nep-dev New Economics Papers
on Development
Issue of 2011‒10‒22
sixteen papers chosen by
Mark Lee
Towson University

  1. Assessing the Impact of the Global Financial and Economic Crisis in Developing Countries: the Case of Uruguay By Carmen Estrades; Cecilia Llambi
  2. A reconsideration of what and who is middle class in South Africa By Justin Visagie; Dorrit Posel
  3. Analysis of Health Care Utilization in Côte d'Ivoire By Alimatou Cisse
  4. Effects of the 2008-09 economic crisis on labor markets in Mexico By Freije, Samuel; Lopez-Acevedo, Gladys; Rodriguez-Oreggia, Eduardo
  5. Study of Municipal Finance: The Case of Local Government in Trinidad and Tobago By Allan Richards
  6. Guyana Property Rights Study By Elena Panaritis; Angelo Kostopoulos
  7. Growth and chronic poverty: Evidence from rural communities in Ethiopia By Stefan Dercon; John Hoddinott; Tassew Woldehanna
  8. Risk and Reciprocity Over the Mobile Phone Network: Evidence from Rwanda By Joshua Blumenstock; Nathan Eagle; Marcel Fafchamps
  9. Social Protection, Efficiency and Growth By Stefan Dercon
  10. Pro-poor trade policy in Sub-Saharan Africa By Nicita, Alessandro; Olarreaga, Marcelo; Porto, Guido
  11. The Effect of Trade and FDI on Inter-industry Wage Differentials: The Case of Mexico By Gabriela López Noria
  12. Law and finance in Africa By Simplice A., Asongu
  13. Law, economic growth and human development By Simplice A., Asongu
  14. The determinants of household poverty in Sri Lanka: 2006/2007 By Ranathunga, Seetha P.B.
  15. Foreign aid and economic growth in Ethiopia By Tadesse, Tasew
  16. Capital Flows and Economic Growth in the Era of Financial Integration and Crisis, 1990-2010 By Joshua Aizenman; Yothin Jinjarak; Donghyun Park

  1. By: Carmen Estrades; Cecilia Llambi
    Abstract: This paper uses a static computable general equilibrium model (CGE) linked to a microsimulation model to analyze how the global crisis and some adopted policy responses may have affected the Uruguayan economy. The focus is on the trade channel and foreign capital flows, since they are the most important mechanisms through which the global crisis affected the Uruguayan economy. The crisis had a strong impact on exports and fixed investment. Poorest households would be the most affected, as they face a stronger reduction in real wages and a rise in unemployment. We find a negative impact on extreme poverty, but not on moderate poverty, as households near the poverty line would benefit from the fall in some consumer prices. A policy based in increasing current public consumption does moderately counteract some negative impacts of the crisis, but benefits mainly skilled workers, and does not act directly towards the most affected.
    Keywords: Global economic crisis, trade shock, fiscal response, Uruguay, unemployment
    JEL: D58 I32 J68 H50
    Date: 2011
  2. By: Justin Visagie; Dorrit Posel
    Abstract: In this paper, we revisit 'what and who' is middle class in South Africa using data collected in the 2008 National Income Dynamics Study. First we consider how to identify the middle class based on two broad definitions adopted in the international literature: a middle class defined by the middle share of the national income distribution; and a middle class defined by an absolute level of affluence and lifestyle. We explore alternative ways of capturing the ‘middle strata’ of the national income distribution; and we suggest an approach for identifying threshold levels of income associated with middle-class affluence. Second, we show that both the size and the composition of the middle class in South Africa are very sensitive to how the middle class is defined. In particular, we demonstrate that there is very little overlap between the two broad definitions, a finding which reflects very high levels of poverty and inequality in the country. Lastly, both definitions of the middle class are shown to be robust to two common issues of measurement, namely the inclusion of implied rental income, and the use of expenditure as opposed to income as the basis for measuring class status.
    Keywords: middle class; income strata; middle-class affluence; income distribution
    JEL: D31 D63 I31 Z13
    Date: 2011
  3. By: Alimatou Cisse
    Abstract: Health constitutes a sufficiently solid entrance to reduce poverty and promote economic growth. Yet, in most African countries and particularly in Côte d’Ivoire, the populations’ state of health has seen a real deterioration over the last decade. This study seeks to explain this decline by determining the explanatory factors of recourse to health care providers. To this end, the multinomial logit model is used. The theoretical basis for this analysis is the maximization of a utility function to produce health. The data to test the study’s hypotheses came from the survey of the National Institute of Statistics, entitled Social Dimension of Structural Adjustment, carried out in April 1993. The results show that the education level of the household head, the household’s income, the price of medication, and the time to reach the health care provider (as a proxy for the distance to a health care provider) determine the choice for a specific health care provider. The level of education and the income positively influence this choice, while the cost of medication and the time to provider (time to reach the health provider) negatively influence the choice of health care provider.
    Date: 2011–10
  4. By: Freije, Samuel; Lopez-Acevedo, Gladys; Rodriguez-Oreggia, Eduardo
    Abstract: The 2008-09 economic crisis has had a long-lasting negative impact on the Mexican economy. This paper examines labor market dynamics in Mexico in light of the crisis. The labor market has been characterized in recent years by low relative unemployment, but high levels of informal jobs, low-growth, and almost stagnant real wages. In this context, the crisis destroyed a wide number of formal jobs, and even informal, increasing the unemployment rates to pre-crisis levels. Manufacturing was the sector that endured the largest job losses during the crisis and wages decreased for all sectors. The government of Mexico implemented a variety of programs to cope with the crises. However, these measures were too limited to counteract the large negative impact of the crisis on labor markets.
    Keywords: Labor Markets,Labor Policies,Population Policies,Labor Standards,Economic Theory&Research
    Date: 2011–10–01
  5. By: Allan Richards
    Abstract: In pursuit of its policy objective of supporting member countries in promoting the democratization of sub-national governments, the Inter-American Development Bank has commissioned studies on municipal finances in five Latin American and Caribbean countries. This Knowledge Creation Project [KCP] is aimed at small countries with unitary governmental structures that include local authorities responsible for delegated functions. The five countries included in the exercise are Costa Rica, Dominican Republic, El Salvador, Panama, and Trinidad and Tobago, which is the subject of this study.
    Keywords: Economics :: Fiscal Policy, Financial Sector, Gobiernos locales; finanzas municipales; países unitarios
    Date: 2010–10
  6. By: Elena Panaritis; Angelo Kostopoulos
    Abstract: As part of an overarching effort to better identify the problems faced today by low-income people and by those with limited access to basic housing, this paper assesses the property rights system in Guyana and the way it affects the real estate/property/ land market and the overall security of the wealth base of individuals. The assessment is based on the methodology of Reality Check Analysis (RCA). RCA allows for a breakdown and mapping of the variables that have contributed to the current bottlenecks in Guyana and as well as poverty, malaise, and lack of affordable housing. With RCA it is possible to identify the correct questions that lead to the appropriate answers regarding policy recommendations.
    Keywords: Public Sector :: Civil Registration, Public Sector :: Population Statistics & Information Systems, Social Development, Rural & Urban Development, Guyana; Property Rights
    Date: 2010–11
  7. By: Stefan Dercon; John Hoddinott; Tassew Woldehanna
    Abstract: What keeps some people persistently poor, even in the context of relative high growth? In this paper, we explore this question using a 15-year longitudinal data set from Ethiopia. We compare the findings of an empirical growth model with those derived from a model of the determinants of chronic poverty. We ask whether the chronically poor are simply not benefiting in the same way from the same factors that allowed others to escape poverty, or whether there are latent factors that leave them behind? We find that this chronic poverty is associated with several initial characteristics: lack of physical assets, education, and ‘remoteness’ in terms of distance to towns or poor roads. The chronically poor appear to benefit from some of the drivers of growth, such as better roads or extension services in much the same way that the non-chronically poor benefit. However, they appear to have lower growth in this period, related to time-invariant characteristics, and this suggests that they face a considerable growth and standard of living handicap.
    Date: 2011
  8. By: Joshua Blumenstock; Nathan Eagle; Marcel Fafchamps
    Abstract: A large literature describes how local risk sharing networks can help individuals smooth consumption in the face of idiosyncratic economic shocks. However, when an entire community faces a large covariate shock, and when the transaction costs of transfers are high, these risk sharing networks are likely to be less effective. In this paper, we document how a new technology – mobile phones – reduces transaction costs and enables Rwandans to share risk quickly over long distances. We examine a comprehensive database of person-to-person transfers of mobile airtime and find that individuals send this rudimentary form of “mobile money” to friends and family affected by natural disasters. Using the Lake Kivu earthquake of 2008 to identify the effect of a large covariate shock on interpersonal transfers, we estimate that a current-day earthquake would result in the transfer of between $22,000 and $30,000 to individuals living near the epicenter. We further show that the pattern of transfers is most consistent with a model of reciprocal risk sharing, where transfers are determined by past reciprocity and geographical proximity, rather than one of pure charity or altruism, in which transfers would be expected to be increasing in the wealth of the sender and decreasing in the wealth of the recipient.
    Keywords: Risk Sharing; Mobile Phones; Mobile Money; Information and communications technologies; Development; Earthquakes; Rwanda; Africa.
    JEL: O16 O17 O33
    Date: 2011
  9. By: Stefan Dercon
    Abstract: Social protection can play an important role in poverty reduction and making growth inclusive of the poor. At times, it is also argued that social proection can directly contribute to growth and economic efficiency. The paper revisits the evidence on the cost of social protection to reduce poverty, and its contribution to efficiencey and growth. As social protection may overcome market failures in credit and insurance, the paper also considers the role of alternatives, such as micro-credit and micro-insurance. The evidence on social transfers (in cash or in kind, conditional or not) suggests that while they have substantial poverty and euity impacts, their efficiency and growth impact is unlikely to be high-not dissimilar to the limited growth impacts of microcredit. The implication is that the main motivation for the social trabsfers must lie in their equity or poverty impacts. The evidence on contigent transfers, made in response to shocks such as illness, drought or unemployment, as in social insurance, is that their contribution to resolving market failures may be higher, leading to potentially more substantial gains, especially where children are targeted. Given the problems with developing market-based solutions via micro-insurance, there is a strong case for social protection initiatives in this area from an efficiency point of view, to complemnet contributions-based social insurance and micro-insurance inititaives. Conditions in conditional cash transfers can also be used to enhance efficiencey gains, for example if conditions target activities or investments with clear soical externalities. the paper ends with three areas where tyhere could be potentiall high growth impacts: social protecion focusing on children, especially before the age of five; social protection meausres to make migration smoother and cities more attractive places to live for low skilled workers, possibly via urban workforce schemes focusing on urban community asset building; and social protection targeted at adolescents and young adults, including transfers conditional on training focused on urban labour market transitions. in all these cases standard cash transfers may be too blunt to have high impacts, suggesting the need for more context-specific 'smarter' social protection schemes.
    Date: 2011
  10. By: Nicita, Alessandro; Olarreaga, Marcelo; Porto, Guido
    Abstract: The objective of this paper is to estimate the potential pro-poor bias in the existing structure of protection in six countries in Sub-Saharan Africa (SSA) (i.e., whether it redistributes income from rich to poor households). We also explore the extent to which the barriers faced by SSA exporters to the rest of the world are biased in favor of poor or rich households. To this end, we start with a simple agricultural household production model and propose an extension to include adjustments in labor income associated with changes in unskilled and skilled wages. We then build indicators that capture the differences in welfare changes across income levels associated with the elimination of SSA's own trade protection, as well as trade protection on SSA's export bundle by the rest of the world. Results suggest that SSA's own trade policy is biased in favor of poor households. In contrast, the trade policies of SSA's trading partners tend to be biased in favor of SSA's rich households, especially when ad-valorem equivalents of non tariff measures (NTMs) are taken into account.
    Keywords: Poverty; Sub-Saharan Africa; Trade policy; Wage elasticities
    JEL: F13 F16
    Date: 2011–10
  11. By: Gabriela López Noria
    Abstract: Taking advantage of the liberalization process under NAFTA, this paper assesses the relative importance of the degree of trade openness and Foreign Direct Investment (FDI) in explaining inter-industry wage differentials for the case of Mexico. Using INEGI's National Survey of Urban Employment for the period 1994-2004, the empirical analysis is conducted on two stages. In the first stage, individual wages are regressed on worker characteristics, job and firm attributes, informality and a set of industry indicators. In the second stage, inter-industry wage differentials (derived from the coefficient estimates of the industry indicators) are regressed on trade and FDI variables. The main findings show that trade openness does not have a robust and statistically significant effect on inter-industry wage differentials, whereas for the case of FDI, a positive nonlinear relationship is found to exist.
    Keywords: Wage Inequality, Trade Liberalization, Foreign Direct Investment, NAFTA.
    JEL: F16 G31 J23 M52
    Date: 2011–10
  12. By: Simplice A., Asongu
    Abstract: This paper assesses how legal-origin influences financial development through regulation quality and the rule of law. It uses data collected after pioneering works on the law-finance nexus to assess hypotheses resulting there-from in the context of Africa. Distinctions are made between English, French, French sub-Saharan, Portuguese and North African countries in how their legal origins affect financial intermediary dynamics of depth, efficiency, size and activity. In terms of policy implications results support the benefits of law channels to financial development in the continent.
    Keywords: Law; finance; banks; Africa
    JEL: O1 K2 G2 P5 K4
    Date: 2011–09–28
  13. By: Simplice A., Asongu
    Abstract: This paper cuts adrift the mainstream approach to the legal-origins debate on the law-growth nexus by integrating both overall economic and human components in our understanding of how regulation quality and the rule of law lie at the heart of economic and inequality adjusted human developments. Findings summarily reveal that legal-origin does not explain economic growth and human development beyond the mechanisms of law channels. As a policy implication results support benefits of the rule of law and quality of regulation as channels to economic growth and human development.
    Keywords: Law; economic growth; human development; developing countries
    JEL: O1 K2 P5 I0 K4
    Date: 2011–10–03
  14. By: Ranathunga, Seetha P.B.
    Abstract: This study examines the Micro-level factors associated with household poverty in Sri Lanka using latest Household Income and Expenditure Surveys (HIES) data in 2006/07 employing OLS, quintile and probit regressions. The results of the probit regression indicate that, the major determinants of household poverty in Sri Lanka are human capital related factors which can be link to the labour market and remittances. Further, qunatile regression shows that education and foreign remittances have significant positive effect on standard of living in Sri Lanka regardless the sector.
    Keywords: Keywords: Poverty determinants; Sri Lanka; Regression Analysis
    JEL: I32
    Date: 2010–08–20
  15. By: Tadesse, Tasew
    Abstract: Abstract The study has examined the impact of foreign aid on investment and economic growth in Ethiopia over the period 1970 to 2009 using multivariate cointegration analysis. The empirical result from the investment equation shows that aid has a significant positive impact on investment in the long run. On the other hand, volatility of aid by creating uncertainty in the flow of aid has a negative influence on domestic capital formation activity. Foreign aid is effective in enhancing growth. However, the aid-policy interaction term has produced a significant negative effect on growth implying that bad policies can constrain aid effectiveness. The growth equation further revealed that rainfall variability has a significant negative impact on economic growth as the economy. This study indicated also that the country has no problem of capacity constraint as to the flow of foreign aid.
    Keywords: foreign aid; policy; economic growth; cointegration; VECM; Ethiopia
    JEL: F35 C22 F43
    Date: 2011–07–02
  16. By: Joshua Aizenman; Yothin Jinjarak; Donghyun Park
    Abstract: We investigate the relationship between economic growth and lagged international capital flows, disaggregated into FDI, portfolio investment, equity investment, and short-term debt. We follow about 100 countries during 1990-2010 when emerging markets became more integrated into the international financial system. We look at the relationship both before and after the global crisis. Our study reveals a complex and mixed picture. The relationship between growth and lagged capital flows depends on the type of flows, economic structure, and global growth patterns. We find a large and robust relationship between FDI – both inflows and outflows – and growth. The relationship between growth and equity flows is smaller and less stable. Finally, the relationship between growth and short-term debt is nil before the crisis, and negative during the crisis.
    JEL: F21 F32 F43
    Date: 2011–10

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