nep-dev New Economics Papers
on Development
Issue of 2012‒09‒22
twenty papers chosen by
Mark Lee
Towson University

  1. Preliminary Study: Explaining the Ten-fold Increase in Remittances to Pakistan 2001-2012 By Rashid Amjad; G. M. Arif; M. Irfan
  2. The Gender Differences in School Enrolment and Returns to Education in Pakistan By Madeeha Gohar Qureshi
  3. The Inter-linkages between Democracy and Per Capita GDP Growth: A Cross Country Analysis By Madeeha Gohar Qureshi; Eatzaz Ahmed
  4. The Economic Causes and Consequences of Social Instability in China By Jobn Knight
  5. The Rise and Robustness of Economic Freedom in China By Rod Tyers
  6. Demographic Dividends, Dependencies and Economic Growth in China and India By Jane Golley; Rod Tyers
  7. China's Gender Imbalance and its Economic Performance By Jane Golley; Rod Tyers
  8. Working Paper 151 - The Dynamics of Inflation in Ethiopia and Kenya By AfDB
  9. Working Paper 152 - Dynamics of Inflation in Uganda By AfDB
  10. The Status of Financial Education in Africa By Flore-Anne Messy; Chiara Monticone
  11. Right in Principle and in Practice: A Review of the Social and Economic Returns to Investing in Children By Nicholas Rees; Jingqing Chai; David Anthony
  12. The Long-Term Cognitive Consequences of Early Childhood Malnutrition: The Case of Famine in Ghana By Samuel K. Ampaabeng; Chih Ming Tang
  13. Globalization and Regional Innovation in China By Hein Roelfsema; Yi Zhang
  14. Health and Wealth: Short Panel Granger Causality Tests for Developing Countries By Judith A. Clarke; Nilanjana Roy; Weichun Chen
  15. The Life Cycle of Plants in India and Mexico By Hsieh, Chang-Tai; Klenow, Peter J.
  16. Citizenry Accountability in Autocracies. The Political Economy of Good Governance in China By Gilli, Mario; Li, Yuan
  17. The impact of armed conflict on economic performance. Evidence from Rwanda By Serneels , Pieter; Verpoorten , Marijke
  18. Economic growth In the long run By Tamura, Robert; Dwyer, Gerald P.; Devereux, John; Baier, Scott
  19. Predation, Economic Activity and Violence: Evidence from the Philippines By Eli Berman; Joseph Felter; Ethan Kapstein; Erin Troland
  20. State vs Consumer Regulation: An Evaluation of Two Road Safety Interventions in Kenya By James Habyarimana; William Jack

  1. By: Rashid Amjad (Pakistan Institute of Development Economics, Islamabad.); G. M. Arif (Pakistan Institute of Development Economics, Islamabad.); M. Irfan (Pakistan Institute of Development Economics, Islamabad.)
    Date: 2012
  2. By: Madeeha Gohar Qureshi (Pakistan Institute of Development Economics, Islamabad.)
    Abstract: In this study attempt has been made to link the gender differences in parental resource allocation in demand for education at primary, secondary and tertiary level of education to gender differences in returns to education in these respective categories in Pakistan. The hypothesis was that if we find that labour market rewards male more than female then this may be able to give a plausible explanation of why households invest much less in daughter’s education. However our results suggest otherwise that there is under investment in females education at all levels even though returns to education are much higher for females than males. One possible explanation could be that even though private rate of return to time spent in school than in labour market is higher for a female compared to male but the part of return that goes to parents are much lower for daughters than sons in Pakistan due to dependence of parents on their son for old age support. The key factor from policy point of view that can reduce such discriminatory attitude towards female enrolment in a household are found to be education of parents especially mother’s education. Both father’s and mother’s education are found to have significant positive impact on education of both sons and daughters. However mother’s education compared to father has much more impact in terms of magnitude at all levels of education and especially the role is more pronounced for daughters.
    Keywords: Enrolment Rates, Rates of Return, Gender, Pakistan
    JEL: I21 J16
    Date: 2012
  3. By: Madeeha Gohar Qureshi (Pakistan Institute of Development Economics, Islamabad.); Eatzaz Ahmed (Quaid-i-Azam University, Islamabad)
    Abstract: The empirical growth literature gives no clear indication as to how democracy impacts growth; there is evidence of both positive and negative effects and also of no direct link in democracy and growth nexus. In this study an attempt has been made to resolve this controversy by putting this question in a dynamic simultaneous equation framework that combines in a system the regression in differences with regression in levels applied on a cross county data set over the period 1987-2002. This type of modelling not only controls for the endogeneity of the explanatory variables and the unobserved country-specific effects but also allows us to analyse the impact of democracy on per capita GDP growth and the reverse causation from per capita GDP growth on political and civil freedom simultaneously. Our result shows evidence in support of a quadratic impact of the democracy on per capita GDP growth (an inverted U relationship) that is per capita GDP is found to be increasing in democracies at low levels but after a certain moderate level of democracy this relation turns negative. The support of reverse causation from per capita GDP growth to political and civil freedom is found only in countries grouped as partially free and free democracies. However we do not find any evidence in support of Lipset Hypothesis that prosperity leads to increase in propensity to experience political freedom taking all countries into consideration.
    Keywords: Democracy, Per Capita GDP Growth, Quadratic Relationship, Lipset Hypothesis
    JEL: C22 O43
    Date: 2012
  4. By: Jobn Knight
    Abstract: Social instability is a concept that economists rarely analyse, and yet it can lurk behind much economic policy-making. China’s leadership has often publicly expressed its concerns to avoid ‘social instability’. It is viewed as a threat both to the political order and to the continued rapid growth of the economy. This threat to growth in turn endangers the maintenance of social stability. This paper examines the likely economic determinants of social instability, using both surveys and other evidence. After explaining the determinants of China’s rapid growth, the paper goes on to examine the likely mechanisms by which social instability can affect the growth rate. There is a case for more research on the role of social instability in the economic development process.
    Keywords: China, Civl unrest, Corruption, Developmental state, Economic growth, Governance, Happiness, Inequality, Social instability
    JEL: O15 O20 O43 P26
    Date: 2012
  5. By: Rod Tyers (Business School, University of Western Australia)
    Abstract: The performance of the Chinese economy since Deng Xiaoping’s and Jiang Zemin’s changes to the core philosophy of the Chinese Communist Party (CCP) is unprecedented for a country so large and could be seen as contrary to Popper’s central idea that liberal democracy is essential to peaceful transitions toward prosperity. It is argued in this chapter that this growth surge is due to the separation of economic from political freedoms and to increased liberalism toward the former. In modern China, however, these freedoms depend on political institutions that are fragile and so its growth cannot be yet regarded as robust. Indeed, interdependent as they are with the general level of development, Chinese economic freedoms are under threat from abroad and from the perceived necessity to depart from “export led” growth to a model driven by expanding consumption and home investment. Political and economic obstacles stand in the way of continued strong growth following this change of policy direction and a failure to deliver could cause a second shift in the core philosophy of the CCP and a future path on which both economic and political freedoms are lessened. While “soft resolutions” are available, they depend on the recognition abroad that global economic performance now depends importantly on continued economic growth in China.
    Date: 2012
  6. By: Jane Golley (Australian Centre On China in the World Australian National University); Rod Tyers (Business School, University of Western Australia)
    Abstract: The world’s two population giants have undergone significant, and significantly different, demographic transitions since the 1950s. The demographic dividends associated with these transitions during the first three decades of this century are examined using a global economic model that incorporates full demographic behavior and measures of dependency that reflect the actual number of workers to non-workers, rather than the number of working aged to non-working aged. While much of China’s demographic dividend now lies in the past, alternative assumptions about future trends in fertility and labor force participation rates are used to demonstrate that China will not necessarily enter a period of “demographic taxation” for at least another decade, if not longer. In contrast with China, much of India’s potential demographic dividend lies in waiting for the decades ahead, with the extent and duration depending critically on a range of policy choices.
    Date: 2012
  7. By: Jane Golley (Centre for China in the World Australian National University); Rod Tyers (Business School, University of Western Australia and Research School of Economics Australian National University)
    Abstract: Chinese GDP growth faces rising handicaps that include the slowdown and eventual contraction of its labour force, a complication of which is its rising sex ratio at birth. The undesirable consequences of the resulting gender imbalance include excessive saving as families with boys compete to match their sons with scarce girls, trafficking in women and rising disaffection and crime amongst the low-skill male population. These are reviewed and analysed using a dynamic model of both economic and demographic behaviour. The results show that the proportion of unmatched low-skill males of reproductive age could be as high as one in four by 2030, with numbers too large for female immigration to be a solution. Policies to rebalance the sex ratio at birth will take decades to reduce the sex ratio at reproductive age and any associated allowance of higher fertility would slow growth in real per capita income. Yet the results suggest that the beneficial effects of reduced male disaffection and crime could outweigh the losses from reduced saving and higher population.
    Date: 2012
  8. By: AfDB
    Date: 2012–09–10
  9. By: AfDB
    Date: 2012–09–10
  10. By: Flore-Anne Messy; Chiara Monticone
    Abstract: While the African situation displays disparities both within and between countries in terms of economic and human development, on average, many African countries have relatively low school enrolment ratios, highly informal labour markets, high poverty rates, as well as low financial inclusion and financial literacy levels. Against this backdrop, it is desirable to improve the level of financial literacy among the most vulnerable parts of the African population. Well-designed financial education initiatives can reduce demand-side barriers to more effective financial inclusion and can empower vulnerable individuals economically, so that they can better manage household resources and develop income generating activities. This report provides an overview of the status of financial education programmes developed in Africa, discusses their rationale, and offers initial guidance for policy makers. In recent years public authorities, as well as the non-profit and the private sector, engaged in the development of financial education programmes in several African countries. These programmes typically aim at improving financial knowledge and skills, raising awareness of financial issues, and improving financial inclusion. They usually target vulnerable groups, including low-income people, women, and youth, and sometimes deliver financial literacy training in combination with access to financial products.
    Keywords: Africa, financial education, financial literacy, financial inclusion, Afrique, éducation financière, inclusion financière, compétences financières
    JEL: D14 D18 I28 O16
    Date: 2012–07
  11. By: Nicholas Rees; Jingqing Chai; David Anthony (Division of Policy and Practice,UNICEF)
    Abstract: At the most fundamental level, providing adequate investments that enable children to thrive is a moral imperative, and investing in a child is to invest in society’s future. Most would agree that there could be no more compelling argument than that. The international community has recognized that investing in children is not only essential, but an obligation as outlined under the United Nations Convention on the Rights of the Child (CRC). Still, other arguments related to economic and social issues have also been made in search of an answer to the broad question: To what extent do investments in children’s survival and well-being also contribute to poverty reduction, income equality and economic growth? This paper provides a review of the literature on these relationships. It finds that investing in children can be extremely effective, and that the social and economic returns are potentially very large. Some of the evidence is based on investments that target the poorest and most vulnerable children and families. The paper also notes, however, that there are still considerable gaps in the literature, and that more needs to be done to effectively analyse the returns and the impact of investments within different contexts and environments.
    Keywords: public expenditures, public investment, economic growth, equity, poverty reduction, early childhood development, health, education, social protection, children’s rights
    JEL: D61 H22 H51 H52 I15 I21 O21 O22
    Date: 2012
  12. By: Samuel K. Ampaabeng (Department of Economics, Clark University, USA); Chih Ming Tang (Department of Economics, Clark University, USA)
    Abstract: We examine the role of early childhood health in human capital accumulation. Using a unique data set from Ghana with comprehensive information on individual, family, community, school quality characteristics and a direct measure of intelligence together with test scores, we examine the long-term cognitive effects of the 1983 famine on survivors. We show that differences in intelligence test scores can be robustly explained by the differential impact of the famine in different parts of the country and the impacts are most severe for children under two years of age during the famine. We also account for model uncertainty by using Bayesian Model Averaging.
    Keywords: cognitive development, early childhood malnutrition, famine, Bayesian model averaging, Ghana
    JEL: C11 C26 C52 I15 I25 O12 O15 O55
    Date: 2012–09
  13. By: Hein Roelfsema; Yi Zhang
    Abstract: This paper explores the connection between the external opening of China and differences in innovation across Chinese regions. Controlling for locational advantages and fixed regional characteristics, for the period 1995-2010 overall we find that regions that have increased most the connections to the world market have become more innovative when compared to other regions. By interacting regional characteristics with openness, we find a U-shaped relation between regional income levels and innovation, where both the lower middle-income and the most advanced regions gain from globalization in terms of increased innovation and productivity. In relative terms, the higher middle-income regions gain less from globalization than the other regions. By examining the nature of international activities across regions, we conjecture that differences in the ownership structures of foreign investments and the nature of linkages between foreign and domestic firms are at the hart of this finding, as the higher middle-income regions have higher outsourcing levels and thus benefit less from foreign technology transfers.
    Keywords: Globalization, Innovation, Regional Development, China
    JEL: F14 F21 F23 O33 O53
    Date: 2012–09
  14. By: Judith A. Clarke (Department of Economics, University of Victoria); Nilanjana Roy (Department of Economics, University of Victoria); Weichun Chen
    Abstract: The world has experienced impressive improvements in wealth and health, with, for instance, the world’s real GDP per capita having increased by 180% from 1970 to 2007 accompanied by a 50% decline in infant mortality rate. Healthier and wealthier. Are health gains arising from wealth growth? Or, has a healthier population enabled substantial growth in wealth? The answers to these questions have serious policy implications. We contribute to understanding dynamic links between wealth and health by analyzing the relationship between health (as measured by infant mortality rate) and wealth (as measured by GDP per capita) for a panel of 58 developing countries using quinquennial data covering the period 1960 through 2005. We examine for causal rather than associative links between these fundamental macro measures of economic development. The panel enables us to examine for causal links using several methods that differ in how cross-country and temporal heterogeneity is imposed: cross-country homogeneity with temporal heterogeneity and cross-country heterogeneity with temporal homogeneity. Under the latter case, we consider sensitivity to assuming fixed versus random causal coefficients. In addition, we explore robustness of outcomes to level of economic development (as measured by national income) and inclusion of another covariate (education).
    Keywords: infant mortality; per capita GDP; Granger causality; fixed and random causal coefficients
    JEL: O11 I15 C33
    Date: 2012–09–12
  15. By: Hsieh, Chang-Tai; Klenow, Peter J.
    Abstract: In the U.S., the average 40 year old plant employs almost eight times as many workers as the typical plant five years or younger. In contrast, surviving Indian plants exhibit little growth in terms of either employment or output. Mexico is intermediate to India and the U.S. in these respects: the average 40 year old Mexican plant employs twice as many workers as an average new plant. This pattern holds across many industries and for formal and informal establishments alike. The divergence in plant dynamics suggests lower investments by Indian and Mexican plants in process efficiency, quality, and in accessing markets at home and abroad. In simple GE models, we find that the difference in life cycle dynamics could lower aggregate manufacturing productivity on the order of 25% in India and Mexico relative to the U.S.
    Date: 2012–09
  16. By: Gilli, Mario (University of Milan-Bicocca); Li, Yuan (University of Duisburg--Essen)
    Abstract: Do the citizens have a role in constraining policies in autocratic governments? Usually the political and economic literature model autocracy as if the citizens have no role in constraining leader’s behavior, but actually autocratic government are afraid of possible citizens’ revolts. In this paper we focus on contemporary China to analyze how citizens might induce an autocratic government to adopt congruent policies. Although there is no party or electoral competition, the leader fears deposition by coup d’état of the selectorate and revolutionary threats from citizens. We build a three player political agency model to study the role of both these constraints and we show that the effectiveness of the selectorate and of revolutionary threats are crucial factors in determining the policy outcomes. In particular, we show that the citizens can effectively discipline the leader because of the revolution threat notwithstanding the selectorate size, but this may result in a failed state when the costs of revolting and the selectorate size are small. As the size of the selectorate and the costs of revolution vary dramatically across countries, our result explain why different types of autocracies arise. In particular our model and results provide a useful framework to interpret China policy in the last twenty years.
    Keywords: Autocracy; Accountability; Revolt; Chinese Economic Reform
    JEL: D02 D74 H11
    Date: 2012–09–05
  17. By: Serneels , Pieter (University of East Anglia); Verpoorten , Marijke (University of Antwerp)
    Abstract: Important gaps remain in the understanding of the economic consequences of civil war. Focusing on the conflict in Rwanda in the early 90s, and using micro data to carry out econometric analysis, this paper finds that households and localities that experienced more intense conflict are lagging behind in terms of consumption six years after the conflict, a finding that is robust to taking into account the endogeneity of violence. Significantly different returns to land and labour are observed between zones that experienced low and high intensity conflict which is consistent with on-going recovery. Distinguishing between civil war and genocide, the findings also provide evidence that these returns, and by implication the process of recovery, depend on the form of violence.
    Keywords: civil war; economic growth; Rwanda; human capital
    Date: 2012–09–05
  18. By: Tamura, Robert; Dwyer, Gerald P.; Devereux, John; Baier, Scott
    Abstract: We present new data on real output per worker, schooling per worker, human capital per worker, real physical capital per worker for 168 countries. The output data represent all available data from Maddison. The physical capital data represent all available data from Mitchell. One major contribution is a new set of human capital per worker, the foundation of which comes mostly from Mitchell. We provide original estimates of schooling per worker & per young worker. With our preferred measure of human capital, between 66 percent to 90 percent of all the variation in long run growth can be explained by variation in the growth of inputs per worker, and only 10-34 percent from variation in TFP growth! Furthermore between 66 percent and 80 percent of the variation in log levels can be explained by variation in the log input levels and only 20 percent to 34 percent is explained by variation in log TFP levels!
    Keywords: economic growth; human capital; variance decomposition
    JEL: O11 O47 O15 J24
    Date: 2012–09–14
  19. By: Eli Berman; Joseph Felter; Ethan Kapstein; Erin Troland
    Abstract: This paper explores the relationship between economic activity and political violence through the lenses provided by several different mechanisms. Investment as a predictor of future violence implies that low private sector investment today provides a robust indicator of high violence tomorrow. “Rent-capture” or predation asserts that economic programs and business investment will increase violence by increasing extortion by insurgents. “Hearts and minds” counterinsurgency has been asserted to link economic activity to political violence in three ways, through an opportunity cost mechanism by which improved economic conditions reduce the cost of rebel recruitment; through a “hope and gratitude” effect by which development assistance generates support for government, reducing cooperation with rebels; and thirdly, though an improved governance mechanism. We lay out these mechanisms in a framework with strategic interaction between rebels, communities, government and firms within an information-centric “hearts and minds” counterinsurgency model. We test the mechanisms in the context of the Philippines in the first decade of this century, using a new dataset that combines violent incidents with indicators of economic activity. The data support the predation thesis, while refuting the predictions of the predictive investment mechanism, the opportunity cost mechanism, and the gratitude effect.
    JEL: F52 F54 H41 H56 K42 N47 O1
    Date: 2012–09
  20. By: James Habyarimana; William Jack
    Abstract: This paper compares the relative impact of two road safety interventions in the Kenyan minibus or matatu sector: a top down set of regulatory requirements known as the Michuki Rules and a consumer empowerment intervention. We use very detailed insurance claims data on three classes of vehicles to implement a difference-in-differences estimation strategy to measure the impact of the Michuki Rules. Despite strong political leadership and dedicated resources, we find no statistically significant effect of the Michuki Rules on accident rates. In contrast, the consumer empowerment intervention that didn’t rely on third party enforcement has very large and significant effects on accident rates. Our intent-to-treat estimates suggest reductions in accident rates of at least 50%. Our analysis suggests that in institutionally weak environments, innovative consumer-driven solutions might provide an alternative solution to low quality service provision.
    JEL: D13 I12 O12
    Date: 2012–09

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