nep-dev New Economics Papers
on Development
Issue of 2011‒04‒23
twenty-two papers chosen by
Mark Lee
Towson University

  1. The network structure of mutual support links: Evidence from rural Tanzania By Margherita Comola
  2. Remittances and the Prevalence of Working Poor By Jean-Louis Combes; Christian Ebeke; Mathilde Maurel; Thierry Yogo
  3. Firm Dynamics and Real Exchange Rate Fluctuations: Does Trade Openness Matter? Evidence from Mexico´s Manufacturing Sector. By Miguel Fuentes; Pablo Ibarrarán
  4. How does political instability affect economic growth? By Ari Aisen; Francisco José Veiga
  5. Marginal Benefit Incidence Analysis of Public Spending in Nigeria By Reuben Adeolu Alabi; Oshobugie Ojor Adams; Chinonso Chinyere Chime; Ebehimerem Edith Aiguomudu; Sifawu Omokhefue Abu
  6. Democratization, Violent Social Conflicts, and Growth By Cervellati, Matteo; Sunde, Uwe
  7. Migration, Transfers and Child Labor By Dimova, Ralitza; Epstein, Gil S.; Gang, Ira N.
  8. Does Female Empowerment Promote Economic Development? By Doepke, Matthias; Tertilt, Michèle
  9. Corruption, Fertility, and Human Capital By Panagiotis Arsenis; Dimitrios Varvarigos
  10. Long-term effects of a nutritional shock: the 1980 famine of Karamoja, Uganda By Marcela UmanaAponte
  11. Are Debt Repayment Incentives Undermined by Foreign Aid? By Bjørnskov, Christian; Schröder, Philipp J.H.
  12. Assessment of the impacts of oil: Opportunities and challenges for economic development in Sudan By Nour, Samia Satti Osman Mohamed
  13. Labour market returns to higher education in Vietnam By Doan, Tinh
  14. How can we learn whether firm policies are working in africa ? challenges (and solutions?) for experiments and structural models By McKenzie, David
  15. Small vs. young firms across the world : contribution to employment, job creation, and growth By Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav
  16. Estimating the short-run poverty impacts of the 2010-11 surge in food prices By Ivanic, Maros; Martin, Will; Zaman, Hassan
  17. The Knowledge Bank and Poverty Reduction By Nora Lustig
  18. The Coffee Crisis, Early Childhood Development, and Conditional Cash Transfers By Seth R. Gitter; James Manley; Bradford Barham
  19. The Impact of ICT on Vegetable Farmers in Honduras By Allan Pineda; Marco Aguero; Sandra Espinoza
  20. Social Assistance and Birth Outcomes: Evidence from the Uruguayan PANES By Veronica Amarante; Marco Manacorda; Edward Miguel; Andrea Vigorito
  21. Do Local Elections in Non-Democracies Increase Accountability? Evidence from Rural China By Monica Martinez-Bravo; Gerard Padró i Miquel; Nancy Qian; Yang Yao
  22. Use of Anthropometric Measures to Analyze How Sources of Water and Sanitation Affect Chidren’s Health in Nigeria By Adewara, Sunday Olabisi; Visser, Martine

  1. By: Margherita Comola (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, 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)
    Abstract: This paper takes a network perspective t oinvestigate how rural households in developing countries form the links through which they provide and get economic support. I test the hypothesis that indirect contacts (e.g. friends of friends) matter for link formation. An estimation procedure of a network formation model à la Jackson and Wolinsky (1996) is proposed and applied to data on a single village in Tanzania. Results show that when agents evaluate the net advantage of forming a link they also consider the wealth and the position of indirect contacts. The network externalities from indirect contacts are negative, which suggests a mechanism of competition over scarce resources. This paper proposes the first structural estimation of an endogenous network formation model, and also contributes to the development literature by overcoming the dyadic regression approach and providing evidence that village-level network structure has an explanatory value disregarded by all previous studies.
    Keywords: mutual support ; network formation ; structural estimation ; indirect contacts
    Date: 2010–06
  2. By: Jean-Louis Combes (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Christian Ebeke (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Mathilde Maurel (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Thierry Yogo (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper focuses on the relationships between remittances and the share of individuals working for less than 2$ US per day. It is based on an original panel dataset containing information related to remittances in about 80 developing countries and to the number of workers being paid less than 2 dollars per day as well. Even after factoring in the endogeneity of remittance inflows the results suggest that remittances lead to a decrease in the prevalence of working poor in receiving economies. This effect is stronger in a context of high macroeconomic volatility but is mitigated by the unpredictability of remittances: remittances are more effective to decreasing the share of working poor when they are easily predictable. Moreover, domestic finance and remittances appear as substitutes: remittances are less efficient in reducing the prevalence of working poor whenever finance is available.
    Keywords: Working poor;Remittances;shocks;Financial Development
    Date: 2011–04–11
  3. By: Miguel Fuentes; Pablo Ibarrarán
    Abstract: In this paper we study the effect of NAFTA on the responsiveness of the Mexican economy to real exchange rate shocks. We argue that, by opening the U.S. and Canadian markets to Mexican goods, NAFTA made it easier for domestic producers to take advantage of the opportunities brought by the depreciation of the real exchange rate. To identify this mechanism, we use plant-level data and compare the behavior of employment, production and investment after two big real exchange rate shocks: the first observed in the mid 1980s, the second the Tequila Crisis of 1994-1995. The evidence indicates that after passage of NAFTA exporting firms exhibited higher growth rates of employment, sales, and investment vis-à-vis non-exporters. We confirm our results by analyzing the behavior of a control group of firms, that had complete access to the U.S. market during both devaluations, and we show that they responded in a similar way in both events. Finally, we also provide direct evidence on the relationship between exports and tariff reductions brought about by NAFTA. Our results support the view that NAFTA has allowed Mexican producers to respond more quickly to real exchange rate shocks.
    Date: 2010–06
  4. By: Ari Aisen; Francisco José Veiga
    Abstract: The purpose of this paper is to empirically determine the effects of political instability on economic growth. Using the system-GMM estimator for linear dynamic panel data models on a sample covering 169 countries, and 5-year periods from 1960 to 2004, we find that higher degrees of political instability are associated with lower growth rates of GDP per capita. Regarding the channels of transmission, we find that political instability adversely affects growth by slowing productivity growth and, to a smaller degree, physical and human capital accumulation. Finally, economic freedom and ethnic homogeneity are beneficial to growth, while democracy may have a slight negative effect.
    Date: 2010–04
  5. By: Reuben Adeolu Alabi; Oshobugie Ojor Adams; Chinonso Chinyere Chime; Ebehimerem Edith Aiguomudu; Sifawu Omokhefue Abu
    Abstract: This study estimates the progressivity of benefit, the average benefit incidence and the marginal benefit incidence of public spending on selected public services in Nigeria, using data from the Nigeria Bureau of Statistics (NBS) 2004 Living Standard Household Survey. The analyses were carried out using Distributive Analysis Stata Package (DASP) 2.1. The results of the analyses show that spending on public services in Nigeria is not pro-poor. The marginal benefit incidence of spending on public services in Nigeria indicates that the poorest group only benefits more than the richest group from extra spending on public services which they already have relatively high access to. Finally, we use the findings of this study to formulate policy recommendations to make public spending in Nigeria pro-poor in order to accelerate the speed at which the poor enjoy additional benefits from increased access to public services in the country.
    Keywords: Marginal Benefit, Public Spending, Nigeria
    JEL: H50 H51 H52 H53 H54
    Date: 2011
  6. By: Cervellati, Matteo (University of Bologna); Sunde, Uwe (University of St. Gallen)
    Abstract: This paper investigates the empirical role of violent conflicts for the causal effect of democracy on economic growth. Exploiting within-country variation to identify the effect of democratization during the “Third Wave”, we find evidence that the effect of democratization is weaker than reported previously once one accounts for the incidence of conflict, while the incidence of conflict itself significantly reduces growth. The results show in turn that permanent democratic transitions significantly reduce the incidence and onset of conflict, which suggests that part of the positive growth effect of democratization arises because democratization reduces conflict incidence. When accounting for the role of violence during democratization, we find evidence that peaceful transitions to democracy have a significant positive effect on growth that is even larger than reported in the previous literature, while violent transitions to democracy have no, or even negative, effects on economic growth.
    Keywords: democratization, armed conflict, civil war, economic growth, democratization scenario, peaceful transition
    JEL: O43 N10 N40
    Date: 2011–04
  7. By: Dimova, Ralitza (University of Manchester); Epstein, Gil S. (Bar-Ilan University); Gang, Ira N. (Rutgers University)
    Abstract: We examine agricultural child labor in the context of emigration, transfers, and the ability to hire outside labor. We start by developing a theoretical background based on Basu and Van, (1998), Basu, (1999) and Epstein and Kahana (2008) and show how hiring labor from outside the household and transfers to the household might induce a reduction in children’s working hours. Analysis using Living Standards Measurement Survey (LSMS) data on the Kagera region in Tanzania lend support to the hypothesis that both emigration and remittances reduce child labor.
    Keywords: child labor, emigration, transfers, Tanzania
    JEL: D62 F22 I30 J13 J20 J24 O15
    Date: 2011–04
  8. By: Doepke, Matthias (Northwestern University); Tertilt, Michèle (Stanford University)
    Abstract: Empirical evidence suggests that money in the hands of mothers (as opposed to their husbands) benefits children. Does this observation imply that targeting transfers to women is good economic policy? We develop a series of noncooperative family bargaining models to understand what kind of frictions can give rise to the observed empirical relationships. We then assess the policy implications of these models. We find that targeting transfers to women can have unintended consequences and may fail to make children better off. Moreover, different forms of empowering women may lead to opposite results. More research is needed to distinguish between alternative theoretical models.
    Keywords: female empowerment, gender equality, development, theory of the household, marital bargaining
    JEL: D13 J16 O10
    Date: 2011–04
  9. By: Panagiotis Arsenis; Dimitrios Varvarigos
    Abstract: We build an overlapping generations model in which reproductive households face a child quantity/child quality trade-off and bureaucrats are delegated with the task of delivering public services that support the accumulation of human capital. By integrating the theoretical analyses of endogenous growth, corruption and fertility choices, we offer a novel mechanism on the driving forces behind demographic transition. In particular, we attribute it to the endogenous change in the incidence of bureaucratic corruption that occurs at different stages of an economy?s transition towards higher economic development.
    Keywords: Corruption; Demographic transition; Human capital; Economic growth
    JEL: D73 H52 J13 O41
    Date: 2011–04
  10. By: Marcela UmanaAponte
    Abstract: This paper uses the 1980 famine in Karamoja, Uganda, as a natural experiment to evaluate its possible long‐lasting cognitive and health effects. Results indicate a strong negative impact on the educational attainment of adults exposed to the famine in utero or infancy. They were less likely to be literate and completed less years of education. These negative effects increase (become more negative) when controlling for family‐level unobservables. The study exploits the Ugandan 1991 and 2002 censuses provided by the Integrated Public Use Microdata Series ‐ International (IPUMS‐I) and conducted by the Uganda Bureau of Statistics. These two unique datasets allow to link the place and date of birth of individuals with the timing and regional variation of the famine.
    Keywords: primary school, secondary school, transition, London, spatial analysis
    JEL: O12 O15 I12 J13 N37 N97
    Date: 2011–04
  11. By: Bjørnskov, Christian (Department of Economics, Aarhus School of Business); Schröder, Philipp J.H. (Department of Economics, Aarhus School of Business)
    Abstract: This paper investigates the effects of inflows of foreign aid on the debt repayment behaviour of developing countries. The paper first delineates the overall incentives to committing to timely repayment in a war of attrition-type model. A set of panel estimates including 93 developing countries shows that foreign aid is strongly negatively associated with repayment incentives. The findings pertain to both total debt service and service on publically guaranteed debt. Only countries that tend to vote predominantly with the US in the UN General Assembly are not significantly discouraged from servicing their debt by inflows of foreign aid.
    Keywords: Foreign aid; external debt; debt service; political economy
    JEL: O15
    Date: 2010–11–24
  12. By: Nour, Samia Satti Osman Mohamed (Faculty of Economic and Social Studies, Khartoum University, and UNU-MERIT)
    Abstract: This paper provides an assessment of the impacts of oil and discusses the opportunities and challenges for enhancing economic development in Sudan. One advantage of our analysis in this paper is that we provide a more comprehensive analysis using the most recent secondary data to discuss the positive and negative impacts of oil for enhancing economic development in Sudan. We explain that the various positive impacts of oil and the opportunities for enhancing development in Sudan's economy include the impacts of oil in satisfying domestic consumption and achievement of self sufficiency, increasing government and public revenues, rapid and impressive economic growth as measured by the growth in the GDP and its composition and structure, increasing foreign direct investment (FDI) and increasing the volume of foreign trade as measured by the volume and structure of exports. We find that while oil has recently contributed to the improvement of economic performance in the country, the recent heavy dependence on it, may lead to negative impacts and serious challenges for the Sudan since oil is an exhaustible resource and because of the instability of oil prices in the international market the revenue from oil is uncertain and volatile and may lead to instability of economic growth. Moreover, the increasing dependence on oil leads to increasing debate for and against the incidence of the Dutch Disease in Sudan economy, the lack of diversification and the challenges related to potential north-south conflict and division of the country.
    Keywords: oil economy, oil impacts, economic development, Sudan
    JEL: O10 O11 Q30 Q32 Q40 Q43
    Date: 2011
  13. By: Doan, Tinh
    Abstract: This paper employs the Ordinary Least Squares, Instrumental Variables and Treatment Effect models to a new dataset from the Vietnam Household Living Standards Survey (VHLSS) to estimate return to the four-year university education in 2008. Our estimates reveal that the return to university education is about 17% (annualized) and robust to the various estimators. The return to higher education has significantly increased since the economic reform in late 1980s. --
    Keywords: economic transition,returns to higher education,IV model,Vietnam
    JEL: C31 J31 O15
    Date: 2011
  14. By: McKenzie, David
    Abstract: Firm productivity is low in African countries, prompting governments to try a number of active policies to improve it. Yet despite the millions of dollars spent on these policies, we are far from a situation where we know whether many of them are yielding the desired payoffs. This paper establishes some basic facts about the number and heterogeneity of firms in different sub-Saharan African countries and discusses their implications for experimental and structural approaches towards trying to estimate firm policy impacts. It shows that the typical firm program such as a matching grant scheme or business training program involves only 100 to 300 firms, which are often very heterogeneous in terms of employment and sales levels. As a result, standard experimental designs will lack any power to detect reasonable sized treatment impacts, while structural models which assume common production technologies and few missing markets will be ill-suited to capture the key constraints firms face. Nevertheless, the author suggests a way forward which involves focusing on a more homogeneous sub-sample of firms and collecting a lot more data on them than is typically collected.
    Keywords: Microfinance,Small Scale Enterprise,E-Business,ICT Policy and Strategies,Banks&Banking Reform
    Date: 2011–04–01
  15. By: Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav
    Abstract: This paper describes a unique cross-country database that presents consistent and comparable information on the contribution of the small and medium enterprises sector to total employment, job creation, and growth in 99 countries. The authors compare and contrast the importance of small and medium enterprises to that of young firms across different economies. They find that small firms (in particular, firms with less than 100 employees) and mature firms (in particular, firms older than 10 years) have the largest shares of total employment and job creation. Small firms and young firms have higher job creation rates than large and mature firms. However, large firms and young firms have higher productivity growth. This suggests that while small firms employ a large share of workers and create most jobs in developing economies their contribution to productivity growth is not as high as that of large firms.
    Keywords: Labor Markets,Microfinance,Small Scale Enterprise,Labor Policies,Emerging Markets
    Date: 2011–04–01
  16. By: Ivanic, Maros; Martin, Will; Zaman, Hassan
    Abstract: Global food prices have increased substantially since mid-2010, as have prices in many developing countries. In this study we assess the poverty impact of the price changes between June and December 2010 in twenty-eight low and middle income countries. This is done by gathering detailed information on individual households'food production and consumption levels for thirty-eight agricultural and food commodities to assess the impacts on household welfare. This study estimates that this sudden food price surge increased the number of poor people globally, but with considerably different impacts in different countries. The heterogeneity of these impacts is partly related to the wide variation in the transmission of global prices to local prices and partly to differences in households'patterns of production and consumption. On balance, the adverse welfare impact on net buyers outweighs the benefits to net sellers resulting in an increase in the number of poor and in the depth of poverty. We estimate that the average poverty change was 1.1 percentage points in low income countries and 0.7 percentage points in middle income countries with a net increase of 44 million people falling below the $1.25 per day extreme poverty line.
    Keywords: Food&Beverage Industry,Rural Poverty Reduction,Markets and Market Access,Regional Economic Development
    Date: 2011–04–01
  17. By: Nora Lustig (Department of Economics, Tulane University)
    Abstract: The World Bank's (WB) mission and overarching goal is to reduce poverty. Moving ahead, what can the WB do to enhance its contribution to the poverty reduction agenda? This question can be answered from at least two perspectives: the WB as a lending institution and the WB as a knowledge bank. This article will concentrate on the latter and suggest two areas in which more and better information and analysis could help move the poverty reduction agenda forward: improving data on poverty and redressing poverty assessments to include the impact of fiscal policy on poverty and inequality.
    Keywords: poverty data, errors, gaps, inconsistencies
    JEL: O10
    Date: 2011–02
  18. By: Seth R. Gitter; James Manley; Bradford Barham
    Abstract: This paper examines the efficacy of three conditional cash transfer (CCT) programs in Honduras, Mexico, and Nicaragua in mitigating the potential negative effects of an income shock caused by falling prices of coffee, an important cash crop to many CCT participants. A theoretical household model is developed that demonstrates both the positive potential of CCTs to mitigate negative shocks effects on early childhood development and the negative potential of CCTs to exacerbate the impacts of a negative shock to early childhood development if the conditionality encourages households to shift resources from younger to older children to sustain their school attendance. The experimental design includes both CCT and non-CCT households and communities with and without coffee production. The paper finds that in Mexico the CCT mitigated the negative shock on child height-for-age z-scores, while in Nicaragua coffeeproducing households who participated in CCTs saw greater declines in z-scores. Findings for Honduras are largely inconclusive.
    JEL: H43 I12 I38 O15
    Date: 2011–03
  19. By: Allan Pineda; Marco Aguero; Sandra Espinoza
    Abstract: Honduran farmers are at a disadvantage when dealing with intermediaries because they lack timely information about market prices. This paper first analyzes which information and communications technology (ICT) would be most suitable for sending price information to producers scattered throughout the country at a reasonable cost and in a sustainable way. Negotiations by two groups of farmers were compared: one to which market prices were not sent (control) and one to which prices were sent (treatment). A simple uninterrupted time series research design was used, followed by linear regression analysis and univariant analyses to determine the cases in which the treatment had an impact on farmers’ negotiations. Findings are reported, as well as recommendations and lessons learned.
    JEL: D24 O33 Q12 Q13
    Date: 2011–03
  20. By: Veronica Amarante; Marco Manacorda; Edward Miguel; Andrea Vigorito
    Abstract: This paper estimates the impact of a large temporary poverty relief program, Uruguay’s PANES—on birth outcomes. Using program administrative data and longitudinal vital statistics, a significant and precisely estimated reduction in the fraction of low-weight newborns (less than 2,500 g. ) on the order of 10 to 20 percent was found to be a result of treatment. The cash (and in-kind) transfer components of the program were considered to drive the results, suggesting that unrestricted social assistance has the potential to positively affect birth outcomes, most likely through improved nutrition. Assuming that all the effect of the program was through the transfer, an elasticity of low birthweight with respect to welfare transfers on the order of around 0. 30 can be inferred.
    JEL: I18 I32 I38 J13
    Date: 2011–03
  21. By: Monica Martinez-Bravo; Gerard Padró i Miquel; Nancy Qian; Yang Yao
    Abstract: We use unique survey data to study whether the introduction of local elections in China made local leaders more accountable towards local constituents. We develop a simple model to predict the effects on different policies of increasing local leader accountability, taking into account that there is an autocratic upper government. We exploit variation in the timing of the top-down introduction of elections across villages to estimate the causal effects of elections and find that elections affected policy outcomes in a way that is consistent with the predicted effects of increased local leader accountability.
    JEL: H4 P16
    Date: 2011–04
  22. By: Adewara, Sunday Olabisi; Visser, Martine
    Abstract: We used 2008 DHS data sets to construct child height- and weight-for-age Z-scores and used regression analysis to analyze the effects of different sources of drinking water and sanitation on child health outcomes in Nigeria. We also calculated the probability of a child being stunted or underweight as our measure of malnutrition among children aged 0–59 months. Our results show that both child height and weight Z-scores are positive and significantly related to access to borehole and piped water, and negative and significant for well water. The probabilities of a child being stunted or underweight are both significantly lower for children drinking borehole or piped water, whereas well water has a positive and significant effect on these measures of child health. Children’s access to flush toilets is positive and significantly related to child height- and weight-for-age Z-scores, but the same measures are negatively related to children’s use of pit latrines. In line with this, the probability of a child being stunted or underweight is negative and significantly related to access to flush toilets, but positively related to pit latrines. Our results suggest that increasing access to, or providing, safe drinking water and flush toilets for households will significantly reduce the high incidence of malnutrition and water-borne diseases among children in Nigeria and should be a high priority for policymakers.
    Keywords: water, sanitation, weight-for-age Z-scores, height-for-age Z-scores, stunting, underweight, child, Nigeria
    JEL: D6 I1 I12 I21 Q5
    Date: 2011–04–11

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