nep-dev New Economics Papers
on Development
Issue of 2012‒06‒05
twenty-two papers chosen by
Mark Lee
Towson University

  1. Labour informality in Latin America: the case of Argentina, Chile, Brazil and Peru By Roxana Maurizio
  2. The devil is in the shadow. Do institutions affect income and productivity or only official income and official productivity? By Axel Dreher; Pierre-Guillaume Méon; Friedrich Schneider
  3. Inheriting the Future: Intergenerational Persistence of Educational status in KwaZulu-Natal, South Africa By Justine Burns; Malcolm Keswell
  4. Educational Inheritance and the Distribution of Occupations: Evidence from South Africa By Malcolm Keswell; Sarah Girdwood; Murray Leibbrandt
  5. Government spending, corruption and economic growth By G. d'Agostino; J.P Dunne; L. Pieroni
  6. Education and Inequality: The South African Case By Nicola Branson; Julia Garlick; David Lam; Murray Leibbrandt
  7. Including women in the policy responses to high oil prices: a case study of South Africa By Fofana, Ismaël
  8. All eggs in one basket : A reflection on Malawi's dependence on agricultural growth strategy By Droppelmann, Klaus; Makuwira, Jonathan; Kumwenda, Ian
  9. Financial reforms and international trade: By Chen, Xing; Munasib, Abdul; Roy, Devesh
  10. Land institutions, investments, and income diversification : Pathways to economic development for Brazil's quilombo communities By Bowser, William; Nelson, Carl H.
  11. Agriculture-nutrition linkages and policies in India: By Dev, Mahendra S.
  12. Exploring agricultural levers for mitigating the overnutrition burden in India: By Sachdev, H.P.S.
  13. The Effects of "Girl-Friendly" Schools: Evidence from the BRIGHT School Construction Program in Burkina Faso By Kazianga, Harounan; Levy, Dan; Linden, Leigh L.; Sloan, Matt
  14. Seasonal Effects of Water Quality on Infant and Child Health in India By Brainerd, Elizabeth; Menon, Nidhiya
  15. Subjective Well-Being and Relative Poverty in Rural Bangladesh By Asadullah, Niaz; Chaudhury, Nazmul
  16. Tracing the Poverty Impact of Market Reforms in Bangladesh By Alam, Mohammad Jahangir; Bhuiyan, Nazmul; Begum, Ismat Ara; Van Huylenbroeck, Guido
  17. Labor share, Informal sector and Development By Paul Maarek
  18. Opportunity entrepreneurs - potential drivers of non-farm growth in rural Vietnam? By Jürgen Brünjes; Javier Revilla Diez
  19. Education, inequality, and development in a dual economy By Yuki, Kazuhiro
  20. External debt, trade and FDI on economic growth of least developed countries By Wamboye, Evelyn
  21. Major impacts of microfinance on the poor: snapshots from Bangladesh By Mallick, Iftekhar
  22. The Effects of Democratization on Public Goods and Redistribution: Evidence from China By Monica Martinez-Bravo; Gerard Padró i Miquel; Nancy Qian; Yang Yao

  1. By: Roxana Maurizio
    Abstract: Abstract Analysis of labour informality is very relevant in Latin America. More than half of all workers in the region are employed in informal activities, mainly as ownaccount workers or wage earners in small enterprises. A similar percentage of people work in jobs not registered in the social security system. The aim of this paper is to analyse two important aspects related to informality from a comparative point of view. The first is the association of informality, labour precariousness and income segmentation. The second is the relationship between informality and poverty. In order to conduct this study, four countries were selected – Argentina, Brazil, Chile and Peru – whose informal sectors and informal employment are significantly different from each other. Data used in this paper come from household surveys with the most recent available information.
    Date: 2012
  2. By: Axel Dreher; Pierre-Guillaume Méon; Friedrich Schneider
    Abstract: This paper assesses the relationship between institutions, output, and productivity when official output is corrected for the size of the shadow economy. Our results confirm the usual positive impact of institutional quality on official output and total factor productivity, and its negative impact on the size of the underground economy. However, once output is corrected for the shadow economy, the relationship between institutions and output becomes weaker. The impact of institutions on total (“corrected”) factor productivity becomes insignificant. Differences in corrected output must then be attributed to differences in factor endowments. These results survive several tests for robustness.
    Keywords: shadow economy; income; aggregate productivity; development accounting
    JEL: O11 O17 O47 O50
    Date: 2012–05
  3. By: Justine Burns; Malcolm Keswell (SALDRU, School of Economics, University of Cape Town)
    Abstract: This paper examines the changes in the educational attainment of three successive generations in South Africa: grandparents, parents and children. Many of the results accord with widely known facts, such as the educational penalty faced by individuals who are African or who live in rural areas or in female-headed households. Similarly, the larger impact of mothers education on child outcomes relative to fathers education accords with previous work, although it is interesting that this gender difference is only sizeable and significant for relationships between the second and third generation. Key findings in this paper include the fact that persistence has increased with subsequent generations.
    Date: 2011
  4. By: Malcolm Keswell; Sarah Girdwood; Murray Leibbrandt
    Abstract: We analyse the role of educational opportunity in shaping inequality in the distribution of occupations in the long-run. We start by modelling the probability that a child occupies the same or a different rung on the occupational ladder as her parents controlling for both the educational attainment of the child, as well as the level of educational opportunity of the child. These conditional probabilities are then used to construct separate transition matrices by level of educational opportunity, race and gender, which in turn are used to the compute the steady-state distribution of occupations. Finally, we use the timing of political events in the history of the struggle to end Apartheid to devise an identification strategy that permits a causal interpretation of the role of educational opportunity. We find evidence that educational opportunity has a strong conditioning effect on the distribution of occupations in steady state. In particular, African female children who inherit the same level of educational opportunity as their parents are 9% more likely to be in the bottom of the occupation distribution in steady-state, than the observed rate for the population at large, whereas they would face a 4% lower probability if they were exposed to better educational opportunities.
    Date: 2011
  5. By: G. d'Agostino; J.P Dunne (SALDRU, School of Economics, University of Cape Town); L. Pieroni
    Abstract: This paper considers the effects of corruption and government spending on economic growth. It starts from an endogenous growth model and extends it to account for the detrimental effects of corruption on the potentially productive components of government spending, namely military and investment spending. The resulting model is estimated on a sample of African countries and the results show, first, that the growth rate is strongly influenced by the interaction between corruption and military burden, with the interaction between corruption and government investment expenditure having a weaker effect. Second, allowing for the cyclical economic fluctuations in specific countries leaves the estimated elasticities close to those of the full sample. Third, there are significant conditioning variables that need to be taken into account, namely the form of government, political instability and natural resource endowment. These illustrate the cross country heterogeneity when accounting for quantitative direct and indirect effects of key variables on economic growth. Overall, these findings suggest important policy implications.
    Keywords: corruption; military spending; development economics; panel data; Africa
    JEL: O57 H5 D73
    Date: 2012
  6. By: Nicola Branson (SALDRU, School of Economics, University of Cape Town); Julia Garlick; David Lam; Murray Leibbrandt (SALDRU, School of Economics, University of Cape Town)
    Abstract: Following the international literature, income inequality decompositions on data from contemporary South Africa show that the labour market is the key driver of overall household inequality. In order to understand one of the channels driving this labour market inequality, we use national household survey data to review changing returns to education in the South African labour market over the last 15 years; with a focus on both the returns to getting employment as well as the earnings returns for those that have employment. We show that South Africa has experienced a skills twist with the returns to matric and post-secondary education rising and the returns to levels of education below this remaining constant. Then, based on a regression based decomposition of earnings inequality, we show how this has impacted earnings inequality. Indeed, the increase in returns to post-secondary education has directly counteracted the equalising gains that have been made by increased educational attainment, resulting in consistent levels of inequality over time.
    Date: 2012
  7. By: Fofana, Ismaël
    Abstract: The recent surge in oil prices has created concern about its impacts on poor people in South Africa. The strong economic performance recorded over the period 1995-05 has not contributed to a substantial reduction in poverty in this country, particularly among women that tend to be overrepresented among poor households. Government management of an oil shock is important in reducing its adverse impacts in oil-importing countries. Thus, this study examines alternative policy responses to the recent high oil prices through a gender lens in South Africa. A multisector general equilibrium framework is developed to account for the energy specificities of the economy and its relationship with nonenergy sectors. In addition, male and female supplies of labor and the households' demand for energy and nonenergy commodities are explored through a careful modeling of the household economy along with the market economy. The simulation scenarios combine increases in world prices of crude oil, petroleum products, and coal with various fiscal policy responses. Under the floating prices scenario, gross domestic product (GDP) falls compared to the baseline value driven by the inflationary effect of high energy prices and the exchange rate depreciation. Labor earnings also fall, while the gap between male and female earnings widens. The low participation of women compared to men in nonoil energy and export-oriented industries increases their vulnerability to the oil price shock. The gender employment gap also increases under the fixed petroleum price scenarios regardless of the tax-financing option. Further, fiscal policy responses are explored through the broadening of price supports to all commodities and all industries financed by an additional tax on household revenue. A government subsidy to businesses under the oil price shock shows the highest multiplier effect—higher GDP and labor earning effects—but the gap in male and female employment does not change significantly compared with that in the floating and set price scenarios. The government subsidy to businesses is decomposed by type of industry to further explore its gender employment impact. Simulation results indicate that the gender employment gap improves when the subsidy is allocated to high female-employing industries. On the other hand, providing a subsidy to industries that easily substitute capital–energy technology with low-skilled work gives the best GDP outcome. Therefore, this study shows that fiscal policy can help ensure equitable growth when an economy faces a serious challenge, such as a surge in world oil prices. This indicates that supporting industries that easily substitute the capital–energy factor and female-dominated, low-skilled work is the most efficient and gender-equitable fiscal response to high oil prices in South Africa. Given the small differences in GDP and employment results between the fiscal response scenarios with and without a focus on gender equity, the cost of investing in gender equality appears to be small.
    Keywords: petroleum, price shock, Gender, Fiscal policies, General equilibrium model, household economy, domestic work, time allocation,
    Date: 2012
  8. By: Droppelmann, Klaus; Makuwira, Jonathan; Kumwenda, Ian
    Abstract: Recently, there has been a resurgence of interest in the study of structural transformation. However, Africa has received little attention despite the fact that its rural areas seem to be very poor and unproductive relative to urban areas. This case study provides a reflection on challenges faced and development strategies adopted by successive governments in Malawi. Malawi is a country with a complex history of rural-urban transformation. On one hand, Malawi has long been, and still is, a predominantly agrarian economy that has seemingly undergone relatively little rural-urban transformation. Malawi is still predominantly rural, most migration is rural-to-rural, and its economic base is heavily dominated by the production of maize (largely for domestic consumption) and tobacco (largely for exports). In this paper we analyze the macroeconomic policy situation and document patterns and trends in Malawi's rural-urban transformation in a systematic manner. To that end, we focus on a number of dimensions of this transformation, including urban population growth, migration patterns, employment trends, and a spatial analysis of agglomerations and connectivity to major urban centers. We then turn to explain these patterns, largely in terms of colonial, post-independence, and more recent history of agricultural policies. We also examine migration patterns (both rural-urban and rural-rural), and constraints on the development of the nonfarm sector. In conclusion it becomes apparent that Malawi must diversify its economy to sustain poverty reduction and economic growth. However, it is not clear whether Malawi has an obvious comparative advantage in any sizeable nonfarm sector and how exactly the economic diversification process is to be achieved.
    Keywords: agglomeration, agricultural sector growth, Rural-urban transformation,
    Date: 2012
  9. By: Chen, Xing; Munasib, Abdul; Roy, Devesh
    Abstract: This research has been undertaken to estimate the effects of one of the major impediments to trade particularly of developing and less developed countries meaning credit constraints. In this paper we address the issue of easing of financial constraints on trade flows. Financial repression is generally a common characteristic across many developing countries. We provide evidence that financial reforms (over the period 1976–2005) significantly affected exports, in particular of industries with high external capital dependence and low asset tangibility. The coverage of reforms is comprehensive, encompassing the banking sector, interest rates, and equity and international capital markets. Our methodology improves upon existing studies by controlling for time-varying unobserved exporter characteristics. We find significant effects of various reforms with diverse impacts by intensity. China emerges as a consistent outlier, but the results are robust to its inclusion or exclusion. Further, event studies that incorporate possible anticipated and lagged effects of commencement of reform policies confirm the findings.
    Keywords: financial reforms, external capital dependence, asset tangibility, time-varying unobserved heterogeneity, event study,
    Date: 2012
  10. By: Bowser, William; Nelson, Carl H.
    Abstract: Efforts to distribute land titles to low-income rural Afro-Brazilian communities, known as quilombos, have been disappointing despite the provision of ample government resources. Until now, research on the implications of Brazil s land reform policies has not considered quilombo communities in an economic context. The unique case of the quilombo communities provides an interesting context to advance the understanding of the role of land titles in rural income generation. The impact of land tenure security in the cycle of assets, activities, and income is explored to identify the importance of institutions for land dependent agricultural enterprises. We find evidence of land titles contributing to desirable welfare outcomes through their impact on production and investment behavior. Income diversity from various production activities is found to positively contribute to higher income levels, particularly for producers earning more than the minimum wage, once conditioned on secure land rights and productive investments.
    Keywords: assets, Institutions, diversification, Land tenure, Property rights, Rural investment,
    Date: 2012
  11. By: Dev, Mahendra S.
    Abstract: By now it is well recognized that agricultural development is important for enhancing nutrition. Agriculture-nutrition linkage has become an emerging area for research and policy in developing countries like India. Earlier studies have shown that there has been a disconnect between agriculture and nutrition particularly regarding policies. In this context, this paper looks at some key entry points for agriculture to influence nutrition and suggests policies for nutrition-sensitive agricultural development, within the current policy framework. In addition, it reviews three key agriculture-food programs for their nutrition sensitivity at the policy level, using a convergence framework. The three key entry points for agriculture-nutrition linkages are inclusive agriculture growth, food prices, and women in agriculture. It provides policy options for strengthening the linkages between agriculture and nutrition. This paper contributes towards an improved policy making in effecting a reduction in malnutrition in India.
    Keywords: Agricultural growth, Nutrition, women empowerment, Food prices, Convergence,
    Date: 2012
  12. By: Sachdev, H.P.S.
    Abstract: The current concern n for and policy response to malnutrition in India is solely restricted to undernutrition diagnosed on the basis of body size (anthropometry). However, recent evidence indicates that the burden of overnutrition and related morbidities is rapidly escalating to alarming proportions. This research first examines the need to address overnutrition in India and subsequently explores the potential of the agricultural sector to mitigate the burden of over nutrition and related non-communicable diseases. The demographic, economic, and dietary transitions seen in India are causing rapid escalation in overnutrition and related morbidities, particularly in urban areas and higher-income groups but also among the poor, with faster escalation expected to occur among this group in the future. Evidence is provided that agricultural policies and production practices affect diet through their influence on food availability, price, and nutrient quality, which, in turn, affect the food choices available to consumers. Agricultural policies are amenable to intervention, but interventions should avoid two potential failings: (1) mitigation of one component of the dual burden (undernutrition and overnutrition) should not inadvertently escalate the other, and (2) socioeconomic equity should not worsen rather than improving. The author concludes that cost-effective strategies that may produce the largest health gains in the shortest timeframe include (1) fiscal measures that increase the price of unhealthy food content or reduce the cost of healthy foods and (2) regulatory measures that improve nutritional information or restrict the marketing of unhealthy foods, particularly to children. Possibilities meriting consideration, as prioritized by the author, include (1) increasing access to and consumption of pulses, vegetables and fruits, and coarse grains and (2) taxation and regulatory measures to curtail the consumption of unhealthy vegetable fats and oils, and processed foods with a high content of oils, fats, sugars, and salt.
    Keywords: Agriculture, overnutrition, undernutrition,
    Date: 2012
  13. By: Kazianga, Harounan (Oklahoma State University); Levy, Dan (Harvard Kennedy School); Linden, Leigh L. (University of Texas at Austin); Sloan, Matt (Mathematica Policy Research)
    Abstract: We evaluate the causal effects of a program that constructed high quality "girl-friendly" primary schools in Burkina Faso, using a regression discontinuity design 2.5 years after the program started. We find that the program increased enrollment of all children between the ages of 5 and 12 by 20 percentage points and increased their test scores by 0.45 standard deviations. The change in test scores for those children caused to attend school by the program is 2.2 standard deviations. We also find that the program was particularly effective for girls, increasing their enrollment rate by 5 percentage points more than boys', although this did not translate into a differential effect on test scores. Disentangling the effects of school access from the unique characteristics of the new schools, we find that the unique characteristics were responsible for a 13 percentage point increase in enrollment and 0.35 standard deviations in test scores, while simply providing a school increased enrollment by 26.5 percentage points and test scores by 0.323 standard deviations. The unique characteristics of the school account for the entire difference in the treatment effect by gender.
    Keywords: Africa, education, gender inequality, enrollment
    JEL: I24 I25 I28 O15
    Date: 2012–05
  14. By: Brainerd, Elizabeth (Brandeis University); Menon, Nidhiya (Brandeis University)
    Abstract: This paper examines the impact of fertilizer agrichemicals in water on infant and child health using data on water quality combined with data on the health outcomes of infants and children from the 1992-93, 1998-99, and 2005-06 Demographic and Health Surveys of India. Because fertilizers are applied at specific times in the growing season, the concentrations of agrichemicals in water vary seasonally and by cropped area as some Indian states plant predominantly summer crops while others plant winter crops. Our identification strategy exploits the differing timing of the planting seasons across regions and differing seasonal prenatal exposure to agrichemicals to identify the impact of agrichemical contamination on various measures of child health. The results indicate that children exposed to higher concentrations of agrichemicals during their first month experience worse health outcomes on a variety of measures (infant mortality, neo-natal mortality, height-for-age z scores and weight-for-age z-scores). Disaggregated runs reveal that effects are largest amongst the most vulnerable groups – children of uneducated poor women living in rural India.
    Keywords: fertilizer agrichemicals, water pollutants, child health, infant mortality, India, fertilizers
    JEL: O12 I15 Q53 Q56
    Date: 2012–05
  15. By: Asadullah, Niaz (University of Reading); Chaudhury, Nazmul (World Bank)
    Abstract: This paper revisits the debate over the importance of absolute vs. relative income as a correlate of subjective well-being using data from Bangladesh, one of the poorest countries in the world with high levels of corruption and poor governance. We do so by combining household data with population census and village survey records. Our results show that conditional on own household income, respondents report higher satisfaction levels when they experience an increase in their income over the past years. More importantly, individuals who report their income to be lower than their neighbours in the village also report less satisfaction with life. At the same time, our evidence suggests that relative wealth effect is stronger for the rich. Similarly, in villages with higher inequality, individuals report less satisfaction with life. However, when compared to the effect of absolute income, these effects (i.e. relative income and local inequality) are modest. Amongst other factors, we study the influence of institutional quality. Institutional quality, measured in terms of confidence in police, matters for well-being: it enters with a positive and significant coefficient in the well-being function.
    Keywords: Bangladesh, institutions, well-being, poverty
    JEL: O12 I30 I31
    Date: 2012–05
  16. By: Alam, Mohammad Jahangir; Bhuiyan, Nazmul; Begum, Ismat Ara; Van Huylenbroeck, Guido
    Abstract: The paper analyse the impact of market reforms on poverty in Bangladesh. To estimate the poverty impact at household level, a binary logit model has been estimated with two latest waves of household income and expenditure data from Bangladesh. The results show that a significant improvement has been made in reducing poverty in the recent decades. As a net importing country, liberalization might has direct impact on household’s real income through the changes of real rice prices. The results also show that net rice buyer households are poorer than net rice sellers. So, decreased rice prices in domestic markets induced by liberalization have benefited the net rice buyers in Bangladesh, hence poverty declines.
    Keywords: market reforms, poverty, Bangladesh, Agricultural and Food Policy, Food Security and Poverty, International Development, International Relations/Trade,
    Date: 2012–05–22
  17. By: Paul Maarek (THEMA, Universite de Cergy-Pontoise)
    Abstract: This paper aims to understand the pattern of the labor share of income during the devel- opment process. We highlight a U-shapped relationship between development and the labor share. Our theory emphasizes the interplay between rms'monopsony power and the size of the informal sector when the formal labor market has frictions. The size of the informal sector parameterizes workers'outside opportunities in wage setting. In the rst stage of development, productivity gains are not compensated by wage increases, as most of workers'outside opportunities depend on the in- formal sector whose productivity remains unchanged. The labor share decreases as a result. In the second stage of development, outside opportunities rely more on productivity in formal rms as the formal sector expands. Consequently, the labor share increases. We then use a policy experiment, namely capital account liberalization episodes, in order to determine the causal impact of economic development on the labor share.
    Keywords: Development ; Informal sector ; Labor share ; Matching frictions
    JEL: E25 J42 O17
    Date: 2012
  18. By: Jürgen Brünjes (Institute of Economic and Cultural Geography, Leibniz University Hanover); Javier Revilla Diez (Institute of Economic and Cultural Geography, Leibniz University Hanover)
    Abstract: In this paper we apply the concept of necessity and opportunity entrepreneurship to rural Vietnam. The aim is to evaluate whether opportunity entrepreneurs in rural areas in developing countries have a greater potential to stimulate endogenous nonâ€farm growth than necessity entrepreneurs. The results show that opportunity entrepreneurs are relatively frequent. They have an agricultural background less often and are better educated and skilled. In addition, they are more successful in terms of profits, even after controlling for general business and locational characteristics. However, even rural opportunity entrepreneurs are often not oriented towards employment growth and thus have a limited capacity to generate nonâ€farm employment for other households. It becomes clear that although the necessity/opportunity concept has so far been primarily applied to developed countries, distinguishing opportunity and necessity entrepreneurship is very suitable in a rural developing context if some contextua l specifics of the rural environmen t are taken into account.
    Keywords: Necessity entrepreneurship, opportunity entrepreneurship, developing countries, Vietnam
    JEL: L2 O18 R23
    Date: 2012–05
  19. By: Yuki, Kazuhiro
    Abstract: In the post-WWII era, most developing economies had decent economic growth, but, with current growth trends, the great majority of them are unlikely to transform into developed economies in near future. In these economies, the dual economic structure, the coexistence of the modern/formal sector and the traditional/informal sector, is persistent. The educational level of the population increased greatly, but the growth of the skill level, especially when measured by the share of high-skill workers, is relatively modest. Wage inequality between workers with basic skills and with advanced skills rose over time, while the inequality between workers with and without basic skills fell greatly. In order to understand these facts, this paper develops a dynamic dual-economy model and examines how the long-run outcome of the economy depends on the initial distribution of wealth and sectoral productivity. It is shown that, for fast transformation into a developed economy, the initial distribution must be such that extreme poverty is not prevalent and the size of ”middle class” is enough. If the former is satisfied but the latter is not, which would be the case for many developing economies falling into ”middle income trap”, the fraction of workers with basic skills and the share of the modern sector rise, but inequality between workers with advanced skills and with basic skills worsens and the traditional sector remains, consistent with the above-mentioned facts.
    Keywords: dual economy; modernization; education; wealth distribution
    JEL: J31 O17 O15
    Date: 2012–05–24
  20. By: Wamboye, Evelyn
    Abstract: This study evaluates the impact of public external debt on long term economic growth of forty least developed countries (LDCs). Arellano-Bond SGMM method is used on unbalanced panel data spanning from 1975 to 2010. A comparative analysis based on different debt specifications and samples is provided. Overall, our findings suggest that high external debt depresses economic growth, regardless of the nature of the debt. Furthermore, debt relief initiatives are crucial as evidenced in the lower negative debt effects on growth in HIPCs sub-sample relative to non-HIPCs. Additionally, trade, initial values of FDI and ODA matter in economic growth of LDCs.
    Keywords: LDCs; External Debt; Economic Growth; HIPCs
    JEL: O47 F34 O57
    Date: 2012–05–23
  21. By: Mallick, Iftekhar
    Abstract: Microfinance has, by now, reached a total of over 60% of all poor households of Bangladesh, and 37% of all households (World Bank, 2005). There are, however some controversies relating to the indebtedness for the microfinance receivers and the contribution of microfinance in their socioeconomic conditions. Some say it is making poor people debt trapped, on the other hand, some say it is benefitting the poor. Well, there are no polar extremes. Throughout this paper we will be examining, to which extent the arguments are feasible, and finally develop some measures to increase the performance of microfinance.
    Keywords: Microfinance; Finance; Bangladesh; Development
    JEL: Q01 R11 R5 G21
    Date: 2012–06–10
  22. By: Monica Martinez-Bravo; Gerard Padró i Miquel; Nancy Qian; Yang Yao
    Abstract: This study investigates the effects of introducing elections on public goods and redistribution in rural China. We collect a large and unique survey to document the history of political reforms and economic policies and exploit the staggered timing of the introduction of elections for causal identification. We find that elections significantly increase public goods expenditure, the increase corresponds to demand and is paralleled by an increase in public goods provision and local taxes. We also find that elections cause significant income redistribution within villages. The results support the basic assumptions of recent theories of democratization (Acemoglu and Robinson, 2000; Lizzeri and Persico, 2004). In addition, we show that the main mechanism underlying the effect of elections is increased leader incentives.
    JEL: H11 O38 P16
    Date: 2012–05

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