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Courant Research Centre: Poverty, Equity and Growth - Discussion Papers

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No. 292   (Download full text)
Juditha Wójcik, Christian Bommer, Dominik Naeher and Sebastian Vollmer
The long-term consequences of the global 1918 influenza pandemic: A systematic analysis of census data from 51 countries
Several country-level studies have identified long-term adverse effects of in-utero exposure to the 1918 influenza pandemic (also known as the Spanish Flu) on economic outcomes. In-utero conditions are theoretically linked to adult health and socio-economic status through the fetal origins hypothesis. Historical exposure to the Spanish Flu provides a natural experiment to test this hypothesis. Although the Spanish Flu was a global phenomenon, with an estimated 500 million people infected worldwide, no comprehensive global study on its long-term economic effects exists. We address this gap by systematically analyzing harmonized census data from 51 countries. Using the same empirical approach as previous studies, we find no evidence of consistent long-term effects on educational attainment and employment. Overall, our results are difficult to reconcile with the view that in-utero exposure to the 1918 influenza pandemic was associated with important long-term adverse effects on economic outcomes at the population level. A comprehensive set of robustness checks do not alter this conclusion.
No. 291   (Download full text)
Anna Reuter, Till Bärnighausen and Sebastian Vollmer
Parental Health, Children’s Education and Unintended Consequences of State Support: Quasi-experimental evidence from KwaZulu-Natal, South Africa
This study investigates whether eligibility for antiretroviral therapy (ART) of HIV positive parents improved their children’s educational attainment in KwaZulu-Natal, South Africa, employing a regression discontinuity design. We find that there is a positive impact of ART eligibility on paternal health, but this does not translate into general improvements of children’s education. Instead, impacts differ by the previous reception of state support. Previous recipients of health-contingent state support can lose the state support after initiation of ART, as their health improves after ART is initiated. For these parents, we see a negative impact of ART eligibility on children’s education, potentially driven by the negative impact on the household’s wealth. In contrast, there is a positive impact of ART eligibility on children’s education for fathers who previously received non-health-contingent state support.
JEL-Codes: I12, I21
Keywords: Education, Health, Regression Discontinuity Design, Antiretroviral Therapy, South Africa
No. 290   (Download full text)
Amal Ahmad, Dominik Naeher and Sebastian Vollmer
The International Political Economy of Patent Buyouts
The literature on patent buyouts has focused on single-economy settings, where buyouts are welfare improving relative to patents unless there are frictions such as imperfect information or commitment problems. We expand the analysis to a world with two heterogeneous countries featuring different sizes and innovation capacities. Moving to an international setting introduces the tradeoff that buyouts help to reduce monopoly distortion but also eliminate profits from foreign markets. We show that this can rationalize why buyouts are not pursued even in the absence of information and commitment problems, and identify the conditions under which this is harmful to global welfare. Instead, countries in the model rely on a system of global patent protection paired with domestic price subsidies, and only intersovereign transfers can achieve a globally optimal buyout equilibrium. Our results suggest that buyouts are constrained not only by domestic frictions but also by a global public good dimension.
JEL-Codes: F13; H87; L1; O31; O34; O38
Keywords: Innovation, intellectual property rights, patents, buyouts, global public goods
No. 289   (Download full text)
Lisa Rogge, Sheraz Ahmad Khan, Zohaib Khan, Muhammad Jawad Noon, Andreas Landmann and Sebastian Vollmer
The Effect of Personalized Health Information on Preventive Behavior amongst Risk Groups: a Randomized Experiment in Pakistan during the COVID-19 Pandemic
Preventing infections is crucial for population groups that are at higher risk to experience a complicated disease course and have limited access to healthcare. Our research with lowincome households from Pakistan first documents gaps in knowledge and individual preventive practices in the context of the COVID-19 pandemic, despite pervasive public information campaigns. Second, using a randomized experiment, we evaluate whether a more targeted and personalized SMS information campaign exploiting administrative health records could contribute to narrowing this gap. We find that the intervention helped the at-risk population to adhere to higher levels of handwashing in the time between the first and second wave of infections, and all message recipients were more than twice as likely to use tele-medical services compared to the control group.
Keywords: COVID-19; health insurance; information campaign; risk group behavior
No. 288   (Download full text)
Pooja Balasubramanian, Francesco Burchi and Daniele Malerba
Does economic growth reduce multidimensional poverty? Evidence from lowand middle-income countries
The long-standing tradition of empirical studies investigating the nexus between economic growth and poverty has concentrated on monetary poverty. This paper engages in the little-explored debate on the relationship between growth and multidimensional poverty, by employing two novel, individual-based multidimensional poverty indices: the G-CSPI and G-M0. It relies on an unbalanced panel dataset of 95 low- and middle-income countries between 1990 and 2018: this is thus far the largest sample and time-span used for this purpose. Using a first-difference econometric strategy, the empirical analysis indicates that a 10% increase in GDP decreases multidimensional poverty by approximately 4-5%. However, results differ depending on the subperiod considered: the elasticity is insignificant before 2000, while it is negative and largely significant afterwards. This is probably due to the changes that occurred in the international scenario at the beginning of the 21st century. Finally, a comparative analysis reveals that the elasticity of income-poverty to growth is between five to eight times higher than that of multidimensional poverty. Our results indicate that economic growth is an important instrument to alleviate multidimensional poverty, but its effect is substantially lower than that on monetary poverty.
Keywords: multidimensional poverty, economic growth, income poverty, econometric analysis, cross-country analysis
No. 287   (Download full text)
Lisa Bogler, Christian Bommer, Cara Ebert, Abhijeet Kumar, SV Subramanian, Malavika A. Subramanyam and Sebastian Vollmer
Effects of a large-scale Participatory Learning and Action Programme in Women’s Groups on Health, Nutrition, Water, Sanitation, and Hygiene: a Cluster-Randomized Controlled Trial in Bihar, India
Evidence from randomized controlled trials suggests that interventions relying on community involvement through a participatory learning and action (PLA) approach can improve health outcomes in resource-poor settings. However, whether PLA-based interventions remain effective after scale-up is only poorly understood. In a cluster-randomized controlled trial in Bihar, India, we assessed whether the PLA approach improved health, nutrition, water, sanitation, and hygiene (HNWASH) outcomes in adults and children when implemented at large scale by a government-supported agency. The intervention consisted of trained female facilitators conducting a series of 20 structured participatory meetings about key HNWASH topics in state-supported women’s groups. In contrast to the strong results of small-scale trials, we do not observe systematic improvements in HNWASH knowledge, attitudes, behaviour or health outcomes but document irregularities in the implementation of the intervention. These findings call for caution when promising public health interventions are transformed into large policy programmes.
Keywords: participatory learning and action; women’s groups; health; nutrition; HNWASH
No. 286   (Download full text)
Nitya Mittal, Marta Parigi and Sebastian Vollmer
Social Cohesion among Syrian und Turkish children, adolescents and young adults in Turkey
Turkey has experienced a large influx of Syrian refugees since the start of Syrian civil war. Integration and social cohesion are thus important questions and priorities of public policy in Turkey. We study social cohesion among young Turkish nationals and Syrian refugees. Our study sample comprises of adolescents and young adults (12-30 years), and children (6-11 years) who participated in events of “The Education Program for Syrian Refugees and Host Communities” (BILSY) project conducted by the German Corporation for International Cooperation (GIZ). Social cohesion among adolescents and young adults is measured by means of three dimensions – sense of belonging, trust, and relational capacity. For children, we use behavioural games to measure two dimensions of social cohesion – altruism and trust. Our results show high social cohesion for both age groups, though lack of reciprocal trust from Turkish nationals is an area of concern. We also evaluate the impact of participation in events of the BILSY project with a randomized design and find that it had no impact on social cohesion.
No. 285   (Download full text)
Cara Ebert, Stephan Klasen and Sebastian Vollmer
Counting Missing Women – A Reconciliation of the `Flow Measure’ and the `Stock Measure’
Existing estimates of the `stock of missing women’ suggest that the problem is mostly concentrated in South and East Asia, and often related to sex-selective abortions and postbirth neglect of female children. In contrast, estimates of yearly excess female deaths, referred to as the `flow of missing women’, suggest that gender bias in mortality is much larger than previously found (about 4 to 5 million excess female deaths per year vs. around 100 million missing women in total), is as severe among adults as it is among children in India, and is larger in Sub-Saharan Africa than in South and East Asia. We argue that these findings largely rely on the choice of the reference standard for sex-specific mortality and an incomplete correction for different disease environments in the flow measure. When alternative reference standards are used, the results of the flow measure can be reconciled with previous findings of the stock measure.
JEL-Codes: J16, D63, I10
Keywords: Missing women, gender bias, mortality, disease, age, Sub-Saharan Africa, China, India
No. 284   (Download full text)
Maja Marcus, Anna Reuter, Lisa Rogge and Sebastian Vollmer
The Effect of SMS Reminders on Health Screening Uptake: A Randomized Experiment in Indonesia
While the burden of non-communicable diseases is rising in low- and middle-income countries, the uptake of screening for these diseases remains low. We conducted a community-based RCT in Indonesia to assess whether personalized and targeted text messages can increase the demand for existing public screening services for diabetes and hypertension in the at-risk population. Our intervention increased screening uptake by approximately 6.6 percentage points compared to the pure control group. Among those, who received and read the messages, the effect size is 17 percentage points. The intervention appears to work through a reminder rather than a knowledge effect. We conclude that text messages can be a cheap and easily scalable tool to reduce testing gaps in a middle-income country setting
JEL-Codes: C93; D83; I12; I15; I18; O15
Keywords: Health, Noncommunicable Diseases, Information, Health Systems, Screening Uptake, mHealth, text message reminder
No. 283   (Download full text)
José Espinoza-Delgado and Jacques Silber
A new inequality-sensitive multidimensional deprivation index (MDI ) for dichotomous variables
In this paper, we propose to use the so-called Sen-Shorrocks poverty index (Shorrocks, 1995) to measure multidimensional deprivation when only dichotomous variables are available to assess deprivation in the various deprivation domains, the most common case in the literature, and introduce a rank-dependent multidimensional poverty index for multiple binary indicators using a counting approach. The resulting multidimensional deprivation index, or MDI for short, also has a nice graphical representation that is derived from the TIP curve of Jenkins and Lambert (1997). The great advantage of measuring multidimensional deprivation using the MDI is that this index is sensitive to inequality and can be fully broken down by deprivation domain, as well as by population subgroups, two features that have far-reaching policy implications and have proven to be important for poverty analysis. An empirical illustration based on deprivation data from four Central American countries (Guatemala, El Salvador, Honduras, and Nicaragua) shows the usefulness of the MDI, as it allows us to conclude, for example, that in each country, education contributes the most (about 30%) to multidimensional poverty.
JEL-Codes: I3; I31; I32; D6; D63; O1
Keywords: Multidimensional poverty analysis; Inequality; Gini index; Dominance
No. 282   (Download full text)
Liza von Grafenstein, Abhijeet Kumar, Santosh Kumar and Sebastian Vollmer
Impacts of Double-Fortified Salt on Anemia and Cognition: Four-Year Follow-up Evidence from a School-Based Nutrition Intervention in India
Long-term follow-up of early childhood health interventions is important for human capital accumulation. We provide experimental evidence on child health and human capital outcomes from the longer-term follow-up of a school-based nutrition intervention in India. Using panel data, we examine the effectiveness of the use of iron and iodine fortified salt in school lunches to reduce anemia among school children. After four years of treatment, treated children, on average, have higher hemoglobin levels and a lower likelihood of anemia relative to the control group. Interestingly, the intervention did not have an impact on cognitive and educational outcomes.
JEL-Codes: C93, I15, I18, O12
Keywords: Child health, double-fortified salt, India, school feeding
No. 281   (Download full text)
Gerda Asmus, Vera Z. Eichenauer, Andreas Fuchs and Bradley Parks
Does India Use Development Finance to Compete with China? A Subnational Analysis
China and India increasingly provide aid and credit to developing countries. This paper explores whether India uses these financial instruments to compete for geopolitical and commercial influence with China (and vice versa). To do so, we build a new geocoded dataset of Indian government-financed projects abroad between 2007 and 2014 and combine it with data on Chinese government-financed projects. Our regression results for 2,333 provinces within 123 countries demonstrate that India’s Exim Bank is significantly more likely to locate a project in a given jurisdiction if China provided government financing there in the previous year. Since this effect is more pronounced in countries where China has made public opinion gains relative to India and where both lenders have a similar export structure, we interpret this as evidence of India competing with China. By contrast, we do not find evidence that China uses official aid or credit to compete with India through co-located projects.
JEL-Codes: F34, F35, F59, H77, H81, O19, O22, P33, R58
Keywords: development finance, foreign aid, official development assistance, official credits, new donors, China, India, geospatial analysis
No. 280   (Download full text)
Sophie Ochmann, Kehinde Elijah Owolabi, Folake Olatunji-David, Niyi Okunlola and Sebastian Vollmer
The impact of grants in combination with school-based management trainings on primary education: A cluster-randomized trial in Northern Nigeria
Grant disbursals and school-based management interventions are expensive interventions that have recently received growing attention from policy-makers despite their mixed success at delivering improvements in educational outcomes in a cost-effective way. This paper reports results from a large-scale, cluster randomized controlled trial that evaluated two components of the Nigerian Partnership for Education Project (NIPEP) in Sokoto state, Nigeria. School-based management committees received both a training and a grant to improve access to and quality of primary school education, especially for girls. One year after implementation, the intervention had no impact on schools’ infrastructure, educational attainment or learning outcome measures. Our results show the importance of understanding the context-specific constraints inhibiting the delivery and uptake of primary school education to avoid spending 100 million USD on a program with no discernable impact.
JEL-Codes: I21, I28, H52, O15
Keywords: Education, school-based management, student learning, impact evaluation, RCT, Nigeria, developing countries
No. 279   (Download full text)
Henrike Sternberg, Janina Isabel Steinert and Sebastian Vollmer
On the Basis of (Mis)Trust? Spousal Trust and Trustworthiness in Household Decision Making: Experimental Evidence from India
This paper examines the role of spousal trust in intra-household decision making through its potential of inciting the creation of information asymmetries in the presence of resource unobservability. We experimentally elicit spousal trust and trustworthiness by means of a binary trust game to assess heterogeneity in saving behavior among lowincome slum dwellers in urban India. 360 married couples were randomly assigned to either a control group, receiving a shared saving device (a lockbox), or a treatment group, receiving a private saving device (a zip-purse) in addition to the lockbox. We find that the supplementary receipt of the private device significantly increased the wife’s savings in couples with a low level of spousal trust. In couples with higher levels of trust, the effect coefficient turned negative. While this heterogeneity is driven by the wife’s mistrust in absence of her husband’s trustworthiness, we provide supportive evidence of an important channel being more effective hiding of the wife’s savings amounts, facilitated through the private saving device. From a policy perspective, our findings have important implications for the design and evaluation of household-based (saving) interventions by offering a novel explanation for existing discrepancies between their observed and intended effects.
JEL-Codes: D14, D15, D91, J12, O12
Keywords: Spousal Trust, Household Decision Making, Saving Interventions, Income Hiding Behavior, Trust Game
No. 278   (Download full text)
Agnieszka Gehringer, Stephan Klasen and Carlos Villalobos
Income Inequality in Europe What role does gender inequality play?
Given the demographic structure of the population of the European countries, this paper examines how gender gaps in earned and non-earned income contribute to explain between household income inequality. We show that this impact depends not only on the existing gender gaps but also on the way how they are jointly distributed across the income distribution. Using the 2010 EU-SILC data, we propose a novel methodology that allows assessing the way in which gender gaps in income per adult, participation, labor earnings, hourly earnings, working hours, and in non-earned income affect inequality levels. We find an empirically discrete relationship between gender gaps and income inequality. Although this relationship tends to work differently across country groups (Western, Southern, Scandinavian, and Former Communist Economies), it is empirically not obvious which types of gender gaps are particularly relevant to determine the inequality level of the income distribution. A remarkable result is that the elimination of the gender gap in non-earned income tends to reduce the income inequality levels in a significant way in almost all European countries. This result suggests that there is a large space for reducing income inequality while improving the gender balance public and private transfers.
JEL-Codes: J16, D63
Keywords: Gender Inequality, Gender Gaps, Household Income Inequality, Gini Coefficient, Microsimulations, Decomposition Technique
No. 277   (Download full text)
José Espinoza-Delgado
Monitoring progress in multi-dimensional poverty reduction: a person-focused and inequality-sensitive approach with evidence from Nicaragua
In this paper, considering the overarching concern of the 2030 sustainable development agenda, “leaving no one behind”, and targets 1.2 and 10.1 of the SDGs, we stress that the mainstream approach to multidimensional poverty measurement in developing countries faces some deficiencies to properly monitor progress in multidimensional poverty reduction, mainly because it uses the household as the unit of identification, ignoring thus intra-household inequalities, and is totally insensitive to inequality among the multi-dimensionally poor individuals, a serious defect of any poverty measure. Consequently, we propose to depart somewhat from the mainstream approach and to adopt a person-focused and inequality-sensitive framework, which is applied to the case of Nicaragua. Overall, we find that in this country, multidimensional poverty decreased between 2001 and 2014, but inequality among the multi-dimensionally poor individuals, an issue that has been ignored by the mainstream approach, increased substantially during that period; in other words, people’s deprivation scores were less unequally distributed in 2001 than in 2014. These findings suggest that progress in multidimensional poverty reduction in Nicaragua seems to be leaving behind the poorest of the poor, challenging thus the overarching concern of the SDGs agenda.
JEL-Codes: I3, I32, D1, D13, D6, D63, O5, O54
Keywords: multi-dimensional poverty, individual-based measures, inequality-sensitive measures, Nicaragua, Latin America and the Caribbean
No. 276   (Download full text)
Cara Ebert, Esther Heesemann and Sebastian Vollmer
Two Interventions to Promote Health and Mental Development in Early Childhood: A Randomized Controlled Trial in Rural India
The lottery of birth draws some children into deprived environments and others into environments where they thrive. In a field experiment in rural India with 10-20 months old children we test two scalable interventions to reduce early disadvantages in health and mental development. We distribute a durable device for home iron fortification of meals, called the Lucky Iron Leaf, and picture books together with a training for caregivers in dialogic reading. We find no significant average impact of either intervention on anemia or mental development. However, we find a cross-productivity of children’s baseline health and the interventions’ effectiveness. Children, who are non-anemic at baseline, improve in receptive language skills by half a standard deviation one year after implementation.
JEL-Codes: D04; I12; I15; J13
Keywords: Early Childhood, Parental Investment, Nutrition, Health Behavior, Human Capital
No. 275   (Download full text)
Archana Dang
Role of Time preferences in Explaining the Burden of Malnutrition: Evidence from Urban India
This study uses a simple theory model to examine how time preferences influence food choices made by individuals, which in turn have implications for their future health. The theory results demonstrate that individuals with higher bias for the present or lower patience will have poorer health outcomes: that is, they will either be underweight (low BMI) or overweight (high BMI). The pathway from time preferences to BMI is through food. To empirically validate these predictions, we use both the nationallyrepresentative India Human Development Survey (IHDS) to estimate a reduced form equation relating savings (a proxy for time preferences) to BMI; and a primary survey of 885 adults conducted in West Delhi. Using quantile regression and SEM estimation, we provide empirical validation for the theory results; namely that time preferences have significant effect on food choices which in turn has a significant impact on BMI. Thus, such psychometric measures are useful in identifying early on those at potential risk of being overweight or obese later as adults.
JEL-Codes: I12; I15; I18; D91; C93
Keywords: BMI, overweight or obese, underweight, time preferences, timeinconsistency, time consistency, present bias, risk and time discounting
No. 274   (Download full text)
Richard Bluhm, Axel Dreher, Andreas Fuchs, Bradley C. Parks, Austin M. Strange and Michael J. Tierney
Chinese Infrastructure Projects and the Diffusion of Economic Activity in Developing Countries
This paper studies the causal effect of transport infrastructure on the spatial concentration of economic activity. Leveraging a new global dataset of geo-located Chinese government-financed projects over the period from 2000 to 2014 together with measures of spatial inequality based on remotely-sensed data, we analyze the effects of transport projects on the spatial distribution of economic activity within and between regions in a large number of developing countries. We find that Chinese-financed transportation projects reduce spatial concentration within but not between regions. In line with land use theory, we document a range of results which are consistent with a relocation of activity from city centers to their immediate periphery. Transport projects decentralize activity particularly strongly in regions that are more urbanized, located closer to the coast, and less developed.
JEL-Codes: F15; F35; R11; R12; P33; O18; O19
Keywords: transport costs; infrastructure; development finance; foreign aid; spatial concentration; China
No. 273   (Download full text)
Eliana Chavarría, Farah Diba, Maja E. Marcus, Marthoenis, Anna Reuter, Lisa Rogge and Sebastian Vollmer
Knowing versus Doing: Protective Health Behavior against COVID-19 in Indonesia
The COVID-19 pandemic shapes the lives of people around the globe – at the same time, people themselves have the power to shape the pandemic. By employing protective health behavior, such as social distancing, hygiene, mask wearing, and appropriate actions when infected, the population can contribute to alleviating the severity of an outbreak. This may be of particular importance whenever health systems or populations are vulnerable to shocks, as is frequently the case in low- and middle-income settings. Therefore, understanding the underlying drivers of protective health behavior against COVID-19 is urgently needed to shape policy responses. We investigate the individual-level determinants of disease knowledge and behavior in the context of the COVID-19 pandemic in Aceh, Indonesia. We use data from a representative population sample of 40-70-year old’s, obtained from telephone interviews between March and May 2020 and face-to-face interviews in 2019. We employ linear probability models that account for a comprehensive set of factors that were previously found to influence knowledge and practice during pandemics. These factors pertain to socioeconomic characteristics, behavioral economic preferences, pandemic knowledge, and informational sources. We find that both knowledge and uptake of protective health behavior are relatively high. Knowledge is the largest explanatory driver of protective health behavior, while socioeconomics and economic preferences are minor determinants. However, knowledge itself is strongly shaped by socioeconomic gradients, being lower in less educated, less wealthy and rural households. Similarly, information sources predict knowledge, and differ significantly by socioeconomic groups.
Keywords: COVID-19; Health Knowledge; Health Behavior; Economic Preferences; Indonesia; South-East Asia
No. 272   (Download full text)
Laura Barros, Liza von Grafenstein, Melanie Grosse, Sarah Khan, Friederike Lenel, Tatiana Orozco Garcia, Marcello Pérez-Alvarez, Manuel Santos Silva, Claudia Schupp and Holger Strulik
The Multidimensional Stephan Klasen Exposure Index: Why Wonder Woman Should Become a Postdoc and Wear White Socks with Sandals
"The job of a `measure' or an `index' is to distill what is particularly relevant for our purpose,and then to focus specifcally on that. . . That is not an easy task." Sen (1989)
And that is precisely our aim. In this paper, a measurement for multidimensional exposure to Stephan Klasen is developed for the frst time ever. We use our exposure measure to test the-oretical predictions on its effects on worldview, life perspectives, and various welfare measures.In our sample, the exposure degree to Stephan Klasen varies signifcantly, with a slight majority identified as "exposed" according to our frst-of-its-kind Multidimensional Stephan Klasen Exposure Index. Our results show that being exposed to Stephan Klasen increases: 1) tolerance overall (and in particular towards macroeconomists, statisticians and people wearing socks with sandals), 2) preference of postdocs over PhDs in times of scarcity, 3) self-perceived wealth, and 4) a person's consciousness towards global problems such as inequality, poverty, and climate change. Furthermore, we show that specifc habits such as signing emails with initials, social media usage, and brushing teeth can partly explain the Stephan Klasen effect. The data allow us to draw some highly relevant policy conclusions. We conclude that while caution on the causal interpretation of our estimates is needed, our exercise confirms years of qualitative evidence which has unequivocally indicated the multidimensional benefits of being exposed to Stephan Klasen.
JEL-Codes: D03; I31
Keywords: Habit formation; Multidimensional index; Role model
No. 271   (Download full text)
Jisu Yoon and Atika Pasha
An alternative strategy to identify deprivations in multidimensional poverty: a partial least squares approach
This study determines data driven weights for the indicators in the multidimensional poverty index (MPI), based on partial least squares (PLS), using income as the outcome variable. Consequently, the resulting MPI is particularly useful to income related policy and research questions. An innovative data driven procedure is proposed to determine the first cut-offs of the MPI inside of the PLS algorithm, which provides an alternative to the first cut-offs based on researchers’ judgement. Another adjustment to the PLS procedure enables the weights to respect the existing practice in the MPI literature, that health, education and living standard dimension are equally important. The new MPI can consider heterogeneous observations by means of interaction terms in the weighting structure. Using this approach, a new MPI is created considering the additional deprivation of the black population in South Africa, compared to other racial groups. This MPI shows different weights and first cut-offs than the old MPI. It suggests that the first cut-offs for the year of education indicator needs to be 12 years instead of 5 years to have a practical relevance for the South African context. Additionally, the weight of assets is important and electricity less so. The black population shows higher deprivation for all considered deprivation indicators within the MPI using interaction terms.
No. 270   (Download full text)
Janina Isabel Steinert, Rucha Vasumati Satish, Felix Stips and Sebastian Vollmer
Commitment or Concealment? Impacts and Use of a Portable Saving Device: Evidence from a Field Experiment in Urban India
We study the impact of a portable "soft" commitment device on the financial behavior of low-income slum dwellers in Maharashtra, India. 1525 individuals were randomly allocated to receiving either a zip purse and a lockbox (treatment arm) or a lockbox only (control arm). Based on self-reported measures and hand counts of money held in the distributed saving devices, we document an 81% increase in total savings in the treatment group. We do not find significant reductions in temptation spending, thus suggesting that increases in savings were not primarily realized through improvements in self-control. Instead, we suggest that reduced sharing obligations are driving the effect. In additional analyses, we document a 35% decrease in past-month transferst of cash to other household members. Hence, our findings suggest that saving can be more effectively promoted by alleviating access-related rather than behavior-related constraints and by giving women access to a saving device of their own.
JEL-Codes: D14; D15; D91; I31; O12; O16
Keywords: Saving; Temptation Spending; Commitment Device; RCT
No. 269   (Download full text)
Kai Gehring, Sarah Langlotz and Stefan Kienberger
Stimulant or depressant? Resource-related income shocks and conflict
We provide evidence on the mechanisms linking resource-related income shocks to con-
flict, focusing specifically on illegal crops. We hypothesize that the degree of group compe-
tition over resources and the extent of law enforcement explain whether opportunity cost or contest effects dominate. Combining temporal variation in international drug prices with spa- tial variation in the suitability to produce opium, we show that in Afghanistan higher prices
increase household living standards, and reduce conflict. Using georeferenced data on the drug
production network and Taliban versus pro-government control highlights the importance of opportunity cost effects, and reveals heterogeneous effects in line with our theory.
JEL-Codes: D74; K42; O13; O53; Q1
Keywords: Resources; resource curse; conflict; drugs; illicit economy; illegality; geography of conflict; Afghanistan; Taliban
No. 268   (Download full text)
Ute Rink and Laura Barros
Spending or Saving? Female empowerment and financial decisions in a matrilineal society
This paper looks at household consumption and financial decisions made in a matrilineal society where women are traditionally the household financial managers. This culture was strongly altered by the British in the mid-19th century through Christian missionaries who proclaimed that the role of the household manager is ascribed to men and not to women. Using self-collected data of 650 individuals from the matrilineal state of Meghalaya, India, and exploring household’s distance to the historical Protestant base in Cherrapunji, we find evidence that household where women are empowered spend more on welfare enhancing goods, such as food, but are less likely to have savings left at the end of the month. Our paper contributes to the literature by investigating how a historical shift in female empowerment, mostly driven by cultural norms, can have long-term effects on financial decisions.
JEL-Codes: I3; O1; R20; Z1
Keywords: female empowerment, matrilineality, culture, savings, India, Protestant missions
No. 267   (Download full text)
Jan Priebe, Ute Rink and Henry Stemmler
Health shocks and risk aversion: Panel and experimental evidence from Vietnam
This paper looks at individual risk behavior and disability in Vietnam, where many households live with a disabled family member. Due to the Vietnam war, disability is a common phenomenon and shapes individuals’ daily life and decision making. Using longitudinal data of 2200 households in Vietnam and an instrumental variable strategy, we show that individuals who live with a disabled family member are more risk averse than others. In addition we employ field experiments and psychological primes to elicit risk and loss behavior of individuals living in the Vietnam province Ha-Thinh. The experimental results, underpin our panel results. We show in addition that a negative recollection of health issues, leads to a lower risk attitude of individuals who do not live with a disabled family member and that individuals who live with a disabled family member are less loss averse. Our findings are causal and contribute to existing studies showing that households who are characterized by higher backward risks are more risk averse than others.
JEL-Codes: I14; D1; Z1
Keywords: risk, disability, Vietnam
No. 266   (Download full text)
Christian Bommer, Axel Dreher and Marcello Perez-Alvarez
Home bias in humanitarian aid: The role of regional favoritism in the allocation of international disaster relief
Natural disasters represent a major challenge for human welfare across the globe. Given the prominent role of international humanitarian aid in alleviating human suffering, the investigation of its determinants is of paramount importance. While existing studies show its allocation to be influenced by donors’ foreign policy considerations, domestic political factors within recipient countries have not been systematically explored. This paper addresses this important research gap by investigating whether regional favoritism shapes humanitarian aid flows. Using a rich and unique dataset derived from reports of the Office of US Foreign Disaster Assistance (OFDA), we show that substantially larger amounts of aid are disbursed when natural disasters hit the birth region of the recipient countries’ political leader. While we find no evidence that US commercial or political interests affect the size of this home bias, the bias is stronger in countries with a weaker bureaucracy and governance, suggesting the absence of effective safeguards in the allocation of aid.
JEL-Codes: H84
Keywords: humanitarian aid; natural disasters; regional favoritism; birth regions
No. 265   (Download full text)
Marion Krämer, Santosh Kumar and Sebastian Vollmer
Anemia, diet, and cognitive development: Impact of health information on diet quality and child nutrition in rural India
Lack of information about health risks may limit adoption of improved nutritional and healthy behavior. This paper studies the effect of nutrition information intervention on household dietary behavior, child health, and cognitive ability of children in rural India. Using experimental data and regression discontinuity design that exploits the exogenous cutoff of hemoglobin level for anemia, we find statistically insignificant treatment effects on dietary improvements, child health, and cognitive outcomes of children. Our findings suggest that nutrition information alone, even when parents are informed about the anemia status of their children, may not promote healthy behavior and factors other than information might constrain households in making nutritional investments for their children.
JEL-Codes: I12; I15; I18; O12
Keywords: Health information; Child health; Anemia; Cognition; Regression discontinuity; India
No. 264   (Download full text)
Cara Ebert and Sebastian Vollmer
Child-specific son preference, birth order and cognitive skills in early childhood
We propose an innovative child-specific measure of son preference. It allows to explicitly address birth order and sex composition effects. We first establish that, when using this child-specific measure, son preference is more common among later born children and in families with fewer sons. We then study the son preference-specific girl-penalty in early cognitive and non-cognitive skills. Son preferences have adverse effects on cognitive and language skills of two-year-old girls at higher birth orders, for girls with sisters and for girls of mothers with a high number of desired sons.
JEL-Codes: I12; J13; J16; J24; O15
Keywords: son preferences; gender discrimination; early childhood; cognitive and non-cognitive skills
No. 263   (Download full text)
Stephan Klasen
From 'MeToo' to Boko Haram: A survey of levels and trends of gender inequality in the world
This survey argues that after decades of continuous progress in reducing gender inequality in developing and developed countries, since about 2000, there has been an unexpected stagnation and regress in many dimensions of gender inequality in many parts of the world. This is most visible in labor markets, but also visible across a range of dimensions of gender inequality. After documenting these developments, the paper suggests causes for this change before suggesting policies to tackle remaining gender inequalities more effectively.
JEL-Codes: J16; J71; O15
Keywords: gender inequality; health; education; labor markets; developing countries
No. 262   (Download full text)
Marcello Perez-Alvarez and Marta Favara
Maternal Age and Offspring Human Capital in India
Early motherhood remains a widespread phenomenon in low- and middle-income countries (LMICs). While the consequences of early motherhood for the mother have been extensively investigated, the impact on their children is severely understudied, especially in LMICs, which host 95% of teen births globally (WHO, 2014). Using panel and sibling data from India, this paper investigates the effect of early maternal age on offspring human capital development in terms of health and cognition, and relies on mother fixed effects to allow for household and mother unobserved heterogeneity. Furthermore, this paper explores the evolution of these effects over time during childhood and early adolescence for the first time. Results indicate that early maternal age has an overall detrimental effect on offspring health and cognition. We show that children born to early mothers are shorter for their age and perform poorer in the math test. Interestingly, the effect on child’s heath is observed at early ages and weakens over time, while the cognition effect surges only in early adolescence. The analysis on heterogeneous effects suggests that children and in particular girls born to very young mothers are worst off. The transmission channel analysis tentatively hints at some behavioral channels driving the relationships of interest and documents a positive (and modest) association between height-for-age and subsequent math performance. Overall, our results support both restorative policies assisting children born to early mothers and preventive policies tackling early pregnancy.
JEL-Codes: I15; I25; J13; J16; O15
Keywords: adolescent motherhood; human capital; child development; cognition; health; nutrition; gender; parenting
No. 261   (Download full text)
Lennart Kaplan, Jana Kuhnt, Katharina Richert and Sebastian Vollmer
What Explains the Uptake of Development Interventions?
A crucial prerequisite for the success of development interventions is their uptake in the targeted population. We use the setup of an intervention conducted in Indonesia and Pakistan to investigate dis-/incentivizing factors for program’s uptake and support. Making use of a framework grounded in psychological theory, “The Theory of Planned Behaviour,” we consider three determinants for intervention uptake: personal attitudes, the social influence of important others and the perceived ease of intervention use. As most development interventions are characterized by a cooperation among local and international agents, we investigate further a potentially important dis-/incentivizing factor: the salience of the implementer’s background. Our findings show that attitudes, important others and ease of intervention use are indeed associated with increased uptake in our two culturally different settings. Conducting a framed field experiment in Indonesia we show further that the study population in the Acehnese context exhibits higher levels of support for the project if the participation of international actors is highlighted. We find that previous experience with the respective actor is pivotal. To strengthen supportive behaviour by the target population for locally led projects, it is essential to strengthen local capabilities to create positive experiences. Hence, our results encourage development research and cooperation, first, to consider personal attitudes, the social influence of important others and the perceived ease of intervention use in the design of interventions in order to increase uptake. Second, depending on the country context, implementers should consider the previous experience with and attitude towards partners – either local or international – when aiming to achieve behavioural change.
Keywords: Theory of Planned Behaviour; Framed Field Experiment; Implementation Research; Public Health
No. 260   (Download full text)
Caroline Dotter and Stephan Klasen
An absolute multidimensional poverty measure in the functioning space (and relative measure in the resource space): An Illustration using Indian data
In this paper we develop a multidimensional poverty measure that attempts to capture absolute poverty in the functioning space. As suggested by Sen, if the measure aims to be absolute in the functioning space, it needs to be relative in the resource space. To generate a relative measure, this measure adapts the poverty cut-off in resource-related indicators in a multidimensional poverty measure to prevailing standards in a region. As illustration, this poverty measure utilizes the Indian Demographic and Health Survey (DHS) and is based on UNDP’s global Multidimensional Poverty Index (MPI). Similar to the global MPI, we apply the Alkire-Foster dual cut-off approach (Alkire and Foster, 2011a) and broadly follow the global MPI in the choice of indicators, weights, and overall cut-off. However, adaptable indicator thresholds are considered when appropriate. We argue that global MPI indicators in the health dimension are not open to a relative assessment, as they reflect specific health functionings (i.e. being free from premature mortality and being well nourished). In the education and standard of living dimensions, we set indicator thresholds at the median of the reference population, while experimenting with different reference populations. Empirically we find that the overall ranking of poverty in India does not change using our relative MPI, but the differentials in poverty are substantially smaller between states and rural and urban areas, also depending on the choice of the reference population.
Keywords: relative poverty, multidimensional poverty, India
No. 259   (Download full text)
Anjali Purushotham, Nitya Mittal, B.C. Ashwini, K.B. Umesh, Stephan von Cramon-Taubadel and Sebastian Vollmer
A quantile regression analysis of dietary diversity and anthropometric outcomes among children and women in the rural-urban interface of India
Based on a primary survey conducted in the rural-urban interface of Bangalore, this study contributes to the understanding of the relationship between dietary diversity (DD) and anthropometric outcomes of young children (6 months – 5 years) (measured by weight-for-age (WAZ), weight-for-height (WHZ) and height-for-age (HAZ) z-scores), school-aged children (6 – 14 years) (measured by Body Mass Index (BMI) z-scores and HAZ scores) and women (15 years and above) (measured by BMI). We examine this association not just at the mean, but also at different points of the conditional distribution of anthropometric outcomes using the quantile regression (QR) method. We use six different measures of individual- and household-level DD to check whether the estimated association depends on the choice of the metric used. Our results show that increased DD is associated with higher z-scores at the lower quantiles of the WAZ distribution. In addition, we find a positive association between DD and upper quantiles of WHZ and BMI z-scores of young and school-aged children, respectively. This reflects an adverse effect of increased DD on anthropometric outcomes among overweight/obese children. Except for these, no other associations at any other quantile for any anthropometric outcome of young children, school-aged children, and women are consistently significant for various measures of DD. Our results suggest that policies that focus on improving DD might not be effective in improving (most) anthropometric outcomes especially in areas facing multiple burdens of malnutrition.
Keywords: Dietary diversity, Anthropometric outcomes, Quantile regression, India, Urbanization, Rural-urban interface
No. 258   (Download full text)
Johannes Bettin and Meike Wollni
Livelihood Environmentalism to Tunnel a Psychological Environmental Kuznets Curve
In the Global South, livelihood environmentalism of the poor contrasts with alleged absence of environmental concern in the emerging middle classes. We present survey evidence from India suggesting that individuals abandoning farming and advancing to middle income still retain influence of past farming, or nature experience. Income and trait heterogeneity of impact on environmental concern then cause ‘tunneling’ of a preference-driven Environmental Kuznets Curve.
Keywords: Environmental Kuznets Curve; Tunneling; Environmentalism of the Poor; Nature Experience
No. 257   (Download full text)
Linda Steinhübel, Johannes Wegmann and Oliver Mußhoff
Digging deep and running dry – the adoption of borewell technology in the face of climate change and urbanization
In this study, we analyze the effects of household location and weather variability on the adoption of borewell technology in the rural-urban interface of Bangalore, India. Understanding these effects can help design policies that ensure smallholders‘ livelihoods and the functioning of ecosystems in drought-prone areas. Our analysis is based on a primary data set collected in 2016 and 2017 covering 574 farm households. With a semiparametric hazard rate model we analyze determinants of the borewell adoption rate. We incorporate different rainfall variables and a two-dimensional geo-spline to capture the effects of household location. Results show that more rain can lead to successful seasons that generate the capital needed for investment in borewell technology. However, we observe ad hoc adoption decisions to prevent harvest loss when rainfalls are low or missing. We also find that proximity to markets accelerates adoption rates. Further, we find that off-farm employment to decreases adoption rates.
Keywords: Urbanization; climate change; borewell technology; India; semiparametric duration models
No. 256   (Download full text)
Linda Steinhübel
Somewhere in between towns, markets, and neighbors – Agricultural transition in the rural-urban interface of Bangalore, India
This paper presents a flexible conceptual and methodological framework to model the dynamics of agricultural transition in the increasingly complex rural-urban interfaces of large cities. Our empirical analysis is based on data of a household survey conducted in the rural-urban interface of Bangalore, India. In our analysis we follow a polycentric perspective of urbanization and introduce a two-dimensional variable to measure its effects. Furthermore, we accommodate high input and crop diversity by applying a Structured Additive Regression (STAR) model. Our results show that satellite towns and road infrastructure are the main channels by which urbanization drives agricultural transition. Access to satellite towns appears to be more strongly associated with the modernization of smallholders’ management systems than access to the urban center of Bangalore. Our results suggest that more flexible models are necessary to understand the dynamics of agricultural transition in the surroundings of fastgrowing large towns, the kind of town expected to be dominating the urbanization trend in the coming decades.
JEL-Codes: Q12; R11; C14
Keywords: Agricultural change; Urbanization; Structured Additive Regression; Geosplines; India
No. 255   (Download full text)
Anna Minasyan, Juliane Zenker, Stephan Klasen and Sebastian Vollmer
Educational Gender Gaps and Economic Growth: A Systematic Review and Meta-Regression Analysis
We conduct a systematic review and meta-analysis of the empirical literature on the impact of gender inequality in education on per capita economic growth, including cross-country, time series, and sub-national growth regressions. Studies using male and female education as separate covariates show a larger effect of female than male education on growth, except when an arguably problematic regression specification popularized by Barro and co-authors is used. We conduct a meta-regression analysis for studies that use the female-male ratio of education as explanatory variable. There we find evidence for a positive and statistically significant relationship between gender equality in education and growth based on 216 estimates from 17 such studies. We find that the average partial correlation coefficient between economic growth and the ratio of female over male education is 0.25, which is a moderate effect. The effect does not appear to be influenced by publication bias, it increases when one controls for initial education levels and social/institutional controls, while it falls with the use of fixed effects, the inclusion of economic controls, and the share of female authors.
JEL-Codes: O47; I24; I25
Keywords: Gender gaps; Education; Growth; Systematic review; Meta-analysis
No. 254   (Download full text)
Stephan Klasen and Sebastian Vollmer
A Flow Measure of Missing Women by Age and Disease
The existing literature on 'missing women' has suggested that the problem is mostly concentrated in India and China, and mostly related to sex-selective abortions and post-birth neglect of female children. In a recent paper in the Review of Economic Studies, Anderson and Ray (AR) develop a new ‘flow’ measure of missing women in developing countries by comparing actual age-sex-specific mortality rates with 'expected' ones. Contrary to the existing literature on missing women, they, and the World Bank which subsequently followed this method, find that gender bias in mortality is much larger than previously found (4-5 million excess female deaths per year), is as severe among adults as it is among children in India, is larger in Sub-Saharan Africa than in China and India, and existed on a large scale in the US around 1900. We first show that the data for Sub-Saharan Africa used by AR are generated by simulations in ways that deliver the findings on Africa (and the US in 1900) essentially by construction. We also show that the findings are entirely dependent on a highly implausible reference standard for sex-specific mortality from rich countries that is inappropriately applied to settings in developing countries; the attempt to control for differences in the disease environment does not correct for this problem and leads to implausible results. When a more appropriate reference standard is used, most of the new findings of AR regarding the regional and age composition of missing women disappear.
JEL-Codes: J16; D63; I10
Keywords: Missing women; gender bias; mortality; disease; age; Sub-Saharan Africa; China; India
No. 253   (Download full text)
Stephan Klasen, Janneke Pieters, Manuel Santos Silva and Le Thi Ngoc Tu
What Drives Female Labor Force Participation? Comparable Micro-level Evidence from Eight Developing and Emerging Economies
We investigate the micro-level determinants of labor force participation of urban married women in eight low- and middle-income economies: Bolivia, Brazil, India, Indonesia, Jordan, South Africa, Tanzania, and Vietnam. In order to understand what drives changes and differences in participation rates since the early 2000s, we build a unified empirical framework that allows for comparative analyses across time and space. We find that the coefficients of women’s characteristics differ substantially across countries, and this explains most of the between-country differences in participation rates. In particular, the relationship between a woman’s education and her participation in the labor force varies from being positive and linear (Brazil and South Africa) to being U- or J-shaped (India, Jordan, and Indonesia), or a mixture of both (Bolivia, Vietnam, and Tanzania). Overall, the economic, social, and institutional constraints that shape women’s labor force participation remain largely country-specific. Nonetheless, rising education levels and declining fertility consistently increased participation rates, while rising household incomes contributed negatively in relatively poorer countries, suggesting that a substantial share of women work out of economic necessity.
JEL-Codes: J20; J16; I25; O15
Keywords: female labor force participation; gender; labor markets; development
No. 252   (Download full text)
Manuel Santos Silva and Stephan Klasen
Gender Inequality as a Barrier to Economic Growth: a Review of the Theoretical Literature
In this article, we survey the theoretical literature investigating the role of gender inequality in economic development. The vast majority of theories reviewed suggest that gender inequality is a barrier to development, particularly over the long run. Among the many plausible mechanisms through which inequality between men and women affects the aggregate economy, the role of women for fertility decisions and human capital investments is particularly important. Yet, we believe the body of theories could be expanded in several directions.
JEL-Codes: E20; J13; J16; J24; O11; O41
Keywords: Gender equality; Economic growth; Fertility; Human capital; Comparative development
No. 251   (Download full text)
Debosree Banerjee and Stephan Klasen
Mothers’ status, food price shock and Child Nutrition in Karnataka
Women’s empowerment is increasingly put forth as a mean to promote child development. However, little empirical research has evaluated the pathways of women empowerment leading to it. This paper uses a household survey conducted in Karnataka, South India to explore the impact of female status on child anthropometric indicators aged below 11 years when food price shock occurs. We distinguish between exogenous status and endogenous status of women and argue that both are important to capture intrahousehold dimensions of women’s empowerment. Endogenous status in our study is measured by mothers’ work status and her time spent with children. Exogenous status is captured by a composite index constructed with parental educational gap, mother’s age at marriage and years of marriage. Our finding suggests that endogenous status, measured by time reduces incidence of underweight, wasting and improves BMI significantly, but it is insignificant to affect weight for age scores. In the case of weight for age scores exogenous status becomes a significant determinant. Similarly, work which is another proxy for endogenous status has a positive impact on BMI and helps reducing incidence of wasting, but when considered together with time and exogenous status the significance vanishes. Time still remains significant to impact BMI, underweight and wasting. We therefore conclude that mothers’ status, measured by time is more important to improve child nutritional status. Finally, our result suggests that the joint effect of time and exogenous variables are particularly crucial to improve child nutrition in households that are affected by a shock.
JEL-Codes: I12; J13; J22; J13
Keywords: Mothers’ time and work; Child nutrition; Food price shock
No. 250   (Download full text)
Debosree Banerjee and Stephan Klasen
Intrahousehold allocations by mothers to children: The role of observability
In this article we analyse the impact of spousal preference expectations on mothers’ willingness to invest in children’s food/nutrition and health/medical expenses. We use a survey conducted in Karnataka, South India, where women with children were asked to state their investment preference in child food and health corresponding to three endowment levels. Alongside, we also attempted to derive their expectations about spousal relative investment choices. We find that if mothers are able to elicit expectations about spousal preference, their own preferences remain unaffected, whereas, if expectation elicitation is impossible, female investments in children reduce significantly. We argue that in the absence of information sharing, uncertainty is created which decreases cooperation by mothers by reducing their willingness to invest in children, especially in girls and increasing their precautionary savings. These results remain consistent across the all endowments. Our study is particularly of relevance for policies that aim to alleviate poverty and improve child human capital accumulation with cash transfer policies. It also suggests that in a noncooperative set up, where household members do not share their financial information, resources tend to be under-allocated in household public goods such as children.
JEL-Codes: D13; D81; D82; J12
Keywords: Incomplete information; Uncertainty; Noncooperation; Itrahousehold allocation
No. 249   (Download full text)
Sarah Khan and Stephan Klasen
Female employment and Spousal abuse: A parallel cross-country analysis of 35 developing countries
This study explores how domestic violence and female employment interact and impact female economic empowerment in developing economies. Using micro data data from 35 countries (Central Africa, West Africa, East Africa, South Asia, Central Asia, and Southeast Asia, Middle East & North Africa, and Latin America), the effect of women’s employment on reported domestic violence is estimated. An instrumental Variables technique is used to correct for the potential endogeneity of women’s employment, which might bias the relationship between employment and domestic violence. The study also attempts to do an in-depth analyses on the linkage between types of domestic violence and break down results by region. Without taking endogeneity into account, the estimation suggests that most woman’s employment increases violence by her spouse, while formal sector work reduces it. After controlling for endogeneity, the results are confirmed for the full sample. Breaking down the estimation by region and controlling for endogeneity shows, however, that women’s employment decreases domestic violence in most regions except Latin America and East Africa. Differentiating by employment type shows that women working in agricultural occupations experience more marital abuse.
JEL-Codes: J16; J21
Keywords: Domestic violence; Female Employment; Developing countries
No. 248   (Download full text)
Soham Sahoo and Stephan Klasen
Gender Segregation in Education and Its Implications for Labour Market Outcomes: Evidence from India
This paper investigates gender-based segregation across different fields of study at the postsecondary level of schooling, and how that affects subsequent labour market outcomes of men and women. Using a nationally representative longitudinal data-set from India, we provide evidence that there is substantial intra-household gender disparity in the choice of study stream at the higher-secondary level of education. A household fixed effects regression shows that girls are 20 percentage points less likely than boys to study in technical streams, namely science (STEM) and commerce, vis-à-vis arts or humanities. This gender disparity is not driven by gender specific differences in mathematical ability, as the gap remains large and significant even after controlling for individuals’ past test scores. Our further analysis on working-age individuals suggests that technical stream choice at higher-secondary level significantly affects the gender gap in labour market outcomes in adult life, including labour force participation, nature of employment, and earnings. Thus our findings reveal how gender disparity in economic outcomes at a later stage in the life-course is affected by gendered trajectories set earlier in life, especially at the school level.
JEL-Codes: I20; J16; J24
Keywords: Post-secondary education; STEM; Gender; Labour market; India
No. 247   (Download full text)
Marion Krämer, Santosh Kumar and Sebastian Vollmer
Improving Children Health and Cognition: Evidence from School-Based Nutrition Intervention in India
We present experimental evidence on the impact of delivering double-fortified salt (DFS), salt fortified with iron and iodine, through the Indian school-feeding program called “midday meal” on anemia, cognition and math and reading outcomes of primary school children. We conducted a field experiment that randomly provided one-year supply of DFS at a subsidized price to public primary schools in one of the poorest regions of India. The DFS treatment had significantly positive impacts on hemoglobin levels and reduced the prevalence of any form of anemia by 9.3 percentage points (or about 20 percent) but these health gains did not translate into statistically significant impacts on cognition and test scores. While exploring the heterogeneity in effects, we find that treatment had statistically significant gains in anemia and test scores among children with higher treatment compliance. We further estimate that the intervention was very cost effective and can potentially be scaled up rather easily.
Keywords: Double-fortified salt; education; anemia; school feeding; India and randomized controlled trial
No. 246   (Download full text)
Stephan Klasen
What explains uneven Female Labor Force Participation Levels and Trends in Developing Countries?
Rapid fertility decline, a strong expansion of female education, and favorable economic conditions should have promoted female labor force participation in developing countries. Yet trends in female labor force participation (FLFP) have been quite heterogeneous, rising strongly in Latin America, stagnating in many other regions, while improvements were modest in the Middle East and female participation even fell in South Asia. These trends are inconsistent with secular theories such as the Feminization U Hypothesis but point to an interplay of initial conditions, economic structure, structural change, and persistent gender norms and values. We find that differences in levels are heavily affected by long-standing differences in economic structure that circumscribe women's economic opportunities. Shocks can bring about drastic changes with the experience of socialism being the most important shock to women's labor force participation. Trends are heavily affected by how independent women's labor force participation is of household economic conditions, how jobs deemed appropriate for more educated women are growing relative to the supply of more educated women, and how much women are able to break down occupational barriers within the sectors where employed women predominantly work.
JEL-Codes: J22; J16
Keywords: female labor force participation; gender; developing countries; feminization U
No. 245   (Download full text)
Sophia Kan and Stephan Klasen
Evaluating UPE in Uganda: school fee abolition and educational outcomes
This paper analyzes the effect of lifting primary school fees on educational attainment in Uganda. After the abolishment of school fees in 1997, the enrollment rate more than doubled. Two decades later, however, we know little about the effect of the policy on educational attainment. With recent data on eight cohorts exposed to free education, we analyze the impact of the policy on years of completed primary school, completion of primary school, and transitioning to secondary school. We use a straightforward regression analysis with cohort dummies and household fixed effects to control for unobserved heterogeneity. We find that lifting school fees had no effect on the years of primary school achievement and the likelihood of primary school completion. We find some weak evidence that the likelihood of those who completed primary education to start secondary school increased after UPE.
JEL-Codes: I21; I28; O55
Keywords: education; school fees; Uganda; UPE
No. 244   (Download full text)
Stephan Klasen
The impact of gender inequality on economic performance in developing Countries
Despite substantial progress, gender gaps persist in many developing countries. Since the 1990s, a literature has emerged arguing that these gaps are not only inequitable, but also reduce economic performance. This review finds that, first, it is methodologically difficult to determine reliable effects of gender gaps on economic performance. Second, accounting studies that calculate how much larger GDP would be if gender gaps in employment disappeared, vastly overestimate likely effects. Third, the theoretical literature has generated important insights on mechanisms linking gender gaps to economic performance. Fourth, systematic reviews of the cross-country evidence robustly show that lowering gender gaps in education leads to higher economic performance, while the literature on the impact of other gaps is much more limited. Fifth, there is accumulating micro evidence on how reducing particular gender gaps at the level of households, farms, or firms can improve economic performance in particular contexts, with robust results in some areas, and less clear evidence in others.
JEL-Codes: J16; O4
Keywords: gender inequality; economic growth; developing countries; systematic reviews
No. 243   (Download full text)
Jana Kuhnt, Ramona Rischke, Anda David and Tobias Lechtenfeld
Social cohesion in times of forced displacement – the case of young people in Jordan
Countries hosting large numbers of refugees often face immense challenges in providing sufficient economic opportunities, and access to basic services. Competition over limited resources can lead to tension and conflict between host and refugee populations. Increases in social tensions have typically been associated with limited social cohesion and inclusion. Jordan is a case in point: with a population of 7.6 million, the country was hosting more than 650,000 Syrian refugees in 2016, most of whom lived in urban areas. To this end, this article explores perceptions of social cohesion among youth (age 18-35) as well as short-term changes over the past two years. Using novel data from an online survey, the article presents evidence of a modest decrease in overall social cohesion in Jordan. At the same time however, young people want to be actors of change and have a clear desire for more civic participation in their communities. Frequently mentioned barriers are a lack of public spaces and limited knowledge regarding possibilities to more actively engage. The results further point to opportunities to strengthen social cohesion between host and refugee youth by supporting joint programs by age and interest, as identities of young people are less driven by nationality, ethnicity or religion, and primarily by age group and interest. While quite encouraging, these findings underscore the importance of further monitoring changes in social cohesion over time.
No. 242   (Download full text)
Sebastian Vollmer and Juditha Wójcik
The long-term consequences of the global 1918 influenza pandemic: A systematic analysis of 117 IPUMS international census data sets
Several country-level studies, including a prominent one for the United States, have identified long-term effects of in-utero exposure to the 1918 influenza pandemic (also known as the Spanish Flu) on economic outcomes in adulthood. In-utero conditions are theoretically linked to adult health and socioeconomic status through the fetal origins or Barker hypothesis. Historical exposure to the Spanish Flu provides a natural experiment to test this hypothesis. Although the Spanish Flu was a global phenomenon, with around 500 million people infected worldwide, there exists no comprehensive global study on its long-term economic effects. We attempt to close this gap by systematically analyzing 117 Census data sets provided by IPUMS International. We do not find consistent global long-term effects of influenza exposure on education, employment and disability outcomes. A series of robustness checks does not alter this conclusion. Our findings indicate that the existing evidence on long-term economic effects of the Spanish Flu is likely a consequence of publication bias.
No. 241   (Download full text)
Manuel Santos Silva, Amy C. Alexander, Stephan Klasen and Christian Welzel
The Roots of Female Emancipation: From Perennial Cool Water via Pre-industrial Late Marriages to Post-industrial Gender Equality
Reviewing the burgeoning literature on the deep historic roots of gender inequality, we theorize and provide evidence for an overlooked trajectory that (1) originates in a climatic configuration called the “Cool Water” (CW-) condition, from where the trajectory leads to (2) late female marriages in pre-industrial times, which eventually pave the way towards (3) various gender-egalitarian outcomes today. The CW-condition is a specific climatic configuration that combines periodically frosty winters with mildly warm summers under the ubiquitous accessibility of fresh water. The CW-condition is most prevalent in Northwestern Europe and its former colonial offshoots and embodies opportunity endowments that significantly reduce fertility pressures on women, which favored late female marriages already in the pre-industrial era. The resulting family and household patterns placed women into a better position to struggle for more gender equality during the subsequent transitions toward the industrial and post-industrial stages of development. Hence, enduring territorial differences in the CW-condition predict differences in pre-industrial female marriage ages, which in turn explain differences in gender equality today. The role of CW retains significance along this causal chain after controlling for other ‘deep drivers’ of gender inequality that have been discussed in the literature. We summarize these findings in a “seed theory of female emancipation” and conclude with a discussion of its broader implications.
JEL-Codes: J12; J16; N30; O15
Keywords: Cool water; Economic development; Gender equality; Historic drivers; Seed theory
No. 240   (Download full text)
Maike Hohberg, Katja Landau, Thomas Kneib, Stephan Klasen and Walter Zucchini
Vulnerability to poverty revisited: flexible modeling and better predictive performance
This paper analyzes several modifications to improve a simple measure of vulnerability as expected poverty. Firstly, in order to model income, we apply distributional regression relating potentially each parameter of the conditional income distribution to the covariates. Secondly, we determine the vulnerability cutoff endogenously instead of defining a household as vulnerable if its probability of being poor in the next period is larger than 0.5. For this purpose, we employ the receiver operating characteristic curve that is able to consider prerequisites according to a particular targeting mechanism. Using long-term panel data from Germany, we build both mean and distributional regression models with the established 0.5 probability cutoff and our vulnerability cutoff. We find that our new cutoff considerably increases predictive performance. Placing the income regression model into the distributional regression framework does not improve predictions further but has the advantage of a coherent model where parameters are estimated simultaneously replacing the original three step estimation approach.
JEL-Codes: C13; C18; C52; I32
Keywords: vulnerability to poverty; distributional regression; generalized additive model for location; scale and shape; receiver operating characteristic curve
No. 239   (Download full text)
Sudipa Sarkar, Soham Sahoo and Stephan Klasen
Employment Transitions of Women in India: A Panel Analysis
This study analyses employment transitions of working-age women in India. The puzzling issue of low labour force participation despite substantial economic growth, strong fertility decline and expanding female education in India has been studied in the recent literature. However, no study so far has looked into the dynamics of employment in terms of labour force entry and exit in this context. Using a nationally representative panel dataset, we show that women are not only participating less in the labour force, but also dropping out at an alarming rate. We estimate an endogenous switching model that corrects for selection bias due to initial employment and panel attrition, to investigate the determinants of women’s entry into and exit from employment. We find that an increase in income of other members of the household leads to lower entry and higher exit probabilities of women. This income effect persists even after controlling for the dynamics of asset holding of the household. Along with the effects of caste and religion, this result reveals the importance of cultural and economic factors in explaining the declining workforce participation of women in India. We also explore other individual and household level determinants of women’s employment transitions. Moreover, we find that a large public workfare program significantly reduces women’s exit from the labour force.
JEL-Codes: J21; J16; O15
Keywords: Female labour force participation; Employment transition; Panel data; Sample selection; Attrition; India
No. 238   (Download full text)
Shubha Chakravarty, Mattias Lundberg, Plamen Nikolov and Juliane Zenker
The Value of Skill Training Programs for Self-Employment, Entrepreneurship and Non-Cognitive Traits. Evidence from a Regression Discontinuity Design
Using a “fuzzy” regression discontinuity design, we examine the short-run impacts of a vocational training program on self-employment, new business plans, entry into entrepreneurship and entrepreneurial traits using data from the Nepal Employment Fund training program, which funds training workshops offered to eligible individuals. We find striking positive effects of training on self-employment among transformative entrepreneurs. Among individuals who our analysis identifies as transformative entrepreneurs, training provision increases the likelihood of self-employment by 0.21, or equivalent to a 50 percent increase in self-employment from the baseline average. We find impact differences by gender: self-employment increase by 21 percent among women and we detect no impacts among men. The program also generated sizable improvements in self-reported self-regulation and a decreased frequency of anxiety about future income. The female sub-sample and the most labor-intensive training types primarily drive the positive program impacts.
JEL-Codes: J24; M53; L26; O15
Keywords: Regression Discontinuity Design; Human Capital; Labor Markets; Self-employment; Entrepreneurship; Nepal
No. 237   (Download full text)
Nathalie Scholl
An Index of Inter-Industry Wage Inequality: Trends, Comparisons, and Robustness
This paper introduces a newly constructed Theil index of between-sectoral manufacturing wage inequality and empirically tests whether the measure can serve as a basis for more general statements about the evolution of broader concepts of inequality, as argued by the authors of the University of Texas Inequality Project (UTIP) for their very similar index. Building on prior work of the UTIP, several concerns regarding the treatment of the raw data as well as important questions of internal and external validity are addressed. The index is based on sector-level data from the UNIDO Industrial Statistics for manufacturing, and I provide a detailed account of how the unbalanced raw data were treated. The newly computed index has the advantage of being consistently measured across countries and years, which makes it a valuable resource for empirical studies focusing on changes in the manufacturing structure within countries over long periods of time. However, its narrow scope also restricts the applicability of the index for other, broader uses. I argue that the latter point is one of the main drawbacks of the index and present evidence that the generalizability from between-sectoral manufacturing wage inequality to overall income inequality is severely limited. This applies not only to the extent to which the index allows conjectures about the overall level of income inequality in a society. There is reason to also question the “internal” capability of the index to accurately reflect developments in manufacturing wage inequality. I therefore do not recommend using the index as a basis for inference about the development of broader concepts of wageor income equality.
JEL-Codes: J31; O15; J30
Keywords: Inequality measurement; Wage inequality; Income inequality; Manufacturing wage inequality
No. 236   (Download full text)
Stephan Klasen and Anna Minasyan
The Impact of Affirmative Action on the Gendered Occupational Segregation in South Africa
This paper studies the impact of an affirmative action policy on occupational segregation by gender in South Africa. We estimate effects of the Employment Equity Act of 1998, the Black Economic Empowerment Act in 2003 and the Codes of Good Conduct in 2007 on (Black) female employment in top occupations using individual level, repeated cross-section data of 21 years. The findings based on difference-in-difference-in-difference identification strategy show that the probability of Black female employment in top occupations increased after 2003, however it decreased after 2007. Overall, the effects are quite small. We offer several explanations for these effects.
JEL-Codes: J7; J16; J15; J18
Keywords: Affirmative action; occupational segregation; gender; South Africa
No. 235   (Download full text)
José Espinoza-Delgado and Stephan Klasen
Gender and Multidimensional Poverty in Nicaragua, An Individual-based Approach
Most existing empirical papers concerned about multidimensional poverty use the house- hold as the unit of analysis, meaning that multidimensional poverty status of the household is equated with the multidimensional poverty status of all individuals in the household. This assumption, nonetheless, overlooks important within-household features and ignores the intra-household inequalities. Besides, by definition, households containing both a female and a male cannot contribute to a gender gap, so gender differentials cannot be estimated. But, the Sustainable Development Goals have put special emphasis on gender equality along their targets; therefore, new measures able to capture the gender differences are needed. Consequently, in this paper, we propose an individual-based multidimensional poverty mea- sure in order to estimate the three Is of multidimensional poverty (incidence, intensity, and inequality) in Nicaragua as well as the gender differentials. We also estimate logit regres- sions to better understanding the determinants of multidimensional poverty in this country. Overall, we find that there are statistically significant gender differences in multidimensional poverty in Nicaragua; but, they are estimated to be small and lower than 5%. However, the gender differential in inequality is larger than 10%, and it suggests that multidimensional poor women are living in very intense poverty when compared with multidimensional poor men. We also find that the elderly and children are the most vulnerable people in terms of multidimensional poverty in this country; furthermore, when information on employment, domestic work, and social protection is considered in the analysis, the gender gaps become more substantial, and women are more likely to be poor than men.
JEL-Codes: I3; I32; D1; D13; D6; D63; O5; O54
Keywords: multidimensional poverty; poverty measurement; intra-household inequality; gender differences in poverty; Nicaragua; Latin America
No. 234   (Download full text)
Ute Filipiak, Antonia Grohmann and Franziska Heyerhorst
Female empowerment, cultural effects and savings: Empirical evidence from India
This paper looks at household consumption and financial decisions made in a matrilineal society where women are by culture the financial household managers. This culture was strongly altered by the British in the mid-19th century in particular through christian missionaries who proclaimed that the role of the household manager is ascribed to men and not to women. Using two different datasets, our results show that female empowerment is stronger and individuals keep following the traditional matrilineal Khasi rules the further they live away from the former British base. Instrumental variable estimates exploiting differences in distance to the former British base in Cherrapunji, suggest that households where women are empowered, spend more on welfare enhancing goods such as education and nutrition, but are less likely to have savings left at the end of the month, and that these effects are causal.
JEL-Codes: I3; O1; R20; Z1
Keywords: Female empowerment; savings; India
No. 233   (Download full text)
Caroline Dotter and Stephan Klasen
The Multidimensional Poverty Index: Achievements, Conceptual and Empirical Issues
The Multidimensional Poverty Index (MPI) has been an important contribution to the debate on national and international poverty measurement. With the creation of the global MPI, OHPI and UNDP have provided a household-level multidimensional poverty measure for over 100 developing countries that can usefully complement the widely used $1.25 a day income poverty indicator. Given its link to the concept of human development, it is an important element of the suite of human development indicators maintained and published by UNDP. Nonetheless, there are many open empirical questions and issues regarding the conceptual underpinning of the MPI that need to be discussed and carefully considered. This essay discusses issues with the dual cut-off method for poverty identification, and how inequality could be incorporated in this poverty measure. Moreover, the choice of headline indicator is debated. We also propose a number of changes regarding the empirical implementation. These include dropping the WHS as one of the data sources, dropping the BMI as a nutrition indicator, and changing the age ranges and cutoffs for the education and mortality indicators. Different approaches to deal with the large share of households where information on an MPI indicator is missing are also discussed. The empirical relevance of these changes are analysed using the Demographic and Health Surveys (DHS) for Armenia, Ethiopia, and India. We argue that these changes could pose improvements to the current formulation, but one may need to investigate them further and for a larger number of countries. In a final section, we briefly comment on the HDRO revisions to the MPI in the 2014 Human Development Report, which have been partly based on the recommendations made in this paper.
No. 232   (Download full text)
Caroline Dotter
Can the World Bank's International Poverty Line reflect extreme poverty?
The World Bank's international poverty line has been a success in drawing the attention of policymakers and media to the issue of poverty. This paper summarises the main critique in the literature and adds some additional insights, pointing out the weak database for the estimation of the international poverty line. The author also shows how poverty outcomes at the country level diverge when the international and respective national poverty lines are applied. For poorer countries, we observe a significant over- as well as underestimation of poverty at similar levels of mean consumption. The international poverty line can therefore not fulfil its own claim of being representative of the poverty lines of poor countries. One also needs to question whether this poverty line can be considered as a measure of ``extreme poverty" in the sense of the SDGs. Summarising all the issues in the estimation process of this measure, the author argues that the simple average of fifteen poverty lines of varying quality chosen through a statistically inaccurate estimation cannot represent a global standard of extreme poverty. These issues gain momentum as the World Bank recently published new (but not improved) global poverty counts exhibiting the identical issues as earlier poverty estimations.
Keywords: poverty; international poverty line; poverty estimation
No. 231   (Download full text)
Alexander Silbersdorff, Julia Lynch, Stephan Klasen and Thomas Kneib
Reconsidering the Income-Illness Relationship using Distributional Regression: An Application to Germany
In this paper we reconsider the relationship between income on health, taking a distributional perspective rather than one centered on conditional expectation. Using Structured Additive Distributional Regression, we find that the association between income on health is larger than generally estimated because aspects of the conditional health distribution that go beyond the expectation imply worse outcomes for those with lower incomes. Looking at German data from the Socio Economic Panel, we find that the risk of very bad health is roughly halved when doubling the net equivalent income from 15,000 Euro to 30,000 Euro, which is more than tenfold of the magnitude of change found when considering expected health measures. This paper therefore argues that when studying health outcomes, a distributional perspective that considers stochastic variation among observationally equivalent individuals is warranted.
JEL-Codes: I14; C13; C21
No. 230   (Download full text)
Jesús Crespo Cuaresma, Stephan Klasen and Konstantin M. Wacker
Is there poverty convergence?
Martin Ravallion ("Why Don't We See Poverty Convergence?" American Economic Review, 102(1): 504-23; 2012) presents evidence against the existence of proportionate convergence in global poverty rates despite convergence in household mean income levels and the link between income growth and poverty reduction. We show that heterogeneity in this link affects the evidence of poverty convergence and that this result depends on the sample selected, especially on the inclusion of transition economies with poorly measured low poverty incidences. Motivating the poverty convergence equation with an arguably superior semi-elasticity specification, we find robust evidence of convergence in absolute poverty rates.
JEL-Codes: I32; D31; P36
Keywords: poverty convergence; income inequality; economic growth; poverty trap; transition economies
No. 229   (Download full text)
S. Chandrasekhar, Soham Sahoo and Hema Swaminathan
Seasonal Migration and Feminization of Farm Management: Evidence from India
This paper explores the association between short-term migration in the household and feminization of farm management in rural India. The analysis uses a nationally representative data set covering 35,604 rural Indian households in the year 2013. There is gender disaggregated information on who operates land in addition to the presence of a short-term migrant in the household. We model the labor outcomes of women as reflected by their participation as major decision-makers (main operator) or minor decision makers (associated operator) on the household operational holding. Overall, we find that women are less likely than men to be either main or an associated operator. However, in households with a short-term migrant, the probability of a woman being a decision maker as an operator increases. These results are robust to endogeneity and sample selection concerns. Our study highlights the importance of unpacking the feminization process to better understand the role of women as farm managers.
JEL-Codes: Q1; R2; J1
Keywords: Feminization of agriculture; Female farm managers; Seasonal migration; Agricultural households; Operational holdings; India
No. 228   (Download full text)
Sebastian O. Schneider and Martin Schlather
A New Approach to Treatment Assignment for One and Multiple Treatment Groups
We present a new approach to treatment assignment in (field) experiments for the case of one or multiple treatment groups. This approach - which we call minimizing MSE approach - uses sample characteristics to obtain balanced treatment groups. Compared to other methods, the min MSE procedure is attrition tolerant, more flexible and very fast, it can conveniently be implemented and balances different moments of the distribution of the treatment groups. Additionally, it has a clear theoretical foundation, which bases on the idea by Kasy (2016), but involves randomness, works without any parameter to be specified by the researcher and is extended to multiple treatments. The information used for treatment assignment can be multivariate and continuous and consist of arbitrary many variables. In this paper, we theoretically derive the underlying selection criteria which we then apply to various simulated treatment effect scenarios and datasets, comparing it to established approaches. Our proposed method performs superior or comparable to competing approaches such as matching in most measures of balance commonly used. We provide software to apply the min MSE approach as an ado-package for Stata.
No. 227   (Download full text)
Elisabeth Hettig, Jann Lay, Katharina van Treeck, Martin Bruness, Dewi Nur Asih and Nunung Nuryartono
Cash crops as a sustainable pathway out of poverty? Panel data evidence on the heterogeneity of cocoa farmers in Sulawesi, Indonesia
The cultivation of cash crops has a great potential for reducing poverty in the developing world that may not be fully harnessed because many smallholders are inefficient producers. Further, income gains may be only static and poverty and vulnerability of smallholder households may not be reduced sustainably. Instead, cash crop farmers, in particular those without proper farm management skills, may experience boom and bust cycles, caused by volatile world market prices local weather shocks and pests. To analyze the long-term poverty impacts of cash crop agriculture, we draw on a unique panel data set of smallholder cocoa farmers in Central Sulawesi, Indonesia, covering the years 2000, 2006 and 2013. We show that – over the analyzed time horizon of more than 10 years – cocoa cultivation is associated with strong and sustainable poverty reduction. Cocoa farmers fare better than non-cocoa farmers and the welfare gains can mainly be attributed to increasing cocoa yields. Yet, yield gaps remain large and are increasingly heterogeneous. We can trace back this productivity heterogeneity to farm management practices. Linking these findings to poverty transitions, we can show that better management practices facilitate the transition out of poverty and shields against income losses.
No. 226   (Download full text)
Janina Steinert, Juliane Zenker, Ute Filipiak, Ani Movsisyan, Lucie Cluver and Yulia Shenderovich
Do Saving Promotion Interventions Help Alleviate Poverty in Sub-Saharan Africa? A Systematic Review and Meta-Analysis
Saving promotion interventions have gained momentum in international development over the recent years. Our analysis investigates whether saving promotion can effectively reduce poverty and economic hardship in Sub-Saharan Africa. In an extensive database search, 9330 records were screened and 27 randomised controlled trials on saving promotion interventions fulfilled the inclusion criteria. Robust-variance estimations of pooled effect sizes show small but significant impacts on poverty reduction, including increases in household expenditures and incomes, higher returns from family businesses, and improved food security. They also show positive impacts on more intermediate outcomes including total savings, pro-saving attitudes, financial literacy, and investments in small-scale family businesses. Our results do not show significant effects on assets, housing quality, education, or health. Findings from this analysis suggest that saving promotion schemes are highly relevant in reducing poverty in Sub-Saharan Africa, and that formal banking services in particular require adaptation to the needs of the poor.
No. 225   (Download full text)
Fabian Dunker, Konstantin Eckle, Katharina Proksch and Johannes Schmidt-Hieber
Tests for qualitative features in the random coefficients model
The random coefficients model is an extension of the linear regression model which allows for additional heterogeneity in the population by modeling the regression coefficients as random variables. Given data from this model, the statistical challenge is to recover information about the joint density of the random coefficients which is a multivariate and ill-posed problem. Because of the curse of dimensionality and the ill-posedness, pointwise nonparametric estimation of the joint density is difficult and suffers from slow convergence rates. Larger features, such as an increase of the density along some direction or a well-accentuated mode can, however, be much easier detected from data by means of statistical tests. In this article, we follow this strategy and construct tests and confidence statements for qualitative features of the joint density, such as increases, decreases and modes. We propose a multiple testing approach based on aggregating single tests which are designed to extract shape information on fixed scales and directions. Using recent tools for Gaussian approximations of multivariate empirical processes, we derive expressions for the critical value. We apply our method to simulated and real data.
Keywords: Random coefficients model; Radon transform; ill-posed problems; Gaussian approximation; mode detection; monotonicity; multiscale statistics; shape constraints
No. 224   (Download full text)
Fabian Dunker, Stefan Hoderlein and Hiroaki Kaido
Nonparametric Identification of Random Coefficients in Endogenous and Heterogeneous Aggregate Demand
This paper studies nonparametric identification in market level demand models for differentiated products with heterogeneous consumers. We consider a general class of models that allows for the individual specific coefficients to vary continuously across the population and give conditions under which the density of these coefficients, and hence also functionals such as welfare measures, is identified. Building on earlier work by Berry and Haile (2013), we show that key identifying restrictions are provided by (i) a set of moment conditions generated by instrumental variables together with an inversion of aggregate demand in unobserved product characteristics; and (ii) the variation of the product characteristics across markets that is exogenous to the individual heterogeneity. We further show that two leading models, the BLP-model (Berry, Levinsohn, and Pakes, 1995) and the pure characteristics model (Berry and Pakes, 2007), require considerably different conditions on the support of the product characteristics.
No. 223   (Download full text)
Sebastian Renner
Poverty and Distributional Effects of a Carbon Tax in Mexico
Mexico recently declared ambitious goals in reducing domestic CO2 emissions and introduced a carbon tax in 2014. Although negative effects on household welfare and related poverty measures are widely discussed as possible consequences, empirical evidence is missing. We try to fill this gap by simulating an input-output model coupled with household survey data to examine the welfare effects of different carbon tax rates over the income distribution. The currently effective tax rate is small and has negligible effects on household welfare. Higher simulated tax rates, maintaining the current tax base, show a slight progressivity but welfare losses remain moderate. Welfare losses, regressivity and poverty rise more with widening the tax base towards natural gas and other greenhouse gases (CH4, N2O) mainly through food price increases. For a complete analysis of the policy, we simulate a redistribution of calculated tax revenues and find that the resulting effects become highly progressive, also for high rates, wider tax bases and even in the absence of perfect targeting of social welfare programs.
JEL-Codes: C67; Q28; Q48; Q52; H23; I38
No. 222   (Download full text)
Mary Borrowman and Stephan Klasen
Drivers of gendered sectoral and occupational segregation in developing countries
Occupational and sectoral segregation by gender is remarkably persistent across space and time and is a major contributor to gender wage gaps. We investigate the determinants of one-digit occupational and sectoral segregation in developing countries using a unique, household-survey based aggregate data base including 69 developing countries between 1980 and 2011. We first show that occupational and sectoral segregation has increased in more countries over time than it has decreased. Using fixed effect panel regressions, we find that income levels have no impact on occupational or sectoral segregation. Rising female labor force participation is associated with falling sectoral but increasing occupational segregation; rising education levels, either overall or for females relative to males, tends to increase rather than decrease segregation.
JEL-Codes: J16; J24; J31; J71; B54
Keywords: occupational segregation; sectoral segregation; gender; developing countries
No. 221   (Download full text)
Edward Asiedu and Elena Gross
Can differences in benefits affect group investment into irrigation projects? Experimental Evidence from Northern Ghana
Particularly in sub-Saharan Africa, agriculture is predominantly rain-fed and, therefore, prone to unstable weather conditions and less productive than in other regions of the world. Increasing the efficiency and sustainability of farmer groups and cooperatives is of primary importance to many policy makers in developing countries. Experimental studies have suggested that the privileged person in a group would voluntarily provide the public good in social dilemma situations, while those with lower benefits would free-ride. Using a framed lab-in-the-field experiment complemented by a detailed household survey in rural Ghana, we examine how asymmetries in benefits and real wealth levels impact farmers’ behavior and group outcomes. We find that efficiency concerns (i.e. higher group returns) outweigh inequality concerns. Thus, the implication is that higher group benefits and heterogeneous within-group benefits reduce strategic uncertainty and enhance cooperation in agricultural settings of subsistence farmers. Finally, aside from the group-level effects, we show that farmers with smaller potential benefits and those who live in poor households contribute even more than the resource rich. The results indicate that, as much as interventions are aimed at saving the poor, the poor contribute much to save themselves. These results remain robust, controlling for a long list of covariates including socioeconomic characteristics, loss aversion and inequality aversion. The results overall have implications for structuring farmer groups and the provision and maintenance of both public goods and common-pool resources in poor countries.
JEL-Codes: C93; D31; D63; O13; Q15; Q2
Keywords: Asymmetric benefits; lab-in-the-field experiments; group financing; farmer cooperatives; development financing; irrigation in Sub-Saharan Africa; Ghana
No. 220   (Download full text)
Stephan Klasen
UNDP's Gender-related measures: Current problems and proposals for fixing them
In contrast to UNDP’s wildly successful Human Development Index (HDI), UNDP’s gender-related indices have had a rather rocky history. To this day, the Human Development Report Office (HDRO) has not produced a measure that has met the requirements of policy-makers, academics and development practitioners for a transparent, clear, well-measured internationally comparable index that can be used to compare countries across the world with regard to the extent of gender inequalities in human development-related dimensions. As a result, this void left by HDRO has been filled by many other indices of gender-related development that compare and rank countries. In this paper I will first briefly review the history of UNDP’s gender-related indicators, discuss the Gender Inequality Index (GII), its most recent incarnation, in some more detail, briefly review other existing measures, before making concrete proposals for gender-related development measures that HDRO might want to consider. I will argue that the GII unfortunately has so many conceptual and empirical weaknesses and is far too complex a measure that it cannot really be considered an improvement over the problems associated with the previous two gender-related measures, the Gender-Related Development Index (GDI) and the Gender Empowerment Measure (GEM). I therefore propose that a better way forward would be a reformed GDI and GEM and I make specific proposals for indicators and illustrate the results of these proposals for levels and rankings of countries. Lastly, I will briefly present and discuss the new Gender Development Index created by the HDRO in the 2014 Human Development Report which is partly related to some of the recommendations made in this paper.
JEL-Codes: I31; O15; J16
Keywords: Gender inequality; human development; UNDP; composite indices
No. 219   (Download full text)
Katharina van Treeck and K.M. Wacker
Financial Globalization and the Labor Share in Developing Countries: The Type of Capital Matters
In this paper, we investigate how de facto financial globalization has influenced the labor share in developing countries. Our main argument is the need to distinguish between different types of capital in this context, as different forms of foreign investment have different fixed costs and impacts on the host countries' production process and vary concerning their bargaining power vis-à-vis labor. Assuming an aggregate elasticity of substitution between capital and labor would thus be misleading. Our econometric analysis of the impact of foreign direct vs. portfolio investment in a sample of about 40 developing and transition countries after 1992 supports this claim. Using different panel data techniques to address potential endogeneity problems, we find that FDI has a positive effect on the labor share in developing countries, while the impact of portfolio investment is significantly smaller, and potentially negative. Our results also highlight that de facto foreign investment cannot explain the decline of the labor share in developing countries over the investigated period.
JEL-Codes: C23; E25; F21; O15
Keywords: Labor Share; Globalization; Income Distribution; International Capital Flows; FDI; Wage Bargaining
No. 218   (Download full text)
Stephan Klasen and Tukae Mbegalo
The Impact of Livestock Ownership on Solar Home System Adoption in the Northern and Western Regions of Rural Tanzania
Livestock has been hypothesized to be one of the major buffer stocks for consumption smoothing in rural areas of developing countries. It is therefore hard for poor farmers in the developing world to finance large investments. We test the latter by estimating a latent variable model of solar home systems. We use off-grid household data from four districts of mainland rural Tanzania. Results indicate that solar adoption is higher for livestock owners than non-livestock owners and that these differences increase as household expenditure increases, but there is no statistical difference at lower- and some middle-expenditure levels. We argue that poor families tend to keep small livestock, which may not generate enough income for investment. They may also decide to accumulate livestock due to a lack of incentives to invest in solar. Furthermore, solar prevalence plays a role in the observed differences of solar adoption. Thus, solar investment financed through livestock will also depend on whether households have enough information on solar technology. In principle, if solar is to spread within a community, households will have to have information on the upfront costs and maintenance costs and the social and economic benefits of solar technology.
JEL-Codes: Livestock; Modern Consumer Goods; Solar Adoption and Solar Home Systems
No. 217   (Download full text)
Tukae Mbegalo
The Impact of Food Price Changes and Land Policy Reforms on Household Welfare in Rural Tanzania
Land policy reforms across Africa are expected to address several of the underlying critical issues of food security and economic development, because they can help stabilize food prices by improving future expectations on trade and supply. However, there is an absence of solid empirical research that considers the relationship between food price and land policy reform. This paper simultaneously estimates the impact of food prices and the Land Act of 1999 on rural household welfare. We use panel data from 2008/2009 and 2010/2011. The data contains information on land ownership and the different forms of land titling. This allows us to construct a treatment variable for landownership before and after the Land Act. Then, we use a matching method to estimate the counterfactual effect of both net consumer and producer welfare. The results indicate that rural food producers have not benefited by the post independence land reforms. Furthermore, we found that education and land titling have a major influence on improving household welfare as well as in offsetting food price shocks and reducing rural food poverty. We argue that education attainment can facilitate literacy on land and credit market issues, enabling the rural population to take full advantage of land titling, which can be used as collateral. Finally, we found that although land titling is an important tool in reducing rural food poverty, few poor rural households have land use certification. This is a crucial issue because titling and access to land for the rural poor are essential for food security and rural economic development.
Keywords: Food Price; Education; Household Welfare; Land Ownership; Land Act; Land Titling and Matching Methods
No. 216   (Download full text)
Tukae Mbegalo and Xiaohua Yu
The Impact of Food Prices on Household Welfare and Poverty in Rural Tanzania
The effects from the change in food prices on household welfare is a topical issue among policy makers and scholars in Tanzania. However, relatively little is known about the quantitative effects of rising food prices on household welfare and poverty. This paper intends to quantitatively assess the welfare implications of rising food prices in rural Tanzania, by using household budget data from 2008/2009 and 2010/2011. We analyse the food Engel curves using a semi-parametric approach. This has revealed that a quadratic parametric fit can approximate the non-parametric food Engel curves. We then estimate the complete demand system using the QUAIDS model, and calculate welfare and poverty indices. Our results indicate that net sellers tend to show an improvement in welfare and net buyers tend to show a loss in welfare due to a food price increase. The effect of rising food prices varies across household characteristics and by region. For example, poor households are more affected than middle-income and rich households. The food prices have a major impact on overall poverty and across households. In particular, the poverty effect is much stronger for poor households than for middle-income and rich households. However, in the long-run, the poverty headcount ratio declines across all households due to the substitution effect. Thus, reformulation of food policy to counterbalance intermediate and long-term food price shocks is crucial in achieving a reduction in poverty and food security. Polices, such as improving domestic agricultural markets and lifting tariffs on imported food, are instrumental in addressing these issues.
Keywords: Food Engel Curves; Food Price; Net Benefit Ratio; Poverty; QUAIDS; Semi Parametric and Welfare
No. 215   (Download full text)
Anna Minasyan
US Aid, US educated Leaders and Economic Ideology
The Unites States (US) openly promotes its economic ideology on free-markets through foreign aid. It also regards foreign education in the US as way of spreading own ideas and values among the powerful elite in developing countries. US educated aid recipient country leaders may thus receive more US aid, if they share both the cultural values and the economic ideology of the US. I test this hypothesis using a panel fixed-effects regression model for 896 leaders and 143 countries over the period from 1981 to 2010. I address self- and donor-selection biases by including leader fixed effects in the regression analysis, in addition to the country and year fixed effects. In result, I find that on average the US allocates 30 percent more bilateral aid to US educated right leaders compared to US educated left leaders. Heterogeneity analysis reveals that the findings are driven by right-wing US leadership.
JEL-Codes: F35; F54; P16; D72
Keywords: US aid; US educated leaders; economic ideology; aid allocation
No. 214   (Download full text)
Simon Lange and Stephan Klasen
How the New International Goal for Child Mortality is Unfair to Sub-Saharan Africa (Again)
The post-2015 development includes level-end goals for both under-five and neonatal mortality to be obtained by 2030: no more than 25 and 12 deaths per 1,000 births, respectively. Recent accelerations in the rate of reduction in under-five mortality have been cited as a cause for optimism. In this paper, we show that changes in mortality rates are subject to mean reversion. Hence, high rates observed recently for Sub-Saharan Africa make for an overly optimistic estimate of future reductions. Taking this into account in projecting mortality rates until 2030, we find that only very few countries in Sub-Saharan Africa are likely to attain the new targets while a majority of countries elsewhere are likely to attain the target or have done so already. We also show that while MDG4 has been rightly criticized as `unfair' to Sub-Saharan Africa in the past, a relative target may have been more appropriate today and would be relevant for all countries. We also offer a discussion of likely challenges the region faces in making further inroads against preventable deaths.
JEL-Codes: I15; I18; J11; J18; O21
Keywords: MDGs; SDGs; under-five mortality; Sub-Saharan Africa
No. 213   (Download full text)
Stephan Klasen and Simon Lange
How Narrowly Should Anti-poverty Programs Be Targeted? Simulation Evidence from Bolivia and Indonesia
A key question in the design of anti-poverty programs is to what extent they should be targeted. Empirical evaluations of targeted transfer schemes and simulation exercises often point to further gains that can be had from targeted transfers vis-à-vis universal transfers or from more narrow targeting. Theoretical work, on the other hand, has identified hidden costs associated with targeting - including politico-economic constraints on budgets - but these are frequently ignored in empirical work. In this paper we first argue that common targeting measures can be interpreted as preferences that attach specific weights to true and false positive rates. Based on data from Bolivia and Indonesia, we show that targeting based on an imperfect poverty classifier based on proxy means tests results in very distinct 'optimal' beneficiary shares when these measures are used as a decision criterion. Implications from poverty simulations are sensitive to assumptions about the political economy relationship between the beneficiary share and the available budget. In fact, in many situations, optimizing targeting measures will be misleading when the actual goal is to maximize the effect on poverty.
JEL-Codes: C52; I38; O21
Keywords: welfare and poverty measurement; targeting; transfers; social assistance; proxy means tests; poverty; Bolivia; Indonesia
No. 212   (Download full text)
Alexandra Rudolph
Pension programs around the world: Determinants of social pension
Old-age poverty is to become one of the most pressing issues in the coming decades given the demographic trends forecasted. Particularly in developing countries this could be an obstacle to inclusive and sustainable growth as well as the fight against all forms of poverty (SDG 1), through shocks on consumption and production patterns within countries. Investigating social, non-contributory pension systems highlights their potential for countries to implement one of the main instrument to fight old-age poverty. A new comprehensive global data set of 185 countries over the 1960-2012 period on the provision of social pension across the world allows the author to examine trends in social pension provision in the last five decades and study internal and external political economy drivers of implementation. Grouped event history data allows the control of duration dependence on the probability of social pension adoption in the multivariate setting. Results show that internal (national) demand drivers are more important than external (international) peer pressure while the composition of the political system and of governments seem to be major factors influencing the provision of social pension mainly in developing countries. Since only 50 percent of countries provide against old-age poverty countries may use the window-of-opportunity of the 2030 Agenda to reach “nationally appropriate social protection systems” (SDG 1.3; UN, 2015).
JEL-Codes: H55; J14; I38
Keywords: public pension; social pension; demographic change; old-age poverty; political economy; panel data
No. 211   (Download full text)
Stephan Klasen
Gender, Institutions, and Economic Development: Findings and Open Research and Policy Issues
Gender relations are a key institution governing important aspects of production and reproduction of societies. They are guided by formal institutions as well as informal norms and values. As this survey shows, there is great regional heterogeneity in gender inequality in formal and informal social institutions. The literature on long‐term drivers of gender gaps suggests that those gender gaps are related to long‐standing and regularly reproduced gender norms and values related to differences in women's economic opportunities and constraints. The paper also shows that these gender gaps not only affect gender equity but overall development outcomes such as economic growth and reductions in mortality. This is best documented in the case of gender gaps in education but there is also evidence for the negative effects gender of gaps in employment, political and economic empowerment, access to resources, and social institutions on development outcomes. The paper then shows that there has been a large and heterogeneous change in gender gaps. While gender gaps in education (and legal rights) have closed very rapidly, gender gaps in labor force participation, health, political participation, and time use have closed much less rapidly, and there has been virtually progress in reducing occupational and sectoral segregation, unexplained gender pay gaps, and violence against women. The paper presents some hypotheses that might explain this differential performance and also contribute to understanding regional dynamics, before pointing towards a forward‐looking research agenda on better understanding the linkages between institutions and their change, gender inequality, and economic development.
JEL-Codes: D63; J71; O15
Keywords: gender; institutions; economic development
No. 210   (Download full text)
Isabel Günther, Melanie Grosse and Stephan Klasen
How to attract an audience at a conference: Paper, person or place?
We analyze the drivers of the size of the audience and number of questions asked in parallel sessions at the annual conference of the German Economics Association. We find that the location of the presentation is at least as important for the number of academics attending a talk as the combined effect of the person presenting and the paper presented. Being a presenter in a late morning session on the second day of a conference, close to the place where coffee is served, significantly increases the size of the audience. When it comes to asking questions, location becomes less important, but smaller rooms lead to more questions being asked (by women). Younger researchers as well as very senior researchers attract more questions and comments. There are also interesting gender effects. Women attend research sessions more diligently than men, but seem to ask fewer questions than men. Men are less likely to attend presentations on health, education, welfare, and development economics than women. Our findings suggest that strategic scheduling of sessions could ensure better participation at conferences. Moreover, different behaviors of men and women at conferences might also contribute to the lack of women in senior scientist positions.
JEL-Codes: A11; B54
Keywords: Economists; Conference; Preferences; Gender Differences
No. 209   (Download full text)
Stephan Klasen, Nathalie Scholl, Rahul Lahoti, Sophie Ochmann and Sebastian Vollmer
Inequality – Worldwide Trends and Current Debates
Income inequality has been rising in many developing countries since the 1980s. At the same time, global income inequality has been roughly stable (or even falling slightly) and there is great heterogeneity in within-country inequality trends across countries and regions. Non-income inequality tends to have fallen, both within and between countries. There is no empirical evidence that rising inequality is an inevitable consequence of economic growth; similarly, the evidence of the impact of changes in inequality on growth is also inconclusive, although higher levels of inequality appear to be harmful for subsequent development. At the same time, reducing inequality is seen as important to promote greater fairness as well as to speed up poverty reduction. To study trends in inequality, we use a framework where income inequality is related to inequality in assets (land, labor, human capital, and physical capital), return to these assets, inequality in private transfers, and redistribution by the state. Trends in inequality are tied to these different drivers which differ greatly by country and over time. This framework also generates opportunities for policy intervention to tackle inequality. This will, however, depend greatly on the country. As a result, it is useful to start a policy framework with an inequality diagnostics to identify the most important drivers of levels and changes in inequality in a particular country; this is also an activity where bilateral development partners can play an important supporting role. When it comes to particular policy issues, some of the issues that have been discussed for a long time remain highly relevant, including land reform (where land is still an important asset), pro-poor educational policies, rural infrastructure, and a focus on improving agricultural productivity of poor farmers. At the same time, increasing the redistributive role of the state through a higher tax take (to be achieved via broadening the tax base, increasing tax compliance, increase resource taxes), and increasing pro-poor social transfers. On the international dimension, there is now a greater emphasis on assisting developing countries with fighting tax evasion and tax avoidance of firms and individuals. As a single bilateral donor, it is not easy to have a significant impact on inequality and an explicit aid program on inequality reduction might also be politically contentious. In principle, the potential is there for significantly affecting inequality via technical cooperation assisting states (and potentially non-state actors) in implementing an inequality-reducing agenda. Budget support and other systemic approaches can of course also support an overall agenda of reducing inequality, as can investment projects if they focus on the policy-areas for inequality reduction outlined here.
No. 208   (Download full text)
Atika Pasha
Impact of Cash Grants on Multidimensional Poverty in South Africa
South Africa is estimated to allocate approximately US $12 billion for the 2014/15 fiscal year for social grants (Bhorat and Cassim, 2014). With an extensive coverage and budget, it is one of the most progressive social security schemes among low and even middle income countries. It helps mitigate income poverty and inequality, and has been shown to have a positive effect on household socioeconomic outcomes such as health and education, employment and other demographic outcomes. However, no study has thus far examined the impact of these grants on the overall or associative deprivation across households. This paper uses the National Income Dynamics Survey (NIDS) to derive the Multidimensional Poverty Index (MPI) and Correlation Sensitive Poverty Index (CSPI) for South Africa, and then estimate the impact that social assistance grants have on both of these composite indices of poverty measurement. The results show that increases in the income from a cash grant, leads to lower multidimensional poverty level in households. Another meaningful result is that cash grants seem to have reduced the multidimensional inequality as well. Using an instrument and a fuzzy Regression Discontinuity Design (RDD) to account for the issue of endogeneity in child and old age grants respectively, health and standard of living are found to be the major channels through which these grants work in reducing multidimensional poverty and inequality.
JEL-Codes: H55; I38
Keywords: Social Assistance Grants; Multidimensional Poverty Index (MPI); Correlation Sensitive Poverty Index (CSPI); National Income Dynamics Survey (NIDS)
No. 207   (Download full text)
Jan Trenczek
Promoting Growth-Enhancing Structural Change: Evidence from a Panel of African, Asian, and Latin American Countries
In what the authors name “a first pass through the data”, McMillan et al. (2014) have recently addressed the question: what determines the magnitude of growth-enhancing structural change - defined as gains to average labor productivity resulting from a reallocation of labor across sectors? This paper extends their cross-section work to a panel data set of 5- and 10-year intervals from 1970 to 2010 for 29 (mostly developing) countries. Controlling for a wide range of control variables and time-invariant unobserved heterogeneity, the results present support for growth-enhancing structural change to be the outcome of a conditional domestic convergence process towards, what I term, a country’s idiosyncratic state of efficient allocation. The regressions further indicate that the removal of labor market rigidities and improvements in gender equality in education correlate with larger gains from structural change in a statistical and economical meaningful way. However, these relationships are not found in countries with large (gender) inequality in education or strong labor market rigidities, respectively. The study also shines some light on the channels through which the variables potentially affect gains from structural change.
JEL-Codes: O10; O14; O47
Keywords: Structural change; productivity growth; labor market rigidity; educational inequality
No. 206   (Download full text)
Sophia Kan
Improving health in Tajikistan: remittances trump other income
This paper investigates the impact of remittances on health outcomes in Tajikistan and finds a positive effect. While existing literature shows that remittances increase health care expenditure, expenditure alone is an incomplete proxy for health outcomes. Moreover, existing literature on health outcomes focuses mainly on infants and children, leaving out a significant share of the population. Our study explores the impact of remittances on proxies of health outcomes beyond expenditure for all household members (adults and children). We use an IV-approach to control for the endogeneity of remittances, and find that on average, remittances have a much larger effect than other sources of income on health expenditure and health outcomes. We also explore two possible transmission channels for how remittances affect health and find that remittances do not affect the likelihood of purchasing medicine in lieu of seeking care when ill; instead remittances have a positive and significant effect on the likelihood of seeking direct medical care.
JEL-Codes: I15; F22; R23
Keywords: health; migration; remittances; Tajikistan
No. 205   (Download full text)
Nathalie Scholl and Stephan Klasen
Re-estimating the Relationship between Inequality and Growth
In this paper, we revisit the inequality-growth relationship using an enhanced panel data set with improved inequality data and special attention to the role of transition countries. We base our analysis on the specification of Forbes (2000), but also address the functional form concerns raised by Banerjee and Duflo (2003). We arrive at three main findings: First, similar to Forbes we find a significant positive association between inequality and subsequent economic growth in the full sample, but this is entirely driven by transition (post-Soviet) countries. Second, this positive relationship in transition countries is not robust to the inclusion of separate time effects. Lastly, it therefore appears that this association is not causal but rather driven by the particular dynamics of the transition. Our finding is consistent with the claim that the relationship between inequality and growth emerges due to the particular timing of inequality and growth dynamics in transition countries. In particular, the rise in inequality in the 1990s coincided with a sharp output collapse, leading us to find an association between the large increase in inequality in the early 1990 and a growth recovery in the late 1990s. In sum, once the transition country dynamics are accounted for, we find no robust, systematic relationship between inequality and subsequent growth, neither for levels nor for changes in inequality. These results hold for different lag structures as well as in the medium- rather than the short term, and the empirical patterns observed are robust to the use of different data sets on inequality.
JEL-Codes: O11; O15; O40; E25
Keywords: Inequality; Growth; Transition Countries; Dynamic Panel
No. 204   (Download full text)
Leoni Eleni Oikonomikou
Modeling Financial Market Volatility in Transition Markets: A Multivariate Case
This paper presents evidence of linkages across equity markets in the following transition economies: Russia, Ukraine, Poland and Czech Republic from beginning of January 2005 till the end of December 2014. We apply a multivariate asymmetric EGARCH model. Empirical results indicate significant return and volatility spillover effects during the full sample and the Russian Great Recession and Ukrainian crisis episodes. Over the full sample period, there is evidence of return co-movements, and strong volatility persistence. During the Russian Great Recession subsample, the ownreturn effects of the markets are stronger than the cross-market effects and their correlations have increased. Finally, the Ukrainian political crisis indicated no clear information producer, whereas, evidence of returns co-movement still exists. The markets in question are mainly partially integrated and the volatility transmission linkages across them are not that strong in crises periods, thus confirming previous literature on the particularities of emerging and frontier markets. According to the empirical finance literature, developed markets are interconnected. However, emerging markets are mainly affected by local shocks. The same applies to frontier markets. Based on the categorization of countries based on their financial market development: frontier markets are in embryonic stages of financial development (in this case, Ukraine), emerging markets are important financial markets, not fully modernized belonging to countries well developed to attract capital (in this case, Russia, Poland and Czech Republic), and developed markets.
JEL-Codes: G01; G15
Keywords: Multivariate EGARCH models; spillover effects; transition markets; equity markets
No. 203   (Download full text)
Leoni Eleni Oikonomikou
Comparing the market risk premia forecasts in JSE and NYSE equity markets
This paper examines the evidence regarding predictability in the market risk premium using artificial neural networks (ANNs), namely the Elman Network (EN) and the Higher Order Neural network (HONN), univariate ARMA and exponential smoothing techniques, such as Single Exponential Smoothing (SES) and Exponentially Weighted Moving Average (EWMA). The contribution of this paper is the inclusion of the South African market risk premium to the forecasting exercise and its direct comparison with US forecasting results. The market risk premium is defined as the expected rate of return on the market portfolio in excess of the shortterm interest rate for each market. All data are taken from January 2007 till December 2014 on a daily basis. Elman networks provide superior results among the tested models in both insample and out-of sample periods as well as among the tested markets. In general, neural networks beat the naive benchmark model and achieve to perform better than the rest of their linear tested counterparts. The forecasting models successfully capture patterns in the data that improve the forecasting accuracy of the tested models. Therefore, they can be applied to trading and investment purposes.
JEL-Codes: C45; C52; G15; G17
Keywords: forecasting performance; market risk premium; South African stock market; US stock market
No. 202   (Download full text)
Leoni Eleni Oikonomikou
Forecasting the Market Risk Premium with Artificial Neural Networks
This paper aims to forecast the Market Risk premium (MRP) in the US stock market by applying machine learning techniques, namely the Multilayer Perceptron Network (MLP), the Elman Network (EN) and the Higher Order Neural Network (HONN). Furthermore, Univariate ARMA and Exponential Smoothing models are also tested. The Market Risk Premium is defined as the historical differential between the return of the benchmark stock index over a short-term interest rate. Data are taken in daily frequency from January 2007 through December 2014. All these models outperform a Naive benchmark model. The Elman network outperforms all the other models during the insample period, whereas the MLP network provides superior results in the out-of-sample period. The contribution of this paper to the existing literature is twofold. First, it is the first study that attempts to forecast the Market Risk Premium in a daily basis using Artificial Neural Networks (ANNs). Second, it is not based on a theoretical model but is mainly data driven. The chosen calculation approach fits quite well with the characteristics of ANNs. The forecasting model is tested with data from the US stock market. The proposed model-based forecasting method aims to capture patterns in the data that improve the forecasting accuracy of the Market Risk Premium in the tested market and indicates potential key metrics for investment and trading purposes for short time horizons.
JEL-Codes: C45; C52; G15; G17
Keywords: nonlinear models; forecasting performance metrics; market risk premium; US equity market
No. 201   (Download full text)
Stephan Klasen and Malte Reimers
Looking at Pro-Poor Growth from an Agricultural Perspective
Pro-poor growth has been identified as one of the most promising pathways to accelerate poverty reduction in developing countries. The diagnostic pro-poor growth toolbox has so far focused on the income dimension as well as key non-income achievements in education and health. This article contributes to the literature by expanding the toolbox with several new measures that take into account the extraordinary importance of agricultural productivity for poverty reduction in developing countries. We distinguish between land productivity and labor productivity and find that the poor identified by low incomes, poor education outcomes, poor health outcomes, low land productivity and low labor productivity overlap only to a small degree, suggesting that analyses of pro-poor growth from these different perspectives are complementary. The toolbox is then applied to three comparable household surveys from Rwanda (EICV data for the years 1999-2001, 2005- 2006, and 2010-2011), a country that has experienced impressive economic growth since the genocide in the mid-1990s and that has undertaken considerable efforts to increase agricultural productivity and improve the population’s access to social services over the first decade of the 2000s. Our application shows that the enormous progress made in the income, education and health dimension of well-being has been pro-poor according to most definitions of the concept. The new tools reveal that the land productivity-poor experienced pro-poor growth in the relative (and absolute) sense while the labor productivity-poor increased their labor productivity relatively (but not absolutely) faster than the labor productivity-rich even though the former dispose of considerably lower education levels.
JEL-Codes: E6; I3; O1
Keywords: Agricultural Productivity; Inequality; Multidimensional Poverty; Pro-Poor Growth; Rwanda; Sub-Saharan Africa
No. 200   (Download full text)
Stephan Klasen and Rahul Lahoti
How Serious is the Neglect of Intra-Household Inequality in Multi-dimensional Poverty Indices?
Income-based as well as most existing multidimensional poverty indices (MPI) assume equal distribution within the household and thus are likely to lead to yield a biased assessment of individual poverty, and poverty by age or gender. In this paper we first show that the direction of the bias depends on how these measures use individual data to determine the poverty status of households, while the impact of these assumptions on inequality between individual cannot be determined a priori. We then use data from the 2012 Indian Human Development Survey to create a standard household-based MPIs closely related to the MPI proposed by Alkire and Santos (2014) as well as UNDP (2014), and compare that to an individual level MPI that individualizes education and nutrition and some aspects of the living standards dimensions. We find that the poverty rate of females is 14 percentage points higher than that of men in our individual MPI measure but only 2 percentage points higher when using the household-based measure. Similarly, the age differentials in poverty are much larger using the individual-based measure. Using a decomposable inequality measure, we find the contribution of intrahousehold inequality to the total inequality in the individual deprivation score inequality to be 30% and total inequality is also some 30% higher using the individual-based measure, while inequality among the poor is found to be 5% smaller using the individual measure.
JEL-Codes: I3; I32; D1; D13; D6; D63; O5; O53
Keywords: multi-dimensional poverty; poverty measurement; intra-household inequality; India
No. 199   (Download full text)
Marcela Ibanez and Juanita Vasquez
Can we fight drugs using communication campaigns? A framed field experiment
This paper uses a framed field experiment to test the effect of persuasive communication as a strategy in the fight against drugs in Colombia. Our design varies the salience and the degree of informativeness of the messages that participants receive, while highlighting particular negative effects of growing coca in the community. We find that messages that make the relation of coca cultivation with violence salient are the most effective at reducing coca investments. Our results suggest that the main mechanism at play is attitudinal change rather than a change in beliefs. Interestingly, we find that exposure to persuasive messages translates into lower intentions to cultivate coca in the future. We conclude that interventions that aim at increasing “awareness” of the negative effects that coca has in the community are a promising policy instrument in the fight against drugs.
JEL-Codes: A13; G11; D03; D83; K42; Z13
Keywords: Field experiment; attitudinal change; communication campaigns; illegal behavior
No. 198   (Download full text)
Tabea Herrmann and Juliane Zenker
Risk-type and preference-based selection and stability of funeral insurance associations in Thailand
Funeral Aid Associations (FAAs) in Northeast Thailand offer micro funeral insurance at affordable premium levels while they barely risk-rate potential members. Due to the set-up of FAAs, high-risk individuals have a monetary incentive to join the insurance. Compared to many other micro insurance schemes, however, FAAs do not seem to face adverse effects of this unregulated selection of highrisk individuals into the schemes. We show that this is partly due to a counter-balancing selection of a sufficient number of low-risk individuals, who deliberately buy insurance despite what their risk types would advice. This is particularly the case for married individuals who self-select into the associations at relatively lower risks. We provide a theoretical framework showing that marriage may reduce mortality risk and at the same time increase insurance demand based on altruistic tendencies towards the spouse. Our results suggest that this preference based selection is able to balance 13 percent of the high-risk type selection based on age, health, and gender.
JEL-Codes: D14; D82; G22; O12
Keywords: Asymmetric Information; Adverse Selection; Advantageous Selection; Microinsurance; Thailand
No. 197   (Download full text)
Dimitrios Minos
“Eat, my child”. Overweight and obesity among children in developing countries
Childhood obesity in developing countries is a topic that hasn’t found its way in the economic literature yet. Despite the fact that obesity rates are rising worldwide and the phenomenon is very present even among the poorest of households in developing countries, most of the attention is still drawn towards industrialized ones. This paper utilizes the South African NIDS panel data set to highlight some of the aspects policy makers should bear in mind. In particular, drivers of the phenomenon and their resulting policy options that are widely used in industrialized countries may not be appropriate in a developing setting, especially in one where excess body weight is considered by many as a positive outcome.
JEL-Codes: I12; I18; P46
Keywords: obesity; nutrition transition; developing country; South Africa
No. 196   (Download full text)
Dimitrios Minos
Overweight and obesity in low- and middle income countries: A panel-data analysis
The rather small literature on obesity in developing countries mainly uses descriptive statistics and cross section analysis to focus on rising income levels as the source of rapidly increasing obesity rates. This paper uses a new panel dataset comprised of WHO and World Bank data for 126 low- and middle income countries to focus on rapid and urbanization as the main driver of rising obesity levels. The results of the fixed effects estimation suggest that urbanization and lifestyle changes associated with the “Nutrition Transition” are responsible for the phenomenon. Moreover, time invariant effects such as tradition and culture account for the differences in overweight and obesity rates across countries. These findings raise new questions and open up paths for further research and can also lead to direct policy implications drawn from the “Urban Agriculture” literature.
JEL-Codes: I12; I18; P46
Keywords: obesity; nutrition transition; developing countries
No. 195   (Download full text)
Philipp Kolo
A dissimilarity-adjusted index of ethnic diversity: Measurement and implications for findings on conflict, growth and trade
Existing indices of ethnic diversity are generally based on pre-defined groups, disregarding the (dis)similarities between them. This paper proposes an index that includes the dissimilarity in language, ethno-racial characteristcs and religion between groups. The resulting distance-adjusted ethno-linguistic fractionalization index (DELF) is based on highly disaggregated data on the language, ethnic and religious composition of groups and allows an assessment of differentiation between groups within and across countries. The DELF is subsequently applied by replicating some key studies on the effects of ethnic heterogeneity on economic outcomes. The results confirm the generally found growth-reducing effect of ethnic heterogeneity but also shows that this does not hold true for ethnic diversity in more developed countries. As regards the cultural distance between countries and its impact on trade, the DELF is, indeed, a very valuable measure of cultural affinity between countries, also showing this affinity affects trade flows in a positive way, especially of heterogenous goods.
JEL-Codes: C43; D63; D74; F15; O10; Z10
Keywords: Composite Index; Conflict; Distance; Ethno-Linguistic Fractionalization (ELF); Growth; Trade
No. 194   (Download full text)
Rahul Lahoti, Arjun Jayadev and Sanjay G. Reddy
The Global Consumption and Income Project (GCIP): An Overview
We introduce two separate datasets (The Global Consumption Dataset (GCD) and The Global Income Dataset (GID)) making possible an unprecedented portrait of consumption and income of persons over time, within and across countries, around the world. The current benchmark version of the dataset presents estimates of monthly real consumption and income for every percentile of the population (a ‘consumption/income profile’) for more than 160 countries and more than half a century (1960-2015). We describe the construction of the datasets and demonstrate possible uses by presenting some sample results concerning the distribution of consumption, poverty and inequality in the world.
JEL-Codes: B41; C80; I30; I32; O10; O15
Keywords: Consumption; Income; Growth; Global Income Distribution; Poverty; Inclusive Growth; Inequality
No. 193   (Download full text)
Arjun Jayadev, Rahul Lahoti and Sanjay Reddy
The Middle Muddle: Conceptualizing and Measuring the Global Middle Class
Interest in the emergence of a global middle class has resulted in a number of attempts to identify and enumerate who belongs to it . Current research provides wildly different estimates about the size and evolution of the global middle class because of a lack of consensus on appropriate identification criteria for a person to be deemed to be middle class. We identify three competing and often conflated understandings in the literature on the subject. We further argue that for at least two of these understandings, the literature has been using inappropriate thresholds for identification. Using data from the Global Consumption and Income Project, we provide estimates of the size, composition and evolution of the global middle class for three competing understandings and contrast these to existing estimates.
JEL-Codes: D30; D31; D60; D63; E21;O50; O10
No. 192   (Download full text)
Fabian Dunker
Convergence of the risk for nonparametric IV quantile regression and nonparametric IV regression with full independence
In econometrics some nonparametric instrumental regression models and nonparametric demand models with endogeneity lead to nonlinear integral equations with unknown integral kernels. We prove convergence rates of the risk for the iteratively regularized Newton method applied to these problems. Compared to related results we relay on a weaker non-linearity condition and have stronger convergence results. We demonstrate by numerical simulations for a nonparametric IV regression problem with continuous instrument and regressor that the method produces better results than the standard method.
JEL-Codes: C13; C14; C31; C36
Keywords: Nonparametric regression; instrumental variables; nonlinear inverse problems; iterative regularization
No. 191   (Download full text)
Debosree Banerjee, Marcela Ibanez, Gerhard Riener and Meike Wollni
Volunteering to Take on Power: Experimental Evidence from Matrilineal and Patriarchal Societies in India
Gender equity in the creation and enforcement of social norms is important not only as a normative principle but it can also support long term economic growth. Yet in most societies, coercive power is in the hands of men. We investigate whether this form of segregation is due to inherent gender differences in the willingness to volunteer for take on positions of power. In order to study whether potential differences are innate or driven by social factors, we implement a public goods game with endogenous third-party punishment in matrilineal and patriarchal societies in India. Our findings indicate that segregation in coercive roles is due to conformity with pre-assigned gender roles in both cultures. We find that women in the matrilineal society are more willing to assume the role of norm enforcer than men while the opposite is true in the patriarchal society. Moreover, we find that changes in the institutional environment that are associated with a decrease in the exposure and accountability of the norm enforcer, result in increased participation of the segregated gender. Our results suggest that the organizational environment can be adjusted to increase representation of women in positions of power, and that it is critical to take the cultural context into account.
JEL-Codes: C90; C92; C93; C92; D03; D70; D81; J16
Keywords: Gender; Norm enforcement; Segregation; Third party punisher; Public goods game
No. 190   (Download full text)
Nathalie Scholl
The Impact of Trade on Wage Inequality in Developing Countries: Technology vs. Comparative Advantage
Since the expansion of world trade in the 1980s, measures of inequality have risen not only in developed countries, but also throughout the developing world. This stylized fact is contrary to the predictions of classical trade theory that in countries with high endowments of unskilled labor, their wages should rise relative to those of skilled labor. This paper empirically tests the effects of trade on wage inequality in a differentiated panel framework where countries are classified according to their relative human capital endowments, constituting also the relevant comparative advantage in trade. Employing a newly constructed measure of technological change, an important source of omitted variable bias, not yet addressed in the literature, is removed. With the inclusion of this measure, several effects otherwise attributed to trade disappear, underscoring the importance of controlling for technological change. Technology transfer as well as technological change is found to take place particularly in industries and trade flows classified as medium-technology intensive. Evidence is also found for pure “trade”- effects, supporting the Heckscher-Ohlin predictions of the effects of trade on wage inequality once the heterogeneity of the trading partners and the traded goods is taken into account.
JEL-Codes: F14; F16; J31
Keywords: Wages; Inequality; Trade; Technology Transfer
No. 189   (Download full text)
Sanjay G. Reddy and Rahul Lahoti
$1.90 Per Day: What Does it Say?
The World Bank’s global poverty estimates suffer from deep-seated problems arising from a single source, the lack of a standard for identifying who is poor and who is not that is consistent and meaningful. The new choice of an international poverty line of $1.90 (2011 PPP) does not in any way resolve these problems. We present alternate estimates of global, regional and national poverty based on reasoning as to what the Bank’s own method, consistently applied, would entail. These show an increase in the absolute number of poor since 1980 or 1990 for certain choices of poverty line. However, we recommend an approach to income poverty assessment that is altogether different, focusing directly on identifying the real requirements of human beings to attain incomedependent human capabilities.
JEL-Codes: I32
Keywords: Global Poverty; International Poverty Line; World Bank; Welfare; Capability; alternate estimates; purchasing power parity
No. 188   (Download full text)
Atika Pasha
Regional Perspectives to the Multidimensional Poverty Index
The Multidimensional Poverty Index (MPI) is not the first attempt to examine poverty along multiple definitions. Vis-a-vis the existing work and other presently available measures, this method has greater advantage in terms of international comparability and reporting. However, the methodology of the Multidimensional Poverty Index (MPI) has been under strong scrutiny since its inception. One of the reasons for these critiques lies in the variation in the MPI country ranks and scores based on different indicators and a different weighing scheme. This paper analyzes the consequences of a different weighting scheme within the MPI, using a more data driven approach rather than a normative or equal weighting scheme. It attempts to assess this alternative weighting via its impact on the scores and relative ranking of various countries. Moreover, it attempts to resolve the differences in the definition of poverty that might emerge upon changing indicators, and thereby evaluate how this affects the construction of the MPI. An analysis covering 22 countries, using the Demographic and Health Survey data, is carried out to quantitatively evaluate the weights assigned to each of the indicators, using the technique of Principal Component Analysis (PCA) and Multiple Correspondence Analysis (MCA). A more detailed country-level analysis is carried out for India, wherein additional indicators based on the data are made available and therefore an alternative multidimensional construct is possible. The analysis shows that equal weighting of the three dimensions cannot be statistically justified and that in trying to capture a more multidimensional view of poverty and well-being, there might actually not be so much multidimensionality in the MPI.
JEL-Codes: I32; C43
Keywords: Multidimensional poverty; weights; PCA; MCA; PLS
No. 187   (Download full text)
Rivayani Darmawan, Stephan Klasen and Nunung Nuryartono
Migration and Deforestation in Indonesia
Indonesia now has the highest deforestation rate in the world, with an average increase of about 47,600 ha per year. As a result, the nation is one of the largest emitters of greenhouse gases in the world and putting its rich biodiversity at risk. Although the literature discussing the political economy of Indonesia commercial’s logging is growing, only a small amount focuses on the relationship between migration and deforestation. Migration may contribute to the forest cover change, as migrants often face serious constraints from the local residents in claiming the land, and thus tend to find new forest land which can be used as a means of living or converted into an agricultural plantation. This paper empirically investigates the relationship between recent in-migration and deforestation in Indonesia. By combining available population census data with the satellite image data MODIS, we find a significant positive relationship between migration and deforestation at the district level using a fixed effects panel econometric framework. The results also suggest that the expanding oil palm production is one significant driver for the fast disappearance of Indonesia’s forest.
JEL-Codes: Q23; R14; J61
Keywords: deforestation; migration; oil palm; Indonesia
No. 186   (Download full text)
Mohammad Iqbal Irfany, Stephan Klasen and Rezky Syahrezal Yusuf
The consumption-based carbon footprint of households in Sulawesi, Jambi and Indonesia as a whole in 2013
This study analyzes the consumption-based carbon footprint of households in Sulawesi, Jambi and Indonesia as a whole. Combining the use of the GTAP data for emission intensities, of input-output tables for inter-industry linkages with household expenditure categories, we then estimate and calculate the carbon footprint from household consumption, including its drivers, pattern and decomposition of increasing household emission intensities. We find that the main driver of carbon footprint is overall household income, but that differentials in fuel, light and transportation expenditures are key drivers of the household carbon footprint. These expenditures also ensure that the carbon footprint of household in Jambi is higher than in Indonesia as a whole, despite lower per capita incomes. At the same time, substantially lower income inequality in Jambi ensures that the inequality in the carbon footprint is much lower in Jambi than in Indonesia as a whole; particularly noteworthy is the poorer quintiles in Jambi have substantially higher emissions than average Indonesian households in the same quintiles. In Sulawesi, average emissions are much lower and also not as unequal than in Indonesia as a whole. Overall expenditures are by far the most important driver of household carbon emissions, but in Jambi, emissions are higher at all expenditure levels, suggesting particularly carbon-intensive consumption patterns.
JEL-Codes: Q54; D12; O13
Keywords: Development economics; carbon footprint; household emissions; comparison of Sulawesi, Jambi, and National SUSENAS
No. 185   (Download full text)
Kai Gehring, Katharina Michaelowa, Axel Dreher and Franziska Spörri
Do we know what we think we know? Aid fragmentation and effectiveness revisited
Aid fragmentation is widely recognized as being detrimental to development outcomes. We re-investigate the impact of fragmentation on aid effectiveness in the context of growth, bureaucratic policy, and education, focusing on a number of conceptually different indicators of fragmentation, and paying attention to potentially heterogeneous effects across countries. Our results demonstrate the lack of robustness and any systematic pattern. This stresses the importance of questioning the sweeping conclusions drawn by much of the previous literature.
JEL-Codes: F35; O11
Keywords: aid effectiveness; fragmentation
No. 184   (Download full text)
Stephan Klasen, Tatyana Krivobokova, Friederike Greb, Rahul Lahoti, Syamsul Hidayat Pasaribu and Manuel Wiesenfarth
International Income Poverty Measurement: Which way now?
In this paper, we critically review conceptual and empirical issues surrounding the derivation of the international poverty line, expressed in PPP-adjusted dollars and linked to various rounds of the International Comparison of Prices (ICP). We find that there are some limitations in the current estimation of these lines, but show that statistically superior methods lead to lines that are relatively robust and confirm the $1.25 using 2005PPPs and suggest $1.67-1.71 using 2011PPPs; they also roughly confirm the current shape of the proposed 'weakly relative' poverty line. Using the new absolute line using 2011 PPPs would lead to substantially lower poverty in our estimation. The extent of the decline depends on whether and how one treats China, India, and Indonesia differently from other countries in the 2005 and 2011 PPPs. More seriously, we note that the dependence on the conceptual and empirical problems associated with the link to successive ICP rounds creates problems that have gotten worse over time so that we suggest that it would be best to consider alternatives to the current reliance on ICP rounds and the resulting PPPs. As a quick fix we propose to fix the international poverty line in national currencies using either the 2005 or 2011 level; in the medium term, we argue for global poverty measurement based on internationally coordinated national poverty measurement.
JEL-Codes: I32
Keywords: poverty; World Bank; dollar-a-day; weakly relative poverty
No. 183   (Download full text)
Maria C. Lo Bue
The Nutrition-Learning Nexus: Evidence from Indonesia
This paper investigates the effect of nutritional status on subsequent educational achievements for a large sample of Indonesians children. I use a long term panel data set and apply a maternal fixed effect plus an instrumental variables estimator in order to control for possible correlation between some of the components of the error term and the main independent variable which will likely to cause a bias in the estimates. Differences in nutritional status between siblings are identified by using exposure in the earliest months of life to the drought associated with the Indonesian wildfires of late 1997. Estimation results show that health capital (measured by height-for-age z-scores at childhood) significantly and positively affects the number of completed grades of schooling and the score on cognitive test. Nevertheless, I only find little robust evidence of an effect on the readiness to enter school.
JEL-Codes: I12; I20; O15; O53
Keywords: Educational achievement; child nutrition; siblings’ difference models; environmental shocks; Indonesia
No. 182   (Download full text)
Laura Metzger and Isabel Günther
Making an impact? The relevance of information on aid effectiveness for charitable giving. A laboratory experiment.
A considerable and increasing share of foreign aid stems from private donations. Hence, individual donors can increase social welfare in developing countries by directing their funds to the most effective NGOs. Surprisingly few studies have analyzed whether private donors care about aid effectiveness when they donate to an international charity. In a laboratory experiment, we investigate if private donors seek information about the exact impact of their donation to an international NGO before they donate. Furthermore, we investigate how relevant private donors find information about aid impact compared to information about administrative costs, and the recipient type who benefits from a donation. First, we find that a relatively small share of individuals makes a well-informed donation decision. Second, the demand for information about aid impact is lowest, and it is highest for information about the recipient type. Third, exact information about aid impact did not lead to a significant change in average donation levels, while information about the exact recipient type and administrative costs led to a significant change in donation levels. In the recipient type group, informed participants donated significantly more than uninformed participants because they “rewarded” the preferred recipient with higher-thanaverage transfers. In the administration costs group, informed participants donated significantly less than uninformed participants because they used the information to “punish” NGOs with high administration costs.
JEL-Codes: D64;L31;O12
Keywords: Charitable giving; aid impact; aid effectiveness; fairness; social preferences
No. 181   (Download full text)
Merle Kreibaum and Stephan Klasen
Missing Men: Differential Effects of War and Socialism on Female Labour Force Participation in Vietnam
We investigate the effect of the Vietnam War and the socialist regime in the Northern part of the country on female labour force participation. We differentiate the effect across birth cohorts, thus comparing immediate and long-term impacts. After presenting a theoretical model implying effects due to the role played by the ‘added workers’ and cultural change, we use data from three national household censuses in 1989, 1999, and 2009 to estimate probit models of determinants of women’s choice to enter the labour market. Proxying war intensity with the provincial share of female population after the war, the effect of ‘missing men’ on the work status of women is found to be positive and significant for those cohorts directly affected by the war. For those cohorts entering working age after the end of the conflict, the effect is still positive but smaller and in some specifications insignificant. Living in the Northern part of the country increases the likelihood of a woman working by around eleven percentage points, suggesting a larger and more persistent effect of socialism on female labour force participation.
JEL-Codes: F51; J16; J20; O15; P2
Keywords: Female labour force participation; conflict, Socialism; Vietnam
No. 180   (Download full text)
Werner Bönte, Ute Filipiak and Sandro Lombardo
Get in with a Foreigner: Consumer Trust in Domestic and Foreign Banks
Prior research suggests that trust plays an important role for individuals' participation in stock markets. This paper focuses on potential customers in retail banking markets and empirically investigates their trust in foreign banks and domestic banks. Using a large survey on savings patterns of Indian households, we find that potential retail banking customers in India are less likely to trust foreign banks with their money than Indian private banks. However, our results also suggest that highly educated Indians using information sources tend to have more confidence in foreign banks than in Indian private banks.
JEL-Codes: G2; D8; Z1
Keywords: Trust; Banking; India
No. 179   (Download full text)
Andreas Fuchs and Kai Gehring
The Home Bias in Sovereign Ratings
Credit rating agencies are frequently criticized for producing biased sovereign ratings. This article discusses how the home country of rating agencies could affect rating decisions as a result of political economy influences and cultural distance. Using data from nine agencies based in six countries, we test whether agencies assign better ratings to their home countries, as well as to countries economically, geopolitically and culturally aligned with them. Our results show biases in favor of the respective home country, culturally more similar countries, and countries in which home‐country banks have a larger risk exposure. Linguistic similarity seems to be the main transmission channel that explains the advantage of the home country.
JEL-Codes: G24; F34; H63; F65; G15
Keywords: Sovereign debt ratings; credit rating agencies; home bias; international finance; cultural distance; bank exposure
No. 178   (Download full text)
Stephan Klasen, Katrin M. Meyer, Claudia Dislich, Michael Euler, Heiko Faust, Marcel Gatto, Elisabeth Hettig, Dian N. Melati, I. Nengah Surati Jaya, Fenna Otten, César Perez, Stefanie Steinebach, Suria Tarigan and Kerstin Wiegand
Economic and ecological trade-offs of agricultural specialization at different spatial scales
Specialization in agricultural systems leads to trade-offs between economic gains and ecosystem functions. Economic gains can be maximized when production activities are specialized at increasingly broader scales (from the household to the village, region or above), particularly when markets for outputs and inputs function well and allow specialization as well as high levels of food security. Conversely, a tendency toward specialization likely reduces biodiversity and significantly limits ecosystem functions at the local scale. When agricultural specialization increases and moves to broader scales as a result of improved infrastructure and markets, ecosystem functions can also be endangered at broader spatial scales. Policies to improve agricultural incomes through improvements in infrastructure and the functioning of markets thus affects the severity of the trade-offs. This paper takes Jambi province in Indonesia, a current hotspot of rubber and oil palm monoculture, as a case study to illustrate these issues. In doing so, it empirically investigates the trade-offs between economic gains and ecosystem functions for three spatial levels of scale (i.e. household, village, and region) and discusses ways to resolve these trade-offs.
JEL-Codes: Q13; Q57
Keywords: Ecosystem services; economies of scale; Indonesia; monoculture; oil palm; rubber
No. 177   (Download full text)
Mohammad Iqbal Irfany
Inequality in emissions: Evidence from Indonesian households
Although the literature on emission inequality is abundant, this study will differentiate itself by focusing on emission inequalities at the household level due to the disparity in household expenditure profiles. We further separate measures on emission inequality based on household characteristics as well as decompose it into sources of emission. Employing a common application for analyzing inequalities, results show that as per capita expenditure increases, within quintiles emission inequality tends to decline until the middle quintiles but then further increases in expenditure level and worsens emission inequality until the richest household. The decomposition of inequality based on emission sources suggests that energy-transportation dominantly contributes of the overall emission inequality.
JEL-Codes: O12; O13; D12; D63
Keywords: carbon footprint; household; inequality
No. 176   (Download full text)
Ute Rink, Yabibal Walle and Stephan Klasen
The Financial Literacy Gender Gap and the Role of Culture
This paper empirically investigates the role of culture in explaining the frequently reported differences in financial literacy between women and men. Using nationally representative survey data from India, we find that women are significantly less financially literate than men. This gender gap is not observable, however, when we only consider matrilineal states. Moreover, matrilineal women are more financially knowledgeable than patriarchal women. Using the Blinder-Oaxaca decomposition method, we find that education, English language skills and the use of different information sources, such as newspapers and TV, are key transmission channels in explaining differences in financial knowledge between men and women in patriarchal states, and between patriarchal and matrilineal societies.
JEL-Codes: O1; I3; Z1
Keywords: Gender, financial literacy, culture, matrilineal and patriarchal societies, Blinder- Oaxaca decomposition
No. 175   (Download full text)
Austin M. Strange, Bradley Parks, Michael J. Tierney, Andreas Fuchs and Axel Dreher
Tracking Under-Reported Financial Flows: China’s Development Finance and the Aid-Conflict Nexus Revisited
China’s provision of development finance to other countries is sizable but reliable information is scarce. We introduce a new open source methodology for collecting project-level development finance information and create a database of Chinese official finance to Africa from 2000-2011. We find that China’s commitments amounted to approximately US$ 73 billion, of which US$ 15 billion are comparable to Official Development Assistance following OECD definitions. We provide details on 1,511 projects to 50 African countries. We use this database to extend previous research on aid and conflict, which suffers from omitted variable bias due to the exclusion of Chinese development finance. Our results show that sudden withdrawals of “traditional” aid no longer induce conflict in the presence of sufficient alternative funding from China. Our findings highlight the importance of gathering more complete data on the development activities of “non-traditional donors” to better understand the link between aid and conflict.
JEL-Codes: F35; F51; D74
Keywords: Development Finance; Foreign Aid; Non-DAC Donors; South-South Cooperation; China; Africa; Aid Shocks; Violent Armed Conflict; Civil War; Intrastate War
No. 174   (Download full text)
Arjun Jayadev, Rahul Lahoti and Sanjay G. Reddy
Who got what, then and now? A Fifty Year Overview from the Global Consumption and Income Project
Using newly comprehensive data and tools from the Global Consumption and Income Project or CGIP, covering most of the world and five decades, we present a portrait of the changing global distribution of consumption and income and discuss its implications for our understanding of inequality, poverty, inclusivity of growth and development, world economic welfare, and the emergence of a global ‘middle class’. We show how regional distributions of income and consumption have evolved very differently over time. We also undertake sensitivity analysis to quantify the impact of various choices made in database construction and analysis. We find that levels of consumption and income have increased across the distribution, that the global distribution has become more relatively equal due to falling inter-country relative inequality, and that by some measures global poverty has declined greatly but by others it has hardly declined at all, even over the fifty years. The global middle class has grown markedly in certain countries but only slightly worldwide. Most of the marked changes have occurred after 1990. China’s rapid economic growth is by far the most important factor underlying almost all of them, notwithstanding sharply increasing inequalities within the country. Most improvements outside of China are associated with rapid developing country growth after 2000, and are of unknown durability. Country-experiences vary widely; there is for instance some evidence of ‘inequality convergence’ with previously more equal countries becoming less equal over time and the obverse. We provide support for previous findings (e.g. the replacement of the global ‘twin peaks’ by a unimodal distribution) but also arrive at some conclusions that overthrow old ‘stylized facts’ (e.g. that the Sub-Saharan African countries, and not Latin American ones, have the highest levels of inequality in the world, when measured using standardized surveys). The GCIP provides a resource for ongoing analysis, and forecasting, of developments in the world distribution.
JEL-Codes: D30; D31; D60; D63; I30; O10; O15; P50
Keywords: Global Distribution; Inequality; Poverty; Economic Growth; Welfare
No. 173   (Download full text)
Jisu Yoon and Stephan Klasen
An Application of Partial Least Squares to the Construction of the Social Institutions and Gender Index (SIGI) and the Corruption Perception Index (CPI)
In this paper the Social Institutions and Gender Index (SIGI) is constructed with Principal Component Analysis (PCA) and Partial Least Squares (PLS). Using the SIGI, we test the effects of social institutions related to gender inequality on several development outcomes, such as female education, fertility, child mortality and corruption, controlling for relevant determinants. As the measure of corruption we use the Corruption Perception Index (CPI), considering alternative weighting procedures using PCA and PLS. We find that gender inequality in social institutions has significant effect on fertility and corruption regardless of the weighting procedure, while for female education and child mortality only the SIGI based on PLS generates significant results.
JEL-Codes: C43; J16; B54; D73
Keywords: Social Institutions and Gender Index; SIGI; Corruption Perception Index; CPI; Principal Component Analysis; PCA; Partial Least Squares; PLS; non-metric variables
No. 172   (Download full text)
Jisu Yoon and Tatyana Krivobokova
Treatments of Non-metric Variables in Partial Least Squares and Principal Component Analysis
This paper reviews various treatments of non-metric variables in Partial Least Squares (PLS) and Principal Component Analysis (PCA) algorithms. The performance of different treatments is compared in the extensive simulation study under several typical data generating processes and recommendations are made. An application of PLS and PCA algorithms with non-metric variables to the generation of a wealth index is considered.
JEL-Codes: C15; C43; R20
Keywords: Principal Component Analysis; PCA; Partial Least Squares; PLS; non-metric variables; simulation; wealth index
No. 171   (Download full text)
Jisu Yoon, Stephan Klasen, Axel Dreher and Tatyana Krivobokova
Composite Indices Based on Partial Least Squares
In this paper, we compare Principal Component Analysis (PCA) and Partial Least Squares (PLS) methods to generate weights for composite indices. In this context we also consider various treatments of non-metric variables when constructing such composite indices. Using simulation studies we find that dummy coding for non-metric variables yields satisfactory performance compared to more sophisticated statistical procedures. In our applications we illustrate how PLS can generate weights that differ substantially from those obtained with PCA, increasing the composite indices' predictive performance for the outcome variable considered.
JEL-Codes: C15; C43; R20; F63
Keywords: Principal Component Analysis; PCA; Partial Least Squares; PLS; non-metric variables; wealth index; globalization
No. 170   (Download full text)
Kai Gehring, T. Florian Kauffeldt and Krishna Chaitanya Vadlamannati
Crime, Incentives and Political Effort: A Model and Empirical Application for India
The large share of politicians facing criminal accusations in India has sparked a public debate and an emerging literature that assesses its causes and effects. We develop a model of the incentives faced by members of parliament when deciding whether to engage in effort for their constituency to assess the effect of their having a criminal background on their decision. We use direct and clearly identifiable measures of effort in the 14 Lok Sabha over the 2004-2009 legislative period: attendance rates, parliamentary activity, and utilization rates of a local area development scheme. The findings suggest that criminal MPs exhibit on average about 5% lower attendance rates and lower utilization rates, but no difference in parliamentary activity. The results depend on the development level of the constituency, a proxy for rent-seeking possibilities and monitoring intensity, as well as on the measurement of criminal background. We use selection on observables, matching techniques, and treatment effect regressions to demonstrate why these negative relations should constitute an upper bound estimate for the causal effect of criminality and to show they are unlikely to be driven by selection on unobservabels.
JEL-Codes: D72; H11; I38
Keywords: India; Elections; Crime; Good and bad politicians; Development; Attendance and activity in parliament; Political economy
No. 169   (Download full text)
Jürgen K. Zattler
The Debate on Growing Inequality – Implications for Developing Countries and International Co-operation
A body of recent research is pointing to a growing inequality in many countries. The current debate focuses on high income countries. However, developing countries are an important element in understanding the full picture. First, evidence indicates that growing inequality can also be observed in many developing countries, in particular if top income and wealth evolution is taken into account, a phenomenon which is at variance with conventional economic theory. This has a multitude of economic, political and social implications for the respective countries. In particular, high inequality is linked with political instability, financial fragility and can undermine economic growth. Secondly, developing countries form an increasingly important part of the world economy. Therefore, options to combat inequality must take into account this broader picture.
For any solution, one has to understand the driving forces behind growing inequality. Piketty’s central claim is that the free-market system has a natural tendency towards increasing the concentration of wealth. However, there are strong arguments that ever growing inequality is not sustainable in the long-term, in particular because it would eventually slow down economic growth, increase debt levels as well as social and political instability. It is argued in this article that the tendency to accumulate capital at the top seems to lead periodically to unsustainable situations, whereby “external factors” such as wars, technological innovations, government re-distribution and bail-outs can rebalance (and have in fact in the past rebalanced) the system for some time.
Governments of developing countries must act on two fronts to contain rising inequality: On the one hand, they have to scale-up domestic resource mobilisation in order to enhance social investments and re-distribution, as many Latin American countries did successfully in the last decade. On the other hand, they must foster the inclusiveness and resilience of their development strategies. Correspondingly, development institutions should go beyond their current focus on extreme poverty and take into account inequality – in terms of general approaches, country support and strategies as well as instruments. Finally, the issue should be adequately taken up within the new “Post-2015” framework.
JEL-Codes: E21; E24; H20; 020
Keywords: Inequality; financial stability; developing countries
No. 168   (Download full text)
Ronald B. Davies and Stephan Klasen
Of Donor Coordination, Free-Riding, Darlings, and Orphans: The dependence of bilateral aid on other bilateral giving
Using data from 1988 to 2007, we examine to what extent bilateral aid flows of an individual donor to a country depend on aid flows from all other bilateral and multilateral donors to that country in that year. We thereby want to assess to what extent donor coordination, free-riding, selectivity, specialization, and common donor motivations drive bilateral aid allocation as these determinants would point to different dependence structures. Using approaches from spatial econometrics and controlling for endogeneity, we find that other bilateral flows lead to a significant increase in aid flows from a particular donor. The effects are particularly pronounced for recipients in Africa and the Middle East and so-called donor ‘orphans’ who seem to be collectively shunned by bilateral aid donors. The positive dependence also seems to be related to donors following the lead of the largest donors. Over time, the positive dependence has become smaller. Overall the results suggest that donor coordination and free-riding are quantitatively less important than common donor interests and selectivity.
JEL-Codes: F35; F42
Keywords: aid; donor coordination; aid darlings; aid orphans
No. 167   (Download full text)
Anna Minasyan
Your development or mine? Effects of donor-recipient cultural differences on the aid-growth nexus
Development aid from the West may lead to adverse growth effects in the global South due to the neglected cultural context in the development framework. There is evidence that development agendas are mainly premised upon western thought and belief systems. Therefore, I hypothesize that the expected effect of development aid on the economic growth of recipients is impaired by cultural differences between western donors and aid recipients. I test this hypothesis empirically by augmenting an aid-growth model with proxy variables of cultural distance between donors and recipients. Namely, based on the theory of cultural transmission, I use donor-recipient weighted genetic distance, to capture vertical transmission of culture. Then, I use western education of the chief executive of the recipient country to capture horizontal transmission of culture. Results of OLS panel estimation in first differences for 1961-2010 period show that a one unit increase in donor-recipient genetic distance reduces the effect of aid on growth by 0.2 percentage points, if aid is increased by one percentage point. In turn, a one percentage point increase in aid yields, on average, 0.3 percentage point increase in growth after a decade, if the leader in power has western education.
JEL-Codes: O111; O170; O190
Keywords: aid effectiveness; cultural differences; genetic distance; western education
No. 166   (Download full text)
Kenneth Harttgen, Stephan Klasen and Ramona Rischke
Analyzing Nutritional Impacts of Price and Income Related Shocks in Malawi: Simulating Household Entitlements to Food
The 2007/2008 food price crisis and the following global economic recession has (temporarily) increased the number of people to suffer from hunger. While the impacts can be measured with precision only ex post, for policy makers it is critical to get a sense of likely impacts ex ante in order to plan approaches to mitigate these impacts. In this paper we adopt a very simple micro-based simulation approach to analyze how changes in prices of specific food groups, such as maize prices or prices for staple foods, as well as how negative short-term household level income shocks affect the entitlements to calorie consumption of individuals and how these changes affect overall food poverty. We illustrate our approach using household survey data from Malawi. We find that food poverty is of serious concern with large within-country variations. We find that price shocks for staple foods have a very large impact on food security with particularly strong effects on poor net food buyers in rural and urban areas. This paper demonstrates that it is possible to estimate food security impacts of price and income shocks ex ante in a relatively straightforward fashion that can be done relatively quickly and that is suitable for cross-country assessments of the likely impacts of shocks on food security and the design of appropriate response measures.
JEL-Codes: C4; D6; I3
Keywords: Price shock; Income shock; Simulation approach; Food security; Entitlement approach
No. 165   (Download full text)
Stephan Dietrich and Marcela Ibanez
Impact of Weather Insurance on Small Scale Farmers: A Natural Experiment
This paper explores the impacts of traditional agricultural insurance that offers protection against climatic shocks on small-scale tobacco farmers in Colombia. We analyze the impacts of access to the insurance on household financial outcomes after a period of severe climatic events that caused substantial crop failures. Our identification strategy benefits from a natural experimental setup of the form in which the insurance was launched. We find that tobacco producers with access to the insurance program were less likely to acquire informal loans, were less likely to use loans to repay debts, and had access to loans with lower interest rates and longer maturation periods. Moreover, access to this program was positively associated with increased savings and accumulation of liquid assets.
JEL-Codes: G22; G23; O13; O16; Q14
Keywords: Insurance; Credit; Natural Disasters; Risk Management; Colombia
No. 164   (Download full text)
Stephan Klasen and Simon Lange
Accuracy and Poverty Impacts of Proxy Means-Tested Transfers: An Empirical Assessment for Bolivia
In the absence of reliable and exhaustive income data, Proxy Means Tests (PMTs) are frequently employed as a cost-effective way to identify income-poor beneficiaries of targeted anti-poverty programs. However, their usefulness depends on whether proxies accurately identify the income poor. Based on Receiver Operating Characteristics (ROC)-analysis, we find that PMTs perform poorly in terms of identifying poor households in Bolivian data when transfers are targeted narrowly to the poor but that the true positive rate is highly responsive to increases in the proportion of beneficiaries. Using non-parametric regression-techniques, we show that the resulting leakage can largely be confined to the non-poor close to the poverty line. However, simulating the impact on poverty measures of a uniform transfer to beneficiaries across inclusion rates suggests that the largest poverty impact is attained with very narrow targeting. Hence, the link between targeting accuracy and poverty impact is weak.
JEL-Codes: C52; I38; O21
Keywords: targeting; transfers; social assistance; proxy means tests; poverty; ROC-analysis; Latin America; Bolivia
No. 163   (Download full text)
Simon Lange and Marten von Werder
The Effects of Delayed Tracking: Evidence from German States
Germany's education system stands out among OECD countries for early tracking: students are tracked into different secondary school types at the age of ten in most German states. In this paper we estimate the effects on educational outcomes of a reform that delayed tracking by two years. While our findings suggest that the reform had no effect on educational outcomes on average, we find a positive effect on male students with uneducated parents and a negative effect on males with educated parents. The reform thus increased equality of opportunity among males, yet not among females. We argue that the gendered pattern is best explained by developmental differences between boys and girls at the relevant age.
JEL-Codes: I21; I24; I28; J62
Keywords: tracking; educational institutions; intergenerational mobility
No. 162   (Download full text)
Simon Lange and Malte Reimers
Livestock as an Imperfect Buffer Stock in Poorly Integrated Markets
Livestock holdings in rural areas of the West African Semi-arid Tropics (WASAT) are often substantial yet there is little evidence for precautionary saving in the form of livestock out of transitory income. The present paper re-visits farm households’ ability to smooth consumption ex post via savings in the form of livestock. Exploiting two comprehensive panel datasets covering Burkina Faso’s 2004 drought, we find that livestock sales increase significantly in response to drought. Consistent with consumption smoothing, the motive frequently cited by households for these extra sales is the need to finance food consumption. Using deviations in rainfall to extract the transitory component of crop profit, we find evidence that shocks are nevertheless to a large extent passed on to consumption expenditure. In line with the literature, our results suggest that some consumption smoothing is achieved via adjustments to grain stocks while households apparently fail to smooth consumption by adjusting livestock holdings. We argue that this seemingly contradictory finding is largely due to a decrease in relative livestock prices during droughts. This suggests that selling livestock is a costly coping strategy which may be the reason that households rely on it only to a limited extent.
JEL-Codes: D14; D91; O16; Q12
Keywords: precautionary saving; livestock; risk and coping strategies; price risk; Africa; WASAT
No. 161   (Download full text)
M. Iqbal Irfany
Affluence and emission trade-offs: evidence from Indonesian household carbon footprint
The objectives of this study are to analyze the household carbon footprint pattern in Indonesia and to analyze the determinants of the growing carbon footprint in this emerging economy. To measure the household emissions, we combine national input-output, emission database to generate sectoral CO2 emission intensities and matched these intensities with two waves of national expenditure surveys from 2005 and 2009. We then use this household CO2 emission for investigating the drivers of the rise in emissions from the micro perspective. Comparing CO2 intensities, the results show that transportation, fuel-light, are the two most intensive emitting sectors in Indonesia. We also found a significant difference of household carbon emission comparing between per capita expenditure level, region, and education. Regression analysis suggests that expenditure is the main determinant of household emission. Although other household characteristics determine the variation of emission, it is shown that varying affluent level differs significantly in term of carbon footprint. The decomposition analysis confirms that changes in emission are dominantly contributed by the rise of expenditure comparing between household level and over the two periods. Expenditure elasticities analysis suggest that the rise of household emission is mainly caused by general volume increase in overall household consumption, and not by shifting the share of expenditure amongst consumption basket.
JEL-Codes: O120; O130; Q54; Q56; Q410
Keywords: carbon footprint; household; Indonesia
No. 160   (Download full text)
Junaid Ahmed and Mazhar Mughal
How do consumption patterns of foreign and domestic remittance recipients and non recipients compare? Evidence from Pakistan
This study analyzes the differential consumption patterns of foreign and domestic remittances to migrant households in Pakistan using Working-Leser framework and propensity score matching. Findings point to differing consumption behaviour across foreign and domestic recipients. Foreign remittances are considered as fungible and spent in the same way as other sources of income. In contrast, domestic remittances are considered a less permanent source of income and are spent more on improving the households’ human capital.
JEL-Codes: O12; O15; O53
Keywords: Expenditure; consumption patterns; foreign remittances; domestic remittances; Pakistan
No. 159   (Download full text)
Elena Gross and Isabel Günther
Why don’t households invest in latrines: health, prestige, or safety?
70 percent of the rural population in sub-Saharan Africa does not use adequate sanitation facilities. In rural Benin, as much as 95 percent of the population has no access to improved sanitation. This paper explores why households remain without latrines analyzing a representative sample of 2000 rural households. Our results show that wealth and latrine prices play the most decisive role for sanitation demand and ownership. At current income levels, sanitation coverage will only increase to 50 percent if costs for construction are reduced from currently $200 USD to $50 USD per latrine. Our analysis also suggests that previous sanitation promotion campaigns, which were based on prestige and modern lifestyle as motives for latrine construction, have had no success in increasing sanitation coverage. Moreover, improved public health, which is the objective of public policies promoting sanitation, is also difficult to achieve at low sanitation coverage rates. Fear at night, especially of animals, and personal harassment, are stated as the most important motivational factors for latrine ownership and the intention to build one. We therefore suggest that new low cost technologies should be introduced on rural markets and that social marketing strategies should be adjusted accordingly.
JEL-Codes: D12; O12; O31; O55
Keywords: Sanitation; Sanitation Demand; Willingness to pay; Motivational factors
No. 158   (Download full text)
Moises Neil V. Seriño
Do Philippine Households Lead a Carbon Intensive Lifestyle?
This paper estimates carbon emission from household consumption and investigates its determinants. We derive total household carbon emission by using the mechanism of input-output analysis combine with household expenditure for 2005 and 2006. Our estimation shows that fuel and light followed by transportation are the most carbon intensive goods while nondurable goods are the least carbon intensive. After controlling for household characteristics, the analyses reveal that income has a significant nonlinear relationship with carbon emission depicting an inverted U-shaped. However, when using asset index as proxy for households’ economic status, no turning point is observed and emission increases as households accumulate more assets. Quintile estimates show that there is a huge disparity in emission between households from the poorest quintile and richest quintile. With this, an option for low-carbon consumption is deemed necessary; else it is imminent that households tend to lead a carbon intensive lifestyle as they get more affluent.
JEL-Codes: Q56; R15; R20; D12
Keywords: carbon emission; household consumption; income quintiles; input-output
No. 157   (Download full text)
Tobias Lechtenfeld and Asmus Zoch
Income Convergence in South Africa: Fact or Measurement Error?
This paper asks whether income mobility in South Africa over the last decade has indeed been as impressive as currently thought. Using new national panel data (NIDS), substantial measurement error in reported income data is found, which is further corroborated by a provincial income data panel (KIDS). By employing an instrumental variables approach using two different instruments, measurement error can be quantified. Specifically, self-reported income in the survey data is shown to suffer from mean-reverting measurement bias, leading to sizable overestimations of income convergence in both panel data sets. The preferred estimates indicate that previously published income dynamics may have been largely overestimated by as much as 77% for the national NIDS panel and 39% for the provincial KIDS panel. Overall, income mobility appears much smaller than previously thought, while chronic poverty remains substantial and transitory poverty is still very limited in South Africa.
JEL-Codes: C81; I32; O15
Keywords: Measurement Error; Income Dynamics; Consumption Dynamics; South Africa
No. 156   (Download full text)
Tobias Lechtenfeld and Steffen Lohmann
The Effect of Drought on Health Outcomes and Health Expenditures in Rural Vietnam
This paper studies the impact of droughts on health outcomes and health expenditures in rural Vietnam. Given the increasing frequency of extreme weather events in Vietnam and many developing countries, it is crucial for policy makers to be aware of the economic impact of such shocks at the micro level. Using local rainfall data, the analysis directly links the incidence of drought to health shocks and health-related expenditures from a multiple-wave panel of rural Vietnamese households. Overall, the results suggest that individuals affected by drought display a deterioration of health conditions and have significantly higher health expenditures. The effect is found to prevail among households with a high degree of agricultural dependency and limited access to coping mechanisms such as selling assets or tapping off-farm income sources. The preferred estimates using an IV strategy reveal that drought-related health shocks can cause non-negligible additional financial burden for many households vulnerable to poverty in rural Vietnam. This paper quantifies the immediate impact of drought on health conditions and contributes to the existing literature which has mostly focused on the long-term consequences.
JEL-Codes: I15; O15; Q54
Keywords: climate shocks; drought; health; Vietnam
No. 155   (Download full text)
Maria Carmela Lo Bue
What drives child health improvements in Indonesian households? A micro-level perspective on complementarities in MDG achievements
Using panel data from Indonesia, this paper analyzes the linkages between child nutrition, health care, household wealth and parental education in order to detect transmission channels between health, education, nutrition, water and sanitation access, five critical MDG targets. This paper therefore also aims at providing an empirical analysis of the drivers of complementarities between these goals at the micro level micro-level perspective. We find that maternal education has a positive and long term effect on child health and that this effect is partly reflected in reproductive behavior and partly conveyed to child health outcomes through child caring practices such as breastfeeding. Although we cannot rule out the existence of strong complementarities existing between household wealth or income and child health, the effect of positive changes in this variable appears to be present only in the short term. On the other hand, there are supply-side factors such as lack of sanitation and access to health facilities which also strongly affect children in terms of anthropometric outcomes.
JEL-Codes: I120; I30; O150
Keywords: Millennium Development Goals; Child undernutrition; Panel data; Mundlak model; Indonesia
No. 154   (Download full text)
Laura Metzger and Isabel Günther
Analyzing Effectiveness of Development Aid Projects: Evaluation Ratings or Project Indicators?
Ongoing empirical research on the drivers of project-aid effectiveness relies on World Bank evaluation ratings across heterogeneous aid sectors. This leads to two problems. First, it is difficult to identify which dimension of project performance World Bank evaluation ratings are measuring precisely. Second, only project management variables, which are sector independent, can be included in the analysis. This study concentrating on an analysis of 150 water supply projects enables us to work with a more precise and objective performance measure by defining sector-specific indicators of improved water supply. Moreover, we are able to analyze the impact of project design in addition to project management. We find that evaluation ratings and indicators of improved water supply are positively but weakly correlated. Project management variables have a higher impact on evaluation ratings whereas project design variables have a higher impact on improving water supply to the target group. Various independent variables even change sign if indicators of improved water supply instead of evaluation ratings are chosen as a performance measure of project-aid effectiveness. Taking into account project design in addition to project management and country characteristics considerably increases the share of variation in project performance that can be explained.
JEL-Codes: F35; O19
Keywords: Aid effectiveness; evaluation; indicators; water supply
No. 153   (Download full text)
Jesús Crespo Cuaresma, Stephan Klasen and Konstantin M. Wacker
Why We Don’t See Poverty Convergence: The Role of Macroeconomic Volatility
Martin Ravallion ("Why Don't We See Poverty Convergence?" American Economic Review, 102(1): 504-23; 2012) presents evidence against the existence of poverty convergence in aggregate data despite the conditional convergence of per capita income levels and the close linkage between growth and poverty reduction in standard neoclassic growth theory and associated empirics. In this contribution we address this puzzle. After showing some evidence of regional convergence, we demonstrate that macroeconomic volatility prevents countries with a higher incidence of poverty from converging in poverty levels to those with less poverty on a global scale. Once volatility is controlled for, the relevant convergence parameter shows the expected negative sign and is robust to various estimation techniques and model specifications. Only if a country’s volatility exceeds a relatively high threshold level, it no longer converges. Similarly, initial poverty only exercises a negative impact on mean (income) convergence in countries where macroeconomic volatility is high.
JEL-Codes: I32; D31; E32
Keywords: poverty convergence; macroeconomic volatility
No. 152   (Download full text)
Iris Butzlaff, Nicole Grunewald and Stephan Klasen
Regional Agreements to Address Climate Change: Scope, Promise, Funding, and Impacts
There is a large number of regional agreements concerning Greenhouse Gas (GHG) emissions, often linked to other regional integration agreements. The most successful one in making effort in reducing carbon emissions is the Emission Trading System by the European Union (EU ETS). Apart from this exceptional agreement there are many others, which either focus directly on reducing GHG emissions or were embedded in another agreement. There is little known about the origin, the design or funding of those agreements. Therefore, we point to the potential contribution of those agreements in order to reduce GHG emissions and give an overview on the nature of those agreements to evaluate their success. We classify 15 agreements by their subject (technology / R&D, trade and finance) and examine their record to date. We find that the impact on mitigating climate change has been negligible to date, but the potential to contribute to mitigation climate change at the regional level is substantial.
JEL-Codes: Q54; Q58; Q55
Keywords: Regional cooperation; climate change; mitigation
No. 151   (Download full text)
Geesche M. Merkle, Rico Ihle, Yael Kachel and Ulf Liebe
Economic cooperation despite of political conflict: Israeli traders’ perception of Israeli-Palestinian food trade
The ongoing political conflict between Israel and the Palestinian territories results in an increasing physical separation and societal alienation of both conflicting parties. In some contexts such as trade ongoing cooperation exists. We provide a micro-level analysis of economic interactions between Israeli and Palestinian wholesale traders of fruits and vegetables. We use a unique dataset gathered by a quantitative survey among Israeli wholesale traders in order to obtain evidence on their perspectives on this economic exchange. Trading patterns show vivid economic exchange of mainly informal character. Logistic regressions suggest that education and the personal social network play vital roles for the existence of Israeli-Palestinian trading relationships. Israeli traders feel not affected by the conflict but wish for its quick settlement. A low level of transaction problems is reported. They are mainly caused by the political and security situation and by the payment behavior of the Palestinian trading partners. Daily contacts of economic agents lead to continuous economic cooperation despite of ongoing political conflict and improve the perception of the actors of the other party.
JEL-Codes: F14; Q17; Z13
Keywords: food trade; Middle East; quantitative survey; political conflict
No. 150   (Download full text)
Marcela Ibanez, Gerhard Riener and Ashok Rai
Sorting Through Affirmative Action: Two Field Experiments in Colombia
Affirmative action is a subject of intense debate. Supporters point to the increased representation of women and minority groups while critics contend that affirmative action can lead to inefficiencies. In this paper we present results from two field experiments that were designed to test how applicants sort in response to affirmative action rules that favor of women. Our results suggest that the criticism of affirmative action is misplaced. We find that affirmative action does not lead to lower standards in the pool of applicants.
Keywords: Field experiment
No. 149   (Download full text)
Marcela Ibanez and Elke Schaffland
The Effect of Outside Leaders on the Performance of the Organization: An Experiment
In order to deal with crises, organizations often bring expert leaders from outside. However, relying in an outside leader can result in decreased performance of the organization. In this paper, we use an experiment to investigate the role of identity and skills of the outside leader on the performance of the organization. Our results indicate that outside leaders are less committed than inside leaders and that group members cooperate less with an outsider than an inside leader.
Keywords: Social Identity; Leadership; Public Good Game; Lab Experiment
No. 148   (Download full text)
Marcela Ibanez
Is the war on drugs working? Examining the Colombian case using micro data
The intense debate on the effectiveness of the war on drugs contrasts with the lack of empirical evidence on its impacts. To evaluate the effectiveness of control-supply policies, we use micro data from an original survey with farmers living in a coca growing area in Colombia. We find that while eradication and alternative development decrease coca supply, the elasticity of supply of these policies is rather low. The efficiency of anti-drug policies could be increased by investing more in alternative development and less in eradication. Our analysis suggests that changing people's attitudes toward coca can be a promising alternative in the fight against drugs.
JEL-Codes: D81; G11; K42; Z12; Z13
Keywords: Coca; Colombia; War on Drugs; Morality
No. 147   (Download full text)
Sofia Karina Trommlerová, Stephan Klasen and Ortrud Lessmann
Determinants of Empowerment in a Capability Based Poverty Approach: Evidence from The Gambia
Although empowerment is seen as intrinsically important and instrumentally valuable to escape poverty, there is very little research on the empirical drivers of empowerment. Using custom-made household-level information and using advanced econometric techniques that also correct for endogeneity, we examine what empowers individuals in The Gambia to change their own lives and affect changes in their communities. We show that people’s self-reported capabilities are the most important drivers of empowerment. We also show that respondents’ confidence that they will be the most powerful agents in their lives is higher for men, foreigners, people free of health limitations, and younger people.
JEL-Codes: I30; I32; O15; Z13; Z18
Keywords: empowerment; agency; capability approach; The Gambia; correction for endogeneity
No. 146   (Download full text)
Stephan Klasen and Janneke Pieters
What explains the stagnation of female labor force participation in urban India?
We study the surprisingly low level and stagnation of female labor force participation rates in urban India between 1987 and 2009. Despite rising growth, fertility decline, and rising wages and education levels, women's labor force participation stagnated at around 18%. Using five large cross-sectional micro surveys, we find that a combination of supply and demand effects have contributed to this stagnation. The main supply side factors were rising household incomes, husband's education, stigmas against educated women engaging in menial work, and falling selectivity of highly educated women. On the demand side, employment in sectors appropriate for educated women grew less than the supply of educated workers, leading many women to withdraw from the labor force.
JEL-Codes: J20; J16; I25; O15
Keywords: female labor force participation; education; India
No. 145   (Download full text)
Rivayani Darmawan and Stephan Klasen
Elite Capture in Urban Development: Evidence from Indonesia
It has been argued that the potential gains of community-driven development (CDD) poverty programs are large as these can foster sustained poverty reduction. However, recent literature shows that community involvement can increase the risk of elite capture, particularly in more unequal communities. The risk is higher when the gap between the poor and the non-poor is larger with limited mobility between groups, the poor find it difficult to increase their bargaining power or voice their preferences. This paper contributes to the limited empirical literature on the existence of elite capture in social programs. Using community and household data from the Second Urban Poverty Project in Indonesia, we find robust evidence for the existence of elite capture under unequal communities. We further find that only when decision makers share similar characteristics with non-elites in terms of wealth, education and social networks, the share of pro-poor projects increases.
JEL-Codes: H42; I32; D63
Keywords: Elite capture; Community-driven Development; Inequality; Poverty; Indonesia
No. 144   (Download full text)
Isabel Günther and Kenneth Harttgen
Desired Fertility and Children Born across Time and Space
With about five children born per woman and a population growth rate of 2.5 per cent per year, sub-Saharan Africa has been the world’s fastest growing region over the last decade. Economists have often argued that high fertility rates are mainly driven by women’s demand for children (and not by family planning efforts) with low levels of unwanted fertility across countries (and hence with little room for family planning efforts to reduce population growth). We study the relationship between wanted fertility and number of children born in a panel of 200 country-years controlling for country characteristics and global trends. In general, we find a close relationship between wanted and actual fertility, with one desired child leading to one additional birth. However, our results also indicate that in the last 20 years the level of unwanted births has stayed at two across sub-Saharan Africa whereas it has decreased from one to zero in other developing countries. Hence, women in African countries are less able to translate child preferences into birth outcomes than women in other developing countries, i.e. leaving plenty of room for family planning efforts; and forces other than fertility demand have been important for fertility declines in other developing countries. Family planning efforts only partly explain the observed temporal and spatial differences in achieving desired fertility levels.
JEL-Codes: J10; J13
Keywords: Fertility; Population Growth; Development; Population Policies
No. 143   (Download full text)
Jana Lenze and Stephan Klasen
The Impact of Women’s Labour Force Participation on Domestic Violence in Jordan
Enhancing women’s participation in the labour force has been seen as a way to promote their empowerment which in turn is believed to enhance their well-being and well-being of their children. However, the empirical literature on the relationship between women’s employment status and domestic violence is less clear-cut. Motivated by this ambiguity, this study explores the effect of women’s employment measured by their participation in paid work outside the home on reported spousal violence, based on quantitative data from Jordan in 2007. A notable feature of this paper is that it controls for the potential endogeneity of women’s employment which might bias the relationship between employment and spousal violence. Disregarding the issue of endogeneity, the first regression results suggest that woman’s participation in paid work enhances violence by her husband. After controlling for endogeneity of female employment using instrumental variable estimation, however, these results turn out to be insignificant, which suggests that women’s work status has no causal influence on marital violence.
No. 142   (Download full text)
Christina Handschuch and Meike Wollni
Traditional food crop marketing in Sub-Saharan Africa: Does gender matter?
Specialization and commercialization of agricultural production is seen as a key to lift small-scale farmers in developing countries out of poverty. While participation in high-value markets has been shown to be beneficial for farmers, especially the smallest and least endowed farmers are often excluded from these markets due to high transaction costs. In this context, marketing traditional food crops poses an important income alternative. The present study aims to contribute to the scarce literature on traditional food crops by analyzing the factors influencing (a) the households’ decision to participate in the finger millet market and (b) the selling prices obtained by the household. A special focus of our analysis lies on the role of gender and collective action. Based on household data from 270 finger millet producers, a probit model on market participation and a linear regression model on the selling price are estimated. Results show that participation in a finger millet group positively influences the decision to market finger millet. While female household members who do not participate in a group are disadvantaged in terms of selling prices, there is no gender effect on selling prices if a female household member participates in a finger millet group.
Keywords: Kenya; finger millet; marketing; collective action; gender
No. 141   (Download full text)
Christina Handschuch and Meike Wollni
Improved production systems for traditional food crops: The case of finger millet in Western Kenya
Increasing agricultural productivity through the dissemination of improved cropping practices remains one of the biggest challenges of this century. A considerable amount of literature is dedicated to the adoption of improved cropping practices among smallholder farmers in developing countries. While most studies focus on cash crops or main staple crops, traditional food grains like finger millet have received little attention in the past decades. The present study aims to assess the factors that are influencing adoption decisions among finger millet farmers in Western Kenya. Based on cross-sectional household data from 270 farmers, we estimate a multivariate probit model to compare the adoption decisions in finger millet and maize production. While improved practices such as the use of a modern variety or chemical fertilizer are well known in maize production, they are less common in finger millet production. Results show that social networks as well as access to extension services play a crucial role in the adoption of improved finger millet practices, while the same variables are of minor importance for the adoption of improved maize practices. A Cobb-Douglas production function shows a positive effect of modern varieties and chemical fertilizer on finger millet yields.
Keywords: finger millet; Kenya; technology adoption; social networks
No. 140   (Download full text)
Dominik Noe
Determinants of the duration and ending of terrorist and other non-state armed groups
This study empirically investigates the impact of group characteristics and host country conditions on the duration and the ending of terrorist organizations and rebel groups. The empirical analysis relies on data for more than 600 armed groups from the Terrorist Organization Profiles, collected by the MIPT, and employs discrete time duration models with unobserved heterogeneity and its application to a setting with competing risks. It is found that organizations stabilize over time and face the highest risk of failure at the beginning. Factors that motivate members play an important role, as does support from other countries. Rich states are more likely to defeat armed groups and there is no evidence found that a restriction of civil rights decreases the duration of armed groups or increases the likelihood of capturing them.
JEL-Codes: H56; D74; H39
Keywords: Terrorist organizations; Insurgency; Duration analysis; Discrete time duration model; Competing risk regression; Civil war
No. 139   (Download full text)
Julia Friesen and Konstantin Wacker
Do Financially Constrained Firms Suffer from More Intense Competition by the Informal Sector? Firm-Level Evidence from the World Bank Enterprise Surveys
This paper investigates which firms suffer from informal competition and highlights the role of access to finance in this context. We use cross-sectional data from the World Bank Enterprise Surveys covering 42,000 firms in 114 developing and transition countries for the period 2006 to 2011 and take discrete responses on the perceived severity of financial constraints and informal competition for our empirical analysis. We find that financially constrained firms face significantly more intense competition by the informal sector and that this effect is economically large. In fact, financial constraints are the most important reason why firms suffer from informal competition. Other influential variables are ill-designed labor market regulations, corruption, and firm size. A wide range of robustness checks substantiates this finding.
JEL-Codes: C25; D21; O17
Keywords: Firm finance; informal competition; enterprise survey data; ordered logit model
No. 138   (Download full text)
Dhanmanjiri Sathe, Stephan Klasen, Jan Priebe and Mithila Biniwale
Does Having a Female Sarpanch Promote Service Delivery for Women and Democratic Participation of Women? Evidence from Maharashtra, India
In this paper we examine the impact of mandated reservations for female sarpanchs in the gram panchayats on perceptions of service delivery and women’s democratic participation. Using survey data from the Sangli district, Maharashtra, we find that the availability of basic, public services is significantly higher in female sarpanch villages as compared to the male sarpanch villages, when the elections have been held three to 3 1/2 years before the survey; while service delivery in villages with more recently elected female sarpanchs is worse. Further, the reservations have a significant, positive impact on the democratic participation of the women in the female sarpanch villages, again driven by the impact of female sarpanchs elected 3 ½ years before the survey. The democratic participation of women, in turn, affects the availability of services very robustly. The findings suggest that the positive effects in terms of service delivery and democratic participation will take some time to materialize.
Keywords: Mandated reservations; Service delivery; political participation
No. 137   (Download full text)
Ronald B. Davies and Stephan Klasen
Of Donor Coordination, Free-Riding, Darlings, and Orphans: The dependence of bilateral aid on other bilateral giving
Using data from 1988 to 2007, we examine to what extent bilateral aid flows of an individual donor to a country depend on aid flows from all other bilateral and multilateral donors to that country. We thereby want to assess to what extent donor coordination, free-riding, selectivity, specialization, and common donor motivations drive bilateral aid allocation as these determinants would point to different dependence structures. Using approaches from spatial econometrics and controlling for endogeneity, we find that other bilateral flows lead to a significant increase in aid flows from a particular donor. The effects are particularly pronounced for recipients in Africa and the Middle East and socalled donor ‘orphans’ who seem to be collectively shunned by bilateral aid donors. The positive dependence also seems be related to donors following the lead of the largest donors. Over time, the positive dependence has become smaller. Overall the results suggest that donor coordination and free-riding are quantitatively less important than common donor interests and selectivity.
JEL-Codes: F35; F42
Keywords: aid; donor coordination; aid darlings; aid orphans
No. 136   (Download full text)
Dominik Noe and Johannes Rieckmann
Violent Behaviour: The effect of civil conflict on domestic violence in Colombia
In this paper we analyse the impact of civil conflict on domestic violence in Colombia and find that higher conflict intensity increases the likelihood of women to become a victim of domestic violence. The idea behind this is that the experience of conflict changes behaviour, attitude and culture. As an observable outcome of this change in behaviour we look at domestic violence. Taking advantage of the uneven spatial distribution of the conflict we assess its impact, using micro data from Colombia.
Keywords: Domestic violence; conflict; Colombia; crime; spatial identification
No. 135   (Download full text)
Jonathan Gheyssens and Isabel Günther
Conditional cooperation among the poor: a new profile?
On the basis of a conditional contribution experiment conducted in Benin and Uganda, we argue that a conditional u-shaped profile exists, at least in poor communities. Under this profile, individuals invest considerably in public goods when nobody else does, reduce their commitment in reaction to positive group participation and turn into conditional cooperators after a threshold of others’ participation is reached. For the understanding of the dynamics of repeated cooperation the implications of this group of u-shaped cooperators might be important.
Keywords: Conditional cooperation; Public goods; Experiments; sub-Saharan Africa
No. 134   (Download full text)
Elena Gross, Isabel Günther and Youdi Schipper
Women: Walking and Waiting for Water The Time Value of Public Water Supply
Public funding of water supply infrastructure in developing countries is often justified by the expectation that the time spent on water collection significantly decreases, leading to increased labor force participation of women. In this study we empirically test this hypothesis by applying a difference-in-difference analysis to a sample of 2000 households in rural Benin where improved water supply was phased in over time. Time savings per day are rather modest at 35 minutes: even though walking distances are considerably reduced, women still spend a lot of time waiting at the water source. Moreover, a reduction in time to collect one water container induces women to collect a higher number of containers per day. Our results indicate that time savings are rarely followed by increased labor supply of women: men are the first to be freed from water fetching activities.
JEL-Codes: I38; J22; J16
Keywords: Water Supply; Behavioral Change; Time Savings; Labor Supply; Gender Bias
No. 133   (Download full text)
Stephan Klasen and Sebastian Vollmer
Missing Women: Age and Disease: A Correction
In a recent paper in the Review of Economic Studies, Siwan Anderson and Debraj Ray (Anderson and Ray, 2010) develop and apply a new ‘flow’ measure of ‘missing women’ to estimate the extent of gender bias in mortality in developing countries. Contrary to the existing literature, they find that the problem of gender bias in mortality is as severe among adults as it is among children in India, that gender bias in mortality is larger in Sub‐Saharan Africa than in China and India, and that there was substantial evidence of gender bias in mortality in the US around 1900. These latter results are driven largely by the finding of substantial gender bias among adults. We show first that the data for Sub‐Saharan Africa used in the paper are generated by simulations in ways that deliver their findings on Africa (and the US in 1900) by construction. Second, we show that the analysis is entirely dependent on a highly implausible reference standard that is inappropriately applied to settings where the overall disease and mortality environment differ greatly; the attempt to control for the disease environment by the authors is not able to address these issues. When a more appropriate reference standard is used, most of the new findings of Anderson and Ray disappear. Instead, the findings from the existing literature relying on stock measures of missing women are confirmed. The one finding that remains and deserves further attention is some evidence of gender bias in mortality among young adults in Africa (though of much lower magnitude than suggested by Anderson and Ray).
JEL-Codes: J16; D63; I10
Keywords: Missing women; gender bias; mortality; disease; age; Sub‐Saharan Africa; China; India
No. 132   (Download full text)
Nicole Rippin
Operationalising the Capability Approach: A German Correlation Sensitive Poverty Index
The official measure to analyse poverty in Germany is the at-risk-of-poverty rate, defined as 60 per cent of the median net equivalence income. The severe methodological weaknesses of this rate seem to be the main source for the uncertainty that the issue of poverty in Germany generates in the minds of both the government and the public. Especially since it smacks of envy as a person needs more when others have more. The unacceptance of the rate is additionally fuelled by the high figures it produces. This paper uses the rich data source of the German Socio-Economic Panel in order to propose a new multidimensional poverty index for Germany that is based on the capability approach. It also introduces a multidimensional happiness index, a concept that is enjoying increasing popularity. All three indices are compared across dimensions, regions and over time, and the results seem to indicate one thing above all: the high added value that is created though the new German Correlation Sensitive Poverty Index (GCSPI).
JEL-Codes: I32
Keywords: Multidimensional poverty measurement; counting indices; inequality; correlation sensitivity; identification
No. 131   (Download full text)
Luis Francisco Rosales and Tatyana Krivobokova
Instant Trend-Seasonal Decomposition of Time Series with Splines
We present a nonparametric method to decompose a times series into trend, seasonal and remainder components. This fully data-driven technique is based on penalized splines and makes an explicit characterization of the varying seasonality and the correlation in the remainder. The procedure takes advantage of the mixed model representation of penalized splines that allows for the simultaneous estimation of all model parameters from the corresponding likelihood. Simulation studies and three data examples illustrate the eff ectiveness of the approach.
Keywords: Penalized splines; Mixed model; Varying coecient; Correlated remainder
No. 130   (Download full text)
Katsiaryna Schwarz and Tatyana Krivobokova
A unified framework for spline estimators
This article develops a unified framework to study the (asymptotic) properties of (periodic) spline based estimators, that is of regression, penalized and smoothing splines. We obtain an explicit form of the Demmler-Reinsch basis of general degree in terms of exponential splines and corresponding eigenvalues by applying Fourier techniques to periodic smoothers. This allows to derive exact expressions for the equivalent kernels of all spline estimators and get insights into the local and global asymptotic behavior of these estimators.
Keywords: B-splines; Equivalent kernels; Euler-Frobenius polynomials; Exponential splines; Demmler-Reinsch basis
No. 129   (Download full text)
Arusha Cooray, Isis Gaddis and Konstantin M. Wacker
Globalization and Female Labor Force Participation in Developing Countries: An Empirical (Re-)Assessment
We investigate the impact of foreign direct investment (FDI) and trade, as two measures of globalization, on female labor force participation in a sample of 80 developing countries over the last decades. Contrary to the mainstream view in the literature, which is mainly based on country-case studies or simple cross-country variation, we find that both, FDI and trade have a generally negative impact on female labor force participation. While the impact is of negligible economic size, it is stronger for younger cohorts, potentially reflecting a higher incentive to stay out of the labor force and invest in education in view of an increased skill premium due to globalization. We also find that the direction of the effect depends on the industrial structure of the economy. This suggests that there is no evidence of a (conditional) anti-female bias in multinational corporations' factor demand once one controls for the interaction of FDI with the size of the agricultural sector. We can thereby explain why country studies find other effects and question the generalization of their results into an overarching globalization tale concerning female labor force participation.
JEL-Codes: F0; J22; O1
Keywords: Globalization; Labor Force Participation; FDI; Trade; Development; Hierarchical Panel Data Models
No. 128   (Download full text)
Nicole Rippin
Distributional Justice and Efficiency: Integrating Inequality Within and Between Dimensions in Additive Poverty Indices
According to Sen (1976), any reasonable poverty index ought to be sensitive to inequality. In a multidimensional framework, inequality between poverty dimensions is traditionally treated as association sensitivity. Such an approach, however, is based exclusively on efficiency considerations, thereby neglecting all aspects of distributive justice. This paper introduces a new property for dealing with inequality that accounts for both efficiency as well as distributive justice. Based on the new property, it then proceeds to derive a new class of inequality-sensitive poverty measures whose advantages are demonstrated by an empirical application to 28 developing countries.
JEL-Codes: I32
Keywords: Multidimensional poverty measurement; counting indices; inequality; correlation sensitivity; identification
No. 127   (Download full text)
Manuel Wiesenfarth, Carlos Matías Hisgen, Thomas Kneib and Carmen Cadarso-Suarez
Bayesian Nonparametric Instrumental Variable Regression based on Penalized Splines and Dirichlet Process Mixtures
We propose a Bayesian nonparametric instrumental variable approach that allows us to correct for endogeneity bias in regression models where the covariate eff ects enter with unknown functional form. Bias correction relies on a simultaneous equations speci cation with flexible modeling of the joint error distribution implemented via a Dirichlet process mixture prior. Both the structural and instrumental variable equation are specified in terms of additive predictors comprising penalized splines for nonlinear eff ects of continuous covariates. Inference is fully Bayesian, employing efficient Markov Chain Monte Carlo simulation techniques. The resulting posterior samples do not only provide us with point estimates, but allow us to construct simultaneous credible bands for the nonparametric e ffects, including data-driven smoothing parameter selection. In addition, improved robustness properties are achieved due to the flexible error distribution speci fication. Both these features are extremely challenging in the classical framework, making the Bayesian one advantageous. In simulations, we investigate small sample properties and an investigation of the eff ect of class size on student performance in Israel provides an illustration of the proposed approach which is implemented in an R package bayesIV.
Keywords: Endogeneity; Markov Chain Monte Carlo methods; Simultaneous credible bands
No. 126   (Download full text)
Maria Carmela Lo Bue and Stephan Klasen
Identifying synergies and complementarities between MDGs: Results from cluster analysis
The MDGs are interlinked: acceleration in one goal is likely to speed up progress in others. Nevertheless, these synergies are not always visible, and may differ across countries. Using bivariate cluster analysis, this paper investigates whether distinct groups of developing countries can be identified, using statistical methods, on the basis of the correlation of changes in main MDG indicators over the 1990-2008 period. Potential groups include: [1] “good performers”, characterized by strong positive synergies in MDGs indicators; [2] “poor performers”, where there are synergies in poor progress towards the MDGs and [3] “partial performers” countries where progress in one MDG went along with regress or stagnation in another. We then study the determinants of cluster membership. While growth in GDP per capita is, unsurprisingly, best able to distinguish between “good” and “poor” performers, a poor institutional framework and deteriorations in the income distribution is a notable correlate of partial progress, thus apparently undermining synergies in reaching the MDGs. In light of the current discussions about the post-MDG system, our results suggest that synergies between MDG progress can be achieved but they cannot be taken for granted. Improving institutional performance and reducing inequality appear particularly important drivers of promoting such synergies.
JEL-Codes: O15; C38
Keywords: Millennium Development Goals, Human Development, Cluster Analysis
No. 125   (Download full text)
Friederike Greb, Nelissa Jamora, Carolin Mengel, Stephan von Cramon-Taubadel and Nadine Würriehausen
Price transmission from international to domestic markets
This study aims to improve our understanding of the extent and speed of the transmission of international cereal prices to local markets in developing countries. We analyse two samples of price transmission (PT) estimates, one extracted from a comprehensive literature sample of 31 published papers and studies on cereal price transmission and one containing of own estimates of cereal PT using the FAO’s GIEWS dataset. We also present the results of a non-parametric analysis of PT in which we analyse the share of periods in which domestic and international prices have jointly increased or decreased. We find a higher share of cointegrated commodity market pairs in the literature sample (79% compared to 43%). This may be due to publication bias. Cointegration is more prevalent for maize market pairs and less prevalent for rice market pairs. Both the literature and the GIEWS-based estimates point to average long-run PT coefficients of roughly 0.75 and average short-run adjustment parameters of roughly 0.09-0.11. In most cases domestic prices adjust to deviations from the long-run price relationship, but international prices do not. The only notable exception to this rule is rice, which suggests that the determination of international rice prices differs fundamentally from the determination of international wheat and maize prices. In a subsequent meta-regression analysis we measure how much of the variation in the samples of PT estimates can be explained by country- or product-specific factors. However, this analysis fails to generate compelling results. An analysis of domestic price volatility reveals that median volatility has increased since July 2007.
JEL-Codes: C32;Q11;Q17;Q18
Keywords: price transmission; cointegration; developing countries; agricultural trade; maize; rice; wheat; commodity prices
No. 124   (Download full text)
Yuko Hashimoto and Konstantin M. Wacker
The Role of Risk and Information for International Capital Flows: New Evidence from the SDDS
In this paper, we investigate whether better information about the macroeconomic environment of an economy has a positive impact on its capital inflows, namely portfolio and foreign direct investment (FDI). The purpose of our study is to explicitly quantify information asymmetries by compliance with the IMF's Special Data Dissemination Standard (SDDS). For FDI, we fi nd statistically signi cant and robust support for this hypothesis: SDDS subscription increased inflows by an economically relevant magnitude of about 60 percent. We also find evidence of aversion against political and macroeconomic risk as determinants of portfolio and FDI flows and use a non-parametric test for spatial correlation in the residuals of capital flows.
JEL-Codes: C33; F21; G14
Keywords: determinants of capital flows; information; panel data; risk; SDDS; IMF; FDI; portfolio investment; spatial econometrics
No. 123   (Download full text)
Stephan Klasen
Policy Note: MDGs post‐2015: What to do?
With the recent appointment of the High‐Level Panel to advise on the post‐2015 development agenda, the preparation of a successor process to the MDGs is (finally) moving into high gear. In this note I provide an input to these discussions by briefly reviewing successes and failures of the current MDG process before making concrete suggestions of how a post‐2015 goal system could look like.
No. 122   (Download full text)
Isis Gaddis and Lionel Demery
Benefit incidence analysis, needs and demography. Measurement issues and an empirical study for Kenya
Benefit incidence analysis is an extremely popular tool to assess the distribution of benefits from government expenditure in developing countries, particularly in the social sectors. The analysis describes the welfare impact of public spending on groups of people or households, typically along the income distribution. While benefit incidence analysis has generated useful insights into the distribution of benefits from public spending in a variety of sectors, many studies fail to take into account differences in needs for public services across population groups. This can lead to an inappropriate and potentially misleading assessment of equity in public spending. This article reviews the evidence and introduces techniques to account better for heterogeneous needs in benefit incidence analysis. Using the example of an empirical benefit incidence study of education expenditure in Kenya, we show that our understanding of the distributional implications of public spending is greatly improved if we account for demographic differences between population groups.
JEL-Codes: D3; I2; I3; H4
Keywords: Benefit incidence; public spending; education; demography; population-normalization; stochastic dominance; Kenya
No. 121   (Download full text)
Andreas Fuchs, Axel Dreher and Peter Nunnenkamp
Determinants of Donor Generosity: A Survey of the Aid Budget Literature
What determines the foreign aid effort of donor countries? We review the existing literature on donors’ aid budgets and examine which of the suggested variables robustly determine aid effort, measured as Official Development Assistance (ODA) as a share of gross national income. More specifically, we empirically test 16 hypotheses using panel econometric methods for member countries of the Development Assistance Committee (DAC) in the 1976-2008 period. To test for the robustness of our results, we extend our dataset to 48 possible determinants of aid budgets and apply an Extreme Bounds Analysis (EBA). In our fixed effects regressions, we find that aid inertia, the donor country’s GDP per capita, the existence of an independent aid agency, and colonial history have a robust and quantitatively relevant impact on countries’ aid efforts. Among the potential substitutes for aid, remittances exert a robust effect. Excluding year fixed effects, political globalization, Russian military capacity, peer effects, aid effectiveness, and government debt also play a significant role.
JEL-Codes: F35; H81; H87
Keywords: Foreign aid; Official Development Assistance; Aid budget; Extreme Bounds Analysis
No. 120   (Download full text)
Michael Kuhn and Klaus Prettner
Growth and welfare e ffects of health care in knowledge based economies
We study the e ffects of a labor-intensive health care sector within an R&D-driven growth model with overlapping generations. Health care increases longevity and labor participation/productivity. We examine under which conditions expanding health care enhances growth and welfare. Even if the provision of health care diverts labor from productive activities, it may still fuel R&D and economic growth if the additional wealth that comes with expanding longevity translates into a more capital/machine- intensive fi nal goods production and, thereby, raises the return to developing new machines. We establish mild conditions under which an expansion of health care beyond the growth-maximizing level is Pareto-improving.
JEL-Codes: I15; I18; O11; O41; O43
Keywords: endogenous growth; mortality; (Blanchard) overlapping generations; health care; research and development; sectoral composition
No. 119   (Download full text)
Tobias Lechtenfeld
Why does piped water not reduce diarrhea for children? Evidence from urban Yemen
This paper investigates why household connections to piped water supply can increase diarrheal diseases among under-5-year-old children. Using a unique mix of household data, microbiological test results and spatial information from urban Yemen it is possible to distinguish the adverse impacts of malfunctioning water pipes from unhygienic household behavior on water pollution and health outcomes. The analysis consists of three parts: First, exogenous variation of pipe construction is used to quantify the health impact of access to piped water, which is found to increase the risk of child diarrhea by 4.6 percentage points. Second, by exploiting the spatial correlation of pollution among households connected to the same water pipe, it is shown that broken pipes and interruptions of water supply are responsible for most of the water pollution. Third, unhygienic water storage and handling at household level additionally increases water pollution. These results show for the first time that water rationing can jeopardize the intended health benefits of access to clean drinking water. Importantly, these results apply to most urban areas in Africa and the Middle East where water resources are limited and water supply is frequently interrupted.
JEL-Codes: I38; O12; O16
Keywords: Water and Sanitation; Diarrhea; Child Health; Impact Evaluation; Yemen
No. 118   (Download full text)
Katja Landau, Stephan Klasen and Walter Zucchini
Measuring Vulnerability to Poverty Using Long-Term Panel Data
We investigate the accuracy of ex ante assessments of vulnerability to income poverty using cross-sectional data and panel data. We use long-term panel data from Germany and apply di fferent regression models, based on household covariates and previous-year equivalence income, to classify a household as vulnerable or not. Predictive performance is assessed using the Receiver Operating Characteristics (ROC), which takes account of false positive as well as true positive rates. Estimates based on cross-sectional data are much less accurate than those based on panel data, but for Germany, the accuracy of vulnerability predictions is limited even when panel data are used. In part this low accuracy is due to low poverty incidence and high mobility in and out of poverty.
JEL-Codes: C23; C52; I32; O29
Keywords: vulnerability; poverty; ROC; German panel data
No. 117   (Download full text)
Enoch M. Kikulwe, Nassul .S. Kabunga and Matin Qaim
Impact of tissue culture banana technology in Kenya: A difference-in-difference estimation approach
Most micro-level studies on the impact of agricultural technologies build on cross-section data, which can lead to unreliable impact estimates. Here, we use panel data covering two time periods to estimate the impact of tissue culture (TC) banana technology in the Kenyan small farm sector. TC banana is an interesting case, because previous impact studies showed mixed results. We combine propensity score matching with a difference-in-difference estimator to control for selection bias and account for temporal impact variability. TC adoption has positive impacts on banana productivity and profits. The technology increases yields by 40-50% and gross margins by around 100%. These large effects represent the impact of TC technology in combination with improved management practices and higher input use, which is recommended. Looking at the isolated TC effect may underestimate impact because of synergistic relationships. The results suggest that extension efforts to deliver the technological package to smallholder farmers should be scaled up.
Keywords: Agricultural technology; Difference-in-difference; Selection bias; Temporal impact variability; Impact; Kenya
No. 116   (Download full text)
Holger Strulik
From Worship to Worldly Pleasures: Secularization and Long-Run Economic Growth
In medieval times, most people identifi ed with religious values and aggregate income and productivity grew at glacier speed. In the 20th century, religion played a much lesser role in daily life and income and productivity grew at high and unprecedented rates. The present paper develops a simple economic theory of identity choice that explains both stylized facts as well as a period of secularization during which an increasing share of the population abandons religious identity for worldly pleasures and aggregate productivity takes off . An extension of the basic model investigates the Protestant reformation as an intermediate stage. Another extension introduces socially-dependent religious preferences, establishes the endogenous emergence of multiple, self-ful lling equilibria, and demonstrates how a social multiplier amplifi es the speed of transition.
JEL-Codes: N30; O10; O40; Z12; Z13
Keywords: religion; identity; economic growth; productivity; secularization; comparative development
No. 115   (Download full text)
Xiaohua Yu
A Simple Approach to Specifying the Weights of the HDI Index
Starting from a representative welfare function, this paper developed a simple method to endogenously specify the weights for the Human Development Index (HDI), and finds that the current equal-weighted HDI significantly biases down the weight of life expectancy. The weights proposed by this study may more properly reflect the humancentered development of the HDI.
JEL-Codes: O15; D6
Keywords: HDI; Weights; Welfare Function; Ranking
No. 114   (Download full text)
Kenneth Harttgen and Sebastian Vollmer
A Reversal in the Relationship of Human Development with Fertility?
For more than a hundred years, advances in development were associated with decreasing fertility rates. This led to total fertility rates far below replacement level in most developed countries. However, during the last decade fertility rates started to increase again in various developed countries. Myrskylä et al (2009) argue that the relationship of the human development index (HDI) with the total fertility rate (TFR) reverses from negative (increases in HDI are associated with decreases in TFR) to positive (increases in HDI are associated with increases in TFR) at a HDI level of 0.85. We revisit this topic and find that the reversal in the HDI-TFR relationship is neither robust to UNDP’s recent revision in the HDI calculation method nor the decomposition of the HDI into its education, standard of living and health sub-indices.
Keywords: Human development; education; health; standard of living; fertility
No. 113   (Download full text)
Xu Tian and Xiaohua Yu
The Enigmas of TFP in China: A Meta-Analysis
This paper presents a meta-analysis of 5308 observations of total factor productivity growth (TFPG) in China from 150 primary studies to provide some insightful explanations to the controversies about productivity growth in China in the current literature. The main findings include that (1) The mean TFPG of the aggregate economy at the national level in the current literature is only about 2% after 1978, which barely contributes to 20% economic growth; (2) There are three cycles for TFPG after 1978 and each circle lasts about ten years; (3) Sector-specific TFPGs are generally larger than aggregate economic TFPGs; (4) Regional disparities of TFPG are significant and specifically the TFPG in East China is higher than that in Central and West China; (5) TFPG after 1978 is in general greater than that before 1978; and (6) Peer-review process and paper languages are significantly correlated with TFPG results.
Keywords: Economic growth; TFP; Meta-Analysis; China
No. 112   (Download full text)
Zhigang Li, Xiaohua Yu, Yinchu Zeng and Rainer Holst
Estimating transport costs and trade barriers in China: Direct evidence from Chinese agricultural traders
Using a unique survey data on agricultural traders in China in 2004, this study provides direct evidence on the significance of inter-regional trade barriers and their key components. Our major findings are as follows. (1) The trade barriers within China are fairly small, accounting for about 20 percent of trade value. (2) Transport and non-transport costs respectively contribute 42% and 58% to the trade barriers. (3) Labor and transport-related taxes are the two largest proportions of total transport costs, and respectively accounts for 35% and 30%. (4) Artificial trade barriers created by the government are not sizable as we perceived. (5) Road quality is crucial for reducing transport costs within China: Increasing transport speed by 1 km per hour, the total transport costs for Chinese agricultural traders would decrease by 0.6 percent mainly due to improved fuel-burning efficiency and reduced labor requirement.
Keywords: Transport Costs; China; Agricultural Traders; Infrastructure
No. 111   (Download full text)
Fatima Lambarraa and Gerhard Riener
On the Norms of Charitable Giving in Islam: A Field Experiment
Charitable giving is one of the major obligations Islam and a strong Muslim norm endorses giving to the needy, but discourages public displays of giving. This norm is puzzling in light of previous evidence, suggesting that making donations public often increases giving. We use an experiment to assess the effects this moral prescription on actual giving levels in an anonymous and in a public setting. We conducted two field experiments with 534 and 186 subjects at Moroccan educational institutions. Subjects who participated in a paid study were given the option to donate from their payment to a local orphanage, under treatments that varied the publicity of the donation and the salience of Islamic values. In the salient Islamic treatment, anonymity of donations significantly increased donation incidence as well as average donations for religious subjects. This stands in stark contrast to most previous findings in the charitable giving literature.
JEL-Codes: H40; C93; D01; Z12
Keywords: Charitable giving; Islam; Social pressure; Priming; Religion; Norms; Field experiment
No. 110   (Download full text)
Stephan Klasen, Tobias Lechtenfeld, Kristina Meier and Johannes Rieckmann
Benefits trickling away: The health impact of extending access to piped water and sanitation in urban Yemen
This article investigates the impact of piped water supply and sanitation on health outcomes in urban Yemen using a combination of quasi-experimental methods and results from microbiological water tests. Variations in project roll-out allow separate identification of water and sanitation impacts. Results indicate that access to piped water supply worsens health outcomes when water rationing is frequent, which appears to be linked to a build-up of pollution in the network. When water supply is continuous no clear health benefits are found compared to traditional urban water supply through water vendors. Connections to piped sewers can lead to health improvements, conditional on regular water supply. The findings suggest that investments in piped water supply should not be made when availability and reliability of water cannot be guaranteed.
JEL-Codes: I10; I38; Q53
Keywords: water supply; water quality; sanitation; hygiene; child health; diarrhoea; impact evaluation; infrastructure; Yemen
No. 109   (Download full text)
Kenneth Harttgen, Stephan Klasen and Sebastian Vollmer
An African Growth Miracle? Or: What do Asset Indices Tell Us about Trends in Economic Performance?
Using changes in the possession of household assets over the past 20 years, several recent papers have argued that economic performance in Arica was substantially better than suggested by national income data and income poverty statistics, who suffer from well-known weaknesses. We scrutinize these claims and first argue that trends in assets provide biased proxies for trends in incomes or consumption. In particular we show that the relationship between growth in assets and growth in incomes or consumption is extremely weak; instead, we find evidence of asset drift using macro and micro data, which is consistent with the claims we make about possible biases in the use of asset indices. As a result, we find no evidence supporting the claim of an African growth miracle that extends beyond what has been reported in GDP/capita and consumption figures.
JEL-Codes: O47; O11; O12
Keywords: Asset index; GDP growth; Africa
No. 108   (Download full text)
R. Emre Aytimur, Aristotelis Boukouras and Robert Schwager
Voting as a Signaling Device
In this paper, citizens vote in order to influence the election outcome and in order to signal their unobserved characteristics to others. The model is one of rational voting and generates the following predictions: (i) The paradox of not voting does not arise, because the benefi t of voting does not vanish with population size. (ii) Turnout in elections is positively related to the size of the local community and the importance of social interactions. (iii) Voting may exhibit bandwagon e ffects and small changes in the electoral incentives may generate large changes in turnout due to signaling effects. (iv) Signaling incentives increase the sensitivity of turnout to voting incentives in communities with low opportunity cost of social interaction, while the opposite is true for communities with high cost of social interaction. Therefore, the model predicts less volatile turnout for the latter type of communities.
JEL-Codes: C70; D72; D80
Keywords: electoral incentives; signaling; voting
No. 107   (Download full text)
Santosh Kumar and Sebastian Vollmer
Does Improved Sanitation Reduce Diarrhea in Children in Rural India?
Almost nine million children under five years of age die every year. Diarrhea is considered to be the second leading cause of under- five mortality in developing countries. About one out of five deaths is caused by diarrhea. In this paper, we use the newly available data set DLHS-3 to quantify the impact of access to improved sanitation on diarrheal morbidity for children under five years of age in India. Using Propensity Score Matching (PSM), we fi nd that access to improved sanitation reduces the risk of contracting diarrhea by 2.2 percentage points. There is considerable heterogeneity in the impacts of improved sanitation. We neither fi nd statistically signi cant treatment eff ects for children in low or middle socioeconomic status (SES) households nor for girls, however, boys and children in high (SES) households experienced economically signifi cant treatment effects. The magnitude of the treatment e ffect also di ffers largely by behavior.
JEL-Codes: H54; I12
Keywords: Sanitation; Diarrhea; Propensity score Matching; Infrastructure; India
No. 106   (Download full text)
Robert Rudolf
Rural Reforms, Agricultural Productivity, and the Biological Standard of Living in South Korea, 1941-1974
This paper analyzes effects of the Republic of Korea’s two major rural reforms in 1950 and 1962/63 on agricultural productivity and individual well-being. The 1950 Land Reform resulted in a large-scale redistribution of land while ‘green revolution’-type reforms in 1962/63 pushed forward the application of modern agricultural technologies and improved rural infrastructure. This study’s findings indicate that both reforms had significant positive impacts on agricultural productivity. Using the link between final height outcomes and early childhood nutrition further allows an assessment of the effects of the interventions on the biological standard of living using adult height outcomes. Korean mean adult height grew by a remarkable 8.1 to 12 cm for women and 7 to 9.6 cm for men born between 1920 and 1987. Two thirds of this growth took place after the 1950 reform, and about 40 to 50 percent after the 1962/63 reforms. Structural break analyses of height trends reveal significant upward shifts in trend around the years of the reforms. While Korea can be considered a case of successful land reform, the years between the two major reforms can be considered Korea’s lost decade.
JEL-Codes: Q15; N35; O13
Keywords: Land Reform; Rural Technological Reforms; Agricultural Productivity; Biological Standard of Living; Equity-Efficiency
No. 105   (Download full text)
Shahzad Kouser and Matin Qaim
Valuing financial, health, and environmental benefits of Bt cotton in Pakistan
Data from a farm survey and choice experiment are used to value the benefits of Bt cotton in Pakistan. Unlike previous research on the economic impacts of Bt, which mostly concentrated on financial benefits in terms of gross margins, we also quantify and monetize positive externalities associated with technology adoption. Due to lower chemical pesticide use on Bt cotton plots, there are significant health advantages in terms of reduced incidence of acute pesticide poisoning, and environmental advantages in terms of higher biodiversity and lower soil and groundwater contamination. These positive externalities are valued at US$ 79 per acre, of which half is attributable to health and the other half to environmental improvements. Adding average gross margin gains of US$ 204 results in an aggregate benefit of US$ 283 per acre of Bt, or US$ 1.7 billion for the total Bt cotton area in Pakistan.
JEL-Codes: D62; I15; Q51; Q57
Keywords: Bt cotton; Pesticide use; Health and environmental benefits; Choice experiment; Pakistan
No. 104   (Download full text)
Michael Grimm, Simon Lange and Jann Lay
Credit-constrained in risky activities? The determinants of capital stocks of micro and small firms in Western Africa
Micro and small enterprises (MSEs) in developing countries are typically considered to be severely credit constrained. Additionally, high business risks may partly explain why capital stocks of MSEs remain low. This article analyzes the determinants of capital stocks of MSEs in poor economies focusing on credit constraints and risk. The analysis is based on a unique, albeit cross-sectional but backward-looking, micro data set on MSEs covering the economic capitals of seven West-African countries. The main result is that capital market imperfections indeed seem to explain an important part of the variation in capital stocks in the early lifetime of MSEs. Furthermore, the analyses show that risk plays a key role for capital accumulation. Risk-averse individuals seem to adjust their initially low capital stocks upwards when enterprises grow older. MSEs in risky activities owned by wealthy individuals even seem to over-invest when they start their business and adjust capital stocks downwards subsequently. As other firms simultaneously suffer from capital shortages, such behaviour may imply large inefficiencies.
JEL-Codes: D13; D61; O12
Keywords: Informal sector; micro and small enterprises; credit constraints; risk; risk aversion; firm growth; West-Africa
No. 103   (Download full text)
Friederike Greb, Stephan von Cramon-Taubadel, Tatyana Krivobokova and Axel Munk
The estimation of threshold models in price transmission analysis
The threshold vector error correction model is a popular tool for the analysis of spatial price transmission and market integration. In the literature, the profi le likelihood estimator is the preferred choice for estimating this model. Yet, in certain settings this estimator performs poorly. In particular, if the true thresholds are such that one or more regimes contain only a small number of observations, if unknown model parameters are numerous or if parameters diff er little between regimes, the profi le likelihood estimator displays large bias and variance. Such settings are likely when studying price transmission. For simpler, but related threshold models Greb et al. (2011) have developed an alternative estimator, the regularized Bayesian estimator, which does not exhibit these weaknesses. We explore the properties of this estimator for threshold vector error correction models. Simulation results show that it outperforms the profi le likelihood estimator, especially in situations in which the pro file likelihood estimator fails. Two empirical applications - a reassessment of the the seminal paper by Goodwin and Piggott (2001), and an analysis of price transmission between German and Spanish markets for pork - demonstrate the relevance of the new approach for spatial price transmission analysis.
Keywords: Bayesian estimator; market integration; spatial arbitrage; TVECM
No. 102   (Download full text)
Stephan Klasen, Tobias Lechtenfeld, Kristina Meier and Johannes Rieckmann
Impact Evaluation Report: Water Supply and Sanitation in Provincial Towns in Yemen
No. 101   (Download full text)
Robert Rudolf and Sung-Jin Kang
Adaptation under Traditional Gender Roles: Testing the Baseline Hypothesis in South Korea
Using detailed longitudinal data from the Korean Labor and Income Panel Study (KLIPS) from 1998 to 2008, this paper analyzes gender-specific impacts as well as anticipation and adaptation to major life and labor market events. We focus on six major events: marriage, divorce, widowhood, unemployment, first job entry, and introduction of the five-day working week. While our results indicate full adaptation to some events, and even more so for women, to others we see no or only partial habituation. Yet, the results show striking gender-specific differences particularly regarding the impact of events related to marital status change. Husbands remain on a higher happiness level throughout marriage. They also suffer more from, and show less rapid or even no adaptation to widowhood and divorce. Women return to their baseline level of happiness relatively quick after marriage and divorce. Surprisingly, widowhood is not associated with negative effects for women. If anything, moderate positive effects can be found here. Husbands’ additional long-run happiness gain during marriage is equivalent to an (husband-only) increase of annual per-capita household income of approximately US$17,800. We show that the intra-marriage happiness gap between husband and wife is strongly related to the intra-couple earnings difference, providing evidence for both intra-household bargaining and the gender identity hypothesis. The studied labor market events point to a gender segregated labor market. The evidence shows that more effort is needed if Korea wants to achieve higher gender equity.
JEL-Codes: A13; D13; I31; J12; J16; J31
Keywords: Life Satisfaction; Adaptation; Gender; Intra-marriage bargaining
No. 100   (Download full text)
Rico Ihle, Linde Götz and Ofir D. Rubin
State-Space Cointegration Modeling for the Analysis of Exogenous Shocks to Prices in Israeli-Palestinian Food Trade
The Israeli-Palestinian conflict constitutes a prominent example of a long-lasting political conflict which has major consequences for the livelihoods of the people on both sides. The agricultural sectors of the Palestinian and Israeli economies are tightly connected. However, various security measures occasionally implemented in consequence of the political conflict between Israelis and Palestinians strongly inhibit the movement of people and commodities. In order to obtain evidence on the impacts of such abrupt trade impediments on price dynamics, we estimate a vector error correction model in state space form employing the Kalman filter. The time-varying cointegration parameters suggest that the security measures indeed impacted price interdependencies on a short-term scale.
JEL-Codes: C32; D74; Q11; Q13; F15
Keywords: cointegration; error correction; Israel; Palestinian territories; price transmission; state space model; time-varying parameters
No. 99   (Download full text)
Friederike Greb, Tatyana Krivobokova, Axel Munk and Stephan von Cramon-Taubadel
Regularized Bayesian estimation in generalized threshold regression models
Estimation of threshold parameters in (generalized) threshold regression models is typically performed by maximizing the corresponding pro file likelihood function. Also, certain Bayesian techniques based on non-informative priors are developed and widely used. This article draws attention to settings (not rare in practice) in which these standard estimators either perform poorly or even fail. In particular, if estimation of the regression coeffcients is associated with high uncertainty, the pro file likelihood for the threshold parameters and thus the corresponding estimator can be highly aff ected. We suggest an alternative estimation method employing the empirical Bayes paradigm, which allows to circumvent defi ciencies of standard estimators. The new estimator is completely data-driven and induces little additional numerical e ffort compared with the old one. Simulation results show that our estimator outperforms commonly used estimators and produces excellent results even if the latter show poor performance. The practical relevance of our approach is illustrated by a real-data example; we follow up the anlysis of cross-country growth behavior detailed in Hansen (2000).
Keywords: threshold estimation; nuisance parameters; empirical Bayes
No. 98   (Download full text)
Konstantin M. Wacker and Krishna Chaitanya Vadlamannati
Do Multinationals Influence Labor Standards? A Close Look at US Outward FDI
This paper investigates the effects of multinational corporations on labor standards. We argue that the previous literature has failed to distinguish the diff erent motives that encourage fi rms to become multinational. Therefore, we build a stylized model of segmented labor markets with equilibrium unemployment where parts of the labor force are willing to accept reductions in their labor standards to attract job-creating horizontal foreign direct investment. By disentangling US FDI data for 34 advanced host countries throughout the period 1997 to 2002 into vertically and horizontally motivated FDI, we show that this disaggregation provides much more signifi cant results. Concretely, we find a statistically signifi cant and economically considerable negative impact of horizontal US FDI on labor right practices in industrialized host countries by using a static OLS model and qualitatively similar results with dynamic GMM estimation. Our results do not imply that this e ffect leads to a decrease in welfare in the host economy but that in the welfare optimization process employment, income and job-quality serve as substitutes with an elasticity positively depending on equilibrium unemployment.
JEL-Codes: F2; J81; C23; M14
Keywords: Multinationals; FDI; Labor Rights; Labor Markets
No. 97   (Download full text)
Diego Hernandez and Alexandra Rudolph
Modern Day Slavery: What Drives Human Trafficking in Europe?
At a time of increased attention on the international agenda for human trafficking, this paper examines the determinants of human trafficking inflows to 13 European countries based on official records. By employing a fixed effects zero-inflated, negative binomial gravity-type model, we address data characteristics appropriately. The econometric analysis suggests that human trafficking occurs in well established routes for migrants and refugees. Victims are more likely to be transported to, and exploited in, host countries with suboptimal institutional quality levels. Countries whose nationals do not require a visa for short term visits are especially prone to being potential source countries. Legal status and regulation of commercial sex services does not affect the pattern of trafficking flows.
JEL-Codes: F22; J61; K14; K42; O17
Keywords: Human Trafficking; Gravity Model; Illegal Migration; International Organized Crime
No. 96   (Download full text)
Seo-Young Cho, Axel Dreher and Eric Neumayer
Does Legalized Prostitution Increase Human Trafficking?
This paper investigates the impact of legalized prostitution on human trafficking inflows. According to economic theory, there are two opposing effects of unknown magnitude. The scale effect of legalizing prostitution leads to an expansion of the prostitution market, increasing human trafficking, while the substitution effect reduces demand for trafficked women as legal prostitutes are favored over trafficked ones. Our empirical analysis for a cross-section of up to 150 countries shows that the scale effect dominates the substitution effect. On average, the legalization of prostitution increases human trafficking inflows.
JEL-Codes: O15; F22; K42
Keywords: human trafficking; prostitution
No. 95   (Download full text)
Max Köhler, Anja Schindler and Stefan Sperlich
A Review and Comparison of Bandwidth Selection Methods for Kernel Regression
Over the last four decades, several methods for selecting the smoothing parameter, generally called the bandwidth, have been introduced in kernel regression. They differ quite a bit, and although there already exist more selection methods than for any other regression smoother we can still see coming up new ones. Given the need of automatic data-driven bandwidth selectors for applied statistics, this review is intended to explain and compare these methods.
Keywords: Kernel regression estimation; Bandwidth Selection; Plug-in; Cross Validation
No. 94   (Download full text)
Max Köhler, Stefan Sperlich and Julian Vortmeyer
The Africa-Dummy in Growth Regressions
The Africa-Dummy has been identfi ed and diff erent explanations for its appearance have been published. In this paper, the issue of the empirical identifcation of the Africa-Dummy is addressed. We introduce a fixed eff ects regression model to identify the Africa-Dummy in one regression step so that its correlations to other coeffcients can be estimated. A semiparametric extension of this model checks whether the Africa-Dummy is a result of misspecifi cation of the functional structure. Furthermore, we show that sub-Saharan African countries have a positive return to the population growth and when adding interaction e ffects, the Africa-Dummy is even positive. Moreover, we show that the Africa-Dummy changes dramatically over time and the punishment for sub-Saharan African countries decreases incrementally since the mid-nineties. According to the Augmented Solow Growth model, it was even insignificant since the end-nineties.
No. 93   (Download full text)
Axel Dreher and Andreas Fuchs
Rogue Aid? The Determinants of China’s Aid Allocation
Foreign aid from China is often characterized as ‘rogue aid’ that is not guided by recipient need but by China’s national interests alone. However, no econometric study so far confronts this claim with data. We make use of various datasets, covering the 1956-2006 period, to empirically test to which extent political and commercial interests shape China’s aid allocation decisions. We estimate the determinants of China’s allocation of project aid, food aid, medical staff and total aid money to developing countries, comparing its allocation decisions with traditional and other so-called emerging donors. We find that political considerations are an important determinant of China’s allocation of aid. However, in comparison to other donors, China does not pay substantially more attention to politics. In contrast to widespread perceptions, we find no evidence that China’s aid allocation is dominated by natural resource endowments. Moreover, China’s allocation of aid seems to be widely independent of democracy and governance in recipient countries. Overall, denominating aid from China as ‘rogue aid’ seems unjustified.
JEL-Codes: F35
Keywords: Aid allocation; China’s foreign aid; new donors; donor motives
No. 92   (Download full text)
Nicole Grunewald, Stephan Klasen, Inmaculada Martínez-Zarzoso and Chris Muris
Income inequality and carbon emissions
We document a U-shaped relationship between income inequality and carbon dioxide emissions per capita, using a newly available panel data set on income inequality (GINI) with observations for 138 countries over the period 1960–2008. Our findings suggest that, for high-income countries with high income inequality, pro-poor growth and reduced per capita emissions levels go hand in hand.
JEL-Codes: I3; O1; Q3
Keywords: environmental quality; income inequality; panel data
No. 91   (Download full text)
Friederike Greb, Stephan Klasen, Syamsul Hidayat Pasaribu and Manuel Wiesenfarth
Dollar a Day Re-Revisited
Recently, the World Bank re-estimated the international poverty line used for global poverty measurement and the first Millennium Development Goal based on an updated country sample of national poverty lines and new results for PPP exchange rates. This generated the new international poverty line of $1.25 per capita per day in 2005PPP$. In this paper we show, using the same data, that the best statistical estimation of the relationship between mean consumption and national poverty lines generates an international poverty line that is substantially higher than $1.25 a day.
No. 90   (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 analysing the determinants of agricultural productivity were only able to detect insignificant or even surprising negative effects of schooling. In this paper, we argue and show that this failure to find a positive impact of education in the international context is rather a data problem related to the use of enrolment and literacy indicators. Using a panel of 95 developing and middle-income countries from 1961 to 2002 together with the newest version of the Barro-Lee educational attainment dataset, we show that education indeed has a highly significant, positive effect on agricultural productivity which is robust to changes in the control variables and in the econometric methods applied. Distinguishing between different levels of education further reveals that only primary and secondary schooling have significant positive impacts while tertiary education remains insignificant. Finally, the effect of education is estimated separately for countries with different income levels. Results indicate that the coefficient of the education variable remains insignificant for countries from the poorest three income quintiles, while it is positive and highly significant for the richest two quintiles. This finding can be interpreted as support for the prominent argument claiming that education leads to higher agricultural productivity only in the presence of rapid technical change where education will help farmers to adjust more readily to the new opportunities.
JEL-Codes: I20; I25; O13; O15; O47; Q10
Keywords: Agricultural productivity; agricultural production function; cross‐country regression; education; human capital
No. 89   (Download full text)
Nassul S. Kabunga, Thomas Dubois and Matin Qaim
Impact of Tissue Culture Banana Technology on Farm Household Income and Food Security in Kenya
While tissue culture (TC) technology for vegetative plant propagation is gradually gaining in importance in Africa, rigorous ex post assessments of welfare effects for smallholder farm households is lacking. Using recent survey data and accounting for self-selection in technology adoption, we analyze the impacts of TC banana technology on household income and food security in Kenya. To assess food security outcomes, we employ the Household Food Insecurity Access Scale (HFIAS) – a tool that has not been used for impact assessment before. Estimates of treatment-effects models show that TC banana adoption increases farm and household income by 153% and 50%, respectively. The technology also reduces relative food insecurity in a significant way. These results indicate that TC technology can be welfare enhancing for adopting farm households; its use should be further promoted through upscaling appropriate technology delivery systems.
Keywords: Technology adoption; tissue culture; impact assessment; household income; food security
No. 88   (Download full text)
Hartwig de Haen, Stephan Klasen and Matin Qaim
What do we really know? Metrics for food insecurity and undernutrition
In this article, we critically review the three most common approaches of assessing chronic food insecurity and undernutrition: (i) the FAO indicator of undernourishment, (ii) household food consumption surveys, and (iii) childhood anthropometrics. There is a striking and worrying degree of inconsistency when one compares available estimates, which is due to methodological and empirical problems associated with all three approaches. Hence, the true extent of food insecurity and undernutrition is unknown. We discuss strengths and weaknesses of each approach and make concrete suggestions for improvement, which also requires additional research. A key component will be the planning and implementation of more comprehensive, standardized, and timely household surveys that cover food consumption and anthropometry, in addition to other socioeconomic and health variables. Such combined survey data will allow much better assessment of the problems’ magnitude, as well as of trends, driving forces, and appropriate policy responses.
Keywords: Food security measurement; hunger; undernutrition; FAO indicator of undernourishment; household surveys; anthropometrics
No. 87   (Download full text)
Stephan Klasen and Simon Lange
Getting Progress Right: Measuring Progress Towards the MDGs Against Historical Trends
Most numerical targets within the framework of the Millennium Development Goals (MDGs) are overly ambitious for the poorest countries when interpreted as country-specifi c goals. As a consequence, the current system undermines accountability and ownership and jeopardizes the public support the MDGs have drawn in the past. This paper proposes an alternative approach to evaluating progress towards non-income MDGs that allows a sensible appraisal of countries' progress. We fi rst estimate transition paths towards high levels of achievement for three MDG indicators (under- five mortality, primary completion, and gender equality in education). In line with previous empirical work, we fi nd that the sigmoid-shaped transition path captures several features of past transition episodes. Accounting only for initial levels and time elapsed, our models explain up to 80 percent of the within-country variation in the data depending on the indicator considered. Estimated transition paths are then used to project progress towards high levels of achievement since 1990. Comparing actual with projected progress allows us to identify over- and underachievers based on realistic expectations. For example, we find that while some countries in Sub-Sahara Africa have in fact shown considerable performance towards low levels of under-five mortality, the bulk of the the countries in that region is still lagging behind. Finally, we provide some preliminary regression results.
Keywords: millennium development goals; human development; mortality transition; education transition
No. 86   (Download full text)
Axel Dreher and Andreas Fuchs
Does terror increase aid?
This article empirically investigates whether, and in which ways, donors in the Development Assistance Committee respond to transnational terrorist incidents and the onset of the War on Terror through changes in aid effort and aid allocation. First, an analysis of 22 donor countries shows that aid effort increased during the War on Terror period, but did not respond to the actual number of terror events. Second, using aid allocation equations, we find that countries where terror originates are not more likely to receive aid as a consequence, but if they are selected, they receive larger amounts of aid.
JEL-Codes: F35
Keywords: Foreign aid; Transnational terrorism; War on Terror and aid; DAC donors; Heckman selection model
No. 85   (Download full text)
Tatyana Krivobokova
Smoothing parameter selection in two frameworks for penalized splines
There are two popular smoothing parameter selection methods for spline smoothing. First, criteria that approximate the average mean squared error of the estimator (e.g. generalized cross validation) are widely used. Alternatively, the maximum likelihood paradigm can be employed under the assumption that the underlying function to be estimated is a realization of some stochastic process. In this article the asymptotic properties of both smoothing parameter estimators are studied and compared in the frequentist and stochastic framework for penalized spline smoothing. Consistency and asymptotic normality of the estimators are proved and small sample properties are discussed. A simulation study and a real data example illustrate the theoretical fi ndings.
Keywords: Maximum likelihood; Mean squared error minimizer; Penalized splines; Smoothing splines
No. 84   (Download full text)
Elke Schaffland
Conditional Cash Transfers in Brazil: Treatment Evaluation of the “Bolsa Família” Program on Education
Brazil’s “Bolsa Família” conditional cash transfer program (BFP) is the most substantial poverty alleviation program in Brazil. It is the biggest program of this kind in the world, reaching more then 13 000 000 families. The BFP awards grants to eligible poor families, allowing increased consumption in the short term, while building human capital in the long term through setting requirements for school attendance and health care. In this paper, we evaluate the effect of these transfers on educational outcomes in 2004 and 2006, as well as heterogeneous treatment effects over age, region, gender and area (rural/urban). Using Propensity Score Matching (PSM), we find that the probability of school enrollment rises by around 4 percentage points for recipients’ children. The effect is higher for younger children, as well as children living in less developed regions (north and north east) and rural areas. Our results also point to a positive impact on school attendance; recipients miss less school than non-recipient children. However, we also find that this result slightly fades over time.
Keywords: conditional cash transfers; propensity score matching; education
No. 83   (Download full text)
Peter Nunnenkamp, Hannes Öhler and Tillmann Schwörer
US based NGOs in International Development Cooperation: Survival of the Fittest?
The non-distribution constraint of non-governmental organizations (NGOs) would be harder, and financiers as well as recipients could expect more charitable output from them, if less efficient NGOs were squeezed out of international development cooperation. We employ Probit and complementary log-log estimations to analyze which factors determine the probability of “market” exit for almost 900 US based NGOs with overseas aid activities during the 1984-2003 period. Apart from their size and experience, we consider administrative overheads as an important aspect of NGO efficiency. We also account for other dimensions of NGO heterogeneity, including the importance of official refinancing. We find that larger administrative overheads increase the probability of exit for secular NGOs, though not for religious NGOs. Furthermore, we detect complex non-linear effects once the interactions between administrative overheads and official refinancing are taken into account.
JEL-Codes: L31; F35
Keywords: non-governmental organizations; foreign aid; NGO characteristics; market exit; Probit models; complementary log-log
No. 82   (Download full text)
Nassul S. Kabunga, Thomas Dubois and Matin Qaim
Yield Effects of Tissue Culture Bananas in Kenya: Accounting for Selection Bias and the Role of Complementary Inputs
We analyze yield effects of tissue culture (TC) banana technology in the Kenyan small farm sector, using recent survey data and an endogenous switching regression approach. TC banana plantlets, which are free from pests and diseases, have been introduced in East Africa since the late-1990s. While field experiments show significant yield advantages over traditional banana suckers, a rigorous assessment of impacts in farmers’ fields is still outstanding. A comparison of mean yield levels between TC adopters and non-adopters in our sample shows no significant difference. However, we find a negative selection bias, indicating that farmers with lower than average yields are more likely to adopt TC. Controlling for this bias results in a positive and significant TC net yield gain of 7%. We also find that TC technology is more knowledge-intensive and more responsive to irrigation than traditional bananas. Simulations show that improving access to irrigation could lift TC productivity gains to above 20%. The analytical approach developed and applied here may also be useful for the evaluation of other knowledge-intensive package technologies and innovations in perennial crops.
Keywords: Biotechnology; adoption; productivity; impact; endogenous switching regression; Kenya
No. 81   (Download full text)
Axel Dreher, Peter Nunnenkamp and Krishna Chaitanya Vadlamannati
The Role of Country-of-origin Characteristics for Foreign Direct Investment and Technical Cooperation in Post-reform India
The decisions of foreign investors on technical cooperation versus equity engagements and on the degree of ownership in FDI projects are likely to depend on their relative bargaining position vis-à-vis the host country. India provides an interesting case for analyzing the interplay between country-of origin-characteristics and host-country-characteristics and their respective effects on ownership decisions since opening up its economy to FDI in the early 1990s. We perform negative binominal regressions by making use of a unique dataset on about 24,500 technical cooperation and FDI projects by investors from 45 countries of origin over the 1991-2004 period. We find that relative market size, relative financial market development, relative risk, relative endowment of human capital and previous international experience significantly affect the type of engagement by foreign investors in post-reform India.
JEL-Codes: F23; L24
Keywords: foreign investors; countries of origin; joint ventures; technical cooperation; India
No. 80   (Download full text)
Jonas Kathage and Matin Qaim
Are the economic benefits of Bt cotton sustainable? Evidence from Indian panel data
While several studies have shown that genetically modified Bt cotton can benefit smallholder farmers economically, the sustainability of these effects is still unclear and debated controversially between biotechnology proponents and critics. We use unique panel data of 533 cotton farmers, collected in India between 2002 and 2008, to analyze Bt impacts on cotton yield, profit, and household living standards. Results from fixed effects models show that the adoption of Bt cotton is associated with a net yield gain of 24% and a profit increase of 50%. These benefits per acre were stable over time; there are even indications that they increased. Given rising adoption rates, the aggregate benefits grew substantially. We further show that Bt cotton adoption raised consumption expenditures, our measure of household living standards, by 18% during the 2006-2008 period. We conclude that Bt cotton has created large and sustainable benefits, which contribute to economic development in India.
JEL-Codes: I31; Q12; Q13; Q16
Keywords: biotechnology; Bt cotton; genetically modified crops; farm survey; household living standards; India; technology adoption
No. 79   (Download full text)
Aristotelis Boukouras
Separation of Ownership and Control: Delegation as a Commitment Device
This paper provides a theoretical model for explaining the separation of ownership and control in firms. An entrepreneur hires a worker, whose eff ort is necessary for running a project. The worker's eff ort determines the probability that the project will be completed on time, but the worker receives some unobservable benefi t by continuing his employment in the project. Thus, motivating the worker requires an efficiency wage which is inflated by the private benefit. The entrepreneur would pay out a smaller wage if he could commit to terminate the project if a delay occurs, but this threat is not credible, because the project has positive continuation value. We show that hiring a manager can solve this time-inconsistency issue and reduce the efficiency wage. We extend the model to include managerial moral hazard and we examine the conditions under which separation of ownership and control is more likely to happen. The model is consistent with many of the findings of the empirical literature, while it generates some new predictions too.
JEL-Codes: D86; G34; J31; L22; L26
Keywords: control structure; delegation; efficiency wage; entrepreneur; managerial contract; moral hazard; organizational hierarchy; private bene fits; separation of owner-ship and control; time-inconsistency
No. 78   (Download full text)
Axel Dreher and James Raymond Vreeland
Buying Votes and International Organizations
This study explores a basic idea in political economy: Trading money for political influence. Our focus is at the level of international institutions, where governments may exploit their influence in one organization to gain leverage over another. In particular, we consider the lending activities of the International Monetary Fund (IMF) and voting behavior at the United Nations Security Council (UNSC). Analyzing an original dataset on the successful and failed resolutions of the UNSC, we find evidence of vote-buying.
JEL-Codes: O19; O11; F35
Keywords: IMF; UN Security Council; Voting; Aid
No. 77   (Download full text)
Robert Rudolf and Seo-Young Cho
The Gender-Specific Effect of Working Hours on Family Happiness in South Korea
This paper uses detailed longitudinal data from the Korean Labor and Income Panel Study (KLIPS) stretching from 1998 to 2008 to analyze the relationship between working hours and family happiness in Korea. The Korean labor market is characterized by high levels of gender inequality which is partly due to long working hours, a significant gender gap in earnings, yet also to traditional gender roles maintained until today. Therefore, post-marriage labor force participation rates for men are still double as high as for women. However, significant changes took place over the period of our study. Working hours have been steadily reduced and female labor force participation slightly increased, partly due to the introduction of the 5-day working week in 2004. Hours, job, and life satisfaction have all increased hence. Running fixed-effects ordered logit models on married couples with children, we analyze hours, job, and life satisfaction separately for women and men. Our findings indicate that past working hours reductions increased family happiness in Korea. However, there are still strong gender-specific effects how working hours affect family happiness. Controlling for household income, wives report highest satisfaction when either not-working or working 31 to 40 hours per week. Both part-time and overtime work reduce women’s happiness. Korean husbands, in comparison, are best off when being full-time employed with weekly working hours between 31 and 50. Staying at home or being only part-time employed (1-30 hours) is strongly detrimental to their happiness. For both sexes, cross-partner effects are strongly significant. These findings are particularly interesting in comparison to other countries like Great Britain or Australia where similar studies were carried out (Booth and van Ours, 2008; 2009). Results confirm strong traditional gender roles in Korea until today. In order to further increase female labor force participation and family happiness, further reductions in working hours should be flanked by policies promoting equal chances at the work place, a rethinking of gender identities, and flexible job and child-care solutions.
JEL-Codes: I31; J22; J16; J28
Keywords: Working hours; Happiness; Gender identity; Female labor force participation
No. 76   (Download full text)
Stephan Klasen, Tobias Lechtenfeld and Felix Povel
What about the Women? Female Headship, Poverty and Vulnerability in Thailand and Vietnam
This paper investigates whether heterogeneous subgroups of female-headed households are worse off than traditional households headed by men. We analyze the determinants of consumption, shock exposure and vulnerability to poverty. Using unique panel data of over 4000 rural households from Thailand and Vietnam, we find strong signs of heterogeneity among the subgroups of female-headed households. In particular, in both countries de facto female-headed households are consumption richer and less vulnerable to poverty than households with a male head. In Vietnam de jure female-headed households are consumption poorer and more vulnerable to poverty. In Thailand de jure female-headed households do not differ significantly from male-headed households in terms of the analyzed welfare dimensions. These results show how widows and singles in Vietnam are not well protected against uncertainties. The results also indicate that differentiation by subgroups of headship is important for policy targeting and future research. We interpret this as a first step towards a more complete picture of vulnerability of female-headed households in the developing world.
JEL-Codes: I32; I39; O12
Keywords: Gender; Poverty; Shocks; Vulnerability to Poverty
No. 75   (Download full text)
Kenneth Harttgen and Stephan Klasen
A Human Development Index at the Household Level
One of the most serious weaknesses of the human development index (HDI) is does not take into account the distribution of human development within a country. All previous attempts to capture inequality in the HDI have also used aggregate information and there exists no HDI at the household level. We provide a method for proxying the HDI at the household level. This allows the analysis of the HDI by any kind of population subgroups and by household socioeconomic characteristics as well as to apply any kind of inequality measure across population subgroups and over time. We illustrate our approach for 15 developing countries. Inequality in the HDI is stunningly large for some countries, driven mostly by very high inequality in the education and income components of the HDI. The inequality in human development is larger than previously reported which is largely due to the new procedures for calculating the HDI used in the 2010 Human Development Report. Inequality in the HDI is largest in poorer countries, particularly in Sub-Saharan Africa.
Keywords: Human Development Index; Income Inequality; Differential Mortality; Inequality in Education
No. 74   (Download full text)
Nassul S. Kabunga, Thomas Dubois and Matin Qaim
Information Asymmetries and Technology Adoption: The Case of Tissue Culture Bananas in Kenya
Classical innovation adoption models implicitly assume homogenous information flow across farmers, which is often not realistic. As a result, selection bias in adoption parameters may occur. We focus on tissue culture (TC) banana technology that was introduced in Kenya more than 10 years ago. Up till now, adoption rates have remained relatively low. We employ the average treatment effects approach to account for selection bias and extend it by explicitly differentiating between awareness exposure (having heard of a technology) and knowledge exposure (understanding the attributes of a technology). Using a sample of Kenyan banana farmers, we find that estimated adoption parameters differ little when comparing the classical adoption model with one that corrects for heterogeneous awareness exposure. However, parameters differ considerably when accounting for heterogeneous knowledge exposure. This is plausible: while many farmers have heard about TC technology, its successful use requires notable changes in cultivation practices, and proper understanding is not yet very widespread. These results are also important for other technologies that are knowledge-intensive and/or require considerable adjustments in traditional practices.
Keywords: adoption; tissue culture; banana; average treatment effects; knowledge and exposure; adoption gap; Kenya
No. 73   (Download full text)
Seo-Young Cho
Integrating Equality - Globalization, Women’s Rights, Son Preference and Human Trafficking
Employing economic and social globalization indicators, we empirically analyze whether globalization affects women’s rights in the economic and social dimensions. Using panel data from 150 countries over the 1981-2008 period, we find that social globalization positively affects both women’s economic and social rights, while the impact of economic globalization disappears when controlling for social globalization. Furthermore, we find that social globalization also reduces ‘son preference’ problems, prevailing in developing countries. However, (marginalized) foreign women, proxied with inflows of human trafficking, are not beneficiaries of such ‘female-friendly’ globalization effects.
JEL-Codes: F15; J13; J16; O16; O19
Keywords: economic and social globalization; women’s economic and social rights; son preference; human trafficking
No. 72   (Download full text)
Peter Nunnenkamp and Hannes Öhler
Donations to US based NGOs in International Development Cooperation: How (Un-)Informed Are Private Donors?
Apart from scaling up foreign aid by NGOs, informed choices of private donors could also encourage an efficient and targeted use of NGO funds in international development cooperation. We assess the determinants of private donations across a large sample of US based NGOs with foreign aid activities. OLS and 2SLS estimations indicate that donors hardly make use of publicly available information on NGO characteristics, notably the “price of giving” and the degree of specialization, when deciding on donations. They rather rely on the frequently offered option to designate donations to preferred purposes – even though this behavior would be rational only under conditions that are unlikely to hold.
JEL-Codes: L31; F35; D80
Keywords: non-governmental organizations; specialization; private donations; informed choices; price of giving; option to designate
No. 71   (Download full text)
Isis Gaddis and Stephan Klasen
Economic Development, Structural Change and Women’s Labor Force Participation A Reexamination of the Feminization U Hypothesis
A large literature claims that female labor force participation (FLFP) follows a U-shaped trend over the course of economic development. This feminization U hypothesis is motivated by secular patterns of structural change in combination with education and fertility dynamics. We show that empirical support for the hypothesis is rather feeble and hinges on the data used for the assessment. The PWT 7.0 revision of international GDP estimates paints a completely different picture of the relationship between aggregate GDP and FLFP than the previous PWT 6.3, with the U coming out much stronger under PWT 7.0 than under PWT 6.3. The feminization U also tends to vanish if we use dynamic instead of static panel data methods. Moreover, differences in levels of FLFP across the world related to historical contingencies are much more important determinants of women’s employment opportunities than the muted U patterns found in some specifications. Given the large margins of error in international GDP estimates at purchasing power parities (PPP) and the sensitivity of the U-relationship we propose an alternative way to explore the effect of structural change on FLFP. We use data on sector-specific growth, which do not require PPP comparisons and allow for a direct test of the effect of structural change on women’s economic activity. Our results suggest that agriculture, mining, manufacturing and services generate different dynamics for FLFP, but the effects are small in magnitude. We conclude that the feminization U hypothesis, especially its declining portion, has little relevance for most developing countries today.
JEL-Codes: J16; J21; J22; O11; O15
Keywords: Female Labor Force Participation; Economic Development; Structural Change; Purchasing Power Parties; Panel; GMM
No. 70   (Download full text)
Xiaohua Yu, Yinchu Zeng and Yuanyuan Liu
Consumer Willingness to Pay for Preservative-Free Food: The Case of Beijing
Consumers are facing a trade-off between the benefits of an increase in the length of the shelf life of food, such as low food costs, and the potential health damages caused by food preservatives. However, few studies in the current literature place emphasis on food preservatives, neither from a scientific perspective nor from an economic perspective. This causes a lot of controversies about government regulations. By constructing a theoretical framework and using a survey of 293 customers from 25 supermarkets in Beijing, this paper studies the consumer attitude towards food preservatives and attempts to fill the gap in the current literature. The main findings include that food price, and consumers’ age and income are important for the willingness to pay (WTP) for “preservative-free food” in Beijing. In particular, food price and consumer incomes are positively correlated with the WTP and there might be an inverted U-shaped relationship between age and WTP. This study indicates that consumers in Beijing are willing to pay a very high premium for preservative-free food —62% for preservative-free Mooncakes compared to conventional ones.
JEL-Codes: I12; Q18
Keywords: Preservative-Free Food; Willingness to Pay; Double-Bounded Dichotomous Choice; Mooncakes; Beijing
No. 69   (Download full text)
Zhifeng Gao, Xiaohua Yu and Jonq-Ying Lee
Consumer Demand for Healthy Diet: New Evidence from the Healthy Eating Index
A large volume of literature has been focusing on the measure of diet quality and consumer demand for food. However, little has estimated consumer demand for diet quality. In this article, we systematically estimate consumer demand for diet quality using the healthy eating index (HEI) developed by the U.S. Department of Agriculture. The Results show that consumers have insufficient consumption of the food containing dark green, orange vegetable, legumes and total grain. Age and education have significant impact on consumer demand for diet quality but income does not. The own price elasticities of demand for diet quality are inelastic and are larger than cross price elasticities. Asymmetric cross price elasticity exists between the diet quality of solid fats, alcoholic beverages and added sugars and the quality of other diet groups. This information is critical in policies and programs that are designed to improve consumer healthy food choice which can reduce social cost of public health.
JEL-Codes: D12
Keywords: Healthy Eating Index; Diet quality; Demand; Household production; Translog cost function
No. 68   (Download full text)
Rainer Holst, Xiaohua Yu and Carola Grün
Climate Change, Risk and Grain Production in China
This paper employs the production function-based method proposed by Just and Pope (1978, 1979) to explicitly analyze production risk in the context of Chinese grain farming and climate change, and test for potential endogeneity of climate factors in Chinese grain production. Our results indicate that grain production in south China might, at least in the short run, could be a net beneficiary of global warming. In particular, we find that a 1 °C increase in annual average temperature in South China could entail an increase of grain output by 3.79 million tons or an economic benefit of around USD 798 million due to the increasing mean output. However the impact of global warming in north China is negative, small and insignificant. In addition, Hausman tests reveal no endogeneity of climate variables in Chinese grain production.
JEL-Codes: Q1; Q54
Keywords: Agriculture; grain production; climate change; production risk; China
No. 67   (Download full text)
Xu Tian and Xiaohua Yu
The Quality Gravity Model with an Application to Chinese Imported Fruits
Derived from unit value and the gravity model, this paper proposes a simple model to analyze the quality determinants of imported fruits in China, and finds that (1) both quantity and price are exogenous for quality, and quality decreases in quantity but increases in price; (2) the own-income elasticity of quality is 8.55 and the partner-income elasticity is only -0.08; and (3) distance and common boundary do not play significant roles in determining quality.
Keywords: Gravity model; Quality index; Quality Gravity model
No. 66   (Download full text)
Stefan Meyer and Xiaohua Yu
World Food Prices after WTO Foundation: Deterministic and Non-deterministic Factors in Production
This paper develops a two-step method to estimate the influence of non-deterministic factors in production on subsequent food prices, and finds that non-deterministic factors of wheat production do significantly affect both wheat and corn prices in the world and, however, those of corn do not.
Keywords: Non-Deterministic Factors; World Food Prices; WTO
No. 65   (Download full text)
Xiaohua Yu and Zhifeng Gao
Consumer Preferences for Country-of-Origin of U.S. Beef Products: A Meta Analysis
By conducting a meta-analysis with 50 observations collected from 15 primary studies, we systematically analyze heterogeneities in consumer preferences for the Country-of-Origin (COO) of U.S. beef products. The main findings include that consumers in Asian countries (Korea and Japan) are willing to pay least for the COO of U.S. beef products compared with North American countries, and that the BSE incidence in the U.S. substantially damaged consumer preferences for the COO of U.S. beef products outside the U.S. but not in the U.S. The results also indicate that choice experiments yield larger WTP values and that the sample size is negatively correlated with WTP values.
JEL-Codes: Q18; Q51
Keywords: U.S. beef; COO; WTP; Meta analysis
No. 64   (Download full text)
Rainer Holst and Xiaohua Yu
Climate Change and Production Risk in Chinese Aquaculture
Drawing on the method developed by Just and Pope (1978, 1979), this paper separately analyzes the marginal contributions of both regular input factors and climate factors to mean output and to production risk in Chinese inland aquaculture. Furthermore, the net change in output following a 1°C increase in annual average temperature will be determined. According to the results obtained, the impending changes in global climate will have both positive and negative impacts. While an increment in annual average temperatures will increase mean output and decrease production risk, an increase in temperature variability will reduce mean output and cause a higher level of production risk. The corresponding measures of precipitation however have no significant impact on mean output and production risk. Finally, a 1°C increase in annual average temperature is, ceteris paribus, likely to increase national mean output by 1.47 million tons.
JEL-Codes: Q1; Q54
Keywords: Aquaculture; climate change; production risk; China
No. 63   (Download full text)
Xiaohua Yu, David Abler and Chao Peng
Dancing with the Dragon Heads: Enforcement, Innovations and Efficiency of Contracts between Agricultural Processors and Farmers in China
Contractual breaches are very prevalent in developing countries, such as in China. In order to prevent breaches of contracts, the contractual designs between farmers and agricultural processors (Dragon-Heads Firms) in China, innovate in two ways: organizational innovations and contractual innovations. In particular, contractual innovations are that initial simple price-quantity contracts involve into complex cooperation contracts. Using the data for over 500 State Key Processors in 2003 from Chinese Ministry of Agriculture, we construct econometric models to study contract choices, contract intensity, and the impacts on sales and profits for agricultural processors in China. The results indicate that capital and the number of contracted farmers are endogenous in contract choices. Processors are more likely to use cooperation contracts compared with price-quantity contracts as the number of contracted farmers increases, because then the costs of coordinating, monitoring and enforcing price-quantity contracts may increase dramatically in the case of price-quantity contracts. On the other hand, contract types are not important for the number of contracted farmers, the intensity of contracts, sales and profits for processors, because the purposes of different contract types are related with prevention of breaching contracts. By the way, the results indicate that the elasticity of profits with respect to capital is 0.52, which implies that the returns to investing in the food processing industry are relatively high in China.
No. 62   (Download full text)
Aristotelis Boukouras and Kostas Koufopoulos
Information Aggregation and Adverse Selection
We consider a general economy, where agents have private information about their types. Types can be multi-dimensional and potentially interdependent. We show that, if the interim distribution of types is common knowledge (the exact number of agents for each type is known), then a mechanism exists, which is consistent with truthful revelation of private information and which implements first-best allocations of resources as the unique Bayes-Nash equilibrium. Our result requires weak restrictions on preferences (Local Non-Common Indiff erence Property) and on the Pareto correspondence (Anonymity) and it is robust to small perturbations regarding the knowledge of the interim distribution. Our paper is useful in understanding the power of information aggregation in alleviating incentive constraints and is particularly pertinent to games with large populations, in which case the interim distribution of types converges to a unique distribution.
JEL-Codes: D71; D82; D86
Keywords: adverse selection; anonymity; first-best allocations; full implementation; information aggregation; mechanism design; single-crossing property; Pareto correspondence
No. 61   (Download full text)
Aristotelis Boukouras
Contract Law and Development
We relate the design of contract law to the process of development. In this paper, contract law de fines which private agreements are enforceable (i.e. are binding and enforced by courts) and which are not. Speci cally, we consider an economy where agents face a hold-up problem (moral hazard in teams). The resulting time-inconsistency problem leads to inefficiently low levels of eff ort and trading among agents. The solution to this problem requires a social contract which meets two conditions: (i) an economywide delegate (judge) responsible for the enforcement of the social contract and (ii) a set of non-enforceable private contracts (regulation). However, because this mechanism is costly, its effectiveness depends on the aggregate production of the economy. To capture the interaction between contract enforcement and development, we introduce a multiperiod economy and show that, in the early stages of development, the mechanism is infeasible. The appearance of enforcement institutions and regulation is delayed for the later stages. At this point of time, the hold-up problem is solved and this spurs economic growth further. Finally, the relationship between economic development and the evolution of contract law may be non-monotonic, which may explain why empirical studies fail to find a robust relationship between the two.
JEL-Codes: D02; D82, D86; K12; O12; O31; O43
Keywords: contract law; development; enforcement institutions; hold-up; institutional agent; regulation; social contract
No. 60   (Download full text)
Aristotelis Boukouras and Kostas Koufopoulos
Separation of Powers, Political Competition and Efficient Provision of Public Goods
In this paper we provide a political game where agents decide whether to become legislators or politicians. Legislators determine the political institutions constraining politicians' behavior and politicians compete for gaining the power to make decisions about the level of the public good. We derive the following results: i) Political competition is a necessary but not a suffcient condition for the elimination of political rents. ii) Agents utilize the separation of powers in order to endogenously select institutions which restrict the power of politicians. iii) In conjunction with political competition, these institutions implement the Lindahl allocation in the economy as a sub-game perfect Nash equilibrium of the political game. iv) As a consequence of the previous result, political rents are zero in equilibrium, in the sense that the winning politician does not extract part of the social surplus because of his power. To the best of our knowledge, this in the only citizen-candidate model with this equilibrium property.
JEL-Codes: D02; D62; D72; H41
Keywords: Lindahl allocation; political competition; voting games
No. 59   (Download full text)
Aristotelis Boukouras and Kostas Koufopoulos
Frictions to Political Competition and Financial Openness
In this paper we present a political economy approach in order to explain the degree of financial openness for an economy. In the model, entrepreneurs, who may have good or bad projects, vote for policies, which are proposed by selfi sh politicians. Two political frictions (ideological adherence and a super- majority requirement) impair political competition and lead to equilibria, where politicians receive corruption bribes. Furthermore, the model implies a non-monotonic relationship between financial openness and corruption and a positive relationship between financial openness and government size. Some of the model predictions are consistent with empirical findings while other predictions have not beeen tested yet.
JEL-Codes: G21; G28; H32; P16; P43
Keywords: corruption; fi nancial openness; ideology; politicians
No. 58   (Download full text)
Aristotelis Boukouras and Kostas Koufopoulos
Political Competition, Ideology and Corruption
This paper presents a model of political competition, where voter decisions are affected by their ideological adherence to political parties. We derive a number of interesting results: First, we show that an equilibrium exists even though voting is fully deterministic. Second, although politicians, because of deterministic voting, can win an election with certainty by making concessions to voters, they choose to win the election only with some probability in order to maximize their expected rents. Third, if the distribution of ideology is asymmetric, then political parties follow different platforms in equilibrium. Finally, our model generates two novel empirical predicitions, which, to the best of our knowledge, have not been tested yet: i) the higher the ideological adherence to a political party the more inefficient policies this party will follow, ii) the higher the number of extra votes required for election victory (the super-majority requirement) the higher the degree of corruption.
JEL-Codes: G21; G28; H32; P16; P43
Keywords: corruption; political instability; voting behavior
No. 57   (Download full text)
Admasu Shiferaw and Degol Hailu
Aid-Dependency and Attributes of an Aid-Exit Strategy
This paper tracks a group of developing countries which started off in the 1960s with a comparable and relatively high aid dependency but followed two different paths in the subsequent four decades: where one sub-group of countries became increasingly aid dependent while the other sub-group nearly exited aid-dependency. It then compares the trajectories of key macroeconomic variables in the two groups of countries in a bid to provide broad sketches of an aid-exit strategy. The paper shows that the likelihood of exiting aid dependency increases with the rate of investment and the share of manufacturing in GDP while it declines with the size of the saving-investment gap and the rate of inflation.
JEL-Codes: F35; O16
Keywords: Aid Dependency; Aid Exit; Investment; Domestic Saving; Inflation
No. 56   (Download full text)
Admasu Shiferaw
Multi-product Firms and Product Basket Adjustments in Ethiopian Manufacturing
This paper analyzes firm level adjustment of the product mix and its implications for aggregate output growth. Using firm level panel data from Ethiopian manufacturing during the period 1996-2007, it shows that about 30% of firms adjust their ‘extensive margin’ annually by adding and/or dropping at least one product and about half of those firms undertake such adjustment only through product adding. At the aggregate level, about 30% of annual growth in sales is accounted for by the adjustment of the extensive margin which is more than four times the net contribution of firm entry and exit. The paper also shows that the likelihood of adding a product tends to decline with firm size and increases dramatically with the incidence of large investment outlays. While the level of productivity does not seem to increase the probability of adding a product, a net increase in the number of products is strongly associated with subsequent growth in sales, productivity and capital stock at the firm level.
JEL-Codes: D21; E23; L11; L60
Keywords: Product Switching; Multiproduct Firms; Extensive Margin; Intensive Margin; Ethiopian Manufacturing
No. 55   (Download full text)
Sebastian Vollmer, Hajo Holzmann, Florian Ketterer and Stephan Klasen
Distribution Dynamics of Regional GDP per Employee in Unifi ed Germany
We investigate to what extent convergence in production levels per worker has been achieved in Germany since unification. To this end, we model the distribution of GDP per employee across German districts using two-component normal mixtures. While in the first year after unification, the two component distributions were clearly separated and bimodal, corresponding to the East and West German districts, respectively, in the following years they started to merge showing only one mode. Still, using the recently developed EM-Test for homogeneity in normal mixtures,the hypothesis of just a single normal component for the whole distribution is clearly rejected for all years. A Posterior analysis shows that about half of the East German districts were assigned to the richer component in 2006, thus catching up to levels of the West. The growth rate of a mover district is about one percentage point higher than the growth rate of a non-mover district which had the same initial level of GDP per employee.
JEL-Codes: O47; R11
Keywords: Regional convergence; distribution dynamics; mixture models; Germany; unification
No. 54   (Download full text)
Rico Ihle and Stephan von Cramon-Taubadel
Price Dynamics in Tanzanian Maize Markets: Insights from a Semiparametric Cointegration Model
Maize is a major staple food in Sub-Saharan Africa. Monthly maize prices in Tanzania are analyzed since the country is an important maize producer and exporter in East Africa. We analyze price transmission between the five most important urban regions of Tanzania between 2000 and 2008 which correspond to major maize production or consumption areas. We propose a novel method for the analysis. The semiparametric vector error-correction model allows the partial impact of the past deviations from price equilibria on current price changes to be potentially nonlinear. The nonparametric estimates of these partial influences suggest that they can be adequately modeled by linear functions.
JEL-Codes: C32; Q11; Q13
Keywords: cointegration; maize; nonlinear time series model; price transmission; semiparametric model; Tanzania
No. 53   (Download full text)
Rico Ihle and Joseph Amikuzuno
Assessing Seasonal Asymmetric Price Transmission in Ghanaian Tomato Markets With the Johansen Estimation Method
We assess market integration and price transmission of perishable agricultural produce in Sub-Saharan Africa by studying Ghanaian tomato markets which are characterized by pronounced seasonality in production and trade flows. We analyse the tomato markets of Ghana by simultaneously regarding its five most important markets, Navrongo, Techiman, Kumasi, Tamale and Accra, in a multivariate asymmetric price transmission framework. The estimation of the model is based on a unique dataset and on a modified version of the Johansen estimation procedure which is suitable for estimating such multivariate models. We estimate the price transmission parameters for four regimes which are a combination of the seasonal patterns in trade flows and asymmetries in the long-run price equilibrium between the most important production region (Techiman) and the most important consumption centre for tomatoes (Accra). We find strong evidence for integration of the five markets. In general, price transmission appears to be fast. Disequilibria mainly trigger price responses in the two production regions of Navrongo and Techiman. The regimes are found to matter for the whole system of tomato markets. Disequilibrium is shown to spillover between the price relationships. Consequently, tomato markets in Ghana appear to be integrated and function very well since price signals are rapidly passed through the country.
JEL-Codes: C32; Q11; Q13; F14; F15
Keywords: asymmetric price transmission; cointegration; Ghana; regime-dependent model; seasonality; tomato; vector error-correction model
No. 52   (Download full text)
Isabel Günther and Kenneth Harttgen
Deadly Cities? A Note on Spatial Inequalities in Mortality in Sub-Saharan Africa
In this paper we analyze if an `urban mortality penalty' exists for today's developing countries, repeating the history of industrialized nations during the 19th century. We analyze the Demographic and Health Survey (DHS) of 19 Sub-Saharan African countries for differences in child and adult mortality between rural and urban areas. Our findings indicate that child mortality is higher in rural areas for almost all countries. On average child mortality rates are 13.6 percent in rural areas and `only' 10.8 percent in urban areas. In contrast, average urban adult mortality rates (on average 14.5 percent) have indeed exceeded rural adult mortality rates (on average 12.8 percent) in many of our sample countries in the 2000s. For many countries high child mortality pockets do, however, exist in slum areas within cities. Child mortality rates in slum areas are on average 1.65 times higher than in the formal settlements of cities, but still lower than in rural areas.
JEL-Codes: I10; I30; J10; R00
Keywords: mortality; urban; slum; inequality
No. 51   (Download full text)
Oleg Nivievskyi, Stephan von Cramon-Taubadel and Sergiy Zorya
Stages of Agricultural Commercialization in Uganda: The Role of the Markets
Agricultural commercialization has become the centerpiece of the sector development strategy in Uganda in recent years. Nevertheless the low market participation of most smallholders in the country remains a fact. We employ semi-parametric regression techniques to analyze the current state of market participation and production diversification and to identify the determinants of commercialization in Uganda. We find that the key constraint to agricultural commercialization in Uganda is inadequate access of farmers to infrastructure and assets, both physical and human. Those with access to assets and closer to markets engage actively in the markets, while those lacking one or more of these essential ingredients largely do not. These findings are in line with the recent literature on smallholder market participation in Africa. We also find that commercialization proceeds in stages. When farmers have appropriate incentives and access to markets, they do not immediately separate production and consumption decisions. Instead they first diversify their production portfolios before subsequently increasing commercial specialization. The result is a U-shaped relationship between commercialization and diversification.
Keywords: commercialization; diversification; smallholder agriculture; Uganda; semi-parametric regression
No. 50   (Download full text)
Manuel Wiesenfarth, Tatyana Krivobokova, Stephan Klasen and Stefan Sperlich
Direct Simultaneous Inference in Additive Models and its Application to Model Undernutrition
This article proposes a simple and fast approach to build simultaneous confi dence bands and perform specification tests for smooth curves in additive models. The method allows for handling of spatially heterogeneous functions and its derivatives as well as heteroscedasticity in the data. It is applied to study the determinants of chronic undernutrition of Kenyan children, with particular focus on the highly non-linear age pattern in undernutrition. Model estimation using the mixed model representation of penalized splines in combination with simultaneous probability calculations based on the volume-of-tube formula enable the simultaneous inference directly, i.e. without resampling methods. Finite sample properties of simultaneous con fidence bands and specifi cation tests are investigated in simulations. To facilitate and enhance its application, the method has been implemented in the R package AdaptFitOS.
Keywords: Additive model; Con dence band; Undernutrition; Heteroscedasticity; Locally adaptive smoothing; Kenya; Penalized splines; Varying variance
No. 49   (Download full text)
Felicitas Nowak-Lehmann D., Inmaculada Martínez-Zarzoso, Adriana Cardozo, Dierk Herzer and Stephan Klasen
Foreign Aid and Recipient Countries’ Exports: Does Aid Promote Bilateral Trade?
This paper uses the gravity model of trade to investigate the link between foreign aid and exports in recipient countries. Most of the theoretical work emphasizes the negative impact of aid on recipient countries’ exports primarily due to exchange rate appreciation, disregarding possible positive effects of aid in promoting bilateral trade relations. The empirical findings, in contrast, indicate that the net impact of aid on recipient countries’ exports is positive -even though the macroeconomic impact of aid is rather small- and that the average return for recipients’ exports is about 1.50 US$ for every aid dollar spent. We argue that “bilateral aid” seems to promote good bilateral trade relations, mutual trust and familiarity and that those factors reinforce bilateral trade, including recipient country exports. The paper also estimates the effect of different types of aid (bilateral aid versus multilateral aid flowing to a specific recipient) and studies aid’s contribution to an expansion of exports in different regions of the world. It is found that aid is strongly export-enhancing in Asia and Latin America, but not in Africa.
JEL-Codes: F10; F35
Keywords: International trade; foreign aid; recipient exports; bilateral trade relations
No. 48   (Download full text)
Elisabeth Fischer and Matin Qaim
Linking Smallholders to Markets: Determinants and Impacts of Farmer Collective Action in Kenya
This article investigates determinants and impacts of cooperative organization, using the example of smallholder banana farmers in Kenya. Farmer groups are inclusive of the poor, although wealthier households are more likely to join. Employing propensity score matching, we find positive income effects for active group members. Yet price advantages of collective marketing are small, and high-value market potentials have not yet been tapped. Beyond prices, farmer groups function as important catalysts for innovation adoption through promoting efficient information flows. Some wider implications are discussed under what conditions collective action is useful, and through what mechanisms the potential benefits emerge.
Keywords: agricultural markets; smallholder farmers; collective action; cooperative organization; Kenya; East-Africa
No. 47   (Download full text)
Nicole Rippin
Poverty Severity in a Multidimensional Framework: The Issue of Inequality between Dimensions
This paper contributes to the axiomatic foundation of multidimensional poverty measures. A well-known problem in the multidimensional framework is that the identification method used in the one-dimensional framework, the union method, leads to exaggerated poverty rates. So far, this problem has been addressed by either changing the identification method itself or by introducing different weighting schemes – which all have in common that they assume attributes to be substitutes. In our paper we claim that the exaggeration problem is first of all an issue of how distribution sensitivity is accounted for and thus ought to be addressed at the aggregation instead of the identification level. In fact, we provide evidence that the way in which the Transfer principle, which accounts for distribution sensitivity in the one-dimensional framework, has been extended to the multidimensional framework is incomplete. We demonstrate that by solving this aggregation problem with the introduction of an additional axiom, the exaggeration problem at the identification level is, as a direct consequence, automatically solved as well. Finally, we derive a family of poverty measures whose specific, axiomatically implied weighting structure solves the exaggeration problem for ordinal as well as cardinal data while at the same time allowing for an independent relationship between attributes. We demonstrate that some of the most well-known poverty measures like the Multidimensional Poverty Index are special cases of this family.
JEL-Codes: I32
Keywords: Multidimensional poverty measurement; axiomatic approach; aggregation of poor; poverty severity
No. 46   (Download full text)
Sreenivasan Subramanian
Identifying the Income-Poor: Some Controversies in India and Elsewhere
Conventional approaches to the measurement of income-poverty require the ability to identify the poor by reference to a specified poverty line. On the face of it, it may appear to be unproblematic to specify such a poverty line. There are, however, analytical and conceptual difficulties entailed in the identification exercise of poverty measurement, and many of these difficulties have to do with the determination of the appropriate space in which to seek invariance of the poverty standard in terms of which poverty comparisons can be effected. These conceptual niggles have been a feature of the actual experience of the evolution of money-metric poverty lines in concrete historical settings. This essay reviews and critically interprets the Indian experience of poverty estimation with specific reference to the identification problem as it has been addressed in the country in the last fifty or so years. The essay also briefly engages with aspects of the record, in this regard, of the United States Federal Government’s poverty thresholds and the World Bank’s international poverty lines. An attempt is made to locate the analytical basis of the conceptual difficulties informing the identification exercise, and to relate this to the confusions and controversies that have attended many of the actual efforts in India and elsewhere to assess the magnitudes, spatial distribution, and temporal trends of money-metric poverty. Finally, the essay also advances an alternative practical proposal for the measurement of poverty which avoids the identification exercise altogether, and incorporates within itself aspects of the notions of both relative inequality and inclusive growth. This approach is certainly not exempt from conceptual difficulties of its own. It is, nevertheless, worth asking if the directness and simplicity of this alternative prescription, combined with the conceptual and practical difficulties which also inform the conventional approach to the identification problem, may constitute grounds for submitting the proposal to at least a preliminary consideration. It remains to add that this essay draws very heavily on earlier work done by the author on its subject of enquiry.
JEL-Codes: D30; I30; I32; O15
Keywords: money-metric poverty line; resources; capabilities; evolution of Indian poverty line; US poverty thresholds; the World Bank poverty line; alternative approach to measuring poverty; quintile income
No. 45   (Download full text)
Jan Priebe
Child Costs and the Causal Effect of Fertility on Female Labor Supply: An investigation for Indonesia 1993-2008
Over the last two decades Indonesia has experienced a signifcant decline in fertility rates and substantial increases in the level of education of women. Despite this development female labor force participation rates have remained roughly constant throughout this period. This paper explores the causes for the seeming unresponsiveness of female labor supply to changes in fertility. The empirical analysis is performed using annual data from the national household survey Susenas for the period 1993-2008. The final sample comprises about 850,000 woman aged 21 to 35 with at least two children. Identifcation of causal effects builds upon the empirical strategy as outlined in Angrist and Evans (1998). The results suggest that a considerable share of women in Indonesia works in the labor market in order to finance basic expenditures on their children. Therefore, reductions in fertility rates seem to have led to two opposing effects that contributed to aggregate levels of female labor supply being constant. While some women were more likely to participate in the labor market due to a lower number of children, others might now lack the need to engage in the labor market due to a relaxation in their budget constraint.
JEL-Codes: C21; D01; J13; J20
Keywords: Causality; Child Costs; Indonesia; Labor Supply; LATE
No. 44   (Download full text)
Felix Povel
Vulnerability to Downside Risk and Poverty in Vietnam
In this paper we propose a new measure of vulnerability called vulnerability to downside risk. The relevant benchmark for this new measure is the current level of wellbeing of a household as opposed to another benchmark such as the poverty line. We argue that this measure adds complementary information to existing measures such as Calvo and Dercon’s (2007) axiomatic measure of vulnerability to poverty. We apply a measure of both vulnerability to downside risk and to poverty to data from Vietnam. We show that consumption smoothing capacities and the probability to experience an adverse event differ substantially between different wealth groups. Consequently, the relation between initial wealth and vulnerability to downside risk is highly non-linear. While moderately but not extremely poor households are relatively vulnerable to extreme poverty, they are less vulnerable to downside risk than any other group of households.
JEL-Codes: D81; I31; I32; O12
Keywords: Vulnerability; Poverty; Shocks; Risk
No. 43   (Download full text)
Felix Povel
Perceived Vulnerability to Downside Risk
In this paper we propose an approach to vulnerability called perceived vulnerability to downside risk. We argue that the other concepts of vulnerability, though partially adhering to the focus axiom, do not exclusively consider downside risks in their measures. The reason for this is that most of them use a pre-determined threshold such as the poverty line as their benchmark for analysis. Instead, we opt for the current level of wellbeing of a household as reference point. Also, we propose to use subjective risk perception as the source of information for quantifying vulnerability since it overcomes some of the shortcomings connected to the reliance on information about the past. Finally, we apply the measure of perceived vulnerability to downside risk to risk perception data from Thailand and Vietnam and find that households in the latter country tend to be more vulnerable than households in the former. Moreover, determinants of perceived vulnerability to downside risk differ significantly between the two countries.
JEL-Codes: D81; I31; I32; O12
Keywords: Vulnerability; Risk; Risk Perception; Subjective Wellbeing
No. 42   (Download full text)
Peter Nunnenkamp and Hannes Öhler
Throwing Foreign Aid at HIV/AIDS in Developing Countries: Missing the Target?
We assess empirically whether foreign official development assistance (ODA) has been effective in alleviating HIV/AIDS epidemics, which figures prominently among the Millennium Development Goals. We employ a difference-in-difference-in-differences approach to identify the treatment effect of ODA specifically meant to fight sexually transmitted diseases on HIV/AIDS-related outcome variables. We do not find that ODA has prevented new infections to an extent that would have reduced the number of people living with HIV. By contrast, ODA has contributed effectively to the medical care of infected people. However, conclusive evidence on significant treatment effects on AIDS-related deaths only exists for the major bilateral source of ODA, the United States. In particular, targeted US assistance programs appear to be more effective than the activities of multilateral organizations.
JEL-Codes: F35; I19
Keywords: HIV prevalence; AIDS-related deaths; official development assistance; aid effectiveness; major donors; difference-in-difference-in-differences
No. 41   (Download full text)
Kenneth Harttgen and Stephan Klasen
Fragility and MDG Progress: How useful is the Fragility Concept?
While it is widely presumed that development progress in so-called fragile states is lagging behind, only very limited empirical analysis exists that investigates to what extent the levels and trends in the MDGs differ significantly between fragile and other developing countries, and between different de-finitions of fragile states. The purpose of this paper is to analyze levels and progress of the MDGs between 1990 and 2008 of fragile and non-fragile developing countries. It shows that fragile countries are, indeed, performing worse in terms of MDG levels. In terms of MDG progress, progress is, on average, not slower in fragile states using most definitions of fragility. Lastly, the heterogeneity of MDG performance among fragile states is so large that it is not very useful to treat them as a group; the problems they face, as well as the solutions required, differ greatly and have to be developed and treated sui generis.
JEL-Codes: I00; I30; O10
Keywords: Fragile States; MDGs; Growth
No. 40   (Download full text)
Marcela Ibáñez
Who crops coca and why? The case of Colombian farmers
Approximately 1.2% of Colombia’s GNP is spent every year on the war on drugs, but very little is known about coca farming decisions at the household level. In order to understand the decision to cultivate coca as well as that of the amount of land to use for its cultivation, we develop an extended version of the portfolio model of crime that considers the effects of behavioral norms and lack of options in the legal economy. The model is tested using data from an original survey with coca and non-coca farmers living in Putumayo, Colombia. We find that farmers react to economic incentives and hence eradication and substitution programs reduce coca cultivation. More interestingly, we find that coca cultivation decisions are explained by moral considerations as well as by the impossibility of making a living from legal forms of agriculture.
JEL-Codes: D81; G11; K42; Z12; Z13
Keywords: Coca; Colombia; Portfolio Model of Crime; Norms of Behavior
No. 39   (Download full text)
Marcela Ibáñez
Adoption of certified organic technologies: The case of coffee farming in Colombia
Agricultural production is an important source of income and employment for developing countries, yet it is the cause of serious environmental problems. Though ECO-labels appear as a promising alternative to control the negative effects of agriculture on the environment and to increase the income of rural poor, the proportion of agricultural land and exports certified as is quite small. We investigate the factors that affect the adoption of certified organic coffee in Colombia and in particular study the effect of economic incentives on adoption. We find that those who have lower cost of adoption are more likely to be certified as organic. Correcting for sample selection, we find that certified organic production is 40% less productive and 31% less costly than non-certified production. Given the price premium in 2007, certified organic production is 15% less profitable than non-organic production. We find that in order to make organic production attractive, the price premium of certified organic coffee should be about 5 times higher than in 2007.
Keywords: Technology adoption; Switching regression models; Organic Coffee; Colombia useful
No. 38   (Download full text)
Peter Nunnenkamp and Hannes Öhler
Funding, Competition and the Efficiency of NGOs: An Empirical Analysis of Non-charitable Expenditure of US NGOs Engaged in Foreign Aid
We assess the determinants of the wide variation in the efficiency of foreign aid activities across US-based non-governmental organizations (NGOs). In particular, we analyze whether non-charitable expenditures for administration, management and fundraising depend on the intensity of competition among NGOs and on the degree to which they are refinanced by governments. We control for NGO heterogeneity in various dimensions as well as major characteristics of recipient countries. We find that fiercer competition is associated with more efficient foreign aid activities of NGOs, rather than leading to “excessive” fundraising. Official funding tends to increase administrative costs. Nevertheless, officially financed NGOs spend relatively more on charitable activities since they are less concerned with collecting private donations through fundraising efforts.
JEL-Codes: F35; L31
Keywords: non-governmental organizations; foreign aid; administrative costs; fundraising; United States
No. 37   (Download full text)
Georges Nguefack-Tsague, Stephan Klasen and Walter Zucchini
On weighting the components of the Human Development Index: A statistical justification
The Human Development Index (HDI) published in the Human Development Report (HDR) of the United Nations Development Program is calculated as a simple average of the Life Expectancy Index (LEI), the Education Index (EI) and the Gross Domestic Product Index (GDPI). This paper provides statistical support for the use of this seemingly arbitrary equal weighting of the three components by treating human development as a latent concept imperfectly captured by its three component indices. We show that a principal component analysis (PCA) based on the correlation matrix of the components leads to practically the same weights. Specifically we show that, for the period 1975 to 2005, the first principal component accounts for between 78% and 90% of the total variability in the data, and that its coefficients are positive and nearly equal. By normalizing the coefficients, the simple average weighting (1/3, 1/3, 1/3) scheme is obtained. The ranks of countries obtained using the PCA weightings are very similar to those based on the HDI. An advantage of the simple equal weighting is that one can define a simple index to measure the balance of a country's development, given its HDI which we show below.
JEL-Codes: I31; C43; O1
Keywords: Human Development Index; Human Development Report; United Nations Development Program; principal component analysis; correlation matrix
No. 36   (Download full text)
Axel Dreher, Jan-Egbert Sturm and James Raymond Vreeland
Does membership on the UN Security Council influence IMF conditionality?
We investigate whether elected members of the United Nations Security Council receive favorable treatment from the International Monetary Fund (IMF), analyzing panel data on the level of conditionality attached to (a maximum of) 314 IMF arrangements with 101 countries over the period of 1992 to 2008. We find a negative relationship: Security Council members receive about 30 percent fewer conditions attached to the loans that they receive from the IMF. We conclude that conditionality is softer for these countries because the major shareholders of the IMF desire influence over the Security Council.
JEL-Codes: O19; O11; F35
Keywords: IMF; UN Security Council; Voting; Aid; Conditionality
No. 35   (Download full text)
Mark Misselhorn
Undernutrition and the Nutrition Transition: Revising the undernutrition aspect of MDG I
Since the publication of the new multi-country reference standard by WHO it is likely that future progress in the ght against undernutrition will be tracked by using this new standard. The use of the new reference standard will result in clear changes in the prevalence and composition of undernutrition. This paper argues that this opportunity should be used to use stunting or a Composite Index of Anthropometric Failure instead of underweight as the indicator to measure progress in the ght against hunger. All weight based anthropometric measures, such as underweight and wasting, suffer from the fact that due to changes in the nutritional composition of diets in developing countries there is going to be a secular reduction in those measures that does not coincide with real improvements in the health of the affected children. This bias could lead to wrong conclusions concerning the fulllment of the undernutrition aspect of MDG I.
JEL-Codes: I10; I32; O12
Keywords: Nutrition transition; child undernutrition; Millennium Development Goals; composition of undernutrition
No. 34   (Download full text)
Hannes Öhler, Peter Nunnenkamp and Axel Dreher
Does Conditionality Work? A Test for an Innovative US Aid Scheme
Performance-based aid has been proposed as an alternative to the failed traditional approach whereby donors make aid conditional on the reform promises of recipient countries. However, hardly any empirical evidence exists on whether ex post rewards are effective in inducing reforms. We attempt to fill this gap by investigating whether the Millennium Challenge Corporation (MCC) was successful in promoting better control of corruption. We employ a difference-in-difference-in-differences (DDD) approach, considering different ways of defining the treatment group as well as different time periods during which incentive effects could have materialized. We find evidence of strong anticipation effects immediately after the announcement of the MCC, while increasing uncertainty about the timing and amount of MCC aid appear to weaken the incentive to fight corruption over time. We conclude that – if designed properly – conditionality can work.
JEL-Codes: F35; O17
Keywords: Foreign Aid; Corruption; Millennium Challenge Corporation; MCC Effect
No. 33   (Download full text)
Stephan Klasen, Jan Priebe and Robert Rudolf
Cash Crop Choice and Income Dynamics in Rural Areas: Evidence for Post-Crisis Indonesia
In this paper we investigate the factors affecting income levels, income growth, and poverty reduction in rural Indonesia following the crisis of 1997/98. We particu- larly investigate the relative roles of non-farm incomes, productivity improvements achieved via changes in crops versus improvements on the same crops, and demographic changes induced by the crisis on income dynamics in rural Indonesia. Using a unique household panel data set for Central Sulawesi that allows us to control for a large set of household and geographical characteristics, household fixed effects as well as endogeneity issues, we find that falling household size and the adoption and intensification of new cash crop varieties can explain a substantial part of the observed post-crisis developments. Moreover, we compare our results to cross-sectional data from SUSENAS, Indonesia's large scale national household survey. While the overall determinants of rural incomes are very similar across both data sets, we find that the importance of agricultural self-employed income seems to be higher in Central Sulawesi than in most other parts of Indonesia. Although several factors could explain these differences, lessons from our Central Sulawesi data suggests that unexploited potentials in the production of cash crops in other areas of Indonesia might contribute to these findings.
JEL-Codes: I31; Q12; Q15; R13
Keywords: Crop choice; Income diversification; non-farm sector; rural development; Indonesia
No. 32   (Download full text)
Johannes Gräb and Jan Priebe
Low Malnutrition but High Mortality: Explaining the Puzzle of the Lake Victoria Region
Comparing DHS data from 235 regions in 29 Sub-Saharan Africa countries, we find that the combination of low levels of malnutrition together with dramatically high rates of mortality, encountered in Kenya’s Lake Victoria territory, is unique for Sub-Saharan Africa. This paper explores the causes of this phenomenon in the Kenyan context. Our identification strategy consists of two parts. First of all, we apply multilevel regression models to control simultaneously for family and community clustering of the observed malnutrition and mortality outcomes. Secondly, to address unobserved but correlated factors, we exploit information from GIS and malaria databases to construct variables that capture additional components of children’s geographic, political and cultural environment. Our analysis reveals that beneficial agricultural conditions and feeding practices lead to the observed sound anthropometric outcomes around Lake Victoria. In contrast, high mortality rates rest upon an adverse disease environment (malaria prevalence, water pollution, HIV rates) and a policy neglect (underprovision of health care services). Even after controlling for these factors, a significant effect of the local ethnic group, the Luo, on mortality remains.
JEL-Codes: I10; I30; O12; R12
Keywords: child mortality; undernutrition; multilevel modeling; Kenya
No. 31   (Download full text)
Andree Ehlert and Martin Schlather
A Constructive Proof for the Extremal Coefficient of a Dissipative Max-Stable Process on Z being a Set Covariance
Keywords: set covariance function; extremal coefficient function; extremal dependence; extreme value theory
No. 30   (Download full text)
Andree Ehlert and Martin Schlather
Some Results for Extreme Value Processes in Analogy to the Gaussian Spectral Representation
The extremal coefficient function has been discussed as an analog of the autocovariance function for extreme values. However, as to the behavior of valid extremal coefficient functions little is known apart from their positive definite type. In particular, the reconstruction of valid processes from given extremal coefficient functions has not been considered before. We show, for the one-dimensional case, the equivalence of the set correlation functions and the extremal coefficient functions with finite range on a grid, and study an analogy to Bochner’s theorem, namely that any such extremal coefficient function is representable as a convex combination of a finite set of positive definite functions. This allows for the construction of simple max-stable processes complying with a given extremal coefficient function and, in addition, highlights further properties of the latter. We will include an application of this approach and discuss several examples. As to processes with infinite range we will consider a natural extension of the term “long memory” that is well-known in the Gaussian framework to max-stable processes.
Keywords: Extreme value theory; max-stable process; extremal dependence; extremal coefficient function; set covariance function; set correlation function; homometric; long memory; summability
No. 29   (Download full text)
Axel Dreher, Peter Nunnenkamp and Hannes Öhler
Why it pays for aid recipients to take note of the Millennium Challenge Corporation: Other donors do!
It is widely believed that the Millennium Challenge Corporation (MCC) has grossly fallen short of high expectations raised by the Bush administration in 2002. From the perspective of potential recipient countries, the crucial issue is whether the MCC increased the overall pool of aid resources available to them. We argue that this question extends far beyond the distribution of the limited MCC resources. By employing OLS and treatment-effects estimations, we assess how other US aid agencies and non-US donors reacted to MCC decisions. We find that positive signaling effects tend to dominate possible substitution effects not only for overall US aid but also for multilateral donors. Regarding other bilateral donors the evidence is mixed.
JEL-Codes: F35
Keywords: official development aid; Millennium Challenge Corporation; additionality; signaling; United States; other DAC donors
No. 28   (Download full text)
Elizaphan J.O. Rao and Matin Qaim
Supermarkets, farm household income, and poverty: Insights from Kenya
The expansion of supermarkets in developing countries may have far-reaching consequences for poverty and rural development. While previous studies have compared farm profits between participants and non-participants in supermarket channels, wider household welfare effects have hardly been analyzed. Moreover, structural differences between the two groups have been ignored. We address these issues by using endogenous switching regression and building on a survey of vegetable farmers in Kenya. Participation in supermarket channels is associated with a 50% gain in average household income, leading to significant poverty reduction. To realize these benefits on a larger scale will require institutional and policy support.
Keywords: supermarkets; household income; sample selection; endogenous switching regression; Kenya; Africa
No. 27   (Download full text)
Wokia-azi N. Kumase, Herve Bisseleua and Stephan Klasen
Opportunities and constraints in agriculture: A gendered analysis of cocoa production in Southern Cameroon
In this paper we examine gender differences in cocoa production in Cameroon using a survey of about 1000 cocoa producers in Southern Cameroon. We find that women farmers have access to land (of similar size to men), but through different mechanisms than men. They are strongly disadvantaged when it comes to access to extension services and marketing and control of proceeds. Despite these disadvantages, the productivity in terms of output per unit of land is similar to that of their male colleagues. Productivity analyses suggest that a slight disadvantage in productivity on female plots turns into a slight advantage when controlling for all the factors affecting productivity. The policy message from this is quite clear: Independent women farmers are a reality in Cameroon that need equal access to inputs and technologies, and support. If given equal opportunities, their productivity is at least as high as that of men.
JEL-Codes: J71; Q12; O13
Keywords: Gender inequality; cocoa farming; Cameroon
No. 26   (Download full text)
Axel Dreher, Stephan Klasen, James Raymond Vreeland and Eric Werker
The costs of favoritism: Is politically-driven aid less effective?
As is now well documented, aid is given for both political as well as economic reasons. The conventional wisdom is that politically-motivated aid is less effective in promoting developmental objectives. We examine the ex-post performance ratings of World Bank projects and generally find that projects that are potentially politically motivated – such as those granted to governments holding a non-permanent seat on the United Nations Security Council or an Executive Directorship at the World Bank – are no more likely, on average, to get a negative quality rating than other projects. When aid is given to Security Council members with higher short-term debt, however, a negative quality rating is more likely. So we find evidence that World Bank project quality suffers as a consequence of political influence only when the recipient country is economically vulnerable in the first place.
JEL-Codes: O19; O11; F35
Keywords: World Bank; Aid Effectiveness; Political Influence; United Nations Security Council
No. 25   (Download full text)
Axel Dreher, Peter Nunnenkamp and Rainer Thiele
Are ‘New’ Donors Different? Comparing the Allocation of Bilateral Aid between Non-DAC and DAC Donor Countries
Major DAC donors are widely criticized for weak targeting of aid, selfish aid motives and insufficient coordination. The emergence of an increasing number of new donors may further complicate the coordination of international aid efforts. On the other hand, new donors (many of which were aid recipients until recently) may have competitive advantages in allocating aid according to need and merit. Project-level data on aid by new donors, as collected by the PLAID initiative, allow for empirical analyses comparing the allocation behavior of new versus old donors. We employ Probit and Tobit models and test for significant differences in the distribution of aid by new and old donors across recipient countries. We find that new donors (i) focus on closer neighbors, (ii) care less for recipient need, (iii) exhibit a weaker bias towards badly governed countries, (iv) respond to disasters, but with fewer resources than old donors, and (v) do not pursue commercial self interest.
JEL-Codes: F35
Keywords: aid allocation; new donors; donor motives; Probit; Tobit
No. 24   (Download full text)
Boris Branisa and Maria Ziegler
Reexamining the link between gender and corruption: The role of social institutions
In this paper we reexamine the link between gender inequality and corruption. We review the literature on the relationship between representation of women in economic and political life, democracy and corruption, and bring in a new previously omitted variable that captures the level of discrimination against women in a society: social institutions related to gender inequality. Using a sample of developing countries we regress corruption on the representation of women, democracy and other control variables. Then we add the subindex civil liberties from the OECD Gender, Institutions and DevelopmentDatabase as the measure of social institutions related to gender inequality. The results show that corruption is higher in countries where social institutions deprive women of their freedom to participate in social life, even accounting for democracy and representation of women in political and economic life as well as for other variables. Our findings suggest that, in a context where social values disadvantage women, it might not be enough to push democratic reforms and to increase the participation of women to reduce corruption.
JEL-Codes: D63; D73; J16
Keywords: Social institutions; Gender inequality; Corruption
No. 23   (Download full text)
Axel Dreher, Peter Nunnenkamp, Susann Thiel and Rainer Thiele
Aid Allocation by German NGOs: Does the Degree of Public Refinancing Matter?
Using a new dataset for 41 German non-governmental organizations (NGOs), we analyze the allocation of NGO aid across recipient countries in a Tobit regression framework. By identifying for each NGO the degree of public refinancing, we address the largely unresolved issue of whether financial dependence on the government impairs the targeting of NGO aid. It turns out that German NGOs are more active in poorer countries, while they do not complement official aid by working under difficult local conditions. Beyond a certain threshold, rising financial dependence weakens their poverty orientation and provides an incentive to engage in “easier” environments. In addition, we find that the NGOs follow the state as well as NGO peers when allocating aid. This herding behavior is, however, hardly affected by the degree of public refinancing.
JEL-Codes: F35
Keywords: NGO aid; aid allocation; public refinancing
No. 22   (Download full text)
Admasu Shiferaw and Arjun Bedi
The Dynamics of Job Creation and Job Destruction: Is Sub-Saharan Africa Different?
This paper analyzes the creation, destruction and reallocation of jobs to better understand the micro-dynamics of aggregate employment change in African manufacturing. The nature and magnitude of gross job flows are examined using a unique panel data of Ethiopian manufacturing establishments over the period 1996-2007. We also assess the relative importance of firm demographics, industry effects and business cycles for job flows. The rates and patterns of job creation and destruction in our sample are comparable to the findings from developed and emerging economies suggesting that African firms adjust their labor force in a manner broadly similar to firms elsewhere and that African labor markets are not uniquely restrictive to undermine job reallocation across firms. We also find, like in many other countries, that job reallocation is relatively higher in industries dominated by small and young establishments. Unlike in other regions, however, job reallocation in our sample is pro-cyclical and its cross-industry variation holds very little similarity with that of developed and emerging economies. Small firms in Africa create jobs mainly at the point of entry to a market with limited contribution to manufacturing employment through post-entry expansion.
JEL-Codes: J20; J23; J49
Keywords: Job Creation; Job Destruction; Job Reallocation; Firm Dynamics; Sub-Saharan Africa; Ethiopia
No. 21   (Download full text)
Melanie Grosse, Stephan Klasen and Julius Spatz
Matching Household Surveys with DHS Data to Create Nationally Representative Time Series of Poverty: An Application to Bolivia
In many developing countries, there does not exist a time series of nationally repre- sentative household budget or income surveys, while there often are urban household surveys as well as nationally representative Demographic and Health Surveys (DHS) which lack information on incomes. This makes an analysis of trends and determinants of poverty and inequality over a longer time period impossible. This is also the situation in Bolivia where there exist urban household surveys and nationally representative DHS since 1989, while nationally representative household income surveys only exist since 1997. In this paper, we adjust a technique developed for poverty mapping exercises to link urban household income surveys with DHS data to generate a nationally representative time series of household income data from 1989 to 1999. Our technique performs well on validation tests, is superior to proxying welfare with asset ownership in the DHS, and is able to generate new information on poverty and inequality in Bolivia.
JEL-Codes: C81; D31; I31; I32; O54
Keywords: Microsimulation; survey matching; poverty; inequality; pro-poor growth; poverty profile; growth incidence curve; Bolivia
No. 20   (Download full text)
Christian Bjørnskov, Axel Dreher, Justina A.V. Fischer and Jan Schnellenbach
On the relation between income inequality and happiness: Do fairness perceptions matter?
In this paper, we revisit the association between happiness and inequality. We argue that the perceived fairness of the income generation process affects this association. Building on a two-period model of individual life-time utility maximization, we predict that persons with higher perceived fairness will experience higher levels of life-time utility and are less in favor of income redistribution. In societies with a high level of actual social mobility, income inequality is perceived more positively with increased expected fairness. The opposite is expected for countries with low actual social mobility, due to an increasing relevance of a disappointment effect resulting from unsuccessful individual investments. Using the World Values Survey data and a broad set of fairness measures, we find strong support for the negative (positive) association between fairness perceptions and the demand for more equal incomes (subjective well-being). We also find strong empirical support for the disappointment effect in low social mobility countries. In contrast, the results for high-mobility countries turn out to be ambiguous.
JEL-Codes: I31; H40; D31; J62; Z13
Keywords: Happiness; life satisfaction; subjective well-being; inequality; income distribution; redistribution; political ideology; justice; fairness; World Values Survey
No. 19   (Download full text)
Renate Hartwig and Michael Grimm
An Assessment of the Effects of the 2002 Food Crisis on Children’s Health in Malawi
In 2002 Malawi experienced a serious shortage of cereals due to adverse climatic conditions. The World Food Programme assumed that about 2.1 to 3.2 million people were threatened of starvation at that time. However, not much research has been undertaken to investigate the actual consequences of this crisis. In particular, little is known about how the crisis affected the health status of children. Obviously, quantifying the health impact of such a crisis is a serious task given the lack of data and the more general problem of relating outcomes to specific shocks and policies. In this paper a difference-in-difference estimator is used to quantify the impact of the food crisis on the health status of children. The findings suggest that at least in the short run, there was neither a significant impact on child mortality nor on malnutrition. This would suggest that the shock might have been less severe than initially assumed and that the various policy interventions undertaken at the time have been effective or at least sufficient to counteract the immediate effects of the crisis.
Keywords: Child Mortality; Malnutrition; Food Crisis; Malawi
No. 18   (Download full text)
Elizaphan J.O. Rao and Matin Qaim
Farmer participation in supermarket channels and technical efficiency: The case of vegetable production in Kenya
Supermarkets and high-value exports are currently gaining ground in the agri-food systems of many developing countries. While recent research has analyzed income effects in the small farm sector, impacts on farming efficiency have hardly been studied. Using a survey of Kenyan vegetable growers and a stochastic frontier approach, we show that participation in supermarket channels increases mean technical efficiency by 19%. This gain is bigger at lower levels of efficiency, suggesting the potential for positive income distribution effects. However, disadvantaged farms often have problems in meeting strict supermarket requirements. Innovative market linkage initiatives can increase the probability of participation significantly.
JEL-Codes: Q12; O12; O13; D24
Keywords: supermarkets; small farms; technical efficiency; stochastic frontier; sample selection; Kenya
No. 17   (Download full text)
Marcela Ibanez and Fredrik Carlsson
A survey-based choice experiment on coca cultivation
From 1997 to 2005, an astonishing 5,200 million USD was invested to reduce cocaine production in Colombia, the world’s main cocaine producer. However, little is known about the effectiveness of policies targeting coca cultivation. This paper uses a surveybased experiment to evaluate the effects of the two main policies: eradication and alternative development programs. Our results support Becker’s (1968) model of crime participation and in addition shed light on other non-monetary factors that affect the coca cultivation decision: religion, legitimacy, remoteness, and poverty are found to be important. We find that coca cultivation is inelastic to increases in perceived risk and relative profit so eradication and alternative development would have a rather small effect on coca cultivation. A simple simulation exercise predicts that investing additional hundred thousand dollars in eradication decreases coca cultivation in only 1.5%.
JEL-Codes: G11; K42; Z12; Z13
Keywords: illegal drugs; choice experiment; Colombia; crime
No. 16   (Download full text)
Peter Nunnenkamp and Hannes Öhler
Aid Allocation through Various Official and Private Channels: Need, Merit and Self-Interest as Motives of German Donors
Previous literature largely ignores the heterogeneity of aid channels used by each single donor country. We estimate Tobit models to assess the relative importance of recipient need, recipient merit and self-interest of donors for various channels of official and private German aid across a large sample of recipient countries in 2005-2007. Our findings strongly underscore the need for a disaggregated analysis of aid allocation. Aid channels differ significantly in the extent to which need and merit are taken into account. Yet, the German case does not reveal unambiguously superior aid channels. Better targeted aid through some channels seems to be conditioned on political support by recipient countries in the UN General Assembly.
JEL-Codes: F35
Keywords: Aid Allocation; Aid Channels; Donor Motives; Germany; Tobit models
No. 15   (Download full text)
Boris Branisa, Stephan Klasen and Maria Ziegler
Why we should all care about social institutions related to gender inequality
Institutions are a major factor explaining development outcomes. This study focuses on social institutions related to gender inequality understood as long-lasting norms, values and codes of conduct that shape gender roles, and presents evidence on why they matter for development. We derive hypotheses from existing theories and empirically test them at the cross-country level with linear regressions using the newly created Social Institutions and Gender Index (SIGI) and its subindices as measures for social institutions. We find that apart from geography, political system, religion, the level of economic development, one has to consider social institutions related to gender inequality to better account for differences in development. Our results show that social institutions that deprive women of their autonomy and bargaining power in the household, or that increase the private costs and reduce the private returns to investments into girls, are associated with lower female education, higher fertility rates and higher child mortality. Moreover, social institutions related to gender inequality are negatively associated with governance measured as rule of law and voice and accountability.
JEL-Codes: D63; I10; I20; H1; J16
Keywords: Social institutions; SIGI; Gender inequality; Fertility; Child and infant mortality; Female education; Governance
No. 14   (Download full text)
Michael Grimm and Stephan Klasen
Endogenous Institutional Change and Economic Development: A Micro-Level Analysis of Transmission Channels
There is a well-known debate about the role of institutions in explaining the long-term development of countries. We believe there is value-added to consider the institutions hypothesis at the micro level within a country to analyze the exact transmission channels linking endogenous institutional change to development outcomes. Given the central importance of agricultural productivity improvements for initiating the process of economic development, we focus on the transmission mechanisms that lead to the emergence of institutions relevant for agricultural development, thereby incorporating insights from the literatures on demographic influences of institutional change, induced innovations, as well as the central role of land rights in our analysis. Our main argument is that in conditions of relative land abundance, geographic factors influence rural-rural migration flows to geographically well-endowed regions which in turn give rise to migration-induced land scarcity. Land scarcity in turn, provides incentives to formalize landownership. Eventually, formalized land rights increase investment in land and enhance the adoption of new and better technologies promoting agricultural growth and economic development. We provide empirical evidence for this hypothesis using longitudinal village and household survey data from Indonesia.
JEL-Codes: K11; O12; Q12
Keywords: Geography; migration; land titles; institutions; agricultural development; Indonesia
No. 13   (Download full text)
Meike Wollni and Bernhard Brümmer
Productive efficiency of specialty and conventional coffee farmers in Costa Rica: Accounting for technological heterogeneity and self-selection
A steep decline in coffee prices at the producer level led to considerable pressure for farmers in Costa Rica and producer countries all over the world. One possible reaction was moving to specialty markets, where price pressure was perceived to be lower. We use original survey data from 2002/03 and 2003/04 to analyze the factors influencing efficiency levels of conventional and specialty coffee farmers. Controlling for selectivity bias, we find that technical efficiency in the two subsamples is influenced by both identical and divergent factors. Among the former, additional income activities increase efficiency. Among the divergent factors, experience, bookkeeping, and the number of adult household members are found to have a significant impact in the specialty coffee model. In the case of conventional coffee farmers, membership in cooperatives leads to higher farm-level efficiency. Based on the results, we derive policy recommendations to improve farmers’ production performance and ability to cope with the effects of the coffee crisis. These policy measures include the provision of extension services with respect to accounting methods, the creation of income opportunities in rural areas, and the support of farmer-owned cooperatives.
JEL-Codes: Q12; D24
Keywords: Coffee; Costa Rica; Stochastic frontier analysis; Sample Selectivity; Specialty markets; Technological heterogeneity
No. 12   (Download full text)
Tatyana Krivobokova, Thomas Kneib and Gerda Claeskens
Simultaneous Confidence Bands for Penalized Spline Estimators
In this paper we construct simultaneous confidence bands for a smooth curve using penalized spline estimators. We consider three types of estimation methods: (i) as a standard (fixed effect) nonparametric model, (ii) using the mixed model framework with the spline coefficients as random effects and (iii) a Bayesian approach. The volume-of-tube formula is applied for the first two methods and compared from a frequentist perspective to Bayesian simultaneous confidence bands. It is shown that the mixed model formulation of penalized splines can help to obtain, at least approximately, confidence bands with either Bayesian or frequentist properties. Simulations and data analysis support the methods proposed. The R package ConfBands accompanies the paper.
Keywords: Bayesian penalized splines; B-splines; Confidence band; Mixed model; Penalization
No. 11   (Download full text)
Stephan Klasen
Levels and Trends in Absolute Poverty in the World: What we know and what we don’t
This paper critically reviews the recent changes to the Global Poverty numbers generated by the World Bank in 2008. While they have little impact on observed poverty trends and while there are good reasons to believe that the previous numbers were on weak foundations, the new numbers on levels of poverty in the developing world create new uncertainties und questions. In particular, there are conceptual issues involved in using one ICP round to update all poverty numbers and more empirical issues related to the particular results of the 2005 ICP round. This paper reviews these issues and finds that we cannot be very certain about levels of absolute poverty in the world and that the current method for generating these absolute poverty numbers is problematic and should possibly be abandoned. At the same time, poverty trends are much less affected by these methodological issues. The paper also discusses potential alternatives to the current methods and highlights their strengths and weaknesses. Unfortunately, there is no readily available alternative to the current method, though with some difficulty, such an alternative could be developed.
JEL-Codes: I32; O1
Keywords: International Comparison of Prices; Purchasing Power Parity; World Poverty
No. 10   (Download full text)
Boris Branisa, Stephan Klasen and Maria Ziegler
New Measures of Gender Inequality: The Social Institutions and Gender Index (SIGI)and its Subindices
In this paper we construct the Social Institutions and Gender Index (SIGI) and its five subindices Family code, Civil liberties, Physical integrity, Son Preference and Ownership rights using variables of the OECD Gender, Institutions and Development database. Instead of measuring gender inequalities in education, health, economic or political participation, these new indices allow a new perspective on gender issues in developing countries. The SIGI and the subindices measure long-lasting social institutions which are mirrored by societal practices and legal norms that might produce gender inequalities. The subindices measure each one dimension of the concept and the SIGI combines the subindices into a multidimensional index of deprivation of women. Methodologically, the SIGI is inspired by the Foster-Greer-Thorbecke poverty measures. It offers a new way of aggregating gender inequality in several dimensions, penalizing high inequality in each dimension and allowing only for partial compensation between dimensions. The SIGI and the subindices are useful tools to identify countries and dimensions of social institutions that deserve attention. Empirical results confirm that the SIGI provides additional information to that of other well-known gender-related indices.
JEL-Codes: D63; I39; J16
Keywords: SIGI; Composite index; Gender inequality; Social institutions; OECD-GID database
No. 9   (Download full text)
Adriana Cardozo and Melanie Grosse
Pro-Poor Growth Using Non-Income Indicators: An Empirical Illustration for Colombia
In this paper, we analyze how the distribution of selected non-income welfare indicators changed between 1997 and 2003 in Colombia. We use multidimensional propoor growth measurement techniques and create indices for assets, health, education, and subjective welfare using two alternative weighing techniques: polychoric principal components and normatively selected weights. Results show that while income and expenditures fluctuated according to economic growth, reflecting the effects of the 1999 economic crisis, non-income indicators had minor changes. While income and expenditures decreased for all income percentiles, and relatively more for the richest, the non-income dimensions stagnated and remained in 2003 as unequally distributed as in 1997.
JEL-Codes: D30; I30; O10; O12
Keywords: Pro-Poor Growth; Inequality; Welfare Measurement; Multidimensionality of Poverty; Latin America; Colombia
No. 8   (Download full text)
Kenneth Hartgen, Stephan Klasen and Mark Misselhorn
Pro-Poor Progress in Education in Developing Countries?
Spurred by international commitments and expanded funding at the national and international level, attendance in education and associated years of schooling have expanded substantially in developing countries in recent years. But has this expansion in enrolments reduced existing inequalities in educational access and achievements? This paper analyzes differences in improvements in the access to the education system and in educational outcomes across the welfare distribution between and within countries, and also by gender and regions for a sample of 37 developing countries using Demographic and Health Surveys (DHS). For the analysis, the toolbox of pro-poor growth analysis is applied to several educational indicators. We find drastic inequalities in educational attendance across the income distribution. Interestingly, inequalities in attendance declines with rising average attendance, while inequality in completion rates or schooling years increases with rising completion rates or schooling years. We find great heterogeneity in the distribution of progress of education, with very little pro-poor progress in educational achievement indicators. Also, progress appears to be less pro-poor in countries with low initial educational achievement and high overall educational progress. We find no correlation between pro-poor progress and free education policies or initial inequality in education. At the regional level, educational progress was generally more pro-poor in Asia and Latin America, while in Africa the experience is very heterogeneous. While gender inequality has decreased slightly, large differences by region tend to persist over time.
JEL-Codes: I20; I29; I31; I32
Keywords: education; human capital; inequality; pro-poor growth
No. 7   (Download full text)
Felicitas Nowak-Lehmann D., Inmaculada Martínez Zarzoso, Stephan Klasen and Dierk Herzer
Aid and Trade - A Donor’s Perspective
One reason donors provide foreign aid is to support their exports to aid-recipient countries. Time series data for Germany suggests an average return of between US$ 1.04 to US$ 1.50 for each US dollar of aid spent by Germany. Although this is well below previous estimates, the value is robust to different specifications and econometric approaches. Interestingly, we find strong evidence of crowding out between bilateral donors in the sense that bilateral aid from other EU members significantly reduces exports from Germany to the recipients. The evidence suggests that, in the long-run, aid causes exports and not vice versa. We discuss the implications these findings might have for aid volumes and allocation.
JEL-Codes: F10; F35; C23
Keywords: trade; foreign aid; donors; time series based panel estimation techniques
No. 6   (Download full text)
Michael Grimm , Kenneth Harttgen, Stephan Klasen, Mark Misselhorn, Teresa Munzi and Timothy Smeeding
Inequality in Human Development: An empirical assessment of thirty-two countries
One of the most frequent critiques of the HDI is that it does not take into account inequality within countries in its three dimensions. In this paper, we apply a simple approach to compute the three components and the overall HDI for quintiles of the income distribution. This allows comparison of the level in human development of the poor with the level of the non-poor within countries, but also across countries. This is an application of the method presented in Grimm et al. (2008) to a sample of 21 low and middle income countries and 11 industrialized countries. In particular the inclusion of the industrialized countries, which were not included in the previous work, implies to deal with a number of additional challenges, which we outline in this paper. Our results show that inequality in human development within countries is high, both in developed and industrialized countries. In fact, the HDI of the lowest quintiles in industrialized countries is often below the HDI of the richest quintile in many middle income countries. We also find, however, a strong overall negative correlation between the level of human development and inequality in human development.
Keywords: Human Development; Income Inequality; Differential Mortality; Inequality in Education
No. 5   (Download full text)
Kenneth Harttgen and Stephan Klasen
A Human Development Index by Internal Migrational Status
Migration continues to be a very important income diversi¯cation strategy, es- pecially for poor populations in developing countries. However, while there has been much analysis on the economic consequences of migration for migrants and the receiving regions, whether internal migration improves or deteriorates human development is not easy to determine. This papers applies a recently de- velopment analytical framework that allows to calculate the HDI for subgroups of a population. We use this approach to calculate the HDI by internal migra- tional status to assess the di®erences between the levels of human development of internal migrants compared to non-migrants, and also across countries as well as by urban and rural areas. An empirical illustration for a sample of 16 low and middle income countries shows that, overall, internal migrants slightly achieve a higher level of human development than non-migrants. The results further show that di®erences in income between migrants and non-migrants are generally higher than di®erences in education and life-expectancy. Disag- gregating the analysis by urban and rural areas reveals that urban internal migrants are better o® than urban non-migrants and rural migrants are better o® than rural non-migrants.
Keywords: Human Development; Migration Income Inequality; Differential Mortality; Inequality in Education
No. 4   (Download full text)
Silvia Marchesi, Laura Sabani and Axel Dreher
Read my lips: the role of information transmission in multilateral reform design
We focus on the role that the transmission of information between a multilateral (e.g., the IMF) and a country has for optimal (conditional) reform design. The main result is that the informational advantage of the country must be strictly greater than the advantage of the multilateral in order to increase a country’s discretion in the choice of the policies to be implemented (country ownership). To the contrary, an increase in the conflict of interests between the multilateral and the country may lead the multilateral to leave more freedom in designing reforms, which is at odds to what is commonly argued. Our empirical results provide support to the idea that the IMF follows an optimal allocation rule of control rights over policies, leaving the recipient countries more freedom whenever their local knowledge appears to be crucial for designing more adequate reforms.
JEL-Codes: C23; D82; F33; N2
Keywords: IMF conditionality; delegation; communication; ownership; panel data
No. 3   (Download full text)
Jeffrey G. Williamson
History without Evidence: Latin American Inequality since 1491
Most analysts of the modern Latin American economy hold to a pessimistic belief in historical persistence -- they believe that Latin America has always had very high levels of inequality, suggesting it will be hard for modern social policy to create a more egalitarian society. This paper argues that this conclusion is not supported by what little evidence we have. The persistence view is based on an historical literature which has made little or no effort to be comparative. Modern analysts see a more unequal Latin America compared with Asia and the rich post-industrial nations and then assume that this must always have been true. Indeed, some have argued that high inequality appeared very early in the post-conquest Americas, and that this fact supported rent-seeking and anti-growth institutions which help explain the disappointing growth performance we observe there even today. This paper argues to the contrary. Compared with the rest of the world, inequality was not high in pre-conquest 1491, nor was it high in the post-conquest decades following 1492. Indeed, it was not even high in the mid-19th century just prior Latin America’s belle époque. It only became high thereafter. Historical persistence in Latin American inequality is a myth.
JEL-Codes: N16; N36; O15; D3
Keywords: Inequality; Development; Latin America
No. 2   (Download full text)
Admasu Shiferaw
Which Firms Invest Less Under Uncertainty? Evidence from Ethiopian Manufacturing
This paper uses firm level panel data from Ethiopian manufacturing to investigate the investment behavior of firms under uncertainty. The paper focuses on the heterogeneity of firm level investment responses to both demand and supply side sources of uncertainty. Accordingly, the investment-uncertainty relationship is examined across groups of firms with varying degrees of investment irreversibility defined on the basis of market structures and access to secondary markets for capital goods. Consistent with theories of irreversible investment, we find evidence that uncertainty undermines the investment responses of firms in less competitive markets and in industries with limited access to secondary markets for capital goods. In comparison with small firms, investment by large firms is more responsive to changes in demand and more in-line with models of partial irreversibility.
JEL-Codes: D21; D81; O16
Keywords: Investment, Uncertainty, Irreversibility, African Manufacturing, Ethiopia
No. 1   (Download full text)
Axel Dreher, Peter Nunnenkamp, Hannes Öhler and Johannes Weisser
Acting Autonomously or Mimicking the State and Peers? A Panel Tobit Analysis of Financial Dependence and Aid Allocation by Swiss NGOs
NGO aid is still widely believed to be superior to official aid (ODA). However, the incentives of NGOs to excel and target aid to the poor and deserving are increasingly disputed. We contribute to the emerging literature on the allocation of NGO aid by performing panel Tobit estimations for Swiss NGOs. The analysis offers new insights in two major regards: First, we cover the allocation of both self-financed and officially co-financed aid for a large panel of NGOs and recipient countries. Second, by classifying each NGO according to its financing structure, we address the unresolved question of whether financial dependence on the government impairs the targeting of NGO aid. It turns out that NGOs mimic the state as well as NGO peers. Officially refinanced NGOs are more inclined to imitate the allocation of ODA. However, the degree of financial dependence does not affect the poverty orientation of NGO aid and the incentives of NGOs to engage in easier environments. The allocation of self-financed aid differs in several respects from the allocation of officially co-financed aid, including the role of financial dependence for imitating the state and herding among NGOs.
JEL-Codes: F35
Keywords: NGO aid; aid allocation; official co-financing; financial dependence
       

 

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