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on Development |
| By: | Karl Hackenbrack (Vanderbilt University); Mikhael Shor (University of Connecticut) |
| Abstract: | We analyze theoretically and empirically the effect of preference policies, which favor some auditors over others for reasons unrelated to the audit. For example, an auditee may prefer minority-owned auditors, all else equal. We construct an analytical model of the competitive bidding process for audit services. We show that preference policies can sometimes improve the audit procurement process by encouraging price concessions from non-preferenced auditors. We test model predictions in a setting amenable to empirical identification of preference; many municipalities prefer local firms over more distant firms. We find strong evidence of local preference, with local firms earning a 13 percent fee premium over non-local firms. We show that audit fees depend not only on the winning firm's capabilities but also crucially on the winning firm's incremental capabilities over the next best alternative. Lastly, we identify conditions under which preference policies benefit audit procurement outcomes. JEL Classification: M42, D44, M48, H83 Key words: audit markets, auditor selection, competitive bidding, local preference |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2012-20&r=dev |
| By: | Gustav Ranis (Economic Growth Center, Yale University) |
| Abstract: | Vertical decentralization, either at the deconcentration, delegation or, more rarely, the devolution level, has been instituted in most countries of Sub-Saharan Africa. It usually has the effect of increasing the quantity as well as the quality, in terms of health and education, of public goods. More neglected in the literature is the issue of horizontal decentralization, shifting the decision-making power from the central ministry of finance to the ministries of education and health, as well as strengthening the legislative and judicial branches of government. We examine the relationship between horizontal decentralization with its important ethnic dimension and vertical decentralization. Local governments are accountable to the center under vertical and to democratic forces and civil society under horizontal decentralization. Smaller local units are more likely to be more homogeneous ethnically, leading to a larger quantity and higher quality of public goods. |
| Keywords: | decentralization, ethnicity, development, Sub-Saharan Africa |
| JEL: | O11 O17 O18 O55 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:1017&r=dev |
| By: | Dean Karlan (Economics Department, Yale University); Ryan Knight (School of Management, Yale University); Christopher Udry (Economics Department, Yale University) |
| Abstract: | Many basic economic theories with perfectly functioning markets do not predict the existence of the vast number of microenterprises readily observed across the world. We put forward a model that illuminates why financial and managerial capital constraints may impede experimentation, and thus limit learning about the profitability of alternative firm sizes. The model shows how lack of information about one’s own type, but willingness to experiment to learn one’s type, may lead to short-run negative expected returns to investments on average, with some outliers succeeding. To test the model we put forward first a motivating experiment from Ghana, and second a small meta-analysis of other experiments. In the Ghana experiment, we provide inputs to microenterprises, specifically financial capital (a cash grant) and managerial capital (consulting services), to catalyze adoption of investments and practices aimed towards enterprise growth. We find that entrepreneurs invest the cash, and take the advice, but both lead to lower profits on average. In the long run, they revert back to their prior scale of operations. The small meta analysis includes results from 18 other experiments in which either capital or managerial capital were relaxed, and find mixed support for this theory. |
| Keywords: | entrepreneurship; credit constraints; business training; consulting; managerial capital |
| JEL: | D21 D24 D83 D92 L20 M13 O12 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:1014&r=dev |
| By: | Gustav Ranis (Economic Growth Center, Yale University) |
| Abstract: | The discussion of the effectiveness of foreign aid has reached a high pitch. This paper assesses the sorry past and present key arguments for a potentially more effective and sustainable method of aid delivery. A key ingredient is to shake off the vestiges of structural adjustment and move towards true recipient country ownership complete with “self-conditionality” with aid recipients formulating their own reform packages. This means donors become much more passive, act like a bank and respond to proposals which concentrate on a few critical areas over a three to five-year period. Policy-based program lending should respond to packages put together by the main domestic stakeholders with the help, if necessary, of independent third parties. There should be no compulsion to lend; indeed, an aid hiatus is an indication that the new system is effective. What is required is for donors to stop using aid as a short-term foreign policy tool and for recipients to accept the notion that aid provides the opportunity to reduce the inevitable adjustment pains caused by real reforms. |
| Keywords: | foreign aid, self-conditionality, program lending, new donors |
| JEL: | O11 O20 O38 P45 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:1015&r=dev |
| By: | Gustav Ranis (Economic Growth Center, Yale University) |
| Abstract: | Unskilled labor is the abundant resource in many developing countries, especially at an early stage of their development. Yet, even as at given technologies labor markets have not cleared, neo-classical economists have rejected the notion of an institutional or bargaining wage not based on competitive full employment marginal productivity fundamentals. This paper puts to rest some objections to labor surplus theory based on “red herrings” and then addresses the substantive challenges from the micro-econometric branch of neo-classical economics. We contend that the finding of inelastic supply curves of labor is based on a cross-section static analysis of labor supply within agriculture while the labor surplus model deals with tracing the dynamic reallocation of labor from a traditional to a neo-classical organized sector in a dualistic economy. We present data for a number of labor surplus developing countries showing that institutional wages lag behind agricultural productivity increases as countries move towards a “turning point” when inter-sectoral balanced growth has eliminated unskilled labor and the economy has lost its dual characteristic. |
| Keywords: | development, labor surplus, neo-classical economics, turning point labor markets |
| JEL: | O10 O11 O17 O18 O41 O43 O57 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:1016&r=dev |
| By: | Alessandra Fogli; Laura Veldkamp |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ste:nystbu:12-16&r=dev |
| By: | del Castillo, Graciana |
| Abstract: | The experience and lessons of the last two decades have shown that ignoring the key differences between the economics of peace and the economics of development has been a major reason why countries relapse into conflict. This paper briefly analyses such d |
| Keywords: | international relations and international political economy, conflict, natural |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2012-47&r=dev |
| By: | Bourguignon, Francois; Platteau, Jean-Philippe |
| Abstract: | This paper addresses the issue of the impact of aid supply on aid effectiveness. We proceed in two steps. First, we review research works that deal with the problem of governance in donor-recipient relationships and are susceptible of highlighting effects |
| Keywords: | aid effectiveness, aid allocation, governance, elite capture, monitoring |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2012-54&r=dev |
| By: | Dorosh, Paul; Thurlow, James |
| Abstract: | Rapid urbanization is an important characteristic of African development and yet the structural transformation debate focuses on agriculture.s relative merits without also considering the benefits from urban agglomeration. As a result, African governments |
| Keywords: | urbanization, rural development, growth, poverty, CGE model, Africa |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2012-50&r=dev |
| By: | de Brauw, Alan (International Food Policy Research Institute); Giles, John T. (World Bank) |
| Abstract: | In this paper, we examine the impact of reductions in barriers to migration on the consumption of households in rural China. We find that increased migration from rural villages leads to significant increases in consumption per capita, and that this effect is stronger for poorer households within villages. Household income per capita and non-durable consumption per capita both increase with out-migration, and this increase is greater for poorer households. We also establish a causal relationship between increased out-migration and investment in housing and durable goods assets, and these effects are also stronger for poorer households. We do not find robust evidence, however, to support a connection between increased migration and investment in productive activity. Instead, increased migration is associated with two significant changes for poorer households: increases both in the total labor supplied to productive activities and in the land per capita managed by the household. In examining the effect of migration, we pay considerable attention to motivating, developing and evaluating our identification strategy. |
| Keywords: | migration, migrant networks, consumption, poverty, wealth, rural China |
| JEL: | O12 O15 J22 J24 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6765&r=dev |
| By: | Chicoine, Luke E. (DePaul University) |
| Abstract: | This paper investigates the relationship between women's education and fertility by exploiting a 1985 policy change in Kenya that lengthened primary school by one year. An instrumental variables approach measures the exogenous variation in treatment intensity across birth cohorts. The reform led to an increase in education, a delay in marriage, and reduced fertility beginning at the age of 20. The effect on fertility becomes increasingly negative through age 25. The findings suggest that postponement of marriage, reduction in the marital education gap, and increased early use of modern contraceptives contribute to reduced fertility. These results are consistent with women having greater control over their fertility decision. |
| Keywords: | fertility, education, Kenya |
| JEL: | O15 J13 I25 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6778&r=dev |
| By: | Mupela, Evans (WSU, UNU-MERIT/MGSoG); Szirmai, Adam (UNU-MERIT/MGSoG) |
| Abstract: | This paper investigates the effects of connectivity charges (communication costs) on bilateral exports in Sub Saharan Africa (SSA). Data from 19 exporter countries was used together with communication costs data in a gravity model of trade setup. The export data derive from the IMF Direction of Trade and the COMTRADE databases, while the communication cost data was collated from a variety of sources including direct contact with service providers. We find that communication cost is an important factor in bilateral trade in the region. Communications have a significant negative effect on export intensity. The study also reveals that countries with high communication costs generally have lower export intensity than countries with low communication costs. The results suggest that investment in ICT infrastructure that brings down international communication costs will have a positive effect on regional trade in the long run. |
| Keywords: | Trade, gravity model, communication cost, connectivity, export |
| JEL: | O25 O41 O43 O47 F15 F43 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2012060&r=dev |
| By: | Gindling, T. H.; Newhouse, David |
| Abstract: | This paper analyzes heterogeneity among the self-employed in 74 developing countries, representing two-thirds of the population of the developing world. After profiling how worker characteristics vary by employment status, it classifies self-employed workers outside agriculture as"successful"or"unsuccessful"entrepreneurs, based on two measures of success: whether the worker is an employer, and whether the worker resides in a non-poor household. Four main findings emerge. First, jobs exhibit a clear pecking order, with household welfare and worker education highest for employers, followed by wage and salaried employees, non-agricultural own-account workers, non-agricultural unpaid family workers, and finally agricultural workers. Second, a substantial minority of own-account workers reside in non-poor households, suggesting that their profits are often a secondary source of household income. Third, as per capita income increases, the structure of employment shifts rapidly, first out of agriculture into unsuccessful non-agricultural self-employment, and then mainly into non-agricultural wage employment. Finally, roughly one-third of the unsuccessful entrepreneurs share similar characteristics with their successful counterparts, suggesting they have the potential to be successful but face constraints to growth. The authors conclude that although interventions such as access to credit can benefit a substantial portion of the self-employed, effectively targeting the minority of self-employed with higher growth potential is important, particularly in low-income contexts. The results also highlight the potential benefits of policies that facilitate shifts in the nature of work, first from agricultural labor into non-agricultural self-employment, and then into wage and salaried jobs. |
| Keywords: | Income,Labor Markets,Skills Development and Labor Force Training,Economic Theory&Research,Rural Poverty Reduction |
| Date: | 2012–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6201&r=dev |
| By: | Ravallion, Martin |
| Abstract: | Against what standards should we judge the developing world's overall performance against poverty going forward? The paper proposes two measures, each with both"optimistic"and"ambitious"targets for 2022, 10 years from the time of writing. The first measure is absolute consumption poverty, as judged by what"poverty"means in the poorest countries. The second is a new relative poverty measure, embracing social inclusion needs consistently with national poverty lines. The optimistic benchmark would entail an absolute poverty rate of 9 percent in 2022, and a relative poverty rate of 40 percent. The more ambitious targets would bring the absolute rate down to 3 percent and the relative rate to 33 percent. The optimistic target would maintain the (impressive) progress against poverty of the last 20 years, without global crises to stall that progress. The ambitious target would require about a 1 percentage point higher growth rate for the gross domestic product of the developing world, as long as this did not come with a reduction in the household sector's share or any further increase in overall inequality after its level in 2008. Alternatively, the 3 percent target could be reached at currently expected growth rates but at the lower level of inequality in 1999. |
| Keywords: | Rural Poverty Reduction,Achieving Shared Growth,Regional Economic Development,Inequality |
| Date: | 2012–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6205&r=dev |
| By: | Inchauste, Gabriela; Olivieri, Sergio; Saavedra, Jaime; Winkler, Hernan |
| Abstract: | This paper quantifies the contributions of different factors to poverty reduction observed in Bangladesh, Peru and Thailand over the last decade. In contrast to methods that focus on aggregate summary statistics, the method adopted here generates entire counterfactual distributions to account for the contributions of demographics and income from labor and non-labor sources in explaining poverty reduction. The authors find that the most important contributor was the growth in labor income, mostly in the form of farm income in Bangladesh and Thailand and non-farm income in the case of Peru. This growth in labor incomes was driven by higher returns to individual and household endowments, pointing to increases in productivity and real wages as the driving force behind poverty declines. Lower dependency ratios also helped to reduce poverty, particularly in Bangladesh. Non-labor income contributed as well, albeit to a smaller extent, in the form of international remittances in the case of Bangladesh and through public and private transfers in Peru and Thailand. Transfers are more important in explaining the reduction in extreme compared with moderate poverty. |
| Date: | 2012–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6199&r=dev |
| By: | Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D. |
| Abstract: | Policy makers in both developed and developing countries want to make cities more competitive, attract entreprepreneurs, boost economic growth, and promote job creation. The authors examine the spatial location of entrepreneurs in India in manufacturing and services sectors, as well as in the formal and informal sectors, in 630 districts spread across 35 states/union territories. They quantify entrepreneurship as young firms that are less than three years old, and define entry measures through employment in these new establishments. They develop metrics that unite the incumbent industrial structures of districts with the extent to which industries interact through the traditional agglomeration channels. The two most consistent factors that predict overall entrepreneurship for a district are its education and the quality of local physical infrastructure. These patterns are true for manufacturing and services. These relationships are much stronger in India than those found for the United States. The authors also find strong evidence of agglomeration economies in India's manufacturing sector. This influence is through both traditional Marshallian economies like a suitable labor force and proximity to customers and through the Chinitz effect that emphasizes small suppliers. India's footprints in structural transformation, urbanization, and manufacturing sector are still at an early stage. At such an early point and with industrial structures not yet entrenched, local policies and traits can have profound and lasting impacts by shaping where industries plant their roots. |
| Keywords: | Microfinance,Labor Markets,Labor Policies,Private Participation in Infrastructure,Small Scale Enterprise |
| Date: | 2012–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6198&r=dev |
| By: | Beegle, Kathleen; Poulin, Michelle |
| Abstract: | In many African countries, the timing of important life events -- such as school-leaving, first marriage, and entry into the labor market -- is thought to be strongly tied to migration. This paper investigates the relationship between major life events, household characteristics, and migration among adolescents and young adults in contemporary Malawi. The specific research questions are twofold. First, what are the socio-economic and demographic determinants of migration? Second, how do school attendance, first marriage, and employment-seeking relate to migration patterns? The study uses panel data collected from a survey designed specifically to explore socioeconomic and demographic aspects of youth transitions to adulthood and which tracked respondents as they moved to new dwellings. Among the sample, they find that moves are not uncommon, and the predominant reasons for moves are non-economic. Although historically ethnic traditions in this area have held that girls and women usually did not move upon marrying, the data show that women were more likely to move between survey rounds than boys and men, and that marriage was the main reason for doing so. Closer ties to the head of the household are associated with less movement for both women and men. |
| Keywords: | Population Policies,Population&Development,Anthropology,Adolescent Health,Gender and Social Development |
| Date: | 2012–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6200&r=dev |
| By: | Blankespoor, Brian; Dasgupta, Susmita; Lagnaoui, Abdelaziz; Roy, Subhendu |
| Abstract: | The Millennium Development Goal of achieving near-zero malaria deaths by 2015 has led to a re-examination of wider use of DDT (dichloro-diphenyl-trichloro-ethane) in indoor residual spraying as a prevention tool in many countries. However, the use of DDT raises concerns of potential harm to the environment and human health, mainly because of the persistent and bio-accumulative nature of DDT and its potential to magnify through the food chain. This paper quantifies the adverse effects of DDT on human health based on treatment costs and indirect costs caused by illnesses and death in countries that use or are expected to re-introduce DDT in their disease vector control programs. At the global level where the total population exposed to DDT is estimated around 1.25 billion, the findings indicate that while the use of DDT can lead to a significant reduction in the estimated $69 billion in 2010 U.S. dollars economic loss caused by malaria, it can also add more than $28 billion a year in costs from the resulting adverse health effects. At the country level, the results suggest that Sub-Saharan African countries with high malaria incidence rates are likely to see relatively larger net benefits from the use of DDT in malaria control. The net health benefits of reintroducing DDT in malaria control programs could be better understood by weighing the costs and benefits of DDT use based on a country's circumstances. |
| Keywords: | Disease Control&Prevention,Health Monitoring&Evaluation,Population Policies,Health Systems Development&Reform,Climate Change Mitigation and Green House Gases |
| Date: | 2012–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6203&r=dev |
| By: | Khandker, Shahidur R. |
| Abstract: | Competing theories increasingly support the positive role of social capital in small loan default costs of group lending; at the same time, potential group collusion may increase loan delinquencies. Findings from the available literature are mixed on the role of the various attributes of group lending. But past studies suffer from estimation bias due to the unobserved sorting behavior of group members and their other attributes. This paper attempts to resolve that estimation bias by utilizing longitudinal data from 297 Grameen Bank groups since their inceptions. A dynamic lagged dependent model with correction for time-varying heterogeneity of group and individual behavior is applied to estimate the effect of group liability in the Grameen Bank. The results suggest that group liability matters in both loan disbursement and repayment, with women less of a credit risk than men and women's groups more homogeneous than men's. Finally, the benefits of social capital outweigh the costs of group collusion, especially for women's groups, thereby reducing overall default rates. The risk-pooling behavior of diverse men's groups increases men's repayment behavior. Overall, group lending as practiced by Grameen Bank appears to increase repayment rates. |
| Keywords: | Debt Markets,Bankruptcy and Resolution of Financial Distress,Banks&Banking Reform,Economic Theory&Research,Microfinance |
| Date: | 2012–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6204&r=dev |
| By: | Charness, Gary; Viceisza, Angelino |
| Abstract: | In the past decade, it has become increasingly common to use simple laboratorygames and decision tasks as a device for measuring both the preferences and understanding ofrural populations in the developing world. In this paper, we report the results observed with threedistinct risk elicitation mechanisms, using samples drawn from the rural population in Senegal,West Africa. We test the understanding of and the level of meaningful responses to the typicalHolt-Laury task, to an adaptation of a simple binary mechanism pioneered by Gneezy andPotters in 1997, and to a non-incentivized willingness-to-risk scale. We find a low level ofunderstanding with the Holt-Laury task and an unlikely-to-be-accurate pattern with thewillingness-to-risk question. Our analysis indicates that the simple binary mechanism hassubstantially more predictive power than does the Holt-Laury mechanism. Our study is acautionary note regarding utilizing either relatively sophisticated risk-elicitation mechanisms ornon-incentivized questions in the rural developing world. |
| Keywords: | Economics, General, International Economics, Economics, Other, risk elicitation, laboratory experiments in the field, comprehension, rural Senegal |
| Date: | 2012–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:qt5512d150&r=dev |