nep-dev New Economics Papers
on Development
Issue of 2011‒04‒16
seventeen papers chosen by
Mark Lee
Towson University

  1. Evaluating ten years of ‘strategizing’ for poverty reduction: a cross-sectional appraisal of the Poverty Reduction Strategy Paper (PRSP) initiative By Richard Marshall; Bernard Walters
  2. What explains cross-country growth in South Asia? Female education and the growth effect of international openness By Arusha Cooray; Sushanta Mallick
  3. Mexico’s Progresa-Oportunidades and the emergence of Social Assistance in Latin America By Miguel Nino-Zarazua
  4. Globalization, brain drain and development By Frédéric DOCQUIER; Hillel RAPOPORT
  5. Labor Market Dynamics in Tunisia: The Issue of Youth Unemployment By Stampini, Marco; Verdier-Chouchane, Audrey
  6. Present and Future of the Chinese labour Marke By Michele Bruni; Claudio Tabacchi
  7. School inputs, household substitution, and test scores By Das, Jishnu; Dercon, Stefan; Habyarimana, James; Krishnan, Pramila; Muralidharan, Karthik; Sundararaman, Venkatesh
  8. How integrated is SADC ? trends in intra-regional and extra-regional trade flows and policy By Behar, Alberto; Edwards, Lawrence
  9. Nigeria The Next Generation Report By David E. Bloom et al.
  10. Will GDP Growth Increase Happiness in Developing Countries? By Clark, Andrew E.; Senik, Claudia
  11. Commodity Price Shocks and Child Outcomes: The 1990 Cocoa Crisis in Côte d'Ivoire By Cogneau, Denis; Jedwab, Rémi
  12. Military Spending, Growth, Development and Conflict By J Paul Dunne
  13. How would population growth affect investment in the future? Asymmetric panel causality evidence for Africa. By Simplice A, Asongu
  14. Remittances in India: Facts and Issues By Chinmay, Tumbe
  15. Cumulative Causation in a Structural Economic Dynamic Approach to Economic Growth and Uneven Development By Araujo, Ricardo
  16. International Relative Prices and Civil Wars in Sub-Saharan Africa. Theory and Evidence over the period (1995-2006) By Caruso, Raul
  17. What about the Women? Female Headship, Poverty and Vulnerability in Thailand and Vietnam By Stephan Klasen; Tobias Lechtenfeld; Felix Povel

  1. By: Richard Marshall; Bernard Walters
    Abstract: In late 1999 a joint meeting of the IMF and World Bank announced the introduction of Poverty Reduction Strategy Papers (PRSPs) as a means of securing comprehensive development, alongside a framework for the provision of increased financial support (specifically via debt relief). PRSPs were pathbreaking in at least two senses. First, because poverty reduction rather than other economic objectives became the focus of policy-based lending; and second, in bringing strategic planning back into the mainstream development agenda. As the decade progressed, PRSPs became the primary framework through which economic and social policy was crafted and managed in low-income countries, and there are now 67 PRSP arrangements in place. Yet, in spite of the passage of ten years, there remains no authoritative evaluation of the initiative’s impact. This paper aims to fill this lacuna, by offering a cross-sectional appraisal based on sound counterfactual analysis. It makes use of a series of quantitative methods, including exhaustive econometric evaluations, of two specially constructed panel datasets. The analysis also employs Bourguignon’s (2004) discussion of the poverty-growth-inequity triangle, and the role played by policy in mediating the core relations. The objective is to appraise performance in terms of poverty reduction, but also to disentangle the separate impacts of distributional change and economic growth. The results provide some evidence of a positive PRSP treatment effect in relation to poverty reduction, but with this operating exclusively via the growth channel. While this lends support to PRSPs as enhanced growth strategies, it undermines their claims to secure more widely balanced, and hence, pro-poor, growth. A number of evidential issues are also addressed, which cast doubt on the strength of the apparent performance gains.
    Date: 2011
  2. By: Arusha Cooray; Sushanta Mallick
    Abstract: Using cross-country regional data over the 1970-2008 period, this study provides further evidence to the growth literature by exploring human capital formation from a gender dimension in India, Bangladesh, Nepal, Pakistan, Sri Lanka, Bhutan and the Maldives. We use an extended version of the Solow growth model with per capita GDP being a function of the key variables, viz, physical capital accumulation, human capital accumulation, openness to trade and capital flows, fiscal policy and financial development. We also construct two alternative measures for physical capital stock. The key contribution of this study is to show that the impact of human capital disaggregated by gender has a differential impact on economic growth, similar to the result in Barro (2001). While male human capital has a positive significant effect on growth, female human capital has insignificant explanatory power when the openness variables are considered. An implication stemming from this study is that if South Asia were to increase its growth momentum, high priority should be given to encouraging educational opportunities for females in order to maximise the effect of FDI on economic growth.
    Date: 2011
  3. By: Miguel Nino-Zarazua
    Abstract: This paper provides an overview of the political and economic context under which Mexico’s Progresa-Oportunidades was introduced to prelude the emergence of social assistance in Latin America. The paper identifies four distinctive features of the programme that were revolutionary in their own right. First, the Progresa-Oportunidades embraced a multidimensional approach to poverty, linking income transfers with simultaneous interventions in health, education and nutrition. Second, the programme focused on the poor. This is in clear contrast to generalised food subsidies and other targeted interventions that dominated the antipoverty agenda in the past. Third, the programme followed a complex system of identification and selection of beneficiaries to prevent discretionary political manipulation of public funds. Finally, an independent impact evaluation protocol proved to be critical for both improving the programme’s effectiveness and strengthening its legitimacy across different political factions and constituencies. The paper concludes that the success of Progresa-Oportunidades must be understood in a broader context, where harsh economic and political environment, coupled with a rapid democratisation and increasing political competition, laid down the foundations for the introduction and then sustained expansion of the programme.
    Date: 2011
  4. By: Frédéric DOCQUIER (FNRS and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Hillel RAPOPORT (Department of Economics, Bar-Ilan University, EQUIPPE, Universités de Lille, and Center for International Development, Harvard University)
    Abstract: This paper reviews four decades of economics research on the brain drain, with a focus on recent contributions and on development issues. We first assess the magnitude, intensity and determinants of the brain drain, showing that brain drain (or high-skill) migration is becoming the dominant pattern of international migration and a major aspect of globalization. We then use a stylized growth model to analyze the various channels through which a brain drain affects the sending countries and review the evidence on these channels. The recent empirical literature shows that high-skill emigration need not deplete a country's human capital stock and can generate positive network externalities. Three case studies are also considered: the African medical brain drain, the recent exodus of European scientists to the United States, and the role of the Indian diaspora in the development of India's IT sector. We conclude with a discussion of the implications of the analysis for education, immigration, and international taxation policies in a global context.∗
    Date: 2011–02–28
  5. By: Stampini, Marco (African Development Bank); Verdier-Chouchane, Audrey (African Development Bank)
    Abstract: This paper analyzes the dynamics of the youth labor market in Tunisia using unique labor force survey data from 2005 to 2007 that include a longitudinal component. It first shows that sustained economic growth will reduce youth unemployment over the next few years. Second, forecasts indicate that the growth of private sector services has the highest potential to reduce youth unemployment. Third, the analysis of labor market characteristics reveals that young graduates experience long unemployment as they cue for high-skill jobs. Moreover, the public sector remains the main provider of employment opportunities for many graduates, in particular for women.
    Keywords: labor market, unemployment, youth, Tunisia
    JEL: J21 J64 J68 J71
    Date: 2011–03
  6. By: Michele Bruni; Claudio Tabacchi
    Abstract: The paper aims to provide a representation, as rich and complete as possible, of the Chinese labour market, both in terms of stock and flow, despite the fact that the statistical information is still rather poor and often inconsistent. It does then document the increasing differences in the level and trends of the main labour market variables at the provincial level. In order to reach a deeper comprehension of the dynamic of the Chinese labour market, the paper analyses two other extremely relevant phenomena: the so called “floating population” and the labour shortages that are more and more frequently affecting the coastal regions. After having provided a demographic background to the Lewis model of development with unlimited supply of labour, the paper shows in which periods China has been obliged to accumulate a large labour surplus, mainly in the agricultural sector, and in which periods and through which mechanisms, including ageing and internal migration, the process of deaccumulation has taken place. More specifically, the paper shows how up to now internal migrations have provided urban areas and coastal regions with an unlimited supply of labour, a factor that has played a major role in boosting the Chinese economic development and determining its typology. In order to reach this result, simple demographic tools have been utilized to estimate the net migration balance of each province and in each province of rural and urban areas, and therefore to define areas of departures and areas of arrival, information not provided by the literature on the floating population. Finally the paper provides a rough estimate of the disguised unemployment in agriculture and of its geographical distribution. After assessing which percentage can represent a possible supply of labour for the modern sector, it will be maintained that China not only is very close to the Lewis turning point (a situation that has already been reached in many coastal areas), but is going to become the world biggest importer of labour. In order to provide its population with living standards comparable to that of the western world, in a reasonable time interval, China needs to continue to grow at an extremely high rate. This will require the capacity to deal with a series of structural problems. Limiting our concerns to the labour market, that is characterized by increasing complexity and regional differentiation, high priority should be given to improve the collection, analysis and dissemination of labour market data; to abolish the one child policy that is totally obsolete in a situation that will be soon characterized by a structural lack of labour supply; to give to the Chinese citizens the right to freely move and change residence, while rapidly regularizing the existing floating population; to raise the legal age of retirement; to plan and implement a structure of t entries in vocational courses and higher educational paths coherent with the expected structure of the labour demand in terms of flows by occupation; to strengthen the Employment service system in order to improve skills matching at the local level, and facilitate the correct allocation of human resources over the national territory, in order to minimize the human and economic costs of future unavoidable internal migrations.
    Keywords: China; labour market; stock and flow; demography; internal migration; Lewis turning point
    Date: 2011–03
  7. By: Das, Jishnu; Dercon, Stefan; Habyarimana, James; Krishnan, Pramila; Muralidharan, Karthik; Sundararaman, Venkatesh
    Abstract: Empirical studies of the relationship between school inputs and test scores typically do not account for the fact that households will respond to changes in school inputs. This paper presents a dynamic household optimization model relating test scores to school and household inputs, and tests its predictions in two very different low-income country settings -- Zambia and India. The authors measure household spending changes and student test score gains in response to unanticipated as well as anticipated changes in school funding. Consistent with the optimization model, they find in both settings that households offset anticipated grants more than unanticipated grants. They also find that unanticipated school grants lead to significant improvements in student test scores but anticipated grants have no impact on test scores. The results suggest that naïve estimates of public education spending on learning outcomes that do not account for optimal household responses are likely to be considerably biased if used to estimate parameters of an education production function.
    Keywords: Tertiary Education,Education For All,Access to Finance,Teaching and Learning,Disability
    Date: 2011–04–01
  8. By: Behar, Alberto; Edwards, Lawrence
    Abstract: Do Southern African Development Community countries trade enough with each other and with the rest of the world? Although its share of world trade has fallen, appropriate benchmarking shows that, controlling for gross domestic product and other characteristics, Southern African Development Community countries have experienced an increase in openness that is comparable to other developing countries. Once market size and geography are taken into account, trade between Southern African Development Community countries is actually high. Southern African Development Community countries also trade more products with each other than they do with the rest of the world. In this sense, and contrary to stylized fears, the Southern African Development Community region is quite integrated. Although the Southern African Development Community has reduced its tariffs, the structure remains complex and could be lowered on intermediates. Other impediments make it costly and difficult to move goods, but are at levels that are comparable with countries at similar levels of development. Although this may be surprising, there is still scope for improvement and the disadvantageous geography of the Southern African Development Community makes it important for other trade impediments to be reduced.
    Keywords: Free Trade,Environmental Economics&Policies,Economic Theory&Research,Trade Policy,Trade Law
    Date: 2011–04–01
  9. By: David E. Bloom et al. (Harvard School of Public Health)
    Abstract: The Next Generation Task Force was convened to explore Nigeria's future at a time of rapid demographic, social, and economic change. Over the next 20 years, Nigeria will experience huge growth in the number of young adults in its society. If these young people are healthy, well educated, and find productive employment, they could boost the country's economy and reinvigorate it culturally and politically. If not, they could be a force for instability and social unrest. The Task Force report is intended to catalyse a broader debate on Nigeria's future – and especially the needs of its young people. The next generation is beginning to find its voice. If Nigeria can harness its ideas and energy, then its future will surely be bright.
    Keywords: Nigeria, demography, growth
    Date: 2010–10
  10. By: Clark, Andrew E.; Senik, Claudia
    Abstract: This paper asks what low-income countries can expect from growth in terms of happiness. It interprets the set of available international evidence pertaining to the relationship between income growth and subjective well-being. Conforming to the Easterlin paradox, higher income always correlates with higher happiness, except in one case: whether national income growth yields higher well-being is still hotly debated; essentially, the question is whether the correlation coefficient is “too small to matter”. The explanations for the small correlation between income growth and subjective well-being over time appeal to the nature of growth itself (e.g. negative side-effects such as pollution), and to the psychological importance of relative concerns and adaptation. The available evidence contains two important lessons: income comparisons do seem to affect subjective well-being even in very poor countries; however, adaptation may be more of a rich country phenomenon. Our stand is that the idea that growth will increase happiness in low-income countries cannot be rejected on the basis of the available evidence. First, cross-country time-series analyses are based on aggregate measures, which are less reliable than individual ones. Second, development is a qualitative process that involves take-offs and thresholds. Such regime changes are eye-visible through the lens of subjective satisfaction measures. The case of Transition countries is particularly impressive in this respect: average life satisfaction scores closely mirror changes in GDP for about the first ten years of the transition process, until the regime becomes more stable. If subjective measures of well-being were made available in low-income countries, they would certainly help measuring and monitoring the different stages and dimensions of the development process.
    Date: 2010–11
  11. By: Cogneau, Denis; Jedwab, Rémi
    Abstract: We look at the drastic cut of the administered cocoa producer price in 1990 Côte d'Ivoire and study to which extent cocoa producers' children suffered from this severe aggregate shock in terms of school enrollment, labor, height stature and morbidity. Using pre-crisis (1985-88) and post- crisis (1993) data, we propose a difference-in-difference strategy to identify the causal effect of the cocoa shock on child outcomes, whereby we compare children of cocoa-producing households and children of other farmers living in the same district or the same village. This causal effect is shown to be rather strong for the four child outcomes we examine. Hence human capital investments are definitely procyclical in this context. We also argue that the difference-in-difference variations can be interpreted as private income effects, likely to derive from tight liquidity constraints.
    Keywords: Education; Health; Child Labor; Commodity price Education; Health; Child Labor; Commodity price
    JEL: I12 I21 O12
    Date: 2010–05
  12. By: J Paul Dunne (University of the West of England and University of Cape Town)
    Abstract: This paper makes a contribution to the debate on the economic effects of military spending using a large cross country panel data set for 1988-2006. As well as providing a relatively up to date analysis, sub groups are created that allow the analysis to focus on groups of countries at different income levels and Sub Saharan Africa (SSA), an area which has seen a large number of damaging conflicts. Estimating the empirical growth model suggested in Dunne et al (2005) gives results that show variation across the subgroups, with the general picture of significant negative short run effect and insignificant long run effect of military burden on per capita GDP growth, not consistent across the different income groups. In addition, breaking down the SSA group into those involved in conflict and those that are not, provides some further intriguing findings that suggest the value of further work on the impact of conflict on growth.
    Keywords: Military expenditure; economic growth; conflict; development
    JEL: O11 H56
    Date: 2011–04
  13. By: Simplice A, Asongu
    Abstract: Our generation is experiencing the greatest demographic transition and Africa is at the center of it. There is mounting concern over rising unemployment and depleting per capita income accruing there-from. We look at the issue in this paper from a long run perspective by examining the nature of the relationship between population growth and a plethora of investment indicators: public, private, foreign and domestic investments. Using asymmetric panels on data spanning from 1977 to 2007, we investigate effects of population growth on investment from Granger causality models. Our findings reveal a long-run positive causal linkage from population growth to only public investment. But for domestic investment, permanent fluctuations in human capital affect changes in other forms of investments. Not unexpected, no significant short-run causal relationship is found. For economic implications, sampled countries should take family planning and birth control policies seriously. Though growth in population may appear not to have an impact on investment in the short spell, in the distant future, it strangles public finances. Therefore measures should be adopted such that, rising unemployment rate resulting from population growth be accommodated by private sector investments. Seemingly, structural adjustments policies implemented by sampled countries have not had the desired investment effects.
    Keywords: Productivity, investment, human capital, asymmetric panel, causality, Africa
    JEL: O10 J00 C33 O40
    Date: 2011–02–14
  14. By: Chinmay, Tumbe
    Abstract: This paper provides a fact sheet of domestic and international remittances at the State level and across household characteristics and discusses the extent of remittance dependency, it’s growth since the 1990’s, the different uses of remittances across States, the possible impact on source region inequality and its importance in enhancing ‘financial inclusion.’ Data from the 49th and 64th round migration related National Sample Surveys, the Reserve Bank of India and the 2001 Census are used for the analysis. Some of the findings are: (a) The domestic remittance market was estimated to be $10 billion in 2007-08, 60% being Inter-State transfers and 80% directed towards rural households (b) Domestic remittances financed over 30% of household consumption expenditure in remittance receiving households that formed nearly 10% of rural India (c) Domestic remittance dependency was high in Bihar, Uttar Pradesh and Rajasthan and has generally grown since the 1990s, most notably in Orissa. (d) The top 25% households received around 50% of domestic remittances suggesting that remittances could be increasing source region inequality (e) 70% of domestic remittances were estimated to be channeled in the informal sector as against 25% in China revealing a huge opportunity for financial institutions to serve migrant workers (f) Kerala, Punjab and Goa accounted for over 40% of international remittance flows and are among the top remittance-dependent economies of the world.
    Keywords: International Remittances; Domestic Remittances
    JEL: F22 O15 F24 R23
    Date: 2011–03
  15. By: Araujo, Ricardo
    Abstract: The Structural Economic Dynamic approach is distinguished by its simultaneous approach to demand and supply sides of economic growth. However, the idea that growth itself can transform an economy, which became known in the literature as cumulative causation, cannot be properly studied by this framework because technological progress is treated in the same manner as in the traditional Neoclassical model, that is, it is exogenous. Besides, it is the only source of economy growth with no role played by demand in the pace of economic growth but only in the sectoral composition of the economy. Here we introduce Verdoon’s Law in the Pasinetti’s model of structural change thus making it able to study cumulative causation and thus rendering structural changes endogenous in this model.
    Keywords: Cumulative causation; structural change; Verdoon’s law
    JEL: O41 O33
    Date: 2011–03–29
  16. By: Caruso, Raul
    Abstract: This paper presents first a theoretical model of conflict between two agents characterized by a two-sector economy. In a contested sector two agents struggle to appropriate the maximum possible fraction of a contestable output. In an uncontested sector, they hold secure property rights over the production of some goods. Agents split their resource endowment between ‘butter’, ‘guns’ and ‘ice-cream’. Eventually, tradable goods made of butter and ice-cream produced by conflicting parties are both sold to the Rest of the world. Therefore, the opportunity cost of conflict depends also on relative profitability of contested and uncontested production. In particular, productivity of uncontested production and profitability of contested sectors are countervailing forces. The empirical section focused on a panel of Sub-Saharan African countries for the period 1995-2006. Results are not fully conclusive. However, there is robust evidence that prices of manufactures (interpreted as the uncontested ice-cream) are negatively associated with the likelihood of a civil war. Eventually, international price of manufactures is also associated with a higher GDP per capita growth rate. The concluding remark seems to be that an increase in world prices of manufactures would make civil wars less likely.
    Keywords: Theoretical model of conflict; Civil war; resource curse; butter guns and ice-cream; structure of the economy; commodity prices; MUV; panel probit analysis
    JEL: D74 O19 C33
    Date: 2011–03
  17. By: Stephan Klasen (Georg-August-University Göttingen); Tobias Lechtenfeld (Georg-August-University Göttingen); Felix Povel (Georg-August-University Göttingen)
    Abstract: This paper investigates whether heterogeneous subgroups of female-headed households are worse off than traditional households headed by men. We analyze the determinants of consumption, shock exposure and vulnerability to poverty. Using unique panel data of over 4000 rural households from Thailand and Vietnam, we find strong signs of heterogeneity among the subgroups of female-headed households. In particular, in both countries de facto female-headed households are consumption richer and less vulnerable to poverty than households with a male head. In Vietnam de jure female-headed households are consumption poorer and more vulnerable to poverty. In Thailand de jure female-headed households do not differ significantly from male-headed households in terms of the analyzed welfare dimensions. These results show how widows and singles in Vietnam are not well protected against uncertainties. The results also indicate that differentiation by subgroups of headship is important for policy targeting and future research. We interpret this as a first step towards a more complete picture of vulnerability of female-headed households in the developing world.
    Keywords: Gender; Poverty; Shocks; Vulnerability to Poverty
    JEL: I32 I O12
    Date: 2011–04–11

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