nep-dev New Economics Papers
on Development
Issue of 2022‒12‒19
sixteen papers chosen by
Jacob A. Jordaan
Universiteit Utrecht

  1. Aid's impact on democracy By Miguel Niño-Zarazúa; Ana Horigoshi; Rachel M. Gisselquist
  2. The demand side of Africa's demographic transition: desired fertility, wealth, and jobs By Céline Zipfel
  3. Health Shocks and Overindebtedness: A Panel Data Analysis from Rural Viet Nam By Chhay, Panharoth; Rahut, Dil
  4. Large-scale agricultural investments, employment opportunities and communal conflict By De Juan, Alexander; Hoffmann, Lisa; Lay, Jann
  5. The effect of birth intention status on infant mortality: a fixed effects analysis of 60 countries By Heini Väisänen; Ewa Batyra
  6. The World Bank, the IMF, and the GATT/WTO: Which institution most supported trade reform in developing economies? By Douglas A. Irwin
  7. Responsible Sourcing? Theory and Evidence from Costa Rica By Alonso Alfaro-Urena; Benjamin Faber; Cecile Gaubert; Isabela Manelici; Jose P. Vasquez
  8. The Impact of Sending Top College Graduates to Rural Primary Schools By Hilmy, Masyhur
  9. The Elusive Link Between FDI and Economic Growth By Agustin Benetrix; Hayley Pallan; Ugo Panizza
  10. The Growth-Poverty-Inequality Nexus in Malawi: A recomputation By Chirwa, Themba
  11. Bribing to escape poverty in Africa By Simplice A. Asongu; Samba Diop
  12. Is Hiring Foreign Worth It? Spillover from Foreign Firms’ Human Capital and Local Firms’ Productivity By Pyun, Ju Hyun; Sun, Jong-in
  13. Diffusion of crime control benefits: Forced eradication and coca crops in Colombia By Eleonora Dávalos; Leonardo Fabio Morales
  14. Natural Resources, Renewable Energy, and Governance: A path towards sustainable development By Tii N. Nchofoung; Nathanael Ojong
  15. The Puzzle of Educated Unemployment in West Africa By Girsberger, Esther Mirjam; Meango, Romuald
  16. Volatility and Recovery Dynamics in Agricultural Trade By Khadka, Savin; Gopinath, Munisamy; Batarseh, Feras A.

  1. By: Miguel Niño-Zarazúa (Department of Economics, SOAS University of London & United Nations University - World Institute for Development Economics Research (UNU-WIDER)); Ana Horigoshi (Universite Paris Dauphine/PSL); Rachel M. Gisselquist (United Nations University - World Institute for Development Economics Research (UNU-WIDER))
    Abstract: This paper investigates the impact of foreign aid on democratic outcomes using a panel of countries for the period between 1995 and 2018. In so doing, it speaks to a major critique of foreign aid, which is that it negatively impacts democratic governance. The analysis distinguishes between developmental aid and democracy aid, and examines democracy aid to specific sectors, in order to explore variation across different aid types. It draws on the Organisation for Economic Co-operation and Development’s (OECD) Creditor Reporting System (CRS) data on foreign aid and indices of democracy from the Varieties of Democracy project, employing a combination of a maximum likelihood estimation and structural equation modelling (ML-SEM) model and fixed effects models. Overall, using a more extensive set of data and methods than previous analyses, we offer comprehensive evidence pointing to aid having a positive if modest impact on democratic outcomes. Our analysis suggests this effect is more significant for democracy aid than developmental aid, but there is no evidence of negative impact for either. These results are robust to multiple specifications
    Keywords: foreign aid; democracy; development
    JEL: D72 F35 F55
    Date: 2022–02
  2. By: Céline Zipfel
    Abstract: Sub-Saharan Africa (SSA) accounts for around 40% of projected global births over the next 80 years. To investigate the roots of persistently high fertility rates across the region, I assemble micro data from 192 Demographic and Health Surveys covering 66 low-and-middle-income countries and document three key facts. First, women's fertility ideals and intentions are, on average, substantially higher in SSA than other low-and-middle-income regions. This gap is particularly large among poorer households: the socioeconomic gradient in desired fertility is twice as steep (more negative) on the sub-continent. Second, poorer women are also significantly less likely to work for a wage in SSA, where there exists a robust negative relationship between female wage work prevalence and desired fertility across provinces. Third, exploiting within-SSA variation across 25 countries, I find that increases in female salaried employment opportunities at the province level are associated with a flattening of this gradient over time, conditional on a rich set of covariates. These findings provide suggestive evidence that the nature of SSA's occupational change process may be an important contributor to the region's distinct fertility transition.
    Date: 2022–12
  3. By: Chhay, Panharoth (Asian Development Bank Institute); Rahut, Dil (Asian Development Bank Institute)
    Abstract: Rural households in developing countries have limited capacity to cope with and manage shocks, thereby resulting in chronic poverty, indebtedness, and a decline in overall well-being. We analyze the effects of health shocks on overindebtedness in rural Viet Nam using four rounds of a balanced panel data set of about 1,750 households observed over a decade (2007, 2010, 2013, 2016). Employing the household-level fixed-effect model, we find that health shocks reduce household income and increase health expenditure among rural Vietnamese households. We also find that households cope with health shocks mainly by borrowing from more sources. Households experiencing health shocks are 2.2 to 3.1 percentage points more likely to be overindebted, which occurs primarily among households without health insurance, suggesting that social health insurance can reduce households’ vulnerability to the consequences of health shocks. These findings strongly support efforts to expand access to social health insurance in rural Viet Nam.
    Keywords: health shocks; overindebtedness; social health insurance; household-level fixed effects; rural Viet Nam
    JEL: E21 E24 I13 I15
    Date: 2022–05
  4. By: De Juan, Alexander; Hoffmann, Lisa; Lay, Jann
    Abstract: We investigate whether and how large-scale agricultural investments (LSAIs) influence the risk of communal conflict. We assess a mechanism that links LSAIs to conflict through interethnic competition over access to plantation employment. Our analyses focus on rural Liberia. We measure communal conflict with joy-of-destruction experiments (JDG). We first investigate associations between access to employment and JDG outcomes---comparing villages that are located below/above a distance threshold at which travel costs to plantations equal daily wages of plantation workers. We find substantively higher levels of destruction in communities with better access to LSAI employment. We then analyze whether participants display more destructive behaviour when members of ethnic minorities interact with members of dominant groups. Contrary to expectations, we find no variation across interethnic experimental constellations. Exploratory descriptive analyses tentatively suggest a link between LSAIs, labor migration and communal conflict.
    Date: 2022–06–24
  5. By: Heini Väisänen; Ewa Batyra (Max Planck Institute for Demographic Research, Rostock, Germany)
    Abstract: Most studies on the impact of birth intentions on children’s wellbeing do not separate the effect of pregnancy intention status from the socio-demographic characteristics associated with it. There is a lack of studies taking a multi-country comparative perspective. We analysed 60 Demographic and Health Surveys in Asia, Americas and Africa to examine the effect of birth intentions on infant mortality using sibling fixed-effects linear probability models accounting for confounding due to unobserved time-invariant family-level characteristics. Compared to wanted births, the probability of infant mortality was higher after an unwanted or mistimed birth, or both, in 44 countries. Particularly in West Africa, mostly mistimed pregnancies were associated with infant mortality, whereas in Americas unwanted pregnancies mattered more. These differences could be partly due to contextual variation in the concept and reporting of birth intentions. We show that the risk of infant mortality after an unwanted/mistimed pregnancy was higher in countries with low human development index and high overall infant mortality rate, highlighting the importance of taking context into account rather than pooling data. To the best of our knowledge, this is the first large-scale, cross-country comparative study to analyse the effect of birth intentions on infant mortality using a fixed-effects approach.
    Keywords: Africa, America, Asia, Global, childbirth, comparative analysis, fertility, health, infant mortality, reproductive behavior, unplanned pregnancy
    JEL: J1 Z0
    Date: 2022
  6. By: Douglas A. Irwin (Peterson Institute for International Economics)
    Abstract: The 1980s and 1990s saw a policy revolution in developing countries in which many highly protected (if not closed) economies were opened to world trade. These reforms were largely undertaken unilaterally, but international economic institutions such as the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade/World Trade Organization supported these efforts. This paper examines the ways in which these institutions promoted, or failed to promote, trade policy reform during this pivotal period.
    Keywords: IMF, World Bank, GATT, WTO, trade reform, structural adjustment, conditional aid, tariff reduction, trade liberalization
    JEL: F13
    Date: 2022–12
  7. By: Alonso Alfaro-Urena; Benjamin Faber; Cecile Gaubert; Isabela Manelici; Jose P. Vasquez
    Abstract: Multinational enterprises (MNEs) increasingly impose “Responsible Sourcing” (RS) standards on their suppliers worldwide, including requirements on worker compensation, benefits and working conditions. Are these policies just “hot air” or do they impact exposed suppliers and their workers? What is the welfare incidence of RS in sourcing countries? To answer these questions, we develop a quantitative general equilibrium (GE) model of RS and combine it with a unique new database. In the theory, we show that the welfare implications of RS are ambiguous, depending on an interplay between what is akin to an export tax (+) and a labor market distortion (–). Empirically, we combine the near-universe of RS rollouts by MNE subsidiaries in Costa Rica since 2009 with firm-to-firm transactions and matched employer-employee microdata. We find that RS rollouts lead to significant reductions in firm sales and employment at exposed suppliers, an increase in their salaries to initially low-wage workers and a reduction in their low-wage employment share. We then use the estimated effects and the microdata to calibrate the model and quantify GE counterfactuals. We find that while MNE RS policies have led to significant gains among the roughly one third of low-wage workers employed at exposed suppliers ex ante, the majority of low-wage workers lose due to adverse indirect effects on their wages and the domestic price index.
    JEL: F15 F63 O24
    Date: 2022–11
  8. By: Hilmy, Masyhur (Asian Development Bank Institute)
    Abstract: Teacher quality is crucial to deliver good education. However, improving teacher quality in developing countries can be a tough problem. We investigate the impact of a teacher placement program that sends college graduates with a strong academic track record to teach in rural primary schools in Indonesia on student test scores. Using a difference-in-difference approach, we find that exposure to program teachers for a semester is associated with a 0.16 standard deviation increase in their students' average mathematics scores. The weakest students benefited more, with an increase in score by 0.20 standard deviation. Students receiving direct instructions from program teachers during scheduled classroom periods benefited even more. Attracting better talents to teach in rural schools could be an important pathway to improve the academic achievements of the weakest students at rural schools.
    Keywords: education; alternative teacher placement; Indonesia
    JEL: I21 I24 I25 O15
    Date: 2022–06
  9. By: Agustin Benetrix (IM-TCD, Trinity College Dublin); Hayley Pallan (World Bank); Ugo Panizza (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: This paper revisits the link between FDI and economic growth in emerging and developing economies. When we study the early decades of our sample, we find that there is no statistically significant correlation between FDI and growth for countries with average levels of education or financial depth. In line with previous contributions, we find that this correlation is positive and statistically significant for countries with sufficienty well-developed financial sectors or high levels of human capital. However, we also find that the link between FDI and growth varies over time. For more recent periods, we find a positive and statistically significant relationship between FDI and growth for the average country, with local conditions having a negative e ect on this link. We also develop a novel instrument aimed at addressing the endogeneity of FDI inflows. Instrumental variable estimates suggest that our results are unlikely to be driven by endogeneity.
    Keywords: FDI, Economic Growth, Human Capital, Financial Development
    JEL: F21 F43 C21 C26
    Date: 2022–11–30
  10. By: Chirwa, Themba
    Abstract: The growth-poverty-inequality hypothesis depicts an inverse relationship between economic growth and poverty and an ambiguous relationship with inequality. However, the official national statistics in Malawi reveal a positive association between economic growth and poverty, falling from 52.4% in 2004 to 50.7% in 2019. The official results also depict that Malawi faces big income gaps evidenced by inequality measures of more than 0.40. We noted several computational errors in estimating the official poverty and inequality measures. They include zero standard errors, significant outliers in consumption aggregates, fewer primary sampling units used, and the median approach to deal with outliers. After observing inconsistent trends between the official National Statistics Office and economic growth, the study aimed to recompute poverty and inequality measures to correct such errors. Contrary to the official results, poverty in Malawi increased significantly from 48.3% in 2004 to 61.5% in 2019, depicting an inverse relationship with economic growth. The approach adopted also downgraded the inequality trends from a big income gap to adequate income equality. The results confirm that the growth-poverty-inequality hypothesis holds in Malawi. The study, therefore, supports the need to ensure data reliability to aid policymakers in making sound policy decisions.
    Keywords: Growth; Poverty; Inequality; Malawi
    JEL: D63 I32 N17 N37 O47
    Date: 2022–05–05
  11. By: Simplice A. Asongu (Yaounde, Cameroon); Samba Diop (Alioune Diop University, Bambey, Senegal)
    Abstract: This study assesses the nexus between bribery and poverty, contingent on the macroeconomic environment within the remit of inflation in Africa. The Afrobarometer survey is used. Our data cover 38 countries consisting of three rounds of survey and a sample of 151,345 individuals. The empirical strategy is based on multi-level mixed-effects ordered logit regression. The results reveal that while poverty has a positive effect on the spread of bribery, inflation can mitigate the impact. The impact is stronger for people living without basic necessities such as food, water and medical care. In other words, the attendant results indicate that the impact of poverty on bribery becomes negative when inflation increases. The findings are robust to inter alia: (i) multi-level mixed effects ordered logistic models for fragile and conflict-affected countries with the food price index at a market level as the mitigating variable and (ii) estimations with the continuous indicator of bribery and experienced poverty at the country level. Policy implications are discussed.
    Keywords: Inclusive development; Poverty; Bribery; Africa
    JEL: D31 I10 I32 K40 O55
    Date: 2022–11
  12. By: Pyun, Ju Hyun (Asian Development Bank Institute); Sun, Jong-in (Asian Development Bank Institute)
    Abstract: We examine the effect of foreign direct investment (FDI) on local firms’ productivity via human capital transfer from multinational enterprises (MNEs) to local firms. Using the firm-level data for 2010–2015 from the Republic of Korea, we identify human capital spillovers using local firms’ hired permanent foreign employees in an industry and region where MNEs and local firms operate. This identification is valid because permanent foreign workers hired by local firms tend to be visa holders from MNEs due to the Republic of Korea’s visa regulations. We find that the industry and regional FDI positively affect local firms’ productivity, particularly firms with higher growth in hiring skilled foreign employees. This human capital spillover from FDI is also more pronounced in high R&D-intensive industries. Our results are robust with various measures of skilled foreign employees hired by local firms, variations of specifications, and controlling for endogeneity issues. Our findings on positive FDI spillovers via human capital transfer to a local firm suggest that policy makers may relax unnecessary regulations for highly skilled foreign workers and provide a platform where a local firm’s manager and skilled foreign employees find each other.
    Keywords: FDI; firm productivity; human capital; foreign employees; technology spillover; knowledge spillover; visa status
    JEL: D24 F21 F23 J24 J63 O33
    Date: 2022–06
  13. By: Eleonora Dávalos; Leonardo Fabio Morales
    Abstract: One explanation for the increasing number of hectares with coca cultivation is that eradication strategies displace coca crops but fail to completely clear affected areas. In the drug policy literature, that dynamic shifting is commonly known as the balloon effect. This study integrates georeferenced agricultural data through spatially explicit econometric models to test the hypothesis that forced eradication displace coca crops. Using annual data for 1,116 contiguous municipalities in Colombia between 2001 and 2015, we estimate a spatial Durbin model with municipal and time fixed effects. Our results suggest that, on average, aerial fumigation in a municipality diffuses the benefits of this crime control strategy to neighboring municipalities. **** RESUMEN: Una posible razón del crecimiento del número de hectáreas de coca en Colombia es que las estrategias de erradicación desplazan los cultivos de coca, pero no logran despejar por completo las áreas afectadas. En la literatura sobre políticas de drogas, ese cambio dinámico se conoce comúnmente como el efecto globo. Este estudio integra datos agrícolas georreferenciados a través de modelos econométricos espaciales para evaluar la hipótesis de que la erradicación forzada desplaza los cultivos de coca. Utilizando datos anuales de 1.116 municipios contiguos en Colombia, estimamos un modelo espacial Durbin. Nuestros resultados sugieren que, en promedio, la fumigación aérea en un municipio difunde los beneficios de esta estrategia de control del crimen a los municipios vecinos.
    Keywords: Spatial dependence, Spatial Durbin model, Drug policy, Spillover, Dependencia espacial, Modelo espacial Durbin; Erradicación; Políticas de drogas
    JEL: K42 R12 R14
    Date: 2022–11
  14. By: Tii N. Nchofoung (University of Dschang, Cameroon); Nathanael Ojong (York University, Toronto, Canada)
    Abstract: Based on data for 48 African countries for the period 2000–2020, we analyse the effects of natural resources on renewable energy development and the mediating effects of governance on that relationship. For this purpose, the Ordinary Least Squares method was used to develop a baseline regression model, and the Generalized Method of Moments (GMM) approach was used for the dynamic model regression. Quantile regression was used for robustness checking across the various distributions of renewable energy. First, we find that natural resources enhance renewable energy development in Africa and that the results are robust across alternative specifications of natural resources and governance, except for forest resources, which have a negative effect on renewable energy development. When robustness is checked through a quantile regression analysis, the results show that the positive effect depends on the conditional distribution of natural resources and the type of natural resource under consideration. The negative effect of total natural resources becomes weaker as we move towards higher quantiles. Second, governance interacts with natural resource rents to generate positive effects across different governance specifications and natural resources, except for coal rent. We thereby derive some relevant implications for renewable energy financing in African countries.
    Keywords: Sustainable development, renewable energy, natural resources, governance, Africa, SDG7
    JEL: C23 Q33 Q48
    Date: 2022–01
  15. By: Girsberger, Esther Mirjam (University of Technology, Sydney); Meango, Romuald (University of Oxford)
    Abstract: Many developing countries exhibit a puzzling pattern given their scarce human capital: unemployment rates increase with education. We develop and estimate a model where educated unemployment arises from heterogeneous workers participating in a frictional labour market with three sectors (public, private and self-employment). We estimate that public sector distortions explain around two-thirds of educated unemployment in urban Burkina Faso and one-quarter in Senegal. We then simulate three equally costly policies. In contrast with public job creation and subsidies to self-employment income, subsidies for private sector vacancy creation effectively reduce educated unemployment and improve aggregate workers' welfare.
    Keywords: unemployment, education, search and matching model, urban West Africa
    JEL: J24 J64 E24
    Date: 2022–11
  16. By: Khadka, Savin; Gopinath, Munisamy; Batarseh, Feras A.
    Abstract: While uncertainty effects on macroeconomic indicators such as consumption, production, and investment have been well-studied, much remains to be known about the relationship between uncertainty and international trade. Some early explorations into this topic have revealed that high economic uncertainty can have detrimental impacts on trade, but the evidence is not conclusive, particularly that on the heterogeneity of uncertainty effects across sectors. This study provides one of the first investigations into the uncertainty-agricultural trade nexus. Application of a novel data-driven methodology - anomaly detection and classification - to monthly trade data at the HS-4 level finds that imports of agricultural commodities are reduced when economic uncertainty is high. Evidence also suggests that economic policy-related uncertainty has larger and more persistent impacts on agricultural trade than structural uncertainty arising from supply-side fluctuations. Interestingly, anticipatory stock-piling occurred, like in durable goods, when uncertainty is specific to trade policy.
    Keywords: Agricultural and Food Policy, International Relations/Trade, Risk and Uncertainty
    Date: 2022–11

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