nep-dev New Economics Papers
on Development
Issue of 2011‒04‒09
twenty-two papers chosen by
Mark Lee
Towson University

  1. Natural natural disasters and economic disruption By Yanos Zylberberg
  2. Is Combined Microfinance an Instrument to enhance Sustainable Pro-Poor Public Policy Outcomes? By Koen Rossel-Cambier
  3. Production, Inequality and Poverty linkages in South Africa By Nicholas Ngepah
  4. Alternative indices of political freedoms, property rights, and political instability for Zambia By J.W. Fedderke; I. Lourenco; F. Gwenhamo
  5. Relative standing and subjective well-being in South Africa: The role of perceptions, expectations and income mobility By Dorrit Posel; Daniela Casale
  6. Risk, Institutions and Growth: Why England and Not China? By Greif, Avner; Iyigun, Murat; Sasson, Diego
  7. The Effect of Older Siblings’ Literacy on School Entry and Primary School Progress in the Ethiopian Highlands By Lindskog, Annika
  8. Does a Diversification Motive Influence Children’s School Entry in the Ethiopian Highlands? By Lindskog, Annika
  9. Caste, local networks and lucrative jobs: Evidence from rural Nepal By Hatlebakk, Magnus; Iversen, Vegard; Torsvik, Gaute
  10. Gender Differences in Time Allocation of Poor Children in Colombia By Juan Miguel Gallego; Carlos E. Sepulveda
  11. Number of siblings and school achievement in sub Sahara Africa By KUEPIE Mathias; TENIKUE Michel; NOUETAGNI Samuel; MISANGUMUKINI Nicaise
  12. Too little too late : welfare impacts of rainfall shocks in rural Indonesia By Skoufias, Emmanuel; Essama-Nssah, B.; Katayama, Roy S.
  13. Water and sanitation to reduce child mortality : the impact and cost of water and sanitation infrastructure By Gunther, Isabel; Fink, Gunther
  14. How economic growth and rational decisions can make disaster losses grow faster than wealth By Hallegatte, Stephane
  15. Electoral accountability, fiscal decentralization and service delivery in Indonesia By Skoufias, Emmanuel; Narayan, Ambar; Dasgupta, Basab; Kaiser, Kai
  16. Crisis, Imbalances, and India By Kumar, Rajiv; Vashisht, Pankaj
  17. The Impact of Cutting Education Expenditures: The Case of Mexico in the 1980s By Francisco Perez-Arce
  18. Embodied technological change, capital sectoral allocation and export-led growth By Araujo, Ricardo Azevedo; Lima, Gilberto Tadeu
  19. When Fast Growing Economies Slow Down: International Evidence and Implications for China By Barry Eichengreen; Donghyun Park; Kwanho Shin
  20. Discussion Sessions Coupled with Microfinancing May Enhance the Role of Women in Household Decision-Making in Burundi By Radha Iyengar; Giulia Ferrari
  21. Self-Production, Friction, and Risk Sharing against Disasters: Evidence from a developing country By SAWADA Yasuyuki; NAKATA Hiroyuki; KOTERA Tomoaki
  22. Aggregate Impacts of Natural and Man-made Disasters: A quantitative comparison By SAWADA Yasuyuki; Rima BHATTCHARYAY; KOTERA Tomoaki

  1. By: Yanos Zylberberg (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The cost of natural calamities is not limited to direct damages and immediate material costs. Economies in the wake of severe shocks experience important slowdowns and long business disruptions. I construct a unique dataset of objective measures on cyclones and earthquakes between 1980 and 2006 and complement existing reports on direct damages. I then estimate the amplitude of indirect economic losses in the aftermath of catastrophes. Declared damages accounting for 1% of GDP translate into a slowdown of .05 to .06 points of GDP growth. The results are essentially driven by cyclones; earthquakes having no effects on immediate growth rate. When instrumenting by the actual exposure, this elasticity piles up to .4. This observation points out censorship issues regarding declarations of losses. In addition, the objective measures happen to be better at predicting the economic slack than reports from officials.
    Keywords: natural disasters ; economic disruption ; declaration biases
    Date: 2010–10
  2. By: Koen Rossel-Cambier
    Abstract: Product diversification involving simultaneously microcredit, savings or insurance services –also called combined microfinance (CMF)- can both leverage and challenge policy outcomes. This paper reviews two complementary questions in this regard: Which are the possible effects of CMF on public policy? and; How can public policy influence CMF outcomes? A literature review, findings from qualitative assessments and a case study in Barbados highlight the increased challenging environment when supervising, regulating and promoting CMF. When preparing regulation, one has to ensure that the necessary technical and organisational capacity is in place to ensure proper monitoring and oversight. When supporting CMF, policy makers should strive at enhancing smart ways of subsidizing. CMF may stimulate economic and outreach policy outcomes. Still, as it can have adverse effects on the depth of poverty outreach, pro-poor and gender specific policy measures need to be put in place to accompany MFIs engaging in CMF. This paper calls for a more ambitious research agenda to accompany the increasingly complex demand and supply side elements relating to CMF public policy oversight.
    Keywords: microfinance; microinsurance; microcredit; microsavings; public policy
    JEL: C12 G21 G22 L31 O54
    Date: 2011–03
  3. By: Nicholas Ngepah
    Abstract: The Kuznets inequality-development hypothesis can be tested with time-series data rather than the cross-section analyses found in earlier literature. Single-country time-series analysis cannot be done without addressing endogeneity between output and inequality. South Africa has been under-researched in this area due to a lack of data. Recent data released by the Presidency of South Africa makes such analysis possible. Besides, the use of a single inequality index in such a multiracial society is likely to capture only average effects. This paper jointly estimates production, inequality (decomposed by sub-group) and poverty with 3sls using South African data. The findings suggest that production is affected negatively by between-group inequality. Credit constraints and interracial tensions are possible causes, generating significant adverse effects that stifle economic productivity. Within-group inequality enhances production, possibly due to within-group social capital. There is evidence of an inverted U-shape relationship between per capita income and between-group inequality, but a U-shaped one between per capita income and within-group inequality. However due to the effects of the active post-apartheid policies — which reduce between-group inequality, but increase within-group inequality — it is doubtful if this relationship is capturing a Kuznets process. There is a significant poverty-increasing (reducing) effect of total and between-group inequalities (output). The abjectly poor seem to suffer more from inequality than others do. Policy efforts have to focus on reducing between group inequality.
    Keywords: Production, income distribution, poverty, 3sls; South Africa
    JEL: C20 C32 D31 E23
    Date: 2011
  4. By: J.W. Fedderke; I. Lourenco; F. Gwenhamo
    Abstract: This paper presents new institutional measures for Zambia. Coverage is of political rights and freedoms, of property rights, and of political instability. The sample period is from 1947 to 2007. Comparison of the indices with directly comparable Zimbabwean and Malawian series, shows strong sources of divergence in institutional conditions. The paper also considers interaction amongst the institutional measures, and between the institutional measures and measures of economic development. We find that there is an association among the institutional variables, with the various rights dimensions moving together, and being negatively associated with political instability. The evidence further suggests that the institutional measures are associated benevolently with economic development. In this sense the indicators of the present paper therefore conform to the precepts of the new institutional economics
    Keywords: Institutions, Political freedom, Property rights, Political Instability and Zambia
    JEL: K00 N4 O1
    Date: 2011
  5. By: Dorrit Posel; Daniela Casale
    Abstract: Most studies that explore the impact of relative standing on subjective well-being use objective measures of the individual’s relative position, such as the mean income of the reference group or the individual’s ranking in the relevant income distribution. In this paper, using a new household survey from South Africa, we are able to derive subjective measures of relative standing, as information is collected on individuals’ perceptions of where they rank in the income distribution. We find considerable differences between objective and subjective measures of an individual’s relative ranking. Furthermore, our results suggest that an individual’s perceived relative status has a significantly larger effect on subjective well-being than objective measures of relative status based on reported income. We also examine the effects on subjective well-being of how individuals perceive their relative position in the income distribution to have changed since childhood, and what they expect their relative position to be in the future. We find that future upward mobility has a smaller effect than upward mobility compared to one’s past, suggesting that life satisfaction is influenced more by what has been achieved than by anticipated achievements.
    Keywords: subjective well-being, relative standing, perceptions, expectations, income mobility, South Africa
    JEL: I31 D31
    Date: 2011
  6. By: Greif, Avner (Stanford University); Iyigun, Murat (University of Colorado, Boulder); Sasson, Diego (Goldman Sachs)
    Abstract: We analyze the role of risk-sharing institutions in transitions to modern economies. Transitions requires individual-level risk-taking in pursuing productivity-enhancing activities including using and developing new knowledge. Individual-level, idiosyncratic risk implies that distinct risk-sharing institutions – even those providing the same level of insurance – can lead to different growth trajectories if they differently motivate risk-taking. Historically, risk sharing institutions were selected based on their cultural and institutional compatibility and not their unforeseen growth implications. We simulate our growth model incorporating England’s and China’s distinct pre-modern risk-sharing institutions. The model predicts a transition in England and not China even with equal levels of risk sharing. Under the clan-based Chinese institution, the relatively risk-averse elders had more control over technological choices implying lower risk-taking. Focusing on non-market institutions expands on previous growth-theoretic models to highlight that transitions can transpire even in the absence of exogenous productivity shocks or time-dependent state variables. Recognizing the role of non-market institutions in the growth process bridges the view that transitions are due to luck and the view that transitions are inevitable. Transitions transpire when ‘luck’ creates the conditions under which economic agents find it beneficial to make the choices leading to positive rates of technological change. Luck came in the form of historical processes leading to risk-sharing institutions whose unintended consequences encouraged productivity-enhancing risk-taking.
    Keywords: institutions, risk, growth, development
    JEL: O10 O31 O43 N10
    Date: 2011–03
  7. By: Lindskog, Annika (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The effects of older sisters’ and brothers’ literacy on the annual school entry and primary school grade progress probabilities of boys and girls are estimated using within-household variation. Older siblings’ literacy has positive effects, especially for same-sex siblings. The literacy of older sisters appears to be more beneficial than that of older brothers, not least since it has positive effects on school entry among both boys and girls, and since it has positive effects also when the sister has left the household. There are positive effects both from literate older siblings who left school and from literate older siblings who are still in school. This suggests that within-household education spillovers, rather than time-varying credit constraints, explain the positive sibling-dependency, since with credit constraints children in school would compete over scarce resources. The positive effects on school progress are limited to same-sex siblings who are still present in the household, suggesting every-day interactions to be important.<p>
    Keywords: Primary education; Ethiopia; Within-Household; Spillovers; Credit-Constraints
    JEL: D13 I21
    Date: 2011–04–01
  8. By: Lindskog, Annika (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Household-level diversification of human capital investments is investigated. A simple model is developed, followed by an empirical analysis using 2000-2007 data from the rural Amhara region of Ethiopia. Diversification would imply negative siblings’ dependency and be more important in more risk-averse households. Hence it is investigated if older siblings’ literacy has a more negative (smaller if positive) impact on younger siblings’ school entry in more risk-averse households. Results suggest diversification across brothers, but are not statistically strong, and with forces creating positive sibling dependency dominating over diversification.<p>
    Keywords: Diversification; Education; Ethiopia; Uncertainty
    JEL: D13 D81 I21
    Date: 2011–04–01
  9. By: Hatlebakk, Magnus (CMI (Chr. Michelsen Istitute)); Iversen, Vegard (Norwegian School of Economics and Business Administration), PhD (Cambridge).); Torsvik, Gaute (University of Bergen)
    Abstract: Abstract: We study how local connections to persons in influential positions affect access to migrant jobs and government employment. In rural Nepal, it would not be surprising if social status strongly influenced the access to attractive labor 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. Wellconnected households are more likely to get government jobs and appear to have favorable access to the manpower agencies and informal loans required to finance migration to the Persian Gulf or Malaysia.
    Keywords: Geographic labor Mobility; Immigrant Workers; Model Construction and Estimation; Regional Migration; Regional Markets; Population; Neighborhood Characteristics
    JEL: C51 J61 R23
    Date: 2011–01–30
  10. By: Juan Miguel Gallego; Carlos E. Sepulveda
    Abstract: This paper studies the e§ect of credit constraints and constraints on transfers between parents and children, on di§erences in labor and schooling across children within the same household, with an application to gender. When families are unconstrained in these respects, di§erences in labor supply or education are driven by di§erences in wages or returns to education. If the family faces an imperfect capital market, the labor supply of each child is ine¢ cient, but di§erences across children are still driven by comparative advantage. However, if interfamily transfers are constrained so that parents cannot o§set inequality between their children, they will favor the human capital accumulation of the more disadvantaged child -generally the one who works more as a child. We use our theory to examine the gender gap in child labor. Using a sample of poor families in Colombia, we conÖrm our prediction among rural households, although this is less clear for urban households. The gender gap is largely explained by the wage gap between girls and boys. Moreover, families with the potential to make capital transfers to adult children (e.g. those with large animals), can compensate adult sons for their greater child labor and reduced educational attainment. In such families, as predicted, the male/female labor gap is greater.
    Date: 2011–02–28
  11. By: KUEPIE Mathias; TENIKUE Michel; NOUETAGNI Samuel; MISANGUMUKINI Nicaise
    Abstract: This paper uses biographical data from Dakar and Yaounde, two big African cities, to study the link between the number of siblings and school attainment. The data describe all fertility events meet by parents and the sibling’s size structure of every child over time. The average sibling size effect is estimated first. Then, the sibling’s size at given age effect is estimated. The results show that, in Dakar, both the overall and age specific siblings size effect on education are negative and statistically significant. In Yaounde, the overall effect is not significant, but we observed negative effects at some schooling ages (between 14 and 16). This paper uses biographical data from Dakar and Yaounde, two big African cities, to study the link between the number of siblings and school attainment. The data describe all fertility events meet by parents and the sibling’s size structure of every child over time. The average sibling size effect is estimated first. Then, the sibling’s size at given age effect is estimated. The results show that, in Dakar, both the overall and age specific siblings size effect on education are negative and statistically significant. In Yaounde, the overall effect is not significant, but we observed negative effects at some schooling ages (between 14 and 16).
    Keywords: Education; siblings; Dakar; Yaounde
    Date: 2011–03
  12. By: Skoufias, Emmanuel; Essama-Nssah, B.; Katayama, Roy S.
    Abstract: The authors use regression analysis to assess the potential welfare impact of rainfall shocks in rural Indonesia. In particular, they consider two shocks: (i) a delay in the onset of monsoon and (ii) a significant shortfall in the amount of rain in the 90 day post-onset period. Focusing on households with family farm businesses, the analysis finds that a delay in the monsoon onset does not have a significant impact on the welfare of rice farmers. However, rice farm households located in areas exposed to low rainfall following the monsoon are negatively affected. Rice farm households appear to be able to protect their food expenditure in the face of weather shocks at the expense of lower nonfood expenditures per capita. The authors use propensity score matching to identify community programs that might moderate the welfare impact of this type of shock. Access to credit and public works projects in communities were among the programs with the strongest moderating effects. This is an important consideration for the design and implementation of adaptation strategies.
    Keywords: Science of Climate Change,Climate Change Mitigation and Green House Gases,Housing&Human Habitats,Rural Poverty Reduction,Regional Economic Development
    Date: 2011–03–01
  13. By: Gunther, Isabel; Fink, Gunther
    Abstract: Using household survey data, this paper estimates the mortality impact of improved water and sanitation access in order to evaluate the potential contribution of water and sanitation investment toward achieving the child mortality targets defined in Millennium Development Goal 4. The authors find that the average mortality reduction achievable by investment in water and sanitation infrastructure is 25 deaths per 1,000 children born across countries, a difference that accounts for about 40 percent of the gap between current child mortality rates and the 2015 target set in the Millennium Development Goals. According to the estimates, full household coverage with water and sanitation infrastructure could lead to a total reduction of 2.2 million child deaths per year in the developing world. Combining this analysis with cost data for water and sanitation infrastructure, the authors estimate that the average cost per life-year saved ranges between 65 and 80 percent of developing countries'annual gross domestic product per capita. The results suggest that investment in water and sanitation is a highly cost-effective policy option, even when only the mortality benefits are taken into consideration. Taking into account the additional expected benefits, such as reduced morbidity, time spending, and environmental hazards, would further increase the benefit-cost ratio.
    Keywords: Population Policies,Town Water Supply and Sanitation,Urban Water Supply and Sanitation,Water Supply and Sanitation Governance and Institutions,Wastewater Treatment
    Date: 2011–03–01
  14. By: Hallegatte, Stephane
    Abstract: Assuming that capital productivity is higher in areas at risk from natural hazards (such as coastal zones or flood plains), this paper shows that rapid development in these areas -- and the resulting increase in disaster losses -- may be the consequence of a rational and well-informed trade-off between lower disaster losses and higher productivity. With disasters possibly becoming less frequent but increasingly destructive in the future, average disaster losses may grow faster than wealth. Myopic expectations, lack of information, moral hazard, and externalities reinforce the likelihood of this scenario. These results have consequences on how to design risk management and climate change policies.
    Keywords: Natural Disasters,Hazard Risk Management,Insurance&Risk Mitigation,Labor Policies,Economic Theory&Research
    Date: 2011–03–01
  15. By: Skoufias, Emmanuel; Narayan, Ambar; Dasgupta, Basab; Kaiser, Kai
    Abstract: This paper takes advantage of the exogenous phasing of direct elections in districts and applies the double difference estimator to: (i) measure impacts on the pattern of public spending and revenue generation at the district level; and (ii) investigate the heterogeneity of the impacts on public spending. The authors confirm that the electoral reforms had positive effects on district expenditures and these effects were mainly due to the increases in expenditures in the districts outside Java and Bali and the changes in expenditures brought about by non-incumbents elected in the districts. Electoral reforms also led to higher revenue generation from own sources and to higher budget surplus. Finally, the analysis finds that in anticipation of the forthcoming direct elections, district governments tend to have higher current expenditures on public works.
    Keywords: Subnational Economic Development,Public Sector Expenditure Policy,Parliamentary Government,E-Government,Debt Markets
    Date: 2011–03–01
  16. By: Kumar, Rajiv (Asian Development Bank Institute); Vashisht, Pankaj (Asian Development Bank Institute)
    Abstract: With the revival of global economy, the issues of “exit policies” and rebalancing global growth have taken center stage in policy discussions. Since many emerging Asian economies presently have large current account surpluses, the issue of rebalancing has special significance for Asia. While India, like other Asian economies, suffered only an indirect impact from the financial crisis, its current policy challenges appear to be different from those facing the People’s Republic of China (PRC) and other East Asian economies, which have relied heavily on external demand and access to the United States market for their growth momentum. With a negative contribution of net exports to gross domestic product growth along with foreign exchange reserves, which amount to a mere one-ninth of the PRC’s, the issue of Trans-Pacific rebalancing of economic growth does not have the same connotations for India as it does for other East Asian economies. However, this paper argues that, given its large domestic market, India could help other East Asian economies in their efforts to achieve greater export diversification and rebalancing of growth.
    Keywords: global financial crisis; rebalancing economic growth; indian economy; export diversification
    JEL: E66 F15
    Date: 2011–03–29
  17. By: Francisco Perez-Arce
    Abstract: This paper studies the impact of expenditures on the returns to schooling within a context of dramatic reductions in public spending. The author matches data on expenditures and pupil-teacher ratios from Mexico in the 1980s with individual earnings in 2007/2008 and find that the returns to education among individuals that went to poorly funded schools are lower than among those that went to better funded ones. He determines that within-state changes in educational expenditures and pupil-teacher ratios predict changes in the returns to education.
    Date: 2011–03
  18. By: Araujo, Ricardo Azevedo; Lima, Gilberto Tadeu
    Abstract: This paper contributes to the literature on economic growth by seeking to join several lines of research on structural factors in a more fully specified framework, on the one hand, and by making this more inclusive supply side to interact with demand factors in a model of export-led growth, on the other hand. Balance-of-payments constraints influence the adoption of investment-specific technological change which requires the import of capital goods, while the sectoral allocation of physical and human capital is likewise revealed to be crucial for economic growth, both results having important policy implications.
    Keywords: embodied technological change; sectoral allocation of investment; human capital accumulation; export-led growth
    JEL: O11 O41 O33
    Date: 2011–03
  19. By: Barry Eichengreen; Donghyun Park; Kwanho Shin
    Abstract: Using international data starting in 1957, we construct a sample of cases where fast-growing economies slow down. The evidence suggests that rapidly growing economies slow down significantly, in the sense that the growth rate downshifts by at least 2 percentage points, when their per capita incomes reach around $17,000 US in year-2005 constant international prices, a level that China should achieve by or soon after 2015. Among our more provocative findings is that growth slowdowns are more likely in countries that maintain undervalued real exchange rates.
    JEL: F00 O10 O4
    Date: 2011–03
  20. By: Radha Iyengar; Giulia Ferrari
    Abstract: The empowerment of women within households remains a major issue around the world including in Africa. We have conducted a study in Burundi coupling discussion sessions with microfinancing to determine if they enhance the role of women in decisions regarding household purchases and the reduction of domestic violence. We compare our findings to that from a published study in South Africa that combined discussion sessions on life skills and health on reduction in domestic violence and decisions on economic issues. Both studies used randomized controlled experiments. Both studies show a trend towards increases in household authority, with the Burundi study showing statistical significance. In South Africa there was a large, albeit short lived decrease in domestic violence. In Burundi there was small reduction but trends suggest a longer duration. The effects on overall empowerment are small. These studies suggest that a more sustained use of discussion sessions may result in longer and more sustained economic and social empowerment. Future research could focus on the longer term effects of the use of discussion sessions and investigate how the observed impacts can be sustained in magnitude and duration.
    JEL: D12 G21 I12 J12
    Date: 2011–03
  21. By: SAWADA Yasuyuki; NAKATA Hiroyuki; KOTERA Tomoaki
    Abstract: This paper uses a unique household data set collected in Vietnam to empirically test the necessary conditions for an extended version of the consumption risk-sharing hypothesis. The test explicitly incorporates self-production and uses natural disasters such as avian influenza, droughts, and floods to identify the effectiveness of market and non-market risk-sharing mechanisms. With these additional treatments, full risk sharing cannot be rejected, which suggests the presence of omitted variable bias in existing studies that reject full risk sharing. We also find that credit constraints have a significant impact, although limited commitment is not necessarily serious.
    Date: 2011–03
  22. By: SAWADA Yasuyuki; Rima BHATTCHARYAY; KOTERA Tomoaki
    Abstract: In recent decades, the world has faced an increasing number of natural and man-made disasters. Such disasters include tsunamis, earthquakes, the current ongoing financial crisis, terrorism, riots, and wars. These disasters generate tremendous social and economic costs, especially for the poor in low income economies. This paper assesses and compares the impacts of various natural and man-made disasters quantitatively. We carefully construct cross-country panel data of 189 countries within the range between 1968 to 2001 on a wide variety of natural disasters such as hydro-meteorological, geophysical, climatological, technological and biological disasters as well as man-made disasters such as economic crises, civil conflicts and wars. The paper employs this unique panel dataset to estimate econometric models which enable us to quantify and compare the impacts of different natural and man-made disasters on welfare as captured by per capita consumption. According to our estimation results, in the short term, natural disasters generate the largest negative welfare impacts which are followed by wars and economic disasters. Intriguingly, in the long term, natural disasters and wars have positive impacts on per capita GDP growth. Wars affect large economies more than small economies while natural disasters affect small economies disproportionately.
    Date: 2011–03

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