nep-dev New Economics Papers
on Development
Issue of 2013‒04‒20
33 papers chosen by
Mark Lee
Towson University

  1. Types of Foreign Aid By Christian Bjørnskov
  2. “Informality and Overeducation in the Labor Market of a Developing Country” By Paula Herrera; Enrique López-Bazo; Elisabet Motellón
  3. The Impact of Conflict on Education Attainment and Enrollment in Colombia: lessons from recent IDPs By Ruth Uwaifo Oyelere; Kate Wharton
  4. Gender-Differential Effects of Conflict on Education: The Case of the 1981-1993 Punjab Insurgency By Prakarsh Singh; Olga N. Shemyakina
  5. Trusting the Enemy: Confidence in the state among ex-combatants By Enzo Nussio; Ben Oppenheim
  6. Assessing Inequalities in Thai Education By Jirada Prasartpornsirichoke; Yoshi Takahashi
  7. Changes in Employment Structures and Investments in Children’s Education: Evidence from Rural India By Wada, Kazuya
  8. Household Vulnerability to Wild Animal Attacks in Developing Countries: Experimental Evidence from Rural Pakistan By Kurosaki, Takashi; Khan, Hidayat Ullah
  9. Dynamics of Household Assets and Income Shocks in the Long-run Process of Economic Development: The Case of Rural Pakistan By Kurosaki, Takashi
  10. Experience Matters: Human Capital and Development Accounting By David Lagakos; Benjamin Moll; Tommaso Porzio; Nancy Qian
  11. Transfers to Households with Children and Child Development By Daniela Del Boca; Christopher Flinn; Matthew Wiswall
  12. Who is Coming to the Experiment? A Cautionary Tale from China By Elaine Liu; Paul Frijters; Tao Sherry Kong
  14. Small Is Not Beautiful: Firm-Level Evidence of the Link between Credit, Firm Size and Competitiveness in Colombia By Arturo Galindo; Marcela Melendez
  15. Firm Size and Credit in Argentina By Sebastian Auguste; Ricardo N. Bebczuk; Gabriel Sanchez
  16. Post-Socialist Transition and the Intergenerational Transmission of Education in Kyrgyzstan By Brück, Tilman; Esenaliev, Damir
  17. Relationship between young women and parents in rural Ethiopia By Kodama, Yuka
  18. The development of private farms in Vietnam By Kojin, Emi
  19. Cooperation, Trust, and Economic Development: An Experimental Study in China By Junyi Shen; Xiangdong Qin
  20. The Effects of Foreign Direct Investment on Industrial Growth: Evidence from a Regulation Change in China By Mitsuo Inada
  21. How ethnic diversity affects economic Development? By Erkan Gören
  22. What Determines Inward FDI in China? --An empirical study using firm-level data By Bin Ni
  23. Seeds of Distrust: Conflict in Uganda By Dominic Rohner; Mathias Thoenig; Fabrizio Zilibotti
  24. Religious Diversity and Economic Development in Sub-Saharan Africa: So Far So Good By Kodila-Tedika, Oasis; Agbor , Julius
  25. Deconstructing the Decline in Inequality in Latin America By Nora Lustig; Luis F. Lopez-Calva; Eduardo Ortiz-Juarez
  26. Re-Examination of the Surplus Agricultural Labour in China By Fung Kwan; Yanrui Wu; Shuaihe Zhuo
  27. Are microcredit participants in Bangladesh trapped in poverty and debt ? By Khandker, Shahidur R.; Samad, Hussain A.
  28. Public policy and industrial transformation in the process of development By Agenor, Pierre-Richard; Dinh, Hinh T.
  29. How does competition affect the performance of MFIs ? evidence from Bangladesh By Khandker, Shahidur R.; Koolwal, Gayatri B.; Badruddoza, Syed
  30. Subnational fiscal policy in large developing countries : some lessons from the 2008-09 crisis for Brazil, China and India By Fardoust, Shahrokh; Ravishankar, V.J.
  31. Food prices, wages, and welfare in rural India By Jacoby, Hanan G.
  32. Export entrepreneurship and trade structure in Latin America during good and bad times By Fernandes, Ana M.; Lederman, Daniel; Gutierrez-Rocha, Mario
  33. Does Aid for Education Attract Foreign Investors? An Empirical Analysis for Latin America By Julian Donaubauer; Dierk Herzer; Peter Nunnenkamp

  1. By: Christian Bjørnskov (Department of Economics and Business, Aarhus University)
    Abstract: Foreign aid is given for many purposes and different intentions, yet most studies treat aid flows as a unitary concept. This paper uses factor analysis to separate aid flows into different types. The main types can be interpreted as aid for economic purposes, social purposes, and reconstruction; a residual category captures remaining purposes. Estimating the growth effects of separable types of aid suggests that most aid has no effects while reconstruction aid has direct positive effects. Although this type only applies in special circumstances, it has become more prevalent in more recent years.
    Keywords: Foreign aid, dimensionality, development, economic growth
    JEL: O11 F35
    Date: 2013–04–09
  2. By: Paula Herrera (Faculty of Economics, University of Barcelona); Enrique López-Bazo (Faculty of Economics, University of Barcelona); Elisabet Motellón (Faculty of Economics, University of Barcelona)
    Abstract: In this paper, we explore the connection between labor market segmentation in two sectors, a modern protected formal sector and a traditional- unprotected-informal sector, and overeducation in a developing country. Informality is thought to have negative consequences, primarily through poorer working conditions, lack of social security, as well as low levels of productivity throughout the economy. This paper considers an aspect that has not been previously addressed, namely the fact that informality might also affect the way workers match their actual education with that required performing their job. We use micro-data from Colombia to test the relationship between overeducation and informality. Empirical results suggest that, once the endogeneity of employment choice has been accounted for, formal male workers are less likely to be overeducated. Interestingly, the propensity of being overeducated among women does not seem to be closely related to the sector choice.
    Keywords: Segmented labor markets, Formal/Informal employment, Human capital, Economic development. JEL classification: O15, J21, J24.
    Date: 2013–04
  3. By: Ruth Uwaifo Oyelere (School of Economics, Georgia Institute of Technology); Kate Wharton (Georgia Institute of Technology)
    Abstract: Forty years of low-intensity internal armed conflict have made Colombia home to over 3 million Internally Displaced Persons (IDPs), the world’s largest population. The effect of violence on a child’s education is of particular concern because of the critical role that education plays in increasing human capital and productivity. This paper explores the education accumulation and enrollment gaps created by being directly affected by conflict. We proxy for this direct impact by focusing on IDPs. First, we show that measuring the impact of conflict on children using levels of conflict at the municipal level underestimates the education enrollment and accumulation gaps. We subsequently estimate the education accumulation and enrollment gaps for IDPs in comparison to non-migrants and other migrants using various econometric techniques. Our results suggest a significant education accumulation gap for children of IDPs compared to non-migrants that widens to approximately half a year at the secondary level. We find no evidence of enrollment gaps at the primary level when appropriate controls are included, but we do find a lower probability of enrollment at the secondary level. The disparity in effects when we focus on direct exposure to conflict versus a dummy that captures living in a municipality with high conflict suggests the need to be careful when using the latter to estimate the impact of conflict.
    Keywords: Education Attainment, School Enrollment, Colombia, Internal Displacement, Conflict
    JEL: I24 O12 O15 J10
    Date: 2013–04
  4. By: Prakarsh Singh (Amherst College); Olga N. Shemyakina (School of Economics, Georgia Institute of Technology)
    Abstract: This study explores the long-run effect of the 1981-1993 Punjab Insurgency on the educational attainment of adults who were between ages 6-16 years at the time of the insurgency, using the 2005 India Human Development Survey. We find a substantial and statistically significant negative effect of terrorism on educational attainment. To explore the channels through which the conflict affected education, we use a unique historical dataset on the annual expenditure decisions by farmers in the state of Punjab during 1978-1989. We find a significant reduction in expenditure on education by households with a high ratio of girls to boys and those residing in violence affected districts, which suggests that this reduction was one of the demand-side channels through which conflict affected education.
    Date: 2013–04
  5. By: Enzo Nussio (Universidad de los Andes (Bogotá)); Ben Oppenheim (University of California, Berkeley)
    Abstract: War-torn societies are often racked with generalized distrust, both among citizens and between citizens and the state. Even long after conflict ends, former combatants who participated in violence and challenged the state’s monopoly on the legitimate use of force may have an especially unsettled relationship with the state. After demobilization, their potential relapse into armed struggle is thought to pose a severe risk to security and stability. What factors determine ex-combatants’ degree of trust in the state after their demobilization? We present the first empirical examination of this question through a survey of 1,485 former members of paramilitary and guerrilla groups in Colombia. We find limited support for social theories of trust: our analysis indicates that participation in civic and association life has no discernible impact on ex-combatants’ trust in the state. However, contrary to the warnings of disarmament, demobilization and reintegration (DDR) practitioners, continuing connection between former fighters has a neutral to positive impact on trust, especially for former guerrilla. We find that intense socialization within the armed group during wartime has a corrosive impact on trust in the state, even years after demobilization. This finding suggests that the formation of “anti-social capital” may be difficult to reverse. With respect to institutional theories of trust, ex-combatants who perceive that the state performs well in important policy areas, such as the protection of civil and political rights, exhibit stronger trust. However, while conventional wisdom holds that ex-combatants are principally interested in material benefits we find no relationship between individual measures of well-being, including unemployment, and lower levels of trust in the state.
    Date: 2013–04
  6. By: Jirada Prasartpornsirichoke (Graduate School for International Development and Cooperation, Hiroshima University); Yoshi Takahashi (Graduate School for International Development and Cooperation, Hiroshima University)
    Abstract: Using data from Thailand's Household Socioeconomic Survey, this paper measures the inequalities of Thai education in 2011. We utilize the Gini coefficients to estimate Thai educational inequalities from cumulative years of educational attainment which are between zero (no schooling) to twenty-one (doctoral level) years. The education Gini coefficient of the whole country is 0.349. At the provincial level, the Gini coefficients are in a range between 0.272 (Nonthaburi) and 0.521 (Mae hong son). The provinces located near the Bangkok metropolis have greater equality in education, except for Samut Sakhon, while the provinces in the northern part of Thailand have severe inequality in education, especially the border provinces. As for the effect of schooling on educational inequality, we found that at the regional level, average years of schooling was significantly and negatively associated with the educational inequality, except in the northern part of Thailand. The magnitudes of coefficients of average years of schooling in the northern and southern parts are twice that of the central part of Thailand. The policy implication of this paper is that the Thai government should pay attention to two points in adjusting the scope of distribution: reduce the number of people without schooling and extend the educational attainment of people with primary education to secondary education. At the regional level, the policy of education expansion for reducing educational inequality is workable only in central Thailand, the north, and the south. Governments should utilize different policies in each region. In addition, the Thai government should pay more attention to solving the social problems which contribute to the issue of educational inequality.
    Keywords: Inequality in education, the Gini coefficient, Years of schooling, Thai education
    JEL: I24
    Date: 2013–03
  7. By: Wada, Kazuya
    Abstract: This study investigates the effects of changes in non-agricultural sectors in India on investments in children's education. By using data from the Census of India (1981, 1991, and 2001) and the India Human Development Survey 2005 (IHDS), this study seeks to capture changes in Indian economic situation for the two decades between 1981 and 2001 and examine the effects of those changes on children's educational attainments in 2005. The results of empirical analysis suggest that changes in the first and second decades have different characteristics in terms of expansion among the non-agricultural sectors. In addition, estimation results imply that the expansion of non-agricultural sectors in the 1990s have had positive effects on investments in girls' education, leading to the alleviation of gender disparity in education. However, it should be noted that such expansion may aggravate income inequality in the future because it adversely affects children from poor households.
    Keywords: Non-agricultural Sectors, Investments in Children’s Education, Disparity
    JEL: O15 I25 J16
    Date: 2013–03
  8. By: Kurosaki, Takashi; Khan, Hidayat Ullah
    Abstract: Based on a three-year panel dataset of households collected in rural Pakistan, we first quantify the extent to which farmers are vulnerable to attacks by wild boars; we then examine the impact of an intervention on households’ capacity to reduce related income losses. A local nongovernmental organization implemented the intervention as a randomized controlled trial at the beginning of the second survey year.This experimental design enabled us to cleanly identify the impact of the intervention. We find that the intervention was highly effective in eliminating the crop-income loss of treated households in the second year, but that effects were not discernible in the third year. The finding from the third year could be due to the high implicit cost incurred by the households in implementing the treatment. Regarding the impact of the intervention on a number of consumption measures, the difference-in-difference estimate for the impact on consumption was insignificant in the second year, but highly positive in the third year when estimated without other controls. A part of this consumption increase was because of changes in remittance inflows. The overall results indicate the possibility that treatment in the absence of subsidies was costly for households due to hidden costs, and hence, the income gain owing to the initial treatment was transient.
    Keywords: wild animal attack, agriculture, consumption, randomized controlled trial, Pakistan
    JEL: O13 O15 Q12
    Date: 2013–03
  9. By: Kurosaki, Takashi
    Abstract: This paper provides a comparative analysis of asset dynamics among low-income farmers facing various types of income shocks in pre- and post-independence Pakistan. Focusing on the province of Khyber Pakhtunkhwa (formerly known as North-West Frontier Province: NWFP), Pakistan, we first investigate the long-run data at the district level beginning from 1902. The results show that agriculture in colonial NWFP was subject to substantial shocks due to natural disasters such as droughts, hailstorms, and floods. The livestock population, the major asset of farmers, substantially declined in response to these shocks. In the post-independence period, vulnerability of crop agriculture to natural disasters continued, although less substantial, while the response of livestock to such shocks was indiscernible in district-level data. To examine microeconomic mechanisms underlying the asset dynamics, we analyze a panel dataset collected from about 300 households in three villages in NWFP du ring the late 1990s. The results show that the dynamics of household landholding and livestock is associated with a single long-run equilibrium. When human capital is added, the dynamics curve changes its shape but not non-linear enough to produce statistically-significant multiple equilibriums. Livestock was depleted widely when the village economy was hit by macroeconomic stagnation, while landholding was depleted only in a village with inferior access to markets. The asset dynamics patterns found from historical and contemporary analyses are consistent with limited but improving access to consumption smoothing measures in the study region over a century.
    Keywords: natural disaster, agriculture, livestock, consumption smoothing, Pakistan
    JEL: O13 O44 N55
    Date: 2013–03
  10. By: David Lagakos (Arizona State University); Benjamin Moll (Princeton University); Tommaso Porzio (Yale University); Nancy Qian (Yale University, NBER, CEPR, BREAD)
    Abstract: Using recently available large-sample micro data from 36 countries, we document that experience-earnings profiles are flatter in poor countries than in rich countries. Motivated by this fact, we conduct a development accounting exercise that allows the returns to experience to vary across countries but is otherwise standard. When the country-specific returns to experience are interpreted in such a development accounting framework - and are therefore accounted for as part of human capital - we find that human and physical capital differences can account for almost two thirds of the variation in cross-country income differences, as compared to less than half in previous studies.
    Keywords: Human Capital, Experience-Earnings Profiles, Development Accounting
    JEL: E24 J24 O11
    Date: 2012–12
  11. By: Daniela Del Boca (University of Torino and CCA); Christopher Flinn (New York University and CCA); Matthew Wiswall (Arizona State University)
    Abstract: In this paper we utilize a model of household investments in the cognitive development of children to explore the impact of various transfer policies on the distribution of child cognitive outcomes in target populations. We develop a cost criterion that can be used to compare the cost effectiveness of unrestricted, restricted, and conditional cash transfer systems, and ï¬nd that conditional cash transfers are the most cost efficient way to attain any given gain in average child quality in a target population. Of course, this is only true if one uses efficiently designed cash transfer systems, and we are able to explore their design using our modeling framework.
    Keywords: Time Allocation; Child Development, conditional and unconditional cash transfer
    JEL: J13 D1
    Date: 2013–04
  12. By: Elaine Liu (University of Houston); Paul Frijters (University of Queensland); Tao Sherry Kong (Peking University)
    Abstract: We compare the characteristics and regression coefficients between the participants in a field experiment in China and the survey population from which they were recruited. The experimental participants were more educated, younger, more likely to be male, more risk-loving and work fewer hours than the more general population. The estimates of their regression coefficients in the standard analyses of wages, happiness and entrepreneurship differed significantly from non-participants, indicating that inferences drawn from experimental samples may not hold for more representative groups of the population.
    Keywords: Field experiment, China
    JEL: A10
    Date: 2013–04–08
  13. By: Elaine Liu (University of Houston); Shu Zhang (University of Houston)
    Abstract: This paper performs a meta-analysis to investigate how changes over time, model specifications, differences in data sets, and variable definitions could contribute to the differences in estimates of returns to education in China. The results show that approximately 10 percent of the variation can be explained by changes in labor market over time, while the other 45 percent can be explained by differences in samples used and empirical methods. Return to education has increased approximately 0.2 percentage points a year since the economic reform, and increases more quickly as the reform progresses; however, this accelerating trend has reached a stop in the last few years when the global recession hit China. We also find that returns to education for rural-to-urban migrant workers are 2.3 percentage points lower than that of urban workers. We conclude that the increasing reward for human capital accumulation over time signals that China is moving toward a well functioning labor market.
    Keywords: Returns to Education, China, Meta-Analysis
    JEL: I20 J3 O12
    Date: 2013–04–08
  14. By: Arturo Galindo; Marcela Melendez
    Abstract: Credit has been found to be a catalyst for economic growth, as it spurs investment, enhances productivity, allows costs to be spread out over time, improves resource allocation, and enables investors to cope better with macroeconomic volatility. Most studies focus on the relationship between financial development and growth at the country level, while few analyze the relationship at the firm level. Using a panel-shaped firm-level dataset of Colombian firms and employing the methodology developed by Love and Zicchino (2006), this paper examines whether the response of firms to financial and real shocks varies according to firm size and across different levels of firm productivity. The study finds that financial shocks have a significant positive impact on firm growth, which is larger for larger firms and more productive firms that export. The results indicate that something is preventing smaller firms from taking full advantage of access to external financing.
    JEL: G32 O54
    Date: 2013–04
  15. By: Sebastian Auguste; Ricardo N. Bebczuk; Gabriel Sanchez
    Abstract: The goal of this paper is to study the link between bank credit (and internal funding) and average firm size in Argentina. Besides the fact that economic growth tends to go hand in hand with larger firm size, the topic is of particular interest because of the severe credit crunch in Argentina in the aftermath of the 2001-2002 financial crisis. To this end, a novel three-digit industry-level dataset spanning the 2000-2010 period was constructed. The results confirm the expected positive impact of credit supply on average firm size. Furthermore, the study expands on common knowledge by testing the sensitivity of firm size to internal funding and the differential financing behavior of the primary and the manufacturing sector. The results do not seem to be driven by endogeneity bias.
    JEL: D22 D23 G21 G32
    Date: 2013–03
  16. By: Brück, Tilman (SIPRI); Esenaliev, Damir (DIW Berlin)
    Abstract: We investigate long-term trends in the intergenerational transmission of education in a low income country undergoing a transition from socialism to a market economy. We draw on evidence from Kyrgyzstan using data from three household surveys collected in 1993, 1998 and 2011. We find that Kyrgyzstan, like Eastern European middle income transition economies, generally maintained high educational mobility, comparable to the levels during Soviet times. However, we find that the younger cohorts, who were exposed to the transition during their school years, experienced a rapid decline in educational mobility. We also document that gender differences in schooling and educational mobility, found among older-aged individuals, disappeared in the younger population.
    Keywords: gender, educational attainment, intergenerational mobility, transition economy, Kyrgyzstan, Central Asia
    JEL: J62 P36 I25
    Date: 2013–03
  17. By: Kodama, Yuka
    Abstract: In rural Ethiopia, parents play an important role in the major life events of their daughters such as education and marriage. However, parents’ roles have been evolving, likely due to the rapid expansion of educational opportunities for girls and the growing need of cash income among rural households. Currently, encouraging their daughters to take up further education and jobs in the formal sector contrasts with rural Ethiopian women’s conventional life course events in the past, which are characterized by early marriage and low educational profiles. An interview analysis with parents of young women indicated that under the continuing de-agrarianization among rural households, women are expected to have their own cash income generating activities to qualify as marriage partners.
    Keywords: Ethiopia, Women, Education, Marriage, Household, Young women, Parents
    JEL: R23 Z13
    Date: 2013–03
  18. By: Kojin, Emi
    Abstract: The objective of this paper is to explore the entities that have developed private farms (trang trai) in Vietnam. Various types of private farms have emerged in the last ten years. It is noteworthy that the owners of private farms are not necessarily agricultural households but also include government officials and the urban rich. Based on data collected from the author’s field surveys in Vietnam from 2006 to 2011, the paper attempts to categorize patterns in the development of private farms and analyze their differences. The paper argues that private farms developed by agricultural households are still limited because of the difficulty of consolidating land.
    Keywords: Vietnam, Land tenure, Agriculture, Private farm, Trang trai, Business history, Agricultural household, Land market
    JEL: O13 Q12 Q15
    Date: 2013–03
  19. By: Junyi Shen (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Xiangdong Qin (School of Economics, Shanghai Jiao Tong University, China)
    Abstract: Many previous empirical studies have suggested that cooperation and trust affect economic growth. However, the precise relationship between trust and cooperation (i.e., whether trust leads to cooperation or cooperation leads to trust) remains unclear and it is not known how the level of economic development affects the level of cooperation and trust. Using a combination of public goods experiment, gambling game experiment, and trust game experiment, we investigate the links among cooperation, trust, and economic development in four regions of China. Our results suggest that first, there is a U-shaped or V-shaped relationship between cooperation and economic development; second, on the one hand, cooperation leads to trust, and on the other hand, more cooperative behavior may be created by rewarding trusting behavior; and third, men are more cooperative and trusting than women. Furthermore, we find that the widely used 'GSS trust' question from the General Social Survey (GSS) does not predict either cooperation or trust, whereas the questions 'GSS fair' and 'GSS help' have weak predictive power for trusting behavior but not for cooperative behavior.
    Keywords: Cooperation, Trust, Economic development, Experiment, China
    JEL: C91 H41 I32
    Date: 2013–04
  20. By: Mitsuo Inada (Graduate School of Economics, Kyoto University)
    Abstract: Inward foreign direct investment (FDI) in China has been accompanied by rapid economic growth. A growing literature has emerged in recent years examining the role of FDI on Chinese economic growth. However, measuring the e?ects of FDI has been challenging, because other fac- tors which in?uence ?rms?productivity occur in parallel with FDI, and because economic growth also simultaneously attracts FDI. To address these endogeneities, this paper analyzes the e?ects of a change in the FDI regulations on the productivity growth of Chinese industries using Chinese industry-level panel data. In 2002, the Chinese government lifted its regulations on the entry of foreign a¢ liates, which has made it substantially easier for foreign ?rms to engage in FDI in a?ected industries. As a result of this regulation change, our di?erence-in-di?erences estimates show that these industries experienced signi?cantly larger increases in foreign ?rms?total sales, exports, and domestic sales. We also ?nd that this increase in FDI resulted in an increase in labor productivity and in total factor productivity (TFP) of the a?ected industries and local industries, but we do not ?nd that they experienced signi?cantly larger in?ows of FDI or productivity growth before 2002, which provides evidence against endogeneity concerns. The results above are su¢ - ciently robust to include changes in industrial tari? reduction as controls. These ?ndings suggest that the growth of foreign sales and TFP in a?ected industries is not well explained except by the e?ects of regulation changes.
    Keywords: Foreign Direct Investment; Regulation Change; Industrial Growth; Technology Spillovers; Difference-in-Differences.
    JEL: F21 O33 O38 O43
    Date: 2013–04
  21. By: Erkan Gören (University of Oldenburg, Department of Economics)
    Abstract: This paper investigates the empirical relationship between the two concepts of ethnicity and economic growth. Ethnicity is assumed to affect economic growth through a number of possible transmission channels that are generally included in cross-country growth regressions by proposing an extended econometric system of equations to describe growth incorporates new channel variables for the potential indirect effects of ethnicity that are important in the process of economic development. The results, based on a sample of 95 countries for the period 1960-1999, suggest that the concept of ethnic fractionalization is a strong predictive measure for the direct effect of ethnicity on growth, whereas the concept of ethnic polarization has non-negligible indirect economic effects through the specified channel variables.
    Keywords: ethnic diversity; fractionalization; polarization; transmission channels; economic growth
    JEL: O11 O5
    Date: 2012–10
  22. By: Bin Ni (PhD Candidate, Graduate School of Economics, Osaka University)
    Abstract: Using firm-level data from an Enterprise Survey of World Bank, this paper is designed to test how policy variables can affect inward foreign direct investment ("FDI") in China. After excluding the problems of sample selection and endogeneity, the result shows that investment promotion agencies (IPAs) and investment incentive zones (IIZs) have significant positive effect on absorbing FDI in China. Other factors such as sales volume and R&D also have significant impact. I also found that both IPAs and IIZs play a more important role in inviting other foreign companies to come to China than they do to Hong Kong, Macau, and Taiwan ("HMT") enterprises. The last finding is that if the city has IPA only, its promotion effect actually outweighs the city with IPA or IIZ combined; on the other hand, if the city has IPA or IIZ, then its positive effect on absorbing FDI will be larger than the city with IIZ solely.
    Keywords: Investment promotion agency, firm-level data, sample selection, China
    JEL: F21 F23
    Date: 2013–04
  23. By: Dominic Rohner; Mathias Thoenig; Fabrizio Zilibotti
    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 e¤ect 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: conflict, Uganda, seeds of distrust, ethnic conflicts, ACLED, cross-ethnic
    JEL: D74 Q34
    Date: 2012
  24. By: Kodila-Tedika, Oasis; Agbor , Julius
    Abstract: This paper investigates the effects of religion on a broad set of development outcomes in sub-Saharan Africa. We regroup these outcomes into three broad categories, namely, development process outcomes (growth, investment, conflict, and government quality), institutional outcomes (property rights and the rule of law) and social development outcomes (social and gender protection). Using two new measures of religion – religious fractionalization (RELFRAC) and religious polarization (RELPOL), alongside the traditional measure of religious diversity, our results suggest that broadly speaking, religion or religious diversity has no statistically significant impact on the institutional and social aspects of development in sub-Saharan Africa. However, our findings do suggest that religion has important effects on the development process through its effects on investment. The analysis suggests that African policy-makers need to pay attention to the changing religious dynamics and increasing religious polarization of African societies.
    Keywords: Economic development, Africa, Religious Polarization; Conflict; Religious diversity
    JEL: D74 O1 O55 Z12
    Date: 2013–04–17
  25. By: Nora Lustig (Department of Economics, Tulane University); Luis F. Lopez-Calva (Poverty and Gender Unit, Latin America and the Caribbean Vice-presidency, World Bank); Eduardo Ortiz-Juarez (Regional Bureau for Latin America and the Caribbean, United Nations Development Programme (UNDP))
    Abstract: Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 14 of the 17 countries where there is comparable data, and the change was statistically significant for all of them. Existing studies point to two main explanations for the decline in inequality: a reduction in hourly labor income inequality, and more robust and progressive government transfers. Available evidence suggests that it is the skill premium--or, more precisely, the returns to primary, secondary and tertiary education vs. no schooling or incomplete primary schooling--that drives the decline in hourly labor income inequality. The causes behind the decline in returns to schooling, however, have not been unambiguously established. Some studies find that returns fell because of an increase in the supply of workers with more educational attainment; others, because of a shift in demand away from skilled-labor.
    Keywords: inequality, skill premium, government transfers, Latin America
    JEL: D31 I24 H53 O15 O54
    Date: 2013–04
  26. By: Fung Kwan (Department of Economics, University of Macau); Yanrui Wu (Business School, University of Western Australia); Shuaihe Zhuo (Department of Economics, University of Macau)
    Abstract: This paper contributes to the pool of studies of rural underemployment in China. It is devoted to the conceptualization and measurement of surplus labour. The agricultural labour requirement function is estimated by the stochastic frontier analysis (SFA) with China’s prefecture-level data. Surplus labour or inefficient labour is obtained by subtracting the required labour from the actual labour participated in agriculture. Our analysis indicates that the existing size of agricultural surplus labour in rural China is still significantly large with the continued practice of the household registration system and China’s WTO membership. However, the size has been decreasing over the last decade. We thus conclude that China is probably experiencing the second stage of the Lewis-Fei-Ranis dualistic economic framework.
    Date: 2012
  27. By: Khandker, Shahidur R.; Samad, Hussain A.
    Abstract: This paper addresses whether microcredit participants in Bangladesh are trapped in poverty and debt, as many critics have argued in recent years. Analysis of data from a long panel survey over a 20-year period confirms this is not the case, although numerous participants have been with microcredit programs for many years. The results of the analysis suggest that participants derive a variety of benefits from microcredit: It helps them to earn income and consume more, accumulate assets, invest in children's schooling, and be lifted out of poverty. This is not to say that non-participants have failed to progress over the same period. Both participants and non-participants have gained as the economy has grown; however, the rates of poverty reduction have been higher for participants. Testing the net effect of microcredit programs requires applying an econometric method that controls for why some households participated and others did not, conditional on their initial characteristics. In addition, the method must control for time-varying, unobserved heterogeneity that affects everyone over time, albeit in possibly different ways. The paper's econometric estimates show significant welfare gains resulting from microcredit participation, especially for women. They also show that the accrued benefits of borrowing outweigh accumulated debt. As a result, households'net worth has increased, and both poverty and the debt-asset ratio have declined.
    Keywords: Rural Poverty Reduction,Debt Markets,Banks&Banking Reform,Poverty Monitoring&Analysis
    Date: 2013–04–01
  28. By: Agenor, Pierre-Richard; Dinh, Hinh T.
    Abstract: This paper studies the role of public policy in promoting industrial transformation from an imitationbased, low-skill economy to an innovation-based, high-skill economy, where technological progress now occurs through the domestic invention of ideas. Industrial transformation is measured by changes in an index of industrial structure, defined as the ratio of the variety of imitation- to innovation-based intermediate goods. A key mechanism through which productivity increases initially in both the imitation and innovation sectors is through a knowledge externality associated with learning by doing in the imitation sector. The process of industrialization increases the demand for high-skill labor, inducing individuals to invest in education. The model also emphasizes the distinction between basic or core infrastructure, which promotes imitation, and advanced infrastructure, which promotes innovation. A calibrated version for a low-income country is used to perform several policy experiments, including an increase in investment in infrastructure, a reduction in the cost of training, and improved enforcement of property rights.
    Keywords: Labor Policies,Economic Theory&Research,Political Economy,Debt Markets,Labor Markets
    Date: 2013–04–01
  29. By: Khandker, Shahidur R.; Koolwal, Gayatri B.; Badruddoza, Syed
    Abstract: Over the past 20 years, Bangladesh has witnessed strong competition among microfinance institutions. Using program-level panel data from 2005-2010, this paper studies the microfinance institutions'recent competitive roles in their pricing of products, targeting strategies and portfolio shifts, as well as their ability to recover loans. The findings do not support the view that newer microfinance institutions are less risk-averse in their targeting, or that increased borrowing among households due to microfinance institution competition has lowered recovery rates. There is also a considerable urban-rural distinction; although newer microfinance institutions tend to attract riskier clients in urban areas, the opposite is true in rural areas. Loan recovery rates are also the highest among the newest microfinance institutions for women in rural areas, suggesting that microfinance institutions may offer distinct products in these areas to attract better-risk clients. The portfolio of newer microfinance institutions also has a greater share of lending for agriculture, and fewer savings products.
    Keywords: Debt Markets,Banks&Banking Reform,Emerging Markets,Microfinance,Rural Finance
    Date: 2013–04–01
  30. By: Fardoust, Shahrokh; Ravishankar, V.J.
    Abstract: In response to the Great Recession of 2008, many national governments implemented fiscal stimuli packages in 2009 and 2010 to prevent further declines in aggregate demand and to jump start their economic recovery. Where subnational governments responded with fiscal contraction, as in the United States, the impact was muted; where states/provinces also expanded expenditures, as in China and India, the impact was magnified. Increases in recurrent expenditure, which were made in Brazil and India, acted as short-term stimulants; additional public investment, as in China, appears to have had a more lasting impact on growth. Large developing countries typically exhibit high interregional inequality in levels of development and global integration, resulting in differential magnitude and timing of the crisis impact. For example, coastal states in India were affected more severely and quickly than landlocked states; revenue moved in opposite directions in the two types of state in 2009. Where fiscal stress varies widely across subnational entities, central transfers alone cannot prevent pro-cyclicality of subnational fiscal response to a recession. There is need for flexibility in subnational borrowing within a sustainable fiscal framework. Many Indian states were able to maintain or accelerate their spending thanks to the additional borrowing permitted in 2009 and 2010. In comparison, limited borrowing capacity and lack of flexibility in federal grants restricted the contribution of Brazilian states to fiscal stimulus. Legal prohibition of subnational borrowing induced China's provinces to finance additional investments through extra-budgetary borrowing by nongovernment entities, with significant fiscal risks on account of contingent liabilities.
    Keywords: Subnational Economic Development,Debt Markets,Banks&Banking Reform,Access to Finance,Public Sector Economics
    Date: 2013–04–01
  31. By: Jacoby, Hanan G.
    Abstract: This paper considers the welfare and distributional consequences of higher relative food prices in rural India through the lens of a specific-factors, general equilibrium, trade model applied at the district level. The evidence shows that nominal wages for manual labor both within and outside agriculture respond elastically to increases in producer prices; that is, wages rose faster in rural districts growing more of those crops with large price run-ups over 2004-09. Accounting for such wage gains, the analysis finds that rural households across the income spectrum benefit from higher agricultural commodity prices. Indeed, rural wage adjustment appears to play a much greater role in protecting the welfare of the poor than the Public Distribution System, India's giant food-rationing scheme. Moreover, policies, like agricultural export bans, which insulate producers (as well as consumers) from international price increases, are particularly harmful to the poor of rural India. Conventional welfare analyses that assume fixed wages and focus on households'net sales position lead to radically different conclusions.
    Keywords: Markets and Market Access,Economic Theory&Research,Labor Policies,Agribusiness,Emerging Markets
    Date: 2013–04–01
  32. By: Fernandes, Ana M.; Lederman, Daniel; Gutierrez-Rocha, Mario
    Abstract: The authors use a new dataset on export transactions for a large set of Latin American and Caribbean and comparator countries to assess the extent of"export entrepreneurship"during periods of fast export growth (2005-2007) and depressed external demand (2008-2009). Export entrepreneurship is equated with the extensive margin of exports, namely the advent of new exporting firms, new export products, and new export market destinations. The main findings are: (1) annual exporter entry, exit, and survival rates in Latin America and the Caribbean are quite similar to what is observed in other countries, and entry rates across sectors are quite similar but survival rates appear to be highest in agriculture; (2) the relative size of entrants into export markets (relative to incumbents) tended to be lower for natural resource-abundant countries during 2005-2007, but less so during the crisis years of 2008-2009; (3) entry rates tend to be lower in sectors in which a country has revealed comparative advantage, however, exit rates and survival rates of new exporters are higher in those sectors; and (4) the low growth of exports during the global recession of 2008-2009 in Latin America and the Caribbean was due to lower growth in exports of incumbent firms'pre-existing products and destinations, while new products and destinations tended to attenuate the recession's effects. Overall, the data suggest that the Latin American and Caribbean region appears to be no less entrepreneurial in terms of the extensive margins of exports than comparator countries.
    Keywords: Currencies and Exchange Rates,Free Trade,Debt Markets,Export Competitiveness,Country Strategy&Performance
    Date: 2013–04–01
  33. By: Julian Donaubauer; Dierk Herzer; Peter Nunnenkamp
    Abstract: We address the question of whether foreign aid helps attract foreign direct investment (FDI). This could be achieved if well targeted aid removed critical impediments to higher FDI inflows. In particular, we test the hypothesis that aid for education is an effective means to increase FDI flows to host countries in Latin America where schooling and education appears to be inadequate from the viewpoint of foreign investors. We employ panel data techniques covering 21 Latin American countries over the period from 1984 to 2008. We find that aid for education has a statistically significant positive effect on FDI. This effect is robust to potential outliers, sample selection, alternative specifications and different estimation methods.
    Keywords: foreign aid, foreign direct investment, aid effectiveness, human capital
    JEL: E24 F21 F35 O15 O19
    Date: 2013–04

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