nep-dev New Economics Papers
on Development
Issue of 2013‒06‒04
nineteen papers chosen by
Mark Lee
Towson University

  1. Does Access to Finance Matter in Microenterprise Growth? Evidence from Bangladesh By Khandker, Shahidur; Samad, Hussain; Ali, Rubaba
  2. HIV/AIDS sero-prevalence and socioeconomic status: Evidence from Uganda By Kasirye, Ibrahim
  3. Structural Change, Wage Formation and Economic Growth in Low-Income Countries By Bender, Dieter
  4. Boosting Manufacturing Firms' Exports? The role of trade facilitation in Africa By Hoekstra, Ruth
  5. The Effectiveness of Aid in Improving Regulations: Empirical evidence and the drivers of change in Rwanda By Busse, Matthias; Hoekstra, Ruth; Osei, Robert
  6. Managing International Labor Migration in ASEAN : Themes from a Six-Country Study By Aniceto Orbeta, Jr.; Kathrina Gonzales
  7. The Structure of Agricultural Trade Industry in Developing Countries By Roehlano M. Briones
  8. The Social Policies of Emerging Economies: Growth and Welfare in China and India By Arjan de Haan
  9. Macroeconomic Vulnerability in Developing Countries: Approaches and Issues By Anuradha Seth; Amr Ragab
  10. Gender Differences in the Effects of Vocational Training: Constraints on Women and Drop-Out Behavior By Cho, Yoon Y.; Kalomba, Davie; Mobarak, Ahmed Mushfiq; Orozco, Victor
  11. Implications of an Economic Theory of Conflict: Hindu-Muslim Violence in India By Anirban Mitra; Debraj Ray
  12. The Evolution Of Education And Health Poverty During Economic Development:The Case Of Indonesia, 1991–2007 By Andy Sumner
  13. Constrained gazelles : high potentials in West Africa's informal economy By Grimm, Michael; Knorringa, Peter; Lay, Jann
  14. The Role of Faith-Inspired Health Care Providers in Sub-Saharan Africa and Public-Private Partnerships: Strengthening the Evidence for Faith-inspired Health Engagement in Africa, Volume 1 By Wodon, Quentin
  15. Non-farm diversification, poverty, economic mobility and income inequality : a case study in village India By Himanshu; Lanjouw, Peter; Murgai, Rinku; Stern, Nicholas
  16. The exceptional persistence of India's unorganized sector By Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D.
  17. Structural change, dualism and economic development : the role of the vulnerable poor on marginal lands By Barbier, Edward B.
  18. Engaging for results in civil service reforms : early lessons from a problem-driven engagement in Sierra Leone By Roseth, Benjamin; Srivastava, Vivek
  19. The poverty impact of climate change in Mexico By de la Fuente, Alejandro; Villarroel, Marcelo Olivera

  1. By: Khandker, Shahidur; Samad, Hussain; Ali, Rubaba
    Abstract: In less-developed economies such as Bangladesh where the farm sector is the major source of employment and income, the rural nonfarm sector (RNF) often as an additional source of income increasingly plays an important role in fostering the development of the rural economy, and microenterprise activities constitute a significant share of this sector. However, the key to participation in such activities requires investment and access to adequate funds. This paper investigates the role of access to finance in promoting efficiency and growth of microenterprise activities. Our findings suggest that the households engaged in microenterprise activities besides farm and other nonfarm activities are much better off (in terms of income, expenditure and poverty) than those who do not engage in such activities. However, fewer than 10 percent of the enterprises have access to institutional finance (formal banks or microcredit) although the rate of return on microenterprise investments is more than sufficient (36 percent per year) to repay institutional loans. Our findings suggest that credit constraints may reduce the enterprise profit margin by as much as 13.6 percent per year. As such, further in-depth studies should explore why microfinance institutions (MFIs) have not been more helpful in promoting microenterprise growth in Bangladesh.
    Keywords: Micro-enterprise development, access to finance, Community/Rural/Urban Development, Financial Economics, International Development,
    Date: 2013
  2. By: Kasirye, Ibrahim
    Abstract: Although Uganda reported large reductions in HIV/AIDS prevalence during the 1990s, recent evidence suggests that country’s rate of new HIV infections is on the rise. This study explores the factors that are correlated with sexual behavior and the risk of HIV infection using a unique dataset of 19,500 individuals from the 2011 Uganda AIDS Indicator Survey. This survey tested individuals 15-49 years of age for sexually transmitted infections, including the HIV virus. The same survey also collected background information for all tested individuals. This information is similar to what is collected in a typical demographic and health survey (DHS). We estimate probit models for the correlates of risky sexual behaviors that can lead to HIV infection such as: having concurrent sexual partners, no-condom use, and alcohol use during sex. In addition, we examine correlates of having been tested for HIV prior to the survey. Also, we estimate models for correlates of the risk of testing HIV positive as well as the self-assessed risks of contracting HIV. We find that higher education attainment and access to health facilities are important for adopting safe sexual behaviors as well as the reducing the risk of testing HIV positive. Among HIV infected couples, we find that women have a higher rate of discordance which is at odds with the low rates of self-reported extra marital sexual behavior.
    Keywords: Sexual behaviour, Kasirye, EPRC, STDs, Health, Health Economics and Policy, Institutional and Behavioral Economics, Risk and Uncertainty,
    Date: 2012
  3. By: Bender, Dieter
    Abstract: This paper analyzes the effects of structural change on the rates of growth of wages, employment and per-capita income in low-income countries, their dualistic structure shown by a Lewis-type two-sector model. Structural change is measured by the varying shares of sectoral employment in total employment. It is shown that the growth rates of GDP and per-capita income can be formulated as functions of these sectoral employment shares. Distinguishing the phases of dualistic development with and without labour surplus and post-dualistic development, it is demonstrated that each of these stages exhibits different growth dynamics: high but falling growth rates under dualistic development with labour surplus, low but rising growth rates under dualistic development after absorption of the labour surplus, growth rates falling again and converging toward a higher income steady state in the post-dual economy. As the growth dynamics of dualistic development are explained by a modified Lewis model and those of post-dualistic development by the Solow model, the study also highlights the complementary roles both models are playing in development economics.
    Keywords: Economic growth; Dualistic development; Labour surplus; Rural-urban migration
    JEL: O11 O41
    Date: 2012
  4. By: Hoekstra, Ruth
    Abstract: Facilitating trade is essential for Africa's economic development and further integration into the world economy, as business in Africa still suffers from behind-the-border barriers to trade. Using firm level data from the World Bank's Enterprise surveys covering more than 6,500 manufacturing firms, this paper empirically investigates the determinants of African firms' export decisions with a special focus on trade facilitation measures like the energy or telecommunications infrastructure. Overall, trade facilitation can increase African firms' probability to participate in international trade. Furthermore, lower trade barriers are associated with a higher propensity to export, i.e. stimulate the growth of exports.
    Keywords: Trade facilitation; Trade barriers; Africa; Firm-level data; Export probability
    JEL: F13 F15 O24
    Date: 2013
  5. By: Busse, Matthias (Ruhr-University Bochum, Faculty of Management and Economics, Germany); Hoekstra, Ruth (Hamburg Institute of International Economics (HWWI), Germany); Osei, Robert (Institute of Statistical, Social and Economic Research (ISSER), Ghana)
    Abstract: The paper assesses the impact of foreign aid on the change in the quality of regulations, and identifies the drivers of this change in a case study on Rwanda. In the empirical analysis, we find that highly targeted Aid for Business has a significantly positive impact on regulations across developing countries, but we do not find any effects for overall aid or aid directed at broad governance areas. In the country case study, we depart from Rwanda's excellent regulatory performance to explain how aid is effective in changing the regulatory environment, driven by the country’s strong political leadership and its singular institutional history.
    Keywords: Foreign aid; Governance; Business regulations; Rwanda
    JEL: F35 G28 L51 O55
    Date: 2013
  6. By: Aniceto Orbeta, Jr. (Philippine Institute for Development Studies (PIDS)); Kathrina Gonzales
    Abstract: The study presents a summary of the six-country study on managing international labor migration in the Association of Southeast Asian Nations (ASEAN)3. The countries are grouped into sending (Cambodia, Indonesia, Philippines) and receiving (Malaysia, Singapore, Thailand). The objective was to share international migration management issues from the perspective of a sending or a receiving country. The country research teams were asked to identify and study a specific migration management issue that is deemed current and reflective of the primary migration management experience of the country. For sending countries, the Cambodia research team studied the high frequency cross-border crossings into Thailand that is dominated by irregular migrants. The Indonesian research team looked at the role of local governments in migration management as the country embarked into substantial decentralization process. The Philippines research team look at the management of massive deployment flows spanning thirty years with special attention to the most vulnerable group – the household service workers. For receiving countries, the Malaysian research team looked at their experience in the continuing running battle with irregular migrants. The Singaporean research team look at the close interaction between the needs of the economy for migrant workers and their desire not to be too dependent on them. The Thai research team described the experience at the crossroad of being both a receiving and still a sending country. The studies have highlighted seven important themes on international labor migration management in ASEAN, namely : (a) the importance of integrating international migration into national and regional development efforts; (b) the importance of both bilateral and multilateral agreements; (c) the importance of recognizing differences in labor market policies in sending and receiving countries in designing protection for migrant workers; (d) the need to consider general administrative capacities in designing migration regulatory efforts; (e) the importance of involving sub-national bodies in migration management; (f) the need to broaden cooperation in handling irregular migration; and (g) the recognition that the protection envisioned by the state need not be the one “desired†by the migrant, hence, the need to check often to find out the effectiveness of protection measures.
    Keywords: International Labor Migration, ASEAN, Cambodia, Indonesia, Philippines, Malaysia, Singapore, Thailand
    JEL: F22 J61
    Date: 2013–05
  7. By: Roehlano M. Briones (Philippine Institute for Development Studies (PIDS))
    Abstract: Expansion of global trade has been heralded as a great boon for agriculture. However, benefits of such expansion has been seen by some quarters as inequitable due to the role of large agribusiness firms and conglomerates. This study synthesizes existing research on the market structure of agro-industry trade Its key findings are as follows : • The dominance of large-scale operations is more pronounced in the downstream stages. Moreover, distribution for foreign markets is the most concentrated part of the global chain. • Increasing horizontal concentration, and vertical coordination, arises from a set of supply drivers (e.g. technological change), demand drivers (e.g. rising purchasing power), policies, and institutional factors. • There is some evidence for significant market power being exercised in among the more concentrated value chains. Furthermore indications that market concentration can also be leveraged to widen the exercise of market power via coordination along a supply chain. However the association is not absolute. • At the farm level the evidence is more solid : size of land asset or scale of production, by itself, does not seem to disqualify smallholders from supplying to consolidated value chains, as there are a enabling schemes such as supervised contract growing, cooperatives, farmer associations and the like. More critical however are human capital, farm management practices, and other assets such as equipment and irrigation facilities. Despite the great volume of relevant literature, the tentative nature of the findings stated above indicate wide scope for further research in this area. Better information and analysis could perhaps pave way towards design of policies towards more equitable and yet productive and efficient global value chains.
    Keywords: Agricultural Trade, global value chain, market structure, distribution
    Date: 2013–05
  8. By: Arjan de Haan (IDRC)
    Abstract: Social policies play a critical role in the transformation of emerging economies. This paper discusses this with reference to China and India, with their very distinctive public policy approaches. Much of the economics literature either does not pay much attention to social policy or regards it as secondary at best or as a market enemy at worst. Views on social policy in emerging economies see this as either lagging or threatening growth. Instead, this paper argues, social policy is congruent and constitutive, and sustainable social policies are those that are formulated as part of economic policies and transformation, and, in turn, shape the conditions of enhancing markets and productivity. The paper describes how the ?great transformation? of both countries shapes social policy responses, the institutions and ideas that give very different shapes to the two countries? policies and the way policies vis-à-vis minorities are situated in both countries? social policies. The conclusion argues for the distinct research agenda that follows from this conceptualisation of social policy. (...)
    Keywords: The Social Policies of Emerging Economies: Growth and Welfare in China and India
    Date: 2013–06
  9. By: Anuradha Seth (BDP); Amr Ragab (The New School for Social Research)
    Abstract: Economic vulnerability is approached from micro- and macroeconomic perspectives. While the microeconomic perspective is concerned with the impact of shocks on the well-being of individual households, the macroeconomic perspective focuses on the impact of these shocks on economic growth. This paper reviews the literature on macroeconomic vulnerability and finds that there is no single approach to understanding macroeconomic vulnerability in the context of financial and economic crises in developing countries. It identifies the critical contributions of different studies on macroeconomic vulnerability and appraises their main differences. The paper then proposes elements for a more comprehensive framework of macroeconomic vulnerability for developing countries. In a world where shocks and crises are becoming more frequent, the imperative for countries to build resilience and protect themselves from development reversals has become all the more urgent. Not surprisingly, addressing macroeconomic vulnerability has become an important aspect of the international development agenda. (?)
    Keywords: Macroeconomic Vulnerability in Developing Countries: Approaches and Issues
    Date: 2012–05
  10. By: Cho, Yoon Y. (World Bank); Kalomba, Davie (Malawi National AIDS Commission); Mobarak, Ahmed Mushfiq (Yale University); Orozco, Victor (World Bank)
    Abstract: We provide experimental evidence on the effects of vocational and entrepreneurial training for Malawian youth, in an environment where access to schooling and formal sector employment is extremely low. We track a large fraction of program drop-outs – a common phenomenon in the training evaluation literature – and this allows us to examine the determinants and consequences of drop-out and how it mediates the effects of such programs. We find that women make decisions in a more constrained environment, and their participation affected by family obligations. Participation is more expensive for them, resulting in worse training experience. The training results in skills development, continued investment in human capital, and improved well-being, with more positive effects for men, but no improvements in labor market outcomes in the short run.
    Keywords: apprenticeship training, vulnerable youth, gender, drop-outs, Malawi
    JEL: O15 J24 I15
    Date: 2013–05
  11. By: Anirban Mitra; Debraj Ray
    Abstract: We study inter-group conflict driven by economic changes within groups. We show that if group incomes are “low”, increasing group incomes raises violence against that group, and lowers violence generated by it. These predicted relationships demonstrate the complex connections between economic growth and violence, and in particular serve as tests for group aggression or victimization, which we apply to Hindu-Muslim violence in India. Our main result is that an increase in per-capita Muslim expenditures generates a large and significant increase in future religious conflict. An increase in Hindu expenditures has negative or no effect. This robust empirical finding, combined with the theory, has direct implications for the origins of Hindu-Muslim violence in post-Independence India.
    JEL: O15 O43 O53
    Date: 2013–05
  12. By: Andy Sumner (King's International Development Institute, King's College London)
    Abstract: This paper discusses the evolution of education and health poverty in Indonesia during a period of substantial economic development. The paper reviews the existing empirical research and provides new estimates of the evolution of education and health poverty using the Demographic and Health Survey. The case of Indonesia suggests that poverty may urbanize but remains largely rural in nature, concentrated among those in households with heads with no or incomplete primary education and in households with heads not in work or employed in agriculture suggesting public policy priorities for the poor remain agriculture support, primary education expansion and employment generation.
    Keywords: Indonesia, poverty, education, health, inequality, economic development
    JEL: I32 D63
    Date: 2013–05
  13. By: Grimm, Michael; Knorringa, Peter; Lay, Jann
    Abstract: The informal sector is typically characterized as being very heterogeneous and possibly composed of two clearly distinct segments, sometimes called the lower and upper tier. However, empirical evidence shows that even among lower tier entrepreneur's profitability can be quite high. The authors combine these findings and develop an innovative approach to identify what is called constrained gazelles, next to the well-known survivalists in the lower tier and growth-oriented top-performers in the upper tier. The sample of informal entrepreneurs in seven West-African countries allows linking the relative size of these three groups to the structural and macroeconomic environment in these countries.
    Keywords: Access to Finance,Economic Theory&Research,Microfinance,Financial Literacy,Environmental Economics&Policies
    Date: 2012–03–01
  14. By: Wodon, Quentin
    Abstract: This role of faith-inspired health care providers in sub-saharan Africa and public-private partnerships is comprised of a three volume series on strengthening the evidence for faith inspired engagement in health in sub-Saharan Africa. An increasing level of interest in the role of faith in development has generated much debate and dialogue at the international and national levels over the last decade. Despite difficulties in communication and differences in cultures within such debates, there has been a continued reaffirmation of the potential benefits that faith-inspired communities can bring towards efforts to achieve the millennium development goals (MDGs), especially in the areas of health. This series focuses on assessing the role and market share of faith-inspired providers and on assessing the extent to which they are involved in and benefit from public-private partnerships. The purpose of this series is three HNP discussion papers is to round up various analytical perspectives and emerging research on faith engagement in health in Africa from a range of researchers and practitioners from the north as well as the south. The series is structured into three volumes: a first volume on the role and market share of faith-inspired providers and public-private partnerships, a second on satisfaction and the comparative nature of faith-inspired health provision, and the third on mapping of faith inspired provision and the extent to which faith-inspired providers reach to the poor.
    Keywords: access to services, advocacy efforts, advocacy purposes, antenatal care, beds, capacity building, choice of provider, civil society actors, CIVIL SOCIETY ORGANIZATIONS, clinics, communities, community care, community development, community health, contraceptives, contractual arrangements, delivery mechanisms, delivery of health care, Delivery of Health Services, delivery systems, Developing Countries, Development Policy, Development Strategies, doctors, drugs, educational services, employment, Equitable Access, Essential Medicines, family planning, formal care, Global Health, Global Health Council, government agencies, government support, HEALTH CARE, health care delivery, health care facilities, HEALTH CARE ORGANIZATIONS, HEALTH CARE PROVIDERS, health care provision, health care sector, health care services, Health Care System, health care systems, health centers, health coverage, Health Delivery, health facilities, health financing, health infrastructure, health initiatives, health needs, Health Organization, health planning, Health Policy, health posts, HEALTH PROGRAMS, health providers, health provision, Health Reform, Health Research, health sector, health service, health service delivery, health service providers, health service provision, health services, health strategies, health system, HEALTH SYSTEMS, Health-sector, healthcare providers, HIV, HIV/AIDS, homes, hospital beds, hospital care, hospital services, hospitals, Household Level, household surveys, households, HR, Human Development, Human Resources, illness, illnesses, important policy, income, Income Countries, individual health, Information Systems, integration, intervention, local community, localities, Low Income, low-income populations, management of Health, medical care, medical facilities, medical goods, medical systems, Medicines, Millennium Development Goals, Ministries of Health, Ministry of Health, mission hospital, mobile clinics, modern contraception, modern contraceptive methods, Multilateral Organizations, national governments, national health, national health service, national health services, national health systems, national level, national levels, Newborn, Newborn Health, Non-governmental Organizations, Nongovernmental Organizations, nurses, Nutrition, orphans, outpatient care, pandemic, patient, patient satisfaction, patients, personal relationships, Pharmaceutical Sector, pharmaceutical services, pharmacies, policy discussions, policy level, practitioners, primary care, PRIMARY HEALTH CARE, private doctors, private hospitals, private sector, providers of health care, providers of health services, provision of health care, provision of health services, Public Health, public health system, public providers, PUBLIC SECTOR, quality of services, quality services, religious practices, REPRODUCTIVE HEALTH, REPRODUCTIVE HEALTH PROGRAMS, reproductive health services, respect, rural areas, rural health care, shops, Social Development, Social Science, Social Services, Supply Systems, technical assistance, traditional healers, traditional practices, UNFPA, Universal Access, urban development, work environment, workforce, World Health Organization
    Date: 2012–11–01
  15. By: Himanshu; Lanjouw, Peter; Murgai, Rinku; Stern, Nicholas
    Abstract: This paper assembles data at the all-India level and for the village of Palanpur, Uttar Pradesh, to document the growing importance, and influence, of the non-farm sector in the rural economy between the early 1980s and late 2000s. The suggestion from the combined National Sample Survey and Palanpur data is of a slow process of non-farm diversification, whose distributional incidence, on the margin, is increasingly pro-poor. The village-level analysis documents that the non-farm sector is not only increasing incomes and reducing poverty, but appears as well to be breaking down long-standing barriers to mobility among the poorest segments of rural society. Efforts by the government of India to accelerate the process of diversification could thus yield significant returns in terms of declining poverty and increased income mobility. The evidence from Palanpur also shows, however, that at the village-level a significant increase in income inequality has accompanied diversification away from the farm. A growing literature argues that such a rise in inequality could affect the fabric of village society, the way in which village institutions function and evolve, and the scope for collective action at the village level. Failure to keep such inequalities in check could thus undermine the pro-poor impacts from the process of structural transformation currently underway in rural India.
    Keywords: Rural Poverty Reduction,Regional Economic Development,Inequality,Labor Markets
    Date: 2013–05–01
  16. By: Ghani, Ejaz; Kerr, William R.; O'Connell, Stephen D.
    Abstract: The transformation of India's unorganized sector is important to its modernization, growth, and attainment of regional economic equality. This paper documents several key facts about India's unorganized sector in manufacturing and services. First, the unorganized sector is large, accounting for more than 99 percent of establishments and 80 percent of employment in manufacturing. Second, the unorganized sector is stubbornly persistent -- it accounted for 81 percent of manufacturing employment in 1989 and 2005. Third, this persistence is not due to particular subsets of industries or states, as most industries and states show limited change in unorganized sector employment shares. Fourth, the degree to which localized unorganized activity exists is important as it is associated with weaker production functions for manufacturing firms. Building from these facts, the paper investigates conditions promoting transformation by state-industry. Decomposition exercises find that both within and between adjustments for state-industries weakly reduce unorganized sector shares. The aggregate persistence instead comes from the covariance term, where fast-growing state-industries witness rising unorganized sector activity. Regressions quantify that growth in the organized sector by state-industry reduces the unorganized sector employment share, but only marginally reduces employment levels in unorganized activity. Analysis of the establishment size distribution highlights that entrepreneurship and larger organized sector plants are most important for transitions in the manufacturing sector, while small establishments play a key role in the services sector.
    Keywords: Labor Markets,Labor Policies,Water and Industry,Tertiary Education,E-Business
    Date: 2013–05–01
  17. By: Barbier, Edward B.
    Abstract: Empirical evidence indicates that in many developing regions, the extreme poor in more marginal land areas form a"residual"pool of rural labor. Structural transformation in such developing economies depends crucially on labor and land use decisions of these most-vulnerable populations located on abundant but marginal agricultural land. Although the modern sector may be the source of dynamic growth through learning-by-doing and knowledge spillovers, patterns of labor, land and other natural resources use in the rural economy matter in the overall dynamics of structural change. The concentration of the rural poor on marginal lands is essentially a barometer of economy-wide development. As long as there are abundant marginal lands for cultivation, they serve to absorb rural migrants, increased population, and displaced unskilled labor from elsewhere in the economy. Moreover, the economy is vulnerable to the"Dutch disease"effects of a booming primary products sector. As a consequence, productivity increases and expansion in the commercial primary production sector will cause manufacturing employment and output to contract, until complete specialization occurs. Avoiding such an outcome and combating the inherent dualism of the economy requires both targeted polices for the modern sector and traditional agriculture on marginal lands.
    Keywords: Environmental Economics&Policies,Banks&Banking Reform,Economic Theory&Research,Rural Poverty Reduction,Economic Growth
    Date: 2013–05–01
  18. By: Roseth, Benjamin; Srivastava, Vivek
    Abstract: Two related propositions have been central in the recent debates on public sector reforms. The first of these is that the appropriate measure of institutional strength is the ability of public sector management systems to deliver ("functionality") rather than the institutional"form"or what these institutions look like. This is a central idea in the World Bank's Public Sector Management (PSM) Approach 2011-2020. Second, and consistent with this, is the recognition that the process of engagement matters in the sense that how problems, solutions, and reform approaches are identified matters at least as much as what the solution is. This suggests that development institutions should focus on bringing a broad range of stakeholders together and facilitate a process of collective problem and solution identification. Recent contributions to the literature describe a"Problem-Driven Iterative Adaptation"approach as a means of putting this idea into practice. While both of these propositions have considerable intellectual and intuitive appeal, they are based on an inductive logic and neither is currently backed with a large body of robust evidence. This paper contributes to this literature by documenting the experience of a civil service reform project -- the World Bank-financed Sierra Leone Pay and Performance Project -- the objective of which is to improve the performance of the civil service in Sierra Leone by targeting a narrowly defined set of critical reforms. The paper concludes that intensive, client-led engagement together with use of a results-based lending instrument provide a promising way forward on a difficult reform agenda.
    Keywords: Banks&Banking Reform,Public Sector Corruption&Anticorruption Measures,Government Diagnostic Capacity Building,E-Business,Access to Finance
    Date: 2013–05–01
  19. By: de la Fuente, Alejandro; Villarroel, Marcelo Olivera
    Abstract: This paper examines the effects of climate change on poverty through the relationship between indicators of climate change (temperature and rainfall change) and municipal level gross domestic product, and subsequently between gross domestic product and poverty. The evidence suggests that climate change could have a negative impact on poverty by 2030. The paper proposes a two-stage least squares regression where it first regresses temperature and rainfall (along with geographic controls and state and year fixed effects) on municipal gross domestic product per capita for 2000 and 2005 The resulting gross domestic product per capita is used in a second equation to estimate municipal poverty on the same years. The authors then incorporate projections of temperature and rainfall changes by 2030 into the estimated climate-gross domestic product coefficients to assess the effects of climate change in economic activity and how this in turn will influence poverty. At the same time, they account for the potential adaptive capacity of municipalities through higher population densities and economic growth. Both would reduce poverty by 31.72 percentage points between 2005 and 2030 with changing climate. However, poverty could have been reduced up to 34.15 percentage points over the same period had there been no climate change. This suggests that climate change slows down the pace of poverty reduction. An alternative reading is that poverty is expected to increase from 15.25 percent (without climate change) to 17.68 percent (with climate change) by 2030. Given the existing population projections for 2030, this represents 2,902,868 people remaining in poverty as a result of climate change.
    Keywords: Science of Climate Change,Climate Change Mitigation and Green House Gases,Climate Change Economics,Regional Economic Development,Rural Poverty Reduction
    Date: 2013–05–01

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