nep-dev New Economics Papers
on Development
Issue of 2012‒03‒28
twenty-six papers chosen by
Mark Lee
Towson University

  1. Are daughters always the losers in the chore war? Evidence using household and twin data from Vietnam By Tien Manh Vu
  2. Global burden of disease and economic growth By Martine Audibert; Pascale Combes Motel; Alassane Drabo
  3. A Re-examination of the Relation between Democracy and International Trade The Case of Africa By Balding, Christopher
  4. Manufacturing and Economic Development By Szirmai, Adam
  5. Rethinking China.s Path of Industrialization By Wu, Harry X.
  6. Emerging Evidence on the Relative Importance of Sectoral Sources of Growth in Sub-Saharan Africa By Ogunleye, Eric Kehinde
  7. Should Africa Industrialize? By Page, John
  8. Inequality in Education: Evidence for Latin America By Cruces, Guillermo; Gasparini, Leonardo
  9. Industrial Policies in Latin America By Peres, Wilson
  10. The Political Economy of Aid Flows to North Africa By Harrigan, Jane
  11. Technological Upgrading in China and India: What Do We Know? By Jaejoon Woo
  12. How is financial regulation different for micro-finance? By M. Sahoo; Renuka Sane; Susan Thomas
  13. Rural housing quality as an indicator of consumption sustainability By Abhiroop Mukhopadhyay; Indira Rajaraman
  14. Productivity Growth of the Non-Tradable Sectors in China By Dong He; Wenlang Zhang; Gaofeng Han; Tommy Wu
  15. Services as a New Engine of Growth for ASEAN, the People’s Republic of China, and India By Shepherd, Ben; Pasadilla, Gloria
  16. The Long-Run Effects of the Scramble for Africa. By Stelios Michalopoulos; Elias Papaioannou
  17. The nexus between economic freedom and growth: Evidence from CEE countries in transition By Gurgul, Henryk; Lach, Łukasz
  18. Peer Effects, Risk Pooling, and Status Seeking: What Explains Gift Spending Escalation in Rural China? By Chen, Xi; Kanbur, Ravi; Zhang, Xiaobo
  19. Exports and Within-Plant Wage Distributions: Evidence from Mexico By Frías, Judith A; Kaplan, David; Verhoogen, Eric A
  20. The Regulation of Land Markets: Evidence from Tenancy Reform in India By Besley, Timothy J.; Leight, Jessica; Pande, Rohini; Rao, Vijayendra
  21. Aid and Agency in Africa: Explaining Food Disbursements Across Ethiopian Households, 1994-2004 By Broussard, Nzinga H; Dercon, Stefan; Somanathan, Rohini
  22. Women's Empowerment and Economic Development By Duflo, Esther
  23. Do Cash Transfers Improve Birth Outcomes? Evidence from Matched Vital Statistics, Social Security and Program Data By Amarante, Veronica; Manacorda, Marco; Miguel, Edward; Vigorito, Andrea
  24. The Diffusion of Microfinance By Banerjee, Abhijit; Chandrasekhar, Arun G; Duflo, Esther; Jackson, Matthew O.
  25. Wealth, Credit Conditions and Consumption: Evidence from South Africa By Aron, Janine; Muellbauer, John
  26. Political Connections and Social Networks in Targeted Transfer Programs: Evidence from Rural Ethiopia By Caeyers, Bet; Dercon, Stefan

  1. By: Tien Manh Vu (Ph.D Candidate, Osaka School of International Public Policy, Osaka University)
    Abstract: This paper examines the gender gap in the division of housework in Vietnam among the household headsf children who are not married and still reside in the family home. We find that in a typical day, a daughter has a higher probability of undertaking some housework and for some 9.66 to 17.94 minutes longer than would an equivalent son. Among siblings in two-child families, a daughter who has a brother has the largest gender gap. However, once we control for differences in genetic endowment, with both twins involved in at least some housework, male?female twins spend approximately the same amount of time on housework. In a mutual decision-making scenario, among siblings in two-child families, an elder daughter would shoulder housework for the other sibling while the reverse holds for younger sisters, but only where the children are 20 years of age or younger. In addition, we find that besides sharing the family total housework load, one minute spent on housework by the mother inspires a 0.0481?0.298 minute increase in the time spent on housework by her daughter.
    Keywords: Housework, Division of housework, Twins, Gender equality
    JEL: J16 J13 J19
    Date: 2012–03
  2. By: Martine Audibert (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Pascale Combes Motel (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Alassane Drabo (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Relationships between health and economic prosperity or economic growth are difficult to assess. The direction of the causality is often questioned and the subject of a vigorous debate. For some authors, diseases or poor health had contributed to poor growth performances especially in low-income countries. For other authors, the effect of health on growth is relatively small, even if one considers that human capital accumulation needs also health investments. It is argued in this paper that commonly used health indicators in macroeconomic studies (e. g. life expectancy, infant mortality or prevalence rates for specific diseases such as malaria or HIV/AIDS) imperfectly represent the global health status of population. Health is rather a complex notion and includes several dimensions which concern fatal (deaths) and non-fatal issues (prevalence and severity of cases) of illness. The reported effects of health on economic growth vary accordingly with health indicators and countries included in existing analyses. The purpose of the paper is to assess the effect of health on growth, by using a global health indicator, the so-called disability-adjusted life year (DALY) that was proposed by the World Bank and the WHO in 1993. Growth convergence equations are run on 159 countries over the 1999-2004's period, where the potential endogeneity of the health indicator is dealt for. The negative effect of poor health on economic growth is not rejected thus reinforcing the importance of achieving MDGs.
    Keywords: Disease Global Burden;DALYs;economic growth;macroeconomic health impact;cross-country analysis
    Date: 2012–03–16
  3. By: Balding, Christopher
    Abstract: Scholars and policy makers believe that democracy will bring prosperity through integration into the global economy via increased international trade. This study tests two theories as to why democracies might trade more. First, political freedom may be correlated with economic freedom, thus prompting higher levels of economic activity, thereby driving states to trade more. Second, democracy implies higher quality governance either through institutions or policy-making procedures. I utilize a bilateral gravity trade model covering approximately 150 countries from 1950 to 1999, with fixed effects for time, importers and exporters. I find the theory that democracy, and many of its components, promotes international trade unconvincing. Economic freedom does not have the expected impact on international trade levels, but quality of governance variables have broad economic and statistical significance.
    Keywords: trade, democracy, governance, Africa, gravity model
    Date: 2011
  4. By: Szirmai, Adam
    Abstract: This paper examines the theoretical and empirical evidence for the hypothesis that manufacturing is the main engine of growth in developing countries. The paper opens with an overview of the main arguments supporting the engine of growth hypothesis and then examines each of these arguments using a mix of statistical analysis of secondary data and secondary literature. The paper concludes that manufacturing will continue to be important in accelerating growth and achieving catch-up in developing countries. However, compared to the past 60 years, market service sectors will become relatively more important as potential sources of growth and catch up.
    Keywords: structural change, manufacturing, engine of growth, catch-up
    Date: 2011
  5. By: Wu, Harry X.
    Abstract: This study shows that China.s post-1949 state-led industrialization has closely followed an underlying path that began in the late nineteenth century. It was initiated by pressing national defence needs and has since been motivated by the same and strong incentives for a faster catch-up with the West despite radical regime shifts. Government determined or influenced resource allocation benefited selected industries and hence nurtured vested interest groups connecting and integrating with the ruling elite, which have strengthened and sustained the path. This means that the path is inherently inefficient which is evidenced by a newly constructed dataset. Reform measures can only temporarily improve efficiency performance, but are unable to break the path in the absence of a genuine political democracy.
    Keywords: government engineered industrialization, path dependence, central planning, economic reform, efficiency
    Date: 2011
  6. By: Ogunleye, Eric Kehinde
    Abstract: Purposeful, well-targeted and successful transformation policies will be elusive for a country or region that does not understand the relative importance of its sectoral sources of growth. This study aims at eliciting our understanding in this respect by providing an assessment of the relative importance of the major sectors as sources of growth in sub-Saharan African (SSA) countries. Our findings reveal that, contrary to the general belief that agriculture is the most important contributor to economic growth in SSA countries, rather it is the service sector that leads, followed by agriculture and manufacturing. While not discounting policies aimed at strengthening all sectors, the service sector particularly needs to be better positioned to foster sustainable economic growth in SSA countries.
    Keywords: Economic growth, sectoral drivers, Arellano-Bond
    Date: 2011
  7. By: Page, John
    Abstract: Africa should industrialize. Without structural change it cannot sustain recent growth. Economies with more diverse and sophisticated industrial sectors tend to grow faster. But since 1980 Africa has deindustrialized. The paper shows that between 1975 and 2005 the size, diversity and sophistication of industry in Africa have all declined. An industrialization strategy containing two elements is needed. The first is straightforward: refocusing current investment climate reforms on infrastructure, skills, and regional integration. These actions alone will not be sufficient, however. Africa must also learn to compete through strategies to create an export push, develop industrial clusters, and attract task-based production.
    Keywords: Africa, industry, industrial policy, growth, sophistication, exports
    Date: 2011
  8. By: Cruces, Guillermo; Gasparini, Leonardo
    Abstract: This paper provides original empirical evidence on the evolution of education inequality for the Latin American countries over the decades of 1990 and 2000. The analysis covers a wide range of issues on the differences in educational outcomes and opportunities across the population, including inequality in years of education, gaps in school enrolment, wage skill differentials and public social expenditure. The evidence indicates a significant difference between the 1990s and the 2000s in terms of both the assessment of the equity of the education expansion and its impact on the income distribution. In particular, changes in the 2000s seem to have had an equalizing impact on earnings, given the more pro-poor pattern of the education upgrading and a more stable or even increasing relative demand for low-skill labour.
    Keywords: education, inequality, enrolment, wage premium, Latin America
    Date: 2011
  9. By: Peres, Wilson
    Abstract: This chapter analyses the main features of industrial policies carried out in Latin America since 1990. It studies these policies during import substitution industrialization and how they changed after the market-oriented economic reforms. It presents the main national strategies, policy lines and instruments designed in the region, as well as the return of sectoral policies to the public agenda. Special attention is paid to Brazilian industrial policies because they represent the most advanced experience in the region. The paper underscores that progress in policy design has out paced improvements in policy implementation and evaluation, and discusses the importance of sector targeting, endogenous capabilities, institutions, and political will for industrial policy.
    Keywords: industrial policy, clusters, policy implementation, Latin America, Brazil, implementation failures.
    Date: 2011
  10. By: Harrigan, Jane
    Abstract: This paper provides an historical overview of aid flows to North Africa. It assesses the aid allocation process and argues that past aid flows to the region have been heavily influenced by donor political interests. This has reduced the effectiveness of aid which, with the exception of Tunisia, has not been associated with sustained economic growth. The Arab Spring provides an opportunity to reappraise aid flows to North Africa and it is argued that future flows need to support the democratization process, generate pro-poor growth, support social safety nets and address the pressing issues of widening inequalities and unemployment.
    Keywords: aid allocation, aid effectiveness, North Africa
    Date: 2011
  11. By: Jaejoon Woo
    Abstract: This paper studies sources of technological upgrading in China and India. What is striking about the impressive growth of China and (to a lesser degree) India is that they export products associated with a high productivity level that is much higher than a country at their income level. China’s export bundle has changed dramatically, diversifying into technologyintensive products. China is now the largest exporter of high-technology products in the world. Exports of India are still significantly less technologically sophisticated, while India has been more successful in exports of business and information technology (IT) services. It presents empirical evidence on the important role of FDI inflows and imported capital goods that embody new technology for TFP growth in a large panel of advanced and developing countries over 1970-2007. Consistent with the cross-country evidence, micro-data and case studies strongly suggest that FDI and import of capital goods have contributed to rapid technological upgrading especially in China. Puzzlingly, however, the TFP level in China is much lower than would be expected from its score on Index of Technological Sophistication of exports, raising a doubt about whether the shift in export bundle towards high-technology products is associated with a technological sophistication of domestic contents of export products. An important explanation appears to be China’s prime role as a final assembler of international production network. The magnitude of reversal in net export position of China across the two categories, intermediate and finished goods, is striking, which implies that more and less developed economies are being affected very differently by China’s rise. With a view to upgrading the capability to absorb advanced technologies and innovate, China and India have increasingly emphasised human capital, skill-intensive industries and R&D efforts. Nonetheless, our analysis shows that there is still an enormous scope for technological catching-up over the next decades.<P>Modernisation technologique en Chine et en Inde : Que savons-nous?<BR>Ce papier étudie les sources de modernisation technologique en Chine et Inde. Ce qui est frappant dans la croissance impressionnante de la Chine et, dans une moindre mesure, de l’Inde est que ces pays exportent des produits associés à un haut niveau de productivité qui est bien plus grand qu’un pays de leur niveau de revenu. La structure des exportations de la Chine a fondamentalement changé, se diversifiant en produits intensifs en technologie. La Chine est dorénavant le plus grand exportateur du monde de produits de haute technologie. Les exportations de l’Inde restent significativement moins sophistiquées technologiquement, quoique l’Inde ait connu davantage de succès dans les exportations de services de technologie du commerce ainsi que de l’information et de la communication (TIC). Ce papier présente des preuves empiriques du rôle important des flux entrants d’IDE et des biens de capital importés comprenant la nouvelle technologie pour la croissance de PGF pour un large panel de pays avancés ou en développement sur la période 1970-2007. En ligne avec les preuves longitudinales, données microéconomiques et études de cas, il suggère fortement que les IDE et importations de biens de capital ont contribué à la rapide modernisation de technologie, particulièrement en Chine. Curieusement, cependant, le niveau de PGF en China est bien plus bas qu’espéré au regard de son Indice de Sophistication Technologique des Exportations, faisant naître le doute que la transformation de la structure des exportations vers des produits de haute-technologie est associée avec à une sophistication technologique du contenu national des produits d’exportation. Une explication importante réside dans le rôle de premier plan de la Chine en tant qu’assembleur final de la chaîne de production mondiale. La magnitude du revirement de la position nette des exportations de la China entre les deux catégories, produits intermédiaires et finaux, est saisissante, ce qui implique que les économies développées sont plus ou moins affectées et de façon très différente par la montée de la Chine. Dans l’optique d’améliorer la capacité d’absorber les technologies avancées et les innovations, la Chine et l’Inde ont mis l’accent sur le capital humain, les industries intensives en compétences et les efforts en R&D. Néanmoins, notre analyse montre qu’il reste une place énorme pour le rattrapage technologique dans les prochaines décennies.
    Keywords: growth, FDI, technology diffusion, technological upgrading, TFP, technological classification of export, export processing, international production network, croissance, transfert de technologie, modernisation technologique, PGF, classification technologique des exportations, traitement des exportations, chaine mondiale de production
    JEL: F15 F21 O33 O47 O53
    Date: 2012–03–01
  12. By: M. Sahoo; Renuka Sane (Indira Gandhi Institute of Development Research); Susan Thomas (Indira Gandhi Institute of Development Research)
    Abstract: What is the role of financial regulation in the field of micro-finance? This paper identiles two features of micro-finance which call for unique treatment in policy considerations as compared to policy thinking in the mainstream body of financial law. These features are credit recovery and the credit risk of the MFI, when credit access is enabled through the structure of the joint liability group. The paper goes on to offer draft law which embeds a regulatory treatment of micro-finance that flows from this analysis.
    Date: 2012–01
  13. By: Abhiroop Mukhopadhyay (Indian Statistical Institute, New Delhi); Indira Rajaraman (Indian Statistical Institute, New Delhi)
    Abstract: An exogenously defined poverty line yields poverty headcounts between any two points in time that are a net outcome of hte two-way traffic into and out of poverty. This paper arugues that, for the rural Indian context, where housing is too lumpy and illiquid to be used for consumption smoothing transitions in housing quality in cross sectional data sets can provide revealed evidence of household perceptions of downside risk to their current consumption levels...
    Keywords: tracking poverty, rural housing
    JEL: D31 R21
    Date: 2011–08
  14. By: Dong He (Hong Kong Monetary Authority and Hong Kong Institute for Monetary Research); Wenlang Zhang (Hong Kong Monetary Authority); Gaofeng Han (Hong Kong Monetary Authority); Tommy Wu (Hong Kong Monetary Authority)
    Abstract: Little is known about the total factor productivity of the non-tradable sectors in China. In this paper we estimate productivity growth of the non-tradable sectors by studying the relative price movements of the non-tradable sectors vis-a-vis the tradable sectors, i.e. changes in the internal real exchange rate. We find that prices of the non-tradable sectors have risen significantly faster than those of the tradable sectors, and China's internal real exchange rate has appreciated at a faster pace than the renminbi real effective exchange rate. We also find the non-tradable sectors have seen much lower productivity growth than the tradable sectors, and such productivity differentials are large when compared to other economies. We argue that if productivity growth in the non-tradable sectors remains slow, China will likely see more difficulty in rebalancing its growth pattern and higher inflationary pressures in the medium term. As such, it is important for the authorities to take policy actions to raise productivity growth in the non-tradable sectors.
    Keywords: Tradable and Non-Tradable Sectors, Internal Real Exchange Rate, Total Factor Productivity
    JEL: E31 F31 F43
    Date: 2012–03
  15. By: Shepherd, Ben (Asian Development Bank Institute); Pasadilla, Gloria (Asian Development Bank Institute)
    Abstract: An increasing services orientation is likely to be a key feature of the economies of the Association of Southeast Asian Nations (ASEAN), the People’s Republic of China, and India (collectively referred to as “ACI”) over the medium-term. This paper aims to present a compendium of relevant data on the state of the services sector in the ACI countries, focusing on its contribution to overall economic activity, employment, and growth. To do this, it relies heavily on standard international sources, as well as national statistics in some cases. It also examines to the extent possible—given data restrictions—the services policy environment in the ACI countries, focusing on its implications for regional and international integration of services markets.
    Keywords: services sector; services markets; economic development; emerging markets; middle income trap
    JEL: O10 O44 O53 Q28 Q53 Q56 Q58
    Date: 2012–03–08
  16. By: Stelios Michalopoulos; Elias Papaioannou
    Abstract: We examine the long run consequences of the scramble for Africa among European powers in the late 19th century and uncover the following empirical regularities. First using information on the spatial distribution of African ethicities before colonization, we show that borders were arbitrarily drawn. Apart from the land mass and water area of an ethnicity's historical homeland, no other geographic, ecological, historical, and ethnic-specific traits predict which ethnic groups have been partitioned by the national border. Second, using data on the location of civil conflicts after independence, we show that partitioned ethnic groups have suffered significantly more warfare; moreover, partitioned ethnicities have experienced more prolonged and more devastating civil wars. Third, we identify sizeable spill overs; civil conflict spreads from the homeland of partitioned ethnicities to nearby ethnic regions. These results are robust to a rich set of controls at a fine level and the inclusion of country fixed effects and ethnic family fixed effects. The uncovered evidence thus identifies a sizable causal impact of the scramble for Africa on warfare.
    Keywords: Africa, Borders, Ethnicities, Conflict, Development.
    JEL: O10 N17 N97 Z10
    Date: 2011
  17. By: Gurgul, Henryk; Lach, Łukasz
    Abstract: This study sought to examine the causal links between economic freedom and economic growth of new EU members in transition in the period 2000-2009. The empirical results suggest significant causality running from monetary and fiscal freedom, trade openness, regulation of credit, labour, and business, legal structure and security of property rights, and access to sound money to growth, especially in less and moderately developed CEE transition countries. Moreover, we found evidence that economic freedom was one of the factors stimulating the convergence of these economies towards rich EU members. The evidence of causality in the opposite direction was much weaker.
    Keywords: economic growth, economic freedom, CEE transition economies
    JEL: O10 O40
    Date: 2011–12–20
  18. By: Chen, Xi; Kanbur, Ravi; Zhang, Xiaobo
    Abstract: It has been widely documented that the poor spend a significant proportion of their income on gifts even at the expense of basic consumption. We test three competing explanations of this phenomenon--peer effect, status concern, and risk pooling--based on a census-type primary household survey in three natural villages in rural China and on detailed household records of gifts received on major occasions. We show that gift-giving behavior is largely influenced by peers in reference groups. Status concern is another key motive for keeping up with the Joneses in extending gifts. In particular, poor families with sons spend more on gift giving in proportion to their income than their rich counterparts, in response to the tightening marriage market. In contrast, risk pooling does not seem to be a key driver of the observed gift-giving patterns. However, we show that large windfall income triggers the escalation of competitive gift-giving behavior.
    Keywords: ceremony; gift giving; peer effects; risk pooling; social network; status seeking
    JEL: D63 D85 R20
    Date: 2012–01
  19. By: Frías, Judith A; Kaplan, David; Verhoogen, Eric A
    Abstract: This short paper examines the effect of exporting on within-plant wage distributions in employer-employee data on Mexican manufacturing plants. Using the late-1994 peso devaluation interacted with initial plant size as a source of exogenous variation in exporting and focusing on wages at the 10th, 25th, 50th, 75th and 90th percentiles within each plant, we document three patterns: (1) there is no evidence of an effect of exporting on wages at the 10th percentile; (2) the wage effects of exporting are larger at higher percentiles, up to the 75th; and (3) there is no evidence of an increase in dispersion within the top quartile.
    Keywords: exports; wage distribution
    JEL: F16 J31
    Date: 2012–02
  20. By: Besley, Timothy J.; Leight, Jessica; Pande, Rohini; Rao, Vijayendra
    Abstract: While the regulation of tenancy arrangements is widespread in the developing world, evidence on how such regulation influences the long-run allocation of land and labor remains limited. To provide such evidence, this paper exploits quasi-random assignment of linguistically similar areas to different South Indian states and historical variation in landownership across social groups. Roughly thirty years after the bulk of tenancy reform occurred, areas that witnessed greater regulation of tenancy have lower land inequality and higher wages and agricultural labor supply. We argue that stricter regulations reduced the rents landowners can extract from tenants and thus increased land sales to relatively richer and more productive middle caste tenants; this is reflected in aggregate productivity gains. At the same time, tenancy regulations reduced landowner willingness to rent, adversely impacting low caste households who lacked access to credit markets. These groups experience greater landlessness, and are more likely to work as agricultural labor.
    Keywords: India; land markets; land reform; tenancy
    JEL: O12 Q12
    Date: 2012–01
  21. By: Broussard, Nzinga H; Dercon, Stefan; Somanathan, Rohini
    Abstract: We study the distribution of food aid in Ethiopia between 1994 and 2004 using data from the Ethiopian Rural Household Survey. Over this period village leaders had considerable discretion in disbursing aid subject to official guidelines and periodic monitoring. We use a principal-agent model and household panel data for approximately 940 households to understand biases in the allocation of aid. The model shows that correlations between aid and observed measures of need are not a good measure of targeting because agents have incentives to distort allocations within targeted classes. Consistent with the model, we find that the aid recipients match official criteria but disbursements are negatively correlated with determinants of need that are not easily observable by monitoring agencies, namely pre-aid consumption, self-reported power and involvement in village-level organizations. Our results suggest informal structures of power within African villages influence the extent to which food aid insulates some of the world's poorest families from agricultural shocks but also that policy guidelines do constrain permissible deviations from need-based allocations.
    Keywords: Africa; food aid; political economy
    JEL: H53 I38 O11
    Date: 2012–02
  22. By: Duflo, Esther
    Abstract: Women’s empowerment and economic development are closely related: in one direction, development alone can play a major role in driving down inequality between men and women; in the other direction, empowering women may benefit development. Does this imply that pushing just one of these two levers would set a virtuous circle in motion? This paper reviews the literature on both sides of the empowerment-development nexus, and argues that the inter-relationships are probably too weak to be self-sustaining, and that continuous policy commitment to equality for its own sake may be needed to bring about equality between men and women.
    Keywords: gender equality; women's empowerment
    JEL: D1 O12 O15
    Date: 2012–01
  23. By: Amarante, Veronica; Manacorda, Marco; Miguel, Edward; Vigorito, Andrea
    Abstract: There is limited empirical evidence on whether unrestricted cash social assistance to poor pregnant women improves children’s birth outcomes. Using program administrative micro-data matched to longitudinal vital statistics on the universe of births in Uruguay, we estimate that participation in a generous cash transfer program led to a sizeable 15% reduction in the incidence of low birthweight. Improvements in mother nutrition and a fall in labor supply, out-of-wedlock births and mother’s smoking all appear to contribute to the effect. We conclude that, by improving child health, unrestricted unconditional cash transfers may help break the cycle of intergenerational poverty.
    Keywords: birth outcomes; welfare transfers
    JEL: I38 J13 J88
    Date: 2012–01
  24. By: Banerjee, Abhijit; Chandrasekhar, Arun G; Duflo, Esther; Jackson, Matthew O.
    Abstract: We examine how participation in a microfinance program diffuses through social networks. We collected detailed demographic and social network data in 43 villages in South India before microfinance was introduced in those villages and then tracked eventual participation. We exploit exogenous variation in the importance (in a network sense) of the people who were first informed about the program, "the injection points". Microfinance participation is higher when the injection points have higher eigenvector centrality. We estimate structural models of diffusion that allow us to (i) determine the relative roles of basic information transmission versus other forms of peer influence, and (ii) distinguish information passing by participants and non-participants. We find that participants are significantly more likely to pass information on to friends and acquaintances than informed non-participants, but that information passing by non-participants is still substantial and significant, accounting for roughly a third of informedness and participation. We also find that, conditioned on being informed, an individual's decision is not significantly affected by the participation of her acquaintances.
    Keywords: diffusion; microfinance; peer effects; social networks
    JEL: D13 D85 G21 L14 O12 O16 Z13
    Date: 2012–01
  25. By: Aron, Janine; Muellbauer, John
    Abstract: There is widespread disagreement about the role of housing wealth in explaining consumption. This paper exploits liquid and illiquid wealth time series from household balance sheet data for South Africa, previously constructed by the authors, to explain fluctuations in the ratios of consumption and household debt to income in South Africa, from 1971 to 2005. The paper emphasizes the role of substantial credit liberalization and of wealth, treating credit conditions as a latent variable with key interactions with drivers of consumption and debt. Credit conditions are proxied by a spline function entering jointly estimated consumption, debt and income expectations equations in a 'latent interactive variable equation system' (LIVES). The empirical results corroborate the theory in the paper, confirming that consumption relative to income is driven by credit liberalization, fluctuations in a range of asset values and asset accumulation, uncertainty and income expectations, inter alia. The paper confirms a collateral interpretation of housing wealth on consumption as opposed to a life-cycle interpretation. The paper also throws important light on the monetary policy transmission mechanism in South Africa.
    Keywords: consumption; credit conditions; credit market liberalisation; household debt; housing collateral; housing wealth; liquid and illiquid wealth
    JEL: C52 E21 E27 E32 E44 E51 E52 E58
    Date: 2012–02
  26. By: Caeyers, Bet; Dercon, Stefan
    Abstract: Despite increasingly large scale social protection programs in Africa, we have limited evidence on the local political economy of their allocation. We investigate community-based processes for food aid allocation and the role of political and social networks, using the case of Ethiopia in the aftermath of a serious drought in 2002. Local political authorities are in charge of food transfers, in terms of free food aid or food-for-work programs. We find that although targeting is clearly imperfect, free food aid is responsive to need, as well as targeted to households with less access to support from relatives or friends. We also find a strong correlation with political connections: households with close associates in official positions have more than 12 % higher probability of obtaining free food than households that are not well connected. This effect is large: someone without political connections has the same probability of getting food aid than someone more than twice as rich, but with these connections. The correlation with political connections is specifically strong in the immediate aftermath of the drought. Payment for food-for-work is also about a third higher for those with political connections. Although these programs appear to be responsive to need, in future it is crucial to look more closely at the local political economy of these programs.
    Keywords: Africa; food aid; political economy; targeting; transfers
    JEL: H53 I38 O11
    Date: 2012–02

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