nep-dev New Economics Papers
on Development
Issue of 2014‒02‒15
eight papers chosen by
Jacob A. Jordaan
Utrecht University

  1. Re-Re-Reply to “The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence” By Mark Pitt
  2. Emigration and democracy By Docquier, Frédéric; Lodigiani, Elisabetta; Rapoport, Hillel; Schiff, Maurice
  3. The Effect of Drought on Health Outcomes and Health Expenditures in Rural Vietnam By Tobias Lechtenfeld; Steffen Lohmann
  4. Governance and Development Outcomes in Asia By Sen, Kunal
  5. Determinants of risk sharing through remittances: cross-country evidence By Faruk Balli; Faisal Rana
  6. Migration, remittances and household welfare in Ethiopia By Andersson L.
  7. The Median Is the Message: A Good-Enough Measure of Material Well-Being and Shared Development Progress By Nancy Birdsall and Christian J. Meyer
  8. (In)equality in Education and Economic Development By Petra Sauer; Martin Zagler

  1. By: Mark Pitt
    Abstract: “The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence,” by David Roodman and Jonathan Morduch (2014) is the most recent of a sequence of papers and postings that seeks to refute the findings of the Pitt and Khandker (1998) article “The Impact of Group-Based Credit on Poor Households in Bangladesh: Does the Gender of Participants Matter?” that microcredit for women had significant, favorable effects on poverty reduction. This response paper refutes the claims of Roodman and Morduch that were not addressed in the earlier World Bank working paper of Pitt and Khandker (2012). This response paper, like the Pitt and Khandker (2012) paper and others that preceeded it, shows that many of the Roodman and Morduch claims are based on a flawed econometric understanding and a lack of due diligence in formulating and interpreting statistical models.
    Keywords: microcredit, microfinance, replication, Bangladesh, Grameen Bank, program evaluation
    Date: 2014
  2. By: Docquier, Frédéric; Lodigiani, Elisabetta; Rapoport, Hillel; Schiff, Maurice
    Abstract: International migration is an important determinant of institutions, not considered so far in the empirical growth literature. Using cross-section and panel analysis for a large sample of developing countries, we find that openness to emigration (as measured by the general emigration rate) has a positive effect on home-country institutional development (as measured by standard democracy indices). The results are robust to a wide range of specifications and estimation methods. Remarkably, the cross-sectional estimates are fully in line with the implied long-run relationship from dynamic panel regressions.
    Keywords: Migration; Institutions; Democracy; Development
    JEL: O15 O43 F22
    Date: 2014–02
  3. By: Tobias Lechtenfeld (The World Bank Group); Steffen Lohmann (Georg-August-University Göttingen)
    Abstract: This paper studies the impact of droughts on health outcomes and health expenditures in rural Vietnam. Given the increasing frequency of extreme weather events in Vietnam and many developing countries, it is crucial for policy makers to be aware of the economic impact of such shocks at the micro level. Using local rainfall data, the analysis directly links the incidence of drought to health shocks and health-related expenditures from a multiple-wave panel of rural Vietnamese households. Overall, the results suggest that individuals affected by drought display a deterioration of health conditions and have significantly higher health expenditures. The effect is found to prevail among households with a high degree of agricultural dependency and limited access to coping mechanisms such as selling assets or tapping off-farm income sources. The preferred estimates using an IV strategy reveal that drought-related health shocks can cause non-negligible additional financial burden for many households vulnerable to poverty in rural Vietnam. This paper quantifies the immediate impact of drought on health conditions and contributes to the existing literature which has mostly focused on the long-term consequences.
    Keywords: climate shocks; drought; health; Vietnam
    JEL: I15 O15 Q54
    Date: 2014–02–06
  4. By: Sen, Kunal (University of Manchester)
    Abstract: The relationship between governance and economic development is one of the most important areas of research in international development. Much of the previous literature has focused on whether better governance leads to higher levels of income. In this paper, we examine the relationship between governance and broader development outcomes, with a specific focus on developing Asia. In our empirical analysis, we use disaggregated measures of governance to capture different dimensions of governance, and to allow for the possibility that different dimensions of governance such as administrative capacity, legal infrastructure, and state accountability can affect development indicators differentially. We find a clear role for governance in affecting most development outcomes except levels of schooling. This is particularly evident for state administrative capacity and legal infrastructure, and less evident for state accountability. However, we find that the benign relationship between governance and development is weaker for Asian countries for several of the development indicators. We also find that the key mechanism by which governance affects development is by increasing the mobilization of domestic resources and by increasing the effectiveness with which these resources are spent on social sectors. Along with the fact that governance quality is lower in Asia than other regions of the world (except sub-Saharan Africa), this suggests that improvements in governance along with the strengthening of the mechanisms by which governance affects social development can deliver clear gains in development outcomes in developing Asia.
    Keywords: governance; development outcomes; Asia
    JEL: I30 O11 O53
    Date: 2013–10–29
  5. By: Faruk Balli; Faisal Rana
    Abstract: The sending of remittances is a decentralised decision of migrant workers, nevertheless it has its macroeconomic implication in providing insurance against domestic output shocks in the recipient economies – a phenomenon known in literature as risk sharing. Using a large sample of 86 developing countries for the period 1990–2010, we establish that remittance inflows serve as an important channel through which risk sharing takes place in the developing world. Although the extent of risk sharing on average stands at 3.3%, there is substantial cross-country variation found in our sample, ranging from 38% for Tajikistan (38%) for Haiti (-13%). Subsequently, we explore why the extent of risk sharing through remittances is so diverse across developing countries. The diversification of migrants turns out to be the leading explanation for the extent of risk sharing via remittances: the more diverse the migration destinations of a country, higher will be the amount of risk shared. In addition, the size of remittance flows appears to have a strong and statistically significant impact on enhancing risk sharing. We also find suggestive evidence that remittances originating from more distant countries facilitate more risk sharing compared to those originating from neighbouring or regional economies. Even after splitting the sample on the basis of country characteristics, our results remain robust.
    Keywords: Diversification, International migration, Remittances, Risk sharing
    JEL: F15 F22 F24 F41
    Date: 2014–01
  6. By: Andersson L. (UNU-MERIT)
    Abstract: This paper investigates the effect of international remittances and migration on household welfare in Ethiopia. We employ both subjective a households subjective economic well-being and objective measures asset holdings and asset accumulation to define household welfare. A matching approach is applied to address self-selection, and by exploiting information before and after the households began receiving remittances, the study sheds light on the changes in welfare associated with international migration and remittances. The results reveal that remittances have a significant impact on a welfare variable that has previously not received much attention in the migration literature, namely household subjective economic well-being. In addition, we find that remittances have positive effects on consumer asset accumulation, especially in rural areas, but no effect on productive assets.
    Keywords: International Migration; Remittances; Economic Development: Human Resources; Human Development; Income Distribution; Migration;
    JEL: F22 F24 O15
    Date: 2014
  7. By: Nancy Birdsall and Christian J. Meyer
    Abstract: We argue that survey-based median household consumption expenditure (or income) per capita be incorporated into standard development indicators, as a simple, robust, and durable indicator of typical individual material well-being in a country. Using household survey data available for low- and middle-income countries from the World Bank’s PovcalNet tool, we show that as a measure of income-related well-being, it is far superior to the commonly used GDP per capita as well as survey-based measures at the mean. We also argue that survey-based median measures are “distributionaware”, i.e. when used as the denominator of various widely available indicators such as mean consumption expenditure per capita they provide a “good-enough” indicator of consumption (or income) inequality. Finally, as a post-2015 indicator of progress at the country-level in promoting shared development and reducing inequality, we propose that the rate of increase in median consumption per capita after taxes and transfers exceed the rate of increase in average consumption in the same period.
    Keywords: welfare measure, median, consumption, inequality, distribution
    JEL: D31 H22 I32 O15
    Date: 2014–01
  8. By: Petra Sauer (Department of Economics, Vienna University of Economics and Business); Martin Zagler (Department of Economics, Vienna University of Economics and Business)
    Abstract: This paper investigates the relationship between economic development and the average level of education as well as the degree of inequality in the distribution of education, respectively. Approaching this question in a dynamic panel over 60 years and 143 countries with a system GMM estimator reveals strong support for the inclusion of an interaction term between the education Gini coeffcient and average years of schooling, indicating the existence of nonlinear effects. We contribute to the literature in providing strong evidence that more schooling is good for economic growth - irrespective of its distribution - but that the coeffcient is variable and substantially declining in inequality. On the other hand, inequality is positively related to economic growth for low average levels of education, whereas highly educated countries exhibit a statistically insignificant negative relationship between inequality and economic growth. From this it follows that at least a slight increase in the degree of inequality is necessary in order to haul initially poor and low educated economies out of the poverty trap. However, as economies become educated, the effect of educational inequality mainly works indirectly. Accordingly, countries that show greater educational inequality experience lower macro economic returns to education than more equal economies, on average.
    Keywords: education, economic growth, distribution of education
    JEL: D31 I00 O15
    Date: 2014–01

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