nep-dev New Economics Papers
on Development
Issue of 2011‒05‒30
fifteen papers chosen by
Mark Lee
Towson University

  1. What are the Distributional Implications of Halving Poverty in South Africa when Growth Alone is not Enough? By Fiona Tregenna
  2. Aftercare of inward foreign direct investment: A case study of South Africa By Benjamin Manasoe; Ronald Mears
  3. Does Cash for School Influence Young Women's Behavior in the Longer Term? Evidence from Pakistan By Alam, Andaleeb; Baez, Javier E.; Del Carpio, Ximena
  4. Are Girls the Fairer Sex in India? Revisiting Intra-Household Allocation of Education Expenditure By Azam, Mehtabul; Kingdon, Geeta
  5. Poisoning the Mind: Arsenic Contamination of Drinking Water Wells and Children's Educational Achievement in Rural Bangladesh By Asadullah, Niaz; Chaudhury, Nazmul
  6. The Impact of Minimum Wages on Wages, Work and Poverty in Nicaragua By Alaniz, Enrique; Gindling, T. H.; Terrell, Katherine
  7. The Impact of Migration Policies on Rural Household Welfare in Mexico and Nicaragua By J.Edward Taylor; Mateusz Filipski
  8. Continental vs. Intercontinental Migration: An Empirical Analysis of the Impacts of Immigration Reforms on Burkina Faso By Fleur Wouterse
  9. Channels of Interprovincial Risk Sharing in China By Julan Du; Qing He; Oliver M. Rui
  10. Impact of adverse economic shocks on the Indian child labour market and the schooling of children of poor households By B, Karan Singh
  11. New financial intermediary development indicators for developing countries By Simplice A., Asongu
  12. Schooling is Associated Not Only with Long-Run Wages, But Also with Wage Risks and Disability Risks: The Pakistani Experience By Asma Hyder; Jere R. Behrman
  13. Inequality, Human Capital Formation and the Process of Development By Oded Galor
  14. Poverty, Voracity, and Growth By Strulik, Holger
  15. Impacts of Household Credit on Education and Healthcare Spending by the Poor in Peri-urban Areas in Vietnam By Tinh Doan; John Gibson; Mark Holmes

  1. By: Fiona Tregenna
    Abstract: The South African government has set a target of halving poverty by 2014. Using microdata from the 2005/6 Income and Expenditure Survey, this article frames government’s stated target of halving poverty by 2014 in terms of specific measures of the poverty gap and poverty headcount ratio. With the poverty line as defined here, about half the South African population is classified as poor. Even so, the aggregate poverty gap is only about 3% of GDP. Projections of poverty in 2014 under various growth scenarios indicate that growth alone will be insufficient to halve poverty by then. It would take average annual growth of 8.7% between 2006 and 2014 to halve both the poverty gap and poverty headcount ratio with the current distribution of income and expenditure. However, projections of the effects of a range of growth and distributional scenarios on poverty, using a new method for simulating pro-poor distributional change, indicate that halving poverty appears feasible with moderate growth rates and fairly mild pro-poor distributional change. The results are indicative as to the scale of distributional changes necessary to halve poverty under various growth scenarios
    JEL: D30 D31 I32
    Date: 2011
  2. By: Benjamin Manasoe; Ronald Mears
    Abstract: Attraction of new inward foreign direct investment (FDI) globally, especially in the developing countries, is problematic. Economic development practitioners have recently started to prioritise the retention and growing of existing investments to enhance their economic development agenda. The purpose of this paper is to analyse and investigate the relationship between inward FDI and investment aftercare in South Africa (SA). Only a few studies have been carried out on the topic at the global level and none on SA as far as could be ascertained. A structured questionnaire was used to collate data, and 30 face-to-face interviews were conducted with 16 investment aftercare practitioners and 14 executives from the investment promotion agencies (IPAs) in seven of the nine provinces of SA. The main finding of the study is that although investment aftercare services are essential, they receive limited funding, staff and attention, and have not yet been developed in SA.
    JEL: P45
    Date: 2011
  3. By: Alam, Andaleeb (World Bank); Baez, Javier E. (World Bank); Del Carpio, Ximena (World Bank)
    Abstract: The Punjab Female School Stipend Program, a female-targeted conditional cash transfer program in Pakistan, was implemented in response to gender gaps in education. An early evaluation of the program shows that the enrollment of eligible girls in middle-school increased in the short term by nearly 9 percentage points. This paper uses regression discontinuity and difference-in-difference analyses to show that five years into the program implementation positive impacts do persist. Beneficiary adolescent girls are more likely to progress through and complete middle school and work less. There is suggestive evidence that participating girls delay their marriage and have fewer births by the time they are 19 years old. Also, girls who are exposed to the program later-on, and eligible for the benefits given in high school, increase their rates of matriculating into and completing high school. The persistence of impacts can potentially translate into gains in future productivity, consumption, inter-generational human capital accumulation and desired fertility. Lastly, there is no evidence that the program has negative spillover effects on educational outcomes of male siblings.
    Keywords: conditional cash transfers, female education, female labor participation, fertility, Pakistan
    JEL: J13 J21 O15
    Date: 2011–05
  4. By: Azam, Mehtabul (World Bank); Kingdon, Geeta (Institute of Education, University of London)
    Abstract: This paper revisits the issue of the intra-household allocation of education expenditure with the recently available India Human Development Survey which refers to 2005 and covers both urban and rural areas. In addition to the traditional Engel method, the paper utilizes a Hurdle model to disentangle the decision to enroll (incur any educational expenditure) and the decision of how much to spend on education, conditional on enrolling. Finally the paper also uses household fixed effects to examine whether any gender bias is a within-household phenomenon. The paper finds that the traditional Engel method often fails to pick up gender bias where it exists not only because of the aggregation of data at the household-level but also because of aggregation of the two decisions in which gender can have opposite signs. It is found that pro-male gender bias exists in the primary school age group for several states but that the incidence of gender bias increases with age – it is greater in the middle school age group (10-14 years) and greater still in the secondary school age group (15-19 years). However, gender discrimination in the secondary school age group 15-19 takes place mainly through the decision to enroll boys and not girls, and not through differential expenditure on girls and boys. The results also suggest that the extent of pro-male gender bias in educational expenditure is substantially greater in rural than in urban areas. Finally, our results suggest that an important mechanism through which households spend less on girls than boys is by sending sons to fee-charging private schools and daughters to the fee-free government-funded schools.
    Keywords: hurdle model, educational expenditure, gender bias, school choice, India
    JEL: I21 J16 J71
    Date: 2011–05
  5. By: Asadullah, Niaz (University of Reading); Chaudhury, Nazmul (World Bank)
    Abstract: Bangladesh has experienced the largest mass poisoning of a population in history owing to contamination of groundwater with naturally occurring inorganic arsenic. Prolonged drinking of such water risks development of diseases and therefore has implications for children's cognitive and psychological development. This study examines the effect of arsenic contamination of tubewells, the primary source of drinking water at home, on the learning outcome of school-going children in rural Bangladesh using recent nationally representative data on secondary school children. We unambiguously find a negative and statistically significant correlation between mathematics scores and arsenic-contaminated drinking tubewells at home, net of the child's socio-economic status, parental background and school specific unobserved correlates of learning. Similar correlations are found for an alternative measure of student achievement and subjective well-being (i.e. self-reported measure of life satisfaction), of the student. We conclude by discussing the policy implication of our findings in the context of the current debate over the adverse effect of arsenic poisoning on children.
    Keywords: drinking water pollution, Madrasa, subjective well-being, Bangladesh
    JEL: I21 Z12 O12 O15
    Date: 2011–05
  6. By: Alaniz, Enrique (Fundación Internacional para el Desafío Económico Global (FIDEG)); Gindling, T. H. (University of Maryland, Baltimore County); Terrell, Katherine (University of Michigan)
    Abstract: We use an individual-level panel data set to study the impact of changes in legal minimum wages on a host of labor market outcomes in Nicaragua including: a) wages and employment, b) transitions of workers across jobs (in the covered and uncovered sectors) and employment status (unemployment and out of the labor force), and c) transitions into and out of poverty. We find that changes in the legal minimum wage affect only those workers whose initial wage (before the change in minimum wages) is close to the minimum. For example, increases in the legal minimum wage lead to significant increases in the wages and decreases in employment of private covered sector workers who have wages within 20% of the minimum wage before the change, but have no significant impact on wages in other parts of the distribution. The estimates from the employment transition equations suggest that the decrease in covered private sector employment is due to a combination of layoffs and reductions in hiring. Most workers who lose their jobs in the covered private sector as a result of higher legal minimum wages leave the labor force or go into unpaid family work; a smaller proportion find work in the public sector. Our analysis of the relationship between the minimum wage and household income finds: a) increases in legal minimum wages increase the probability that a poor worker's family will move out of poverty, and b) increases in legal minimum wages are more likely to reduce the incidence of poverty if they impact the head of the household rather than the non-head.
    Keywords: minimum wages, employment, poverty
    JEL: J3 O17
    Date: 2011–05
  7. By: J.Edward Taylor; Mateusz Filipski
    Abstract: This working paper presents findings from an effort to evaluate the impacts of immigration policies on the welfare of migrants and their families in migrant-sending countries. It uses a disaggregated micro economy-wide modelling approach, designed to capture both the potentially positive and negative effects of migration and remittances in migrant-sending areas and the complex processes shaping these impacts. The model is used to explore the possible effects of destination-country immigration policies on rural welfare in Mexico and Nicaragua (US policies in the first case and US and Costa Rican policies in the second). The findings highlight the sensitivity of sending-country welfare to immigration policies, not only in the households that send migrants and receive remittances but other households with which they interact within the migrant-sending economy. Impacts vary between the two countries and across households, and they also depend upon the gender and skills of migrants. The paper concludes by discussing the importance of both destination and source country policies in shaping the impacts of international migration on rural welfare.<BR>Ce document de travail tente d’évaluer l’impact des politiques d’immigration sur le bien-être des migrants et de leurs familles dans les pays de départ. Il s’appuie sur un modèle micro-économique désagrégé, conçu pour rendre compte à la fois des effets négatifs et positifs de la migration et des transferts de fonds dans les régions de départ, et des procédés complexes qui déterminent ces effets. Ce modèle permet d’étudier les effets potentiels des politiques migratoires des pays de destination sur le bien-être en zone rurale au Mexique et au Nicaragua (les politiques américaines dans le premier cas, et les politiques américaines et costaricaines dans le second). Les conclusions soulignent la sensibilité du bien-être dans les pays d’origine aux politiques d’immigration, non seulement dans les ménages de migrants qui reçoivent des transferts mais aussi dans les autres ménages qui interagissent au sein de l’économie du pays d’origine. Les impacts diffèrent selon les pays et entre ménages. Ils dépendent aussi du sexe et du niveau de qualification des migrants. Ce document discute enfin le poids des politiques des pays de destination et d’origine en matière d’impact des migrations internationales sur le bien-être en zone rurale.
    Keywords: Mexico, labour supply, remittances, international migration, Nicaragua, Mexique, offre de travail, migration internationale, Nicaragua, transferts d’argent
    JEL: F22 J08 J61 O55
    Date: 2011–05
  8. By: Fleur Wouterse
    Abstract: This working paper uses an agricultural household model to explore the impact of potential immigration policy reforms on the welfare of rural households in Burkina Faso. Simulation results demonstrate that, in contrast to continental migration, increased intercontinental migration has strong positive household welfare effects. Similarly, an increase in the stay abroad of intercontinental migrants impacts positively on welfare. Findings lend support to the introduction of a Temporary Migration Programme (TMP) which, by lowering the cost involved, would enable poorer households to engage in intercontinental migration. The temporary nature of such a program ensures that ‚Dutch disease? effects are mitigated through eventual migrant return. Granting of legal status to migrants already abroad through a temporary work and residence permit is also recommended if the objective is to improve the welfare of migrant-sending households. Legalisation can be granted under the same TMP so that the eventual return of migrants would be encouraged.<BR>Ce document de travail repose sur un modèle décrivant des ménages agricoles pour étudier l’impact de réformes potentielles des politiques migratoires sur le bien-être en zone rurale au Burkina Faso. Les résultats des simulations démontrent qu’à la différence des migrations continentales, l’effet des migrations intercontinentales est plus important sur le bien-être du ménage. De même, une durée plus longue de séjour à l’étranger des migrants intercontinentaux a un impact positif sur le bien-être. Les résultats constituent un argument en faveur de la mise en place d’un programme de migrations temporaires (PMT) qui en abaissant le coût des migrations intercontinentales permettrait aux ménages les plus pauvres de recourir aux migrations intercontinentales. La nature temporaire d’un tel programme permet d’atténuer les effets liés au « syndrome hollandais » de par un retour éventuel des migrants. Accorder un statut légal aux migrants qui sont déjà à l’étranger avec un permis de travail temporaire et un permis de résidence est aussi recommandé si l’objectif est d’améliorer le bien-être des ménages de migrants. La légalisation peut être accordée selon le même PMT afin d’encourager le retour éventuel des migrants.
    Keywords: migration, labour supply, remittances, immigration policy, Burkina Faso, offre de travail, migration, transferts d’argent, politiques d’immigration, Burkina-Faso
    JEL: F22 J08 J61 O55
    Date: 2011–05
  9. By: Julan Du (The Chinese University of Hong Kong); Qing He (Renmin University of China and Hong Kong Institute for Monetary Research); Oliver M. Rui (The Chinese University of Hong Kong and Hong Kong Institute for Monetary Research)
    Abstract: This paper decomposes consumption risk sharing among provinces in China over the 1980-2007 period. We find that 9.4 percent of the shocks to gross provincial product are smoothed by the interprovincial fiscal transfer system. This system also cushions a relatively large fraction of the province-specific shocks in the coastal provinces of China. Using a variety of indicators, we explore non-fiscal channels of consumption risk sharing. We find that the migration of rural labor to urban areas and the remittance of migrant wages play important roles in promoting interprovincial consumption risk sharing in the inland provinces of China. In contrast, the extent of risk sharing through financial intermediaries and the capital markets is very limited. These factors have resulted in a low degree of risk sharing among Chinese provinces, especially over the last decade.
    Keywords: Consumption Risk Sharing, Chinese Economy, Fiscal System, Credit Markets, Remittance
    JEL: O16 O53 R11
    Date: 2011–04
  10. By: B, Karan Singh
    Abstract: This paper analyses the impact of adverse economic shocks on human capital formation in the case of India. It uses the extended theoretical model of Basu and Van (1998). The study has been carried out for the period between 1999 and 2002 and covers 385 districts. The results show that during a crisis, there is a fall in the school enrollment rate and a rise in the child labour participation rate. The study also argues that in the absence of a well-functioning credit market, to mitigate the adverse economic shocks on the children of poor households, the government must provide an incremental cash/in-kind conditional transfers to poor households with children.
    Keywords: Adverse economic shock; Child labour; Poverty; Labour market; Education; Human capital formation; Mid-day meal programme
    JEL: E62 D81 B21 C33
    Date: 2011–05–17
  11. By: Simplice A., Asongu
    Abstract: Financial development indicators are often applied to countries/regions without taking into account specific financial development realities. Financial depth in the perspective of monetary base is not equal to liquid liabilities in every development context. This paper introduces complementary indicators to the existing Financial Development and Structure Database (FDSD). These new measures can easily be computed from the FDSD. We present absolute as well as relative measures which are robust to the finance-growth nexus. When all financial sectors are taken into account in the definition and usage of liquid liabilities: (1) the formal and non-formal/informal financial sectors are inherently mutually antagonistic and should not be assimilated to the monetary base without distinction; (2) equating formal banking sector liquid liabilities to monetary base significantly undermines the formal banking system elasticity of growth; (3) there is a trade-off between growth and welfare from one financial sector to another; (4) non-formal and informal financial sectors are independent significant growth determinants.
    Keywords: Finance; Development; Formalization; Panel; Developing Countries
    JEL: E00 E26
    Date: 2011–05–15
  12. By: Asma Hyder (Business School, National University of Sciences and Technology, Islamabad); Jere R. Behrman (Department of Economics, University of Pennsylvania)
    Abstract: Many studies document significantly positive associations between schooling attainment and wages in developing countries. But when individuals enter occupations subsequent to completing their schooling, they not only face an expected work-life path of wages, but a number of other occupational characteristics, including wage risks and disability risks, for which there may be compensating wage differentials. This study examines the relations between schooling on one hand and mean wages and these two types of risks on the other hand, based on 77,685 individuals from the wage-earning population as recorded in six Labor Force Surveys of Pakistan. The results suggest that schooling is positively associated with mean total wages and wage rates, but has different associations with these two types of risks: Disability risks decline as schooling increases but wage risks, and even more, wage rate risks increase as schooling increases. The schooling-wage risks relation, but not the schooling-disability risks relation,is consistent with there being compensating differentials.
    Keywords: Wages, Risks, Labor Markets, Job Disabilities, Compensating Differentials,Developing Country, Schooling
    JEL: J31 J28 O53
    Date: 2011–05–09
  13. By: Oded Galor
    Abstract: Conventional wisdom about the relationship between income distribution and economic development has been subjected to dramatic transformations in the past century. While classical economists advanced the hypothesis that inequality is beneficial for growth, the neoclassical paradigm dismissed the classical hypothesis and suggested that income distribution has limited role in the growth process. A metamorphosis in these perspectives has taken place in the past two decades. Theory and subsequent empirical evidence have demonstrated that income distribution has a significant impact on human capital formation and the development process. In early stages of industrialization, as physical capital accumulation was a prime engine of growth, inequality enhanced the process of development by channeling resources towards individuals whose marginal propensity to save is higher. In later stages of development, however, as human capital has become a main engine of growth, equality, in the presence of credit constraints, has stimulated human capital formation and growth. Moreover, unequal distribution of land has been a hurdle for economic development. While industrialists have had an incentive to support education policies that foster human capital formation, landowners, whose interests lay in the reduction of the mobility of their labor force, have favored policies that deprived the masses of education.
    JEL: O11 O15
    Date: 2011–05
  14. By: Strulik, Holger
    Abstract: This article investigates economic performance when enforceable property rights are missing and basic needs matter for consumption. It suggests a new view of the so-called voracity effect according to which windfall gains in productivity induce behavior that leads to lower economic growth. Taking into account that the rate of intertemporal substitution in consumption depends on the level of consumption, it is shown that "voracious behavior" is situation-specific. It occurs when an economy is in decline and suffciently close to stagnation.
    Keywords: economic growth, property rights, common pool resources, voracity, fractionalization.
    JEL: O11 O13 D74 P48
    Date: 2011–05
  15. By: Tinh Doan (University of Waikato); John Gibson (University of Waikato); Mark Holmes (University of Waikato)
    Abstract: There is debate about whether microfinance has positive impacts on education and health for borrowing households in developing countries. To provide evidence for this debate we use a new survey designed to meet the conditions for propensity score matching (PSM) and examine the impact of household credit on education and healthcare spending by the poor in peri-urban areas of Ho Chi Minh City, Vietnam. In addition to matching statistically identical non-borrowers with borrowers, our estimates also control for household pre-treatment income and assets, which may be associated with unobservable factors affecting both credit participation and the outcomes of interest. The PSM estimates of binary treatment effect show significant and positive impacts of borrowing on education and healthcare spending. However, multiple ordered treatment effect estimates reveal that only formal credit has significant and positive impacts on education and healthcare spending, while informal credit has insignificant impacts on the spending.
    Keywords: matching; education and healthcare spending; household credit; the poor; peri-urban; Vietnam
    JEL: C14 C21 H81
    Date: 2011–05–23

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