nep-dev New Economics Papers
on Development
Issue of 2013‒12‒20
twelve papers chosen by
Jacob A. Jordaan
Utrecht University

  1. Business Literacy and Development: Evidence From a Randomized Controlled Trial in Rural Mexico By Gabriela Calderón; Jesse M. Cunha; Giacomo De Giorgi
  2. Global income distribution : from the fall of the Berlin Wall to the great recession By Lakner, Christoph; Milanovic, Branko
  3. On the Impact of Microcredit: Evidence from a Randomized Intervention in Rural Ethiopia By Jaikishan Desai; Kristin Johnson; Alessandro Tarozzi
  4. Demand factors that influence financial inclusion in Mexico. Analysis of the barriers based on the ENIF survey By Carmen Hoyo; Ximena Pena; David Tuesta
  5. Size and age of establishments: evidence from developing countries By Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav
  6. What happen to children's education when their parents emigrate? Evidence from Sri Lanka By Sarma, Vengadeshvaran; Parinduri, Rasyad
  7. Are Women “Naturally” Better Credit Risks in Microcredit? Evidence from Field Experiments in Patriarchal and Matrilineal Societies in Bangladesh By Sugato Chakravarty; S. M. Zahid Iqbal; Abu Zafar M. Shahriar
  8. Migrant Remittances and Information Flows: Evidence from a Field Experiment By Catia Batista; Gaia Narciso
  9. The Paradigm of African Agricultural Efficiency, 1967-2012: What Does Meta-Analysis Reveal? By Ogundari, Kolawole
  10. The Quantitative Importance of Openness in Development By Wenbiao Cai; B. Ravikumar; Raymond G. Riezman
  11. One Mandarin Benefits the Whole Clan: Hometown Favoritism in an Authoritarian Regime By Quoc-Anh Do; Kieu-Trang Nguyen; Anh N. Tran
  12. Efficiency And Equity Impacts Of The Rental Market For Cropland In Vietnam And Sources Of Transaction Costs Impeding The Market By Huy, Hoang; Lyne, Michael; Ratna, Nazmun; Nuthall, Peter

  1. By: Gabriela Calderón; Jesse M. Cunha; Giacomo De Giorgi
    Abstract: A large share of the poor in developing countries run small enterprises, often earning low incomes. This paper explores whether the poor performance of businesses can be explained by a lack of basic business skills. We randomized the offer of a free, 48-hour business skills course to female entrepreneurs in rural Mexico. We find that those assigned to treatment earn higher profits, have larger revenues, serve a greater number of clients, are more likely to use formal accounting techniques, and more likely to be registered with the government. Indirect treatment effects on those entrepreneurs randomized out of the program, yet living in treatment villages, are economically meaningful, yet imprecisely measured. We present a simple model of experience and learning that helps interpret our results, and consistent with the theoretical predictions, we find that “low-quality” entrepreneurs are the most likely to quit their business post-treatment, and that the positive impacts of the treatment are increasing in entrepreneurial quality.
    Keywords: business literacy, development, entrepreneurship
    JEL: C93 I25 O12 O14
    Date: 2013–12
  2. By: Lakner, Christoph; Milanovic, Branko
    Abstract: The paper presents a newly compiled and improved database of national household surveys between 1988 and 2008. In 2008, the global Gini index is around 70.5 percent having declined by approximately 2 Gini points over this twenty year period. When it is adjusted for the likely under-reporting of top incomes in surveys by using the gap between national accounts consumption and survey means in combination with a Pareto-type imputation of the upper tail, the estimate is a much higher global Gini of almost 76 percent. With such an adjustment the downward trend in the Gini almost disappears. Tracking the evolution of individual country-deciles shows the underlying elements that drive the changes in the global distribution: China has graduated from the bottom ranks, modifying the overall shape of the global income distribution in the process and creating an important global"median"class that has transformed a twin-peaked 1988 global distribution into an almost single-peaked one now. The"winners"were country-deciles that in 1988 were around the median of the global income distribution, 90 percent of whom in terms of population are from Asia. The"losers"were the country-deciles that in 1988 were around the 85th percentile of the global income distribution, almost 90 percent of whom in terms of population are from mature economies.
    Keywords: Inequality,Economic Theory&Research,Poverty Impact Evaluation,Rural Poverty Reduction,Emerging Markets
    Date: 2013–12–01
  3. By: Jaikishan Desai; Kristin Johnson; Alessandro Tarozzi
    Abstract: We use data from a randomized controlled trial conducted in 2003-2006 in rural Amhara and Oromiya (Ethiopia) to study the impacts of the introduction of micro finance in treated communities. We document that borrowing increased substantially in locations where the programs started their operations, but we find mixed evidence of improvements in a number of socio-economic outcomes, including income from agriculture, animal husbandry, non-farm self-employment, schooling and indicators of women's empowerment.
    Keywords: microcredit, cluster randomized controlled trial, Ethiopia
    JEL: O12 O16
    Date: 2013–10
  4. By: Carmen Hoyo; Ximena Pena; David Tuesta
    Abstract: In Mexico 62% of adults between the ages of 18 and 70 do not have formal savings or credit products, even though 97% of adults have access to them through different channels. The difference between the supply and the effective use of the financial system means the existence of demand barriers that have not been explored fully so far. Thanks to the interest of the Mexican government in measuring and evaluating financial inclusion from the point of view of supply and demand, the first National Financial Inclusion Survey (Encuesta Nacional de Inclusión Financiera, ENIF) was applied in 2012 in Mexico. It has become a model in Latin America for the study of demand for financial services. Using ENIF data, and a probit model, we have analyzed the socioeconomic factors that from the point of view of individual demand, influence the decision of whether or not to use formal saving or credit financial services in Mexico. According to our analysis, the insufficiency or variability of income and self-exclusion are the most important barriers in the Mexican market. They are influenced by three types of factors: 1) variables that denote individual vulnerability, such as income level, gender, education and occupation; 2) geographical variables with respect to the size of the community in which the individual lives (towns with a population of less than 15,000 or more than 15,000; and 3) variables that appear related to a preference for the informal financial market, such as the capacity to respond to exogenous shocks and belonging to households with a capacity to save.
    Keywords: financial inclusion, financial institutions, barriers, personal finance
    JEL: C01 D14 G21
    Date: 2013–12
  5. By: Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav
    Abstract: Survey data from 120 developing countries are used to examine the relation between establishment size and age in the formal sector. Existing research suggests that manufacturing establishments in developing countries do not grow over time, most likely because of market imperfections and regulations. To the contrary, this paper finds that the average plant in developing countries that is more than 40 years old employs almost five times as many workers as the average plant that is five years old or younger. The analysis finds consistent evidence when it looks within a large country, India, based on detailed manufacturing census data over 23 years. It also finds that differences in financial development across Indian states, while substantial, have a minor effect on firm growth, consistent with inefficiency of state-owned financial systems. These results hold controlling for differences in labor regulations across states, capital intensity, labor regulations, and firms born before and after the major reforms.
    Keywords: Microfinance,Banks&Banking Reform,Scientific Research&Science Parks,Science Education,Labor Markets
    Date: 2013–12–01
  6. By: Sarma, Vengadeshvaran; Parinduri, Rasyad
    Abstract: We examine the effects of parental emigration from Sri Lanka on the education of the migrants' children left behind. Using access to foreign-employment agencies at community level as an instrument for migration in two-stage least squares estimations, we do not find parental migration matters on average. However, analyses by the gender of the migrants show the effects are heterogeneous: When the mothers migrate and the fathers stay behind, education of the children worsens; but, when the fathers migrate and the mothers take care of the children, it improves. There are also some evidence boys, younger children, and children of the less educated parents gain more from parental migration.
    Keywords: parental migration, children’s education, South Asia, Sri Lanka
    JEL: F22 I22 O15
    Date: 2013
  7. By: Sugato Chakravarty (Purdue University); S. M. Zahid Iqbal (Purdue University); Abu Zafar M. Shahriar (Monash University)
    Abstract: We use controlled experiments to identify the proximal causes of gender differences in the repayment of microcredit. We recruit male and female subjects from a patriarchal and a matrilineal community in Bangladesh, who live in the same villages, and find that the female subjects have a greater willingness to repay microcredit in every society irrespective of the type of loan. Thus, the observed gender differences in the repayment of microcredit cannot be explained by the different roles that women play in different societies. In other words, women are “naturally” better credit risks than men in microcredit. We confirm that our results are not driven by the common culture and values among our subjects that stem from geographical proximity.
    Keywords: microfinance,nature; nurture; competition; loan repayment
    Date: 2013–12
  8. By: Catia Batista (Nova University of Lisbon); Gaia Narciso (Trinity College Dublin)
    Abstract: Do information flows matter for remittance behavior? We design and implement a randomized control trial to quantitatively assess the role of communication between migrants and their contacts abroad on the extent and value of remittance flows. In the experiment, a random sample of 1,500 migrants residing in Ireland was offered the possibility of contacting their networks outside the host country for free over a varying number of months. We find a sizable, positive impact of our intervention on the value of migrant remittances sent. Our results exclude that the remittance effect we identify is a simple substitution effect. Instead, our analysis points to this effect being a likely result of improved information via factors such as better migrant control over remittance use, enhanced trust in remittance channels due to experience sharing, or increased remittance recipients’ social pressure on migrants.
    Keywords: information flows, international migration, migrantnetworks, remittances, randomized control trial
    JEL: F22 J61 O15
    Date: 2013–12
  9. By: Ogundari, Kolawole
    Abstract: The present study investigates the development (i.e., rise or decline) in African agricultural efficiency level and what drives the efficiency over the years. A total of 379 frontier studies resulting in 534 farm level efficiency estimates were considered using meta-regression analysis (MRA) for the empirical analysis. The results show that mean efficiency estimates from the selected case studies decrease significantly as year of survey in the primary study increases. Apparently, this implies that over the years, negative efficiency change characterized the growth of African agriculture and food production. The effect of other study attributes considered in the MRA show that studies published in Journals, with parametric and primal technology specification produced significantly higher efficiency estimates, while those published in top ranking journals and with Cobb-Douglass and Translog functional forms produced significantly lower efficiency estimates. Other results show that education, followed by experience; extension and credit are the major drivers of agricultural efficiency levels in Africa over the years. Given these findings; we suggest policies that encourage investment in human capital development associated with education and extension should be prioritized to enhance the growth of agriculture and food production in the region.
    Keywords: Agriculture, efficiency, meta-analysis, growth, fractional regression, Africa, Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Demand and Price Analysis, Environmental Economics and Policy, Land Economics/Use, Productivity Analysis, C13, Q12, Q18,
    Date: 2013–08
  10. By: Wenbiao Cai; B. Ravikumar; Raymond G. Riezman
    Abstract: This paper deals with a classic development question: how can the process of economic development – transition from stagnation in a traditional technology to industrialization and prosperity with a modern technology – be accelerated? Lewis (1954) and Rostow (1956) argue that the pace of industrialization is limited by the rate of capital formation which in turn is limited by the savings rate of workers close to subsistence. We argue that access to capital goods in the world market can be quantitatively important in speeding up the transition. We develop a parsimonious open-economy model where traditional and modern technologies coexist (a dual economy in the sense of Lewis (1954)). We show that a decline in the world price of capital goods in an open economy increases the rate of capital formation and speeds up the pace of industrialization relative to a closed economy that lacks access to cheaper capital goods. In the long run, the investment rate in the open economy is twice as high as in the closed economy and the per capita income is 23 percent higher.
    JEL: O11 F43 O14
    Date: 2013–11
  11. By: Quoc-Anh Do (Département d'économie); Kieu-Trang Nguyen (London School of Economics); Anh N. Tran (Indiana University Bloomington)
    Abstract: Although patronage politics in democracies has been studied extensively, it is less understood in undemocratic regimes, where a large proportion of the world's population resides. To fill this gap, our paper studies how government officials in authoritarian Vietnam direct public resources toward their hometowns. We manually collect an exhaustive panel dataset of political promotions of officials from 2000 to 2010 and estimate their impact on public infrastructure in their rural hometowns. We obtain three main results. First, promotions of officials improve a wide range of infrastructure in their hometowns, including roads, markets, schools, radio stations, clean water and irrigation. This favoritism is pervasive among officials across different ranks, even among those without budget authority, suggesting informal channels of influence. Second, in contrast to pork-barrel politics in democratic parliaments, elected legislators have no power to exercise favoritism. Third, only home communes receive favors, while larger and more politically important home districts do not. This suggests that favoritism is likely motivated by officials’ social preferences for their hometowns rather than by political considerations.
    Date: 2013–03
  12. By: Huy, Hoang; Lyne, Michael; Ratna, Nazmun; Nuthall, Peter
    Abstract: This research investigates the efficiency and equity impacts of the cropland rental market in rural Vietnam and attempts to identify the determinants and importance of transaction costs impeding this market. A generalised ordered logit model with shifting thresholds accounting for effects of transaction costs associated with market participation was specified and estimated using pooled data extracted from the Vietnam Household Living Standards Surveys of 2004 and 2008. The findings show that the cropland rental market reduced imbalances in factor endowments, transferring cropland to those households more willing and able to farm. Equity advantages were also revealed as cropland transferred from relatively land-rich to relatively land-poor households, allowing young farmers to ‘scale the agricultural ladder’. However, the market is constrained by transaction costs that effect lessors and lessees differently. It is recommended that the Vietnamese government should complete its land registration programme and consider relaxing restrictions on the use of wetlands to grow crops other than rice. It should also focus on improving access to all-weather roads as this encourages participation on both sides of the rental market whereas better access to communications infrastructure was found to promote only the supply side.
    Keywords: Vietnam, 2003 land law, rental market, transaction costs, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Community/Rural/Urban Development, Crop Production/Industries, Demand and Price Analysis, Environmental Economics and Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Land Economics/Use, Production Economics, Productivity Analysis,
    Date: 2013–08

This nep-dev issue is ©2013 by Jacob A. Jordaan. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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