nep-dev New Economics Papers
on Development
Issue of 2023‒03‒06
ten papers chosen by
Jacob A. Jordaan
Universiteit Utrecht

  1. What draws investment to Special Economic Zones? Lessons from developing countries By Susanne A. Frick; Andres Rodriguez-Pose; ;
  2. Climate Change in Developing Countries: Global Warming Effects, Transmission Channels and Adaptation Policies By Olivier R de Bandt; Luc Jacolin; Thibault Lemaire
  3. Slavery and the British Industrial Revolution By Heblich, Stephan; Redding, Stephen J.; Voth, Hans-Joachim
  4. Internal Migration as a Response to Soil Degradation: Evidence from Malawi By Keiti Kondi; Stefanija Veljanoska
  5. Long-term effects of rainfall shocks on foundational cognitive skills: Evidence from Peru By Nicolas Pazos; Marta Favara; Alan Sánchez; Douglas Scott; Jere Behrman
  6. Financial technology and human development in Africa: The moderating impact of energy poverty By Rilwan Sakariyahu; Fatima Oyebola Etudaiye-Muhtar; Rodiat Lawal; Olayinka Oyekola
  7. Pain or Anxiety? The Health Consequences of Rising Robot Adoption in China By Qiren Liu; Sen Luo; Robert Seamans
  8. Rapid Economic Growth but Rising Poverty Segregation: Will Vietnam Meet the SDGs for Equitable Development? By Dang, Hai-Anh H.; Dhongde, Shatakshee; Do, Minh; Nguyen, Cuong Viet; Pimhidzai, Obert
  9. When will civil society sanction the state? Evidence from Mali By Bleck, Jaimie; Gottlieb, Jessica; Kosec, Katrina
  10. Intergenerational mobility along the income distribution: estimates using administrative data for a developing country By Martín Leites; Xavier Ramos; Cecilia Rodríguez; Vilá Joan

  1. By: Susanne A. Frick; Andres Rodriguez-Pose; ;
    Abstract: Special Economic Zones (SEZs) are a popular policy tool for the promotion of economic development. However, questions remain about their economic contribution and about what aspects of SEZ policies are most relevant to investors. This article sheds light on these issues by comparing SEZs across Africa, Asia and Latin America. We find that, while investment decisions by foreign companies are driven by market access, political stability and low labour costs, adequate SEZ policies facilitate the attraction of investment. A good industrial infrastructure together with a strategic location and service provision within the zones draw investment. Fiscal incentives, by contrast, have a limited influence on investment decisions.
    Keywords: Special Economic Zones, inward investment, industrial policy, developing countries, FDI location decision
    JEL: F21 O14 O24 L52
    Date: 2023–02
  2. By: Olivier R de Bandt (Banque de France - Banque de France - Banque de France); Luc Jacolin (Banque de France - Banque de France - Banque de France); Thibault Lemaire (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Banque de France - Banque de France - Banque de France)
    Abstract: Using panel data covering 126 low- and middle-income countries over 1960-2017, we find that sustained positive temperature deviations from their historical norms have a non-linear negative effect on economic growth and growth per capita. A sustained 1°C temperature increase lowers real GDP per capita annual growth by 0.74–1.52 percentage points, irrespective of levels of development. We also find that temperature rise affects the households' intertemporal trade-off between consumption and investment, since the share of private consumption in total value-added increases while the share of investment declines. A sectoral decomposition shows that the share of industrial value-added also declines. While the share of agricultural value-added increases, agricultural output and productivity declines. Taken together, our results suggest that global warming will reinforce development traps, hindering further adaptation to climate change, particularly in the countries with the lowest levels of income given their lower resilience and higher socioeconomic vulnerability.
    Keywords: Climate Change, Economic Growth, Adaptation, Developing Countries
    Date: 2021–07
  3. By: Heblich, Stephan; Redding, Stephen J.; Voth, Hans-Joachim
    Abstract: Did overseas slave-holding by Britons accelerate the Industrial Revolution? We provide theory and evidence on the contribution of slave wealth to Britain's growth prior to 1835. We compare areas of Britain with high and low exposure to the colonial plantation economy, using granular data on wealth from compensation records. Before the major expansion of slave holding from the 1640s onwards, both types of area exhibited similar levels of economic activity. However, by the 1830s, slavery wealth is strongly correlated with economic development - slave-holding areas are less agricultural, closer to cotton mills, and have higher property wealth. We rationalize these findings using a dynamic spatial model, where slavery investment raises the return to capital accumulation, expanding production in capital-intensive sectors. To establish causality, we use arguably exogenous variation in slave mortality on the passage from Africa to the Indies, driven by weather shocks. We show that weather shocks influenced the continued involvement of ancestors in the slave trade; weather-induced slave mortality of slave-trading ancestors in each area is strongly predictive of slaveholding in 1833. Quantifying our model using the observed data, we find that Britain would have been substantially poorer and more agricultural in the absence of overseas slave wealth. Overall, our findings are consistent with the view that slavery wealth accelerated Britain's industrial revolution.
    Keywords: industrial revolution; overseas slave-holding; slavery wealth
    JEL: J15 N63
    Date: 2022–11–16
  4. By: Keiti Kondi (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Stefanija Veljanoska (CREM, Université de Rennes)
    Abstract: We study how the slow deterioration of soil, caused by climate change, affects internal migration and household resettlement. Rural households are expected to move when they face worsening soil conditions, as soil degradation is detrimental to agricultural productivity. The other possibility is that they can get stuck in a poverty trap. We use the Integrated Household Survey in Malawi for the years 2010-2016. Soil depletion is not a random process and to account for its endogeneity, we instrument soil degradation by using distant climate shocks and controlling for recent weather conditions. We find that severe soil nutrient constraints push households to send their members away. The underlying mechanism is that soil degradation is harmful to agricultural productivity, and therefore food security, which incentivizes households to seek better opportunities by pushing their members to migrate.
    Keywords: land degradation, migration, internal migration, resettlement, land quality, climate change, soil nutrition
    JEL: J1
    Date: 2023–01–13
  5. By: Nicolas Pazos (University of Nottingham); Marta Favara (University of Oxford); Alan Sánchez (Grupo de Análisis para el Desarrollo (GRADE)); Douglas Scott (University of Oxford); Jere Behrman (University of Pennsylvania)
    Abstract: Global warming is changing precipitation patterns, harming communities strongly tied to agricultural production, particularly in low-and-middle income countries (LMICs). Whilst the long-term effects of being exposed to rainfall shocks early in life on school achievement tests are well-established, there is little population-based evidence from LMICs on the mechanisms through which these shocks operate. This paper analyses the effects of early exposure to rainfall shocks on four foundational cognitive skills (FCSs), including executive functions (EF) that have been found to be key predictors of educational success. These skills were measured via a series of tablet-based tasks administered in Peru as part of the Young Lives longitudinal study (YLS). We combine the YLS data with gridded data on monthly precipitation to generate monthly, community-level rainfall estimates. The key identification strategy relies on temporary climatic shocks being uncorrelated with other latent determinants of FCS development. Our results show significant negative effects of early life exposure to rainfall shocks on EF. We also find evidence of rainfall shocks decreasing households’ abilities to invest in human capital, which may affect both FCS and domain-specific test scores. Interestingly, social policies providing affected households with additional resources partially offset the effects of the rainfall shocks.
    Keywords: Skills formation, Human capital, Rainfall, Peru, Early childhood
    JEL: J24 Q54 I24 I14
    Date: 2022–02–08
  6. By: Rilwan Sakariyahu (Business School, Edinburgh Napier University); Fatima Oyebola Etudaiye-Muhtar (Ilorin Business School, University of Ilorin); Rodiat Lawal (School of Finance and Management, SOAS University of London); Olayinka Oyekola (Department of Economics, University of Exeter)
    Abstract: Several studies in the academic literature have identified the critical role of financial technology (fintech) in improving socio-economic conditions of nations, measured by human development index (HDI). However, despite the efforts to increase HDI using fintech, the ranking of African countries on the index table remains low. Given that access to electricity is imperative for fintech, and fundamental to human development, we provide novel evidence by investigating the degree to which the prevailing energy poverty in Africa affects the success of fintech on human development on the continent. Employing a number of econometric techniques which include linear (OLS, Prais-Winsten), instrumental-variable (GMM) and non-linear (M-M Quantile) regression models, our empirical framework is robust to heteroscedasticity, endogeneity, and cross-sectional dependence among countries. Our results show that fintech has a significant positive impact on human development and the impact remains consistent irrespective of the estimation methods employed. However, when we split our sample based on regions and income classification proposed by the World Bank, our results show that the impact of fintech, when interacted with access to electricity, on human development is more pronounced in the upper-middle, high-income, Eastern, Central and Southern countries. The Western countries have not significantly benefitted from fintech adoption, perhaps because those countries fall in the low-income categories and have a high prevalence of energy challenge. In light of the current state of human development in Africa, our study advocates for more investment in energy infrastructure for the rapid realization of the gains of fintech.
    Keywords: fintech, human development, energy poverty, access to electricity, sub-Saharan Africa
    JEL: C22 O43 Q4 Q43 Q48 Q55
    Date: 2023–02–15
  7. By: Qiren Liu; Sen Luo; Robert Seamans
    Abstract: The rising adoption of industrial robots is radically changing the role of workers in the production process. Robots can be used for some of the more physically demanding and dangerous production work, thus reducing the possibility of worker injury. On the other hand, robots may replace workers, potentially increasing worker anxiety about their job safety. In this paper, we investigate how individual physical health and mental health outcomes vary with local exposure to robots for manufacturing workers in China. We find a link between robot exposure and better physical health of workers, particularly for younger workers and those with less education. However, we also find that robot exposure is associated with more mental stress for Chinese workers, particularly older and less educated workers.
    Date: 2023–01
  8. By: Dang, Hai-Anh H.; Dhongde, Shatakshee; Do, Minh; Nguyen, Cuong Viet; Pimhidzai, Obert
    Abstract: Vietnam is widely regarded as a success story for its impressive economic growth and poverty reduction in the last few decades. Yet, recent evidence indicates that the country's economic growth has not been uniform. Compiling and analyzing new extensive province-level data from the Vietnam Household Living Standards Surveys (VHLSSs) for every alternate year between 2002 and 2020 and other data sources, we find within-province inequality to be much larger than between-province inequality. Furthermore, this inequality gap is rising over time. Despite the country's fast poverty reduction, the poor were increasingly segregated in certain provinces. We find beneficial impact of economic growth on poverty reduction, but this can depend on inequality levels. We also find greater inequality to have negative impact on economic growth and poverty reduction. Our results suggest that policy makers in Vietnam should focus on reducing spatial disparities and income inequality in order to attain sustainable economic development.
    Keywords: poverty, inequality, pro-poor growth, convergence, household surveys, Vietnam
    JEL: C15 D31 I31 O10 O57
    Date: 2023
  9. By: Bleck, Jaimie; Gottlieb, Jessica; Kosec, Katrina
    Abstract: Under what conditions will civil society organizations (CSOs) sanction corruption (the private use of public funds)? CSOs have overcome coordination problems, but could either use this capacity to hold government accountable for public goods provision or to extract rents from politicians. We develop a model and test its predictions using a face-to-face survey with 1, 014 CSO leaders from 48 communes in Mali. We describe a forthcoming performance-based funding program (PBF) providing a formal channel for civil society monitors to sanction mayoral corruption: they influence whether or not mayors receive a performance bonus. We ask CSO leaders their likelihood of sanctioning known corruption under the program and their expected transfer price if they instead enter into a collusive bargain. We find that CSOs most embedded in the community are best able to extract informal transfers from the mayor and least likely to sanction. By contrast, CSOs with high technical and informational capacity are most likely to sanction.
    Keywords: MALI; WEST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; bargaining power; civil society organizations; corruption; governance; politics; public goods; performance-based funding program (PBF)
    Date: 2023
  10. By: Martín Leites (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Xavier Ramos (Universitat Autònoma de Barcelona); Cecilia Rodríguez (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Vilá Joan (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: In this paper, we provide novel estimates of intergenerational mobility for Uruguay that for the first time in a developing country, are based on administrative tax-social security records. We estimate the Intergenerational Ranking Association (IRA) and explore non-linearities. We explore alternatives to address the role of informal labour market, which is one of the main challenges to obtain precise measure of intergenerational mobility for a developing country. We have three main results: first, the level of persistence is higher when we consider individuals with less attachment to the formal labour market. Second, we find evidence of non-linearities in the degree of intergenerational persistence, being substantially higher for high-income households. Finally, there is heterogeneity by gender on the degree of intergenerational mobility, with mother-daughter transmission being the most persistent.
    Keywords: intergenerational income mobility, inequality, top incomes, non-linearities, formal labour market
    JEL: D31 J62 E26
    Date: 2022–05

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