nep-dev New Economics Papers
on Development
Issue of 2012‒05‒15
nineteen papers chosen by
Mark Lee
Towson University

  1. Barriers to Capital Accumulation and the Incidence of Child Labor By Richard C. Barnett; Marco A. Espinosa-Vega
  2. Guest-Worker Migration, Human Capital and Fertility By Leonid V. Azarnert?
  3. Predation, Labor Share and Development By Carlos Bethencourt; Fernando Perera-Tallo
  4. A Causal Panorama of Cross-Country Human Development By David Mayer-Foulkes
  5. Migration, Remittances and Growth By Nurgul Ukueva
  6. Interests of Social Groups, Direction of Technical Progress, and Barriers to Development: How Sustainable is the World Economic Growth? By Vladimir D. Matveenk
  7. Social Globalization and Child Labor By Congdon Fors, Heather
  8. Techniques for dealing with reverse causality between institutions and economic performance By Cingolani, Luciana; Crombrugghe, Denis de
  9. Institutions and long-run growth performance: An analytic literature review of the institutional determinants of economic growth By Bluhm, Richard; Szirmai, Adam
  10. Preliminary conclusions on institutions and economic performance By Crombrugghe, Denis de; Farla, Kristine
  11. Stylized facts of governance, institutions and economic development. Exploring the institutional profiles database By Verspagen, Bart
  12. Gender, geography and generations : intergenerational educational mobility in post-reform India By Emran, M. Shahe; Shilpi, Forhad
  13. Experiments in culture and corruption : a review By Banuri, Sheheryar; Eckel, Catherine
  14. Female wages in the apparel industry post-MFA : the cases of Cambodia and Sri Lanka By Savchenko, Yevgeniya; Acevedo, Gladys Lopez
  15. What has driven the decline of infant mortality in Kenya ? By Demombynes, Gabriel; Trommlerova, Sofia Karina
  16. Young women's economic daily lives in rural Ethiopia By Kodama, Yuka
  17. Mapping Modes of Rural Labour Migration in China By Sylvie Démurger
  18. The location substitution effect: does it apply for China? By Banik, Nilanjan; Das, Khanindra Ch.
  19. Misallocation, Property Rights, and Access to Finance: Evidence from Within and Across Africa By Sebnem Kalemli-Ozcan; Bent E. Sorensen

  1. By: Richard C. Barnett; Marco A. Espinosa-Vega
    Abstract: The World Bank documents an inverse relationship between GDP per-capita and child labor participation rates. We construct a life-cycle model with human and physical capital in which parents make a time allocation choice for their child. The model considers two features that have shown potential in explaining differences in states of development across nations. These are: i) a minimum consumption requirement, and ii) barriers to physical capital accumulation. We find the introduction of capital barriers alone is not enough to replicate the aforementioned observation by the World Bank. However, we find the interplay of a minimum consumption requirement and barriers to capital may enhance our understanding of child labor, human capital, and the poverty of nations. Additionally, we find support for policies aimed at reducing capital barriers as means to reduce child labor over an out and out ban on it.
    Date: 2011–09
  2. By: Leonid V. Azarnert?
    Abstract: This work focuses on a temporary guest-worker-type migration of individuals from the middle class of the wealth distribution. The article demonstrates that the possibility of a low-skilled guest-worker employment in a higher wage foreign country lowers the relative attractiveness of the skilled employment in the home country. Thus it prevents a fraction of individuals from acquiring human capital. Therefore, even if all individuals who acquired education remain in the home country, the actual number of educated workers in the source economy decreases, and the aggregate level of human capital in this economy would thus be negatively affected.
    Keywords: Migration, Human Capital, Fertility, Brain Drain, Economic Growth
    JEL: F22 F43 J13 J24 J61 O15
    Date: 2011–09
  3. By: Carlos Bethencourt; Fernando Perera-Tallo
    Abstract: This paper proposes a new mechanism based on the allocation of labor to help understand why differences among countries have remained stable. We formulate a neoclassical growth model in which agents devote time either to produce or to commit predation. Labor share is the key variable which determines in equilibrium the time devoted to each activity: an increase in the labor share raises the incentive to devote time to production and discourages predation. When the elasticity of substitution between labor and capital is lower than one, the labor share rises throughout the transition while the per capita capital is lower than the steady state level. This increase in the labor share reduces the incentive to predate and increases the incentive to work for production. Empirical evidence supports these results: low per capita income countries have larger portions of predation and present lower labor shares. The standard effects of an increase in the productivity are amplified by the indirect effects of productivity on the reallocation of labor from predation to production. Institutional improvements play a key role in reducing predation and increasing the level of per capita income.
    Keywords: Predation, Rent-seeking, Labor share, Growth, Development
    JEL: O15 O17 O29 O30
    Date: 2011–09
  4. By: David Mayer-Foulkes
    Abstract: I broadly summarize the theoretical and recent empirical literatures on human development. Using Gray and Purser’s 1970-2010 database of human development index (HDI) components (income, life expectancy, literacy, gross enrolment ratios) for 135 countries, together with indicators of the demographic transition, urbanization, technological change, sustainability, and institutions (15 variables), I construct a panel for the 1985-2010 quinquennia, and instruments for the same variables using the 1970-1980 data and conduct a descriptive dynamic analysis. I then analyze the matrix of causal interactions between the 15 variables, using three types of instrumented regressions for each matrix entry: a) levels regressions; b) growth regressions; c) growth regressions also containing the contemporary growth of independent variables. This analysis is repeated for 3 subsamples obtained according to HDI levels and another 3 according to technological levels. The Hausman and Sargan test results show a ranking of endogenous determination and indirect impacts of the variables on each other that vary qualitatively for levels and growth and across HDI and technological levels. Main results: the HDI distribution is broadly twin peaked and its dynamics vary substantively across HDI and technological levels. The main development transitions are broadly advancing at different stages: fertility, infant mortality, the dependency ratio, literacy, enrolment, life expectancy, urbanization. Also, there is a transition towards more democracy and less autocracy. However, at very low HDI levels income per capita decreased. The main policy suggestions for promoting the demographic and human development transition are to support: technology transfer to the poor, investments not supplied by the markets (human capital, urbanization, sustainability), the emergence of democracy, and global governance.
    Keywords: Human Development, Technology Transfer, Democracy, Global Governance, Causality
    JEL: O11 O20 O47
    Date: 2011–09
  5. By: Nurgul Ukueva
    Abstract: This paper analyzes the effect of migration and remittances on a small, open, migrant-sending country in the context of an endogenous growth model with technology transfers. The paper demonstrates that, due to a dynamic feedback effect from economic conditions to migration and from migration to economic development in an economy exposed to migration, initial conditions can determine its long-run steady state, leading to the rise of vicious or virtues circles of development. Countries with a low level of technological development may end up in a poverty trap, in which a low level of development results in low wage rates and consequently high migration rates. The high migration and loss of manpower in a general equilibrium generates less demand for the adoption of leading technologies, reducing incentives to invest into new technologies. This reduced incentive effect in turn leads to low output and low wages and even higher migration next period. Potentially, as in the case of depopulated countries and regions the economy diverges from the world’s growth rate and eventually ends up being emptied out. The poverty trap with migration is possible even with the possibility of transfer of foreign technologies and for an economy that was converging to the world’s growth rate absent migration. Altruistic remittances as an important by-product of migration allow people to share the benefits of technological advances developed elsewhere and dampen the negative impact of migration. In particular, remittances remove the limiting case of emptying out of the economy and reduce the chances of ending up in a poverty trap.
    Date: 2011–09
  6. By: Vladimir D. Matveenk
    Abstract: A considerable part of literature in the theory of economic growth is devoted to detecting of a relative role of factor accumulation, technological changes and institutions in economic growth. In the present paper an attempt is made to link and explain stylized facts characterizing economic growth in the contemporary World: i) there is a high degree of heterogeneity in levels of development and growth rates of countries, ii) the countries are subdivided into groups characterized, correspondingly, by low, intermediate and high levels of the capital to labor ratio and of the average labor productivity, iii) these groups of countries are rather stable in their composition; in particular some countries with a low capital to labor ratio stay in a “poverty trap” for a long time, iv) there is a global tendency of an increase in the capital share in GNP, v) the growth is influenced by political and social factors. In this paper a model is proposed in which two types of technological changes are distinguished: (a) an endogenous growth of the total factor productivity (TFP) and (b) a change in a technological parameter of a production function defining a directedness of technological progress. The latter change in technology is controlled by social groups – owners of labor (workers) and owners of capital (“capitalists”) – in a country and takes place together with a change in factor shares. We describe areas of coincidence and of non-coincidence of interests of the social groups related to a choice of technology and, correspondingly, to a distribution of the national product. The frontiers of these areas are made more precise taking account of a boundedness of the capital to labor ratio. Roles of the TFP and the elasticity of substitution in formation of the areas of social cohesion are of social conflict are studied. It is proved that, under some conditions, a degree of social cohesion increases. In a certain degree, the model is close to models of the new political economy (see e.g. Besley, 2007) and fills their shortage of account of technological progress and of dependence of political decisions on the state of economy. The model provides a possible explanation of a stability of the poverty traps, it shows a role of the TFP as a potential for the economic growth, and, in particular, it demonstrates a possibility of an economic crisis in industrial countries in result of an “innovation pause”. The model also throws light on differences in possibilities of growth in poorly developed, actively developing and industrial countries; in particular, it explains, why there is no advantage of late start in low income countries in a poverty trap.
    Date: 2011–09
  7. By: Congdon Fors, Heather (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In recent years, a growing number of authors have turned their focus to the question of why children work. While much of the research focuses on household level factors, macroeconomic factors have gained increasing attention. This is particularly true in the case of globalization. The purpose of this paper is to contribute to the literature on the role of globalization in child labor by examining a specific aspect of globalization: social globalization. The results of the empirical analysis indicate that social globalization does have a significant impact on the average incidence of child labor in the cross-country sample of developing countries.<p>
    Keywords: child labor; globalization; norms
    JEL: J20 O11
    Date: 2012–05–07
  8. By: Cingolani, Luciana (UNU-MERIT / MGSOG, Maastricht University); Crombrugghe, Denis de (School of Business and Economics, Maastricht University)
    Abstract: This article provides a succinct review of the arguments stressing the mutual relationship between institutions and economic performance, and a scholarly account of some of the most popular econometric strategies used to minimize reversed causality problems in impact estimation. Among the techniques revisited we find the instrumental variables (IV) approach, distributed lags and vector autoregressions (VAR), quasi-experiments, and identification by heteroskedasticity (IH). Ultimately, the review is conceived as a methodological aide to researchers seeking to explore causal relationships through the use of the Institutional Profiles Database (IPD) produced by the Agence Francaise de Developpement (AFD).
    Keywords: Institutions and growth, endogeneity, instrumental variables, dynamic analysis, identification, heteroskedasticity.
    JEL: O42 C33 C36 P14
    Date: 2012
  9. By: Bluhm, Richard (UNU-MERIT / MGSOG, Maastricht University); Szirmai, Adam (UNU-MERIT / MGSOG, Maastricht University)
    Abstract: This paper provides an analytic review of selected contributions to the study of institutions and economic growth. We review the contributions to the study of institutional determinants of long-run growth by Engerman and Sokoloff, and Acemoglu, Johnson and Robinson. We discuss the work of Rodrik and others who focus on institutions and institutional reform and take steps towards bridging the gap between the study of long-run and short-run growth performances. In addition, we review two new theoretical frameworks by North, Wallis and Weingast and Khan that relate the structure of institutions to short-run volatility and long-run growth trends. We survey a wide array of supplementary econometric evidence and criticisms relating to each of these key contributions. Special attention is given to identifying the underlying causal relationships, the empirical methods and the kind of data used to test theories and hypotheses found in the literature. Further, we compare the findings in different strands of the literature using a sources-of-growth framework which distinguishes between ultimate, intermediate and proximate causes of growth and development.
    Keywords: growth, institutions, inequality, development
    JEL: O43 O30 O11
    Date: 2012
  10. By: Crombrugghe, Denis de (School of Business and Economics, Maastricht University); Farla, Kristine (UNU-MERIT / MGSOG, Maastricht University)
    Abstract: Using institutional indicators describing 122 countries, we conduct an exploratory study highlighting which institutional characteristics differ across countries with different levels of income and rates of growth. We describe a country's institutions by the degree of formalization of its regulations, the depersonalization of their implementation, and by the degree of control and intervention of the state. Our findings reveal that the variation in state control and intervention decreases along with countries formalization of regulations. This phenomenon may be explained by institutional convergence, by endogeneity in the data and/or by bias. In addition, we find evidence of a strong relationship between institutions and income levels; however, we find no such evidence on growth rates. We find mixed evidence for a relationship between institutions and growth volatility.
    Keywords: Institutions, Economic performance, Growth
    JEL: O11 O43
    Date: 2012
  11. By: Verspagen, Bart (UNU-MERIT / MGSOG, and School of Business and Economics, Maastricht University)
    Abstract: The empirical literature on economic growth agrees that institutions and governance are important determinants of long-run economic growth rates. As a stylized fact, this literature points to a strong correlation between the level of GDP per capita and the general development level of institutions and governance. However, the growth rate of GDP per capita itself, as well as other indicators that are broadly associated with the level of economic development, are generally much less strongly correlated with the level of institutional development. We document these correlations, and argue that there is a need for a broader set of stylized facts about institutions, governance and economic development, covering the broader set of economic indicators, including the growth rate itself. To find such stylized facts, we use canonical correlation analysis. We use a database on institutions and governance that has a very large number of indicators, and our analysis produces a number of aggregated measurements of institutions and governance that broadly correlate with patterns of economic development. The analysis confirms the correlation between the general level of economic development on the one hand, and institutional development on the other hand, which is the core stylized fact identified in the literature. In addition to this, our analysis points to the general attitude towards markets, and the level of financial development as specific dimensions of the institutional and governance characteristics of a country that correlate highly with specific development patterns. In particular, we find that a positive attitude towards markets combined with a low level of financial development goes together with growth rates, based on catching-up. We also find that a tendency towards market steering combined with strong financial development goes together with a high involvement in international trade (openness), combined with a low investment rate.
    Keywords: institutions, governance, economic development
    JEL: O10 O16 O17 O43
    Date: 2012
  12. By: Emran, M. Shahe; Shilpi, Forhad
    Abstract: India experienced sustained economic growth for more than two decades following the economic liberalization in 1991. While economic growth reduced poverty significantly, it was associated with an increase in inequality. Does this increase in inequality reflect deep-seated inequality of opportunity or efficient incentive structure in a market oriented economy? This paper provides evidence on economic mobility in post-reform India by focusing on the educational attainment of children. It uses two related measures of immobility: sibling and intergenerational correlations. The paper analyzes the trends in and patterns of educational mobility from 1992/93 to 2006, with a special emphasis on the roles played by gender and geography. The evidence shows that family background plays a strong role; the estimated sibling correlation in India in 2006 is higher than the available estimates for Latin American countries. There is a persistent gender gap in rural and less-developed areas. The only group that experienced substantial improvements is women in urban and developed areas, with the lower caste women benefiting the most. Almost 70 percent of the variance in children's education can be accounted for by parental education and geographic location. The authors provide possible explanations for the apparently puzzling improvements for urban women in a country with strong son preference.
    Keywords: Population Policies,Primary Education,Education and Society,Population&Development,Rural Development Knowledge&Information Systems
    Date: 2012–05–01
  13. By: Banuri, Sheheryar; Eckel, Catherine
    Abstract: Two decades of empirical evaluation have shown that corruption has a negative impact on economic growth, political stability, judicial effectiveness, democratization, educational attainment, and equality of income. However, corruption exists, persists, and varies significantly by culture. Lab studies have recently come to the forefront in identifying both the incentives and disincentives for corrupt behavior. However, lab studies on culture and corruption have led to some puzzling, contradictory results. This paper begins with a discussion of non-experimental work in this area, and evaluates the experimental findings in the context of earlier research. The authors sketch out the channels through which culture interacts with corruption (through institutions and social norms), and argue that discrepancies in experimental results may be due to differences in design (including repetition or unobserved variation in beliefs) or to differences in the response to punishment across societies. In addition to exploring design-based reasons for previous contradictory findings, avenues for future research include: behavioral responses to different types of externalities; replicating results in different countries; and utilizing the lab to formulate effective anti-corruption measures.
    Keywords: Public Sector Corruption&Anticorruption Measures,Corruption&Anticorruption Law,Cultural Policy,Crime and Society,Social Accountability
    Date: 2012–05–01
  14. By: Savchenko, Yevgeniya; Acevedo, Gladys Lopez
    Abstract: The end of the Multi-fiber Arrangement/Agreement on Textiles and Clothing in 2005 was a major policy change that affected the allocation of global apparel productions well as the lives of workers involved in this sector. Since the apparel industry is often the major female employer in developing countries, this policy change was expected to have major implications for women. This paper analyzes the wages and working conditions of women in the apparel sector in Cambodia and Sri Lanka following the phase-out the Multi-fibre Arrangement. In both countries, apparel is a major source of exports, and women constitute 70 to 80 percent of the workers employed in the apparel industry. The paper finds that after the removal of the Multi-fibre Arrangement, apparel prices declined as a result of the increased competition. The theoretical model suggests that a decrease in prices would lead to a decrease in apparel wage premiums relative to other industries in the short run and the widening of the male-female wage gap in the long run. The empirical findings support these theoretical predictions. Wage premiums in the apparel sector relative to other industries went down post-Multi-fibre Arrangement in Cambodia and Sri Lanka and the male-female wage gap increased. The paper finds mixed results in terms of working conditions in Cambodia and Sri Lanka.
    Keywords: Free Trade,Labor Policies,Labor Markets,Water and Industry,Work&Working Conditions
    Date: 2012–05–01
  15. By: Demombynes, Gabriel; Trommlerova, Sofia Karina
    Abstract: Substantial declines in infant and under-5 mortality have taken place in recent years in many countries in Sub-Saharan Africa. Kenya's infant mortality rate has fallen by 7.6 percent per year, the fastest rate of decline among the 20 countries in the region for which recent Demographic and Health Survey data is available. Kenya's rate of postneonatal deaths per 1,000 live births fell by more than half over a five-year period, dropping from 47 to 22, as measured using data from the 2003 and 2008-09 Demographic and Health Surveys. Among the possible causes of the decline are various targeted new public health initiatives and improved access to water and sanitation. A Oaxaca-Blinder decomposition using Demographic and Health Survey data shows that the increased ownership of insecticide-treated bednets in endemic malaria zones explains 39 percent of the decline in postneonatal mortality and 58 percent of the decline in infant mortality. Changes in other observable candidate factors do not explain substantial portions of the decline. The portion of the decline not explained may be associated with generalized trends such as the overall improvement in living standards that has taken place with economic growth. The widespread ownership of insecticide-treated bednets in areas of Kenya where malaria is rare suggests that better targeting of insecticide-treated bednet provision programs could improve the cost-effectiveness of such programs.
    Keywords: Population Policies,Health Monitoring&Evaluation,Early Child and Children's Health,Adolescent Health,Disease Control&Prevention
    Date: 2012–05–01
  16. By: Kodama, Yuka
    Abstract: In rural Ethiopia, livelihood diversification is essential for households to be able to sustain themselves. Declining agricultural profits and a land shortage have accelerated this diversification. While the past literature has ignored young women's economic contributions in its discussions about livelihood diversification, this research indicates that the current rapid educational expansion for girls has changed their economic role in their households. This has resulted in changes in the conventional life courses of women in rural Ethiopia as they have more choices in terms of education, marriage, and the types and location of their economic activities, due to the increasing importance of young women's economic contributions to their households and their improved educational opportunities. The aim of this paper is to elucidate how the economic environment and government educational policy have affected young women's lives in terms of education, marriage, economic activities, and intra-household power relationships, especially with their parents.
    Keywords: Ethiopia, Female labor, Women, Rural societies, Household
    JEL: J16 J21
    Date: 2012–03
  17. By: Sylvie Démurger (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: Internal labour migration has become an important part of the process of China’s industrialization and urbanisation in the 2000s. Using micro data for the year 2007, this chapter attempts to contribute to a better understanding of the motives of and the constraints to labour mobility in China. Drawing on various empirical investigations at the household level, it examines both the decision and the level of migration and provides a mapping of the main factors driving different types of labour mobility across space (by destination) and time (by duration).
    Keywords: rural-urban migration, destination, duration, migration networks, China
    JEL: O15 R23 D13 O53
    Date: 2012
  18. By: Banik, Nilanjan; Das, Khanindra Ch.
    Abstract: The notion about China being factory of the world is changing. Factories in China are shifting their production base to neighboring Asia, primarily because of higher input costs in China, a volatile Chinese exchange rate, Chinese exports being increasingly targeted by its major trading partners, and a fall in price-competitiveness in producing in mainland China. We examine the location substitution effect for China: Chinese firms are exporting primary, intermediate and machinery items, meant for producing final output elsewhere. Results suggest Chinese firms are increasingly substituting their production base outside China.
    Keywords: Trade; Foreign Direct Investment; China; GMS
    JEL: F14
    Date: 2012–04–17
  19. By: Sebnem Kalemli-Ozcan; Bent E. Sorensen
    Abstract: We study capital misallocation within and across 10 African countries using the World Bank Enterprise Surveys. First, we compare the extent of misallocation among firms within countries. We document high variation in firms' marginal product of capital (MPK), implying that countries could produce significantly more with the same aggregate capital stock if capital were allocated optimally. Such variation differs from country to country with some African countries (success stories) closer to developed country benchmarks. Small firms and non-exporters have less access to finance and have higher returns to capital in general. Self reported measures of obstacles to firms' operations suggest access to finance is the most important obstacle: A firm with the worst access to finance has MPK 45 percent higher than a firm with the worst access to finance as a result of low capital per worker. We compare average levels of the MPK across countries, finding evidence that the strength of property rights and the quality of the legal system help explain country-level differences in capital misallocation.
    JEL: F40 O10
    Date: 2012–05

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