nep-dev New Economics Papers
on Development
Issue of 2012‒04‒10
27 papers chosen by
Mark Lee
Towson University

  1. Productivity, Structural Change, and Latin American Development By Carlos Gustavo Machicado; Felix Rioja; Antonio Saravia
  2. Welfare and Common Property Rights Forestry: Evidence from Ethiopian Villages By Dambala Gelo; Steven F. Koch
  3. The fertility transition in South Africa: A retrospective panel data analysis By Laura Rossouw; Rulof Burger; Ronelle Burger
  4. Father’s employment and sons’ stature: the long run effects of a positive regional employment shock in South Africa’s mining industry By Martine Mariotti
  5. Two Steps Forward, One Step Back: The Limits of Foreign Aid on Malawi.s Democratic Consolidation By Resnick, Danielle
  6. The Changing Dynamics of Foreign Aid and Democracy in Mozambique By Manning, Carrie; Malbrough, Monica
  7. Macroeconomic Policies, Growth, Employment, and Inequality in Latin America By Damill, Mario; Frenkel, Roberto
  8. Redistribution without Structural Change in Ecuador: Rising and Falling Income Inequality in the 1990s and 2000s By Ponce, Juan; Vos, Rob
  9. How Aid Supply Responds to Economic Crises: A Panel VAR Approach By Gravier-Rymaszewska, Joanna
  10. Aid, Growth and Private Capital Flows to Ghana By Osei, Robert Darko
  11. Aid as a Second-Best Solution: Seven Problems of Effectiveness and How to Tackle Them By Manning, Richard
  12. Social Policies or Private Solidarity?: The Equalizing Role of Migration and Remittances in El Salvador By Acevedo, Carlos; Cabrera, Maynor
  13. Changes in Labour Market Conditions and Policies: Their Impact on Wage Inequality during the Last Decade By Keifman, Saul N.; Maurizio, Roxana
  14. Foreign Aid and Democratic Development in Africa By Dietrich, Simone; Wright, Joseph
  15. Good Governance as a Concept, and Why This Matters for Development Policy By Gisselquist, Rachel M.
  16. Aid and Dutch Disease in Sub-Saharan Africa By Fielding, David; Gibson, Fred
  17. Foreign Aid in Africa: Tracing Channels of Influence on Democratic Transitions and Consolidation By Resnick, Danielle
  18. Foreign Aid and Democratic Consolidation in Zambia By Rakner, Lise;
  19. Aid, Structural Change and the Private Sector in Africa By Page, John
  20. The Dynamics of Inequality Change in a Highly Dualistic Economy: Honduras, 1991.2007 By Klasen, Stephan; Otter, Thomas; Villalobos Barria, Carlos
  21. Foreign Assistance and the Food Crisis of 2007.08 By Abbott, Philip
  22. Fiscal Composition and Aid Effectiveness: A Political-Economy Model By Mosley, Paul
  23. Economic Growth, Comparative Advantage, and Gender Differences in Schooling Outcomes: Evidence from the Birthweight Differences of Chinese Twins By Rosenzweig, Mark; Zhang, Junsen
  24. Quantifying the Impact of Financial Development on Economic Development By Jeremy Greenwood; Juan M. Sanchez; Cheng Wang
  25. When do donors trust recipient country systems ? By Knack, Stephen
  26. Household coping and response to government stimulus in an economic crisis : evidence from Thailand By Khandker, Shahidur R.; Koolwal, Gayatri B.; Haughtonm Jonathan; Jitsuchon, Somchai
  27. Foreign aid, illegal immigration, and host country welfare By Subhayu Bandyopadhyay; Dustin Chambers; Jonathan Munemo

  1. By: Carlos Gustavo Machicado (Institute for Advanced Development Studies); Felix Rioja (Department of Economics, Georgia State University); Antonio Saravia (Deloitte Tax LLP)
    Abstract: We calibrate a simple neoclassical model of structural transformation to a set of Latin American countries and show that slow growth in agricultural productivity can substantially delay the development process and result in signicant dierences in per capita incomes. Some of our results indicate that low agricultural productivity delayed the beginning of the industrialization process in Paraguay and Bolivia by about 100 years compared to the leader of the group, Chile. The development pro- cess can be accelerated, however, by increasing productivity in the non-agricultural sector. In fact, in the long run, it is non-agricultural productivity what determines the speed of convergence. Improvements in non-agricultural productivity between 20% to over 100% would be required for the other Latin American countries in our set to signicantly close the income gap with Chile by the end of the century.
    Keywords: Economic Development, Latin America, Agriculture Productivity, Manufacturing Productivity
    JEL: O47 O57 E13
    Date: 2012–03
  2. By: Dambala Gelo; Steven F. Koch
    Abstract: In this study, welfare impacts associated with a unique common-property forestry program in Ethiopia were examined. This program is different from other programs, because it is two-pronged: a community forest is developed and additional support is provided for improved market linkages for the community's forestry products. The treatment effects analysis is based on both matching, which assumes random treatment assignment conditional on the observable data, and instrumental variable (IV) methods, which relax the matching assumptions. Data for the analysis is taken from selected villages in Gimbo district, southwestern Ethiopia. The program was found to raise the welfare of the average program participant households. Correcting for selection into the program led to both increased welfare and less precise estimates, as is common in IV analyses. The analysis results underscore the benefits to be derived from expanding the current forestry management decentralization efforts, although these benefits, given the design of the program, cannot be separated from the benefits to be derived from increasing market access for forestry products. However, the results suggest that placing property rights in the hands of those closest to the forest, combined with improved forest product market linkages, offers one avenue for both rural development and environmental improvement
    Keywords: community forestry, treatment effects, IV, matching and Ethiopia
    JEL: Q23 Q28
    Date: 2012
  3. By: Laura Rossouw (Department of Economics, University of Stellenbosch); Rulof Burger (Department of Economics, University of Stellenbosch); Ronelle Burger (Department of Economics, University of Stellenbosch)
    Abstract: Since 1960 South Africa has seen a steep fall in fertility levels and currently the total fertility rate is the lowest on the African continent. Given the high prevailing levels of fertility in African countries, a better understanding of the factors behind the fertility transition can be valuable not only for South Africa, but also more widely for other African countries. This paper uses the National Income Dynamics Study data to construct a retrospective panel to investigate reasons for the decline in fertility in South Africa since the 1960s. The analysis attributes a large share of the observed fertility decline across birth cohorts to improving education levels and the lower prevalence of marriage. However, a considerable segment of the transition is ascribed to the unobservables. This may include HIV/AIDS, the increased use of contraceptives and changes in intra-household relationships and the social role of women.
    Keywords: South Africa, fertility, education, marriage, social norms
    JEL: J13 J12
    Date: 2012
  4. By: Martine Mariotti (Research School of Economics, Australian National University and University of Stellenbosch)
    Abstract: I exploit the sudden increase in employment in 1975, 1976 and 1977 in four former South African homelands to compare the long term adult outcomes of children benefitting from the employment increase to those not subject to it. Using a standard difference in difference approach I find that there was severe malnutrition in the homelands resulting in stunting in African men born during the shock providing support to the foetal origins hypothesis. The employment shock did not affect other long term outcomes such as education and general health, although there is some evidence of an improvement in long term health. This study provides previously unmeasured individual level information on the quality of life in the homelands during apartheid, an era when African living standards were neglected but unmeasured because of a lack of data collection.
    Keywords: apartheid; living standards; stunting; difference-in-difference; foetal origins hypothesis
    JEL: I31 N37
    Date: 2012
  5. By: Resnick, Danielle
    Abstract: Since the era of one-party rule, Malawi.s relationship with the donor community has proved erratic and contentious. During the second term of Malawi.s current president, Bingu wa Mutharika, this trend has continued apace, with important implications for the consolidation of the country.s nascent democracy. Donors providing democracy aid have assisted with the conduct of elections and improved the technical capacity of parliamentarians. However, inconsistency across programme cycles, the concentration of funding around elections, and a reluctance to support political parties hinders the size of democracy aid.s long-term impact. Development aid, particularly general budget support, has tended to further sideline the role of parliament and indirectly has provided the incumbent party with an electoral advantage through support for the country.s fertilizer input subsidy programme. To prevent an erosion of democracy caused by violations of civil liberties, donors often have threatened to withhold aid to Malawi. Yet, they frequently only proceed with these threats when concurrent concerns exist over economic governance, including corruption and management of the exchange rate.
    Keywords: democratic consolidation, donor relations, foreign aid, general budget support, Malawi
    Date: 2012
  6. By: Manning, Carrie; Malbrough, Monica
    Abstract: This study explores the effects of foreign aid on democracy in Mozambique during the last decade. Aid for democracy built on historic relationships forged between donors and the government during the wartime humanitarian emergency. Foreign aid played an important role in Mozambique.s transition from war to peace and from single-party rule to multiparty politics in the early 1990s. Since 2000, aid has shifted markedly toward general budget support and away from project support. Emphasis has moved from building central government institutions to bolstering local governance, and from a focus on democracy to good governance.
    Keywords: Mozambique, foreign aid, democracy, local governance, budget support, project support
    Date: 2012
  7. By: Damill, Mario; Frenkel, Roberto
    Abstract: This paper examines the macroeconomic policies and outcomes experienced by the Latin American economies during the period 1990-2010. Macroeconomic policies refer to exchange rates, monetary and aggregate fiscal policies, while macroeconomic outcomes, on the other hand, refer to the patterns of growth, inflation, employment, investment, balance of payments, and the evolution of external and public debts and international reserves. The analysis includes a discussion of the effects of macroeconomic outcomes on poverty rates. With regard to policy, the study examines the changes that took place in 1997-98, and then reviews the resulting new macroeconomic configuration that was established in 2002-03. This new configuration favoured the acceleration of output growth and employment creation, and contributed to reducing poverty rates.
    Keywords: Latin American economies, macroeconomic policies, economic growth, employment, poverty rates, inequality
    Date: 2012
  8. By: Ponce, Juan; Vos, Rob
    Abstract: This study examines the rise and fall in income inequality in Ecuador over the past two decades. Falling income equality during the 2000s partly coincides with the rise to power of a .new leftist. government, but the trend was already set early in the decade. The recent trend is mainly associated with a recovery from the country.s deep crisis of the late 1990s. The new leftist regime.s social transfer policies helped reduce inequality further, but the continuation of Ecuador.s primary export-based growth model and the lack of structural economic change do not augur for a more structural decline in inequality.
    Keywords: education, welfare, poverty, Ecuador
    Date: 2012
  9. By: Gravier-Rymaszewska, Joanna
    Abstract: The strong interdependence between the developed and developing worlds surfaced with the recent economic downturn. Due to the global character of the economy, the downturn affected not only the North but also the South. In addition, the Official Development Assistance (ODA) is subject to a pro-cyclical trend in aid which falls when donors encounter recession. We attempt to answer the question of whether and how donors adjust aid budgets in response to various macroeconomic shocks. The main objective of the study is to explore the channels as well as behavioural consequences of unexpected financial shocks on aid budget adjustments in the short run. Crises are found to affect aid budgets and their trend through two channels: directly through lower revenues and indirectly by increasing fiscal costs through exchange rates and financial volatility. In addition, this relationship between aid and the donor economy is not solely economic as the donor.s internal political orientation also plays an important role.
    Keywords: financial crisis, aid, donors, panel VAR
    Date: 2012
  10. By: Osei, Robert Darko
    Abstract: This study provides an analysis of the aid-private capital flows-growth nexus for Ghana. It is premised on the argument that Ghana.s new status as a middle income country plus the start of oil production is bound to result in a reduction in ODA inflows in the long term. However in the short to medium term ODA will remain an important component in the country.s fiscals as well as an important tool for leveraging government policy. One of the key questions that the study addresses is how aid can be used as to reinforce the country.s growth in a way that reduces its chances of being a victim of the .oil curse.. The study makes two key observations about the economy of Ghana. First, it notes that although the structure of the economy has changed over the years, the observed change has not been of the developmentally transformative type. Production within the economy still takes place on the lower end of the technology scale and the country.s exports is still dominated by primary products. Second, it notes that revenue from oil can at best replace foreign aid in the long run. However in the short to medium term, Ghana will have the complement of both oil and aid. It there behoves on the country that aid is used in an efficient and creative way so as to help improve productivity and production in agriculture and manufacturing. The study concludes by making two suggestions as to how aid can be used to help transform the economy. The first suggestion is to tackle the structural deficiency in the country.s fiscals in a decisive way. The second is the need to properly prioritize public investments so as to maximize their returns.
    Keywords: aid, oil production, structural change
    Date: 2012
  11. By: Manning, Richard
    Abstract: Most rich countries developed without aid, and this .self-development. has some intrinsic advantages. In today.s massively unequal world, however, such an approach would imply very low levels of human development for several generations for many poor countries. Aid can therefore usefully be thought of as a necessary but .second-best option.. The challenge then is how to manage this second-best option, particularly in the more aid-dependent states and the more fragile environments, in order to achieve sustainable results. The study examines seven problems that can limit the effectiveness of aid, and suggests possible ways of tackling them.
    Keywords: aid, aid effectiveness, development
    Date: 2012
  12. By: Acevedo, Carlos; Cabrera, Maynor
    Abstract: This paper reviews the pattern of poverty rates and income inequality in El Salvador since the 1990s. It discusses some of the likely factors that explain the reduction in income inequality that has taken place in the country in the last decade, which paradoxically has coincided with the long period of economic stagnation that has followed dollarization since 2001. After examination of the available evidence, we conclude that this trend has been mainly due to the equalizing effect of migration and remittances (that is, a .private safety net. built around solidarity within families) rather than the distributive effect of public social expenditure or other public policies.
    Keywords: El Salvador; remittances; migration; inequality; poverty; labour market
    Date: 2012
  13. By: Keifman, Saul N.; Maurizio, Roxana
    Abstract: Labour market incomes have been a major contributor to the important fall in inequality in Latin America during the 2000s. Indeed, it was the main contributor in countries where inequality fell more dramatically. A proper understanding of the workings of the labour market is necessary to comprehend why inequality fell, what lies ahead of us and what we can do to achieve more equitable societies in Latin America. Social progress was real in the last decade but we should not overlook the structural deficits that still remain in Latin American labour markets. Inequality fell more dramatically in countries where formality rose faster and real minimum wages increased more significantly. Labour market institutions have a played positive role in reducing inequity in the last decade.
    Keywords: labour institutions, inequality, Latin America, minimum wage
    Date: 2012
  14. By: Dietrich, Simone; Wright, Joseph
    Abstract: Over the past two decades, donors increasingly linked foreign aid to democracy objectives in sub-Saharan Africa. Yet systematic research on this topic typically focuses on how aid influences democratic transitions. This study investigates whether and how foreign aid affects the process of democratic consolidation in sub-Saharan Africa by examining two potential mechanisms: (1) the use of aid as leverage to buy political reform, and (2) investment in the opposition. We test these mechanisms using five dependent variables that capture different aspects of democratic consolidation. Using survival analysis for the period from 1991 to 2008, we find that democracy and governance aid has a consistently positive effect on democratic consolidation. Economic aid, on the other hand, has no effect on democratic consolidation.
    Keywords: Africa, democratic consolidation, foreign aid, survival analysis
    Date: 2012
  15. By: Gisselquist, Rachel M.
    Abstract: Almost all major development institutions today say that promoting good governance is an important part of their agendas. Despite this consensus, .good governance. is an extremely elusive objective: it means different things to different organizations and to different actors within these organizations. This study provides a review of donor approaches and discusses good governance as a concept. While methodological discussions are often esoteric, the study argues that this one has real world relevance to development policy because donor agencies regularly measure and assess the quality of governance, condition assistance on these measurements, seek to design evidence-based policies, and justify their focus on good governance partly on the basis of claims that better governance promotes economic development. The weakness of the good governance concept calls into question each of these projects. Future work would do well to disaggregate the concept of good governance and refocus attention and analysis on its various disaggregated components, as defined here (e.g., democracy, the rule of law, efficient public management).
    Keywords: democracy, development policy, foreign aid, good governance, governance
    Date: 2012
  16. By: Fielding, David; Gibson, Fred
    Abstract: International aid has an ambiguous effect on the macroeconomy of the recipient country. To the extent that aid raises consumer expenditure, there will be some real exchange rate appreciation and a shift of resources away from traded goods production and into non-traded goods production. However, aid for investment in the traded goods sector can mitigate this effect. Also, a relatively high level of productivity in the non-traded goods sector combined with a high level of investment will tend to depreciate the real exchange rate. We examine aid inflows in 26 sub-Saharan African countries, and find a variety of macroeconomic responses. Some of the variation in the responses can be explained by variation in observable country characteristics; this has implications for donor policy.
    Keywords: aid, Dutch disease, Africa
    Date: 2012
  17. By: Resnick, Danielle
    Abstract: How does aid impact democracy in sub-Saharan Africa? Drawing on existing literature, this study elaborates on the various channels, direct and indirect, through which development and democracy aid has influenced transitions to multi-party regimes and democratic consolidation within the region. The study.s findings are at least threefold. First, development aid was effective at promoting democratic transitions during the 1990s in those African countries that were beset by economic crisis, faced domestic discontent, or possessed a high dependence on aid, as well as when major donors took concerted action. Second, development and democracy aid demonstrate disparate effects on key elements of consolidation, including the avoidance of democratic erosion, the enhancement of accountability, and the promotion of competitive party systems. Development aid.s most direct influence is with respect to preventing democratic backsliding, though this is often done in an inconsistent manner. Democracy aid plays a more direct role with respect to enhancing accountability and party systems but, its cumulative impact remains hindered by the dispersion of assistance across different activities and its temporal focus on elections. Third, in some areas of consolidation, the disparate objectives of development and democracy aid create clear trade-offs that remain unresolved.
    Keywords: accountability, Africa, democratic consolidation, foreign aid, party systems
    Date: 2012
  18. By: Rakner, Lise;
    Abstract: The study examines Zambia.s evolving aid relationship in relation to the country.s democratic trajectory. The impact of aid in terms of democratic consolidation is linked to the development of the party system, the efficacy of key democratic institutions, and accountability in relation to tolerance of participation by the media and civil society in the political process. The study suggests that there are many good reasons for so-called traditional donors to phase out aid to Zambia. Zambia has recorded economic growth for the most part of this decade, but poverty levels still stand at near 70 per cent and both equity issues and poor human development indicators provide reasons for concern. The study cautions against an aid exit at a time when economic growth and new foreign partners may strengthen the executive office vis-à-vis civil society, opposition and agencies of restraint. The study argues for an enhanced emphasis on democracy assistance that may strengthen stakeholders and institutions with capacity to hold the executive to account for their policy actions in terms of development.
    Keywords: Zambia, aid, democracy, political parties, civil society
    Date: 2012
  19. By: Page, John
    Abstract: This paper argues that official development assistance (foreign aid) is partly responsible for the lack of structural change in Africa. Africa.s development partners have devoted too few resources and too little attention to two critical constraints to private investment, infrastructure and skills, focusing instead on easily understood, but potentially low impact regulatory reforms. A new aid strategy, one that catalyses private investment in high value added sectors, is needed. Support for strategic interventions to push non-traditional exports, support industrial agglomerations, build firm capabilities, and strengthen regional integration should anchor a new donor agenda to create good jobs and sustain growth.
    Keywords: aid, structural change, private sector, industry, exports
    Date: 2012
  20. By: Klasen, Stephan; Otter, Thomas; Villalobos Barria, Carlos
    Abstract: We examine the drivers of inequality change in Honduras between 1991-2007, trying to understand why inequality increased in Honduras until 2005, while it was falling in most other Latin American countries. Using annual household surveys, we document first rising inequality between 1991-2005, which is followed by falling inequality thereafter. Using an inequality decomposition technique, we show that the rising inequality between 1991 and 2005 was, for the most part, driven by the dispersion of labour incomes in rural areas. We also show that the extraordinary labour earnings disequalization is mainly the result of a widening wage gap between the tradable and non-tradable sectors and occupations, combined with highly segmented labour markets and poor overall educational progress. The underlying determinants of the divergencebetween tradable and non-tradable sectors were highly overvalued currencies and poor commodity process for Honduras. agricultural exports. Between 2005 and 2007, however, the inequality reduction was a result of equalizing trends in labour and non-labour incomes. The commodity boom promoting the tradable sector and remittances (in this order) played a significant role here, with government transfers playing a small supporting role. Since the decline in inequality is largely driven by international factors, we cannot be sure whether the decline in inequality will continue.
    Keywords: inequality, decomposition, education, wages, Honduras, migration
    Date: 2012
  21. By: Abbott, Philip
    Abstract: Dramatically increased international agricultural commodity prices from 2007 to mid-2008 brought food inflation and greater incidence of poverty and malnutrition to developing countries. Higher food prices in 2011 threaten to repeat that crisis. The international community responded strongly to these concerns in 2008 and 2009, promising greater financial support for food aid, safety nets, and agricultural development. The focus of international dialogue differed somewhat from the priorities of national governments, and the objectives of national governments mostly targeting short-run responses to both food security and agriculture prevailed. But a long-run trend of declining foreign assistance to agriculture appears to have reversed.Nevertheless, foreign assistance was small relative to promises made by donors, increased grain and fertilizer import costs, budgetary costs of mitigating policy responses, an investment costs needed to accelerate agricultural production. Both food aid and agricultural development projects have in the past come under the criticisms found in the aid effectiveness debate. Issues to be addressed if renewed efforts toward agricultural development and food aid are to be effective are explored here. High returns to agricultural research require that enabling institutions are developed. National ownership and governance of initiatives that share donor objectives focusing on poverty and long-run development are critical to success.
    Keywords: foreign assistance, food crisis, agricultural development, food aid, safety nets, aid effectiveness, international commodity prices
    Date: 2012
  22. By: Mosley, Paul
    Abstract: In accounting for the rather gloomy trend of the aid effectiveness literature over the last few years, one explanatory strand has been fiscal, suggesting in particular that aid flows in weak states have tended to erode the taxbase and the structure of institutions. We pursue this idea, tracing the link from politics to domestic tax effort and then using the influence of this on expenditure to explain the leverage of aid. Thus, we argue that in the long run, tax effort determines the effectiveness of aid, and this relationship operates simultaneously in some countries with the negative link in the opposite direction, from aid to domestic tax effort, as observed by Bräutigam and Knack (2004) and others. We find that tax effort and the ability of the state to diversify its taxation structure are important determinants of long-term growth and aid effectiveness, and in our model, we find that overall aid effectiveness is, in a 3SLS model, weakly positive and significant, echoing the findings of Arndt, Jones and Tarp (2009) and Minoiu and Reddy (2010); however, these findings are not robust when retested using the GMMapproach favoured by the literature. A more robust finding, and a key message for policy, is that a broadening of the tax structure in low-income countries is crucial in order to enable those countries to escape from the .weak state . low tax trap., and to make aid more effective.
    Keywords: aid effectiveness, tax policy
    Date: 2012
  23. By: Rosenzweig, Mark (Yale University); Zhang, Junsen (Chinese University of Hong Kong)
    Abstract: Data from two surveys of twins in China are used to contribute to an improved understanding of the role of economic development in affecting gender differences in the trends in, levels of, and returns to schooling observed in China and in many developing countries in recent decades. In particular, we explore the hypothesis that these phenomena reflect differences in comparative advantage with respect to skill and brawn between men and women in the context of changes in incomes, returns to skill, and/or nutritional improvements that are the result of economic development and growth.
    JEL: I15 I25 J16 J24 O15
    Date: 2012–02
  24. By: Jeremy Greenwood (University of Pennsylvania); Juan M. Sanchez (Federal Reserve Bank of St. Louis); Cheng Wang (Iowa State University)
    Abstract: How important is financial development for economic development? A costly state veriÂ…cation model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as the intermediation spreads and the firm-size distributions for 1974 and 2004. It is then used to study the international data using cross-country interest-rate spreads and per-capita GDPs. The analysis suggests a country like Uganda could increase its output by 116 percent if it could adopt the worldÂ’s best practice in the financial sector. Still, this amounts to only 29 percent of the gap between UgandaÂ’s potential and actual output.
    Keywords: costly state veriÂ…cation, economic development, Â…financial intermediation, fiÂ…rm-size distribution, interest-rate spreads, cross-country output differences, cross-country differences in Â…financial sector productivity, cross-country TFP differences
    JEL: E13 O11 O16
    Date: 2012–03
  25. By: Knack, Stephen
    Abstract: The 2005 Paris Declaration on Aid Effectiveness sets targets for increased use by donors of recipient country systems for managing aid. The target is premised on a view that country systems are strengthened when donors trust recipients to manage aid funds, but undermined when donors manage aid through their own separate parallel systems. This study provides an analytical framework for understanding donors'decisions to trust or bypass country systems. Empirical tests are conducted using data from three OECD-DAC surveys designed to monitor progress toward Paris Declaration goals. Tests show that a donor's use of the recipient country's systems is positively related to: (1) the donor's share of aid provided to the recipient (a proxy for the donor's reputational stake in the country's development); (2) perceptions of corruption in the recipient country (a proxy for the trustworthiness or quality of the country's systems); and (3) public support for aid in the donor country (a proxy for the donor's risk tolerance). Findings are robust to corrections for potential sample selection, omitted variables or endogeneity bias.
    Keywords: Gender and Health,Development Economics&Aid Effectiveness,Disability,Coastal and Marine Environment,Microfinance
    Date: 2012–04–01
  26. By: Khandker, Shahidur R.; Koolwal, Gayatri B.; Haughtonm Jonathan; Jitsuchon, Somchai
    Abstract: The crash of global financial markets in 2008 caused a ripple effect on economic demand and growth worldwide. Export-oriented economies were hit particularly hard, and many governments stepped in quickly with broad-ranging stimulus programs to lessen the effects on households of rising unemployment and falling income. To better understand the role that stimulus policy might play in softening the effects of these shocks, this paper examines recent nationally-representative data from Thailand, an export-dependent economy where a large-scale stimulus program was introduced in 2009. Using monthly data spanning 2006-2010, the paper uses sub-province-level community panel data to examine the effects of major components of the stimulus on household consumption, income, borrowing, and debt repaid. To address simultaneity of changes in government spending and household outcomes, the analysis estimates a dynamic panel regression, instrumenting the stimulus effect with second-order lagged outcome variables, and estimating the model using the Generalized Method of Moments. The results suggest that household participation in these programs helped smooth consumption. This increase in monthly consumption was not supported from household receipts from the government stimulus, but more likely through a reallocation of consumption and savings that included greater debt repayment. The paper typically finds stronger effects in urban compared with rural areas.
    Keywords: Economic Theory&Research,Emerging Markets,Rural Poverty Reduction,Climate Change Economics,Debt Markets
    Date: 2012–03–01
  27. By: Subhayu Bandyopadhyay; Dustin Chambers; Jonathan Munemo
    Abstract: This paper analyzes the effect of foreign aid on illegal immigration and host country welfare using a general equilibrium model. We show that foreign aid may worsen the recipient nation’s terms of trade. Furthermore, it may also raise illegal immigration, if the terms of trade effect on immigration flows dominates the other effects identified in our analysis. Empirical analysis of the effect of foreign aid on illegal immigration to the United States broadly supports the predictions of our theoretical model. Foreign aid worsens the recipient’s terms of trade. While the terms of trade effect tends to reduce illegal immigration, countervailing effects are found to dominate. The paper contributes to the related literature by establishing that there are unintended consequences of foreign aid, and, while some of them are reminiscent of the classical transfer problem, others are new and arise due to endogenous illegal immigration flows.
    Keywords: Foreign aid program ; Immigrants ; Public welfare
    Date: 2012

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