Showing papers by "World Institute for Development Economics Research published in 2014"

Beyond Agriculture versus Nonagriculture: Decomposing Sectoral Growth–Poverty Linkages in Five African Countries

Abstract: The development debate in Africa south of the Sahara is often cast as “agriculture versus nonagriculture.” Yet this view overlooks the heterogeneity within these broad sectors and the synergies between them. We estimate sectoral poverty–growth elasticities using economywide models for five African countries. Our detailed treatment of nonagriculture complements an expanding literature disaggregating the growth–poverty relationship in agriculture. Although our estimated elasticities are higher for agriculture given the importance of farm incomes for the poor, the extent to which this is true varies by country. In fact, elasticities for certain nonagricultural sectors are much closer to those in agriculture. Overall, elasticities are typically higher for trade and transport services and manufacturing (agroprocessing).

Corruption and the efficiency of capital investment in developing countries

Abstract: This paper considers the effect of corruption on the effciency of capital investment. Using firm-level level data from the World Bank enterprise surveys, covering 90 developing and transition economies, we consider whether the cost of informal bribe payments distorts the efficient allocation of capital by reducing the marginal return per unit investment. Using country estimates of fractionalization and legal origin as instruments, and controlling for censoring, we find that bribery decreases investment efficiency, as measured using both absolute and relative metrics of investment returns. The negative effect is strongest for domestic small and medium-sized enterprises while there is no significant effect on foreign and large domestic firms. We conclude that reducing the level and incidence of bribery by public officials would facilitate a more efficient allocation of capital. This in turn would support economic growth and development, particularly for small and medium-sized enterprises.

Caste-Based Crimes and Economic Status: Evidence from India

Abstract: Crimes against the historically marginalized Scheduled Castes and Scheduled Tribes (SC and ST) by the upper castes in India represent an extreme form of prejudice and discrimination. In this paper, we investigate whether changes in relative material standards of living between the SCs/STs and upper castes – as measured by the ratio of consumption expenditures of SCs/STs to that of upper castes – are associated with changes in the incidence of crimes against SCs/STs. Based on the hierarchical social structure implied by the caste system, we posit that an increase in the expenditure ratio is positively correlated with the incidence of crimes committed by the upper castes against the lower castes. Using official district level crime data for the period 2001–2010, we find a positive association between crimes and expenditure of SC/ST vis-a-vis the upper castes. Further, distinguishing between violent and non-violent crimes, we find it is the violent crimes that are responsive to changes in economic gaps. Moreover, this relationship is on account of changes in the upper castes’ economic well-being rather than changes in the economic position of the SCs and STs.

The Happy Farmer: Self-Employment and Subjective Well-Being in Rural Vietnam

Abstract: Using a unique survey data set this paper documents a positive effect of self-employment in farming on subjective well-being. This direct effect is only partly offset by negative, indirect effects working through income and other variables. These findings are interpreted as effects of self-employment in farming on perceived autonomy, competence and relatedness. The results suggest that economic transformation is associated with a psychological cost, which may contribute to explaining earnings gaps between sectors and types of employment. We also investigate other determinants of happiness, and for example find strong positive effects of own income and strong negative effects of neighbors’ income, suggesting the importance of relative rather than absolute levels of income.

Ethnic Heterogeneity and Public Goods Provision in Zambia: Further Evidence of a Subnational ‘Diversity Dividend’

Abstract: The hypothesis that ethnic diversity has a negative impact on public goods provision is widely accepted. Notably, most work on this issue fails to distinguish adequately between national versus subnational governance. We find that subnational empirical evidence in particular is inconclusive, and speak to this gap with new analysis at the Zambian district level. Results lend strong support to an emerging body of work challenging the ‘diversity debit’ hypothesis: we find no clear evidence of a negative impact but instead a robust positive association with key welfare outcomes. Contra the conventional wisdom, future work should explore mechanisms underlying the ‘diversity dividend’ now suggested in multiple subnational analyses.

The Political Economy of Zambia's Recovery: Structural Change without Transformation?

Abstract: During the last decade, the resurgence in economic growth in Africa south of the Sahara has generated an interest in the drivers and consequences of structural change and transformation Using the case of Zambia, this paper examines whether structural change translates into reduced poverty and improved social welfare through an empirical and systematic analysis of the country’s growth trajectory during 1991-2010 We find that growth after 2002 was accompanied by positive structural change, but most new jobs were in the low-wage, insecure informal sector in urban areas Due to the demands of an expanding middle class, construction and high-value services also generated additional jobs, but the share of employment growth from these sectors was small and skewed more toward higher-skilled Zambians Consequently, for a majority of the population, large-scale social transformation did not follow from structural change As a consequence, the government that oversaw Zambia’s economic recovery was thrown out of office in 2011 in favor of an opposition party that promised to rectify perceived inequalities created by the country’s resurgence The case therefore holds economic, social, and political implications for many of the region’s other fast growing democracies

Developing and evaluating governance indexes: 10 questions

Abstract: Recent years have seen a proliferation of composite indicators or indexes of governance and their use in research and policy-making. This article proposes a framework of 10 questions to guide both the development and evaluation of such indexes. In reviewing these 10 questions – only six of which, it argues, are critical – the paper advances two broad arguments: First, more attention should be paid to the fundamentals of social science methodology, that is, concept formation, content validity, reliability, replicability, robustness, and the relevance of particular measures to underlying research questions. Second, less attention should be paid to other issues more commonly highlighted in the literature on governance measurement, that is, descriptive complexity, theoretical fit, the precision of estimates, and ‘correct’ weighting. The paper builds on review of the literature and on three years of research in practice in developing a well-known governance index.

Climate Change and Economic Growth Prospects for Malawi: An Uncertainty Approach

Abstract: Malawi confronts a development imperative in a context of rising temperatures and deep uncertainty about precipitation trends. We evaluate the implications of climate change for overall growth and development prospects to 2050. We focus on three impact ch

Young populations in young democracies: generational voting behaviour in sub-Saharan Africa

Abstract: Why do young Africans participate less in elections than their older counterparts? Given Africa's growing youth bulge, this constituency represents a numerically important voting bloc, and their lower participation in elections could undermine the legitimacy of the region's democratic trajectory We address this question through a multi-level model that relies on individual-level data from the Afrobarometer surveys and country-level data for 19 of the region's more democratic countries We classify Africa's youth as belonging to two categories, those aged 18–24 and those aged 25–35 We find that key determinants of the youth's voting behaviour include their access to political knowledge and information as well as their perceptions of the electoral context and party system In the latter regard, the efficacy and fairness of elections and the degree of partisanship increase the youth's decision to vote, while the length of party incumbency is a deterrent to turnout These findings hold important implication

The economywide effects of teff, wheat, and maize production increases in Ethiopia: results of economywide modeling.

Abstract: The government of Ethiopia is investing significant public resources to increase overall national production of teff, wheat, and maize. To better understand the likely economywide effects of increases of between 12 and 14 percent in the national production of these cereals, a set of production increase scenarios for each crop were run using a computable general equilibrium model of the Ethiopian economy. The analyses were extended to also consider the effects of several international wheat price and wheat import scenarios, a wheat subsidy program, and maize exports. Among the effects considered are changes in economic growth, prices, total household consumption, cereal and calorie consumption levels, and poverty measures.The model estimates that the Ethiopian economy would be 1.4 percent larger if the desired production increases for all three cereals were jointly achieved. However, the cereal production increases do not bring about much change in the structure of the economy of Ethiopia. While the agriculture sector expands by 3.1 percent, there is virtually no increase in the size of the nonagricultural sector as a result of increased cereal production. The impact of these cereal initiatives on the consumption and welfare of various household groups in the country are uniformly positive — higher consumption and reduced poverty. However, different household groups benefit depending on which cereal sees its production levels rise. Teff production increases will provide greatest benefits for urban consumers, particularly poor urban households, while the economic benefits of increases in maize production will principally flow to rural households, both poor maize consumers and maize producers. The benefits of increased wheat production are more evenly shared.

Producing Biofuels in Low-Income Countries: An Integrated Environmental and Economic Assessment for Tanzania

Abstract: This paper jointly evaluates the greenhouse gas emissions and economic impacts from producing biofuels in Tanzania. Sequentially-linked models capture natural resource constraints; emissions from land use change; economywide growth linkages; and household poverty. Results indicate that there are economic incentives to convert unused lands to sugarcane-ethanol production, but only grasslands (not forests) have a reasonable carbon payback period. There are also strong socioeconomic reasons to involve smallholders in feedstock production in order to reduce rural poverty, especially since our results indicate that biofuels have little effect on food production. Yet smallholders require more land than large-scale plantations and so face more binding natural resource and emissions constraints. Overall, environmental constraints alter the socioeconomically optimal biofuel strategy for Tanzania by limiting potential poverty reduction. Unlike previous studies, our integrated assessment suggests that a mixed farming system with greater emphasis on large-scale plantations is more appropriate for producing sugarcane-ethanol in Tanzania.

Social spending and aggregate welfare in developing and transition economies

Abstract: Notwithstanding the unprecedented attention devoted to reducing poverty and fostering human development via scaling up social sector spending, there is surprisingly little rigorous empirical work on the question of whether social spending is effective in

Social Capital, Network Effects and Savings in Rural Vietnam

Abstract: Information failures are a major barrier to formal financial saving in low-income countries. We explore the extent to which social capital in rural Vietnam plays a role in increasing formal savings where knowledge gaps exist. Social capital is defined as information sharing and the elimination of information asymmetries through active participation in the Women's Union. We consider high- and low-quality networks in terms of the quality of information transmitted. We find that membership of high-quality networks leads to higher levels of saving in formal financial institutions and saving for productive investments. Our results support a role for social capital in facilitating savings and suggest that transmitting financial information through the branches of the Women's Union could be effective in increasing formal savings at grassroots level. We also conclude that it is important to ensure that the information disseminated is accurate given that behavioral effects are also found in networks with low-quality information.

Paired Comparison and Theory Development: Considerations for Case Selection

Abstract: Despite the widespread use of paired comparisons, we lack clear guidance about how to use this research strategy in practice, particularly in case selection. The literature tends to assume that cases are systematically selected from a known population, a major assumption for many topics of interest to political scientists. This article speaks to this gap. It describes three distinct logics of paired comparison relevant to theory development, presents a simple way of considering and comparing them, and explores how this approach can inform more intentional research design, with particular attention to low information settings where substantial research is needed to ascertain the values of independent or dependent variables. The discussion underscores inter alia the need to be aware and explicit about the implications of case selection for the ability to test and build theory, and the need to reconsider the well-cited "rule" of not selecting on the dependent variable.

Aiding government effectiveness in developing countries

Abstract: SUMMARY More than a decade after becoming a buzzword on the development agenda, governance remains a high priority for the international donor community. This article provides an introduction and overview of key findings from the United Nations University—World Institute for Development Economics Research symposium on “Aiding Government Effectiveness in Developing Countries.” This symposium moves beyond traditional debates about whether aid supports or undermines “good governance” in the aggregate to instead focus on donor interventions in two interrelated governance domains. The first domain examines donor efforts to augment government effectiveness at providing key services to citizens by national and local authorities. Three studies in the collection therefore focus on policing, regulation, and civic education. The second addresses the underlying administrative and financial institutions and processes that facilitate service delivery. Relevant papers in this regard address decentralization, civil service reform, and taxation. In assessing what we know about “what works?” and “what could work?” across these core areas of governance, the contributions shed new light on several key themes, including the dilemma of reconciling governance with ownership, the importance of identifying exactly how context and sequencing matters, and the weaknesses in existing donor evaluation methods. © 2014 The Authors. Public Administration and Development published by John Wiley & Sons, Ltd.

Has the Clean Development Mechanism assisted sustainable development

Abstract: One of the dual objectives of the Clean Development Mechanism (CDM) of the Kyoto Protocol is to assist host countries in achieving sustainable development. With various CDM indicators for 58 CDM host countries over the period 2005-2010, this paper empirically assesses whether CDM project development fulfils its sustainable development objective. Using a unique dynamic panel data method based on the long-differenced model, this research provides convincing evidence that CDM projects contribute to sustainable development in host countries. It sheds light on the role of the CDM in the process of global sustainability with clear policy implications for developing countries and those embracing market instruments.

Production and scale efficiency of maize farming households in South-Western Nigeria

Abstract: Purpose – The purpose of this paper is to estimate production and scale efficiency of maize producing farms in South-Western Nigeria. Design/methodology/approach – This study is based on a semi-parametric approach and uses a combination of econometrics and linear programming to build two stage Data Envelopment Analysis (DEA) model. Findings – Model findings shows existence of production and scale inefficiencies in maize production. The study concludes that there is still room for efficiency improvements in the existence of the current maize production technology. It also finds several socio-economic variables such as, off-farm work, education, extension services and credit, which positively impact on technical efficiency of farm households. Practical implications – Efficiency indicators could be used to monitor resource use efficiency in crop production by local government. Social implications – Efficiency improvements will increase maize production in the country which in turn reduce social unrest and fo...

First Order Dominance Analysis: Child Wellbeing in the Democratic Republic of Congo.

Abstract: This paper performs a multidimensional first order dominance analysis of child wellbeing in the Democratic Republic of Congo (DRC). This methodology allows the ordinal ranking of the 11 provinces of the DRC in terms of their wellbeing based upon the probability of their domination. This empirical application obviates the need to adopt a weighting scheme for the deprivation indicators or to rely on the signs of other cross-derivatives for comparison. We execute a bootstrap linear programming algorithm on seven deprivation indicators for three age groups of children derived from the DRC 2007 Standard Demographic and Health Survey. The results reveal widespread disparities in child wellbeing in the DRC.

Poverty Dynamics and Programme Graduation from Social Protection : A Transitional Model for Mexico’s Oportunidades Programme

Abstract: Social protection programmes have emerged as one of the most important anti-poverty policy strategies in developing countries. Their effects on poverty and well-being have been widely studied. Yet, there is limited knowledge on how a transfer programme sh

Aid, Political Business Cycles and Growth in Africa

Abstract: This study develops a model of opportunistic behaviour in which an incumbent government resorts to expansionary fiscal and/or monetary stimuli to foster economic growth and thus, maximize the probability of re-election. Using a panel dataset of 31 African countries covering the period 1980 to 2009, we test whether donor aid facilitates such political business cycles and investigate their effect on growth. We find evidence that donors, through guaranteeing support to incumbent governments, may unwittingly instigate political business cycles. With forbearance, and sometimes complicity by donors, aid seems to allow incumbent governments to instigate macroeconomic stimuli that ensure electoral victory with no fear of losing aid support. © 2015 UNU-WIDER. Journal of International Development published by John Wiley & Sons, Ltd.

Is the clean development mechanism effective for emission reductions

Abstract: This research studies whether the Clean Development Mechanism (CDM) of the Kyoto Protocol achieves its objective of emission reductions in the host countries. It empirically investigates the impacts of CDM projects on CO₂ emission reductions for 60 CDM host countries over 2005-10. This research makes use of the newly-developed econometric methods for dynamic panel data models associated with X-differencing procedure. It provides evidence in support of a decline in CO₂ emissions in the CDM host countries. It has important policy implications that encourage the international community to support developing countries’ efforts towards low-carbon development via CDM projects.

Social Service Delivery and Access to Financial Innovation : the Impact of Oportunidades’ Electronic Payment System in Mexico

Abstract: This paper follows a quasi-experimental research design to assess the impact of the electronic payment system of Mexico’s Oportunidades programme. The switch from cash payments to electronic payments delivered via a bank account is found to have implications in terms of reallocation between saving portfolio choices, transaction costs, and coping strategies. The study shows that, following the intervention, participation in informal saving arrangements was reduced, the frequency of remittance reception increased and, when hit by idiosyncratic shocks, beneficiaries of bank accounts were more likely to use savings rather than contracting loans or reducing consumption to cope with the events. The study also reveals impact heterogeneity between rural and urban areas, with important implications for policy and replicability of similar financial innovations in other developing country contexts.

Global Interpersonal Inequality: Trends and Measurement

Abstract: This paper discusses different approaches to the measurement of global interpersonal in equality. Trends in global interpersonal inequality during 1975-2005 are measured using data from UNU-WIDER’s World Income Inequality Database. In order to better understand the trends, global interpersonal inequality is decomposed into within-country and between-country inequality. The paper illustrates that the relationship between global interpersonal inequality and these constituent components is a complex one. In particular, we demonstrate that the changes in China’s and India’s income distributions over the past 30 years have simultaneously caused inequality to rise domestically in those countries, while tending to reduce global inter-personal inequality. In light of these findings, we reflect on the meaning and policy relevance of global vis-a-vis domestic inequality measures.

Biofuels, Poverty, and Growth: A Computable General Equilibrium Analysis of Mozambique

Abstract: This paper examines the recent decentralization of governance in Indonesia and its impact on local infrastructure provision. The decentralization of decision-making power to local jurisdictions in Indonesia may have improved the matching of public infrastructures provision with local preferences. However, decentralization has made local public infrastructures depend on local resources. Due to differences in initial endowments, this may result in the divergence of local public infrastructures in rich and poor jurisdictions. Using data from village-level panel surveys conducted in 1996, 2000, and 2006, this paper finds that (1) local public infrastructures depend on local resources, (2) decentralization has improved the availability of local public infrastructures, (3) local jurisdictions are converging to a similar level of local public infrastructure, and (4) to some extent, decentralized public infrastructures' provision reflects local preferences.

Climate Change and Economic Development in Africa: An Overview

Abstract: Recent studies indicate that climate change will negatively impact Africa's growth and development prospects, particularly in the absence of adaptation and mitigation. Losses of up to 4% of Africa's gross domestic product (GDP) are projected, and agriculture is a major economic impact channel given the high share of Africa's GDP accounted for by rain-fed agriculture. This calls for concerted efforts by African policy-makers and development partners to help Africa build adaptive capacity to reduce vulnerability. Climate finance is a critical ingredient in the efforts to build Africa's adaptive capacity and also in mitigation. Climate funding pledges made by the developed countries have not been realised however, with a large variance between pledges and actual contributions. On the other hand, the uptake of available climate funding for Africa has been slow, in part due to week capacity of African countries to develop and execute adaptation measures. Another important contribution from the papers in this supplement is the treatment of uncertainty in the assessment of economic impacts of climate change. Two of the complicating factors in the assessment of economic impacts are (i) uncertainty associated with climate change and (ii) the fact that climate can be very localised, with different climates for proximate localities. A methodological approach for handling these two challenges is developed and applied to the country of Malawi. Results indicate that overall implications of climate change on GDP growth are relatively small to 2050, but the losses from climate change tend to increase over time, suggesting that impacts may become larger post 20150.