nep-dev New Economics Papers
on Development
Issue of 2014‒11‒12
six papers chosen by
Jacob A. Jordaan
Universitiet Utrecht

  1. Risk, Infrastructure, and Rural Market Integration: Implications of Infrastructure Provision for Food Markets and Household Consumption in Rural Indonesia By Miyazaki, Suguru; Shimamura, Yasuharu
  2. Fertility, Household’s size and Poverty in Nepal By François Libois; Vincent Somville
  3. Local government spending and multidimensional poverty in Senegal: insight from the fuzzy approach By Séne, Ligane; Cissé, Momath
  4. Basis Risk and the Welfare Gains from Index Insurance: Evidence from Northern Kenya By Jensen, Nathaniel D.; Barrett, Christopher B.; Mude, Andrew G.
  5. Is Country-system-based Aid Really Better than Project-based Aid? Evidence from Rural Water Supply Management in Uganda By Furukawa, Mitsuaki; Mikami, Satoru
  6. Looking Like an Industry: Supporting Commercial Agriculture in Africa By Diwan, Ishac; Gaddah, Olivier; Osire, Rosie

  1. By: Miyazaki, Suguru; Shimamura, Yasuharu
    Abstract: Utilizing original panel data collected in 2007 and 2010 in rural Indonesia for 2261 households located in 98 villages in 7 provinces, this paper investigates the food markets' functions with different extents of integration, and aims to interlink three important factors in the process of economic development — risk, infrastructure and welfare — of the rural poor. Focusing especially on irrigation systems and local paved roads, we explore the potential effect of infrastructure in relation to the global food price crisis that occurred in 2007–08 and thereafter affected poor households in rural Indonesia. The most important finding from our empirical analysis can be seen in the villages with relatively low integration to the surrounding markets, but which had access to irrigation systems. In those villages food prices, and in particular the price of rice, were kept lower, even when rural Indonesia experienced a spike in food prices. This implies that, although the implication is contrastive to rice producers (net sellers), irrigation facilities offset the negative effects for rural households by maintaining a relatively abundant food supply in local markets. Along with this investigation, the threshold estimation examines whether there exists a certain threshold for the proportion of local paved roads that divides villages according to either lower or higher spatial connectivity. Our results clearly indicate the existence of such a threshold. These findings suggest that when evaluating the potential role of irrigation and the effectiveness of irrigation development and management, it is important to pay more attention to the functions of the surrounding markets as related to rural road conditions, in addition to the direct impact of irrigation on agricultural productivity as it affects households.
    Keywords: risk , infrastructure , market integration , food price crisis , Indonesia
    Date: 2014–10–07
  2. By: François Libois (CRED, University of Namur); Vincent Somville (Chr. Michelsen Institute, Norway)
    Abstract: Population control policies keep on attracting massive attention: having more children would directly contribute to household’s poverty.Using household level data from Nepal, we investigate the links between household’s fertility decisions and variations in their size and composition. We show that household size barely changes with additional births but household composition is affected. Couples with fewer children host, on average, more other relatives. This result implies that fertility of a household has an ambiguous impact on its per capita consumption which depends on the relative gains in lower consumption versus costs of a lower income. We use the gender of the first born child to instrument the total number of consecutive children and identify the causal relationship.
    Keywords: Nepal ; Household size ; Household composition ; Poverty ; Fertility
    JEL: I31 J13 D13 O53
    Date: 2014–10
  3. By: Séne, Ligane; Cissé, Momath
    Abstract: The majority of African countries, included Senegal, continue to face widespread poverty. The objective of poverty reduction is accompanied by a set of initiatives and programs that might be reflected in the government budget allocation. A crucial point is to explore, in a context of severely limited resources, how to optimize budget allocation between different sectors and therefore get higher impact without necessarily much financial resources. In an effort to inform this discussion, this paper examines the linkage between disaggregated government expenditures and poverty using the most recent poverty monitoring survey in Senegal. Unlike most previous studies, our analysis is based on fuzzy set theory in the aim to find a suitable, complete and reliable way of measuring poverty, to overcome the limitations of one-dimensional framework, and better assess the impact of prior government expenditures. High heterogeneity in poverty appears from the decomposition of the overall poverty by location and by household head’s characteristics. The results from the model elucidate that previous government spending in infrastructure and spending on social development and women entrepreneurship yielded some positive impacts on poverty. These results provide useful policy insights for helping to improve the effectiveness of expenditures in reducing poverty.
    Keywords: poverty reduction, fuzzy set, government spending, multidimensional
    JEL: H5 I32 I38
    Date: 2014–09–15
  4. By: Jensen, Nathaniel D.; Barrett, Christopher B.; Mude, Andrew G.
    Abstract: Index insurance products circumvent many of the transaction costs and asymmetric information problems that obstruct provision of low value conventional insurance policies in developing countries. Recent years have seen tremendous growth in index insurance pilots in developing countries, but there has been little progress in our understanding of the quality of those products. Basis risk, or remaining uninsured risk, is a widely recognized, but rarely measured drawback of index insurance that carries significant implications for the quality of any such product. This research uses a rich longitudinal household dataset to examine basis risk associated with an index based livestock insurance (IBLI) product available to pastoralists in northern Kenya since 2010. We find that IBLI coverage reduces downside risk for most households when purchased at actuarially fair premium rates and has net utility benefits for most even at commercial rates. Examining the components of basis risk, we find that IBLI reduces exposure to covariate risk due to high loss events by an average of 62.8%. The benefits of reduced covariate risk exposure are relatively small, however, due to high exposure to seemingly mostly random idiosyncratic risk, even in this population often thought to suffer largely from covariate shocks. Depending on covariate region, IBLI policy holders are left with an average of between 62.3% and 76.7% of their original risk due to high loss events. This research underscores the need for caution when promoting index insurance as a tool for reducing exposure to risk and the importance of ex post product evaluation.
    Keywords: index insurance, basis risk, pastoralists, Kenya
    JEL: O1 O16
    Date: 2014–09
  5. By: Furukawa, Mitsuaki; Mikami, Satoru
    Abstract: The adoption by donors of the recipient country’s system, rather than a parallel donor system, in implementing aid projects has been highly recommended within the aid community in recent years. However, the assumption behind this policy that using a country’s own system would enhance the recipient’s bureaucratic capability and result in improved public service delivery has yet to be verified. We show in this paper that this expectation does not necessarily fit with the reality, taking the Ugandan rural water supply sector as an example. When bureaucracy itself is in flux in the name of “decentralization,” the unconditional adoption of a country-system approach could underperform when compared to the conventional donor-project approach.
    Keywords: Uganda , rural water supply , country system
    Date: 2014–01–23
  6. By: Diwan, Ishac (Harvard University); Gaddah, Olivier (Harvard University); Osire, Rosie (Harvard University)
    Abstract: It has long been known that countries only converge conditionally i.e. poor countries catch up with richer ones only if they adopt policies and institutions that are conducive to economic growth. Recently, Dani Rodrik (2011) has shown that manufacturing industries, unlike countries, converge unconditionally. We look at countries' performance in agriculture and find that agricultural productivity actually shows unconditional divergence (and like GDP, conditional converge). This means that agriculture very much behaves like a country and not like industry. We find however that many crops do converge unconditionally, like industry. The question we then ask is: how can we make particular sectors in agriculture more like an "industry" and less like a "country?" The paper argues that the solution lies in finding business models that provide capital and access to missing markets in an aggregated fashion, thus forming high-productivity islands of quality. We provide examples and a discussion of promising business models that do that.
    Date: 2014–02

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