nep-dev New Economics Papers
on Development
Issue of 2011‒08‒15
sixteen papers chosen by
Mark Lee
Towson University

  2. Evolution of the Industrial Wage Structure in China Since 1980 By Kwon, O Hyun; Fleisher, Belton M.; Deng, Quheng
  3. China’s Emergence in the World Economy and Business Cycles in Latin America By Cesa-Bianchi, Ambrogio; Pesaran, Hashem; Rebucci, Alessandro; Xu, TengTeng
  4. Measuring the economic gain of investing in girls : the girl effect dividend By Chaaban, Jad; Cunningham, Wendy
  5. How can micro and small enterprises in Sub-Saharan Africa become more productive? the impacts of experimental basic managerial training By Mano, Yukichi; Iddrisu,, Alhassan; Yoshino, Yutaka; Sonobe, Tetsushi
  6. Recent perspectives on trade and inequality By Harrison, Ann; McLaren, John; McMillan, Margaret
  7. Learning from developing country experience : growth and economic thought before and after the 2008-09 crisis By Harrison, Ann; Sepulveda, Claudia
  8. Real Exchange Rates and Growth Surges By Darryl McLeod; Elitza Mileva
  9. Direct and Indirect Determinants of Obesity: The Case of Indonesia By Romling, Cornelia; Qaim, Matin
  10. Impacts of agricultural trade and market liberalization of food security in developing countries: comparative study of Kenya and Zambia By Nyairo, Newton Morara; Kola, Jukka; Sumelius, John
  11. The gWillh to Save in China By Ting Yin
  12. Exporting wage premium in the exporting sector: evidence from manufacturing firms in China By Fu, Dahai; Wu, Yanrui
  13. Does microfinance move the households toward self employment? By Khaleque, Abdul
  14. Rebalancing China’s economic growth: some insights from Japan’s experience By Muto, Ichiro; Fukumoto, Tomoyuki
  15. Why is Polygyny More Prevalent in Western Africa?: An African Slave Trade Perspective By Dalton, John T.; Leung, Tin Cheuk
  16. Limited insurance within the household: evidence from a field experiment in Kenya By Robinson, Jonathan

  1. By: Pami Dua (Department of Economics, Delhi School of Economics, Delhi, India); B. N. GOLDAR (V.K.R.V. Rao Centre for Studies in Globalization Institute of Economic Growth Delhi); SMRUTI RANJAN BEHERA (Department of Economics Shyamlal College, University of Delhi,Delhi)
    Abstract: The paper attempts to explore the technology spillover effects of Foreign Direct Investment (FDI) in Indian manufacturing industries across different selected clusters in India. To measure the spillover effect to domestic firms in a particular cluster, a model is used that combines an innovative production function with a conventional production function. The model parameter estimates provide an evaluation of the technology spillovers in a cluster and the inter-cluster spillovers taking place in various regions. The empirical findings reveal significant variations across clusters in regard to spillovers. While some clusters benefit from foreign firm presence and technological stock within the cluster, a more commonly observed pattern is that domestic firms in a cluster gain from the presence of foreign firms in other clusters of the region and spillovers from technological stock in the regions. In some clusters, productivity enhancing effects of investment climates is visible, but in several others there is no such effect.
    Keywords: Foreign Direct Investment; Technology Spillover; Clusters; Firm location
    JEL: O41 O1 L6 R12
    Date: 2011–08
  2. By: Kwon, O Hyun (Peking University); Fleisher, Belton M. (Ohio State University); Deng, Quheng (Chinese Academy of Social Sciences)
    Abstract: Industry mean wages in China have exhibited sharply increased dispersion since the early 1990s. The upward trend in differences of average wages among major industry groups parallels increases in wage and income inequality not only between rural and urban sectors but within the urban economy as well. Research on the trend has focused on (1) how market forces have led to a better match between worker pay and worker skills; on (2a) how the growing share of employment in the private sector has “caused” growing wage inequality; and (2b) how residual government control in a few industrial sectors has contributed to wage inequality due monopoly rent sharing. We show that the industrial wage dispersion in China has evolved to match long-recognized international patterns of industrial wage dispersion and that an increasing proportion of industrial wage dispersion can be explained as returns to observed worker characteristics.
    Keywords: industry-wage structure, inequality, China
    JEL: J31 D33 L16 O53
    Date: 2011–07
  3. By: Cesa-Bianchi, Ambrogio (Inter-American Development Bank); Pesaran, Hashem (University of Cambridge); Rebucci, Alessandro (Inter-American Development Bank); Xu, TengTeng (University of Cambridge)
    Abstract: The international business cycle is very important for Latin America’s economic performance as the recent global crisis vividly illustrated. This paper investigates how changes in trade linkages between China, Latin America, and the rest of the world have altered the transmission mechanism of international business cycles to Latin America. Evidence based on a Global Vector Autoregressive (GVAR) model for 5 large Latin American economies and all major advanced and emerging economies of the world shows that the long-term impact of a China GDP shock on the typical Latin American economy has increased by three times since mid-1990s. At the same time, the long-term impact of a US GDP shock has halved, while the transmission of shocks to Latin America and the rest of emerging Asia (excluding China and India) GDP has not undergone any significant change. Contrary to common wisdom, we find that these changes owe more to the changed impact of China on Latin America’s traditional and largest trading partners than to increased direct bilateral trade linkages boosted by the decade long commodity price boom. These findings help to explain why Latin America did so well during the global crisis, but point to the risks associated with a deceleration in China’s economic growth in the future for both Latin America and the rest of the world economy. The evidence reported also suggests that the emergence of China as an important source of world growth might be the driver of the so called “decoupling” of emerging markets business cycle from that of advanced economies reported in the existing literature.
    Keywords: China, GVAR, Great Recession, emerging markets, international business cycle, Latin America, trade linkages
    JEL: C32 E32 O54
    Date: 2011–07
  4. By: Chaaban, Jad; Cunningham, Wendy
    Abstract: Although girls are approximately half the youth population in developing countries, they contribute less than their potential to the economy. The objective of this paper is to quantify the opportunity cost of girls'exclusion from productive employment with the hope that stark figures will lead policymakers to reconsider the current underinvestment in girls. The paper explores the linkages between investing in girls and potential increases in national income by examining three widely prevalent aspects of adolescent girls'lives: early school dropout, teenage pregnancy and joblessness. The countries included in the analysis are: Bangladesh, Brazil, Burundi, China, Ethiopia, India, Kenya, Malawi, Nigeria, Paraguay, Senegal, South Africa, Tanzania, and Uganda. The authors use secondary data to allow for some comparability across countries. They find that investing in girls so that they would complete the next level of education would lead to lifetime earnings of today's cohort of girls that is equivalent to up to 68 percent of annual gross domestic product. When adjusting for ability bias and labor demand elasticities, this figure falls to 54 percent, or 1.5 percent per year. Closing the inactivity rate between girls and boys would increase gross domestic product by up to 5.4 percent, but when accounting for students, male-female wage gaps and labor demand elasticities, the joblessness gap between girls and their male counterparts yields an increase in gross domestic product of up to 1.2 percent in a single year. The cost of adolescent pregnancy as a share of gross domestic could be as high as 30 percent or as low as 1 percent over a girl's lifetime, depending on the assumptions used to calculate the losses.
    Keywords: Population Policies,Adolescent Health,Gender and Development,Primary Education,Gender and Education
    Date: 2011–08–01
  5. By: Mano, Yukichi; Iddrisu,, Alhassan; Yoshino, Yutaka; Sonobe, Tetsushi
    Abstract: The vast majority of micro and small enterprises in developing countries are located in industrial clusters, and the majority of such clusters have yet to see their growth take off. The performance of micro and small enterprise clusters is especially low in Sub-Saharan Africa. While existing studies often attribute the poor performance to factors outside firms, problems within firms are seldom scrutinized. Entrepreneurs in these clusters are unfamiliar with standard business practices. Based on a randomized experiment in Ghana, this study demonstrates that basic-level management training improves business practices and performance, although the extent of improvement varies considerably among entrepreneurs.
    Keywords: Labor Policies,Primary Education,Access&Equity in Basic Education,Education For All,E-Business
    Date: 2011–08–01
  6. By: Harrison, Ann; McLaren, John; McMillan, Margaret
    Abstract: The 1990's dealt a blow to traditional Heckscher-Ohlin analysis of the relationship between trade and income inequality, as it became clear that rising inequality in low-income countries and other features of the data were inconsistent with that model. As a result, economists moved away from trade as a plausible explanation for rising income inequality. In recent years, however, a number of new mechanisms have been explored through which trade can affect(and usually increase) income inequality. These include within-industry effects due to heterogeneous?firms; effects of offshoring of tasks; effects on incomplete contracting; and effects of labor-market frictions. A number these mechanisms have received substantial empirical support.
    Keywords: Labor Markets,Economic Theory&Research,Labor Policies,Trade Policy,Emerging Markets
    Date: 2011–08–01
  7. By: Harrison, Ann; Sepulveda, Claudia
    Abstract: The aim of this paper is twofold. First, it documents the changing global landscape before and after the crisis, emphasizing the shift towards multipolarity. In particular, it emphasizes the ascent of developing countries in the global economy before, during, and after the crisis. Second, it explores what these global economic changes and the recent crisis imply for shifts in the direction of research in development economics. The paper places a particular emphasis on the lessons that developed countries can learn from the developing world.
    Keywords: Achieving Shared Growth,Emerging Markets,Population Policies,Economic Theory&Research,Debt Markets
    Date: 2011–08–01
  8. By: Darryl McLeod (Fordham University, Department of Economics); Elitza Mileva (European Central Bank)
    Abstract: Maintaining a weak real exchange rate is a widely recommended growth strategy, in part because of the success of Asian exporters, most recently China. Simulations of a simple two-sector open economy growth model based on Matsuyama (1992) suggest that a weaker real exchange rate can lead to a "growth surge", as workers move into traded goods industries with more "learning by doing" and exit non-traded goods sectors with slower productivity growth. Using the updated total factor productivity (TFP) estimates from Bosworth and Collins (2003) we test this model in a panel of 58 countries. We find the anticipated non-linear relationship between the real exchange rate and TFP growth: beyond a certain point real currency depreciation reduces TFP and GDP growth. Manufacturing exports appear to be one channel via which the real exchange rate affects TFP growth. Fears that a weaker real exchange rate might reduce investment and therefore productivity growth by making imported equipment more expensive are not supported by our estimates.
    Keywords: Economic growth, total factor productivity growth, exchange rate policy
    JEL: O14 O41 O47 O57
    Date: 2011
  9. By: Romling, Cornelia; Qaim, Matin
    Abstract: Overweight and obesity are becoming serious issues in many developing countries. Since undernutrition is not completely eradicated yet, these countries face a dual burden that obstructs economic development. We analyze the nutrition transition in Indonesia using longitudinal data from the Indonesian Family and Life Survey, covering the period between 1993 and 2007. Obesity has been increasing remarkably across all population groups, including rural and low income strata. Prevalence rates are particularly high for women. We also develop a framework to analyze direct and indirect determinants of body mass index. This differentiation has rarely been made in previous research, but appears useful for policy making purposes. Regression models show that changing food consumption patterns coupled with decreasing physical activity levels during work and leisure time directly contribute to increasing obesity. Education, income, and marital status are significant determinants that influence nutritional status more indirectly. Change regressions underline that there are important path-dependencies. From a policy perspective, nutrition awareness and education campaigns, combined with programs to support leisure time exercise, seem to be most promising to contain the obesity pandemic. Women should be at the center of policy attention.
    Keywords: Obesity, Overweight, Nutrition Transition, Asia, Indonesia, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, I10, O12,
    Date: 2011–06
  10. By: Nyairo, Newton Morara; Kola, Jukka; Sumelius, John
    Abstract: The introduction of agricultural reforms has debatable effects on food security in developing countries. This research investigates how such effects influenced maize supply in two developing countries which were among the first to introduce agricultural reforms. Conclusions from the research suggest that agricultural reforms led to mixed results. This may be attributed to the sometimes stop-go nature of reform implementation. The mixed results are reflected in the weak maize output response to price changes. Overall country economic conditions, state of agricultural development can be attributed to the pace of response, hence effect on agricultural supply. Elasticity of maize output to changes in price and acreage are strongly significant in maize output for the case of Kenya. Both restricted models of maize production suggest that prior to the introduction of reforms acreage, prices and alternative crops were more elastic when simulated with Zambian data than with Kenyan data.
    Keywords: food security, agricultural reforms, elasticity of supply, International Relations/Trade,
    Date: 2010–09
  11. By: Ting Yin (Institute of Social and Economic Research, Osaka University)
    Abstract: In this paper, I discuss the actual conditions and determinants of the saving behavior and wealth holdings of the aged in China, with emphasis on the impact of bequest motives thereon, using micro data from the 2009 gSurvey of Living Preferences and Satisfactionh (urban households) and the 2010 gSurvey of Living Preferences and Satisfactionh (rural households), which were conducted in February 2009 and January 2010, respectively, as part of the Global Center of Excellence (GCOE) Program on gBehavioral Macro-dynamics based on Surveys and Experimentsh of the Graduate School of Economics and the Institute of Social and Economic Research of Osaka University. I found that bequest motives are strong in China, with more than 87 percent of respondents in urban areas, more than 75 percent in rural areas, and more than 85 percent in the country as a whole having a bequest motive, that these bequests are motivated primarily by altruism, that there is little evidence that aged households in China dissave (decumulate their wealth), and that altruistic and selfish bequest motives, especially the latter, increase the saving (or reduce the dissaving) of aged households.
    Keywords: Bequest motives; saving behavior; wealth accumulation; life-cycle model; altruism model
    JEL: D12 D91 E21
    Date: 2011–08
  12. By: Fu, Dahai; Wu, Yanrui
    Abstract: This paper investigates whether exporting firms pay average higher wages than non-exporting firms by analyzing a large sample of Chinese manufacturing firms in 2004. Through rigorous exercises involving robust regressions, quantile regressions and nonparametric matching estimators, we find that the wage premium of exporting activities is not a prevailing phenomenon in China. It is unevenly distributed among firms with different ownerships, export-orientations and locations. Overall, exporters located in coastal regions but Guangdong province are more likely to pay higher average wages than nonexporters, while those producing in Guangdong offer a lower pay.
    Keywords: Exporters; Wage premium; Manufacturing; China
    JEL: F16 J31 L6
    Date: 2011–06–06
  13. By: Khaleque, Abdul
    Abstract: The present study is based on 5208 observations, which is comprised of participant households of microcredit programs, non-participant households of program villages as well as non-participant households from control villages. We found that among the participant households 37% depend on wage as well as self employment activity and 20% is solely dependent on self-employment activity and the remaining depends on dual activity (self-employment as well as wage employment), but among the non-participant households 60% is solely dependent on day labor activity. To find the link between occupation selection and microfinance participation, we use simple as well as multiple regression models like logit, multinomial logit, seemingly unrelated regression, etc. The regression results based on earnings from the elective occupations or number of days worked in that occupation suggests that the surveyed participant households have higher likelihood of being self-employed or to maintain self-employment as well as wage employment at a time to increase their welfare. The shifters due to relaxation of credit constraint or proliferation of access to credit moves toward sole self-employment activity with higher likelihood than the dual activity – to be employed in self-employment as well as wage employment within a given time span. In compendium, we can lucidly claim from this paper that beyond the asset structure of the households such as landholdings, savings, education, etc., the microfinance directly induces self-employment activity or transfer available working days from the day labor activity to self-employment activity and maximize their economic gain such as higher income, savings etc.
    Keywords: Credit; Self-employment; Logit; Multinomial logit; Seemingly Unrelated Model
    JEL: E24 J22 J24 J23
    Date: 2011–07
  14. By: Muto, Ichiro; Fukumoto, Tomoyuki
    Abstract: One of the greatest challenges China faces is how to reshape its heavily investment-driven mode of economic growth. By investigating how the rebalancing of Japan’s economic growth mode was realized in the 1970s, we indicate that it is essential in the rebalancing to correct the distortions in the factor cost (labor cost and capital cost) in a harmonious way. In addition, we refer to Japan’s experience to indicate that achieving domestic rebalancing does not necessarily lead to external rebalancing.
    Keywords: China; Japan; Rebalancing; Factor Cost Distortion; Current Account Imbalance
    JEL: O11 E25 O53 E22 E21
    Date: 2011–08–04
  15. By: Dalton, John T.; Leung, Tin Cheuk
    Abstract: Polygyny rates are higher in Western Africa than in Eastern Africa. The African slave trades explain this difference. More male slaves were exported in the trans-Atlantic slave trades from Western Africa, while more female slaves were exported in the Indian Ocean and Red Sea slave trades from Eastern Africa. The slave trades led to prolonged periods of abnormal sex ratios, which impacted the rates of polygyny across Africa. In order to assess these claims, we construct a unique ethnicity-level data set linking current rates of polygyny with historical trade flow data from the African slave trades. Our OLS estimates show a positive correlation between the trans-Atlantic slave trades and polygyny. An IV approach shows the relationship is causal and statistically signicant. We also provide cross-country evidence corroborating our findings.
    Keywords: slave trades; polygyny; Africa; development
    JEL: O55 F14 J12 N17
    Date: 2011–06
  16. By: Robinson, Jonathan
    Abstract: In many developing countries, unexpected income shocks are common, formal insurance is absent, and informal inter-household risk-sharing networks are unable to provide full insurance. An important question is therefore whether risk sharing within the household is effective. I conducted a field experiment in Western Kenya in which 142 married couples were followed for approximately 8 weeks. Every week, each individual had a 50% chance of receiving an income shock equivalent to a few days' income. Since these shocks are, by definition, small relative to lifetime income, they should not affect intra-household bargaining power and should only affect a Pareto efficient household through the pooled budget constraint. However, I find that men increase their private consumption when they receive the shock but not when their wives do, a rejection of efficiency. I present evidence that such behavior is not specific to the experiment - both husbands and wives spend more on themselves in weeks in which their labor income is higher. The results suggest that insurance is limited even within the households in this sample.
    Keywords: risk sharing, intra-household, efficiency
    JEL: O20 O12
    Date: 2011–05–10

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