nep-dev New Economics Papers
on Development
Issue of 2011‒05‒14
nineteen papers chosen by
Mark Lee
Towson University

  1. The Effect of Foreign Remittances on Schooling: Evidence from Pakistan By Muhammad Nasir; Muhammad Salman Tariq; Faiz-ur-Rehman
  2. The Demographic Dividend: Effects of Population Change on School Education in Pakistan By Naushin Mahmood
  3. Foreign Direct Investment and Economic Growth in Pakistan: A Sectoral Analysis By Muhammad Arshad Khan; Shujaat Ali Khan
  4. Growth, inequality, and poverty reduction in developing countries: recent global evidence By Augustin Kwasi Fosu
  5. Student loans: Liquidity constraint and higher education in South Africa By Marc Gurgand; Adrien Lorenceau; Thomas Mélonio
  6. Education and Migration Choices in Hierarchical Societies: The Case of Matam, Senegal By Auriol, Emmanuelle; Demonsant, Jean-Luc
  7. Real Exchange Rate Movements in Developed and Developing Economies: an Interpretation of the Balassa-Samuelson's Framework By Taya Dumrongrittikul
  8. Reconsidering Gender Bias in Intra-Household Allocation in India By Zimmermann, Laura
  9. Youth employment and unemployment in India By S. Mahendra Dev; M. Venkatanarayana
  10. Why It Worked: Critical Success Factors of a Financial Reform Project in Africa By Peterson, Stephen
  11. Ghana: Will it be Gifted or Will it be Cursed? By Burcu Aydin
  12. Characteristics and Patterns of Intergenerational Poverty Traps and Escapes in Rural North India By Anirudh Krishna
  13. Do Local Elections in Non-Democracies Increase Accountability? Evidence from Rural China By Monica Martinez Bravo; Gerard Padro i Miquel; Nancy Qia; Yang Yao
  14. Micro-loans, Insecticide-Treated Bednets and Malaria:Evidence from a Randomized Controlled Trial in Orissa (India) By Alessandro Tarozzi; Aprajit Mahajan; Brian Blackburn; Dan Kopf; Joanne Yoong; Lakshmi Krishnan
  15. Labor market transitions and social security in Colombia By Cuesta, Jose; Bohorquez, Camilo
  17. On the Move Livelihood Strategies in Northern Ghana By Francesca MARCHETTA
  18. Information and Communication Technologies, Agricultural Profitability, and Child Labor in Rural Peru By Diether W. Beuermann
  19. Productivity Growth and Ownership Change in China: 1998-2007 By Liu, Jing; Cao, Shutao

  1. By: Muhammad Nasir (Pakistan Institute of Development Economics, Islamabad.); Muhammad Salman Tariq (Pakistan Institute of Development Economics, Islamabad.); Faiz-ur-Rehman (Quaid-i-Azam University, Islamabad.)
    Abstract: The underlying study intends to show the impact of foreign remittances on the educational performance of children in the households receiving these remittances. Much of the literature in this area covers the effects of remittances on poverty, consumption, and investment behaviour of the receiving households. The literature on the impact of remittances on educational performance, however, is rare, especially in Pakistan. To investigate the impact of remittances on educational performance, primary data at the household level is collected from four main cities of the Khyber Pakhtunkhwa Province, Pakistan. The OLS results illustrate that, without considering parental education, remittances have significant adverse effects on educational performance. However, the effect becomes insignificant once parental education is included, as a control variable, in the regression. The results also reveal that the low level of parental education, current income, assets, family type, and family size play an important role in the educational performance of children.
    Keywords: Remittances , Education, Parental Absence
    JEL: A20 I22
    Date: 2011
  2. By: Naushin Mahmood (Pakistan Institute of Development Economics, Islamabad.)
    Abstract: This study examines how the changing demographics in Pakistan, resulting primarily from fertility transition, would affect educational attainment of school-age population during the next two decades. The basic question addressed is whether the expected population change would enable the country to benefit from the demographic dividend and enhance the chances to achieve universal primary education by 2015, one of the targets of the Millennium Development Goals (MDGs). Using projected population es timates and school enrolment data, the findings show that about 9.5 million children aged 5-9 years were not enrolled in school in 2005-06. Assuming a gradual and steady increase in enrolment, education simulations show that the number of children aged 5-9 years who will never enter school will cumulatively rise to approximately 27.7 million by 2030, of which 12.2 million would be boys, and 15.5 million girls, and it may take another two decades to achieve universal primary enrolment. Furthermore, children aged 10-14 years not attending secondary level were 14.5 million in 2005-06. Given the current trends in enrolment, this number is expected to increase almost four times by 2030, thereby widening the population education gap over the years. Thus rapid increase in enrolment is the desired option. Otherwise the large education deficit would create conditions highly unfavourable to capitalis e on the demographic dividend, and pose a threat rather than offer an opportunity to stimulate economic development. In terms of policy actions, investments in school education need to be almost doubled to absorb the prospective increase in the school-age population during the next two decades.
    Keywords: Demographic Dividend, Education, Primary Enrolment
    JEL: J1 I2 I22
    Date: 2011
  3. By: Muhammad Arshad Khan (Pakistan Institute of Development Economics, Islamabad.); Shujaat Ali Khan (Middlebury College, USA.)
    Abstract: This paper establishes an empirical relationship between industry -specific foreign direct investment (FDI) and output under the framework of Granger causality and panel cointegration for Pakistan over the period 1981-2008. The result supports th e evidence of panel cointegration between FDI and output. FDI has a positive effect on output in the long run. The result also supports the evidence of long-run causality running from GDP to FDI, while in the short run, the evidence of two-way causality between FDI and GDP is identified. At the sectoral level, the effects of FDI on growth vary significantly across sectors. The most striking result obtained is that FDI causes growth in the primary and services sectors, while growth causes FDI in the manufacturing sector.
    Keywords: FDI, Growth, Cointegration, Causality
    JEL: F23 O40 C33
    Date: 2011
  4. By: Augustin Kwasi Fosu
    Abstract: The study presents recent global evidence on the transformation of economic growth to poverty reduction in developing countries, with emphasis on the role of income inequality. The focus is on the period since the early-mid-1990s when growth in these countries as a group has been relatively strong, surpassing that of the advanced economies. Both regional and country-specific data are analysed for the $1.25 and $2.50-level poverty headcount ratios, using the most recent World Bank data. The study finds that on average income growth has been the major driving force behind both the declines and increases in poverty. The study, however, documents substantial regional and country differences that are masked by this ‘average’ dominant-growth story. While in the majority of countries, growth was the major factor behind falling or increasing poverty, inequality, nevertheless, played the crucial role in poverty behaviour in a large number of countries. And, even in those countries where growth has been the main driver of poverty reduction, further progress could have occurred under relatively favourable income distribution. For more efficient policymaking, therefore, idiosyncratic attributes of countries should be emphasised. In general, high initial levels of inequality limit the effectiveness of growth in reducing poverty, while growing inequality reduces poverty directly for a given level of growth. It would seem judicious, therefore, to accord special attention to reducing inequality in certain countries where income distribution is especially unfavourable. Unfortunately, the present study also points to the limited effects of growth and inequality-reducing policies in low-income countries.
    Date: 2011
  5. By: Marc Gurgand (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, J-PAL Europe - J-PAL Europe, 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); Adrien Lorenceau (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Thomas Mélonio (AFD - Agence Française de Développement - Agence Française de Développement)
    Abstract: Empirical evidence that access to higher education is constrained by credit availability is limited and usually indirect. This paper provides direct evidence by comparing university enrollment rates of South African potential students, depending on whether they get a loan or not to cover their registration fees, in a context where such fees are high. We use matched individual data from both a credit institution (Eduloan) and the Department of Education. Based on a regression discontinuity design using the fact that loans are granted according to a credit score threshold, we can estimate the causal impact of loan obtainment. We find that the credit constraint is substantial, as it decreases the enrollment rate into higher education by more than 20 percentage points in a population of student loan applicants.
    Keywords: Education ; university ; credit constraint ; regression discontinuity
    Date: 2011–05
  6. By: Auriol, Emmanuelle (TSE, ARQADE and IDEI); Demonsant, Jean-Luc (Universidad Autonoma de Nuevo Leon)
    Abstract: The paper aims at studying determinants of schooling in traditional hierarchical societies confronted with an established history of outmigration. In the village, a ruling caste controls local political and religious institutions. For children who do not belong to the ruling caste, migration is a social mobility factor that is enhanced by formal schooling. Since formally educated children tend not to return, the ruling caste seeks to develop family loyalty by choosing religious education instead. The theory hence predicts that the social status of the family has a signicant impact on educational choice. Children from the ruling caste who are sent abroad have a lower probability of being sent to formal school. They are more likely to be sent to Koranic schools that emphasize religious and family values. The theoretical predictions are tested on data from Matam region in Senegal, a region where roughly one of every two children have ever attended school.
    Keywords: Schooling, Migration, Social Status, Haalpulaar
    JEL: I21 O12 O15 O17 Z13
    Date: 2011–03–28
  7. By: Taya Dumrongrittikul
    Abstract: This paper investigates empirically the Balassa-Samuelson hypothesis (BSH) using annual data over 1970-2008 from 33 countries grouped into developed and developing countries. The innovative feature of our study is that we introduce a new approach for classifying traded and nontraded industries. Our proposed approach allows for country specific heterogeneity over each industry, and changes in classifications of industries across periods. We apply panel cointegration tests with group-mean panel dynamic ordinary least squares (DOLS) estimators suggested in Pedroni (2000, 2001) to examine the BSH. We also use persistence profiles in order to investigate the speed of adjustment to equilibrium in response to shocks on cointegrating relations, and employ them as a complementary tool for checking whether the long run relationships obtained from the tests are actually valid. Our main finding is that there is not enough evidence in favour of the BSH nor in favour of purchasing power parity (PPP) in either developed or developing countries. In developed countries, there is strong evidence that higher growth countries will experience real exchange rate appreciation. However, this relation does not provide evidence in favour of the BSH. We actually find opposing evidence that as productivity growth in traded goods relative to that in nontraded goods increases, the real exchange rated tends to depreciate. For developing countries, our results support the BSH. However, the speed of reversion to equilibrium is very slow. We also find moderate evidence that comparatively rapidly growing developing countries will experience real exchange rate depreciation.
    Keywords: Balassa-Samuelson effect, real exchange rate, non-stationary panels, traded and nontraded sectors, persistence profile
    JEL: C12 C23 F31 F43
    Date: 2011–04–22
  8. By: Zimmermann, Laura (University of Michigan)
    Abstract: Detecting gender discrimination among children in the intra-household allocation of goods from household surveys has often proven to be difficult. This paper uses some of the commonly used techniques in this field to analyze education expenditures in India. Contrary to most previous research, I find evidence of discrimination against girls. Results at the all-India level are robust to the statistical method and the education expenditure measure, while they are more sensitive to changes in the analysis at the state level. In general, girls experience gender discrimination especially from age 10 onwards, with almost universal disadvantage in the amount of education expenditures in the group of 15-19 year olds.
    Keywords: gender discrimination, India, intra-household allocation, education expenditures
    JEL: J16 O15
    Date: 2011–04
  9. By: S. Mahendra Dev (Indira Gandhi Institute of Development Research); M. Venkatanarayana (Centre for Economic and Social Studies)
    Abstract: Increase in the share of youth population due to demographic `dividend' or the `youth bulge' seems to be one of the sources of future economic growth in India. Although with increase in school and college enrolment rates, the proportion of youth in the labour force has been declining, their high proportions in the labour force indicate that the problem of youth unemployment and underemployment would remain a serious policy issue for many more years to come in India. In this context, this paper examines the employment and unemployment situation of the youth in India during the last two-and-half decades viz., 1983 to 2007-08. It analyses the trends in labour force and workforce participation rates, unemployment, joblessness, working poor, growth and employment elasticities etc. The paper also offers policy recommendations for increasing productive employment and reduction in unemployment for the youth. The poor employability of the workforce would hamper the advantages due to demographic dividend if measures are not taken to improve the educational attainment and skill development of the youth.
    Keywords: Youth Employment, unemployment, skill development, joblessness, demographic dividend, literacy, school education, vocational training
    JEL: J21 J23 J10 J11
    Date: 2011–04
  10. By: Peterson, Stephen (Harvard University)
    Abstract: Little is written about the critical success factors that make or break a project implementing a public financial management reform in Africa. Based on the twelve year experience of Harvard's DSA project which transformed Ethiopia's financial management in the third best on the continent, this paper presents the key factors of the projects success: task, context, patrons, roles, staff and decisions. The task was focused from the start on the basics of financial control (budget and accounts and their budget classification, chart of accounts and financial calendar) and the development of an often forgotten end state in PFM reform--the self-accounting unit. Three features of context supported the project: political (close ties between the US and Ethiopia government established during the civil war), task environment (a hard budget constraint) and, serendipity (a war that ensure one set of cooks in the kitchen and removed the inevitable critique by foreign aid agencies, and the government policy of second stage devolution--which made the focal point of district level decentralization). The third CSF, the projects patrons, stayed the course, met stated commitments and did not meddle. The project performed four roles (go-between in the vacuum of decentralization), decider (making the key decisions on pilots), first responder (providing PFM innovations not specified in the terms of reference) and perhaps most important, the furniture (an object that could be kicked and blamed). The project was able to assemble the array of essential staff: all rounders, managers, technicians, networkers and a closer.
    Date: 2011–03
  11. By: Burcu Aydin
    Abstract: Will Ghana’s oil production from 2011 accelerate progress toward middle-income status, or will it retard gains in living standards through a possible "resource curse"? This paper examines the likelihood of "resource curse" effects, drawing on a dataset of 150 low and middle income countries from 1973 to 2008 using static and dynamic panel estimation techniques. Results confirm that resource rich countries in Ghana’s income range do experience slower growth than their more diversified peers, an effect that appears to be related to weaker governance. Provided that Ghana can preserve and improve its economic governance and also strengthen fiscal management, prospects look good for converting its oil wealth into sustained strong economic growth.
    Date: 2011–05–04
  12. By: Anirudh Krishna
    Abstract: The poverty status of all 4,198 households resident in 18 villages of Rajasthan, India, was examined at four points of time between 1977 and 2010 using a retrospective methodology known as Stages of Progress. Households that were consistently poor at all four points spanning a period of 33 years were regarded as the intergenerational poverty (IGP) group, including the long-term and intergenerationally poor. Characteristics and experiences of this group of households were compared with those of other village households, including, particularly, households that – after being consistently poor at the first three points in time – had overcome poverty before the fourth (and final) measurement. [Working Paper no. 189]. URL:[ ds/publication_files/WP189%20Krishna.pdf ]
    Keywords: retrospective methodology, disabled, inheritance, uncared-for elderlyIndia, Rajasthan, stages of progress, methodology, poor, intergenerational poverty, IGP group, households, village,
    Date: 2011
  13. By: Monica Martinez Bravo; Gerard Padro i Miquel; Nancy Qia; Yang Yao
    Abstract: Unique survey data is used to study whether the introduction of local elections in China made local leaders more accountable towards local constituents. A simple model is developed to predict the effects on different policies of increasing local leader accountability, taking into account that there is an autocratic upper government. Variation in the timing of the top-down introduction of elections across villages is studied 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. [BREAD Working Paper No. 300]. URL:[ rs/working/300.pdf].
    Keywords: mexico, one child policy, leader accountability, rural china, local constituents, elections, policies, local, villages, democracy, public goods, institutions,
    Date: 2011
  14. By: Alessandro Tarozzi; Aprajit Mahajan; Brian Blackburn; Dan Kopf; Joanne Yoong; Lakshmi Krishnan
    Abstract: Many severe health risks in developing countries could be substantially reduced with access to appropriate preventive measures. However, the associated costs are often high enough to restrict access among poor households, and free provision through public health campaigns is often not financially feasible. Findings are described from the first large-scale cluster randomized controlled trial in a developing country context that evaluates the uptake of a health-protecting technology, insecticide-treated bednets (ITNs), through micro-consumer loans, as compared to free distribution and control conditions. [BREAD Working Paper No. 297]. URL:[ rs/working/297.pdf].
    Keywords: malaria, developing country, insecticide-treated bednets, ITNs, health technology, micro consumer loans, poor households, public health, Orissa, India, randomized controlled trial
    Date: 2011
  15. By: Cuesta, Jose; Bohorquez, Camilo
    Abstract: This paper quantifies the magnitude of transitions across occupational categories in Colombia, a country with high unemployment and informality but quickly increasing its social security coverage for health. The analysis makes use of a panel of households between 2008 and 2009, representative of the main metropolitan areas in the country. Results confirm previous evidence found in Colombia and elsewhere in the region that transitions between occupations are large and asymmetric: they are disproportionally more likely to happen from formal to informal occupations than vice versa. The paper finds for the first time that such transitions are also different for salaried workers compared with the self-employed, as well as by poverty status of the worker. Salaried workers are more likely to transition first into other salaried jobs, while self-employed are more likely to transition into unemployment or out of the labor force. There are marked differences in the profiles of transitioning and non-transitioning workers, both in terms of socioeconomic characteristics and social security coverage. Causal analysis shows that affiliation to social security on health deters occupational transitions, while pension insurance does not. Hence, high-volume transitions may not be crisis-specific phenomena, but rather associated with contributive and non-contributive social security mechanisms that incentivize informality, and workers'preferences for informal jobs. The debate on labor market and social security reforms needs to take these features of transitions into account.
    Keywords: Labor Markets,Labor Policies,Population Policies,Labor Standards,Work&Working Conditions
    Date: 2011–05–01
  16. By: Jane Golley; Rod Tyers
    Abstract: The timing of China‘s and India‘s demographic transitions and the implications of alternative fertility scenarios are here explored using a global economic model incorporating full demographic behavior and measures of dependency that include the working aged and those of working age who do not work. The results show that, while the path of total dependency in China will be comparatively flat, the positive contribution of declining youth dependency to real per capita income will not be offset by rising aged dependency until beyond 2030. India‘s dependency ratio declines more sharply. Its higher initial fertility contributes positively to growth in GDP while weakening that in its real per capita income. Yet, so long as fertility continues to decline the latter negative effect will be partially offset by a demographic dividend worth at least five per cent of its 2000 real per capita income over more than three decades.
    JEL: C68 E27 F43 J11 O53
    Date: 2011–05
  17. By: Francesca MARCHETTA
    Abstract: The households who live in the rural areas of Northern Ghana base their subsistence on natural resources, which are threatened by the progressive desertification and increased frequency of extreme weather events in the region. We draw on a field work and on extensive secondary data sources to analyze how the rural population successfully adapted its livelihood strategies to cope with the economic, institutional and environmental changes which occurred over the last two decades. The field work evidences significant differences across communities in the adaptation strategies, which depend closely on the available portfolio of assets. The analysis evidences serious concerns about the environmental consequences of some of the observed changes in livelihood strategies, strengthening the case for public policies aimed at promoting a sustainable development in the region.
    Keywords: Livelihood Strategies, agriculture, Non Farm Activities, Internal migration, sustainable development, Rural Areas
    JEL: Q15 O55 O18 I31
    Date: 2011
  18. By: Diether W. Beuermann (Office of Evaluation and Oversight, Inter-American Development Bank, Washington, USA)
    Abstract: We estimate the impact of access to information and communication technologies on agricultural profitability and child labor among isolated villages in rural Peru. We exploit an intervention that provided at least one public (satellite) payphone to 6,509 rural villages that did not previously have any kind of communication services (either landlines or cell phones). We show that the timing of the intervention was uncorrelated with baseline outcomes and exploit it using a panel dataset of treated villages. Consistent with theoretical expectations, we find that profitability increased by 19.5 percent. Moreover, this income shock translated into a reduction in the likelihood of child market work of 13.7 percentage points and a reduction in child agricultural work of 9.2 percentage points. Overall, the evidence suggests a dominant income effect in the utilization of child labor.
    Keywords: Information technology, rural development, child labor, Peru, Latin America
    JEL: Q12 Q16 H43
    Date: 2011–05
  19. By: Liu, Jing; Cao, Shutao
    Abstract: This paper studies the industry productivity dynamics in China’s manufacturing sector from 1998 to 2007, and in particular, explores to what extent the privatization of state-owned enter- prises (SOEs) contributes to the aggregate productivity growth. Our results show that, though non-SOEs on average are more productive than SOEs, the average productivity growth among SOEs is greater than their counterparts. Industry concentration, taxation, and credit market all account for this difference in growth between SOEs and non-SOEs. We find that industry productivity growth is mainly attributed to the growth of non-SOEs, entry of non-SOE firms, and the exit of SOEs. However, non-SOE firms that are transformed directly from SOEs make a small and negative contribution to industry productivity growth.
    Keywords: Productivity Growth; Industry Dynamics; Ownership Change; Reallocation
    JEL: E6 D24 O4
    Date: 2011–04–28

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