nep-dev New Economics Papers
on Development
Issue of 2022‒09‒12
seven papers chosen by
Jacob A. Jordaan
Universiteit Utrecht

  1. New Perspectives on Inequality in Latin America By Fernández, Manuel; Serrano, Gabriela
  2. Maternal Investments in Children : The Role of Expected Effort and Returns By Bhalotra, Sonia; Delavande, Adeline; Font-Gilabert, Paulino; Maselko, Joanna
  3. Wheels of Change: Transforming Girls' Lives with Bicycles By Nathan Fiala; Ana Garcia-Hernandez; Kritika Narula; Nishith Prakash
  4. Finance, Informal Competition, and Expectations: A Firm-Level Analysis By Brancati, Emanuele; Di Maio, Michele; Rahman, Aminur
  5. Does foreign direct investment spur economic growth? New empirical evidence from Sub-Saharan African countries By Odhiambo, Nicholas M
  6. The role of gender inequality in the obesity epidemic: A case study from India By Valentina Alvarez-Saavedra; Pierre Levasseur; Suneha Seetahul
  7. Real sector macroeconomic stabilization and structural resilience in Africa By Krantz, Sebastian

  1. By: Fernández, Manuel (Universidad de los Andes); Serrano, Gabriela (Universidad de los Andes)
    Abstract: Latin American countries have some of the highest levels of income inequality in the world. However, earnings inequality significantly changed over the last three decades, increasing during the 1980s and 1990s, declining sharply in the 2000s, and stagnating or even increasing in some countries during the last decade. Macroeconomic instability in the region in the 1980s and early 1990s, and the introduction of structural reforms like trade, capital, and financial liberalization, affected the patterns of relative demand and relative earnings across skill-demographic groups in the 1990s, increasing inequality. Significant gains in educational attainment, the demographic transition, and rising female labor force participation changed the skill-demographic composition of labor supply, pushing education and experience premium downward, but this was not enough to counteract demand-side trends. At the turn of the century, improved external conditions, driven by China's massive increase in demand for commodities boosted economies across Latin America, which began to grow rapidly. Growth was accompanied by a positive shift in the relative demand for less-educated workers, stronger labor institutions, rising minimum wages, and declining labor informality, a confluence of factors that reduced earnings inequality. In the aftermath of the global financial crisis, particularly after the end of the commodities price boom in 2014, economic growth decelerated, and the pace of inequality decline stagnated. There is extensive literature trying to explain the causes of earnings inequality dynamics during the last three decades in Latin America. We discuss this literature regarding themes, methodological approaches, and key findings, emphasizing the latest perspectives. The focus is on earnings inequality and how developments in labor markets have shaped it.
    Keywords: inequality, Latin America, education premium, experience premium, trade reforms, minimum wage, informality
    JEL: D31 D33 F16 J21 J23 J31 O54
    Date: 2022–07
  2. By: Bhalotra, Sonia (University of Warwick); Delavande, Adeline (University of Technology Sydney); Font-Gilabert, Paulino (King’s College London); Maselko, Joanna (University of North Carolina)
    Abstract: We investigate the importance of subjective expectations of returns to and effort costs of the two principal investments that mothers make in newborns: breastfeeding and stimulation. We find heterogeneity across mothers in expected effort costs and expected returns for outcomes in the cognitive, socio-emotional and health domains, and that this contributes to explaining heterogeneity in investments. We find no significant differences across women in preferences for child developmental outcomes. We simulate the impact of alternative policies on investments. Our findings highlight the relevance of interventions designed to address maternal depression and reduce perinatal fatigue alongside interventions that increase perceived returns to investments. JEL Codes: I12 ; I15 ; J24
    Date: 2022
  3. By: Nathan Fiala; Ana Garcia-Hernandez; Kritika Narula; Nishith Prakash
    Abstract: Reducing the gender gap in education is a primary goal for many countries. Some major challenges for many girls include the distance to school, their safety when commuting to school, lack of agency, and deep-rooted cultural norms. In Zambia, we studied the impact of providing a bicycle to a school-going girl who lives more than 3 km from the school. We randomized whether a girl received a bicycle with a small cost to her family to cover replacement parts, a bicycle where these costs are covered by the program, and therefore is zero cost to the family, or a control group. One year after the intervention, we find that the bicycle reduced average commuting time to school by 35%, reduced late arrival by 66%, and decreased absenteeism by 27%. We find continued improvement in girls’ attendance and reduction in dropouts two, three, and four years after the intervention. We also find evidence of improved math test scores, girls expressing higher feelings of control over their lives and, for those who received bicycles with a small cost to her family, higher levels of aspirations, self-image, and a desire to delay marriage and pregnancy. Heterogeneity analysis by distance to school shows an inverted U-shape for most of the schooling and empowerment results, suggesting greater impact for girls that live further away from school. These results suggest that empowerment outcomes worked through increased attendance in school.
    Keywords: bicycles, commute time, girls’ education, female empowerment, safety, Zambia
    JEL: H42 I21 I25 J16 O15
    Date: 2022
  4. By: Brancati, Emanuele (Sapienza University of Rome); Di Maio, Michele (Sapienza University of Rome); Rahman, Aminur (World Bank)
    Abstract: This paper documents the link between finance and informal competition. Using longitudinal firm-level data, we show that formal firms that are more exposed to the competition of informal firms are less likely to apply for a bank loan. This result is not due to sample selection, omitted variable bias, or reverse causality, and it is robust to different econometric specifications, including the use of an IV strategy. As for the mechanism explaining our result, we show that firms more exposed to informal competition have worse expectations on future sales growth, which in turn are associated with a lower probability of loan application. Finally, we provide suggestive evidence excluding supply-side mechanisms that may explain heterogeneities in firms' access to finance.
    Keywords: finance, informality, competition, expectations, MENA countries
    JEL: O16 E26 D84 D22
    Date: 2022–07
  5. By: Odhiambo, Nicholas M
    Abstract: In this study we re-examine the relationship between foreign direct investment (FDI) and economic growth in 27 sub-Saharan African (SSA) countries during the period 1990?2019. Unlike some previous studies, we clustered SSA countries into two groups, namely low-income and middle-income countries. We also employed three panel data techniques in a stepwise fashion, namely the dynamic ordinary least squares (DOLS), the fully modified ordinary least squares (FMOLS), and heterogeneous Granger non-causality approaches. Our results show that while the positive impact of FDI on economic growth is supported by both DOLS and FMOLS techniques in low-income countries, in middle-income countries only the DOLS technique supports this finding. This shows that the impact of FDI may be sensitive to the level of income of the recipient country. Overall, the results show that FDI inflows play a larger role in stimulating economic growth in low-income SSA countries than in middle-income SSA countries. These findings are also corroborated by heterogeneous Granger non-causality results. However, these findings are not surprising, given that many low-income countries tend to be more dependent on inward FDI inflows to stimulate their economic growth than middle-income countries. Policy recommendations are discussed.
    Keywords: FDI, economic growth, sub-Saharan African countries, panel data analysis
    Date: 2022–08
  6. By: Valentina Alvarez-Saavedra (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Pierre Levasseur (SADAPT - Sciences pour l'Action et le Développement : Activités, Produits, Territoires - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Suneha Seetahul (World Bank, Human Development Department, The Africa Region - World Bank)
    Abstract: Recent empirical evidence emphasizes the higher prevalence of overweight and obesity for women, especially in developing countries. However, the potential link between gender inequality and obesity has rarely been investigated. Using longitudinal data from India (IHDS 2005-11), we implement Hausman-Taylor and fixed-effect models to estimate the effect of different dimensions of gender inequalities on female overweight. This study demonstrates that the form of gender inequality or women's mistreatment differently affects female bodyweight. Indeed, we show that some forms of women's mistreatments (such as perceived community violence and age difference with husband) increase the risk of female overweight, whereas more severe forms of abuse such as child marriage increase the risk of underweight. Moreover, we also find that higher decision-making power and autonomy about outings are risk factors of weight gain and obesity, especially in urban settings, perhaps indicating a higher exposure to urban obesogenic lifestyles. To conclude, our results suggest that, although improving women's status in society may be a key action to address the epidemic of obesity, policies must also target hazardous habits that emancipation may imply in urban (obesogenic) environments.
    Keywords: India,Gender inequality,Obesity,Hausman-Taylor estimations,Fixed effects estimations,JEL codes: I14 I15 J16
    Date: 2022–08–04
  7. By: Krantz, Sebastian
    Abstract: Over the past 30 years (1990-2019), African economies have experienced remarkable improvements in real macroeconomic conditions, characterized by higher and more stable real per-capita growth rates, and lower and more stable inflation. This paper documents and seeks to explain these changes at the aggregate and sectoral levels. Sectoral analysis shows a particularly strong reduction in growth volatility, of more than 50%, in the agricultural sector, and a gradual stabilization in services. On the expenditure side, private consumption and investment have also stabilized considerably. Most of the decline in aggregate growth volatility is due to within-sector changes in volatility, structural change explains less than 5%. Correlates of African stabilization are firstly a more favorable external environment through lower levels of external debt, higher levels of FDI and remittances, and improved terms of trade (ToT), as well as lower volatility of ToT and financial flows. These developments were complemented by better exchange rate management (resulting in lower exchange rate and inflation volatility) and more fiscal stability through the adoption of fiscal rules. Domestic financial deepening and higher levels of reserves, both official and by banks, as well as slightly higher national savings, further increased Africa's resilience to shocks. Regarding structural characteristics, the quality of the institutional and business environment appears to be the most important factor for stability, followed by the intensity and volatility of financial flows, trade intensity and diversification, natural resource dependence, natural disaster and conflict incidence. Some of these factors encourage deeper investigations, for example how improvements in business conditions in multiple African economies interacted with broader macroeconomic stabilization.
    Keywords: macoeconomic stability,structural resilience,growth,inflation,volatility,structural change,economic structure,institutions,macroeconomic policy
    JEL: O11 E30 E60
    Date: 2022

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