nep-dev New Economics Papers
on Development
Issue of 2014‒10‒22
ten papers chosen by
Jacob A. Jordaan
Universitiet Utrecht

  1. Microcredit as insurance: Evidence from Indian Self-Help Groups By Timothée Demont
  2. The Miracle of Microfinance Revisited: Evidence from Propensity Score Matching By Inna Cintina; Inessa Love
  3. Time Discounting and Credit Market Access in a Large Scale Cash Transfer Program By Sudhanshu Handa; Bruno Martorano; Carolyn Halpern; Audrey Pettifor; Harsha Thirumurthy
  4. Evidence on Policies to Increase the Development Impacts of International Migration By David McKenzie; Dean Young
  5. Who benefits from government health spending and why? a global assessment By Wagstaff, Adam; Bilger, Marcel; Buisman, Leander R.; Bredenkamp, Caryn
  6. Measuring the impact of a change in the price of Cashew received by exporters on farmgate prices and poverty in Guinea-Bissau By Cont, Walter; Porto, Guido
  7. Dowry Deaths:Response to Weather Variability in India By Sheetal Sekhri; Adam Storeygard
  8. The Economic Costs of Civil War: Synthetic Counterfactual Evidence and the Effects of Ethnic Fractionalization By Stefano Costalli; Luigi Moretti; Costantino Pischedda
  9. Climate change and economic growth in sub-Sahara Africa: A nonparametric evidence By Paul Alagidede and George Adu
  10. The Effect of Climate Change and Adaptation Policy on Agricultural Production in Eastern Africa By Goytom Abraha Kahsay; Lars Gårn Hansen

  1. By: Timothée Demont (CERDI, University of Auvergne)
    Abstract: In developing countries, most poor households experience extremely variable in-come because of a large exposure to climatic, economic and policy shocks, combined with a lack of appropriate insurance devices. Extreme weather events, in particular, are projected to become more frequent in a warming climate, leaving rainfed agriculture and large populations in developing countries at risk. In this context, reliable access to finance in general and credit in particular can potentially bring welfare-improving opportunities to smooth household consumption. This paper documents the extent and the nature of the reactions to rainfall shocks that can be attributed to the participation to informal savings and credit groups in villages of Northern India. I exploit first-hand panel data measuring the living standards of member and control households, coupled with meteorological data at the district-level. I find that agricultural production and income are very dependent on the monsoon quality. Interestingly, while the access to credit collapses for control households after a bad monsoon, Self-Help Groups (SHGs) appear to be robust credit sources that offer to member households the possibility to increase borrowing in order to cope with shocks, even when those are largely covariate within the village. This in turn implies a higher degree of food security over the year and a lower need for temporary migration following a large negative shock. Finally, I review some noteworthy features that allow SHGs to withstand covariate shocks, though potentially at a cost in terms of longer-term insurance.
    Keywords: Microfinance, climate shocks, income smoothing, risk-coping strategies
    JEL: O13 O15 G21 Q54
    Date: 2014–10
  2. By: Inna Cintina (University of Hawai‘i at Manoa); Inessa Love (University of Hawai‘i at Manoa)
    Abstract: We provide new evidence on the effectiveness of microfinance intervention for poverty alleviation. We apply the Propensity Score Matching (PSM) method to data collected in a recent randomized control trial (RCT) in India by Banerjee et al. (2014). The PSM method allows us to answer an additional set of questions not answered by the original study. First, we explore the characteristics of MFI borrowers relative to two comparison groups: those without any loans and those with other types of loans, predominantly from family and friends and money lenders. Second, we compare the impact on expenditures of MFI borrowers relative to these two comparison groups. We find that microfinance borrowers have higher expenditures in a number of categories, notably durables, house repairs, health, festivals and temptation goods. The differences are stronger relative to those without any loans. Our results suggest that microfinance can make a larger difference for households previously excluded from other credit sources. However, some of the increased expenditures are unlikely to lead to long-term benefits and there is no significant difference in total expenditures. We also present suggestive evidence of negative spillovers, i.e. non-participants reducing some categories of expenditures, while MFI participants "pick up the tab."
    Date: 2014–09
  3. By: Sudhanshu Handa; Bruno Martorano; Carolyn Halpern; Audrey Pettifor; Harsha Thirumurthy
    Abstract: Time preference, the weight that individuals give to future over current consumption, is a characteristic that is thought to influence decision-making in almost every sphere of life, including personal finances, diet, exercise, sexual behavior and the environment. In this article we provide evidence on whether a national poverty alleviation program in Kenya can affect inter-temporal decisions. We administered a preferences module as part of a large-scale impact evaluation of the Kenyan Government’s Cash Transfer for Orphans and Vulnerable Children. Four years into the program we find that individuals randomized to the treatment group are only marginally more likely to wait for future money. However among the poorest households for whom the value of transfer is still relatively large we find significant program effects on the propensity to wait. We also find strong program effects among those who have access to credit markets and are thus less liquidity constrained to begin with, though the program itself does not improve access to credit. The results demonstrate a unique and potentially powerful way in which large-scale unconditional cash transfers can contribute to economic development in Africa. And the external validity of the results is likely high given the similarity of the Kenyan program to other national programs in the region.
    Keywords: Time preference, credit constraints, cash transfers, Kenya
    Date: 2014
  4. By: David McKenzie (The world bank); Dean Young (University of Michigan)
    Abstract: International migration offers individuals and their families the potential to experience immediate and large gains in their incomes, and offers a large number of other positive benefits to the sending communities and countries. However, there are also concerns about potential costs of migration, including concerns about trafficking and human rights, a desire for remittances to be used more effectively, and concerns about externalities from skilled workers being lost. As a result there is increasing interest in policies which can enhance the development benefits of international migration and mitigate these potential costs. We provide a critical review of recent research on the effectiveness of these policies at three stages of the migration process: pre-departure, during migration, and directed towards possible return. The existing evidence base suggests some areas of policy success: bilateral migration agreements for countries whose workers have few other migration options, developing new savings and remittance products that allow migrants more control over how their money is used, and some efforts to provide financial education to migrants and their families. Suggestive evidence together with theory offers support for a number of other policies, such as lowering the cost of remittances, reducing passport costs, offering dual citizenship, and removing exit barriers to migration. Research offers reasons to be cautious about some policies such as enforcing strong rights for migrants like high minimum wages. Nevertheless, we find the evidence base to be weak for many policies, with no reliable research on the impact of most return migration programs, nor for whether countries should be trying to induce communal remitting through matching funds.
    Keywords: Migration Policy, Remittances, Return Migration, Impact Evaluation
    JEL: O15 F22
    Date: 2014–10
  5. By: Wagstaff, Adam; Bilger, Marcel; Buisman, Leander R.; Bredenkamp, Caryn
    Abstract: This paper uses a common household survey instrument and a common set of imputation assumptions to estimate the pro-poorness of government health expenditure across 69 countries at all levels of income. On average, government health expenditure emerges as significantly pro-rich, but there is heterogeneity across countries: in the majority, government health expenditure is neither pro-rich nor pro-poor, while in a small minority it is pro-rich, and in an even smaller minority it is pro-poor. Government health expenditure on contracted private facilities emerges as significantly pro-rich for all types of care, and in almost all Asian countries government health expenditure overall is significantly pro-rich. The pro-poorness of government health expenditure at the country level is significantly and positively correlated with gross domestic product per capita and government health expenditure per capita, significantly and negatively correlated with the share of government facility revenues coming from user fees, and significantly and positively correlated with six measures of the quality of a country's governance; it is not, however, correlated with the size of the private sector nor with the degree to which the private sector delivers care disproportionately to the better-off. Because poorly-governed countries are underrepresented in the sample, government health expenditure is likely to be even more pro-rich in the world as a whole than it is in the countries in this study.
    Keywords: Health Monitoring&Evaluation,Health Systems Development&Reform,Information Security&Privacy,E-Business,Economic Theory&Research
    Date: 2014–09–01
  6. By: Cont, Walter; Porto, Guido
    Abstract: This paper assesses the impact of a change in the price of cashew received by exporters in general -- and by FUNPI, a fund to promote the industrialization of agricultural products, in particular -- on farmgate prices and poverty in Guinea-Bissau. The analysis builds a theoretical model of supply chains in export agriculture that includes exporters, traders, and farmers competing in a bilateral oligopoly fashion. The model is adapted to data from the country's cashew sector and a household survey. Given the market structure, a shock on export prices or the introduction of an export tax, such as the FUNPI contribution, has a strong effect on farmgate prices, as farmers absorb about 80 percent of the tax (while exporters take up 13 percent and traders absorb the remaining 7 percent). The effect is uneven across households, as poor rural households are more exposed to price volatility and most cashew farmers are poor. It is estimated that their income falls by 12 percent as a result of the FUNPI contribution. Complementary policies can overcome the effect of the FUNPI surcharge on farmgate prices by aiming for reductions in transport, infrastructure, and transaction costs for traders and exporters. Fostering cashew processing would create added value through a displacement of volume from exporters to processors. The analysis finds it implausible that, under reasonable assumtions, a subsidy would overturn the welfare costs of the FUNPI contribution.
    Keywords: Markets and Market Access,Economic Theory&Research,Debt Markets,Emerging Markets,Access to Markets
    Date: 2014–09–01
  7. By: Sheetal Sekhri; Adam Storeygard
    Abstract: We examine the effect of rainfall shocks on dowry deaths using data from 583 Indian districts for 2002-2007. We find that a one standard deviation decline in annual rainfall from the local mean increases reported dowry deaths by 7.8 percent. Wet shocks have no apparent effect. We examine patterns of other crimes to investigate whether an increase in general unrest during economic downturns explains the results but do not find supportive evidence. Women's political representation in the national parliament has no apparent mitigating effect on dowry deaths.
    JEL: O10 O13 Q54
  8. By: Stefano Costalli (University of Essex); Luigi Moretti (Univeristy of Padova); Costantino Pischedda (Columbia University)
    Abstract: There is a consensus that civil wars entail enormous economic costs, but we lack reliable estimates, due to the endogenous relationship between violence and socio-economic conditions. This paper measures the economic consequences of civil wars with the synthetic control method. This allows us to identify appropriate counterfactuals for assessing the national-level economic impact of civil war in a sample of 20 countries. We find that the average annual loss of GDP per capita is 17.5 percent. Moreover, we use our estimates of annual losses to study the determinants of war destructiveness, focusing on the effects of ethnic heterogeneity. Building on an emerging literature on the relationships between ethnicity, trust, economic outcomes, and conflict, we argue that civil war erodes interethnic trust and highly fractionalized societies pay an especially high “price”, as they rely heavily on interethnic business relations. We find a consistent positive effect of ethnic fractionalization economic war-induced loss.
    Date: 2014–09
  9. By: Paul Alagidede and George Adu
    Abstract: Climate change has been classed as the greatest and urgent global issue facing humanity today, yet the empirics of the debate remain largely muted, more so with reference to sub-Saharan Africa (SSA), where the impact of warming global temperatures are forecasted to have the worst impact. This paper is a contribution to the empirics of climate change and its effect on sustainable economic growth in SSA using nonparametric regression techniques. We establish the following: the relationship between real GDP per capita on one hand and climate change on the other hand, is intrinsically linear and monotonically decreasing at a constant proportionate rate. This relationship holds for both temperature and precipitation.
    Keywords: climate change, Sub-Saharan Africa, Sustainable Growth, Nonparametric techniques
    JEL: C14 C23 O11 O13 O40 Q54
    Date: 2014
  10. By: Goytom Abraha Kahsay (Department of Food and Resource Economics, University of Copenhagen); Lars Gårn Hansen (Department of Food and Resource Economics, University of Copenhagen)
    Abstract: We estimate the production function for agricultural output in Eastern Africa incorporating climate variables disaggregated into growing and non-growing seasons. We find a substantial negative effect of within growing season variance of precipitation. We simulate predicted climate change for the region and find a resulting output reduction of between 1.2% and 4.5%. We also find substantial potential for mitigating the effects of within growing season precipitation variability through conventional technologies such as flexible planting and rainwater harvesting that substantially exceeds the potential loss from predicted climate change.
    Keywords: Climate change, adaptation policy, Eastern Africa, agricultural production
    JEL: Q18 Q54 O55 E23 O13 R11
    Date: 2014–09

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