nep-dev New Economics Papers
on Development
Issue of 2012‒03‒08
nineteen papers chosen by
Mark Lee
Towson University

  1. China's lagging region development and targeted transportation infrastructure investments By Xubei Luo; Nong Zhu; Heng-fu Zou
  2. Regional Differences in China's Urbanization and its Determinants By Nong Zhu; Xubei Luo; Heng-fu Zou
  3. Optimal public investment, growth and consumption: evidence from African countries By Augustin Kwasi Fosu; Yoseph Yilma Getachew; Thomas Ziesemer
  4. Why has China grown so fast? The role of international technology transfer By John Van Reenen; Linda Yueh
  5. The Rise and Fall of Income Inequality in Mexico: 1989-2010 By Raymundo M. Campos-Vazquez; Gerardo Esquivel; Nora Lustig
  6. Determinants of FDI into China and Vietnam: A comparative study By Thi-Hong-Hanh Pham
  7. Are Remote Rural Workers Trapped in Low-Remunerated Non-Agricultural Jobs? Evidence from China By Chloe Duvivier; Shi Li; Mary-Françoise Renard
  8. Hukou and Consumption Heterogeneity: Migrants' Expenditure Is Depressed by Institutional Constraints in Urban China By Binkai Chen; Ming Lu; Ninghua Zhong
  9. Local Public Goods Provision in the Post-Agricultural Tax Era in Rural China By Hiroshi Sato; Sai Ding
  10. Does Family Planning Reduce Infant Mortality? Evidence from Surveillance Data in Matlab, Bangladesh By Soest, A.H.O. van; Saha, U.R.
  11. Why Public Investment fails to raise economic growth in some countries?: The role of corruption By M. Emranul Haque; Richard Kneller
  12. Crime, Fertility, and Economic Growth: Theory and Evidence By Kyriakos C. Neanidis; Vea Papadopoulou
  13. Financing Africa: Through the crisis and beyond. By Beck, T.H.L.; Munzele Maimbo, S.; Faye, I.; Triki, T.
  14. Working-Age Adult Mortality, Orphan Status, and Child Schooling in Rural Zambia By Mather, David
  15. Returns to migration : the role of educational attainment in rural Tanzania By Kudo, Yuya
  16. New Development of Fiscal Decentralization in China By Wang, Zhiguo; Ma, Liang
  17. Foreign aid, foreign direct investment and domestic investment nexus in landlocked economies of Central Asia By Arazmuradov, Annageldy
  18. The Institutions-Growth Nexus: Stages of Development By Nawaz, Saima
  19. Should Aid Reward Performance? Evidence from a Field Experiment on Health and Education in Indonesia By Benjamin A. Olken; Junko Onishi; Susan Wong

  1. By: Xubei Luo (The World Bank); Nong Zhu (The World Bank); Heng-fu Zou (The World Bank)
    Date: 2012
  2. By: Nong Zhu (The World Bank); Xubei Luo (The World Bank); Heng-fu Zou (The World Bank)
    Date: 2012
  3. By: Augustin Kwasi Fosu; Yoseph Yilma Getachew; Thomas Ziesemer
    Abstract: Abstract How much does public capital matter for economic growth? How large should it be? This paper attempts to answer these questions, taking the case of Sub-Saharan African (SSA) countries. It develops and estimates a model that posits a non-linear relationship between public investment and growth, to determine the growth-maximising public investment GDP share. It empirically also accounts for the crowding-in and crowding-out effects between public and private investment, with equations estimated separately and simultaneously, using System GMM. The paper further runs a simulation and examines the public investment GDP share that maximises consumption. This is estimated to be between 8.4 percent and 11 percent. The results from estimating the growth model are in the middle of this range, which is larger than the observed value of 7.2 percent at the end of the sample period. These outcomes suggest that, on average, there has been public under-investment in Africa, contrary to previous findings.
    Date: 2012
  4. By: John Van Reenen; Linda Yueh
    Abstract: Chinese economic growth has been spectacular in the last 30 years. We investigate the role of International Joint Ventures with Technology Transfer agreements, an understudied area. Technology transfer is the traditional mechanism for developing countries to “catch up” and has been a key component of Chinese economic policy. We collect original survey data on Chinese firms and their joint ventures and match this to administrative data on firm performance. To identify the causal effect of joint ventures we use time-varying and province-specific policies at the time when a firm was born. International joint ventures in general and I have large effects on productivity especially when combined with a technology transfer component. We estimate that without International joint ventures China’s growth would have been about one percentage point lower per annum over the last three decades.
    Keywords: China, Technology transfer, Joint ventures, Productivity
    JEL: O32 O33
    Date: 2012
  5. By: Raymundo M. Campos-Vazquez (El Colegio de México); Gerardo Esquivel (El Colegio de México); Nora Lustig (Tulane University)
    Abstract: Inequality in Mexico rose between 1989 and 1994 and declined between 1994 and 2010. We examine the role of market forces (demand and supply of labour by skill), institutional factors (minimum wages and unionization rate), and public policy (cash transfers) in explaining changes in inequality. We apply the ‘re-centered influence function’ method to decompose changes in hourly wages into characteristics and returns. The main driver is changes in returns. Returns rose (1989-1994) due to institutional factors and labor demand. Returns declined (1994-2006) due to changes in supply and --to a lesser extent--in demand; institutional factors were not relevant. Government transfers contributed to the decline in inequality, especially after 2000.
    Keywords: inequality, wages, disposable income, labor markets, Mexico
    JEL: D31 D60 J20 J31 O54
    Date: 2012–01
  6. By: Thi-Hong-Hanh Pham (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: Since the inception of economic reforms, China in 1978 and Vietnam in 1986, both countries have become successful examples of transition to a market economy. Over their courses of reform, attracting substantial and rising amounts of inward FDI has been a key focus of their market-oriented policy reforms. Yet, the last two decades have experienced a widening gap in inward FDI between these two countries even though the context and characteristics of their economic reform are relatively similar. Therefore, this paper aims to address the question "What has caused the substantial gap in FDI inflows between China and Vietnam?" through a comparative study of the FDI determinants. In other words, this paper revisits the determinants of FDI into China and Vietnam by employing an augmented gravity model and using a panel dataset containing information on bilateral FDI and a large set of acroeconomic variables over the period 1994-2008. The main finding is that the widening gap in inward FDI flows between China and Vietnam can be explained by two broad sets of main factors: one related to institutions and another to domestic macroeconomic stability.
    Keywords: Foreign direct investment ; Gravity model ; China ; Vietnam
    Date: 2012–02–17
  7. By: Chloe Duvivier (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Shi Li (School of Economics and Business Administration - School of Economics and Business Administration - Beijing Normal University); Mary-Françoise Renard (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This paper analyzes the effect of urban proximity on rural non-agricultural wages. Using the 2002 Chinese Household Income Project data, we study the determinants of rural non-agricultural workers' hourly wages. We find strong evidence that rural workers close to cities benefit from higher hourly wages, indicating that there is a spatial differentiation in wages across rural areas. Specifically, workers living close to cities are paid about 15% more for one hour worked. This is true even after controlling for living costs, suggesting that urban proximity leads to higher non-agricultural wages in real terms. We also find that migration enables remote workers to partially compensate for lower local wages, suggesting that restrictions on migration hurt remote workers more than other workers.
    Keywords: Wages;Remoteness;regional labor market;China Codes
    Date: 2012–02–24
  8. By: Binkai Chen; Ming Lu; Ninghua Zhong
    Abstract: This paper provides a new explanation for China's extremely low consumption-to-GDP ratio, highlighting the constraints of the "household registration system" (Hukou) on China's household consumption. Our baseline results show that the consumption of migrants without an urban Hukou is 30.7% lower than that of urban residents. Moreover, consumption heterogeneity cannot be explained by migration effects, culture, social norms, habits or some other forms of household heterogeneity. Further studies on the composition of household consumption have shown that the gaps are largest in areas such as education and culture, durable goods and health. As both the number and income level of migrants are rising, the constraining effects of Hukou on household consumption will continue to increase.
    Keywords: Consumption, Heterogeneity, Hukou System, Migrants, Urban Residents
    JEL: R23 E21
    Date: 2012–02
  9. By: Hiroshi Sato; Sai Ding
    Abstract: This paper investigates regional differences in local public goods provision in rural area in the 2000s, using large village sample surveys (CHIP 2002 and 2007 surveys, a survey in Ningxia). Focuses are on changes in the coverage of public investment projects, regional differences in the determinants of public investment projects, and changes in the coverage of public services provided by village collectives. The main findings are as follows. First, we confirmed that coverage of public investment projects had increased in the 2000s. Second, in spite of concentration of fiscal administration into county level as one of the pillars of the reform of taxation and local fiscal system, administrative villages still played indispensable roles in local public goods provision. Third, we found that incentive of peasants, financial ability of villages, and incentive of local government affect location decision and budget structure of public investment projects and that direction and strength of such factors were different by regions.
    Keywords: Local Public goods, Village, Local Government, Rural China
    JEL: H2 H4 R5
    Date: 2012–02
  10. By: Soest, A.H.O. van; Saha, U.R. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Analyzing the effect of family planning on child survival remains an important issue but is not straightforward because of several mechanisms linking family planning, birth intervals, total fertility, and child survival. This study uses a dynamic model jointly explaining infant mortality, whether contraceptives are used after each birth, and birth intervals. Infant mortality is determined by the preceding birth interval and other covariates (such as socio-economic status). The decisions about using contraceptives after each birth are driven by similar covariates, survival status of the previous child, and the family’s gender composition. Birth spacing is driven by contraceptive use and other factors. We find favourable effects of contraceptive use, reducing infant deaths in second and higher order births. Because the mortality risks for first-borns is higher than for later births and contraceptive use reduces the number of higher order births, the net effect on the total infant mortality rate is small.
    Keywords: child mortality;family planning;contraceptive use;demography;dynamic panel data models;Bangladesh.
    JEL: I1 J13 C33
    Date: 2012
  11. By: M. Emranul Haque; Richard Kneller
    Abstract: In an endogenous growth model, the government officials are given the task of procuring public goods that are used as productive inputs in the production. Due to the information asymmetry between the government and the bureaucracy, the bureaucrats can falsely report of high quality-high cost procurement, while providing low quality-low cost product. This affects the productivity of the economy and hence reduces growth. Our analysis can show that corruption not only reduces the quality of public services that are necessary for production, but also inflates the public spending beyond the efficient level. In this way, we can explain why public investment fails to raise growth in the countries where corruption is endemic. We test our results empirically by improving the methodology on previous research on this topic by explicitly recognizing the role of simultaneity between public investment, corruption and growth and the possible biases arising from omission of correlated variables from the single reduced form equation based analysis. We use three-stage least squares method in a panel set up for a system of four equations on growth, public investment, corruption and private investment. Our primary results are twofold. First, corruption increases public investment. Second, corruption reduces the returns to public investment and makes it ineffective in raising economic growth.
    Date: 2012
  12. By: Kyriakos C. Neanidis; Vea Papadopoulou
    Abstract: This paper studies the link between crime and fertility and the way by which they jointly impact on economic growth. In a three-period overlapping generations model, where health status in adulthood depends on health in childhood, adult agents allocate their time to work, leisure, child rearing and criminal activities. An autonomous increase in the probability o¤enders face in escaping apprehension, increases both crime and fertility non-monotonically, giving rise to an ambiguous e¤ect on growth. A cross-country empirical examination, based on data that span four decades, supports the non-linear e¤ects on both crime and fertility. At the same time, it reveals a negative effect on output growth.
    Date: 2012
  13. By: Beck, T.H.L. (Tilburg University); Munzele Maimbo, S.; Faye, I.; Triki, T.
    Date: 2011
  14. By: Mather, David
    Abstract: During the last decade, the Zambian government has dramatically increased expenditures on primary and secondary schooling, and enrollment rates have risen dramatically. At the same time, Zambia has faced the challenge of rising HIV prevalence and the possibility that recent gains in long-term human capital development could be eroded if households which suffer the death of a working-age (WA) adult pull their children out of school due to family labor shortages or financial constraints. This paper uses panel survey data from rural Zambia to measure the impact of WA adult mortality and morbidity on primary school attendance and school advancement, and separately tests the extent to which orphan status affects these schooling outcomes. There are five principal findings from our analysis.
    Keywords: Zambia, Adult Mortality, Orphan, Schooling, Community/Rural/Urban Development, Food Security and Poverty, Health Economics and Policy,
    Date: 2011–11
  15. By: Kudo, Yuya
    Abstract: Given the migration premium previously identified in an impact evaluation approach, this paper asks the question of why migration is not more prominent, given such high premium associated with it. Using long-term household panel data drawn from rural Tanzania, Kagera for the period 1991-2004, this study aims to answer this question by exploring the contribution of education in the migration premium. By separating migrants into those that moved out of original villages but remained within Kagera and those who left the region, this study finds that, in consumption, the return on investment in education is higher at both destinations. However, whilst the higher return on education fully explains the gains associated with migration within Kagera, it only partly explains those of external migration. These findings suggest that welfare opportunities are higher at the destination and that an individual's limited investment in education plays a major role in preventing short-distance migration from becoming a significant source of raising welfare, which is not the case for long-distance migration. While education plays a role, it appears that other mechanisms may prohibit rural agents from exploiting the arbitrage opportunity when they migrate to the destination at a great distance from the source.
    Keywords: Tanzania, Population movement, Migration, Education, Rural societies, Africa, Internal migration, School Investment, Return to education, Welfare growth
    JEL: J61 J62 O15 R23 I25
    Date: 2012–02
  16. By: Wang, Zhiguo; Ma, Liang
    Abstract: Understanding the logic of fiscal decentralization is pivotal for the next steps of fiscal reform, and retrospection of the literature and evidences accumulated in the field is the first step. As a typical transition economy with rapid and extensive devolution reforms, China is the ideal context to examine the causes, processes, and effects of fiscal decentralization, attracting numerous academic endeavors both domestic and abroad. However, the literature has not been fully reviewed and the evidences on fiscal decentralization are still mixed and inconclusive. This paper aims to comprehensively review the latest advancement in the area of fiscal decentralization in China over the past decades. The processes, characteristics, and measurements of fiscal decentralization are firstly reviewed, and the antecedents and consequences of fiscal decentralization are then synthesized. The knowledge gap and avenues for future research are finally discussed, aiming to make the China fiscal decentralization knowledge contributive, accumulative, and sustainable.
    Keywords: Fiscal decentralization; Federalism; New development; Corruption; China; Review
    JEL: H70 H30
    Date: 2012–02–25
  17. By: Arazmuradov, Annageldy
    Abstract: This paper investigates the relationship between foreign aid (ODA), foreign direct investment (FDI) and their effect on domestic investment in five landlocked and emerging economies of Central Asia. It is important for donor countries to understand whether their aid helps to bring in a private capital essential in transition period or not. If it does, it creates a ground for public-private partnership that could release from financial constraints and restore conditions for economic growth in transition economies. If it does not, then it calls for reassessing mechanisms of ‘aid architecture’. We test ODA-FDI link on two levels: regional and country. Our results from seemingly unrelated regression on regional level indicate that (a) aid has a positive role on FDI inflows; (b) aid and FDI are complementing flows, and (c) FDI complements domestic investment, while ODA decrease it. However, on the country level only in Kyrgyzstan and Tajikistan, foreign aid catalyzes FDI inflows. We conclude that the ODA-FDI nexus is present in countries with low per capita GDP and economic growth. There is a need for improvement of aid mechanism and a room for public-private cooperation in economies of Central Asia.
    Keywords: Central Asia; transition economies; foreign direct investment; official development assistance;gross fixed capital formation
    JEL: F30 P20
    Date: 2011–12–29
  18. By: Nawaz, Saima
    Abstract: The objective of this study is to analyze the impact of institutions on the economic growth and examine whether the ultimate impact differs at various stages of development among 24 Asian countries over the period 1996-2008 using a dynamic panel data analysis model based on the SYS-GMM estimation procedure. The overall analysis of this study shows that institutions indeed are important in determining the long-run economic growth. However, the impact of the institutions on economic growth varies across the regions and depends upon the existence level of development. This study concludes that the institutions are more effective in developed region as compared to developing region. More specially, control over corruption, rule of law and regulatory quality are highly effective in promoting long rum economic growth in East Asia than South Asia. Different countries require different set of institutions to promote long run economic growth.
    Keywords: Institutions; Economic Growth; Stages of Development
    JEL: E02 O43
    Date: 2011–12–01
  19. By: Benjamin A. Olken; Junko Onishi; Susan Wong
    Abstract: This paper reports an experiment in over 3,000 Indonesian villages designed to test the role of performance incentives in improving the efficacy of aid programs. Villages in a randomly-chosen one-third of subdistricts received a block grant to improve 12 maternal and child health and education indicators, with the size of the subsequent year’s block grant depending on performance relative to other villages in the subdistrict. Villages in remaining subdistricts were randomly assigned to either an otherwise identical block grant program with no financial link to performance, or to a pure control group. We find that the incentivized villages performed better on health than the non-incentivized villages, particularly in less developed areas, but found no impact of incentives on education. We find no evidence of negative spillovers from the incentives to untargeted outcomes, and no evidence that villagers manipulated scores. The relative performance design was crucial in ensuring that incentives did not result in a net transfer of funds toward richer areas. Incentives led to what appear to be more efficient spending of block grants, and led to an increase in labor from health providers, who are partially paid fee-for-service, but not teachers. On net, between 50-75% of the total impact of the block grant program on health indicators can be attributed to the performance incentives.
    JEL: I15 I25 O38
    Date: 2012–03

This nep-dev issue is ©2012 by Mark Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.