nep-dev New Economics Papers
on Development
Issue of 2015‒02‒28
eight papers chosen by
Jacob A. Jordaan
Universiteit Utrecht

  1. The Moral and Fiscal Implications of Anti-Retroviral Therapies for HIV in Africa By Paul Collier ; Olivier Sterck ; Richard Manning
  2. Facilitating Savings for Agriculture: Field Experimental Evidence from Malawi By Lasse Brune ; Xavier Giné ; Jessica Goldberg ; Dean Yang
  3. Impact of Weather Insurance on Small Scale Farmers: A Natural Experiment By Stephan Dietrich ; Marcela Ibanez
  4. Do Agricultural Extension Programmes Reduce Poverty and Vulnerability? Farm Size, Agricultural Productivity and Poverty in Uganda By Katsushi S. Imai ; Md. Faruq Hasan ; Eleonora Porreca
  5. Handling the weather : insurance, savings, and credit in West Africa By de Nicola, Francesca
  6. Same question but different answer : experimental evidence on questionnaire design's impact on poverty measured by proxies By Kilic, Talip ; Sohnesen, Thomas
  7. Competition in Kenyan markets and its impact on income and poverty : a case study on sugar and maize By Argent, Jonathan ; Begazo, Tania
  8. When Selection Trumps Persistence: The Lasting Effect of Missionary Education in South Africa By Johan Fourie and Christie Swanepoel

  1. By: Paul Collier ; Olivier Sterck ; Richard Manning
    Abstract: Thanks to anti-retroviral therapies, people living with HIV in developing countries can now have a near-normal life at a cost of a few hundred dollars per year.  We postulate that given this newly low cost of maintaining lives, there is a moral duty to rescue those who are infected.  The core of the paper quantifies a reasonable lower bound for the fiscal consequences of this duty, which we show creates a financial quasi-liability which for some African countries is comparable to their debt-to-GDP ratios.  Expenditures on prevention can pre-empt some of these liabilities.  We construct a model to show that in some countries expenditure on prevention would be cost-effective, reducing liabilities by more than its cost.  In principle, prevention should be pursued at least up to the point at which expenditure on it reduces the quasi-liability sufficiently to minimize the overall cost of accepting the duty to rescue.  However, we show that even with optimal prevention the quasi-liability is likely to remain too high to be affordable for a significant number of African countries.  Extending the model to two players, we show that if the international community accepts part of the quasi-liability, (as it does), it should finance an equal share of prevention and treatment efforts.  Any imbalance in this distribuiton would introduce moral hazard and lead to a sub-optimal level of prevention.
    Date: 2015–02–01
  2. By: Lasse Brune ; Xavier Giné ; Jessica Goldberg ; Dean Yang
    Abstract: We implemented a randomized intervention among Malawian farmers aimed at facilitating formal savings for agricultural inputs. Treated farmers were offered the opportunity to have their cash crop harvest proceeds deposited directly into new bank accounts in their own names, while farmers in the control group were paid harvest proceeds in cash (the status quo). The treatment led to higher savings in the months immediately prior to the next agricultural planting season, and raised agricultural input usage in that season. We also find positive treatment effects on subsequent crop sale proceeds and household expenditures. Because the treatment effect on savings was only a small fraction of the treatment effect on the value of agricultural inputs, mechanisms other than alleviation of savings constraints per se are needed to explain the treatment’s impact on input utilization. We discuss other possible mechanisms through which treatment effects may have operated.
    JEL: D03 D91 O16 Q14
    Date: 2015–02
  3. By: Stephan Dietrich (Georg-August-University Göttingen ); Marcela Ibanez (Georg-August-University Göttingen )
    Abstract: This paper explores the impacts of traditional agricultural insurance that offers protection against climatic shocks on small-scale tobacco farmers in Colombia. We analyze the impacts of access to the insurance on household financial outcomes after a period of severe climatic events that caused substantial crop failures. Our identification strategy benefits from a natural experimental setup of the form in which the insurance was launched. We find that tobacco producers with access to the insurance program were less likely to acquire informal loans, were less likely to use loans to repay debts, and had access to loans with lower interest rates and longer maturation periods. Moreover, access to this program was positively associated with increased savings and accumulation of liquid assets.
    Keywords: Insurance; Credit; Natural Disasters; Risk Management; Colombia
    JEL: G22 G23 O13 O16 Q14
    Date: 2015–02–23
  4. By: Katsushi S. Imai (School of Social Sciences, University of Manchester (UK) and RIEB, Kobe University (Japan) ); Md. Faruq Hasan (Department of Agricultural Extension, Hajee Mohammad Danesh Science and Technology University, Bangladesh ); Eleonora Porreca (University of Tor Vergata, Rome, Italy )
    Abstract: The present study examines the relationship between farm size, agricultural productivity and access to agricultural extension programmes in reducing poverty and vulnerability drawing upon LSMS panel data in Uganda in 2009-2012 covering three rounds. We first estimate household crop productivity using stochastic frontier analysis that can allow for stochastic shocks in the production function. Second, we have found a negative association between farm size and agricultural productivity for output per hectare, intensity of land use and net profit per hectare, but not for technical efficiency, suggesting that smallholders are generally more productive than large-holders. It is misleading to consolidate land or neglect smallholders in favour of large farmers on the grounds of economy of scale in crop production. Third, the effect of different types of agricultural extension programmes - namely NAADS or government, NGO, cooperatives, large farmer, input supplier and other types extension service providers - on the crop productivity is estimated by treatment effects model which controls for the sample selection bias associated with household participation in the agricultural extension as well as unobservable factors at household levels. It is found that participation in agricultural extension programs significantly raised crop productivity only in a few cases, but increased household expenditure per capita in all cases. Fourth, a substantial share of households was found to be vulnerable and education was found to be the key to reducing poverty and vulnerability. Finally, improvement in agricultural productivity reduces static poverty, but does not lead to reduction in household vulnerability. Agricultural policies tailored to local needs, such as agricultural extension programmes, should be thus combined with poverty or vulnerability alleviation policies targeting smallholders or the landless households.
    Keywords: Agricultural Productivity, Farm Size, Agricultural Extension, Poverty, Vulnerability, Treatment Effects Model, Uganda
    JEL: C21 C31 I32 N57 O13 O16
    Date: 2015–02
  5. By: de Nicola, Francesca
    Abstract: Farmers in developing countries face a wide array of risks. Yet they often lack formal financial instruments to protect against risks. This paper examines the impact on consumption, investment, and welfare of the separate provision of three financial products: weather insurance, savings, and credit. The paper develops a dynamic stochastic mode to capture the essential features of the lives of West African rural households. The model is calibrated with data from farmers in Burkina Faso and Senegal, to assess quantitatively the effects of three policy interventions. For each intervention the analysis first considers a benchmark scenario that abstracts from the flaws that affect each instrument; later the assumptions are relaxed. Weather insurance offers the largest welfare gains at each level of wealth, although the gains are significantly reduced by introducing a multiple on the insurance premium. Over time, however, savings can lead to substantial gains, higher than those achievable by unsubsidized weather insurance.
    Keywords: Debt Markets,Climate Change Economics,Economic Theory&Research,Financial Intermediation,Banks&Banking Reform
    Date: 2015–02–01
  6. By: Kilic, Talip ; Sohnesen, Thomas
    Abstract: Does the same question asked of the same population yield the same answer in face-to-face interviews when other parts of the questionnaire are altered? If not, what would be the implications for proxy-based poverty measurement? Relying on a randomized household survey experiment implemented in Malawi, this study finds that observationally equivalent as well as same households answer the same questions differently when interviewed with a short questionnaire versus the longer counterpart that, in a prior survey round, would have informed the prediction model for a proxy-based poverty measurement exercise. The analysis yields statistically significant differences in reporting between the short and long questionnaires across all topics and types of questions. The reporting differences result in significantly different predicted poverty rates and Gini coefficients. While the difference in predictions ranges from approximately 3 to 7 percentage points depending on the model specification, restricting the proxies to those collected prior the variation in questionnaire design, namely demographic variables from the household roster and location fixed effects, leads to same predictions in both samples. The findings emphasize the need for further methodological research, and suggest that short questionnaires designed for proxy-based poverty measurement should be piloted, prior to implementation, in parallel with the longer questionnaire from which they have evolved. The fact that at the median it took 25 minutes to complete the food and non-food consumption sections in the long questionnaire also implies that the implementation of these sections might not be as overly costly as usually assumed.
    Keywords: Rural Poverty Reduction,Regional Economic Development,Social Analysis,Food&Beverage Industry
    Date: 2015–01–01
  7. By: Argent, Jonathan ; Begazo, Tania
    Abstract: This paper investigates the link between competitive, well-functioning food markets and consumer welfare. The paper explores two key food markets in Kenya -- sugar and maize -- and argues that a variety of factors conspire to distort market prices upward. Distortionary factors include import tariff policy, nontariff barriers, potential anticompetitive conduct by firms, and direct state intervention in markets. Changes in sugar and maize prices are shown to have significant welfare effects on consumers. Equivalent income effects are estimated using the most recent available representative household survey data -- the Kenya Integrated Household Budget Survey 2005/06. The paper shows that relaxing trade barriers to allow sugar prices to fall by 20 percent could reduce poverty by 1.5 percent. Similarly, adjusting government interventions in the maize market, which have been shown to inflate maize prices by 20 percent on average, could reduce poverty by 1.8 percent. The magnitude of the estimated income effects may vary based on updated household-level consumptiondata, assumptions regarding demand elasticities, and estimates of import parity prices for these staples. However, in all the scenarios, more competitive prices have a larger average effect on the poorest households in urban and rural areas, supporting the relevance of effective competition policies for poverty reduction strategies.
    Keywords: Markets and Market Access,Food&Beverage Industry,Economic Theory&Research,Climate Change Economics,Emerging Markets
    Date: 2015–01–01
  8. By: Johan Fourie and Christie Swanepoel
    Abstract: To estimate the long-term, persistent effects of missionary education requires two strong assumptions: that mission station settlement is uncorrelated with other economic variables, such as soil quality and access to markets, and 2) that selection into (and out of) mission stations is unimportant. Both these assumptions are usually not sufficiently addressed, which renders the interpretation of the persistent effects of mission stations suspect. We use an 1849 mission census of the Cape Colony in South Africa to test whether, controlling for location and selection, mission station education can explain education outcomes 147 years later. Our first set of results show that Black and Coloured residents of districts with a mission station are today likely to attain more years of schooling than those in districts with no stations. In addition, when only modern-day controls are included, education seems to be the mechanism that explains this persistence. However, when we control for selection in 1849, literacy loses its explanatory power. Education outcomes may be highly persistent – even in the face of active repression by apartheid authorities – but the key factor is early selection and not education persistence.
    Keywords: Missionaries, South Africa, Protestant, Cape Colony
    JEL: N37 I25
    Date: 2015

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