nep-dev New Economics Papers
on Development
Issue of 2011‒06‒25
eleven papers chosen by
Mark Lee
Towson University

  1. The Effect of Land Scarcity on Farm Structure: Empirical Evidence from Mali By Catherine Guirkinger; Jean-Philippe Platteau
  2. Contrasting Giants: Demographic Change and Economic Performance in China and India By Jane Golley; Rod Tyers
  3. Why Use ROSCAs When You Can Use Banks? Theory and Evidence from Ethiopia By Kedir, Abbi M.; Disney, Richard; Dasgupta, Indraneel
  4. Learning about Education By Emerson, Patrick M.; McGough, Bruce
  5. Unequal Property Rights: A study of land right inequalities in Rwanda By Isaksson, Ann-Sofie
  6. Foreign Aid - a Fillip for Development or a Fuel for Corruption? By Keith Blackburn; Gonzalo F. Forgues-Pucciot
  7. Religion and the shadow economy By Heinemann, Friedrich; Schneider, Friedrich
  8. Inequality in Developing Economies: The Role of Institutional Development By Adalgiso Amendola; Joshy Easaw; Antonio Savoia
  9. Investing in human capital to escape poverty: evidence from Latin America. By Di Maro, V.
  10. The long term impact of Vietnam war's veteran on economic governance By Dang, Duc Anh
  11. Globalization, Structural Change and Productivity Growth By Margaret S. McMillan; Dani Rodrik

  1. By: Catherine Guirkinger (Center for Research in the Economics of Development, University of Namur); Jean-Philippe Platteau (Center for Research in the Economics of Development, University of Namur)
    Abstract: We analyze the individualization of farm units in Mali in the sense of a transformation of purely collective farms into mixed units in which private plots coexist with collective fields. While a moral-hazard-in-team problem plagues production on the latter, a dilemma arises insofar as the household head extracts his income form it. The head thus faces a trade-off between efficiency and capture. We show, within the framework of a patriarchal farm household model, that the choice is tilted toward private plot as land becomes more scarce. On the basis of first hand data collected in Southern Mali, we test and confirm the above prediction. Moreover, the relationship between land scarcity and the presence of individual plots holds only when there are at least one married couple (besides the head) within the household. The explanation we put forward is that the presence or suspicion of labour-shirking on the collective field arise only when there are interferences by in-laws and differences in the size of conjugal units.
    Date: 2011–05
  2. By: Jane Golley (The Australian Centre on China in the World Australian National University); Rod Tyers (UWA Business School, The University of Western Australia)
    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.
    Date: 2011
  3. By: Kedir, Abbi M. (University of Leicester); Disney, Richard (University of Nottingham); Dasgupta, Indraneel (Centre for Studies in Social Sciences, Calcutta)
    Abstract: Much of the existing literature on the use of informal credit arrangements such as ROSCAs (Rotating and Credit Saving Associations) theorises the use of such institutions as arising from market failures in the development of formal saving and credit mechanisms. As economic development proceeds, formal institutions might therefore be expected to displace ROSCAs. We show, using household data for Ethiopia, that in fact use of formal institutions and ROSCAs can co-exist, even in the same household. We examine usage of both formal and informal institutions across the household income gradient, and provide a theoretical model consistent with these empirical facts.
    Keywords: household saving, credit institutions, ROSCAs, Ethiopia
    JEL: O16 O17
    Date: 2011–06
  4. By: Emerson, Patrick M. (Oregon State University); McGough, Bruce (Oregon State University)
    Abstract: Limited human capital investment is a common characteristic of low-income countries despite the fact that estimated returns to educational investment in low-income countries are generally higher than in high-income countries. Empirical evidence suggests that income and credit constraints can only account for a small part of this underinvestment. Recent experimental evidence shows that families' misperceptions about the returns to education play a large role in their low investment levels. This paper builds a model of human capital and growth that incorporates an adaptive learning mechanism to capture the way agents form perceptions about returns to education. In an economy where human capital investments have both private and public returns, we find multiple learnable equilibria, including those which are characterized by low investment and low returns. We also find that even when the rational equilibrium corresponds to a high level of human capital investment, the learning mechanism, influenced by the agents' priors and cultural bias, may impart low human capital investment for extended periods. Policies that can speed up the learning process are examined and it is found that faster rates of growth can be achieved through interventions.
    Keywords: growth, education, learning
    JEL: O40 O15
    Date: 2011–06
  5. By: Isaksson, Ann-Sofie (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The aim of the present paper is to examine the existence and patterns of systematic within-country inequalities in effective land rights in Rwanda. The results of empirical estimations drawing on data on the land tenure arrangements of over 5,000 Rwandan households indeed suggest systematic within-country inequalities in land rights, with households headed by women or young individuals, households that have been displaced due to conflict, and households in the Imidugudu village settlements reporting significantly weaker rights than their respective comparison groups. The observed inequalities are not only the result of variation in tenure arrangements, but also exist when comparing households cultivating plots under similar land tenure regimes. Finding within-country inequalities in effective property rights highlights the need to – unlike much of the quantitative literature in the field – carefully evaluate how property rights apply to different segments of a country’s population. For Rwanda, which is in the process of implementing an extensive land reform, this is especially relevant.
    Keywords: property rights; land rights; inequality; Rwanda
    JEL: D02 K11 O12 O55 Q15 R14 R52
    Date: 2011–06–15
  6. By: Keith Blackburn; Gonzalo F. Forgues-Pucciot
    Abstract: We present an analysis of the effects of foreign aid on economic development when the quality of governance may be compromised by corruption. The analysis is based on a dynamic general equilibrium model in which growth is driven by capital accumulation and public policy is administered by government-appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds which are otherwise used to provide productive public goods and services. Our main results may be summarised as follows: (1) corruption impedes economic development and compromises the effectiveness of aid programmes; (2) the incidence of corruption may, itself, be affected by both the development process and the donation of aid; (3) foreign aid is good for development when governance is good, but may be bad (perhaps very bad) for development when governance is bad; and (4) corruption and poverty may co-exist as permanent, rather than just transitory, fixtures of an economy.
    Keywords: Corruption, development, foreign aid.
    JEL: D73 F35 O11
    Date: 2011–06
  7. By: Heinemann, Friedrich; Schneider, Friedrich
    Abstract: Religion is increasingly acknowledged to be a cultural dimension which affects economic outcomes in different regards. This contribution focuses on religion's possible impact on the shadow economy. Different dimensions of the religious markets are taken into account. These dimensions refer to the overall degree of religiosity, the specific impact of different religions, religious competition or the proximity between religion and the state. The empirical test makes use of the largest available cross-section on the size of the shadow economy and matches this dataset with numerous religious indicators. Summary measures of general religiosity or indicators of religious competition do not have a measurable impact. However, robust differences emerge across religions. Countries dominated by Islam or Eastern religions are associated with smaller shadow economies compared to Christian countries. Furthermore, the proximity between state and religion matters. Close ties between both are typical for smaller shadow economies. This is in line with the view that religion uses its normative influence to protect state interests if there is a mutually beneficial relationship. --
    Keywords: Economics of religion,tax morale,shadow economy
    JEL: O17 O57 Z12 H26
    Date: 2011
  8. By: Adalgiso Amendola (Università di Salerno); Joshy Easaw (University of Swansea); Antonio Savoia (Department of Economics, University of Exeter)
    Abstract: This paper studies the distributive impact of institutional change in developing countries. In such economies, property rights systems may preserve the interests of an influential minority, who can control key-markets, access to assets and investment opportunities, especially if they enjoy disproportionate political power. We test this hypothesis using cross-section and panel data methods on a sample of low- and middle-income economies from Africa, Asia and Latin America. Results suggest that: (a) increasing property rights protection increases income inequality; (b) this effect is larger in low-democracy environments; (c) few countries have developed political institutions capable of counterbalancing this effect.
    Keywords: Inequality, developing economies, institutions, property rights, democracy.
    JEL: O15 O17 D70
    Date: 2011
  9. By: Di Maro, V.
    Abstract: This thesis studies the impact of different types of policy interventions on demand for human capital in Latin America. Chapter 1 focuses on the unintended consequence (spillover effects) of the Oportunidades program in rural Mexico. We show that the program has an indirect effect on cervical cancer screening rates of women who were not eligible for the program but lived in areas where the program was in operation. These effects - health externalities - can dramatically change the assessment of the impacts of a program as well as considerations about its design. In addition to this, we show evidence of the mechanism through which the program operates being the weakening of the social norm of husbands' opposition to their spouses being screened by male doctors. In Chapter 2 we show that Oportunidades is bringing families out of poverty, which is considered here as a necessary condition to allow them to invest in human capital. We also discuss why CCT programs can have perverse incentives on the labor supply of eligible individuals and show that the program is not having this effect. In chapter 3 and 4 we contribute to the evidence on the impact of Early Childhood interventions. In chapter 3 we discuss how conditional cash transfers can increase the caloric intake of very young children and young mothers. This chapter also has some methodological content, in that it shows how to apply a technique for estimating individual caloric intake when only household aggregate data is available to a program evaluation setting. Results show that Oportunidades is successful at increasing the caloric intake of young children and young mothers, while it does not seem to have an effect at other age ranges. Chapter 4 focuses on the evaluation of the impact of a preschool nursery program in Colombia: Hogares Comunitarios. When compared to a CCT program, this program can be thought as a direct attack to children development, as participants (kids age 0 to 6) in the Hogares Comunitarios receive daycare services and food at the house of a community mother. Our evidence shows that this program can have a positive and sizeable effect on child growth, with this result being robust to different instruments for participation into the program and different samples. In chapter 5 we deal with the long-standing debate about in-kind transfers vs. cash transfers and with how this relates to child nutrition. In particular, we study how nutrient intake responds to changes in income in a sample of rural Mexican households. This increase in income can be thought as an unconditional cash transfer to households. Our evidence is mixed: while consumption of some key nutrients (vitamins A and C, heme iron, calcium and fats) responds positively to an increase in income, other nutrients (energy, zinc and protein) seem not to be affected by a change in income, with this supporting the case for conditionalities and/or in-kind transfers.
    Date: 2011–02–28
  10. By: Dang, Duc Anh
    Abstract: I investigate the effects of Vietnam War’s veteran on long run economic development in Vietnam. Using a unique dataset containing the number of war invalids at province levels, I find the number of war invalids from each province to be an important determinant of its current economic performance. To correct for potential biases arising from reverse causality, measurement error and unobservable province characteristics, I use an instrumental variable approach exploiting distance to the 17th parallel demilitarized zone. I also find that the importance of the war invalids for contemporary development is a result of its impacts on overall provincial economic governance and other disaggregated economic institutions, such as the pro-activity of provincial leadership, the quality of the legal institutions and services supporting business development.
    Keywords: War invalids, economic governance, economic development, Vietnam
    JEL: O10 O43
    Date: 2010–01–01
  11. By: Margaret S. McMillan; Dani Rodrik
    Abstract: Large gaps in labor productivity between the traditional and modern parts of the economy are a fundamental reality of developing societies. In this paper, we document these gaps, and emphasize that labor flows from low-productivity activities to high-productivity activities are a key driver of development. Our results show that since 1990 structural change has been growth reducing in both Africa and Latin America, with the most striking changes taking place in Latin America. The bulk of the difference between these countries’ productivity performance and that of Asia is accounted for by differences in the pattern of structural change – with labor moving from low- to high-productivity sectors in Asia, but in the opposite direction in Latin America and Africa. In our empirical work, we identify three factors that help determine whether (and the extent to which) structural change contributes to overall productivity growth. In countries with a relatively large share of natural resources in exports, structural change has typically been growth reducing. Even though these “enclave” sectors usually operate at very high productivity, they cannot absorb the surplus labor from agriculture. By contrast, competitive or undervalued exchange rates and labor market flexibility have contributed to growth enhancing structural change.
    JEL: O1
    Date: 2011–06

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