nep-dev New Economics Papers
on Development
Issue of 2011‒11‒14
thirty papers chosen by
Mark Lee
Towson University

  1. Beyond Cash: Assessing Externality and Behaviour Effects of Non-Experimental Cash Transfers By Rafael Perez Ribas; Fabio Veras Soares; Clarissa Teixeira; Elydia Silva; Guilherme Hirata
  2. Capital-Labor Substitution, Structural Change and Growth By Francisco Alvarez-Cuadrado; Ngo Van Long
  3. What has really happened to poverty and inequality during the growth process in developing countries? By Nomaan Majid
  4. The impact of the financial and economic crisis on ten African economies and labour markets in 2008-2010 : findings from the ILO/World Bank policy inventory By Catherine Saget; Jean-François Yao
  5. Employment trends in Indonesia over 1996-2009: Casualization of the labour market during an era of crises, reforms and recovery By Makiko Matsumoto; Sher Verick
  6. Informality in Mexico By Nicola Brandt
  7. Race, poverty, and deprivation in South Africa By Carlos Gradín
  8. Is there a motherhood penalty? Decomposing the family wage gap in Colombia By Luis Fernando Gamboa; Blanca Zuluaga
  9. Exchange Rate Pass-Through to Prices: Evidence from Mexico By Carlos Capistrán; Raúl Ibarra-Ramírez; Manuel Ramos Francia
  10. Estimating the long-term impacts of rural roads : a dynamic panel approach By Khandker, Shahidur R.; Koolwal, Gayatri B.
  11. Do crises catalyze creative destruction ? firm-level evidence from Indonesia By Hallward-Driemeier, Mary; Rijkers, Bob
  12. What drives the global"land rush"? By Arezki, Rabah; Deininger, Klaus; Selod, Harris
  13. The measurement of educational inequality : achievement and opportunity By Ferreira, Francisco H. G.; Gignoux, Jeremie
  14. The impact of climate change on global tropical storm damages By Mendelsohn, Robert; Emanuel, Kerry; Chonabayashi, Shun
  15. Should cash transfers be confined to the poor ? implications for poverty and inequality in Latin America By Acosta, Pablo; Leite, Phillipe; Rigolini, Jamele
  16. Export growth and diversification : the case of Peru By Illescas, Javier; Jaramillo, C. Felipe
  17. Can social safety nets alleviate seasonal deprivation ? evidence from northwest Bangladesh By Khandker, Shahidur R.; Khaleque, M. Abdul; Samad, Hussain A.
  18. Is informality welfare-enhancing structural transformation ? evidence from Uganda By Fox, Louise; Pimhidzai, Obert
  19. Wage rigidity and disinflation in emerging countries By Messina, Julian; Sanz-de-Galdeano, Anna
  20. The Interaction between Culture and Economy in Vietnam By Uwe Blien
  21. The Ambiguous Outcome of NGOs’ Activism in Developing Countries By Michela Limardi
  22. Urban-rural interaction and implications for regional planning in China, 1980-2010 By Yuheng Li
  23. The Impossible Trinity and Capital Flows in East Asia By Grenville, Stephen
  24. Resource Windfalls, Political Regimes, and Political Stability By Francesco Caselli; Andrea Tesei
  25. Do Giant Oilfield Discoveries Fuel Internal Armed Conflicts? By Yu-Hsiang Lei; Guy Michaels
  26. The financial trilemma in China and a comparative analysis with India By Aizenman, Joshua; Sengupta, Rajeswari
  27. Home-bias Politics, Financial Deregulation and Economic Growth: A Causal Relationship By He, Qichun
  28. Capital Income and Income Inequality: Evidence from Urban China By Chi, Wei
  29. Ownership Characteristics, Real Exchange Rate Movements and Labor Market Adjustment in China By Risheng Mao; John Whalley
  30. Socioeconomic Differences in the Impact of Smoking Tobacco and Alcohol Prices on Smoking in India By G. Emmanuel Guindon; Arindam Nandi; Frank J. Chaloupka, IV; Prabhat Jha

  1. By: Rafael Perez Ribas; Fabio Veras Soares; Clarissa Teixeira; Elydia Silva; Guilherme Hirata
    Abstract: In this paper we propose a method to estimate externality effects in cash transfer programmes, even in cases when the benefit is not randomly assigned. Externality is assessed through the decomposition of the average treatment effect on the treated (ATT) into participation (direct) effect and externality (indirect) effect. We also suggest a nonparametric decomposition to investigate whether changes in household outcomes are caused by the income transfer itself or by the other non-monetary components of the programme, such as conditionalities and family support services. We apply all these decompositions on the effect of a conditional cash transfer (CCT) programme on household consumption and savings in Paraguay. This was possible because of the presence of two distinct comparison groups, one within the village and potentially exposed to the externality, and another in a different village not affected by the programme. Furthermore, the evaluation survey collected information on both income and consumption. The results indicate that the programme has a small impact on consumption and a considerable impact on savings. In the absence of externality, however, the programme would have a higher effect on consumption, mostly associated with the cash transfer, and a lower effect on savings. Moreover, the impact on the pattern of consumption is significantly related to a substitution effect and is not related to the increase in income.
    Keywords: Externality, Income effect, Behaviour effect, Conditional cash transfer
    JEL: C21 D12 D62 I38
    Date: 2011
  2. By: Francisco Alvarez-Cuadrado; Ngo Van Long
    Abstract: There is a growing interest in multi-sector models that combine aggregate balanced growth, consistent with the well-known Kaldor facts, with systematic changes in the relative importance of each sector, consistent with the Kuznets facts. Although variations in the income elasticity of demand across goods played an important role in the initial attempts, recent models stress the role of supply-side factors in this process of structural change. Along these lines, Ngai and Pissarides (American Economic Review, 2008) focus in differential productivity growth across sectors while Acemoglu and Guerrieri (Journal of Political Economy, 2008) stress differences in factor proportions and capital deepening. We explore a general framework that encompasses, as special cases, these two supply-side mechanisms. Our model uncovers an additional driving force for structural change based on differences in the degree of capital-labor substitutability. When the flexibility to combine capital and labor varies across intermediate goods and the final sector is Cobb-Douglas, as the economy grows the fraction of capital (labor) allocated to the sector with high elasticity of substitution increases (decreases). We provide some casual evidence consistent with this new mechanism. <P>There is a growing interest in multi-sector models that combine aggregate balanced growth, consistent with the well-known Kaldor facts, with systematic changes in the relative importance of each sector, consistent with the Kuznets facts. Although variations in the income elasticity of demand across goods played an important role in the initial attempts, recent models stress the role of supply-side factors in this process of structural change. Along these lines, Ngai and Pissarides (American Economic Review, 2008) focus in differential productivity growth across sectors while Acemoglu and Guerrieri (Journal of Political Economy, 2008) stress differences in factor proportions and capital deepening. We explore a general framework that encompasses, as special cases, these two supply-side mechanisms. Our model uncovers an additional driving force for structural change based on differences in the degree of capital-labor substitutability. When the flexibility to combine capital and labor varies across intermediate goods and the final sector is Cobb-Douglas, as the economy grows the fraction of capital (labor) allocated to the sector with high elasticity of substitution increases (decreases). We provide some casual evidence consistent with this new mechanism.
    Keywords: Capital-labor substitution, balanced growth, structural change, Capital-labor substitution, balanced growth, structural change
    JEL: O40 O30
    Date: 2011–11–01
  3. By: Nomaan Majid (International Labour Office, Economic and Labour Market Analysis Department)
    Keywords: poverty / income distribution / poverty alleviation /economic growth / globalization / developing countries
    Date: 2011
  4. By: Catherine Saget (International Labour Office, Economic and Labour Market Analysis Department); Jean-François Yao
    Abstract: The main contribution of this document is to analyse the financial and economic crisis impact on economies and labour markets, and a range of policy responses in 10 African countries, namely Benin, Burkina Faso, Cameroon, Egypt, Ghana, Kenya, Mali, Mozambique, Nigeria, and Tanzania. This document compares policy measures implemented in 2008-2009 in these ten economies using data from the ILO/WB inventory of policy responses to the financial and economic crisis. It looks at fiscal policy responses using data on direct beneficiaries and costs reported in this inventory. These measures included oil and food subsidies to answer the rise in commodity prices up to May 2008. The packages also included new measures to support agriculture and exports, to build and maintain infrastructure, and to create jobs for youth, as well as, in four cases, an increase in public wages.
    Keywords: economic development / employment / unemployment / economic indicator / economic recession / economic implication / social implication / trend / Benin / Burkina Faso / Cameroon / Egypt / Ghana / Kenya / Mali / Mozambique / Nigeria / Tanzania
    Date: 2011
  5. By: Makiko Matsumoto (International Labour Office, Country Employment Policy Unit); Sher Verick (International Labour Office, Employment Analysis and Research Unit)
    Abstract: The East Asian financial crisis of 1997-1998 hit Indonesia hard, resulting in a winding back of the substantial economic and social gains made during the previous two decades. However, that crisis did not result in a large fall in employment and a commensurate rise in unemployment; rather, the economic contraction of over 13 per cent was accompanied by considerable transitions within employment,namely, from formal sector to informal and agricultural employment, particularly among women. The years following were characterized by slow growth and weak formal job creation, which has often been attributed to such factors as rigid labour regulations, especially the enactment of the Manpower Law in 2003. The economic and labour market situation in Indonesia only began to consistently improve over the last five years, notably during the boom years leading up to the global financial crisis. During this period, unemployment fell from its 2005 peak and employment increased. When the global financial crisis spread in late 2008 to emerging economies like Indonesia, it was expected that these countries would be severely affected. However, in contrast to the East Asian financial crisis, Indonesia proved to be rather resilient despite the fact that exports collapsed by almost 18 per cent from 2008 to 2009. This paper presents estimates that confirm the milder labour market impact of the most recent crisis. At the same time, the move towards more flexible and less protected forms of employment, as reflected by the increase in casualization, notably among the less-skilled, appear to be part of longer term trends. In this respect, labour market regulations, notably the Manpower Law of 2003, may have contributed to this trend, but the Law alone is not the main problem for employers in Indonesia. Overall, despite the apparent resilience to the global financial crisis, Indonesia continues to face a number of substantial challenges at both the macroeconomic and labour market level.
    Keywords: employment / unemployment / labour force participation / employment status / economic recession / economic recovery / trend / Indonesia
    Date: 2011
  6. By: Nicola Brandt
    Abstract: Mexico has a relatively large informal sector by OECD standards. While this is in part a symptom of limited development and low productivity, it can also be to some extent its cause, as informal firms stay small to hide their activities and have limited access to productivity-enhancing government services, such a protection of property rights and training. A long-term and broad-based strategy with education at its core is needed for Mexico to reach its productivity potential and fight informality. Lowering the costs of formality, while enhancing its benefits and increasing the cost of non-compliance with labour and tax laws, will be an important part of this strategy. This would include more flexible labour laws, a further reduction in the business regulatory burden and a rethink of the social security package to enhance its attractiveness for low-wage workers and limit costs by making service provision more efficient. This Working Paper related to the 2011 OECD Economic Survey of Mexico. (<P>L'économie informelle au Mexique<BR>Le secteur informel est relativement ample au Mexique par rapport à la situation observée généralement dans les pays de l’OCDE. Cette situation est en partie le symptôme d'un développement limité et d'une faible productivité, mais elle peut aussi dans une certaine mesure en être la cause, étant donné que les entreprises informelles restent petites pour dissimuler leurs activités et ne disposent que d'un accès limité aux services rendus par les administrations publiques qui sont sources de gains de productivité, tels que la protection des droits de propriété et la formation. Une stratégie globale à long terme, centrée sur l'éducation, est nécessaire pour que le Mexique puisse concrétiser son potentiel en matière de productivité et lutter contre l'économie informelle. Réduire les coûts de l'appartenance au secteur formel de l'économie, tout en renforçant les avantages qui en découlent et les coûts du non-respect du droit du travail et de la législation fiscale, constituera une composante importante de cette stratégie. Pour y parvenir, il faudra assouplir le droit du travail, alléger encore les obligations réglementaires des entreprises et repenser le système de sécurité sociale afin de le rendre plus attractif pour les travailleurs faiblement rémunérés et limiter les coûts, en améliorant l'efficience des prestations de services. Ce Document de travail se rapporte à l’Étude économique de l’OCDE du Mexique 2011 (
    Keywords: labour markets, social security, informality, marché du travail, sécurité sociale, économie informelle
    JEL: H55 J23 J32
    Date: 2011–10–17
  7. By: Carlos Gradín (Universidade de Vigo)
    Abstract: The aim of this paper is to explain why poverty and material deprivation in South Africa are significantly higher among those of African descent than among whites. To do so, we estimate the conditional levels of poverty and deprivation Africans would experience had they the same characteristics as whites. By comparing the actual and counterfactual distributions, we show that the racial gap in poverty and deprivation can be attributed to the cumulative disadvantaged characteristics of Africans, such as their current level of educational attainment, demographic structure, and area of residence, as well as to the inertia of past racial inequalities. Progress made in the educational and labor market outcomes of Africans after Apartheid explains the reduction in the racial poverty differential.
    Keywords: poverty, deprivation, race, decomposition, South Africa, households’ characteristics.
    JEL: D31 D63 I32 J15 J71 J82 O15
    Date: 2011
  8. By: Luis Fernando Gamboa (Universidad del Rosario, Bogotá, Colombia); Blanca Zuluaga (Universidad Icesi, Cali, Colombia)
    Abstract: The aim of this paper is to provide an estimation and decomposition of the motherhood wage penalty in Colombia. Our empirical strategy is based on the matching procedure designed by Ñopo (2008) for the case of gender wage gaps. This is an alternative procedure to the well-known Blinder-Oaxaca decomposition method. The cross-section data of the Colombian Living Standard Survey allows us to decompose the wage gap in four components, according to the characteristics of mothers and non-mothers. We found that mothers earn, in average, 1:73% less than their counterparts without children and that this gap slightly decreases as the group includes older women. Taking into account that this procedure is sensitive to the set of variables included in the matching, several specifications are tested. The main result of the paper is obtained when considering schooling as a matching variable. Once schooling is included, the unexplained part of the gap considerably decreases and turns non significant. Thus, we do not find evidence of wage discrimination against mothers in Colombia.
    Keywords: Family wage gap; childbearing costs; female wages.
    JEL: J31 J16
    Date: 2011
  9. By: Carlos Capistrán; Raúl Ibarra-Ramírez; Manuel Ramos Francia
    Abstract: This paper analyzes the pass-through of exchange rate to different price indexes in Mexico. The analysis is based on a vector autoregressive model (VAR) using monthly data from January 1997 to December 2010. The pass-through effects are calculated by means of accumulated impulse response functions to a recursively identified exchange rate shock. The results show that the exchange rate pass-through to import prices is complete, but it declines along the distribution chain in such a way that the impact on consumer prices is below 20 percent. Moreover, we find that the exchange rate pass-through seems to have decreased substantially from 2001 onwards, which coincides with the adoption of an inflation targeting regime by Banco de Mexico.
    Keywords: Exchange rate pass-through, import price, consumer price, distribution chain, inflation.
    JEL: E31 F31 F41
    Date: 2011–11
  10. By: Khandker, Shahidur R.; Koolwal, Gayatri B.
    Abstract: Infrastructure investments are typically long-term. As a result, observed benefits to households and communities may vary considerably over time as short-term outcomes generate or are subsumed by longer-term impacts. This paper uses a new round of household survey as part of a local government engineering department's rural road improvement project financed by the World Bank in Bangladesh to compare the short-term and long-term effects of rural roads over eight years. A dynamic panel model, estimated by generalized method of moments, is applied to estimate the varying returns to public road investment accounting for time-varying unobserved characteristics. The results show that the substantial effects of roads on such outcomes as per capita expenditure, schooling, and prices as observed in the short run attenuate over time. But the declining returns are not common for all outcomes of interest or all households. Employment in the rural non-farm sector, for example, has risen more rapidly over time, indicating increasing returns to investment. The very poor have failed to sustain the short-term benefits of roads, and yet the gains accrued to the middle-income groups are strengthened over time because of changing sectors of employment, away from agriculture toward non-farm activity. The results also show that initial state dependence -- or initial community and household characteristics as well as road quality -- matters in estimating the trajectory of road impacts.
    Keywords: Transport Economics Policy&Planning,Housing&Human Habitats,Economic Theory&Research,Rural Poverty Reduction,Rural Roads&Transport
    Date: 2011–10–01
  11. By: Hallward-Driemeier, Mary; Rijkers, Bob
    Abstract: Using Indonesian manufacturing census data (1991-2001), this paper rejects the hypothesis that the East Asian crisis unequivocally improved the reallocative process. The correlation between productivity and employment growth did not strengthen and the crisis induced the exit of relatively productive firms. The attenuation of the relationship between productivity and survival was stronger in provinces with comparatively lower reductions in minimum wages, but not due to reduced entry, changing loan conditions, or firms connected to the Suharto regime suffering disproportionately. On the bright side, firms that entered during the crisis were relatively more productive, which helped mitigate the reduction in aggregate productivity.
    Keywords: Labor Policies,Labor Markets,Banks&Banking Reform,Economic Theory&Research,Microfinance
    Date: 2011–11–01
  12. By: Arezki, Rabah; Deininger, Klaus; Selod, Harris
    Abstract: The 2007-2008 upsurge in agricultural commodity prices gave rise to widespread concern about investors causing a"global land rush". Large land deals can provide opportunities for better access to capital, transfer of technology, and advances in productivity and employment generation. But they carry risks of dispossession and loss of livelihoods, corruption, deterioration in local food security, environmental damage, and long-term social polarization that led some countries to recently pass legislation restricting foreign land acquisition. To stimulate evidence-based debate, this paper explores determinants of foreign land acquisition for large-scale agriculture. It quantifies demand for land deals, showing it focused on Africa where land expansion is about 20 times the level it was in the past. The analysis uses data on bilateral investment relationships, together with newly constructed indicators of agro-ecological suitability in non-protected and forested areas with low population density as well as land rights security. It estimates gravity models that can help identify determinants of foreign land acquisition dedicated to large-scale agriculture. The results confirm the central role of agro-ecological potential as a pull factor. In contrast to the literature on foreign investment in general, the quality of the business climate is insignificant, whereas weak land governance and tenure security for current users make countries more attractive for investors. Implications for policy are discussed.
    Keywords: Banks&Banking Reform,Emerging Markets,Debt Markets,Rural Land Policies for Poverty Reduction,Forestry
    Date: 2011–10–01
  13. By: Ferreira, Francisco H. G.; Gignoux, Jeremie
    Abstract: This paper proposes two related measures of educational inequality: one for educational achievement and another for educational opportunity. The former is the simple variance (or standard deviation) of test scores. Its selection is informed by consideration of two measurement issues that have typically been overlooked in the literature: the implications of the standardization of test scores for inequality indices, and the possible sample selection biases arising from the Program of International Student Assessment (PISA) sampling frame. The measure of inequality of educational opportunity is given by the share of the variance in test scores that is explained by pre-determined circumstances. Both measures are computed for the 57 countries in which PISA surveys were conducted in 2006. Inequality of opportunity accounts for up to 35 percent of all disparities in educational achievement. It is greater in (most of) continental Europe and Latin America than in Asia, Scandinavia, and North America. It is uncorrelated with average educational achievement and only weakly negatively correlated with per capita gross domestic product. It correlates negatively with the share of spending in primary schooling, and positively with tracking in secondary schools.
    Keywords: Teaching and Learning,Secondary Education,Education For All,Poverty Impact Evaluation,Tertiary Education
    Date: 2011–11–01
  14. By: Mendelsohn, Robert; Emanuel, Kerry; Chonabayashi, Shun
    Abstract: This paper constructs an integrated assessment model of tropical cyclones in order to quantify the impact that climate change may have on tropical cyclone damages in countries around the world. The paper relies on a tropical cyclone generator in each ocean and several climate models to predict tropical cyclones with and without climate change. A damage model is constructed to compute the resulting damage when a cyclone strikes each country. Economic development is expected to double global tropical cyclone damages because more will be in harm's way. Climate change is expected to double global damage again, causing an additional $54 billion of damage per year. The damage is projected to be concentrated in North America and eastern Asia but many Caribbean islands will suffer the highest damages per unit of GDP. Most of the increased damage will be caused by rare but very powerful storms.
    Keywords: Climate Change Economics,Climate Change Mitigation and Green House Gases,Hazard Risk Management,Science of Climate Change,Global Environment Facility
    Date: 2011–02–01
  15. By: Acosta, Pablo; Leite, Phillipe; Rigolini, Jamele
    Abstract: This paper compares for 13 Latin American countries the poverty and inequality impacts of cash transfer programs that are given to all children and the elderly (that is,"categorical"transfers), to programs of equal budget that are confined to the poor within each population group (that is,"poverty targeted"transfers). The analysis finds that both the incidence of poverty and the depth of the poverty gap are important factors affecting the relative effectiveness of categorical versus poverty targeted transfers. The comparison of transfers to children and the elderly also supports the view that choosing carefully categories of beneficiaries is almost as important as targeting the poor for achieving a high poverty and inequality impact. Overall, the findings suggest that although in the Latin American context poverty targeting tends to deliver higher poverty impacts, there are circumstances under which categorical targeting confined to geographical regions (sometimes called"geographic targeting") may be a valid option to consider. This is particularly the case in low-income countries with widespread pockets of poverty.
    Keywords: Rural Poverty Reduction,Services&Transfers to Poor,Regional Economic Development,Poverty Monitoring&Analysis
    Date: 2011–11–01
  16. By: Illescas, Javier; Jaramillo, C. Felipe
    Abstract: The rapid growth of exports since the early 1990s is a central feature in the extraordinary rise of Peru's economy in recent years. This study puts a lens on this export growth episode, with special attention to two issues. The first one is the role of international price levels as well as export volumes in explaining this growth. The second one is whether Peru has seen a diversification of its exports during this growth episode. The empirical analysis finds that although the increase in international mineral prices has exerted a significant impact in recent years, much of the growth of Peru's export revenues has also been related to an increase in volumes. This finding applies to traditional and non- traditional exports, although the importance of volumes is more predominant for the latter. The analysis does not reveal a trend toward greater diversification of Peru's exports since 1993. On the contrary, some of the evidence suggests that the rises in price and volumes in the mining components could be leading to greater concentration. Nonetheless, there is a clear trend toward diversification among non-traditional exports due to the significant emergence of new export products in recent years.
    Keywords: Economic Theory&Research,Achieving Shared Growth,Agribusiness&Markets,Markets and Market Access,Tax Law
    Date: 2011–11–01
  17. By: Khandker, Shahidur R.; Khaleque, M. Abdul; Samad, Hussain A.
    Abstract: This paper examines the role of social safety-net programs in Bangladesh run by the government and nongovernmental organizations to mitigate seasonal deprivation in the country's highly vulnerable northwest region. Specifically, the paper explores whether social safety nets are limited to averting seasonal deprivation or can also address seasonality of income and employment more generally. Using a recent survey from the greater Rangpur (northwest) region, the paper finds that social safety nets have a positive effect on mitigating both seasonal and non-seasonal food deprivation. The results are robust, owing to the recent expanded coverage of social safety-net programs run by nongovernmental organizations active in the region. But given the annual recurrence of monga (seasonal food insecurity) in the northwest region owing to agricultural seasonality and an overwhelming dependence on agriculture for livelihoods, social safety nets are not a reliable tool for monga eradication. Programs are also needed to promote the income and productivity of the poor through diversification of income and employment.
    Keywords: Safety Nets and Transfers,Rural Poverty Reduction,Food&Beverage Industry,Regional Economic Development,Housing&Human Habitats
    Date: 2011–10–01
  18. By: Fox, Louise; Pimhidzai, Obert
    Abstract: While Africa's recent decade of growth and poverty reduction performance has been lauded, concern has been expressed regarding the structure of this growth. In particular, questions have been raised about whether the growth is based on a commodities boom, or whether it is the beginning of a structural transformation that will lift workers from low-productivity jobs into higher-productivity ones. Macro evidence has suggested that the structural transformation has not started. But macro analysis misses the evidence that the process of transformation has started, because this process begins at the household level. Household livelihoods do not move from ones based on subsistence farming and household level economic activities into livelihoods based on individual wage and salary employment away from the household in one leap -- this process takes generations. The intermediate step is the productive informal sector. It is income gains at the household level in this sector that fuel productivity increases, savings, and investment in human capital in this sector. Ensuring that most households are able to diversify their livelihoods into the non-farm sector through productive informality not only increases growth, but also allows the majority of the population to share in the growth process. This paper illustrates this point with the case of Uganda which followed this path and experienced two decades of sustained growth and poverty reduction.
    Keywords: Rural Poverty Reduction,Achieving Shared Growth,Labor Policies,Regional Economic Development,Economic Theory&Research
    Date: 2011–10–01
  19. By: Messina, Julian; Sanz-de-Galdeano, Anna
    Abstract: This paper examines the consequences of rapid disinflation for downward wage rigidities in two emerging countries, Brazil and Uruguay, relying on high quality matched employer-employee administrative data. Downward nominal wage rigidities are more important in Uruguay, while wage indexation is dominant in Brazil. Two regime changes are observed during the sample period, 1995-2004: (i) in Uruguay wage indexation declines, while workers'resistance to nominal wage cuts becomes more pronounced; and (ii) in Brazil, the introduction of inflation targeting by the Central Bank in 1999 shifts the focal point of wage negotiations from changes in the minimum wage to expected inflation. These regime changes cast doubts on the notion that wage rigidity is structural in the sense of Lucas (1976).
    Keywords: Labor Markets,Income,Economic Theory&Research,Environmental Economics&Policies,Labor Policies
    Date: 2011–10–01
  20. By: Uwe Blien
    Abstract: Historically, the Vietnamese state developed in an area along the Red River and within its delta. The need to protect the inhabitants of this land from dangerous floods gave rise to a “hydraulic societyâ€, which was accompanied by a specific culture. One of the features of this culture is an emphasis on formal education, which was “inherited†from a past in which the passing of an examination was a precondition for acquiring a high position in the state. Today, the Vietnamese culture is a supporting factor in the current development process in Vietnam. Rigorous reform steps carried out since 1986 have transformed the Vietnamese socialist economy, which mainly followed the Soviet blueprint, into a market driven economy which is governed by strong private incentives. The culture predominant in this country on the one hand supports the functioning of the new capitalist system, and on the other hand compensates for many of its weaknesses. As a consequence a development process has been generated which has led to high rates of economic growth. However, it is not without systemic risks.
    Date: 2011–09
  21. By: Michela Limardi
    Abstract: Many Developing Countries ratified ILO Fundamental Conventions and authorized local labour unions. Multinational companies producing in these countries pay more when NGOs campaigns take place and reputation counts. However, whether this external pressure from NGOs benefit local workers outside MNEs affiliates in host countries remains an open issue. Segmented and weak local labour unions often rely on external funding from the North and technical assistance by labour NGOs. They need to increase their visibility in the labour intensive sectors targeted by Northern donations and activism. To address these issues we develop a bargaining model adapted to peculiarities of labour market institutions in developing countries, i.e. external funding and the complementarity with labour NGOs. This model is estimated on data on Indonesian manufacturing firms, before and after the authorisation of labour unions, in sensitive and non sensitive sectors. We find that, in sector with visibility for labour unions, the net outcome on wages of the presence of NGOs is negative. The external fundings imply a distortion in the objective of labour unions, confronted with the constraint of increasing the employment in the formal sector.
    Date: 2011–09
  22. By: Yuheng Li
    Abstract: Urban-rural interaction in China has evolved a lot due to the economic growth and policy influences in the post-reform era since 1978. This evolution has exerted influences on the urban and rural areas in various aspects of demography, economy and environment. At present, China is on a track of fast economic growth and urbanization development which will definitely shape urban and rural areas at the same time. How will urban-rural interaction in China develop in the future? What are the implications for regional planning? The paper historically reviews and quantitatively assesses urban-rural interaction in China. It finds that urban-rural interaction has increased continuously in the post-reform era. The assessment of this interaction bears some resemblances to the historical evolution. The findings also reveal that the change of urban-rural interaction at the provincial level presents much regional difference in the period of 1980-2010. Besides, regional agglomeration of provinces of same level of urban-rural interaction has also emerged in China. The paper concludes through emphasizing the increase of urban-rural interaction in inland areas so as to decrease the regional inequality in China.
    Date: 2011–09
  23. By: Grenville, Stephen (Asian Development Bank Institute)
    Abstract: While the initial certainty and stark simplicity of the Impossible Trinity have fuzzed and softened over time, this idea still holds a powerful sway over analysis of exchange rates and in the policy debate on capital flows. Yet the practical evidence suggests that the constraints on policy implicit in this doctrine are greatly exaggerated. This disconnect between the analysis and the practical world seems a major limitation on developing suitable policies for addressing the very real problems which large volatile capital flows are causing emerging countries. The Impossible Trinity argument has been an unhelpful element in developing an effective policy framework to address these foreign capital inflows.
    Keywords: impossible trinity; exchange rates; capital flows; emerging economies
    JEL: F21 F31 F32
    Date: 2011–11–06
  24. By: Francesco Caselli; Andrea Tesei
    Abstract: We study theoretically and empirically whether natural resource windfalls affect political regimes. We document the following regularities. Natural resource windfalls have no effect on the political system when they occur in democracies. However, windfalls have significant political consequences in autocracies. In particular, when an autocratic country receives a positive shock to its flow of resource rents it responds by becoming even more autocratic. Furthermore, there is heterogeneity in the response of autocracies. In deeply entrenched autocracies the effect of windfalls on politics is virtually nil, while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system. To frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability by deciding how much to spend on vote-buying, bullying, or outright repression. Potential challengers decide whether or not to try to unseat the incumbent and replace him. The model uncovers a reason for the asymmetric impact of resource windfalls on democracies and autocracies, as well as the differential impact within autocratic regimes.
    Keywords: natural resources, elections, political accountability
    JEL: D72 D78 Q33
    Date: 2011–11
  25. By: Yu-Hsiang Lei; Guy Michaels
    Abstract: We use new data to examine the effects of giant oilfield discoveries around the world since 1946. On average, these discoveries increase per capita oil production and oil exports by up to 50 percent. But these giant oilfield discoveries also have a dark side: they increase the incidence of internal armed conflict by about 5-8 percentage points. This increased incidence of conflict due to giant oilfield discoveries is especially high for countries that had already experienced armed conflicts or coups in the decade prior to discovery.
    Keywords: Natural resources, resource curse, petroleum, armed conflict, civil war
    JEL: Q34 Q33 O13
    Date: 2011–11
  26. By: Aizenman, Joshua; Sengupta, Rajeswari
    Abstract: A key challenge facing most emerging market economies today is how to simultaneously maintain monetary independence, exchange rate stability and financial integration subject to the constraints imposed by the Trilemma, in the era of deepening globalization. In this paper we study the Trilemma choices of the two key drivers of global growth, China and India. We overview and contrast the policy choices of the two, and test their Trilemma choices and tradeoffs. China’s Trilemma configurations are unique relative to the one characterizing other emerging markets in the predominance of exchange rate stability, and in the failure of the Trilemma regression to capture any significant role for financial integration. One possible interpretation is that the segmentation of the domestic capital market in China, its array of capital controls and the large hoarding of international reserves imply that the “policy interest rate” does not reflect the stance of monetary policy. In contrast, the Trilemma configurations of India are in line with the regression results of other emerging countries, and are consistent with the predictions of the Trilemma tradeoffs. India like other emerging economies has overtime converged towards a middle ground between the three policy objectives, and has achieved comparable levels of exchange rate stability and financial integration buffered by sizeable international reserves.
    Keywords: Financial trilemma; International reserves; Foreign exchange intervention; Monetary policy; Capital account openness
    JEL: E58 F3 E52 F41
    Date: 2011–11–01
  27. By: He, Qichun
    Abstract: We re-examine the finance-growth nexus using the Chinese financial deregulation experience during the reform period 1981-1998. We use lagged home-bias political variables as instruments for financial deregulation. Dealing with weak instruments by LIML (limited-information maximum likelihood) estimation, we find that financial deregulation has a significant causal effect on economic growth. The result holds up when we control for conditional convergence, other growth determinants, and time and province effects.
    Keywords: Financial Deregulation; Home-bias Politics; Causality; Growth
    JEL: O21 G20
    Date: 2011–10–15
  28. By: Chi, Wei
    Abstract: Using urban household survey data collected by National Bureau of Statistics of China from 1988-2009, this study examines the distribution, composition, and changes of capital income and its contribution to income inequality. The data shows that capital income has increased considerably in past 20 years in urban China. Although the average value of capital income is still relatively low, the dispersion of capital income is significant, and for high-income earners capital income is substantial. Compared to other forms of income, capital income is distributed the most unequally, and its contribution to total income inequality has been growing. This study also examines capital income in China’s western, central, and eastern regions separately, and finds that capital income is highest and contributes the most to income inequality in the eastern region.
    Keywords: capital income; income inequality; regional income gaps; Gini coefficient
    JEL: J3
    Date: 2011–10
  29. By: Risheng Mao; John Whalley
    Abstract: This paper uses a firm level multi-industry data set covering 456 Chinese manufacturing sectors to assess the implications of Renminbi (RMB) real exchange rate appreciation for adjustments in employment and wage rates. We stress differences in both industry and firm characteristics within sectors. Our empirical results show that modest (and also larger) RMB real exchange rate appreciation would likely have pronounced effects on both net employment and wage rates. A 10% RMB appreciation would likely cause a net employment decline in Chinese manufacturing industries of between 4.1% and 5.3%, and a wage rate drop of 4% after controlling for other factors. Real exchange rate change effects by industry on net employment and wage rates vary significantly with the ownership characteristics of firms within industries. Employment and wage rates for private enterprises are less responsive to RMB real exchange rate fluctuations than is true for state owned enterprises (SOEs) and foreign invested enterprises (FIEs). This finding is opposite to the widely held belief that the labor market behavior of Chinese SOEs shows stronger labor market rigidities than for private firms. Impacts of exchange rate movements emerge as systematically related to export openness, overall import penetration and profit margins of individual manufacturing industries.
    JEL: F16 F31 J21 J31
    Date: 2011–11
  30. By: G. Emmanuel Guindon; Arindam Nandi; Frank J. Chaloupka, IV; Prabhat Jha
    Abstract: The threat posed by smoking to health in India is severe. Already 1 in 5 of all adult male deaths and 1 in 20 of all adult female deaths at ages 30-69 are due to smoking and India will soon have 1 million smoking deaths a year. Increasing tobacco prices has been found to be the single most effective method to reduce smoking. Yet, bidis, the most common form of smoked tobacco in India, are largely untaxed, while cigarettes are taxed at about 40% of retail price, well below the 65–80% rate noted by the World Bank in countries with effective tobacco control policies. Moreover, low and stagnant tax rates have occurred in a period in which all tobacco products have become more affordable with income growth. First, we use data from the most recent three consecutive quinquennial National Sample Survey (NSS) rounds (NSS 50, 55 and 61 conducted in 1993/94, 1999/00 and 200/05) and a two-equation system of budget shares and unit values that attempts to correct for quality and measurement error. Second, we pool data from the most recent nine rounds of NSS (NSS 55-57, 59-64, conducted between 1999/00 to 2007/08). Our analyses of single and repeated cross-sections yield own-price elasticity for bidis that are roughly in keeping with existing evidence. We find that a 10% increase in bidi prices would reduce the demand for bidis by about 6 to 9.5%. We find, however, that own-price elasticity for cigarettes in India is substantially larger than previously thought. Our estimates suggest that cigarette users are at least as responsive as bidi users to price changes. On the whole, our analyses suggest that low SES households are likely more responsive to price changes than high SES households. Our analyses also uncovers important and policy-relevant cross-prices effects. Findings from this study provide additional evidence of the effectiveness of tobacco prices at reducing tobacco use.
    JEL: H2 I18
    Date: 2011–11

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