending within the framework of an endogenous growth model. The non-linearities that emerge from are the result of the links between the components of public spending, corruption and economic growth. The main findings of the empirical analysis confirm the expectation that corruption and military burden lower the growth rate of GDP per capita. They also suggest that when the the complementarity effect between military spending and corruption is omitted, as in most studies, the impact of military burden on economic performance is underestimated.
    Keywords: corruption, military spending, development economics
    JEL: O57 H5 D73
    Date: 2011–03
  22. By: Charlot Olivier; Malherbet Franck; Terra Cristina (THEMA, Universite de Cergy-Pontoise; Universit´e de Rouen, CECO - Ecole Polytechnique, fRDB and IZA.; THEMA, Universite de Cergy-Pontoise)
    Abstract: This paper studies the impact of product and labor market regulations on informality and unemployment in a general framework where formal and informal firms are subject to the same externalities, differing only with respect to some parameter values. Both formal and informal firms have monopoly power in the goods market, they are subject to matching friction in the labor market, and wages are determined through bargaining between large firms and their workers. The informal sector is found to be endogenously more competitive than the formal one. We find that lower strictness of product or labor market regulations lead to a simultaneous reduction in informality and unemployment. The difference between these two policy options lies on their effect on wages. Lessening product market strictness increases wages in both sector but also increases the formal sector wage premium. The opposite is true for labor market regulation. Finally, we show that the so-called overhiring externality due to wage bargaining translates into a smaller relative size of the informal sector.
    Keywords: Informality; Product and Labor Market Imperfections; Firm Size
    JEL: E24 E26 J60 L16 O1
    Date: 2011
  23. By: Matthieu CLEMENT (GREThA, CNRS, UMR 5113)
    Abstract: The object of this article is to assess the impact of remittances on household expenditure patterns in Tajikistan. More specifically, the paper applies propensity score matching methods to the 2003 Tajikistan Living Standards Measurement Survey. The results do not provide evidence of a productive use of remittances since neither internal nor external remittances have a positive effect on investment expenditures. Migration and remittances are therefore interpreted in terms of short-term coping strategies that help dependent households to achieve a basic level of consumption
    Keywords: remittances; expenditure patterns; propensity score matching; sensitivity analysis, Tajikistan.
    JEL: O12 O15
    Date: 2011
  24. By: Bereket Kebede; Marcela Tarazona; Alistair Munro; Arjan Verschoor
    Abstract: Using data from experimental games and household survey from 1, 200 married couples in three sites in Ethipoia, this paer uses different versions of a voluntary contribution mechanism to test for household efficiency. The experimental and econometric analyses provide many interesting results that have far-reaching implications for intra-houisehold models. Efficiency in contribution behaviour is decisively rejected in all treatments casting doubt on 'unitary' and 'collective' household models that assume Pareto optimality - significant amounts of potential surplus are not realised. Contribution rates by males and females are not significantly different from each other undermining models that argue females tend to contribute more to the family (for example, Sen 1990). Information on itital endowments of spouses improves contribution rates (efficiency) in some treatments while not having effect in others suggesting that the effect of information is context dependent. Actual and expected contribution rates of spouses are systematically different; husbands' expect their wives will contribute more than their actual contributions and wives expect their husbands will contribute lower than actual contribution. These systematic errors in expectations imply that the attainment if equilibrium in a game theoretic framework is unlikely. Statistical tests indicate that instead of efficiency considerations other norms are likely important. For example, in many of the treatments spouses contributed around half of their endowments implying either a norm like fairness or focal points influence decisions. Overall, most of the empirical resulst cast doubt on cooperative models and provide some support for behaviour guided either by farirness or other norms.
    Keywords: household efficiency, intra-household models, experiemental games, ethiopia
    JEL: D13 C93
    Date: 2011
  25. By: Tanguy Bernard; Stefan Dercon; Alemayehu Seyoum Taffesse
    Abstract: Fatalism is considered pervaisve, not leaste within many poor communities. In this paper, we explore whether 'fatalistic' beliefs have implications for the attitudes and behaviour of poor rural households towards investment in the future. We first explore the idea of fatalos, drawing inspiration from theories in psychology focusing on the role of locus of control and self-efficacy, and from the theoretical framework of aspiration failure as developed in recent economic literature. using survey data from rural Ethiopia, we find evidence of fatalistic beliefs among a substantial group of rural households, as well as indicators consistent withy a small aspiration gap and low self-efficay. We also find that such beliefs consistently correlate with lower demand for credit, in terms of loan size, repayment horizon and productive purposes.
    Date: 2011
  26. By: Marcel Fafchamps; Matthias Schündeln
    Abstract: Combining data from the Moroccan census of manufcaturing enterprises with information from a commune survey, we test whether firm expansion is affected by local financial development. Our findings are consistent with this hypothesis: local bank availability is robustly associated with faster growth for small and medium-size firms in sectors with growth opportunities, with a lower likelihood of firm exit and a higher likelihood of investment. The findings also suggests a channel for the effect of the availability of financing in firm growth in our data, namely that access to credit was used to invest in labor saving technology.
    Keywords: manufacturing, credit constraint, firm size
    JEL: O16 L25
    Date: 2011
  27. By: Catalina Amuedo-Dorantes (San Diego State University); Susan Pozo (Western Michigan University)
    Abstract: Due to inadequate savings and binding borrowing constraints, income volatility can make households in developing countries particularly susceptible to economic hardship. We examine the role of remittances in either alleviating or increasing household income volatility using Mexican household level data over the 2000 through 2008 period. We correct for reverse causality and endogeneity and find that while income smoothing does not appear to be the main motive for sending remittances in a non-negligible share of households, remittances do indeed smooth household income on average. Other variables surrounding income volatility are also considered and evaluated.
    Keywords: remittances, income smoothing.
    JEL: F22 O
    Date: 2011–03
  28. By: Besley, Timothy J.; Persson, Torsten
    Abstract: It is widely recognized that fragile states are key symptoms of under-development in many parts of the world. Such states are incapable of delivering basic services to their citizens and political violence is commonplace. As of yet, mainstream development economics has not dealt in any systematic way with such concerns and the implications for development assistance. This paper puts forward a framework for analyzing fragile states and applies it to a variety of development policies in different types of states.
    Keywords: development; state fragility
    JEL: O10 O19 P45
    Date: 2011–03

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