nep-dev New Economics Papers
on Development
Issue of 2021‒09‒20
eleven papers chosen by
Jacob A. Jordaan
Universiteit Utrecht

  1. Project Aid and Firm Performance By Marchesi, Silvia; Masi, Tania; Paul, Saumik
  2. Targeted interventions: Consumption dynamics and distributional effects By Chakrabarti, Anindya S.; Mishra, Abinash; Mohaghegh, Mohsen
  3. The right to health and the health effects of denials By Sonia Bhalotra; Manuel Fernández
  4. Should Farmers Farm More? Comparing Marginal Products within Malawian Households By Brummund, Peter; Merfeld, Joshua D.
  5. Imperfect information and learning: Evidence from cotton cultivation in Pakistan By Amal Ahmad
  6. Education and Food Consumption Patterns: Quasi-Experimental Evidence from Indonesia By Dr Mohammad Rafiqul Islam; Dr Nicholas Sim
  7. Effect of mobile financial services on financial behavior in developing economies-Evidence from India By Shreya Biswas
  8. Fiscal Incidence, Inequality and Poverty in Kenya: A CEQ Assessment By Damiano Kulundu Manda; Reuben Mutegi; Samuel Kipruto; Moses Muriithi; Paul Samoei; Martine Oleche; Germano Mwabu; Stephen D. Younger; Anda David
  9. The legacy of violence: building or destroying trust? Evidence from Colombia's La Violencia By María Alejandra Chávez Báez
  10. Demographic Change and Economic Growth in India By Jain, Neha; Goli, Srinivas
  11. Adoption of fintech services: role of saving and borrowing mechanisms By Babak Naysary; Ruth Tacneng; Amine Tarazi

  1. By: Marchesi, Silvia (University of Milan Bicocca); Masi, Tania (University of Chieti Pescara); Paul, Saumik (Newcastle University)
    Abstract: This paper evaluates the effect of development project aid from the World Bank and China on firms' sales growth, using a large dataset of 110864 firms spanning 121 countries between 2001 and 2016. We find that, contrary to the World Bank, Chinese ODA projects increase, on average, firm sales and, compared to sector-specific, Chinese region-specific aid positively affect firm performance. Finally, we show that the positive effect of Chinese aid is stronger for firms lacking transport infrastructure (and with better electricity provision), suggesting that aid may improve firm performance by releasing their infrastructure constraints.
    Keywords: aid effectiveness, world bank projects, chinese projects, geo-coding, firm growth
    JEL: F35 O19 D22
    Date: 2021–08
  2. By: Chakrabarti, Anindya S.; Mishra, Abinash; Mohaghegh, Mohsen
    Abstract: Income distribution-based targeted interventions are quite common in developing economies. However, often due to institutional frictions, identification of the recipients happens at a lower frequency than the frequency of movement across income groups, leading to mis-identification of true and false recipients. What are the general equilibrium effects of such interventions? To measure the effects, we develop a heterogeneous agent production economy where agents face uninsurable income risks and we calibrate it to a novel panel dataset on monthly household income and consumption in India. We study the effects of persistent (identity-based) shocks as opposed to the usual temporary (income-based) income shocks, the difference being that in persistent payments individuals are guaranteed a payment across periods, regardless of their income status in future. We find that temporary interventions have muted distributional effects, while identity-based stimulus of the same size give rise to more prominent effects. In particular, a persistent income shock to the poorest decile equivalent to 0.6% of GDP leads to a 0.543% increase in consumption.
    Date: 2021–09–13
  3. By: Sonia Bhalotra; Manuel Fernández
    Abstract: We estimate the health costs of supply-side barriers to accessing medical care. The setting is Colombia, where citizens have a constitutional right to health care, but insurance companies that manage delivery impose restrictions on access. We use administrative data on judicial claims for health as a proxy for unmet demand. We validate this using the register recording all health service utilization, estimating that a one standard deviation increase in judicial claims is associated with pervasive decreases in utilization rates of between 0.25 and 0.71 standard deviations, including in medical consultations, procedures, hospitalizations and emergency care. These restrictions on access manifest in population health outcomes. We estimate that a one standard deviation increase in judicial claims increases the all-cause mortality rate by between 0.10 and 0.23 standard deviations. Increases in mortality are pervasive across causes, with the largest increase in deaths from certain cancers. They are also pervasive across the age and sex distribution but larger among individuals over the age of fifty and (weakly) among women and the low-income population
    Keywords: Health care, health insurance, mortality, right-to-health, litigation, universalhealth-coverage, Colombia
    JEL: I11 I13 I18 K4
    Date: 2021–08–24
  4. By: Brummund, Peter (University of Alabama); Merfeld, Joshua D. (KDI School of Public Policy and Management)
    Abstract: According to standard economic theory, households should equate the marginal revenue product of an input across activities within the household. However, this prediction may not hold in the presence of risk. Using data on farm plots and non-farm enterprises in Malawi, we examine the impact of risk on the allocation decisions of agricultural households as they allocate labor across farm and non-farm production. We control for many household and production characteristics, including household fixed effects, and find farm marginal revenue product of labor (MRPL) to be consistently higher than non-farm MRPL. These results hold when restricting estimation to periods of high and low non-farm labor allocation. These results are consistent with farm production being riskier than non-farm production for most households in Malawi. These findings suggest that improved access to insurance of farming activities and wage employment opportunities could increase total household income.
    Keywords: labor productivity, agriculture, non-farm production, risk, efficiency
    JEL: J24 J43 O13 Q12 R23
    Date: 2021–08
  5. By: Amal Ahmad (Department of Economics, University of Massachusetts Amherst)
    Abstract: Information problems are pervasive in developing economies and can hinder pro- ductivity growth. This paper studies how much rural producers in developing countries can learn from their own experience to redress important informa- tion gaps. It builds a model of learning from experience and applies it using a rich dataset on cotton farmers in Pakistan. I test whether farmers learn from cultivation experience about the pest resistance of their seeds and use this in- formation to improve selection and productivity. I find no such learning effect and this conclusion is robust to several parameters that could signal learning. The findings document the difficulty of parsing out and processing information from cultivation experience alone and point to the importance of information provision to producers by the government or external agencies.
    Date: 2021
  6. By: Dr Mohammad Rafiqul Islam; Dr Nicholas Sim
    Abstract: How does food consumption improve educational outcomes is an important policy issue for developing countries. Applying the Indonesian Family Life Survey (IFLS) 2014, we estimate the returns of food consumption to education and investigate if more educated individuals tend to consume healthier bundles than less-educated individuals do. We implement the Expected Outcome Methodology, which is similar to Average Treatment on The Treated (ATT) conceptualized by Angrist and Pischke (2009). We find that education tends to tilt consumption towards healthier foods. Specifically, individuals with upper secondary or higher levels of education, on average, consume 31.5% more healthy foods than those with lower secondary education or lower levels of education. With respect to unhealthy food consumption, more highly-educated individuals, on average, consume 22.8% less unhealthy food than less-educated individuals. This suggests that education can increase the inequality in the consumption of healthy food bundles. Our study suggests that it is important to design policies to expand education for all for at least up to higher secondary level in the context of Indonesia. Our finding also speaks to the link between food-health gradient and human capital formation for a developing country such as Indonesia.
    Date: 2021–09
  7. By: Shreya Biswas
    Abstract: The study examines the relationship between mobile financial services and individual financial behavior in India wherein a sizeable population is yet to be financially included. Addressing the endogeneity associated with the use of mobile financial services using an instrumental variable method, the study finds that the use of mobile financial services increases the likelihood of investment, having insurance and borrowing from formal financial institutions. Further, the analysis highlights that access to mobile financial services have the potential to bridge the gender divide in financial inclusion. Fastening the pace of access to mobile financial services may partially alter pandemic induced poverty.
    Date: 2021–09
  8. By: Damiano Kulundu Manda; Reuben Mutegi; Samuel Kipruto; Moses Muriithi; Paul Samoei; Martine Oleche; Germano Mwabu; Stephen D. Younger; Anda David
    Abstract: The objective of this paper is to evaluate the effects of fiscal policy actions by the Government of Kenya on inequality and poverty. The paper uses the Kenya Integrated Household Budget Survey (KIHBS) dataset for 2015/16 combined with administrative data for the same period to construct various income concepts that are used in an analysis of welfare effects of fiscal measures following the methodology developed by the Commitment to Equity (CEQ) Institute (Lustig, 2018). The results show that the combined impact of government taxes and expenditure actions is to reduce inequality and increase poverty, a finding that is similar to effects reported in CEQ studies done in other African countries, such as Ghana, Tanzania, Uganda and Ethiopia. The study also finds that people in the first six deciles of the income distribution are net beneficiaries of taxation plus all social expenditures while those at the richer three deciles are net tax payers, indicating that individually and jointly, taxation and social spending in Kenya are progressive. On a cash only basis (i.e., excluding in-kind health and education benefits), however, only the first decile is a net beneficiary, largely because indirect taxes are paid by everyone, including the poor. This is despite the fact that, contrary to expectation, indirect taxes in Kenya are generally progressive. However, direct taxes are significantly more progressive than the indirect taxes, i.e., they are paid at higher rates in richer deciles. Further, cash and near-cash transfers, basic education and health benefits are pro-poor while tertiary education benefits are not. Cash and near-cash transfers lead to a reduction in poverty. Finally, simulation results show that increasing cash transfer to existing beneficiaries by 50% and increasing coverage could lead to greater reduction in poverty and inequality. The main conclusion of our analysis is that Kenya’s fiscal policy can be redesigned to support both inequality and poverty reduction.
    Keywords: Fiscal incidence, CEQ methodology, poverty, inequality, concentration coefficients, Kenya
    JEL: H2 H22 I14 I24
    Date: 2020–11
  9. By: María Alejandra Chávez Báez
    Abstract: This paper examines how trust on institutions and organizations are shaped according to age and exposure to violence during La Violencia. It also evaluates how people's actual trust on different groups (out-group trust) changes in municipalities that were exposed to violence in comparison to municipalities that were not exposed. From 1950's to the mid 1960's, Colombia experienced a period of intense civil wars and conflicts between social classes known as La Violencia. Using evidence on the index of violence built by Guzman et al. (2006) during this period and the Political Culture Survey of 2019, the main objective of this paper is to find whether people trust on State's institutions and people from different groups in municipalities that were mostly affected by violence. To complement the analysis, I analyzed press articles and news by the newspaper El Tiempo from 1950 to 1990 to find how is the perception of the State's legitimacy. After gathering information on 13,413 interviewees, I found that people who live during La Violencia trust less on government institutions and more on certain groups of people (neighbours). Moreover, people over 84 years-old living in municipalities that were exposed to La Violencia trust less on strangers and immigrants than younger people living in the same municipalities. These findings are supported in two mechanisms: deficient government-citizens relationship over time and risk aversion. That is, people who live in municipalities affected by violence during the bipartisan conflict are more risk averse and therefore show less trust on different groups of people. The revision of press articles suggest that there is a tendency of mistrust on State's actions, at least among high educated individuals.
    Keywords: mistrust, violence, institutions, political participation, out-group trust
    JEL: N30 N36 N46
    Date: 2021–09–01
  10. By: Jain, Neha (Indian Institute of Foreign Trade); Goli, Srinivas
    Abstract: In this paper, we assess the economic benefits of demographic changes in India by employing econometric models and robustness checks based on panel data gathered over a period of more than three decades. Our analysis highlights four key points. First, the contribution of India’s demographic dividend is estimated to be around 1.9 percentage points out of 12% average annual growth rate in per capita income during 1981–2015. Second, India’s demographic window of opportunity began in 2005, significantly improved after 2011, and will continue till 2061. Third, our empirical analysis supports the argument that the realisation of the demographic dividend is conditional on a conducive policy environment with enabling aspects such as quality education, good healthcare, decent employment opportunities, good infrastructure, and gender empowerment. Fourth, the working-age population in India contributes around one-fourth of the inequality in per capita income across states. Thus, to reap the maximum dividends from the available demographic window of opportunity, India needs to work towards enhancing the quality of education and healthcare in addition to providing good infrastructure, gender empowerment, and decent employment opportunities for the growing working-age population.
    Date: 2021–09–04
  11. By: Babak Naysary (INTI International University, Faculty of Business, Nilai, Malaysia); Ruth Tacneng (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)
    Abstract: This paper investigates the relationship between an individual's saving and borrowing practices and his/her propensity to use fintech services. More particularly, we examine whether having multiple saving and borrowing channels increases a person's likelihood to participate in online funding platforms, and use robo-advisors. Using a sample of over 2000 respondents to a survey we conducted in Malaysia, our main results indicate that individuals who save and borrow via multiple channels, and through external conduits, are more likely to use fintech services than their counterparts. This is consistent with the view that individuals who use multiple saving and borrowing conduits are more likely to perform mental accounting, a concept which is commonly used by fintech companies to facilitate personal wealth management. Further, our findings reveal that among respondents with multiple saving channels, those who put less importance on trust in financial products, and consider financial returns essential, are the most likely users of fintech services. Overall, our findings offer new insights by providing a better understanding of the factors that foster the use of fintech services.
    Keywords: alternative lending,trust,fintech,P2P lending platforms,crowdfunding,robo-advisors
    Date: 2021–09–06

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