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No. 216   (Download full text)
Seo-Young Cho
Modeling for Determinants of Human Trafficking
This study aims to identify robust push and pull factors of human trafficking. I test for the robustness of 78 push and 67 pull factors suggested in the literature. By employing an extreme bound analysis, running more than two million regressions with all possible combinations of variables for up to 180 countries during the period of 1995-2010, I show that crime prevalence robustly explains human trafficking prevalence both in destination and origin countries. My finding also implies that a low level of gender equality and development may have constraining effects on human trafficking outflows, contrary to expectations. The linkage between migration and human trafficking is less clear, and institutional quality matters more in origin countries than destinations.
JEL-Codes: JEL: F22; J16; J61; O15
Keywords: Human trafficking: push and pull factors: robustness; extreme bound analysis
No. 215   (Download full text)
Stephan Klasen, Thomas Otter and Carlos Villalobos Barría
The dynamics of inequality change in a highly dualistic economy: Honduras, 1991-2007
We examine the drivers of inequality change in Honduras between 1991-2007, trying to understand why inequality increased in Honduras until 2005, while it was falling in most other Latin American countries. Using annual household surveys, we document first rising inequality between 1991-2005, which is followed by falling inequality thereafter. Using an inequality decomposition technique, we show that the rising inequality between 1991 and 2005 was, for the most part, driven by the dispersion of labour incomes in rural areas. We also show that the extraordinary labour earnings disequalization is mainly the result of a widening wage gap between the tradable and non-tradable sectors and occupations, combined with highly segmented labor markets and poor overall educational progress. The underlying determinants of the divergence between tradable and non-tradable sectors were highly overvalued currencies and poor commodity process for Honduras’ agricultural exports. Between 2005 and 2007, however, the inequality reduction was a result of equalizing trends in labour and non-labour incomes. The commodity boom promoting the tradable sector and remittances (in this order) played a significant role here, with government transfers playing a small supporting role. Since the decline in inequality is largely driven by international factors, we cannot be sure whether the decline in inequality will continue.
JEL-Codes: C15, D31, I21, J23, J31, R23, J31, J61
Keywords: Inequality, Decomposition, Education, Wages, Honduras, Migration
No. 214   (Download full text)
Malte Reimers and Stephan Klasen
Revisiting the Role of Education for Agricultural Productivity
While the majority of micro studies finds that rural education increases agricultural productivity, various recent cross‐country regressions analyzing the determinants of agricultural productivity were only able to detect an insignificant or even surprisingly negative effect of schooling. In this paper, we show that this failure to find a positive impact of education in the international context appears to be a data problem related to the inappropriate use of enrolment and literacy indicators. Using a panel of 95 developing and middle‐income countries from 1961 to 2002 that includes data on educational attainment, we show that education indeed has a highly significant, positive effect on agricultural productivity which is robust to the use of different control variables, databases and econometric methods. Distinguishing between different levels of education further reveals that only primary and secondary schooling attainment has a significant positive impact while the effect of tertiary education is insignificant. When distinguishing between income groups, our results indicate that even though the coefficient of the education variable is highly significant and positive for all quintiles, the returns to education are higher for the countries belonging to the richest three quintiles. This finding can be interpreted as support for the claim that education will have larger impacts on agricultural productivity in the presence of rapid technical change since it helps farmers to adjust more readily to the new opportunities provided by technological innovations.
JEL-Codes: I20, I25, O13, O15, O47, Q10
Keywords: Agricultural productivity, agricultural production function, cross‐country regression, education, human capital
No. 213   (Download full text)
Inmaculada Martínez-Zarzoso and Sami Bensassi
The price of modern maritime piracy
A growing body of literature has recently focused on the economic origins and consequences of modern maritime piracy and on the perception that the international community has failed to control it. This paper aims to investigate maritime transport costs as one of the channels through which modern maritime piracy could have a major impact on the global economy. A transportcost equation is estimated using a newly released dataset on maritime transport cost from the OECD together with data on maritime piracy from the IMB. Our results show that maritime piracy significantly increases trade cost between Europe and Asia.
JEL-Codes: F51
Keywords: maritime piracy, transport costs, maritime trade, panel data
No. 212   (Download full text)
Nicole Grunewald and Inmaculada Martínez-Zarzoso
How well did the Kyoto Protocol work? A dynamic-GMM approach with external instruments
This paper assesses the impact of the Kyoto Protocol on CO2 emissions. With this aim a dynamic panel data model is estimated for a cross-section of 213 countries over the period 1960 to 2009. The model, based on a STIRPAT approach, also integrates the EKC approach and specifically considers the endogeneity of the policy variable. To sort out causality the number of financed CDM projects is used as an external instrument. The main results indicate that obligations from the Kyoto Protocol have a measurable reducing effect on CO2 emissions and indicate that a treaty often seen as "failed" in fact may be producing some non-trivial effects.
JEL-Codes: Q54; Q56
Keywords: Environmental Kuznets Curve, Kyoto Protocol, panel data, Clean Development Mechanism
No. 211   (Download full text)
Konstantin M. Wacker
Do multinationals beat down developing countries' export prices? The impact of FDI on net barter terms of trade
This paper explores the economic relationship between foreign direct investment to developing countries and the export prices of the latter, measured by terms of trade. It is rst shown that economic theory suggests such a relationship for various reasons but is inconclusive about the direction of the e ect. To address this open issue empirically, I analyze data on more than 50 developing countries throughout the period 1980 - 2008 using dynamic panel data methods. The results show that multinational corporations, measured by data on foreign direct investment, had an economically relevant and statistically signi cant positive impact on developing countries' net barter terms of trade. A higher level of education in the developing country fosters this e ect.
JEL-Codes: C23, F23, O11
Keywords: Multinationals, FDI, Terms of Trade, Prebisch-Singer hypothesis
No. 210   (Download full text)
Philipp Kolo
Questioning Ethnic Fragmentation's Exogeneity - Drivers of Changing Ethnic Boundaries
Ethnic fragmentation is a variable increasingly used in the economic literature to explain differences in economic development level, growth or the incidence of conflicts. Nearly all articles have in common that they treat ethnic fragmentation as a static, exogenous fact. Only recently some contributions outlined first ideas, why different levels of ethnic fragmentation evolved based on biodiversity and evolutionary theories. This article has two main goals. In connecting with these recent findings, the article boldly confirms their results that a ‘base-level’ of fragmentation evolved due to geographical and evolutionary factors. Additionally, it draws the attention to the impact of colonization on fragmentation, especially on how a country was colonized. The main goal, however, is to show that ethnic fragmentation is not only evolving over centuries, but changes over a short period of time. As static factors, e.g. geographical ones, can’t be responsible for changes in the short run, the article offers a structured assessment of factors that may influence diversity levels in the short term. Although migration is the most obvious factor, urbanization and especially education play an even more important role in influencing a country’s ethnic boundaries.
JEL-Codes: C23, F54, I29, O10, Z10
Keywords: Colonization, Endogeneity, Ethnic fractionalization (ELF), Heterogeneity
No. 209   (Download full text)
Dierk Herzer
Cross-country heterogeneity and the trade-income relationship
This paper makes the following contributions to the literature on the impact of trade on income. First, we use heterogeneous panel cointegration techniques that are robust to omitted variables and endogenous regressors to estimate the effect of trade on income for 75 developed and developing countries, both for the sample, as a whole, and for each individual country. Second, we use a general-to-specific variable-selection approach to identify important determinants of the effect of trade on income. Our main findings are: (i) A one-percent increase in the trade share of GDP results, on average, in a statistically significant increase in income per worker of about 0.18 percent. This result is in contrast to previous studies, which tend to produce either unreasonably large or statistically insignificant estimates of the impact of trade on income. (ii) There are large cross-country differences in the income effect of trade, in particular, between developed and developing countries. For developed countries the income effect of trade is positive, whereas trade has, on average, a negative impact on income in developing countries. (iii) The cross-country heterogeneity in the impact of trade on income can be explained mainly by cross-country differences in primary export dependence, labor market regulation, and property rights protection. The level of property rights protection is positively related, while the levels of primary export dependence and labor market regulation are negatively related to the income effect of trade.
JEL-Codes: F43; F14; C23; C52
Keywords: Trade; Income; Cross-country heterogeneity; Panel cointegration; General-to-specific approach
No. 208   (Download full text)
Sami Bensassi and Inmaculada Martínez-Zarzoso
How Costly is Modern Maritime Piracy for the International Community?
This paper focuses on the impact of maritime piracy on international trade. Piracy increases the cost of international maritime transport through an increase in insecurity regarding goods deliveries. Bilateral trade flows between the main European and Asian countries over the 1999 to 2008 period are used to estimate an augmented gravity model that includes various measures of piracy acts. We found robust evidence indicating that maritime piracy reduces the volume of trade; the effect of ten additional vessels hijacked being associated to an 11% decrease in exports. Using these results, the international cost of piracy in terms of trade destruction is estimated to be 28 billion dollars. Finally, we compare the cost of low intensity conflict like Somalia, to the cost of a full scale conflict (Afghanistan) and to the cost of an autarkic state (North Korea) for the international community in the year 2008.The results indicate that the cost of war more than doubles the cost of low intensity conflict.
JEL-Codes: F10, F51
Keywords: Piracy, International trade, Gravity equation, cost of conflict, security
No. 207   (Download full text)
Dierk Herzer
How does foreign direct investment really affect developing countries` growth?
This paper contributes to the literature on foreign direct investment (FDI) and economic growth in two main ways. First, we examine the effect of FDI on economic growth for 44 developing countries over the period 1970 to 2005 using heterogeneous panel cointegration techniques that are robust to omitted variables and endogenous regressors. In contrast to previous studies, we find that FDI has, on average, a negative effect on growth in developing countries, but that there are large cross-country differences in the growth effects of FDI. Second, we use a general-tospecific model selection approach to systematically search for country-specific factors explaining the cross-country differences in the growth effects of FDI. Contrary to previous results, we find that the cross-country differences in per capita income, human capital, openness, and financial market development cannot explain the cross-country differences in the growth effects of FDI. Instead, the growth effects of FDI are positively related to freedom from government intervention and freedom from business regulation, and negatively related to FDI volatility and natural resource dependence.
JEL-Codes: F21; F43; C23; C21
Keywords: FDI; Growth; Developing countries; Panel cointegration; General-to-specific approach
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