nep-dev New Economics Papers
on Development
Issue of 2018‒05‒28
thirteen papers chosen by
Jacob A. Jordaan
Universiteit Utrecht

  1. Fading Choice: Transport Costs and Variety in Consumer Goods By Gunning, Jan Willem; Krishnan, Pramila; Mengistu, Andualem Telaye
  2. Structural Change, Fundamentals, and Growth: A Framework and Case Studies By McMillan, Margaret; Rodrik, Dani; Sepulveda, Claudia
  3. A meta-analysis of aid effectiveness: Revisiting the evidence By Tseday J. Mekasha; Finn Tarp
  4. Accountability, Political Capture and Selection into Politics: Evidence from Peruvian Municipalities By Gianmarco León; Lukas Kleine-Rueschkamp
  5. Does Workfare Work Well? The Case of the Employment Generation Program for the Poorest in Bangladesh By Cho, Yoon Y.; Ruthbah, Ummul
  6. Colonial Legacy, State-building and the Salience of Ethnicity in Sub-Saharan Africa By Ali, Merima; Fjeldstad, Odd†Helge; Jiang, Boqian; Shifa, Abdulaziz B.
  7. Unconditional cash transfers do not prevent children's undernutrition in the Moderate Acute Malnutrition Out (MAM'Out) cluster-randomized controlled trial in rural Burkina Faso By Jean-François Huneau; Freddy Houngbe; Audrey Tonguet-Papucci; Chiara Altare; Myriam Ait-Aissa; Lieven Huybregts; Patrick Kolsteren
  8. How does access to formal finance affect household welfare dynamics? Micro evidence from Nigeria By Olabimtan Adebowale and David Lawson
  9. Why are Refugee Children Shorter than the Hosting Population? Evidence from Camps Residents in Jordan By Rashad, Ahmed; Sharaf, Mesbah; Mansour, Elhussien
  10. The Effects of Universal Secondary Education Program Accompanying Public-Private Partnership on Students' Access, Sorting and Achievement: Evidence from Uganda By Masuda, Kazuya; Yamauchi, Chikako
  11. The Contribution of Formal and Non-formal Finance to Household Welfare: Evidence from South Africa By Lwanga Elizabeth Nanziri
  12. The Interlinkage between Social Exclusion and Financial Inclusion: Evidence from Pakistan By Shirazi, Nasim Shah; Javed, Sajid Amin; Ashraf, Dawood
  13. Structural Change and Patterns of Inequality in the South African Labour Market By Haroon Bhorat; Safia Khan

  1. By: Gunning, Jan Willem; Krishnan, Pramila; Mengistu, Andualem Telaye
    Abstract: The lack of market development in remote areas is usually measured by spatial variation in prices for a given set of consumer goods. We focus instead on the way distance constrains the choices consumers can make. We construct a model of monopolistic competition between traders moving goods from market towns to rural areas. An increase in transport costs reduces consumer welfare not only through lower incomes for farm households and higher prices for manufactures but also through reduced availability of manufactures: choice fades with distance. The model allows for heterogeneity of villages in terms of market size and the distribution of income. We test the model using data from a purpose-designed survey of shops and consumers in rural villages in Ethiopia. Falling transport costs, larger market size and higher inequality dramatically raise variety of items and brands available locally. We use data on prices of matched source and destination goods to estimate similar tastes for variety across space and estimate an average markup of 10-15 percent. We use these results to estimate the welfare costs of falling variety at between 5-7 percent of expenditures on manufactured consumer goods. Our results suggest ignoring the costs of lower variety in remote places will mean that the level of poverty is underestimated while the rate at which poverty declines is underestimated as well.
    JEL: F14 R12
    Date: 2018–05
  2. By: McMillan, Margaret (Tufts University); Rodrik, Dani (Harvard University); Sepulveda, Claudia (World Bank)
    Abstract: Developing countries made considerable gains during the first decade of the 21st century. Their economies grew at unprecedented rates, resulting in large reductions in extreme poverty and a significant expansion of the middle class. But more recently that progress has slowed with an economic environment of lackluster global trade, not enough jobs coupled with skills mismatches, continued globalization and technological change, greater income inequality, unprecedented population aging in richer countries, and youth bulges in the poorer ones. This essay examines how seven key countries fared from 1990-2010 in their development quest. The sample includes seven developing countries--Botswana, Ghana, Nigeria, Zambia, India, Vietnam and Brazil--all of which experienced rapid growth in recent years, but for different reasons. The patterns of growth are analyzed in each of these countries using a unifying framework which draws a distinction between the "structural transformation" and "fundamentals" challenge in growth. Out of these seven countries, the traditional path to rapid growth of export oriented industrialization only played a significant role in Vietnam.
    JEL: O11
    Date: 2017–05
  3. By: Tseday J. Mekasha; Finn Tarp
    Abstract: As research on the empirical link between aid and growth continues to grow, it is time to revisit the accumulated evidence on aid effectiveness. This paper does this by building on the meta-analysis in our previous work. The availability of more data enables us to conduct a subgroup analysis by disaggregating the sample into different time horizons and assess if there are temporal shifts in aid effectiveness. Our new and updated results show that the previously reported positive evidence of aid’s impact is robust to the inclusion of more recent studies in the metaanalysis and this holds for different time horizons as well. The authenticity of the observed effect is also confirmed by results from funnel plots, regression-based tests, and a cumulative metaanalysis for publication bias.
    Date: 2018
  4. By: Gianmarco León; Lukas Kleine-Rueschkamp
    Abstract: We estimate the effects of political accountability on the selection of politicians when accountability mechanisms are prone to political capture. Using a comprehensive dataset that records characteristics of candidates for mayor in the last three local elections in Perú, and a close election sharp regression discontinuity design, we compare candidates running for mayor in districts where the incumbent was ousted from office through a recall referendum in the previous electoral term with those who run in districts where the recall referendum failed by a small margin. Candidates in municipalities where the incumbent was recalled are less educated, have less experience in elected offices and in the public sector, and are younger. These findings are consistent with a framework where potential candidates learn about an accountability mechanism which is prone to capture, distorting the main objectives of improving the quality of government, and instead discouraging high quality candidates to run. The negative selection of candidates is partially offset by voters, who elect the best politician out of a lower quality pool of candidates.
    Keywords: accountability, selection into Politics, Peru
    JEL: O10 D72 O53 D71
    Date: 2018–05
  5. By: Cho, Yoon Y. (World Bank); Ruthbah, Ummul (University of Dhaka)
    Abstract: Evidence on the effectiveness of workfare as an anti-poverty program in developing countries is weak compared with the relatively well-established role of public works during economic crisis as a social safety net. This paper contributes to evidence building by examining the impact of a large-scale workfare program in Bangladesh, the Employment Generation Program for the Poorest. Taking advantage of the program's distinguishable feature of direct wage transfer to a person's bank account, the paper uses accessibility to local banks as an instrumental variable to identify the program's impacts on rural social assistance beneficiaries. Based on locality-by-time fixed effects models over two rounds of locality panel data, the analysis finds that the Employment Generation Program for the Poorest has contributed to increasing overall household consumption and reducing outstanding loans. In particular, expenditures on quality food and health care have significantly increased, which likely helps individuals continue to engage in income-generating activities in the labor market. However, the implementation costs and poor quality of public assets built through work projects could potentially undermine the program's efficiency. Moreover, further evidence is required on the impacts of work experience through workfare on subsequent labor market outcomes and the value of public assets, to assess the program's effectiveness compared with administratively simpler alternative instruments such as unconditional cash transfers.
    Keywords: social assistance, workfare, public works, Bangladesh, poverty, consumption
    JEL: I32 O12 I38 O20
    Date: 2018–04
  6. By: Ali, Merima; Fjeldstad, Odd†Helge; Jiang, Boqian; Shifa, Abdulaziz B.
    Abstract: African colonial history suggests that British colonial rule may have undermined state centralisation due to legacies of ethnic segregation and stronger executive constraints. Using micro†data from anglophone and francophone countries in sub†Saharan Africa, we find that anglophone citizens are less likely to identify themselves in national terms (relative to ethnic terms). To address endogeneity concerns, we utilise regression discontinuity by focusing on observations near anglophone−francophone borders, both across countries and within Cameroon. Evidence on taxation, security and the power of chiefs also suggests weaker state capacity in anglophone countries. These results highlight the legacy of colonial rule on state†building.
    Keywords: Governance,
    Date: 2018
  7. By: Jean-François Huneau (PNCA - Physiologie de la Nutrition et du Comportement Alimentaire - INRA - Institut National de la Recherche Agronomique - AgroParisTech); Freddy Houngbe (Food Safety and Food Quality - UGENT - Ghent University [Belgium]); Audrey Tonguet-Papucci (Action contre la Faim); Chiara Altare (Action contre la Faim); Myriam Ait-Aissa (Association de Coordination Technique Agricole); Lieven Huybregts (IFPRI - International Food Policy Research Institute); Patrick Kolsteren (Food Safety and Food Quality - UGENT - Ghent University [Belgium])
    Abstract: Background: Limited evidence is available on the impact that unconditional cash transfer (UCT) programs can have on child nutrition, particularly in West Africa, where child undernutrition is still a public health challenge. Objective: This study examined the impact of a multiannual, seasonal UCT program to reduce the occurrence of wasting (weight-for-height, midupper arm circumference), stunting (height-for-age), and morbidity among children
    Keywords: Burkina Faso,children,morbidity,nutritional status,seasonal unconditional cash transfers
    Date: 2017
  8. By: Olabimtan Adebowale and David Lawson
    Abstract: Abstract The relationship between access to formal finance and poverty reduction lies at the heart of the development literature and policy discourse, particularly in developing countries, where access to financial services is often argued to have poverty-alleviating potential. Most of the stylised theoretical literature and empirical evidence, however, focus their efforts on the poverty-alleviating potential of access to finance at a given point in time, which ignores the dynamic and multidimensional nature of poverty. Using a nationally representative panel data set of households, this paper explores the effect of access to formal finance on household welfare dynamics in Nigeria between 2010–11 and 2012–13. Applying a bivariate probit model, which addresses the endogenous selection associated with households’ initial welfare status, our estimates indicate that controlling for the exogeneity of initial household status is relevant when exploring the implications of access to finance for welfare dynamics in Nigeria, as the exogenous treatment of the initial conditioning may distort the correlation coefficients of our estimates. Our results suggest that access to formal finance has poverty-reducing effects, as we found that initially poor households with access to finance were less likely to remain poor in the subsequent period. Also, initially non-poor households with access to finance were seen to face a lower probability of descending into poverty over the period, thus suggesting that access to finance plays a significant role in reducing transient poverty.
    Date: 2018
  9. By: Rashad, Ahmed (Government of Dubai); Sharaf, Mesbah (University of Alberta, Department of Economics); Mansour, Elhussien (New School for Social Research)
    Abstract: The literature on children’s health inequalities in refugee camps in Jordan remains sparse. We noticed a marked height difference between Palestinian children living in the refugee camps and children of the remaining population in Jordan. Children living in refugee camps are significantly shorter than the rest of the children in the hosting population. This paper explores the drivers of the height gap, measured by the height for age z-score, among children residing in refugee camps and the non-camp residents. A Blinder- Oaxaca decomposition is used to quantify the sources of the inequalities between the two groups into two components; one that is explained by regional differences in the level of the determinants, and another part that is explained by differences in the effect of the determinants of the child nutritional status. Our results suggest that the endowment effect dominates the coefficients effect. More specifically, the height gap is mainly driven by wealth disparities between the two groups. Poverty alleviation programs such as conditional cash transfers and microfinance to camps’ residents are likely to reduce the child malnutrition gap.
    Keywords: Child malnutrition; Refugees; Camps; Blinder-Oaxaca decomposition; Jordan
    JEL: I14 J13 J15
    Date: 2018–05–21
  10. By: Masuda, Kazuya; Yamauchi, Chikako
    Abstract: This paper evaluates how the abolition of fees for public secondary education affects the access, sorting and achievement of students when it is accompanied by the Public-Private Partnership (PPP) scheme. In 2007, Uganda introduced the Universal Secondary Education policy, which solicited the participation of private schools to offer fee-free education by receiving public assistance. This has created (1) public schools (fee-free for all), (2) PPP private schools (accepting both fee-free and fee-paying students) and (3) private schools. We investigate the sorting across these types of schools, and further assess the impact on achievement, student composition, and learning environments by the type. In order to identify the effects of the policy, we utilize the across-cohort discontinuity in exposure to the program and across-district variation in the program intensity based on the pre-existing transition and retention rates. Our results suggest that the program increased the overall number of the students taking the secondary school exit exam by 16% in the median intensity district, the private school entry. It was not accompanied by a change in test scores, though learning environments worsened. Across the subsectors, the PPP and private schools experienced particularly large gains in the test scores. Our findings suggest that fee elimination can improve the access to secondary education with few negative effects on learning, and that PPP can provide one of the cost-effective means for financing it.
    Keywords: Post-primary education, Uganda, Access, Learning Achievement, Fee-free schooling program, Africa
    JEL: J13 J12 D10 O10
    Date: 2018–05
  11. By: Lwanga Elizabeth Nanziri
    Abstract: Access to finance has been identified as a tool in the fight against poverty and inequality. While efforts have been made to ensure that affordable formal financial services are accessible, the use of alternative non-formal mechanisms persists in many developing economies and thus compromises the potential gains from financial inclusion. Using a dataset from the FinScope surveys on South Africa, this paper investigates whether welfare outcomes of users of formal financial services and users of alternative non-formal financial services differ. Results, based on panel and treatment effect techniques show that the use of formal and semi-formal financial services leads to positive and significant welfare outcomes which are measured using an asset and well-being index. While these positive outcomes persist beyond the immediate period following the use of formal financial services, there is no such effect when one uses non-formal financial services. An attempt is made to contextualise these results for financial inclusion.
    Keywords: Financial Inclusion; Recentered Influence Function; Social Grants; South Africa; Welfare
    JEL: G2 I3
    Date: 2018
  12. By: Shirazi, Nasim Shah (The Islamic Research and Teaching Institute (IRTI)); Javed, Sajid Amin (Policy Solutions Lab, Sustainable Development Policy Institute (SDPI), Islamabad, Pakistan); Ashraf, Dawood (The Islamic Research and Teaching Institute (IRTI))
    Abstract: Using the data from Pakistan Panel Household Survey (2010), this paper assesses the role of financial inclusion in reducing social exclusion. The findings from regression analysis confirm a statistically significant negative impact of financial inclusion on social exclusion including deep [multidimensional] social exclusion. Deep exclusion for population having financial inclusion drops to 34.8% from 81% otherwise. Most importantly, none of the women was found having deep social exclusion if she has access to financial services. Results from logistic regression analysis confirm that having access to finacial services lowers the likelihood of facing marginal exclusion by 0.54 times and deep exclusion by 0.28 times compared to those having no access. Further, results from sum score method corroborate that Pakistan has higher prevalence of minor and marginal exclusion as compared to deep [multidimensional] social exclusion. The evidence further suggests that rather than income and consumption, old age, low education and gender contribute to multidimensional social exclusion mainly. The ratio of population within age groups 35-44 and 45-54 facing the multidimensional exclusion is 53.1% and 70.8% while the number rises to 85.5% and 80.5% for age groups 55-64 and 65 and above. Similarly, percentage of population with only primary education facing multidimensional social exclusion is 36% as compared to 4.7% for population having a degree. Finally, 23.3% of women face multidimensional exclusion as compared to 14.1% of men. We conclude that government needs to rethink the social design as well as to ensure improved access to financial services.
    Keywords: Social Exclusion; Financial Inclusion; Pakistan
    Date: 2018–01–30
  13. By: Haroon Bhorat; Safia Khan (University of Cape Town; Director)
    Abstract: In the post-apartheid era South Africa has found itself in a long run growth trap with growth in Agriculture and Manufacturing notably absent from the economy, resulting in an inability of the economy to absorb excess labour supply. To understand the role that structural change has had on inequality in the labour market this paper provides an overview of key labour market trends in the post-apartheid era followed by an analysis of labour demand trends, and structural transformation. The impact of structural transformation on wage shifts and wage inequality is investigated pointing to the existence of a “missing middle” in the real-earnings distribution of those employed. Post-apartheid wage inequality is explained using a participation, employment and quantile regression framework, showing that wage inequality has increased over time. The role of unions, the impact of the New Minimum Wage, and the influence of legislative changes such as the regulatory amendment accounting for workers in Temporary Employment Services, and the employment tax incentive is evaluated. We show that in the two decades following the end of apartheid South Africa’s growth path has been characterised by a rapid relative expansion in the services (or tertiary) sector resulting in the marginalization of workers in the middle of the skills and wage distribution. Ultimately, inequality in South Africa has been replicated through a reversion to a skills biased employment trajectory. With policies in place to protect the bottom end worker, a hollowing out of workers in the middle of the wage distribution has arisen. This “missing middle” is a key new manifestation of the persistent and high inequality in the South African labour market.
    Keywords: Structural change, inequality, labour markets, missing-middle, wage distribution, south Africa, labour market
    JEL: J21 J3 J6 N17 N37 O1 O14 O17
    Date: 2018–03

This nep-dev issue is ©2018 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.