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Wednesday, January 23, 2013

Growing pains

 

Africa's (Dis)advantage: The Curse of Party Monopoly

Ann Harrison, Justin Yifu Lin & Colin Xu
NBER Working Paper, January 2013

Abstract:
Africa's economic performance has been widely viewed with pessimism. In this paper, we use firm-level data for 89 countries to examine formal firm performance. Without controls, manufacturing African firms do not perform much worse than firms in other regions. But they do have structural problems, exhibiting much lower export intensity and investment rates. Once we control for geography and the political and business environment, formal African firms robustly lead in sales growth, total factor productivity levels and productivity growth. Africa's conditional advantage is higher in low-tech than in high-tech manufacturing, and exists in manufacturing but not in services. While geography, infrastructure, and access to finance play an important role in explaining Africa's disadvantage in firm performance, the key factor is party monopoly. The longer a single political party remains in power, the lower are firm productivity levels, growth rates, and sales growth for manufacturing. In contrast, the business environment and firm characteristics (except for foreign investment) do not matter as much. We also find evidence that the effects of the political and business environment are heterogeneous across sectors and firms of various levels of technology.

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Students Today, Teachers Tomorrow: Identifying constraints on the provision of education

Tahir Andrabi, Jishnu Das & Asim Ijaz Khwaja
Journal of Public Economics, forthcoming

Abstract:
With an estimated one hundred and fifteen million children not attending primary school in the developing world, increasing access to education is critical. This paper highlights a supply-side factor - the availability of low-cost teachers - and the resulting ability of the market to offer affordable education. We first show that private schools are three times more likely to emerge in villages with government girls' secondary schools (GSSs). Identification is obtained by using official school construction guidelines as an instrument for the presence of GSSs. In contrast, private school presence shows little or no relationship with girls' primary or boys' primary and secondary government schools. In support of a supply-channel, we then show that, villages which received a GSS have over twice as many educated women, and private school teachers' wages are 27 percent lower in these villages. In an environment with low female education and mobility, GSSs substantially increase the local supply of skilled women lowering wages locally and allowing the market to offer affordable education. These findings highlight the prominent role of women as teachers in facilitating educational access and resonate with similar historical evidence from developed economies. The students of today are the teachers of tomorrow.

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The Changing Shape of Global Inequality 1820-2000; Exploring a New Dataset

Jan Luiten van Zanden et al.
Review of Income and Wealth, forthcoming

Abstract:
A new dataset for charting the development of global inequality between 1820 and 2000 is presented, based on a large variety of sources and methods for estimating (gross household) income inequality. On this basis we estimate the evolution of global income inequality over the past two centuries. Two sets of benchmarks about between-country inequality (the Maddison 1990 benchmark and the recent 2005 ICP round) are taken into account. We find that between 1820 and 1950, increasing per capita income is combined with increasing global inequality. After 1950, global inequality as measured by the Gini coefficient or the Theil index remains more or less constant. It also appears that the global income distribution was uni-modal in the nineteenth century, became increasingly bi-modal between 1910 and 1970 with two world wars, a depression and de-globalization, and was suddenly transformed back into a uni-modal distribution between 1980 and 2000.

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National intelligence and personality: Their relationships and impact on national economic success

Maciej Stolarski, Marcin Zajenkowski & Gerhard Meisenberg
Intelligence, March-April 2013, Pages 94-101

Abstract:
The relationships between national personality traits and intelligence from 51 countries were examined. It was found that extraversion, openness to experience and agreeableness measured at the national level were significantly and positively correlated with national IQs; however, in the regression model only the former two were marginally significant. For openness but not extraversion, this corresponds to observations made at the individual level. It was also shown that, taken together, Big Five traits and IQs of various cultures statistically explained 70% of a nation's gross domestic product (GDP) per capita. The most important predictors of economic success were intelligence and extraversion, which proved to be strongly positively related to GDP. Agreeableness and openness to experience, although significantly correlated with GDP, did not statistically explain any additional variance of GDP over and above IQ and extraversion. The question about causality concerning differential variables and a nation's wealth is discussed. The results provide new insights into relationships between personality and intelligence at the country level. However, uncertainty remains about the validity of country-level personality measures.

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The surprising social mobility of Victorian Britain

Jason Long
European Review of Economic History, February 2013, Pages 1-23

Abstract:
This paper derives new estimates of social mobility in England and Wales between 1851 and 1901, using a large new dataset of fathers and sons linked across censuses from 1851-1881 and 1881-1901. Mobility rates were substantially greater than has been previously estimated, to the extent that mobility in the 1850s was only slightly less than in the 1970s. The development of mass public education in England after 1870 thus had surprisingly modest effects over the long run. Earnings mobility increased moderately for the first generation under public education (1881-1901), but did not increase over the course of the twentieth century.

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Growth Slowdowns Redux: New Evidence on the Middle-Income Trap

Barry Eichengreen, Donghyun Park & Kwanho Shin
NBER Working Paper, January 2013

Abstract:
We analyze the incidence and correlates of growth slowdowns in fast-growing middle-income countries, extending the analysis of an earlier paper (Eichengreen, Park and Shin 2012). We continue to find dispersion in the per capita income at which slowdowns occur. But in contrast to our earlier analysis which pointed to the existence of a single mode at which slowdowns occur in the neighborhood of $15,000-$16,000 2005 purchasing power parity dollars, new data point to two modes, one in the $10,000-$11,000 range and another at $15,000-$16,000. A number of countries appear to have experienced two slowdowns, consistent with the existence of multiple modes. We conclude that high growth in middle-income countries may decelerate in steps rather than at a single point in time. This implies that a larger group of countries is at risk of a growth slowdown and that middle-income countries may find themselves slowing down at lower income levels than implied by our earlier estimates. We also find that slowdowns are less likely in countries where the population has a relatively high level of secondary and tertiary education and where high-technology products account for a relatively large share of exports, consistent with our earlier emphasis of the importance of moving up the technology ladder in order to avoid the middle-income trap.

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Disease Ecology, Biodiversity, and the Latitudinal Gradient in Income

Matthew Bonds, Andrew Dobson & Donald Keenan
PLoS Biology, December 2012

Abstract:
While most of the world is thought to be on long-term economic growth paths, more than one-sixth of the world is roughly as poor today as their ancestors were hundreds of years ago. The majority of the extremely poor live in the tropics. The latitudinal gradient in income is highly suggestive of underlying biophysical drivers, of which disease conditions are an especially salient example. However, conclusions have been confounded by the simultaneous causality between income and disease, in addition to potentially spurious relationships. We use a simultaneous equations model to estimate the relative effects of vector-borne and parasitic diseases (VBPDs) and income on each other, controlling for other factors. Our statistical model indicates that VBPDs have systematically affected economic development, evident in contemporary levels of per capita income. The burden of VBDPs is, in turn, determined by underlying ecological conditions. In particular, the model predicts it to rise as biodiversity falls. Through these positive effects on human health, the model thus identifies measurable economic benefits of biodiversity.

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The Long-Run Impact of Foreign Aid in 36 African Countries: Insights from Multivariate Time Series Analysis

Katarina Juselius, Niels Framroze Møller & Finn Tarp
Oxford Bulletin of Economics and Statistics, forthcoming

Abstract:
We comprehensively analyse the long-run effect of foreign aid (ODA) on key macroeconomic variables in 36 sub-Saharan African countries from the mid-1960s to 2007, using a well-specified cointegrated VAR model as statistical benchmark. Results provide broad support for a positive long-run impact of ODA flows on the macroeconomy. In contrast, we find little evidence supporting the thesis that aid has been harmful. From a methodological point of view we highlight the importance of transparency in reporting results, especially when the hypothesis being tested differs from theoretical expectations, and we identify reasons for econometrically inadequate results in the literature.

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On the Human Capital of Inca Indios before and after the Spanish Conquest. Was there a "Pre-Colonial Legacy"?

Dácil-Tania Juif & Joerg Baten
Explorations in Economic History, forthcoming

Abstract:
Not only the colonial period, but also the pre-colonial times might have influenced later development patterns. In this study we assess a potential "pre-colonial legacy" hypothesis for the case of the Andean region. In order to analyze the hypothesis, we study the human capital of Inca Indios, using age-heaping-based techniques to estimate basic numeracy skills. We find that Peruvian Inca Indios had only around half the numeracy level of the Spanish invaders. The hypothesis holds even after adjusting for a number of potential biases. In addition, we find evidence on inequality in pre-Columbian times. Given the low educational level and the high inequality reigning before the Spanish Conquest in the Andean region, we argue that more attention should be paid to the pre-colonial legacies when assessing the genesis of the long-term path of only modest economic growth in the countries of Latin America.

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Does Trust Promote Growth?

Roman Horváth
Journal of Comparative Economics, forthcoming

Abstract:
We examine the effect of generalized trust on long-term economic growth. Unlike in previous studies, we use Bayesian model averaging to deal rigorously with model uncertainty and attendant omitted variable bias. In addition, we address endogeneity and assess whether the effect of trust on growth is causal. Examining more than forty regressors for nearly fifty countries, we show that trust exerts a positive effect on long-term growth and, based on the posterior inclusion probabilities, suggest that trust is an important driver of long-term growth. Our results also show that trust is key for growth in countries with a weak rule of law.

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The causal effect of watching TV on material aspirations: Evidence from the "valley of the innocent"

Walter Hyll & Lutz Schneider
Journal of Economic Behavior & Organization, forthcoming

Abstract:
The paper addresses the question of whether TV consumption has an impact on material aspirations. We exploit a natural experiment that took place during the period in which Germany was divided. Owing to geographical reasons TV programs from the Federal Republic of Germany could not be received in all parts of the German Democratic Republic. Therefore a natural variation occurred in exposure to West German television. We find robust evidence that watching TV is positively correlated with aspirations. Our identification strategy implies a causal relationship running from TV to aspirations. This conclusion resists various sets of alternative specifications and samples.

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The Social Consequences of Postcommunist Structural Change: An Analysis of Suicide Trends in Eastern Europe

Yuka Minagawa
Social Forces, forthcoming

Abstract:
Guided by Durkheim's classic theory of suicide, this article examines suicide trends and determinants in Eastern European countries for the period of 1989-2006, with particular attention given to the association between postcommunist social change and suicide mortality. I find that countries characterized by more drastic structural change experienced increased suicide rates during the period immediately after the fall of communism. Yet continued reforms were associated with reductions in suicide in more recent years. Further, I observe large gender differences in suicide patterns. Male suicide rates are consistently and strongly related to structural change, while female rates remain almost unaffected. By directly and statistically substantiating the relationship between postcommunist transition and suicide death rates, this study provides a more thorough and textured account of the social consequences of the fall of communism in Eastern Europe.

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Assessing Economic Liberalization Episodes: A Synthetic Control Approach

Andreas Billmeier & Tommaso Nannicini
Review of Economics and Statistics, forthcoming

Abstract:
We use a transparent statistical methodology for data-driven case studies - the synthetic control method - to investigate the impact of economic liberalization on real GDP per capita in a worldwide sample of countries. Economic liberalization is measured by a widely used indicator that captures the scope of the market in the economy. The methodology compares the post-liberalization GDP trajectory of treated economies with the trajectory of a combination of similar but untreated economies. We find that liberalizing the economy had a positive effect in most regions, but more recent liberalizations, in the 1990s and mainly in Africa, had no significant impact.

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An African Growth Miracle? Or: What do Asset Indices Tell Us About Trends in Economic Performance?

Kenneth Harttgen, Stephan Klasen & Sebastian Vollmer
Review of Income and Wealth, forthcoming

Abstract:
Using changes in the possession of household assets over the past 20 years, several recent papers have argued that economic growth and poverty reduction in Africa was substantially better than suggested by national income data and income poverty statistics, which 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 official GDP/capita and consumption figures.

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Africa's Statistical Tragedy

Shantayanan Devarajan
Review of Income and Wealth, forthcoming

Abstract:
While Africa may have overcome its growth tragedy, it is facing a statistical tragedy, in that the statistical foundations of the recent growth in per-capita GDP and reduction in poverty are quite weak. In many countries, GDP accounts use old methods, population censuses are out of date, and poverty estimates are infrequent and often not comparable over time. The proximate reasons have to do with weak capacity, inadequate funding, and a lack of coordination of statistical activities. But the underlying cause may be the political sensitivity of these statistics, and some donors' tendency to go around countries' own National Statistical Development Strategies (NSDS). Greater openness and transparency of statistics, and a higher profile for the NSDS, possibly with "naming and shaming" of those who try to circumvent it, may help Africans turn around their statistical tragedy.

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What can ecological data tell us about reasons for divergence in health status between West Central Scotland and other regions of post-industrial Europe?

M. Taulbut et al.
Public Health, forthcoming

Background: The link between the effects of de-industrialization (unemployment, poverty) and population health is well understood. Post-industrial decline has, therefore, been cited as an underlying cause of high mortality in Scotland's most de-industrialized region. However, previous research showed other comparably de-industrialized regions in Europe to have better and faster improving health (with, in many cases, a widening gap evident from the early to mid-1980s).

Objectives: To explore whether ecological data can provide insights into reasons behind the poorer, and more slowly improving, health status of West Central Scotland (WCS) compared with other European regions that have experienced similar histories of post-industrial decline. Specifically, this study asked: (1) could WCS's poorer health status be explained purely in terms of socio-economic factors (poverty, deprivation etc.)? and (2) could comparisons with other health determinant information identify important differences between WCS and other regions? These aims were explored alongside other research examining the historical, economic and political context in WCS compared with other de-industrialized regions.

Study design and methods: A range of ecological data, derived from surveys and routine administrative sources, were collected and analysed for WCS and 11 other post-industrial regions. Analyses were underpinned by the collection and analysis of more detailed data for four particular regions of interest. In addition, the project drew on accompanying literature-based research, analysing important contextual factors in de-industrialized regions, including histories of economic and welfare policies, and national and regional responses to de-industrialization.

Results: The poorer health status of WCS cannot be explained in terms of absolute measures of poverty and deprivation. However, compared with other post-industrial regions in Mainland Europe, the region is distinguished by having wider income inequalities and associated social characteristics (e.g. more single adults, lone parent households, higher rates of teenage pregnancy). Some of these distinguishing features are shared by other UK post-industrial regions which experienced the same economic history as WCS.

Conclusion: From the collection of data and supporting analyses of important contextual factors, one can argue that poor health in WCS can be attributed to three layers of causation: the effects of de-industrialization (which have impacted on health in all post-industrial regions); the impact of ‘neoliberal' UK economic policies, resulting in wider inequalities in WCS and the other UK regions; and an as-yet-unexplained (but under investigation) set of factors that cause WCS to experience worse health outcomes than similar regions within the UK.

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Colonies, copper, and the market for inventive activity in England and Wales, 1680-1730

Nuala Zahedieh
Economic History Review, forthcoming

Abstract:
Between 1680 and 1730 the English and Welsh copper industry rose from the dead and by the mid-eighteenth century it had become Europe's leading copper producer. The revival followed the extension of sugar cultivation in England's colonies and the creation of a strong new demand for copper, which was reflected in rising exports and rising prices. Buoyant demand created a favourable market for the inventive activity needed to cut costs in the native industry, which encouraged investment in a systematic programme of research and development and culminated in important breakthroughs in smelting and mining technologies which transformed the non-ferrous metal industries. The story provides an insight into how the economic context shaped the way useful knowledge was produced and consumed. Colonial expansion not only provided England with additional resources overseas but also encouraged the reallocation of human and financial capital to make better use of slack resources at home. Empire and technical change intersected with positive consequences for economic growth.

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The Colonial Origins of the Divergence in the Americas: A Labor Market Approach

Robert Allen, Tommy Murphy & Eric Schneider
Journal of Economic History, December 2012, Pages 863-894

Abstract:
This article introduces the Americas in the Great Divergence debate by measuring real wages in various North and South American cities between colonization and independence, and comparing them to Europe and Asia. We find that for much of the period, North America was the most prosperous region of the world, while Latin America was much poorer. We then discuss a series of hypotheses that can explain these results, including migration, the demography of the American Indian populations, and the various labor systems implemented in the continent.

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Media Exposure and Internal Migration - Evidence from Indonesia

Lídia Farré & Francesco Fasani
Journal of Development Economics, forthcoming

Abstract:
This paper investigates the impact of television on internal migration in Indonesia. We exploit the differential introduction of private television throughout the country and the variation in signal reception due to topography to estimate the causal effect of media exposure. Our estimates reveal important long and short run effects. An increase of one standard deviation in the number of private TV channels received in the area of residence as an adolescent reduces future inter-provincial migration by 1.7-2.7 percentage points, and all migration (inter and intra-provincial) by 3.9-6.8 percentage points. Short run effects are similar in magnitude. We also show that respondents less exposed to private television are more likely to consider themselves among the poorest groups in society. As we discuss in a stylized model of migration choice under imperfect information, these findings are consistent with Indonesian citizens over-estimating the net gains from internal migration when access to television is limited.

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When did England overtake Italy? Medieval and early modern divergence in prices and wages

Paolo Malanima
European Review of Economic History, February 2013, Pages 45-70

Abstract:
According to Allen, between 1500 and 1750, a "great divergence" among countries in the level of wages occurred in Europe. Italian real wages were already among the lowest in the late medieval and early modern age. Their relative level diminished even more from the seventeenth century. An analysis of prices and wages in Italy and England does not support this view. Actually, until the beginning of the eighteenth century, Italian real wages were either higher than in England (fourteenth and fifteenth centuries) or more or less equal (sixteenth and seventeenth). It was not until the eighteenth century that England began to overtake Italy. However, the disparity in wages before 1800 was modest. It increased fast from then onwards.

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Impact of Terrorism on Investment Decisions of Farmers: Evidence from the Punjab Insurgency

Prakarsh Singh
Journal of Conflict Resolution, forthcoming

Abstract:
This article provides evidence for a particular channel through which sustained terrorism in rural areas may affect growth in developing countries. Using micro-level data from agricultural surveys during the period of insurgency in Punjab (India), I find significant negative effects of terrorism on the level of investment in long-term agricultural technology, but effects are small and insignificant for short-term investment. The presence of a major terrorist incident in a district in a year reduces long-term fixed investment by around 17 percent after controlling for district fixed-effects, time trends, district trends, and other farm-level controls. These negative effects are greater for richer farmers and those living in bordering districts. This results in a farmer losing close to 4 percent of his income annually because of the insurgency.

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Poverty Dynamics, Violent Conflict, and Convergence in Rwanda

Patricia Justino & Philip Verwimp
Review of Income and Wealth, forthcoming

Abstract:
This paper analyzes the poverty impact of the violent events that affected Rwanda in the 1990s. The main objective of the paper is to identify systematically potential mechanisms linking violent conflict with changes in poverty across provinces and households in Rwanda before and after a decade of violence. In accordance with emerging literature on the long-term economic effects of violent conflict, we find empirical evidence for economic convergence between richer and poorer Rwandan provinces and households following the conflict shocks. Using a small but unique panel of households surveyed before and after the conflict period, we find that households whose house was destroyed or who lost land ran a higher risk of falling into poverty. We do not find much evidence for an economic effect of violent deaths at the household level due to substitution effects of labor within the household. Non-violent deaths however seem to increase income per adult equivalent for the survivors. Results are shown to be robust to sample selection and IV models.

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Does living in slums or non-slums influence women's nutritional status? Evidence from Indian mega-cities

Kirti Gaur, Kunal Keshri & William Joe
Social Science & Medicine, January 2013, Pages 137-146

Abstract:
This article examines the intra-city distribution of women's nutritional status across eight Indian mega-cities with a specific focus on slum-non-slum divide. The analysis is based on the National Family Health Survey (2005-06) of India and highlights the dual burden of malnutrition among urban women. The results show that one in every two women in mega-cities is malnourished (either undernourished or overnourished), but a biased, analytical focus on citywide averages conceals the nature of the problem. Overnutrition among women is notably higher in non-slum areas whereas underweight persists as a key concern among slum dwellers. Cities located in the Central India (Nagpur and Indore) have the highest proportion of underweight women whereas the cities in South India (Chennai and Hyderabad) show a high prevalence of overweight women across both slum and non-slum areas. The intensity of income-related inequalities in underweight outcome is much greater for non-slum areas, whereas inequalities in overweight outcomes are higher among slums. Furthermore, regression analysis indicates that place of residence as such has no significant impact on women's nutritional status and that this elementary association is primarily a ramification mediated through other key socioeconomic correlates. Results suggest that, it would be rational to develop a comprehensive urban nutritional plan that focuses on dietary planning and behaviour change to address both type of malnutrition at the same time.

By KEVIN LEWIS | 09:00:00 AM