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Thu, 24 Sep 2009 08:46:23 PDT

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Thu, 24 Sep 2009 08:46:23 PDT

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Thu, 24 Sep 2009 08:46:23 PDT

Aggregate Economic Shocks, Child Schooling, and Child Health

Ferreira, F. H. G., Schady, N. — Thu, 24 Sep 2009 08:46:23 PDT

Do aggregate income shocks, such as those caused by macroeconomic crises or droughts, reduce child human capital? The answer to this question has important implications for public policy. If shocks reduce investments in children, they may have a long-lasting impact on poverty and its intergenerational transmission. The authors develop a simple framework to analyze the effects of aggregate economic shocks on child schooling and health. They show that the expected effects are theoretically ambiguous because of a tension between income and substitution effects. They then review the recent empirical literature on the subject. In richer countries, like the United States, child health and education outcomes are counter-cyclical: they improve during recessions. In poorer countries, mostly in Africa and low-income Asia, the outcomes are procyclical: infant mortality rises and school enrollment and nutrition fall during recessions. In the middle-income countries of Latin America, the picture is more nuanced: health outcomes are generally procyclical and education outcomes counter-cyclical. Each of these findings is consistent with the simple conceptual framework. The authors discuss possible implications for expenditure allocation.

The Regulation of Entry: A Survey

Djankov, S. — Thu, 24 Sep 2009 08:46:23 PDT

Simplifying entry regulation has been a popular reform since the publication of Djankov and others (2002). The inclusion of business entry indicators in the World Bank's Doing Business project has led to an acceleration in reform: in 2003–08, 193 reforms took place in 116 countries. A large academic literature has followed: 201 academic articles have used the data compiled by Djankov and others (2002) and subsequently by the World Bank. The author identifies three theories as to why some countries impose burdensome entry requirements. He also surveys the literature on the effects of making business entry easier.

How Relevant Is Targeting to the Success of an Antipoverty Program?

Ravallion, M. — Thu, 24 Sep 2009 08:46:23 PDT

Policy-oriented discussions often assume that "better targeting" implies larger impacts on poverty or more cost-effective interventions for fighting poverty. The literature on the economics of targeting warns against that assumption, but evidence has been scarce and the lessons from the literature have often been ignored by practitioners. This paper shows that standard measures of targeting performance are uninformative or even deceptive about the impacts on poverty, and cost-effectiveness in reducing poverty, of a large cash transfer program in China. The results suggest that in program design and evaluation, it would be better to focus directly on the program's outcomes for poor people than to rely on prevailing measures of targeting.

Land Registration, Governance, and Development: Evidence and Implications for Policy

Deininger, K., Feder, G. — Thu, 24 Sep 2009 08:46:23 PDT

The developmental impact of institutions to establish and maintain secure property rights to land has been a subject of much debate. The authors review the literature on the impact of land administration interventions in specific contexts, highlighting the dependence of outcomes on the governance environment, the effectiveness of the state apparatus, and the distribution of socio-economic power. There is evidence, albeit not uniform, of enhancement of tenure security through land registration with benefits manifesting themselves in higher levels of investment and productivity and a reduced need to defend land rights. Land registration has also been shown to increase activity in land rental markets, leading to higher efficiency overall. Evidence of improved access to credit, due to formalization of land rights, is scant. Even in situations where land registration had positive benefits, the literature contains little rigorous analysis of cost-effectiveness and long-term sustainability of impacts. The authors conclude that formalization of land rights should not be viewed as a panacea and that interventions should be decided only after a careful diagnosis of the policy, social, and governance environment. If intervention is justified, the performance of land administration systems needs to be benchmarked in terms of coverage, cost-effectiveness, and quality of service provision.

Instructional Time Loss in Developing Countries: Concepts, Measurement, and Implications

Abadzi, H. — Thu, 24 Sep 2009 08:46:23 PDT

Students in developing countries are often taught for only a fraction of the intended number of school hours. Time is often wasted due to informal school closures, teacher absenteeism, delays, early departures, and poor use of classroom time. Since the 1970s, attempts have been made in several countries to measure the use of instructional time in schools and its impact on student achievement. Studies have been of variable quality and have used different definitions and methods. However, they have consistently shown that significant amounts of time are lost and that the amount of time spent engaged in learning tasks is related to student performance. The large losses in many countries raise issues of governance, monitoring, and validity of economic analyses. It is important to take instructional time wastage into account when considering public sector expenditures on education, teacher salary rates, unit costs, and the rates of return from graduates. Refining time-loss measurement methods and disseminating policy implications may improve the efficiency of educational systems worldwide.

Rural Poverty: Old Challenges in New Contexts

Dercon, S. — Thu, 23 Apr 2009 07:08:43 PDT

Poverty is still a predominantly rural phenomenon. However, the context of rural poverty has been changing across the world, with high growth in some economies and stagnation in others. Furthermore, increased openness in many economies has affected the specific role of agricultural growth for rural poverty reduction. This paper revisits an ‘old’ question: how does growth and poverty reduction come about if most of the poor live in rural areas and are dependent on agriculture? What is the role of agricultural and rural development in this respect? Focusing on Sub-Saharan Africa, and using economic theory and the available evidence, the author comes to the conclusion that changing contexts has meant that agricultural growth is only crucial as an engine for growth in particular settings, more specifically in landlocked, resource-poor countries, which are often also characterized by relatively low potential for agriculture. However, extensive market failures in key factor markets and likely spatial effects give a remaining crucial role for rural development policies, including focusing on agriculture, to assist the inclusion of the rural poor in growth and development. How to overcome these market failures remains a key issue for further research.

Evaluation in the Practice of Development

Ravallion, M. — Thu, 23 Apr 2009 07:08:43 PDT

Standard methods of impact evaluation often leave significant gaps between what we know about development effectiveness and what we want to know—gaps that stem from distortions in the market for knowledge. The author discusses how evaluations might better address these knowledge gaps and so be more relevant to the needs of practitioners. It is argued that more attention needs to be given to identifying policy-relevant questions (including the case for intervention), that a broader approach should be taken to the problems of internal validity (including heterogeneity and spillover effects), and that the problems of external validity (including scaling up) merit more attention by researchers.

Timing and Duration of Exposure in Evaluations of Social Programs

King, E. M., Behrman, J. R. — Thu, 23 Apr 2009 07:08:43 PDT

Impact evaluations aim to measure the outcomes that can be attributed to a specific policy or intervention. While there have been excellent reviews of the different methods for estimating impact, insufficient attention has been paid to questions related to timing: How long after a program has begun should it be evaluated? For how long should treatment groups be exposed to a program before they benefit from it? Are there time patterns in a program's impact? This paper examines the evaluation issues related to timing, and discusses the sources of variation in the duration of exposure within programs and their implications for impact estimates. It reviews the evidence from careful evaluations of programs (with a focus on developing countries) on the ways that duration affects impacts.

Competition in the Financial Sector: Overview of Competition Policies

Claessens, S. — Thu, 23 Apr 2009 07:08:43 PDT

Competition in the financial sector, as in other sectors, matters for allocative, productive, and dynamic efficiency. Theory suggests, however, that unfettered competition is not necessarily best given the special features of financial services. The author discusses these analytical complications before reviewing how to assess competition in the financial sector and its determinants. It is shown that competitiveness varies greatly across countries, in perhaps surprising ways, and that it is not driven by financial system concentration. Rather, systems with greater foreign entry and fewer entry and activity restrictions tend to be more competitive, confirming that contestability—the lack of barriers to entry and exit—determines effective competition. The author then analyzes how competition policy in the financial sector has generally been conducted and how changes in competition in the financial services industries should affect competition policy going forward. In part based on comparison with other industries, the author provides some suggestions on how competition policy in the financial sector could be better approached as well as what institutional arrangements best fit a modern view of competition policy in the sector. The specific competition challenges for developing countries is also highlighted. The author concludes that practices today fall far short of the need for better competition policy in the financial sector.

Access to Financial Services: Measurement, Impact, and Policies

Beck, T., Demirguc-Kunt, A., Honohan, P. — Thu, 23 Apr 2009 07:08:43 PDT

In many developing countries less than half the population has access to formal financial services, and in most of Africa less than one in five households has access. Lack of access to finance is often the critical mechanism for generating persistent income inequality, as well as slower economic growth. Hence expanding access remains an important challenge across the world, leaving much for governments to do. However, not all government actions are equally effective and some policies can even be counterproductive. This paper sets out principles for effective government policy on broadening access, drawing on the available evidence and illustrating with examples. The paper concludes with directions for future research.

Collecting the Pieces of the FDI Knowledge Spillovers Puzzle

Smeets, R. — Mon, 04 Aug 2008 08:12:25 PDT

Recent surveys of the empirical literature have concluded that the evidence is mixed on the magnitude, direction, and even existence of knowledge spillovers from foreign direct investment (FDI). This article reviews the recent theoretical and empirical literature that responds to these inconclusive results and considers three main issues: spillover channels, mediating factors, and FDI heterogeneity. Studies that take into account individual spillover channels find robust evidence of knowledge spillovers from FDI. Studies on the importance of mediating factors and FDI heterogeneity are less conclusive and could benefit from greater convergence in methodologies and greater specificity in the spillover channels of interest. More generally, many studies do not properly distinguish between knowledge spillovers and knowledge transfers, and empirical studies seem to greatly outnumber theoretical studies.

Can Survey Evidence Shed Light on Spillovers from Foreign Direct Investment?

Javorcik, B. S. — Mon, 04 Aug 2008 08:12:25 PDT

Although some economists remain skeptical of the existence of positive externalities associated with foreign direct investment (FDI), many countries spend large sums attracting foreign investors in the hope of benefiting from knowledge spillovers. Data collected through enterprise surveys conducted in the Czech Republic and Latvia suggest that the entry of multinationals affects domestic enterprises in the same industry or in upstream or downstream sectors through multiple channels. Some of these channels represent true knowledge spillovers while others have positive or negative effects on domestic producers in other ways. The relative magnitudes of these channels depend on host country conditions and the type of FDI inflows, which explains the seemingly inconsistent findings of the literature. The focus of the debate should shift from attempting to generalize about whether or not FDI leads to productivity spillovers to determining under what conditions it can do so.

The Growing Phenomenon of Private Tutoring: Does It Deepen Human Capital, Widen Inequalities, or Waste Resources?

Dang, H.-A., Rogers, F. H. — Mon, 04 Aug 2008 08:12:25 PDT

Does private tutoring increase parental choice and improve student achievement, or does it exacerbate social inequalities and impose heavy costs on households, possibly without improving student outcomes? Private tutoring is now a major component of the education sector in many developing countries, yet education policy too seldom acknowledges or makes use of it. This survey of the literature examines the extent of private tutoring, identifies the factors that explain its growth, and analyzes its cost-effectiveness in improving student academic performance. It also presents a framework for assessing the efficiency and equity effects of tutoring. The results suggest that even taking equity concerns into account, tutoring can raise the effectiveness of the education system under certain reasonable assumptions. Guidance is offered for attacking corruption and other problems that diminish the benefits of private tutoring.

Can Biological Factors Like Hepatitis B Explain the Bulk of Gender Imbalance in China? A Review of the Evidence

Das Gupta, M. — Mon, 04 Aug 2008 08:12:26 PDT

A recent study challenges the assumption that the large deficit of girls in East and South Asia reflects the preference for sons, suggesting that much of the deficit—as much as 75 percent in China—is attributable to hepatitis B (HBV). The claim is inconsistent with the results of a study based on a large medical data set from Taiwan (China), which indicates that HBV infection raises a woman's probability of having a son by only 0.25 percent. In addition, demographic data from China show that the only group of women who have elevated probabilities of bearing sons are those who have already borne daughters. This pattern makes it difficult to see how any biological factor can explain a large part of the imbalance in China's sex ratios at birth, unless it can be shown that it somehow selectively affects those who have borne girls or causes them to first bear girls and then boys. The Taiwanese example suggests that this is not the case with HBV, the impact of which is unaffected by the sex composition of previous births. The data thus support the cultural rather than the biological explanation for gender imbalance.

Industrial Location in Developing Countries

Deichmann, U., Lall, S. V., Redding, S. J., Venables, A. J. — Mon, 04 Aug 2008 08:12:26 PDT

Despite a diminishing role in industrial countries, the manufacturing sector continues to be an engine of economic growth in most developing countries. This article surveys the evidence on the determinants of industry location in developing countries. It also employs micro data for India and Indonesia to illustrate recent spatial dynamics of manufacturing relocation within urban agglomerations. Both theory and empirical evidence suggest that agglomeration benefits, market access, and infrastructure endowments in large cities outweigh the costs of congestion, higher wages, and land prices. Despite this evidence, many countries have tried to encourage industrial firms to locate in secondary cities or other lagging areas. Cross-country evidence suggests that fiscal incentives to do so rarely succeed. They appear to influence business location decisions among comparable locations, but the result may be a negative-sum game between regions and inefficiently low tax rates, which prevent public goods from being funded at sufficiently high levels. Relocation tends to be within and between agglomerations rather than from large cities to smaller cities or lagging regions. Rather than provide subsidies and tax breaks, policymakers should focus on streamlining laws and regulations to make the business environment more attractive.