nep-dev New Economics Papers
on Development
Issue of 2021‒10‒25
fifteen papers chosen by
Jacob A. Jordaan
Universiteit Utrecht

  1. Education, Income and Mobility: Experimental Impacts of Childhood Exposure to Progresa after 20 Years By Maria Caridad Araujo; Karen Macours
  2. Risk spillover between climate variables and the agricultural commodity market in East Africa By Mubenga-Tshitaka, Jean-Luc; Muteba Mwamba, John W.; Dikgang, Johane; Gelo, Dambala
  3. Contract clientelism: How infrastructure contracts fund vote-buying By Alisha Holland; Will Freeman
  4. Gender and vulnerable employment in the developing world: Evidence from global microdata By Maria C. Lo Bue; Tu Thi Ngoc Le; Manuel Santos Silva; Kunal Sen
  5. Income Shocks, Borrowing Constraints and Household Child Schooling: Evidence from Rural Thailand By Sasiwooth Wongmonta
  6. Can Redistribution Keep Up with Inequality? Evidence from South Africa, 1993-2019 By Aroop Chatterjee; Léo Czajka; Amory Gethin
  7. The Poverty Effect of Democratization By Christoph Dörffel; Andreas Freytag
  8. A multidimensional approach to measuring economic insecurity: The case of Chile By Joaquín Prieto
  9. The changing nature of work and inequality in Brazil (2003-19): A descriptive analysis By Sergio Firpo; Alysson Portella; Flavio Riva; Giovanna Úbida
  10. School Starting Age and the choice of elementary schoolJulio Cáceres-Delpiano; Eugenio P. Giolito By Cáceres, Julio; Giolito, Eugenio P.
  11. An Application of the Tourist Test to Colombian Merchants By Carlos Alberto Arango-Arango; Yanneth Rocío Betancourt-García; Manuela Restrepo-Bernal
  12. Glimpses of fiscal states in sub-Saharan Africa By Mick Moore
  13. The effects of a risk-based approach to tax examinations: Evidence from Tanzania By Amina Ebrahim; Elineema Kisanga; Ezekiel Swema; Vincent Leyaro; Edwin P. Mhede; Ephraim Mdee; Heikki Palviainen; Jukka Pirttilä
  14. Determinants, Wage Inequality, and Occupational Risk Exposure of Informal Workers: A Comprehensive Analysis With the Case Study of Thailand By Upalat Korwatanasakul
  15. How do farm sizes and perceptions matter for farmers’ adaptation responses to climate change in a developing country? By Pankaj Koirala; Koji Kotani; Shunsuke Managi

  1. By: Maria Caridad Araujo (Inter-American Development Bank - Inter-American Development Bank); Karen Macours (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: In 1997, the Mexican government designed the conditional cash transfer program Progresa, which became the worldwide model of a new approach to social programs, simultaneously targeting human capital accumulation and poverty reduction. A large literature has documented the short and medium-term impacts of the Mexican program and its successors in other countries. Using Progresa's experimental evaluation design originally rolled out in 1997-2000, and a tracking survey conducted 20 years later, this paper studies the differential long-term impacts of exposure to Progresa. We focus on two cohorts of children: i) those that during the period of differential exposure were in-utero or in the first years of life, and ii) those who during the period of differential exposure were transitioning from primary to secondary school. Results for the early childhood cohort, 18–20- year-old at endline, shows that differential exposure to Progresa during the early years led to positive impacts on educational attainment and labor income expectations. This constitutes unique long-term evidence on the returns of an at-scale intervention on investments in human capital during the first 1000 days of life. Results for the school cohort - in their early 30s at endline - show that the short-term impacts of differential exposure to Progresa on schooling were sustained in the long-run and manifested themselves in larger labor incomes, more geographical mobility including through international migration, and later family formation.
    Date: 2021–10
  2. By: Mubenga-Tshitaka, Jean-Luc; Muteba Mwamba, John W.; Dikgang, Johane; Gelo, Dambala
    Abstract: This paper assesses the effect of extreme weather variability in predicting the impact on two agricultural crop-related variables: yield and production. We use a Markov-Switching time-varying copula to describe the joint dependence structure between extreme weather variability and crops in East Africa during the period 1961-2018. Understanding the risk associated with weather variability on agricultural production is crucial, as mitigation, and even adaptation, can then be made more effective. Climate data are divided into regimes: higher and lower regimes. The abnormal or higher regime is the period during which the temperature exceeds a certain threshold, while the lower regime is the period during which the rainfall is below a certain threshold. The findings show that there is strong dependence between weather variability and crops, meaning an increase in temperature or a decrease in rainfall is associated with a decrease in crop yield or production. The dependence is more significant when weather variability moves into either regime compared to the normal condition. The dependency in the higher regime tends to be more significant. This highlights the need to formulate policies that consider crop improvement strategies such as genetic crops, irrigation, and adaption under carbon dioxide (CO2) fertiliser to mitigate the impact on food supply in the region.
    Keywords: Dependence structure,weather variability,markov-switching,constant and time-varying copulas
    JEL: Q1 Q2 Q10 Q54
    Date: 2021
  3. By: Alisha Holland; Will Freeman
    Abstract: Where does the money come from to buy votes? We argue that an important source of funds for vote-buying comes from 'contract clientelism', or the provision of public contracts to private firms in exchange for campaign donations. Using quantitative data on Colombian infrastructure contracts, we demonstrate that municipalities exhibit an 'electoral contracting cycle' in which incumbents assign low-quality contracts while on the campaign trail. Contract manipulations are more common in municipalities with higher reports of clientelist activity.
    Keywords: Contracts, vote-buying, Clientelism, Infrastructure, Colombia, Public goods, Firms
    Date: 2021
  4. By: Maria C. Lo Bue; Tu Thi Ngoc Le; Manuel Santos Silva; Kunal Sen
    Abstract: This paper investigates gender inequality in vulnerable employment: forms of employment typically featuring high precariousness, inadequate earnings, and lack of decent working conditions. Using a large collection of harmonized household surveys from developing countries, we measure long-term trends, describe geographical patterns, and estimate correlates of gender inequalities in vulnerable employment. Conditional on individual and household characteristics, women are 7 percentage points more likely to be in vulnerable employment than men.
    Keywords: Vulnerable employment, Gender gap, Developing countries
    Date: 2021
  5. By: Sasiwooth Wongmonta
    Abstract: Education is a crucial component of human capital and make a contribution to social welfare. In rural developing countries, shocks and financial constraints on households are generally recognized as obstacles to children’s schooling opportunities. This paper investigates the effects of income shocks and borrowing constraints on household demand for education in rural Thailand, using the Townsend Thai panel data spanning from 2013 to 2017. Information on annual rainfall at provincial level is used to estimate a transitory income component for Thai rural households. Estimation results indicate that income risks and borrowing constraints have a substantial negative impact on child schooling outcomes, including educational attainment and years delayed in school. However, it finds that the transitory income results in an increase in household education expenditures conditional on child’s attendance at school. Further evidence shows that the interaction between income risk and borrowing constraints has no effect on household schooling decision. These findings suggest that in addition to household socioeconomic status, children’s human capital is at risk mainly due to income uncertainty and the absence of well-developed financial and insurance markets.
    Keywords: Income Shocks; Borrowing Constraints; Education; Child Schooling; Thailand
    JEL: D10 I21 I25 O15
    Date: 2021–09
  6. By: Aroop Chatterjee (WITS - University of the Witwatersrand [Johannesburg]); Léo Czajka (UCL - Université Catholique de Louvain = Catholic University of Louvain); Amory Gethin (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, WIL - World Inequality Lab)
    Abstract: Can government redistributive policies successfully curb rising inequality and foster inclusive growth in emerging economies? This paper sheds new light on this question by combining survey, tax, and historical administrative data to measure the incidence of taxes and transfers on the distribution of growth in South Africa since the end of the apartheid regime. Our new database is fully consistent with macroeconomic totals reported in the national accounts and allocates the entirety of government revenue and expenditure to individuals, including indirect taxes and inkind transfers, with unprecedented level of detail. We document a dramatic divergence in the growth of top and bottom income groups: between 1993 and 2019, the pretax income of the top 1% rose by 50%, while that of the poorest 50% fell by a third. However, the widening of pretax income gaps has been almost fully compensated by the growing size and progressivity of the taxand-transfer system, effectively mirroring a "chase between rising inequality and enhanced redistribution". The decline of racial inequalities since the end of apartheid has been entirely driven by the boom of top Black income groups, which is only marginally reduced by taxes and transfers. Our results have important implications for fiscal policy, the measurement of poverty, and the analysis of the link between inequality and growth.
    Date: 2021–09
  7. By: Christoph Dörffel (Friedrich Schiller University Jena); Andreas Freytag (Friedrich Schiller University Jena)
    Abstract: In this paper we examine the interrelatedness between regime types of democracy and non-democracy and poverty reduction. The liberal international order and democratic principles have been challenged by the populace’s general discontent in recent years, while the reduction of poverty is a central goal of the global development agenda as embodied by the Sustainable Development Goals. Democracies could promote poverty reduction by encouraging redistribution, lifting barriers for poor people, or giving better access to the institutions of society. Democracies might hinder poverty reduction if they are captured by elites or become dysfunctional in general. Our data cover around 140 countries and a period from 1980-2018. We use a mix of methods to address endogeneity concerns. In dynamic panel estimates that control for past influences of poverty, GDP and inequality we find no significant impact of democratization on poverty rates. In more flexible and causal treatment effects estimates we find democratization reduces poverty rates by about 11-14% in the first five years after democratization on a 95% significance level and about 20% 10-14 years after democratization on a 90% significance level. Although we find mixed results, we are still confident that democratic political institutions matter greatly, and societies are better off when the political systems are more inclusive. The fact that our results do not find clear support for this suggest that this is too often not the case, even in democracies.
    Keywords: Poverty, Democracy, Human Development
    JEL: I32 O15 P48
    Date: 2021–10–13
  8. By: Joaquín Prieto (International Inequalities Institute at LSE)
    Abstract: This paper proposes a strategy to measure economic insecurity in countries in the Global South. It builds a 'Multidimensional Economic Insecurity Index' (MEII) that combines four indicators of economic vulnerability that cause stress and anxiety: unexpected economic shocks, unprotected employment or non-workers in the household, over-indebtedness and asset poverty. The index offers a measure that directly relates economic uncertainty to stress and anxiety due to the lack of protection and buffers to face an unexpected economic shock. The MEII is applied to Chile using Survey of Household Finances (SHF) cross-sectional data (2007, 2011, 2014 and 2017). The results show that i) about half of the Chilean households experienced, on average, two or more economic vulnerabilities during the last decade with an intensity of 2.3 vulnerabilities, and ii) economic insecurity affects households on the entire income distribution, even in the highest income deciles groups. By identifying the groups of households most affected by economic insecurity and its trend in recent years, applying the MEII in countries such as Chile provides relevant information to monitor, evaluate and improve social safety nets besides labour market regulations.
    Keywords: Economic insecurity, Global South, multidimensional index, Survey of Households Finances, Well-being
    JEL: D63 I31
    Date: 2021–10
  9. By: Sergio Firpo; Alysson Portella; Flavio Riva; Giovanna Úbida
    Abstract: In this paper we use different sources of data on job task content to investigate the importance of occupations and the intensity of routine tasks embodied in them in explaining changes in employment and earnings in Brazil, in particular their relation with earnings and polarization, and inequality. We show some evidence of polarization in earnings but not with respect to employment, although the patterns resemble more that of pro-poor or pro-rich growth.
    Keywords: Brazil, Inequality, Polarization, Task content of jobs, Occupations, Earnings inequality
    Date: 2021
  10. By: Cáceres, Julio; Giolito, Eugenio P.
    Abstract: Using administrative data for Chile, we study the impact of School Starting Age (SSA) on the characteristics of the school of rst enrollment. After addressing the usual concerns of endogeneity using minimum age requirements and an RD-design, we uncover gains associated with a delay of school entry at the start of the student's school life. SSA is associated withan enrollment in a school with an approximately 0.1 standard deviations higher average in standardized test scores, an increase of approximately 0.17 years in the average education of the peers' parents, and an increase of 4 percentage points in the probability of being enrolled in a private school. The heterogeneity analysis by parents' education reveals the largest gain in the probability of enrollment in a voucher school among less-educated families. We also show that the impact on school's standardized test scores occurs among girls. This heterogeneity by parents' education and student's gender di ers from that reported in previous studies.
    Keywords: Latin America; Chile; Early Entry; Schools' Characteristics
    JEL: A21 I24 I25 I28
    Date: 2021–10–22
  11. By: Carlos Alberto Arango-Arango; Yanneth Rocío Betancourt-García; Manuela Restrepo-Bernal
    Abstract: Cash is still widely used in Colombia, even among merchants that accept payment cards. Indeed, 60% of these merchants use dissuasive strategies to make their clients pay with cash. This shows that merchant service costs (MSC) for cards are not optimal in the sense of the Tourist Test. We present estimates of MSC compatible with the Tourist Test, such that merchants are indifferent between being paid with cash or cards. We find that cash is less costly than cards at the average retail-sales transaction-value, hence there is no positive optimal MSC at this ticket value. For the average card transaction ticket, the optimal MSC would be positive but far below the rates charge by the industry (0.74% in a short-term scenario). Yet, the additional incentive that sales-tax evasion provides to cash payments reduces the Tourist Test MSC to 0.44%. Our estimates for long-term scenarios yield even lower optimal MSC. An average price cap regulation that strikes a middle ground between these figures, and is complemented with sales-tax evasion measures, should discourage merchant strategies that deter consumers from paying with cards and will accommodate the wide heterogeneity in merchants´ scale, payment processing processes and ticket size. These results should be taken as a guideline as the estimations depend on the underlying assumptions and only consider the merchant´s side of the card industry. **** RESUMEN: En Colombia el efectivo continúa usándose ampliamente, incluso entre los comerciantes que aceptan tarjetas de pago. De hecho, el 60% de los comerciantes utilizan estrategias disuasivas para que sus clientes paguen en efectivo, reflejando que los cargos de los servicios por tarjetas (MSC) para los comerciantes no son óptimos. Este documento presenta estimaciones del MSC compatibles con el Test del Turista (Rochet y Tirole, 2007, 2011), donde el nivel de costos debe ser tal que los comerciantes sean indiferentes entre recibir pagos en efectivo o con tarjeta. Las estimaciones para Colombia muestran que el efectivo es menos costoso que las tarjetas para valores promedio de transacción en ventas minoristas, por lo tanto, no hay un MSC óptimo positivo para estos valores. Para el ticket promedio de transacción con tarjeta, el MSC óptimo sería positivo pero muy por debajo de las tarifas cobradas por la industria (0,74% en el corto plazo). El incentivo adicional generado por la evasión de impuestos a las ventas en efectivo, sin embargo, disminuye el cálculo del MSC de acuerdo con el test del turista a 0,44%. Las estimaciones para escenarios a largo plazo arrojan un MSC óptimo aún más bajo. Una regulación que imponga techos a los precios promedio basados en un nivel medio de estas cifras, complementada con medidas de evasión de impuestos sobre las ventas, debería desalentar las estrategias comerciales que buscan disuadir a los consumidores de pagar con tarjetas, adaptándose a la amplia heterogeneidad en la escala de los comerciantes, a los procesos de procesamiento de pagos y al tamaño del ticket. Es de mencionar que estos resultados deben tomarse como una guía, ya que las estimaciones dependen de los supuestos subyacentes en el modelo y solo consideran el lado comercial de la industria de las tarjetas.
    Keywords: cash, debit and credit cards, tourist test, merchant card fees, merchant interchanges fees, Efectivo, tarjetas débito y crédito, test del turista, tarifas de intercambio
    JEL: D23 D40 G20 G21 G28 E41 E58
    Date: 2021–10
  12. By: Mick Moore
    Abstract: There is a widespread perception that taxing in sub-Saharan Africa has been and remains fraught with problems or government failure. This is not generally true. For more than a century, colonial administrations and independent states have steadily developed the capacity to routinely collect more substantial revenues than one might expect in a low-income region. The two main historical dimensions of this collection capacity were (a) powerful, centralized bureaucracies focused on achieving revenue collection targets and (b) large, taxable international trade sectors.
    Keywords: Tax, Revenue, Sub-Saharan Africa, Tax reform, Tax administration, Customs
    Date: 2021
  13. By: Amina Ebrahim; Elineema Kisanga; Ezekiel Swema; Vincent Leyaro; Edwin P. Mhede; Ephraim Mdee; Heikki Palviainen; Jukka Pirttilä
    Abstract: While technical assistance and increased use of ICT in the area of tax administration have been regarded to hold considerable promise for greater revenue collection, the evidence on how these activities work in the real-world circumstances of developing countries is scant. The paper attempts to fill this gap by evaluating an intervention undertaken jointly by the Finnish and Tanzanian revenue administrations. In this pilot programme, a risk-based method for enhancing firm tax examinations in Tanzania was developed.
    Keywords: Risk-based approach, Tax compliance, Tanzania, Tax administration, Domestic revenue mobilization, Administrative data, Taxable income
    Date: 2021
  14. By: Upalat Korwatanasakul
    Abstract: This study provides a comprehensive analysis of informal workers in Thailand by utilising the 2006-2019 Thai Informal Employment Survey data. The estimated results reveal the adverse effects of informal employment on workers’ economic and social conditions as follows: 1) the wages gap working against informal employment, confirming that informal employment is not a choice but rather an unavoidable constraint (Oaxaca-Blinder decomposition), 2) a negative relationship between informal employment and wages, particularly among workers in the lowest tail of the wage distribution (quantile regression), and 3) a positive association between informal employment and occupational risks, particularly injury with high severity (logit and probit models). Therefore, policies to smooth informal workers’ mobility to the formal sector is crucial. Furthermore, the analyses manifest the importance of schooling in reducing the tendency to work in the informal sector, narrowing the wages gap, and lowering occupational risks and injury severity. However, the estimated results from the pseudo-panel fixed effects regression show no relationship between schooling and informal workers’ wages but a positive relationship between their wages and working experience. Thus, policymakers may adopt schooling-related policies to improve informal workers’ welfares and mobility to the formal sector. On the other hand, to help workers who inevitably remain in the informal sector, the government may resort to policies regarding working experience, e.g. on-the-job training programmes, to help informal workers earn more wages and, in turn, become less vulnerable.
    Keywords: Informal Worker; Occupational Risk; Sectoral Transition; Thailand; Wage Inequality
    JEL: J16 J21 J31 J71 O17
    Date: 2021–09
  15. By: Pankaj Koirala (School of Economics and Management, Kochi University of Technology); Koji Kotani (School of Economics and Management, Kochi University of Technology); Shunsuke Managi (Kyusyu University)
    Abstract: Farm sizes and climatic perceptions are important economic and cognitive factors for farmers’ activities. However, little is known about how these factors are related to farmers’ responsiveness to climate change. This research addresses what matters for farmers’ responses to the climate change, hypothesizing that farm sizes, climatic perceptions and the interplay between the two are key determinants. We conduct questionnaire surveys with 1000 farmers in Nepal, collecting data on their adaptation responses, farm sizes, climatic perceptions and sociodemographic information in Nepal. With the data, the statistical analysis is conducted by employing the index to reflect farmers’ effective adaptation responses. The result reveals that farmers take adaptations as the farm sizes become small or as they have good climatic perceptions & social network with other farmers. It also shows that small-sized farmers tend to adapt much more in response to their climatic perceptions than do large-sized ones. Overall, this research suggests that agriculture may be losing responsiveness to climate change, as large-sized farmers become dominant by holding a majority of land in developing countries. Thus, it is advisable to reconsider the tradeoff between productivity and responsiveness to climate change regarding farm sizes as well as how large-sized farmers can be induced to adapt through their cognition, policies, social networking and technology for food security.
    Keywords: climate change, agriculture, farm sizes, adaptations, perceptions
    Date: 2021–10

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