Showing papers in "The World Bank Economic Review in 1996"

A New Data Set Measuring Income Inequality

Abstract: This article presents a new data set on inequality in the distribution of income. The authors explain the criteria they applied in selecting data on Gini coefficients and on individual quintile groups' income shares. Comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage, although differences in the definition of the underlying data might still affect inter temporal and international comparability. Based on this new data set, the authors do not find a systematic link between growth and changes in aggregate inequality. They do find a strong positive relationship between growth and reduction of poverty.

How important to India's poor is the sectoral composition of economic growth?

Abstract: Using a new series of consistent, consumption-based poverty measures spanning forty years, the author assess how much India's poor shared in the country's economic growth, taking into account its urban-rural and output composition. Rural consumption growth reduced poverty in both rural and urban areas. Urban growth brought some benefits to the urban poor, but had no impact on rural poverty. And rural-to-urban population shifts had no significant impact on poverty. Decomposing growth by output sectors, we found that output growth in the primary and tertiary sectors reduced poverty in both urban and rural areas but that secondary sector growth did not reduce poverty in either.

Stock market development and long-run growth

Abstract: The authors empirically evaluate the relationship between stock market development and long-term growth. The data suggest that stock market development is positively associated with economic growth. Moreover, instrumental variables procedures indicate a strong connection between the predetermined component in the long run. While cross-country regressions imply a strong link between stock market development and economic growth, the results should be viewed as suggestive partial correlations that stimulate additional research rather than as conclusive findings. Careful case studies might help identify causal relationships and further research could be done on the time-series property of such relationships.

Roads, land use, and deforestation : a spatial model applied to Belize

Abstract: Rural roads promote economic development, but they also facilitate deforestation. To explore this tradeoff, this article develops a spatially explicit model of land use and estimates probabilities of alternative land uses as a function of land characteristics and distance to market using a multinomial logit specification of this model. Controls are incorporated for the endogeneity of road placement. The model is applied to data for southern Belize, an area experiencing rapid expansion of both subsistence and commercial agriculture, using geographic information system (GIS) techniques to select sample points at 1 kilometer intervals. Market access, land quality, and tenure status affect the probability of agricultural land use synergistically, having differential effects on the likelihood of commercial versus semi subsistence farming. The results suggest that road building in areas with agriculturally poor soils and low population densities may be lose-lose proposition, causing habitat fragmentation and providing low economic returns.

Stock markets, corporate finance, and economic growth : an overview

Abstract: The research presented here focuses on four issues. First, it constructs more measures or criteria of stock market development than any previous study. It compares liquidity, concentration, volatility, institutional development, and international integration across forty-four industrial and developing countries from 1976 to 1993. Besides identifying general characteristics of these measures and defining stock market development empirically, these data facilitate further research into the relationship between stock market development and financial intermediaries, corporate finance decisions, and economic growth. These measures, ranked for each country, can be used for inter country comparisons of the level of stock market development. In addition, the data provide a basis for gauging the success of capital market development projects using objective criteria. Second, with these new data the research investigates the relationships between stock markets and financial intermediaries. Third, the research analyzes the relationship between stock market development and long-run economic growth. Fourth, the research studies the ties between stock market development and financing choices of firms. This overview puts this research in context and reviews the main results of the study. Section I provides a brief review of the role of stock markets in economic development and documents the evolution of debt and equity markets during the growth process. Section II defines stock market development and presents summary data on the development of financial intermediaries and stock markets. Section III presents evidence on the effect of stock market development on economic growth. Section IV summarizes the empirical results on how stock market development affects firm financing decisions. Section V concludes by discussing policy implications.

Stock market development and financial intermediaries : stylized facts

Abstract: World stock markets are booming, and emerging stock markets account for a disproportionate share of this growth. Yet economists lack a common concept or measure of stock market development. This article collects and compares a broad array of indicators of stock market and financial intermediary development, using data from forty-four developing and industrial countries during the period from 1986 to 1993. The empirical results exhibit wide cross-country differences for each indicator as well as intuitively appealing correlations between various indicators. The article constructs aggregate indexes and analyzes them to document the relationship between the emergence of stock markets and the growth of financial intermediaries. It produces a set of stylized facts that facilitates and stimulates research into the links among stock markets, economic development, and corporate financing decisions.

Stock Market Development and Financing Choices of Firms

Abstract: In many developing countries with emerging stock markets, banks are fearful of stock market development because they think that stock markets will reduce the volume of their business. This article ...

Patterns of transition from plan to market

Abstract: Patterns of transition from plan to market. Martha de Melo, Cevdet Denizer, and Alan Gelb Hungary's bankruptcy experience, 1992-1993. Cheryl W. Gray, Sabine Schlorke, and Miklos Szanyi Why and when do governments initiate public enterprise reform? Jose Edgardo Campos and Hadi Salehi Esfahani Roads, land use, and deforestation: a spatial model applied to Belize. Kenneth M. Chomitz and David A. Gray Industrial centralization in Indonesia. J. Vernon Henderson and Ari Kuncoro Guidlines on searching for a Dalton-improving tax reform: an illustration with data from Indonesia. Shlomo Yitzhaki and Jeffrey D. Lewis A new data set measuring income inequality. Klaus Deininger and Lyn Squire

The surge in capital inflows to developing countries : an analytical overview

Abstract: After being excluded from world capital markets during the debt crisis, many developing countries have experienced large capital inflows during the past five years. The challenges that these inflows pose for domestic policy in recipient countries have generated a substantial literature. This article presents an overview of that literature, describing the characteristics of the new inflows, analyzing the policy issues they raise, assessing their causes and likely sustainability, and evaluating potential policy responses. The desirable policy response is tied to characteristics of the flows themselves as well as to the characteristics of the recipient economy.

Equity Markets, Transactions Costs, and Capital Accumulation: An Illustration

Abstract: Poorly developed equity markets inhibit the transfer of capital ownership. Moreover, the costs of transacting in equity markets affect not just the level of investment, but the kinds of investments that are undertaken. Once equity markets allow the ownership of capital to be transferred economically, reductions in costs tend to favor the use of longer-maturity investments. When there is a relationship between the maturity of an investment and its productivity, transactions cost reductions are conducive to observing certain kinds of increases in productive efficiency. This article analyzes savings, investment, and consumption decisions by using an overlapping generation’s model with two-period-lived agents. The analysis allows for several technologies for converting current output into future capital that varies by productivity and maturity, and it makes ownership of capital costly to transfer. A reduction in transactions costs will typically alter the composition of savings and investment, and have potentially complicated consequences for capital accumulation and steady state output.

The impact of women's schooling on fertility and contraceptive use : a study of fourteen Sub-Saharan African countries

Abstract: This article examines the relationship between female schooling and two behaviors, cumulative fertility and contraceptive use, in fourteen Sub-Saharan African countries where Demographic and Health Surveys (DHS) have been conducted since the mid-1980s Average levels of schooling among women of reproductive age are very low, from less than two years to six Controlling for background variables, the last years of female primary schooling have a negative relation with fertility in about half the countries, while secondary schooling is associated with substantially lower fertility in all countries Female schooling has a positive relationship with contraceptive use at all levels Among ever-married women, husband's schooling exerts a smaller effect than doe's female schooling on contraceptive use and, in almost all cases, on fertility Although the results suggest commonalities among these Sub-Saharan countries, they also reveal intriguing international differences in the impact of female schooling, which might reflect differences in the quality of schooling, labor markets, and family planning programs, among others

The Coevolution of the Real and Financial Sectors in the Growth Process

Abstract: The role of debt and equity changes over time and with the level of development. What are these changes, and why should they systematically occur across different countries and time periods? This article characterizes financial innovation as a dynamic process that both influences and is influenced by the development of the real sector. It focuses on the emergence and development of equity markets, using a model that allows for growth and for capital accumulation that is financed externally through a combination of debt and equity. As an economy develops, the aggregate ratio of debt to equity will generally fall; yet, debt and equity remain complementary sources for the financing of capital investments. The results suggest how various government policy actions might affect capital 'accumulation and equity market activity.

Industrial centralization in Indonesia

Abstract: In certain situations, economic liberalization policies can increase the degree of spatial centralization of resources and spatial concentration of manufacturing in large metropolitan areas. In addition, historical patterns of location make it difficult to alter the degree of centralization. This article explores these issues by specifying and estimating a nested logit model of industrial location of manufacturing activity in Java, focusing on the unincorporated sector. The results indicate that plants strongly prefer locations with mature plants in related industries, which offer a built-up stock of local knowledge. In addition, the 1983 liberalization in Indonesia was associated with increased centralization of the unincorporated sector. Although the liberalization gave unincorporated firms better access to government and other centralized services, firms needed to centralize to take advantage of these opportunities because the bureaucratic process is centralized and communications are poor. The relative increased growth of the corporate sector following liberalization may also have helped to further draw unincorporated plants into centralized locations.

Is the Debt Crisis History? Recent Private Capital Inflows to Developing Countries

Abstract: The outlook for economic development for an important group of middle-income countries has again been buoyed by substantial private capital inflows in the 1990s. As in the 1970s, this development has been met with cautious optimism. It is generally accepted that these countries need resource transfers from the rest of the world to support capital formation and growth. It is also generally accepted that these private capital flows make the allocation of resources more efficient. But there is concern that a rapid reversal of market sentiment could impose considerable adjustment costs on these same economies. The authors try to quantify what many consider to be the main reasons debtor countries have access to capital markets again: (a) Domestic policy reform in the debtor countries. (b) Debt and debt service reduction, usually associated with Brady Plan restructuring. (c) Changes in the external market, such as changes in interest rates in industrial countries. They argue that a useful barometer for access to new loans is the market value of existing sovereign debt. It follows that a quantitative analysis of the factors that caused the market value of sovereign debts to rise rapidly after 1989 would also improve understanding of the forces behind the renewed access to international capital. Empirical historical evidence suggests that fiscal reform, privatization, and debt reduction are useful in explaining relative improvements in the standing of debtor countries in international credit markets. Debtor countries with strong reform programs, in other words, are better prepared to withstand deterioration in the external environment. But the reduction in dollar interest rates since 1989 appears to be the chief factor in the debtor countries' renewed access to international loans. The authors estimate the effect of increases in dollar interest rates and conclude that the typical debtor country remains vulnerable to increases in interest rates that are well within the range of recent experience.

A Measure of Stock Market Integration for Developed and Emerging Markets

Abstract: A wide array of official capital controls across countries makes it difficult to perform cross-sectional analysis of the effects of market segmentation. This article constructs a measure of deviati...

Fertility and Child Mortality in Côte d'Ivoire and Ghana

Abstract: This article examines individual, household, and community characteristics that may affect fertility in contemporary Cote d'lvoire and Ghana and the relationship between child mortality and fertility. It was not possible to reject the null hypothesis that child mortality is exogenous. Treating child mortality as exogenous, fertility responds directly to child mortality, but by a smaller proportion than estimated in studies of East Asia and Latin America. Increases in female education and urbanization are likely to contribute to declines in fertility in both countries, but economic growth without these structural changes is not yet strongly related to lower fertility.

Why and When Do Governments Initiate Public Enterprise Reform

Abstract: Initiating public enterprise reform is a complex decision influenced by economic factors as well as the ideological biases and personalities of political leaders. Nevertheless, the use of a contracting framework yields important generalizations about what drives the decision. This article argues that the decision depends fundamentally on the potential efficiency gains from the reform and its associated transactions costs. Costs arise because of asymmetries in information and opportunism, problems that usually plague contract negotiations. The article identifies observable variables that may affect either the potential gains or the transactions costs, uses them to construct a simple probit decision-making model, and tests the model using data from fifteen developing countries over a twenty-year period.

Guidelines on Searching for a Dalton-Improving Tax Reform: An Illustration with Data from Indonesia

Abstract: This article documents the search for a Dalton-improving tax and expenditure reform using a methodology developed by Yitzhaki and Slemrod (1991) and Mayshar and Yitzhaki (1995). The methodology overcomes the need to define a specific social welfare function by searching instead for reforms that improve each social welfare function belonging to a wide class of functions. The authors apply the method to the energy sector of Indonesia, ignoring distributional constraints, and find that both the subsidy on kerosene and the tax on gasoline should be reduced. But taking distributional concerns into account, the present structure of energy taxes is reasonable and the country may benefit by increasing the subsidy to kerosene, taxing electricity, and reducing the gasoline tax. These conclusions are robust to changes in the relevant parameters representing the Indonesian economy.

Fertility, contraceptive choice, and public policy in Zimbabwe

Abstract: Zimbabwe has invested massively in public infrastructure since independence in 1980. The impact of these investments on demographic outcomes is examined using household survey data matched with two community level surveys. A woman's education is a powerful predictor of both fertility and contraceptive use. These relationships are far from linear and have changed shape in recent years. After controlling for household resources, both the availability and quality of health and family planning services have an important impact on the adoption of modern contraceptives. In particular, outreach programs such as mobile family planning clinics and community- based distributors (CBDs) have been especially successful. However, not all women are equally served by this infrastructure. For example, CBDs have a bigger impact on younger, better educated women, while mobile family planning clinics appear to have more success with older, less educated women.

Hungary's Bankruptcy Experience, 1992-93

Abstract: Policymakers working on enterprise restructuring should take a close look at Hungary's experience with bankruptcy reform since 1992. This article provides detailed data on a randomly selected stratified sample of actual cases filed in the first two years after the enactment of the law. These data are supplemented with information obtained from interviews with judges, liquidators, and firms involved in the bankruptcy process to give an overall picture of the process in the first two years of its implementation. The bankruptcy process in Hungary has indisputably spurred institution building in the courts, the trustee profession, and the banks. It may also have succeeded broadly in separating viable from unviable firms. It did little, however, to further either deep restructuring or the exit of ailing firms. The changes in incentives and institutions that are needed to make bankruptcy work in transition economies invariably take time. Hungary's initiative, albeit imperfect, was a bold start toward reform.

A symposium on fertility in Sub-Saharan Africa

Abstract: During the 1980s the population of Sub-Saharan Africa grew at a rate of 3.1 percent per year, the highest of any developing region (World Bank 1993). The population of South Asia, the developing region with the next highest rate, grew at 2.2 percent annually. Recent demographic surveys in Sub-Saharan Africa found that the average total fertility rate (TFR), the number of children a woman will have in her lifetime at prevailing age-specific fertility rates, is generally between six and seven children per woman. Child mortality has declined steadily since Second World War, but infant and child mortality remain relatively high (Hill 1990). In fifteen Sub-Saharan African countries, the infant mortality rate exceeds 100 per 1,000 live births, and in four countries the rate is greater than 140 per 1,000 (World Bank 1995). There are signs of fertility decline in a few countries (Botswana, Kenya, and Zimbabwe), but even in these cases total fertility is relatively high at five or more children per woman. Changing this scenario will require not only policies that help restore economic growth but that also enable families to have fewer children and to invest more in the quality of each child. To this end, most African countries have adopted or have endorsed public provision of subsidized family planning services, which provide families with not only the means to implement their fertility preferences but also to improve maternal and child health. However, levels of modern contraceptive use in all but a handful of Sub-Saharan African countries are still below 10 percent.

Fertility and child mortality in Cote dIvoire and Ghana.

Abstract: Zimbabwe has invested massively in public infrastructure since independence in 1980. The impact of these investments on demographic outcomes is examined using household survey data matched with two community level surveys. A womans education is a powerful predictor of both fertility and contraceptive use. These relationships are far from linear and have changed shape in recent years. After controlling for household resources both the availability and quality of health and family planning services have an important impact on the adoption of modern contraceptives. In particular outreach programs such as mobile family planning clinics and com- munity-based distributors (CBDs) have been especially successful. However not all women are equally served by this infrastructure. For example CBDs have a bigger impact on younger better educated women while mobile family planning clinics appear to have more success with older less educated women.