Showing papers in "Economic Development and Cultural Change in 2003"

Migration and Incomes in Source Communities: A New Economics of Migration Perspective from China

Abstract: The objective of this paper is to understand the effects of China’s migration on source communities and to discuss their policy implications. We draw from New Economics of Labor Migration (NELM) theory to understand how migration and migrant remittances can relax or tighten market constraints in China’s rural economy. Using simultaneous-equation econometric techniques and household survey data from China, we estimate net, sectorspecific effects of migration on rural household income, focusing on farm production and self-employment. Our econometric findings indicate that the loss of labor to migration has a negative effect on household cropping income in source areas. However, we provide evidence that remittances sent home by migrants positively compensate for this lost-labor effect, contributing to household incomes directly and indirectly by stimulating crop and possibly self-employment production. This finding offers evidence in support of the NELM hypothesis that remittances loosen constraints on production in the imperfect-market environments characterizing rural areas in less developed countries. Taking into account both the multiple effects of migration and the change in household size, participating in migration increases household per-capita income between 14 and 30 percent. Migration and Incomes in Source Communities: A New Economics of Migration Perspective from China China is experiencing the largest peacetime flow of labor out of agriculture ever witnessed in world history (Solinger, 1999; Rozelle et al., 1999). Despite the rapid expansion of labor migration, China’s work force is still disproportionately employed in agriculture compared to other countries at similar levels of per-capita GDP (Taylor and Martin, 2001). Hence, as China’s economy continues to expand, the flow of labor to urban areas will continue and even accelerate (Johnson, 1999). The massive flow of labor away from farms has intensified research interest in China’s migration in recent years. However, as in the broader literature on migration in less developed countries, most recent studies on China’s migration have focused on determining the size and composition of the labor flow, macroeconomic implications of increased migration, and the effects of migration on urban areas (Zhao, 1999; Yang, 1999; 1997). Less emphasis has been placed on researching the effects of migration on the rural communities that migrants leave, even though evidence shows that the rural household in the village of origin is typically the central concern of all those involved in migration– both those who leave and those who stay behind (exceptions include Wang and Zuo, 1999; Bai, 2001). Moreover, the recent increase in migration has left policy makers particularly concerned regarding the way source communities will be affected (MOA, 1999). They are concerned that as labor flows away from farms, food production and crop income will decline, potentially threatening China’s food security. Furthermore, policy makers are concerned about the increasing gap between urban and rural household incomes. If migration exacerbates this gap, some fear that as it grows rural residents eventually will flood cities ill-equipped to absorb them. Others fear that discontent over a rising urban-rural income gap could even spill over into political unrest (Yang, 1999). Because China’s markets and other modern economic institutions are still relatively undeveloped, migration may play a pivotal role in creating or overcoming constraints caused by the lack of well-functioning markets and/or institutions (Knight and Song, 1999; Benjamin and Brandt, 2000). The “new economics of labor migration” (NELM) literature analyzes migration as a household decision rather than as an individual decision (Stark, 1991). The NELM hypothesizes that rural households facing imperfect market environments decide

Is There a Child Labor Trap? Intergenerational Persistence of Child Labor in Brazil*

Abstract: This article examines the intergenerational persistence of child labor empirically by looking at household survey data from Brazil. Previous empirical work on child labor has focused primarily on isolating the determinants of child labor using survey data. We take a different approach by asking “Does the child labor status of parents affect the child labor incidence of their children?” We look at this question in two ways. Our working assumption is that financial need creates this generational link but we also ask if there exists an intergenerational link over and above that which is transmitted through the production of income (perhaps through norms). We find strong evidence that this link exists and that it appears to persist even when income is held constant. Moreover we find that children who did not work as child laborers command higher salaries later in life which suggests that the potential human capital gains through apprenticeship as children are outweighed by the human capital gains children receive through schooling. (excerpt)

The impact of agricultural extension on farm production in resettlement areas of Zimbabwe

Abstract: In this paper, we revisit the contested issue of the impact of agricultural extension on farm production We exploit two features of the data available to us: its longitudinal nature and explicit measures of farmer ability We find that after controlling for innate productivity characteristics and farmer ability either using household fixed effects estimation, or by including a measure of farmer ability and village fixed effects, access to agricultural extension services, defined as receiving one or two visits per agricultural year, raises the value of crop production by about 15 per cent This parameter estimate is statistically significant However, we also find variability in these parameter estimates across individual crop years, with the impact being markedly different in drought and non-drought years Collectively, these results suggest that although access to farm-level extension visits does increase productivity even after controlling for innate productivity characteristics and farmer ability, results from single-year cross-sectional studies should be treated with caution

Development Strategy, Viability, and Economic Convergence*

Abstract: The paper argues that an economy’s industry/technology structure is endogenously determined by the economy’s endowment structure. For the convergence to occur, the government of an LDC should target the upgrading of endowment structure instead of the industry/technology structure in its development strategy. If the government chooses to pursue an industry/technology structure, which is inconsistent with the comparative advantage determined by the economy’s endowment structure, the firms in the government’s priority sectors will be nonviable and the government needs to suppress the function of market and distort all kinds of prices as a way to protect the nonviable firms. Convergence will fail to occur as a result. Regression results from cross-country panel data are consistent with the predictions of the above arguments.

Foreign Direct Investment and Economic Growth: The Importance of Institutions and Urbanization*

Abstract: where g denotes the equilibrium rate of growth, s denotes the capital-formation rate, and b is the productivity of capital. Foreign direct investment (FDI) adds gross capital formation and, hence, raises s. The FDI also raises the productivity of capital, b, through improved competition, positive technological externalities, and accelerated spillover effects. Therefore, many developing countries have been aggressive in their efforts to attract FDI. However, most theories of FDI determination are developed from the perspective of a multinational corporation. This article argues that, in addition to the standard factors affecting the cost-benefit analysis of an investment project, there are intangibles, such as bureaucracy, degree of openness, stability of the institutions, and urbanization, and that these are just as important in attracting FDI. We use a panel data of 23 developing countries from 1976 through 1997 to analyze factors determining foreign direct investment. We also provide a statistical analysis of the relationship between economic growth and the inflow of FDI. Moreover, China, since its opening up in the late 1970s, has been the greatest recipient of FDI among developing countries (US$346.703 billion received from 1979 to 2000) and has stood as the second largest recipient of FDI in the world, next to the United States. However, FDI distribution in China has also been extremely uneven (see table 1). During the 1985–91 period, 89.49% of actually used FDI was absorbed by nine coastal provinces

Regulation and Internet Use in Developing Countries

Abstract: Concerns about a worsening “digital divide” between rich and poor countries parallel the hope that information technology (IT) could increase economic growth in developing countries. Little research, however, has explored the role of public policies, and of regulation in particular, in IT growth. I use data from a unique new survey of telecommunications regulators and other sources to measure the effects of regulation on Internet development. Controlling for income and other factors that affect demand, I find that countries requiring formal regulatory approval for Internet service providers (ISPs) to operate have fewer Internet users and hosts than countries that do not require such approval. Moreover, countries that regulate ISP prices have higher Internet access prices than countries without such regulations. These results suggest that developing countries’ own regulatory policies can have large impacts on IT penetration.

Trust, Membership in Groups, and Household Welfare: Evidence from KwaZulu‐Natal, South Africa*

Abstract: Unfortunately these two literatures have remained largely unconnected. The group and network literature concludes that participation has important economic benefits even when the stated function of the group is noneconomic. In most cases however the mechanisms by which groups and networks achieve this are unclear. The determinants-of-trust and participation-in-groups literature highlights the importance of income and social homogeneity. What remains less understood is whether—and how—trust can be generated for example via participation in groups. This article links the empirical literatures referenced above by exploring the relationship between membership in groups and trust. Specifically using longitudinal data from KwaZulu-Natal Province South Africa we examine (1) the importance of trust in the decision to join groups; (2) the subsequent ability of groups to generate trust; and (3) the effect of group membership and trust on a measure of well-being per capita household income. In addition we disaggregate groups into financial and nonfinancial and we categorize “trust in people” by agent or actor. Therefore we can explore whether trust in different kinds of actors is important for participation in different kinds of groups and whether participation in different kinds of groups is important for generating trust in different kinds of actors. (excerpt)

The Causes of China’s Great Leap Famine, 1959–1961*

Abstract: With a population of roughly 660 million in 1958, the year marking the origin of this famine, 30 million amounted to a loss of close to 5% of the country’s population. 4 Moreover, the loss of lives of this magnitude occurred within an incredibly short period of time; within 2 years the country’s death rate was doubled from slightly below 12 per thousand in 1958 to 25 per thousand in 1960, making it “the worst famine in human history.” 5

South-North Trade, Intellectual Property Jurisdictions, and Freedom to Operate in Agricultural Research on Staple Crops*

Abstract: International Food Policy Research Institute, Washington D.C. Center for the Application of Molecular Biology to International Agriculture, Canberra University of California, Berkeley The authors are listed alphabetically. Philip Pardey is a senior research fellow and Patricia Zambrano a senior research assistant at the International Food Policy Research Institute, Carol Nottenburg is Director of Intellectual Property at the Center for the Application of Molecular Biology to International Agriculture, and Brian Wright is a professor and Eran Binenbaum a Ph.D. student in the Department of Agricultural and Resource Economics, University of California, Berkeley. Stephen Stohs, Bonwoo Koo, and Yuan Liang provided excellent research assistance, and Agapi Somwaru (USDA, ERS) collaborated with us in compiling the trade data. Richard Jefferson provided invaluable comments on earlier drafts. Research for this paper was made possible, in part, by a grant from the Swedish International Development Agency (Sida).

Minimum wages and compliance: The case of Trinidad and Tobago

Abstract: Explores compliance to the national minimum wage in Trinidad and Tobago. Potential costs associated with the national minimum wage; Actual incidence of compliance in terms of employment and wage distribution; Nature of labor market.

Labor effects of adult mortality in Tanzanian households

Abstract: Due to the HIV/AIDS epidemic, sub-Saharan populations are challenged with increasing adult mortality rates that have potentially profound economic implications Yet, little is known about the impact of adult deaths in African households Using panel data from Tanzania, this paper will explore how prime-age adult mortality impacts the time allocation of surviving household members and the portfolio of household farming activities Analysis of farm and chore hours across demographic groups generally found small and insignificant changes in labor supply of individuals in households experiencing a prime-age adult death While some farm activities are temporarily scaled back and wage employment falls after a male death, households did not shift cultivation towards subsistence food farming and did not appear to have reduced their diversification over income sources more than six months after a death

Agricultural output and productivity in the former soviet republics

Abstract: The paper reviews agricultural development in the fifteen former Soviet republics over the period 1965-1997. Production functions are estimated and productivity differences and changes calculated. Large differences were found in terms of productivity and growth between the republics. The differences grew after 1990 reflecting variation in reform policies.

The Economics of Ecotourism: A Galápagos Islands Economy‐Wide Perspective*

Abstract: Ecotourism, the fastest growing sector of the largest industry on earth, is strongly advocated by major conservation groups as a way to help conserve nature. Its potential for generating income while creating incentives for conservation has sparked academic discussion regarding the meaning of ecotourism and attention to the design of integrated conservation and tourism projects. With a few exceptions, economists have been absent from these discussions. The World Conservation Union (IUCN) and the Ecotourism Society define ecotourism as “responsible travel to natural areas that conserves the environment and sustains the well-being of local people.” A basic premise of this article is that there may be trade-offs between these two goals. Expanding tourism can generate pressures for demographic growth by widening the economic disparities between tourist destinations and outside economies, stimulating migration to fill jobs linked directly or indirectly to tourism. This may create a tourism-income-population growth spiral at nature destinations inviting to tourists. Researchers have observed what appears to be a strong association between tourism and local population growth. A few economists have assessed ecotourism’s potential for generating income, but economic research into ecotourism’s impacts and its potential for creating conservation incentives is sparse. Current insights along these lines come primarily from noneconomists. Sven Wunder notes that “when economic aspects are treated, it is mostly without quantification that would allow for a

Low Investment Is Not the Constraint on African Development

Abstract: While many analysts decry the lack of sufficient investment in Africa, we find no evidence that private and public investment are productive, either in Africa as a whole (unless Botswana is included in the sample), or in the manufacturing sector in Tanzania. In this restricted sense, inadequate investment is not the major obstacle to African economic development.

Terms‐of‐Trade Shocks and Economic Performance, 1870–1940: Prebisch and Singer Revisited*

Abstract: Debate over trends in the terms of trade between primary commodities and manufactures, their causes and their impact has dominated the literature for more than a century. Classical economists claimed that the terms of trade of primary commodities should improve since land and natural resources are always in inelastic supply. Following the Great Depression, a new view emerged. What came to be known as the Prebisch-Singer thesis was instead that the terms of trade for primary products had deteriorated up to the 1950s. The subsequent literature has almost exclusively and obsessively asked whether a deterioration has actually taken place over the 130 years following 1870. Nowhere in this literature has the impact of these terms of trade shocks on long run growth been assessed, although it is certainly full of lively speculation and debate. This paper fills part of this empirical gap by constructing a country-specific panel data base 1870-1940, by documenting terms of trade trends by country and region, and, finally, by estimating the impact of the price shocks on long run economic performance. We find the impact to have been asymmetric between center and periphery.

The Economics of Water-Conserving Technology Adoption in Tunisia: An Empirical Estimation of Farmer Technology Choice

Abstract: Economic theory tells us that increases in the relative prices of natural resources should cause farmers to switch to techniques that use fewer farming resources. The adoption of resource-conserving technology is one possible response that can lead toward a more environmentally sustainable outcome. Do farmers respond to changes in natural resource prices and quality by adopting available resource-conserving technology? This article investigates a case study of decisions made by Tunisian farmers as to whether or not they should invest in water-conserving drip-irrigation technology as a function of natural resource prices and quality along with farm and farmer characteristics. In contrast to many studies of technology adoption this work uses both the standard revealed preference analysis of who adopts and a direct elicitation of the reasons for adoption or nonadoption by farmers. By reviving an ancient methodology—the direct question—to elicit real preferences from farmers the research goes beyond the restrictive assumptions of the commonly used random utility models. The combination of these techniques allows triangulation on the causes of technology adoption and helps insure that the results are more than a statistical artifact. (excerpt)

The Economic Impact and Determinants of Investment in Human and Political Capital in China

Abstract: This paper analyzes the roles of human capital and political capital in income determination, and the determinants of investment in these two types of capital in China. Political capital is treated as a distinct form of capital, which is accumulated through investment and commands a return. The empirical evidence reveal that (1) both human and political capital have positive and significant effects on individual and household income as well as the welfare of the family; (2) parental income is an important determinant of educational attainment of today's generation; and (3) the political capital endowment of a person's family, his occupational choice, and economic gains are crucial factors influencing investment in political capital.

China’s Investment in Human Capital*

Abstract: China, at all levels of government, currently spends about 2.5% of its gross domestic product (GDP) on investment in schooling. 1 At the same time, roughly 30% of its GDP is devoted to physical capital investment. In comparison, the figures for the United States are 5.4% and 17%, respectively. In South Korea, they are 3.7% and 30%, respectively. Table 1 compares China with other countries in terms of expenditure of GDP on education. China is below average even among its peers in its expenditure on investment in people. Its ratio of annual investment in physical capital to human capital is much higher than that of most countries around the world. Perhaps this imbalance is warranted. Perhaps the economic rate of return of physical capital is much greater than the economic rate of return to human capital. Below, I summarize evidence indicating that the true rate of return to education and skill formation is very high and that the imbalance revealed in table 1 is symptomatic of a serious distortion in current policy that serves to retard economic development in China. A basic result of economics is that resources should flow to their most productive use. A policy that equalizes returns across all investment types increases economic growth. Current Chinese policy tends to ignore this fundamental rule and thereby retards the economic growth of China. This article first presents the potential benefits that flow from investment in human capital. Then I discuss the empirical evidence on the rate of return to education in China. I next consider alternative policy reforms that would foster skill acquisition and enable China to harvest the benefits of investment in human capital.

On Measuring Aggregate "Social Efficiency"

Abstract: Cross‐country comparisons of social indicators controlling for income and/or social spending have been widely used to measure and explain “social efficiency,” analogously to “technical efficiency” in production. The article argues that these methods are clouded in ambiguities about what is being measured. Standard methods of measuring technical efficiency require assumptions that are unlikely to hold for social indicators. In the context of a simple parametric model of life expectancy, conditions are identified under which there will be a systematic pattern of bias in estimates of efficient public health spending.

Recrafting Rights over Common Property Resources in Mexico

Abstract: I. Endogenous Evolution of Land Rights The propositions of Ester Boserup and the Property Rights School have dominated thinking about the endogenous evolution of land rights from open access to individual property. According to these views, there are two fundamental changes that push toward the privatization of a resource. One is its rising scarcity associated with population growth. The other is the rising value of the resource associated with greater market integration and the commercialization of agriculture. As long as there was land abundance and the resource had little commercial value, the marginal cost to current users of entry by an additional user was sufficiently small not to be worth opposing, and the magnitude of the externalities imposed in extraction by each user on all others was insignificant, making it not worth controlling. As the scarcity and value of the resource increases, changing property rights to regulate entry and to internalize the externality imposed by other users becomes profitable. Regulating entry requires transformation of the resource from open access to common property or to private property, limiting in each case access of the resource to a well-defined group of users. Internalizing externalities requires choosing between two options. One is to cooperate in the management of the common property resource (CPR) by introducing and enforcing rules that deter opportunism in the provision of services to the CPR and in the appropriation of resources from the CPR. The other is to divide the CPR among members of the community, either in subcoalitions where cooperation may prevail more easily or in individual allotments. The default option prevails when there is failure to enclose, failure to cooperate in the management of the CPR, and failure to enforce individual

Development strategy, viability, and economic convergence

Abstract: The paper argues that an economy's industry/technology structure is endogenously determined by the economy's endowment structure. For the convergence to occur, the government of an LDC should target the upgrading of endowment structure instead of the industry/technology structure in its development strategy. If the government chooses to pursue an industry/technology structure, which is inconsistent with the comparative advantage determined by the economy's endowment structure, the firms in the government's priority sectors will be nonviable and the government needs to suppress the function of market and distort all kinds of prices as a way to protect the nonviable firms. Convergence will fail to occur as a result. Regression results from cross-country panel data are consistent with the predictions of the above arguments.

Aggregate Private R&D Investments in Agriculture: The Role of Incentives, Public Policies, and Institutions*

Abstract: Huffman, W.E. and O. Alfranca. i¾“Private R&D Investments in Agriculture: The Role of Incentives, Public Policies, and Institutions,i¾” Econ. Dev. & Cult. Change forthcoming.

Girls’ Education and Fertility Transitions: An Analysis of Recent Trends in Tanzania and Uganda*

Abstract: The effect of educating girls on economic growth and poverty reduction has become an important area of research in the field of economics. The educational level of the females in a population affects economic development in many ways including its consequent effects on fertility. In general there is a negative association between the number of years a girl spends in school and her fertility as an adult. It is hypothesized that education for girls has a direct effect on fertility through the knowledge skills and behaviors imparted through schooling that guide childbearing and child-care practices in adulthood. It is also widely believed that education affects fertility through a number of indirect pathways by delaying the age at first marriage and increasing the practice and efficacy of contraception. Furthermore education is thought to enhance women’s autonomy and control over childbearing decisions through more egalitarian conjugal relationships and increased control over economic resources. The education-fertility relationship in developing countries is most consistent among women who have completed at least 7 years of schooling. At the primary and preprimary school levels the categories into which most women in developing countries fall the inverse relationship of education to childbearing is inconsistent since an increase in the years of schooling may not lead to a decline in fertility in a linear fashion. Fertility may also be lower among women with no formal education than among those with some primary schooling in countries with low levels of literacy because even a few years of schooling may increase the likelihood of having a live birth owing to improvements in the mother’s health. A further inconsistency is that the autonomy often associated with schooling may remain limited for the vast majority of women regardless of their level of education even though a country’s fertility rate has begun to decline. This situation has been found in Bangladesh Egypt and Kenya. The variation in the relationship between women’s education and fertility suggests the need for further study of the threshold level of education beyond which fertility begins to decline in different countries especially in countries where lower fertility has not yet been achieved. (excerpt)