nep-dev New Economics Papers
on Development
Issue of 2013‒01‒07
nineteen papers chosen by
Mark Lee
Towson University

  1. Wealth Effects and Consumption in Thailand By Phurichai Rungcharoenkitkul
  2. Historical Sources of Institutional Trajectories in Economic Development : China, Japan, and Korea Compared By Masahiko Aoki
  3. Impact of Production Linkages on Industrial Upgrading in ASEAN, the People’s Republic of China, and India : Organizational Evidence of a Global Supply Chain By Tomohiro Machikita; Yasushi Ueki
  4. Does Intra-Africa Regional Trade Cooperation Enhance Africa’s Export Survival? By Dick Nuwamanya Kamuganga
  5. The Persistence of Subjective Poverty in Urban Ethiopia By Alem, Yonas; Köhlin, Gunnar; Stage, Jesper
  6. Seeds of Distrust: Conflict in Uganda By Dominic Rohner; Mathias Thoenig; Fabrizio Zilibotti
  7. War and Stature: Growing Up During the Nigerian Civil War By Richard Akresh; Sonia Bhalotra; Marinella Leone; Una Osili
  8. Causes of Civil War: Micro Level Evidence from Côte d’Ivoire By Andrew L. Dabalen; Ephraim Kebede; Saumik Paul
  9. Returning Home after Civil War: The Consequences of Forced Displacement for Food Security, Nutrition and Poverty among Burundese Households By Philip Verwimp
  10. Households amidst urban riots: The economic consequences of civil violence in India By Jaideep Gupte; Patricia Justino; Jean-Pierre Tranchant
  11. Nutrition, Governance and Violence: A Framework for the Analysis of Resilience and Vulnerability to Food Insecurity in Contexts of Violent Conflict By Patricia Justino
  12. Do Natural Disasters Affect the Poor Disproportionately? The Case of Typhoon Milenyo in the Rural Philippines. By Sakai, Yoko; Estudillo, Jonna P.; Fuwa, Nobuhiko; Higuchi, Yuki; Sawada, Yasuyuki
  13. Investment Financing and Financial Development: Firm Level Evidence from Vietnam By Conor O'Toole; Carol Newman
  14. Fiscal Decentralisation, Local Institutions and Public Goods Provision: Evidence from Indonesia By Pal, Sarmistha; Wahhaj, Zaki
  15. Cost-Benefit Analysis in Developing Countries: What’s Different? By Euston QUAH
  16. Social Fragmentation, Public Goods and Elections: Evidence from China By Gerard Padro i Miquel; Nancy Qian; Yang Yao
  17. Deregulation, Misallocation, and Size: Evidence from India By Laura Alfaro; Anusha Chari
  18. Could inward FDI offset the substitution effect of outward FDI on domestic investment? evidence from Malaysia By goh, sookhoon
  19. On the fungibility of spending and earnings -- evidence from rural China and Tanzania By Christiaensen , Luc; Pan, Lei

  1. By: Phurichai Rungcharoenkitkul (Bank of Thailand)
    Abstract: The effects of changes in wealth on consumption in Thailand are estimated, using a cross-sectional household survey conducted in 2010. It is found that consumption, after conditioning for income and household characteristics, is increasing in wealth, whether measured in terms of net worth or gross asset values. The estimated elasticity of consumption with respect to wealth is 0.06, while the estimated income elasticity is 0.60. The corresponding marginal propensity to consume out of wealth is estimated to be around 0.02-0.03. Physical assets, such as housing, matter for consumption more than financial assets, with the elasticity being about five-fold larger. Durable goods consumption is found to be much more sensitive to wealth than consumption of non-durable goods. The paper also discusses evidence that wealth eects may vary across households, and can be explained by the levels of existing wealth and certain household characteristics.
    Keywords: consumption, wealth effects
    JEL: E21 C21 D91
    Date: 2011–03–10
  2. By: Masahiko Aoki (Asian Development Bank Institute (ADBI))
    Abstract: This essay provides a game-theoretic, endogenous view of institutions, and then applies the idea to identify the sources of institutional trajectories of economic development in China, Japan, and Korea. It stylizes the Malthusian-phase of East Asian economies as peasant-based economies in which small families allocated their working time between farming on small plots— leased or owned—and handcrafting for personal consumption and markets. It then compares institutional arrangements across these economies that sustained otherwise similar economies. It characterizes the varied nature of the political states of Qing China, Tokugawa Japan, and Yi Korea by focusing on the way in which agricultural taxes were enforced. It also identifies different patterns of social norms of trust that were institutional complements to, or substitutes for, political states. Finally, it traces the path-dependent transformations of these state-norm combinations along subsequent transitions to post-Malthusian phases of economic growth in the respective economies.
    Keywords: economic development, institutions, China, Japan, Korea, political states, social norms, institutional complements and substitutes
    JEL: O43 O53 P51
    Date: 2012–11
  3. By: Tomohiro Machikita (Asian Development Bank Institute (ADBI)); Yasushi Ueki
    Abstract: This paper presents a simple model of industrial upgrading as a result of backward and forward information linkages between upstream and downstream relations. It also serves as an empirical investigation of the impact of mutual knowledge exchange on the knowledge production function using data on firms' self-reported customers and suppliers. Evidence from interconnected firms in Indonesia, Thailand, Philippines, and Viet Nam suggests that there are strong spillover effects between downstream and upstream firms in terms of international standard certification. The degree of product and process innovation is quite diverse across manufacturing firms within a local supply chain and within a global supply chain. Firms are likely to achieve product innovation if they have customers in foreign countries. Customers in Japan and the People's Republic of China play an important product innovation role for firms in Association of Southeast Asian Nations (ASEAN) economies, and customers in the United States or Europe play an important industrial upgrading role in connecting ASEAN firms with the global market.
    Keywords: production linkages, industrial upgrading, ASEAN, PRC, India, global supply chains, upstream and downstream relations, backward and forward linkages, product and process innovation
    JEL: O31 O32 R12
    Date: 2012–11
  4. By: Dick Nuwamanya Kamuganga (Graduate Institute of International Studies)
    Abstract: In this paper, I use a stratified Cox Proportional Hazard Model to econometrically evaluate the effects of intra-Africa regional trade cooperation and other underlying factors on Africa`s export survival. Using a highly disaggregated dataset of bilateral trade flows at HS 6 digit level for 49 African countries for the period 1995 to 2009, I obtain 3 key main empirical results. First, intra-Africa regional trade cooperation do increase the likelihood of Africa`s export survival. The results show that the depth of regional integration matters on lowering Africa`s export hazard rates relative to countries that are not in any regional cooperation. Second, I find evidence that supports the “learning by export hypothesis”. That is export experience within regional as well as rest of the world markets increases the likelihood of Africa`s export survival. Finally, results suggests that infrastructure related trade frictions such as costs to export, time to export, and customs procedures to export as well as weak export supporting institutions have a negative effect on Africa`s export survival. Similarly macroeconomic developments particularly exchange rate volatility, financial underdevelopment, “inappropriate” foreign direct investment hurt chances of an African export survival. The results also show that interaction effects between regional integration initiatives and a variety of these trade frictions namely: costs to export, time to export and customs procedures effects on hazard rates diminish in significance with the depth of regional integration over time.
    Keywords: regional integration, export survival, trade relationships
    JEL: F14 F15 C14 C41
    Date: 2012–12–13
  5. By: Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University); Köhlin, Gunnar (Department of Economics, School of Business, Economics and Law, Göteborg University); Stage, Jesper (Dept of Social Sciences, Mid Sweden University)
    Abstract: Using panel data spanning 15 years, this paper investigates the persistence and correlates of subjective and consumption poverty in urban Ethiopia. Despite the decline in consumption poverty in recent years, which has been linked to rapid economic growth, subjective poverty has remained largely unchanged. Dynamic probit regression results show that households with a history of past poverty continue to perceive themselves as poor even if their material consumption improves. Our results also suggest that the relative economic position of households is a strong determinant of subjective poverty, and having at least some type of employment reduces the likelihood that households will perceive themselves as poor, even if they remain in objective poverty. Receiving remittances from abroad, on the other hand, does not reduce perceived poverty, even if it raises material consumption. We argue that any analysis to measure the impact of growth on welfare should encompass subjective measures as well.<p>
    Keywords: Ethiopia; subjective poverty; dynamic probit
    JEL: I32 O12
    Date: 2012–12–19
  6. By: Dominic Rohner (Department of Economics, University of Zurich); Mathias Thoenig (Department of Economics, University of Lausanne); Fabrizio Zilibotti (Department of Economics, University of Zurich, and Institute for International Economic Studies, Stockholm University)
    Abstract: We study the effect of civil conflict on social capital, focusing on the experience of Uganda during the last decade. Using individual and county-level data, we document large causal effects on trust and ethnic identity of an exogenous outburst of ethnic conflicts in 2002-05. We exploit two waves of survey data from Afrobarometer 2000 and 2008, including information on socioeconomic characteristics at the individual level, and geo-referenced measures of fighting events from ACLED. Our identification strategy exploits variations in the intensity of fighting both in the spatial and cross-ethnic dimensions. We find that more intense fighting decreases generalized trust and increases ethnic identity. The effects are quantitatively large and robust to a number of control variables, alternative measures of violence, and different statistical techniques involving ethnic and spatial fixed effects and instrumental variables. We also document that the post-war effects of ethnic violence depend on the ethnic fractionalization. Fighting has a negative effect on the economic situation in highly fractionalized counties, but has no effect in less fractionalized counties. Our findings are consistent with the existence of a self-reinforcing process between conflicts and ethnic cleavages.
    Keywords: ethnicity, violence, fractionalization
    JEL: D74
    Date: 2012–02
  7. By: Richard Akresh (University of Illinois at Urbana-Champaign and IZA); Sonia Bhalotra (University of Bristol and IZA); Marinella Leone (University of Sussex); Una Osili (Indiana University-Purdue University Indianapolis)
    Abstract: The Nigerian civil war of 1967-70 was precipitated by secession of the Igbodominated south-eastern region to create the state of Biafra. It was the first civil war in Africa, the predecessor of many. We investigate the legacies of this war four decades later. Using variation across ethnicity and cohort, we identify significant long-run impacts on human health capital. Individuals exposed to the war at all ages between birth and adolescence exhibit reduced adult stature and these impacts are largest in adolescence. Adult stature is portentous of reduced life expectancy and lower earnings.
    Keywords: war, height, early life conditions, human capital investments, Nigeria
    JEL: I12 O12 J13
    Date: 2012–04
  8. By: Andrew L. Dabalen (The World Bank); Ephraim Kebede (The World Bank); Saumik Paul (Osaka University)
    Abstract: A multiethnic country like Côte d’Ivoire, which was relatively stable until the late 1980s, has been mired in crisis in the last two decades and experienced large-scale violence. This paper undertakes a disaggregated analysis of the civil war at sub-national levels in Cote d’Ivoire for the period from 1998 to 2006 using: (1) nationally representative household survey data, and (2) the ACLED conflict database that contains information on the date and geographical location of conflicts. We use both the department and the sub-prefecture levels as units of analysis, and find robust evidence that ethnic diversity is significantly associated with conflicts. We also find strong empirical evidence that the share of Ivoirites population and the share of Muslim population is a significant determinant of civil war at the sub-prefecture level. Furthermore, more populous areas are at high risk of civil war, but the outcome is statistically significant only at the department level. However, we do not find significant evidence that income inequality and land inequality have determined the level of civil conflict. Overall the findings suggest ethnicity and religious identities are the significant determinants of civil war in Cote d’Ivoire.
    Keywords: Civil war; Disaggregated data; Ethnicity; GIS; Cote d’Ivoire
    Date: 2012–08
  9. By: Philip Verwimp (ECARES and Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles)
    Abstract: Civil wars often force people to leave their homes. Displaced populations run higher risk in terms of disease, hunger and death, something that is well-documented. They leave their land, cattle and other assets behind for an uncertain existence in a refugee camp or depend on relatives or friends. But what happens when they return back home? This paper investigates the food security and poverty of formerly displaced persons and their household. Using the 2006 Core Welfare Indicator Survey for Burundi we compare their food intake and their level of expenses with that of their non-displaced neighbours. We test whether it is the duration of displacement that matters for current welfare or the time lapsed since returning. We use log-linear and ordered probit models as well as propensity score matching. We find that the individuals and households who returned home just before the time of the survey are worse off compared to those who returned several years earlier. It takes 8 to 10 years after return before the level of welfare of the displaced converges to that of the non-displaced. The duration of displacement seems not to matter. On average, the formerly displaced have 20% lower expenses per adult equivalent compared to the non-displaced, 15% lower food expenses but only 6 % lower calorie intake, showing that the formerly displaced consume relatively more high calorie products. The formerly displaced also report more children with a smaller size at birth. Despite international, government and NGO assistance, the welfare of recent returnees is lagging seriously behind in comparison with the local non-displaced populations.
    Keywords: Forced Displacement, Food Security, Nutrition, Poverty, Burundi
    Date: 2012–09
  10. By: Jaideep Gupte (Institute of Development Studies, University of Sussex); Patricia Justino (Institute of Development Studies, University of Sussex); Jean-Pierre Tranchant (Institute of Development Studies, University of Sussex)
    Abstract: The objective of this paper is to uncover the determinants of riot victimization in India. The analysis is based on a unique survey collected by the authors in March-May 2010 in Maharashtra. We adopt a multilevel framework that allows neighborhood and district effects to randomly influence household victimization. The main results are that households that (i) are economically vulnerable, (ii) live in the vicinity of a crime-prone area, and (iii) are not able to rely on community support are considerably more prone to suffer from riots than other households. All else equal, income per capita increases victimization, presumably through an opportunity cost mechanism. We find further that relatively affluent neighborhoods and those characterized by large caste fragmentation are more riot-prone than disfranchised and homogeneous ones. Victimization is more common in neighborhoods with weaker social interactions, but some evidence suggests that weak social interactions may also be a consequence of rioting.
    Date: 2012–10
  11. By: Patricia Justino (Institute of Development Studies, University of Sussex)
    Abstract: We show that armed conflict affects social capital as measured by trust and associational membership. Using the case of Uganda and two rounds of nationally representative individual-level data bracketing a large number of battle events, we find that self-reported generalized trust and associational membership decreased during the conflict in districts in which battle events took place. Exploiting the different timing of two distinct waves of violence, we provide suggestive evidence for a rapid recovery of social capital. Evidence from a variety of identification strategies, including difference-indifference and instrumental variable estimates, suggests that these relationships are causal.
    Date: 2012–11
  12. By: Sakai, Yoko; Estudillo, Jonna P.; Fuwa, Nobuhiko; Higuchi, Yuki; Sawada, Yasuyuki
    Abstract: This paper illustrates the sharp contrast in welfare impacts between the rich and the poor caused by typhoon Milenyo in a Philippine village. Fish price dropped sharply after a large volume of cultured fish was set loose due to the damage caused to fish pens near the village, leading to positive net welfare gains among the wealthy. Among the poor, however, the negative effects of food (other than fish) price increase outweighed the positive benefit of the fish price decrease, and the poor non-agricultural households (who receive their income by cash rather than by rice) were the most severely hit.
    Date: 2012–11
  13. By: Conor O'Toole (Department of Economics, Trinity College Dublin; Department of Agricultural Economics and Farm Surveys, Teagasc; Economic Analysis Division, Economic and Social Research Institute, Ireland); Carol Newman (Department of Economics and Institute for International Integration Studies, Trinity College Dublin)
    Abstract: We explore whether financial development reduces external investment financing constraints for firms. Within-country provincial measures of financial development are linked to investment usingdata from the Vietnamese enterprise survey (VES). We focus on three main aspects of financialdevelopment: financial sector depth, state interventionism in finance, and the degree of marketdriven financing in the economy. We find that financial development reduces investment financing constraints. Constraints are decreasing in credit to the private sector, increasing in the use of finance by state-owned enterprises and decreasing in the degree to which finance is allocated on commercial market terms.
    Keywords: Financial development, Financing constraints, Investment
    JEL: G31 G32 O16
    Date: 2012–10
  14. By: Pal, Sarmistha (University of Surrey); Wahhaj, Zaki (University of Kent)
    Abstract: Using data from the Indonesian Family Life Surveys, this paper studies the impact of fiscal decentralisation in Indonesia on local public spending across communities with different types of local institutions. Our results provide evidence of heterogeneity in access to public goods across communities in the period prior to fiscal decentralisation; with significantly greater spending on schools and health centres in communities which observe traditional adat laws (which promote an ethic of mutual cooperation), and less spending on roads, public transport, communications etc. in communities which have a democratic electoral system. Fiscal decentralisation led to an increase in the share of spending on physical infrastructure, as well as a convergence in spending across communities with different types of local institutions. We develop a theoretical model to argue that communities which enjoy a higher level of mutual cooperation would benefit less from investment in public goods which facilitate communication and exchange with outsiders – as these improve the outside options of community members and therefore makes it more difficult to sustain intra-community cooperation. Surprisingly, investment in communications and transport infrastructure in these communities were more restrained during the period of centralised fiscal control.
    Keywords: decentralisation, democratisation, mutual co-operation, social and physical infrastructure, local public spending, Indonesia
    JEL: D02 H41 O43
    Date: 2012–12
  15. By: Euston QUAH (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore)
    Abstract: There are both similarities and differences between conducting cost-benefit analysis in developed and developing countries . While the fundamental principles and theory underlying cost-benefit analysis maybe the same , the methodologies and the estimation techniques that are most appropriate in each context may substantially differ . The incompleteness and deficiencies of the labour , goods, and financial markets in developing economies may render revealed preference approaches to valuation unsuitable and inferior to stated preference models . But yet , even stated preference models are difficult to operationalize in developing countries where the literacy rates may not be too encouraging to allow for complete understanding of such valuation methods . It is largely because of the latter’s complexity that the paper here suggests the newer method of adapting to the damage schedules approach to yield meaningful and more straightforward valuation of non-market goods and services . Understanding the differences in applying cost-benefit analysis to developed and developing countries will go a long way to helping policy makers make informed decisions.
    Keywords: Cost- benefit analysis, public project evaluation, policy economics, valuation methods, reviewed preference, related preference
    JEL: D61 Q5 H43 E6
    Date: 2012–05
  16. By: Gerard Padro i Miquel; Nancy Qian; Yang Yao
    Abstract: This study examines how the economic effects of elections in rural China depend on voter heterogeneity, for which we proxy with religious fractionalization. We first document religious composition and the introduction of village-level elections for a nearly nationally representative sample of over two hundred villages. Then, we examine the interaction effect of heterogeneity and the introduction of elections on village-government provision of public goods. The interaction effect is negative. We interpret this as evidence that voter heterogeneity constrains the potential benefits of elections for public goods provision.
    JEL: O38 O43 P16 P35
    Date: 2012–12
  17. By: Laura Alfaro; Anusha Chari
    Abstract: This paper examines the impact of the deregulation of compulsory industrial licensing in India on firm-size dynamics and the reallocation of resources within industries over time. Following deregulation, we find that the extent of resource misallocation declines and a considerable thickening of the left-hand tail of the firm-size distribution suggesting a significant increase in the number of small firms. However, the dominance and growth of large incumbents remains unchallenged. Quantile regressions reveal that the distributional effects of deregulation on firm size are significantly non-linear. The size distribution we observe—namely, a large number of small firms and a small number of large firms—can be characterized as the “missing middle” in Indian manufacturing and suggests that small firms may continue to face constraints in their attempts to grow.
    JEL: F43 G31 G38 L10 O12 O14
    Date: 2012–12
  18. By: goh, sookhoon
    Abstract: It is well documented in the literature that Malaysia has become an emerging source of outward foreign direct investment (OFDI) in the region. The drastic increase in her OFDI has raised concerns as to whether the outbound direct investment activities from the country would detract domestic investment activities which have been sluggish since the aftermath of the Asian Currency Crisis. Using the autoregressive distrusted lag (ARDL) modeling approach to cointegration, the findings show that there is a long-run equilibrium relationship involving the four variables i.e., between domestic investment and its determinants, viz, FDI outflows, FDI inflows and domestic savings. Moreover, this study reveals that the effect on domestic investment by FDI outflows is substitutional and inelastic, while that by FDI inflows is complementary and elastic, implying that the latter can overcome the substitution effect caused by the former if the Malaysian government could formulate pragmatic policies in attracting FDI inflows.
    Keywords: Outward FDI; inward FDI; domestic investment; multinationals; Malaysia
    JEL: F21
    Date: 2012–08
  19. By: Christiaensen , Luc; Pan, Lei
    Abstract: A common behavioral assumption of micro-economic theory is that income is fungible. Using household panel data from rural China and Tanzania, this study finds however that people are more likely to spend unearned income on less basic consumption goods such as alcohol and tobacco, non-staple food, transportation and communication, and clothing, while they are somewhat more likely to spend earned income on basic consumption goods such as staple food, and invest it in education. This resonates with the widespread cultural notion that money that is easily earned is also more easily spent. Cognitively, the results could be understood within the context of emotional accounting, whereby people classify income based on the emotions it evokes, prompting them to spend hard earned money more wisely to mitigate the negative connotations associated with its acquisition. The policy implications are real, bearing for example on the choice between employment guarantee schemes and cash transfers in designing social security programs.
    Keywords: Economic Theory&Research,Rural Poverty Reduction,Inequality,Labor Policies,Fiscal&Monetary Policy
    Date: 2012–12–01

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