nep-dev New Economics Papers
on Development
Issue of 2011‒11‒21
sixteen papers chosen by
Mark Lee
Towson University

  1. The Extension of Social Security Coverage in Developing Countries By Juergen Jung; Chung Tran
  2. Seeds of hope: Assessing the effect of development aid on the reduction of child mortality By Roberto Burguet; Marcelo Soto
  3. The Labor Supply and Retirement Behavior of China's Older Workers and Elderly in Comparative Perspective By Giles, John T.; Wang, Dewen; Cai, Wei
  4. Remittances and Return Migration By Collier, William; Piracha, Matloob; Randazzo, Teresa
  5. Trade Policy Determinants and Trade Reform in a Developing Country By Baybars Karacaovali
  6. Disasters and Development: Natural Disasters, Credit Constraints and Economic Growth By McDermott, Thomas K. J.; Barry, Frank; Tol, Richard S. J.
  7. Average and marginal returns to upper secondary schooling in Indonesia By Carneiro, Pedro; Lokshin, Michael; Ridao-Cano, Cristobal; Umapathi, Nithin
  8. The household enterprise sector in Tanzania : why it matters and who cares By Kweka, Josaphat; Fox, Louise
  9. The impact of pro-vulnerable income transfers : Leisure, dependency and a distribution hypothesis By Limodio, Nicola
  10. Foreign aid, foreign direct investment and economic growth of Lao PDR By Vatthanamixay Chansomphou; Masaru Ichihashi
  11. How Do Foreign and Domestic Demand Affect Exports Performance? An Econometric Investigation of Indonesia's Exports By Rudy Rahmaddi; Masaru Ichihashi
  12. Law and Investment in Africa By Simplice A., Asongu
  13. Effect of employment guarantee on access to credit: Evidence from rural India By Saraswat, Deepak
  14. The Determinants and Long-term Projections of Saving Rates in Developing Asia By Charles Yuji Horioka; Akiko Terada-Hagiwara
  15. Local Industrial Structures and Female Entrepreneurship in India By Ejaz Ghani; William R. Kerr; Stephen D. O'Connell
  16. Impact of food inflation on poverty in the Philippines By Tomoki Fujii

  1. By: Juergen Jung (Department of Economics, Towson University); Chung Tran (Research School of Economics, The Australian National University)
    Abstract: We study the dynamic general equilibrium effects of introducing a social pension program to elderly informal sector workers in developing countries who lack formal risk sharing mechanisms against income and longevity risk. To this end, we formulate a stochastic dynamic general equilibrium model that incorporates defining features of developing countries: a large informal sector, private transfers as an informal safety net, and a non-universal social security system. We find that the extension of retirement benefits to informal sector workers results in efficiency losses due to adverse effects on capital accumulation and the allocation of resources across formal and informal sectors. Despite these losses recipients of social pensions experience welfare gains as the positive insurance effects attributed to the extension of a social insurance system dominate. The welfare gains crucially depend on the skill distribution, private intra-family transfers and the specific tax used to finance the expansion.
    Keywords: Informal Sector, Family Social Safety Nets, Social Pension, General Equi-librium, and Welfare.
    JEL: E6 E21 E26 H30 H53 H55 I38 O17
    Date: 2011–11
  2. By: Roberto Burguet; Marcelo Soto
    Abstract: The Millennium Declaration (2000) set as one of its targets a substantial reduction in child mortality. This paper studies whether the massive increase in development aid can account for part of the reduction in child mortality observed in developing countries since the year 2000. To do so, we analyze a panel of more than 130 developing countries over the 2000-2008 period. We use the time trend evolution of aid to identify an exogenous source of variation. Total aid has had no statistically significant effect on child mortality. However, a disaggregate analysis identifies certain sectors of aid that have had a significant impact. The effects have been larger in high mortality countries, including Sub-Saharan Africa. Projections based on our estimates strongly support the concern that most countries in that region will miss the Millennium Goals target on child mortality.
    Keywords: ODA, child mortality, aid effectiveness.
    JEL: O11 O15
    Date: 2011–01–14
  3. By: Giles, John T. (World Bank); Wang, Dewen (World Bank); Cai, Wei (World Bank)
    Abstract: This paper highlights the employment patterns of China’s over-45 population and, for perspective, places them in the context of work and retirement patterns in Indonesia, Korea, the United States, and the United Kingdom. As is common in many developing countries, China can be characterized as having two retirement systems: a formal system, under which urban employees receive generous pensions and face mandatory retirement by age 60, and an informal system, under which rural residents and individuals in the informal sector rely on family support in old age and have much longer working lives. Gender differences in age of exit from work are shown to be much greater in urban China than in rural areas, and also greater than observed in Korea and Indonesia. Descriptive evidence is presented suggesting that pension eligible workers are far more likely to cease productive activity at a relatively young age. A strong relationship between health status and labor supply in rural areas is observed, indicating the potential role that improvements in access to health care may play in extending working lives and also providing some basis for a common perception that older rural residents tend to work as long as they are physically capable. The paper concludes with a discussion of measures that may facilitate longer working lives as China’s population ages.
    Keywords: retirement, population aging, labor supply, pensions, China, Indonesia, Korea
    JEL: J26 J14 O15 O17 O57
    Date: 2011–10
  4. By: Collier, William (University of Kent); Piracha, Matloob (University of Kent); Randazzo, Teresa (University of Kent)
    Abstract: This paper utilises survey data of return migrants to analyse the determinants of remittances sent while the migrants were abroad. We approach our research question from the perspective of three sending countries in the Maghreb, namely Algeria, Morocco and Tunisia. We investigate the remittance behaviour using the migrants’ conditions before migration as well as during the migration experience. Using a two-part model, we show that the decision to remit and the amount remitted depend on a combination of different migrant characteristics as well as the duration and form of migration. We also consider if the remittance behaviour is dependent on the type of return: decided or compelled. We show that those who decided to return have a higher probability to remit for investment purposes and remit more as the time spent abroad increases.
    Keywords: remittances, return migration, Maghreb countries
    JEL: F22 F24
    Date: 2011–10
  5. By: Baybars Karacaovali (Department of Economics, University of Hawaii)
    Abstract: In this paper, I start out with a standard political economy of trade policy model to guide the subsequent estimation of the determinants of trade policy in a developing country. I carefully test the model with Colombian data from 1983 to 1998 accounting for endogeneity and omitted variable bias concerns and then expand it empirically in several directions. I show that it is important to control for the impact of a drastic trade reform shock that affects all sectors and disentangle its effect from preferential trade agreements (PTAs). I find that protection is higher in sectors that are important exports for preferential partners which may be seen as a stumbling block effect of PTAs for Colombia. I also relax the assumption of fixed political weights that measure the extra importance of producers' welfare relative to consumers in the government objective. I measure the impact of sectoral characteristics on tariffs indirectly through political weights as a novel alternative to nonstructurally estimating them as determinants of protection. Accordingly, I obtain more realistic estimates for the political weights further contributing to the literature.
    Keywords: Political economy of trade policy, trade liberalization, preferential trade agreements, empirical trade
    JEL: F13 F14 F15
    Date: 2011–11–01
  6. By: McDermott, Thomas K. J.; Barry, Frank; Tol, Richard S. J.
    Abstract: We demonstrate, using a simple two-period equilibrium model of the economy, the potential effects of extreme event occurrences - such as natural or humanitarian disasters - on economic growth over the medium- to long-term. In particular, we focus on the effect of such shocks on investment. We examine two polar cases; an economy in which agents have unconstrained access to capital markets, versus a credit-constrained version, where the economy is assumed to operate in financial autarky. Considering these extreme cases allows us to highlight the interaction of disasters and economic underdevelopment, manifested through poorly developed financial markets. The theoretical analysis shows that the shock of a disaster occurrence could have lasting effects on economic growth only if agents face borrowing constraints. The predictions of our theoretical model are then tested using a panel of data on natural disaster events at the country-year level, covering the period 1979-2007. We find that for countries with low levels of financial sector development, natural disaster events exert a significant negative impact on economic growth. In particular, where access to credit is problematic, the negative effects of disasters on growth are persistent over the medium-term. These results are robust to various checks. Our findings suggest that natural disasters do represent significant threats to economic development in poor countries.
    Keywords: natural disasters,financial development,credit constraints,economic growth/growth/investment/US/data
    Date: 2011–10
  7. By: Carneiro, Pedro; Lokshin, Michael; Ridao-Cano, Cristobal; Umapathi, Nithin
    Abstract: This paper estimates average and marginal returns to schooling in Indonesia using a non-parametric selection model estimated by local instrumental variables, and data from the Indonesia Family Life Survey. The analysis finds that the return to upper secondary schooling varies widely across individual: it can be as high as 50 percent per year of schooling for those very likely to enroll in upper secondary schooling, or as low as -10 percent for those very unlikely to do so. Returns to the marginal student (14 percent) are well below those for the average student attending upper secondary schooling (27 percent).
    Keywords: Education For All,Secondary Education,Teaching and Learning,Primary Education,Population Policies
    Date: 2011–11–01
  8. By: Kweka, Josaphat; Fox, Louise
    Abstract: The household enterprise sector has a significant role in the Tanzanian economy. It employs a larger share of the urban labor force than wage employment, and is increasingly seen as an alternative to agriculture as a source of additional income for rural and urban households. The sector is uniquely placed within the informal sector, where it represents both conditions of informal employment and informal enterprise. This paper presents a case study on Tanzania using a mixed approach by combining both quantitative and qualitative analysis to examine the important role of household enterprises in the labor force of Tanzania, and to identify key factors that influence their productivity. Household enterprise owners are similar to typical labor force participants although primary education appears to be the minimum qualification for household enterprise operators to be successful. Access to location matters -- good, secure location in a marketplace or industrial cluster raises earnings - and access to transport and electricity is found to have a significant effect on earnings as well. In large urban areas, the biggest constraint faced by household enterprises is the lack of access to secure workspace to run the small business. Although lack of credit is a problem across all enterprises in Tanzania, household enterprises are more vulnerable because they are largely left out of the financial sector either as savers or borrowers. Although HEs are part of the livelihood strategies of over half of households in Tanzania, they are ignored in the current development policy frameworks, which emphasize formalization, not productivity. Tanzania has a large number of programs and projects for informal enterprises, but there is no set of policies and program interventions targeted at the household enterprise sector. This gap exacerbates the vulnerability of household enterprises, and reduces their productivity.
    Keywords: Access to Finance,Banks&Banking Reform,Labor Markets,Population Policies,Debt Markets
    Date: 2011–11–01
  9. By: Limodio, Nicola
    Abstract: This paper studies a transmission mechanism through which pro-vulnerable income transfers may affect individual decision-making of non-beneficiaries in an extreme poverty context, leading to labor supply contraction and the so-called dependency syndrome. The argument is based on the distributional distortion this transfer may provoke to the relative quality of leisure, enjoyed by the population in an extreme poverty scenario. Assuming the existence of vulnerable individuals and different income groups based on certain physical, economic, or social characteristics, the author studies their decision processes and, in particular, their reactions to the aid program. The results of this theoretical research provide some insights on the conditions that an optimal pro-poor income transfer should present. A literature review is presented in support of the arguments made in the theoretical part.
    Keywords: Labor Policies,Poverty Monitoring&Analysis,Economic Theory&Research,Services&Transfers to Poor,Food&Beverage Industry
    Date: 2011–11–01
  10. By: Vatthanamixay Chansomphou; Masaru Ichihashi (Graduate School for International Development and Cooperation, Hiroshima University)
    Abstract: This paper investigates the impact of foreign aid and foreign direct investment on the long-run income per capita and short-run income growth of Lao PDR. We formulate a modification of Solow model; then we employ a cointegration technique to carry out the long-run relationship, and employ an error correction model to estimate the short-run growth effects. The results show that foreign aid has a strong positive impact and is the main contributor on income level and income growth of Lao PDR in the long run. Surprisingly, FDI has significant negative impact on long-run income per capita and small positive impact on income growth in the short run. We conclude that the long-run negative impact of FDI might be due to its surge and concentration on few economic sectors and due to its extreme rises and falls in some period. Therefore, the policies to promote FDI in many sectors and the policies that attract stable FDI inflows should be promulgated.
    Keywords: Foreign direct investment; Convergence; Economic growth
    JEL: C22 F21 F35 O1 O4
    Date: 2011–09
  11. By: Rudy Rahmaddi; Masaru Ichihashi (Graduate School for International Development and Cooperation, Hiroshima University)
    Abstract: This paper explores the impacts of foreign and domestic demand on Indonesia's exports within demand and supply frameworks using aggregate data of 1971 - 2007. To capture effects of secular and cyclical movements on exports, we dissect income variables into trend and business cycle as proxies of productive capacity and capacity utilization rate, respectively. Our result suggests that both demand- and supply-price elasticity are elastic, and secular and cyclical movements may have contrast effects on exports. The findings draw policy implications namely the importance of price-based policy, provision of adequate and sound infrastructures, and further development of human capital-based industrialization.
    Keywords: Exports; demand and supply for exports; domestic demand pressure; Indonesia; simultaneous equations.
    JEL: F11 O19
    Date: 2011–09
  12. By: Simplice A., Asongu
    Abstract: This paper sets a new tone in the legal origins debate with the overwhelming dominance of French civil-law countries in private investment: contrary to mainstream consensus where-in, English common-law countries are better at championing private property rights (La Porta et al., 1998; Beck et al, 2003). Findings are premised on much recent data (1996-2007) from 38 African countries. The study investigates how French, English, French sub-Saharan, Portuguese and North African legal origins shape domestic, foreign, private and public investments through law channels of regulation quality and the rule of law.
    Keywords: Law; investment; developing countries
    JEL: K40 K20 E22 G20 P50
    Date: 2011–11–14
  13. By: Saraswat, Deepak
    Abstract: Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is the largest and most ambitious public works program for poverty alleviation, adopted by Government of India since independence. It was implemented in year 2006, starting with the first phase of 200 most backward districts in India. Two more consecutive phases were implemented to cover all rural regions in India but, even after almost 6 years of its implementation, it has not been adequately analyzed for its effect on various development indicators. This paper aims to study, whether participating in a typical employment guarantee program like MGNREGA, increases access to financial services and in particular, credit. Results provide evidence that, MGNREGA has been successful in self-selecting rural poor into participation and households participating longer in the program have been able to borrow more from formal sources. This paper also provides evidence that, increase in productivity of economic activities for participants, due to work in MGNREGA acts as a link between longer participation and increased access to formal credit.
    Keywords: MGNREGA; Access to Credit
    JEL: C13 O18 C0 C3 O10 C87 C12 D82
    Date: 2011–09–14
  14. By: Charles Yuji Horioka; Akiko Terada-Hagiwara
    Abstract: In this paper, we present data on trends over time in domestic saving rates in twelve economies in developing Asia during the 1966-2007 period and analyze the determinants of these trends. We find that domestic saving rates in developing Asia have, in general, been high and rising but that there have been substantial differences from economy to economy and that the main determinants of these trends appear to have been the age structure of the population (especially the aged dependency ratio), income levels, and the level of financial sector development. We then project future trends in domestic saving rates in developing Asia for the 2011-2030 period based on our estimation results and find that the domestic saving rate in developing Asia as a whole will remain roughly constant during the next two decades despite rapid population aging in some economies in developing Asia because population aging will occur much later in other economies and because the negative impact of population aging on the domestic saving rate will be largely offset by the positive impact of higher income levels.
    JEL: D91 E21 G10 J11
    Date: 2011–11
  15. By: Ejaz Ghani; William R. Kerr; Stephen D. O'Connell
    Abstract: We analyze the spatial determinants of female entrepreneurship in India in the manufacturing and services sectors. We focus on the presence of incumbent female-owned businesses and their role in promoting higher subsequent female entrepreneurship relative to male entrepreneurship. We find evidence of agglomeration economies in both sectors, where higher female ownership among incumbent businesses within a district-industry predicts a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries (e.g., those sharing similar labor needs, industries related via input-output markets) predict greater relative female entry rates even after controlling for the focal district-industry’s conditions. The core patterns hold when using local industrial conditions in 1994 to instrument for incumbent conditions in 2000-2005. The results highlight that the traits of business owners in incumbent industrial structures influence the types of entrepreneurs supported.
    JEL: J16 L10 L26 L60 L80 M13 O10 R00 R10 R12
    Date: 2011–11
  16. By: Tomoki Fujii (School of Economics, Singapore Management Unversity)
    Abstract: We simulate the impact of actual food price increase between June 2006 and June 2008 on poverty across different areas and whether the household’s main income source is agricultural activities. We explicitly treat heterogeneity in food price changes and the patterns of consumption and production by merging a expenditure survey dataset and a price dataset at the provincial level or lower. While the increase of head count index is larger for non-agricultural households than agricultural households, the opposite is true for the poverty gap and poverty severity measures, because poor agricultural households are particularly vulnerable to food inflation.
    Keywords: non-parametric regression, net consumption ratio, global food crisis, vulnerability
    JEL: E31 I32 O1
    Date: 2011–11

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