Showing papers in "Journal of Development Studies in 2006"

The economics of poverty traps and persistent poverty: An asset-based approach

Abstract: Longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty. While a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty, this paper develops an asset-based approach to poverty analysis that makes it possible to distinguish deep-rooted, persistent structural poverty from poverty that passes naturally with time due to systemic growth processes. Drawing on the economic theory of poverty traps and bifurcated accumulation strategies, this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long-term, persistent structural poverty, as well as relevant extensions of the popular Foster-Greer-Thorbecke class of poverty measures. The paper closes with reflections on how asset-based poverty can be used to underwrite the design of persistent poverty reduction strategies.

Exploring Poverty Traps and Social Exclusion in South Africa Using Qualitative and Quantitative Data

Abstract: Recent theoretical work hypothesises that a polarised society like South Africa will suffer a legacy of ineffective social capital and blocked pathways of upward mobility that leaves large numbers of people trapped in poverty. To explore these ideas, this paper employs a mix of quantitative and qualitative methods. Novel econometric analysis of asset dynamics over the 1993–98 period identifies a dynamic asset poverty threshold that signals that large numbers of South Africans are indeed trapped without a pathway out of poverty. Qualitative analysis of this period and the period 1998–2001 more deeply examines patterns of mobility, and confirms the continuation of this pattern of limited upward mobility and a low-level poverty trap. In addition, the qualitative data permit a closer look at the specific role played by social relationships. While finding ample evidence of active social capital and networks, these are more helpful for non-poor households. For the poor, social capital at best helps sta...

Shocks and their consequences across and within households in Rural Zimbabwe

Abstract: Increasing attention is now being paid to poverty dynamics in developing countries. This work links the extent to which households smooth consumption or smooth assets given income shocks, the empirical evidence on the churning of households in and out of poverty, and the possibility that temporary shocks can have permanent consequences. Using longitudinal data from rural Zimbabwe, this paper extends the discussion of these issues by disaggregating the impact of shocks by levels of asset holdings, by disaggregating the impact of shocks on individual level welfare and by assessing the extent to which such shocks have permanent consequences. By doing so, it assesses the validity of distinguishing between asset and consumption smoothing and provides insights into whether poverty dynamics assessed at the household level provide an adequate picture of dynamics at the individual level.

Welfare dynamics in rural Kenya and Madagascar

Abstract: This paper presents comparative qualitative and quantitative evidence from rural Kenya and Madagascar in an attempt to untangle the causality behind persistent poverty. We find striking differences in welfare dynamics depending on whether one uses total income, including stochastic terms and inevitable measurement error, or the predictable, structural component of income based on a household's asset holdings. Our results suggest the existence of multiple dynamic asset and structural income equilibria, consistent with the poverty traps hypothesis. Furthermore, we find supporting evidence of locally increasing returns to assets and of risk management behaviour consistent with poor households' defence of a critical asset threshold through asset smoothing.

Higher education and economic growth in Africa

Abstract: This paper uses panel data over the 1960–2000 period, a modified neoclassical growth equation, and a dynamic panel estimator to investigate the effect of higher education human capital on economic growth in African countries. We find that all levels of education human capital, including higher education human capital, have positive and statistically significant effect on the growth rate of per capita income in African counties. Our result differs from those of earlier research that find no significant relationship between higher education human capital and income growth. We estimate the growth elasticity of higher education human capital to be about 0.09, an estimate that is twice as large as the growth impact of physical capital investment. While this is likely to be an overestimate of the growth impact of higher education, it is robust to different specifications and points to the need for African countries to effectively use higher education human capital in growth policies.

Proliferation and fragmentation: Transactions costs and the value of aid

Abstract: The problem of the proliferation of the number of aid donors and aid channels continues to worsen. It is widely and plausibly believed that this significantly reduces the value of aid by increasing direct and indirect transactions costs. We contribute to the existing literature by: (a) categorising the apparent adverse effects of proliferation; (b) producing a reliable and fair indicator of the relative degree to which the main bilateral donors proliferate or concentrate their aid; (c) giving some explanation of why some donors proliferate more than others; (d) constructing a reliable measure of the extent to which recipients suffer from the problem of fragmentation in the sources of their aid; and (e) demonstrating that the worst proliferators among the aid donors are especially likely to be suppliers of aid to recipients suffering most from fragmentation. There are significant implications for aid policy.

Openness and Technological Innovations in Developing Countries: Evidence from Firm-Level Surveys

Abstract: This paper examines international technology transfers using firm-level data across 43 developing countries Its findings show that exporting and importing activities are important channels for the transfer of technology Majority foreign-owned firms are less likely to engage in technological innovations than minority foreign-owned firms or domestic firms The authors interpret this finding as evidence that the technology transferred from multinational parents to majority-owned subsidiaries is more mature than that transferred to minority-owned subsidiaries Their findings also suggest that foreign-owned subsidiaries rely mostly on the direct transfer of technology from their parents and that firms that import intermediate inputs are more likely to acquire new technology from their machinery suppliers

Development and social capital

Abstract: This paper examines social capital and its relation with economic development. We focus on the role that interpersonal relationships play in social exchange, whether through the market or through the provision of public goods. By facilitating search and trust, social capital can increase the efficiency of social exchange where formal institutions are weak. But the benefits from social capital are likely to be unequally distributed. Given these features, documenting empirically the benefits of social capital is complicated by the presence of negative and positive externalities and by the existence of leadership and group effects. Lessons for development policy are drawn at the end.

Subjective Well-being Poverty versus Income Poverty and Capabilities Poverty?

Abstract: The conventional approach of economists to the measurement of poverty is to use measures of income or consumption. This has been challenged by those who favour broader criteria, such as fulfilment of ‘basic needs’ and the ‘capabilities’ to be and to do things of intrinsic worth. This paper asks: to what extent are these different concepts measurable, to what extent are they competing or complementary, and is it possible for them to be accommodated within an encompassing framework? We conclude that it is possible to view subjective well-being as an encompassing concept, which permits us to quantify the relevance and importance of the other approaches and of their component variables. Any attempt to define poverty involves a value judgment as to what constitutes a good quality of life or a bad one. We argue that an approach which examines the individual's own perception of well-being is less imperfect, or more quantifiable, or both, as a guide to forming that value judgement than are the other pote...

Technology spillovers from Foreign Direct Investment (FDI): the active role of MNC subsidiaries in Argentina in the 1990s

Abstract: The usual perspective on technology spillovers from FDI sees the MNC subsidiary as a passive actor. It presumes that the technological superiority that spreads from subsidiaries to other firms in the host economy is initially created outside it by MNC parent companies, and is delivered to subsidiaries via international technology transfer. The role of subsidiaries is little more than to act as a ‘leaky container’ lying between the technology transfer pipeline and the absorption of spillovers by domestic firms. This paper suggests a different model in which a substantial part of the potential for spillover is created within local subsidiaries as a result of their own knowledge-creating and accumulating activities in the host economy. We explore empirically the effects of these activities on technology spillovers from FDI using data for industrial firms in Argentina over the period 1992–96. The analysis suggests that significant results can be obtained incorporating subsidiaries' own technological ...

Conditional cash transfers, adult work incentives, and poverty

Abstract: Conditional cash transfer (CCT) programs aim to alleviate poverty through monetary and in-kind benefits, as well as reduce future levels of poverty by encouraging investments in education, health, and nutrition. The success of CCT programs at reducing poverty depends on whether, and the extent to which, cash transfers affect adult work incentives. The authors examine whether the PROGRESA program of Mexico affects adult participation in the labor market and overall adult leisure time, and they link these effects to the impact of the program on poverty. Using the experimental design of PROGRESA's evaluation sample, the authors find that the program does not have any significant effect on adult labor force participation and leisure time. Their findings on adult work incentives are reinforced further by the result that PROGRESA leads to a substantial reduction in poverty. The poverty reduction effects are stronger for the poverty gap and severity of poverty measures.

Setting weights for aggregate indices: An application to the commitment to development index and human development index

Abstract: Aggregate indices like UNDP's Human Development Index (HDI) or the Centre for Global Development and Foreign Policy's Commitment to Development Index (CDI) are subject to multiple criticisms. This paper addresses concerns linked to the equal weights used in the HDI and the CDI and evaluates alternative weighting schemes. It relies on an opinion survey conducted electronically among researchers from 60 countries to assess whether or not professional judgment affects the use of equal weights. Results of the opinion survey point to a surprising result for the HDI: despite widespread criticism of equal weights, a simple scheme based on equal weights is not only convenient but also consistent with the views of experts. For some components of the CDI, however, weights derived from the survey do differ from equal weights. Nevertheless, the weights emerging from the survey are not sufficiently different from equal weights to significantly alter country rankings.

US politics and World Bank IDA-lending

Abstract: This paper studies the role of US political factors in the allocation of World Bank concessional lending, where US political interests are proxied by voting similarity in the United Nations General Assembly on issues identified as important by the US Department of State. In contrast to previous studies we find that the US exerted a significant influence on IDA lending during the period 1993 2000. We demonstrate that the influence was both statistically as well as economically significant. Finally, we demonstrate that our result is robust with respect to the omission of the IDA Country Performance Rating index.

The impact of poor health on total factor productivity

Abstract: A number of recent studies have illustrated the link between health and economic growth. This paper argues that a key mechanism through which health affects growth is via total factor productivity (TFP). We first estimate TFP based on a production function and then estimate the determinants of TFP, paying particular attention to three indicators of health that are particularly problematic in developing regions: malnutrition, malaria and water borne diseases. We find the impact of poor health on TFP to be negative, significant, and robust across a wide variety of specifications.

The Success of a Policy Model: Irrigation Management Transfer in Mexico

Abstract: The Mexican policy of Irrigation Management Transfer has been widely propagated as a success and has become a model for other countries seeking to improve the performance of their irrigation systems while also cutting public expenditures. This article analyses the process of policy-making that has generated the policy model and follows the practices, means, and events through which it has achieved increasing transnational circulation, popularity, and support. The main argument of this article is that the success of a policy model is only a success within the cultural and ideological understandings of a policy network and given the means, practices, and events that generate and disseminate it. This particular case further suggests that success in policy-making, rather than being based on straightforward evidence of improved management performance, is often part of a cultural performance.

‘Moving in place’: Drought and poverty dynamics in South Wollo, Ethiopia

Abstract: This article discusses the impact of drought on poverty dynamics in the South Wollo area of northeastern Ethiopia. Using both survey and anthropological/qualitative data covering a six-year period, the paper assesses which households were able to hold on to assets and recover from the 1999-2000 drought and which were not. It suggests that while the incidence of poverty changed very little during 1997 to 2003 despite the occurrence of a major drought, the fortunes of the poorest improved, but not enough to keep them from poverty. The study concludes by asking how current policies affect patterns of poverty and inequality and what might be done to improve welfare in South Wollo.

Representing poverty and attacking representations: Perspectives on poverty from social anthropology

Abstract: This article considers the potential contribution of social anthropology to understanding poverty as both social relation and category of international development practice. Despite its association with research in communities and countries now considered poor anthropology has remained disengaged from the current poverty agenda. This disengagement is partly explained by the disciplinary starting point of anthropology which explores the processes though which categories come to have salience. It is accentuated by the relationship of anthropology as a discipline to the development policy and the research commissioned to support it. An anthropological perspective on poverty and inequality can shed light on the ways in which particular social categories come to be situated as poor. It can also reveal the social processes through which poverty as policy objective becomes institutionalised in development practice and in the social institutions established to monitor, assess and address it.

Waste pickers and collectors in Delhi: Poverty and environment in an urban informal sector

Abstract: Waste pickers and collectors constitute the bottom layer of waste recycling in the metropolis of Delhi. Pickers collect waste just by picking them up from public places such as garbage dumps and streets, whereas collectors purchase waste from waste producers such as households and shops for sale to higher-level waste traders. Most pickers have incomes below the poverty line set by the Planning Commission of India, whereas the majority of collectors earn marginally higher than the poverty-line income. The poverty of pickers is not transitory, but chronic as they have no connection to enter the community of collectors and higher-level waste traders within which the community mechanism works effectively to reduce risk and transaction costs. Despite their low economic and social status, pickers and collectors are making important contributions to society. It is found that pickers and collectors are adding more value than their own income to waste producers' income and to the saving of the city govern...

Institutions and collective action: Does heterogeneity matter in community-based resource management?

Abstract: This article examines the relationship between local level heterogeneity and the likelihood of successful collective action in community-based forest management in Nepal. Economic and social heterogeneity are discussed and their effects on local level collective action considered. The study develops simple measures of inequality for key variables, and shows that there is no clear-cut impact of group heterogeneity on collective action. Forest user groups can create institutions for resource management according to their local context in order to avoid management problems created by inequalities among resource users. Perhaps the most important result is that the effects of heterogeneity can be highly variable, and the recommendation is that systems of governance need to be flexible to allow adaptation of management regimes to local conditions.

Deficiencies in education and poor prospects for economic growth in the Gulf countries: The case of the UAE

Abstract: Our paper shows that the deficient educational system and the large share of unskilled foreign workers in the Gulf countries are serious impediments to a successful implementation of the strategies of these countries to reduce their dependence on foreign technologies and to restructure their economies in order to make them less dependent on oil exports. A novel element in our analysis is that we emphasise the role of the deficient educational system as an important problem, next to the well-documented quandary of a high incidence of unskilled foreign workers in the workforce. We use new survey data, both at an establishment level and economy-wide, to provide evidence on how the poor educational facilities lead to a poor provision of training, low skill levels, serious skills mismatch and deficient transfer of knowledge. These inadequate facilities and the lack of incentives to improve them also lead to low R&D efforts to promote local technologies and hamper a restructuring of the economy.

Escaping poverty and becoming poor in 36 villages of Central and Western Uganda

Abstract: Twenty-four per cent of households in 36 village communities of Central and Western Uganda have escaped from poverty over the past 25 years, but another 15 per cent have simultaneously fallen into poverty. A roughly equal number of households escaped from poverty in the first period (ten to 25 years ago) as in the second period (the last ten years) examined here. However, almost twice as many households fell into poverty during the second period as in the first period. Progress in poverty reduction has slowed down as a result. Multiple causes are associated with descent into poverty and these causes vary significantly between villages in the two different regions. For nearly two-thirds of all households in both regions, however, ill health and health-related costs were a principal reason for descent into poverty. Escaping poverty is also associated with diverse causes, which vary across the two regions. Compared to increases in urban employment, however, land-related reasons have been more import...

Understanding and reducing persistent poverty in Africa: Introduction to a special issue

Abstract: This paper introduces a special issue exploring persistent poverty in sub-Saharan Africa. As a set, these papers break new ground in exploring the dynamics of structural poverty, integrating qualitative and quantitative methods of analysis and adopting an asset-based approach to the study of changes in well-being, especially in response to a wide range of different (climatic, health, political, and other) shocks. In this introductory essay, we frame these studies, building directly on evolving conceptualisations of poverty in Africa.

The case for cross-disciplinary social science research on poverty, inequality and well-being

Abstract: Arguments for cross-disciplinary research in development studies have been applied recently to work on poverty, inequality and well-being. However, much research on these issues remains fragmented and, in particular, the intellectual barrier between economics and the other social science subjects continues to be powerful. In this paper, we review the prospects for cross-disciplinary research (both multidisciplinary and interdisciplinary); and, examine the ways in which forms of being ‘disciplined’, and the linkages between disciplines and professions, constrains such research. We also introduce the papers in this collection and explain their relationship to the quest for cross-disciplinary research on poverty issues. Our conclusion is that cross-discipline working should be promoted and that both interdisciplinary and multidisciplinary approaches can benefit research on poverty and well-being, provided that their specific merits and demerits are evaluated in relation to the research task in hand.

Poverty persistence and transitions in Uganda: A combined qualitative and quantitative analysis

Abstract: Despite Uganda's impressive reduction in income poverty during the 1990s, recent evidence has shown there to be substantial mobility into and out of poverty. This paper represents one of the first attempts to combine qualitative and quantitative information to understand the factors and processes underlying poverty transitions and persistence. In some instances similar factors are identified by both qualitative and quantitative approaches, including lack of key physical assets, high dependency ratios and increased household size. In other instances though one approach identifies additional factors not so easily identified by the other, for example the impacts of excessive alcohol consumption in many cases. The paper argues that there is considerable value added in combining the two approaches allowing us to provide a much richer understanding of many of the processes underlying poverty and poverty transitions.

Rural income and poverty in a time of radical change in Malawi

Abstract: Malawi is one of the poorest countries in Africa. There is widespread, though not universal, agreement about the shape of poverty in the country and the policy challenge this sets. Agriculture continues to be the most obvious means to stimulate broad-based rural growth and to provide levels of food security and income needed for the majority rural population. A longitudinal study over a decade during which radical policy and political changes occurred provides the data and basis for discussing the appropriate policy directions for reducing poverty.

The economic impact of genetically modified cotton on South African smallholders: Yield, profit and health effects

Abstract: Results of a large-scale survey of resource-poor smallholder cotton farmers in South Africa over three years conclusively show that adopters of Bt cotton have benefited in terms of higher yields, lower pesticide use, less labour for pesticide application and substantially higher gross margins per hectare. These benefits were clearly related to the technology, and not to preferential adoption by farmers who were already highly efficient. The smallest producers are shown to have benefited from adoption of the Bt variety as much as, if not more than, larger producers. Moreover, evidence from hospital records suggests a link between declining pesticide poisonings and adoption of the Bt variety.

Competition and entrepreneurs' human capital in small business longevity and growth

Abstract: An analysis of data on a sample of small-scale manufacturers shows that a business is less likely to survive and grows slower the smaller the average price–cost margin in the industry in which it operates. The probability of survival is also smaller in import competing industries. So is the mean growth rate among survivors. We interpret this as evidence that small businesses are less likely to survive and grow slower in industries where the pressure of competition is stronger. Given competitive pressure and establishment characteristics, the probability of business survival and the expected growth rate conditional on survival both increase with entrepreneurial human capital. This is in the sense that the probability of business survival increases with the number of years of schooling and the number of years of business experience of the entrepreneur as does the expected growth rate conditional on survival. These results are consistent with another finding that unobservable influences on business ...

Fixed capital stock depreciation in developing countries: Some evidence from firm level data

Abstract: Previous growth accounting studies suggest severe capital underutilisation and mismeasurement of the stocks of capital in some developing countries. Using the firm level data sets from the World Ba...

Unravelling the linkages between the millennium development goals for poverty, education, access to water and household water use in developing countries: Evidence from Madagascar

Abstract: All members of the United Nations have pledged to meet eight Millennium Development Goals (MDGs) by the year 2015. This study looks at the MDG objectives and linkages between poverty, education, access to water, and household water use based on primary data collected in Madagascar. We find strong links between these MDGs. Better educated and higher income households rely significantly more on private water supplies and use significantly more water. Econometric results show that, for poorer households who rely on public sources, improving access to public water taps (by reducing the distance to such a water source) would not alter dramatically water use patterns. Improved access does free up a significant amount of time that could contribute to poverty reduction. The willingness of households to pay for improved access is very price sensitive, probably because of the liquidity constraints of these households.

Consumption Vulnerability to Risk in Rural Pakistan

Abstract: As one of the dimensions of vulnerability, this paper empirically investigates the inability of rural dwellers to cope with negative income shocks. A variable coefficient regression model is applied to a two-period household panel dataset collected in the North-West Frontier Province, Pakistan, an area with high incidence of income poverty and low human development. The empirical model allows for a different ability to smooth consumption, approximated by a linear function of households’ attributes, and controls for the endogeneity of observed changes in income, using qualitative information on subjective risk assessment. Estimation results show that the ability to cope with negative income shocks is lower for households that are aged, landless and do not receive remittances regularly.