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GDN FUNDED PAPERS
Decentralization and political institutions
Project : Awards and Medals Competition (AMC)
Author : Ekaterina Zhuravskaya and Ruben Enikolopov
Date : 2005
Description : Does fiscal decentralization lead to more efficient governance, better public goods, and higher economic growth? This paper tests hypotheses of the theoretical literature that decentralization outcomes depend on features of political institutions. Using data from up to 75 developing and transition countries for 25 years we show that the effect of fiscal decentralization strongly depends on two aspects of political centralization: 1) strength of national party system (measured by the age of main parties and fractionalization of government parties) and 2) subordination (whether local and state executives are appointed or elected). We find solid support for Riker’s theory (1964): strong parties significantly improve such outcomes of fiscal decentralization as economic growth, quality of government, and public goods provision. There is some evidence that administrative subordination of local to higher-level authorities also improves efficiency of decentralization.
Provincial Protectionism
Project : Awards and Medals Competition (AMC)
Author : Konstantin Sonin
Date : 2005
Description : In a federal state with weak political institutions, constituent units might protect their enterprises from enforcement of federal taxes. The effectiveness of such protection depends on the ability of local politicians to extract rents from enterprises. They can easily do so when local monopolies can be effectively sustained and electoral competition is weak. To analyze effects of political decentralization in a country with powerful regional industries, we build a simple general-equilibrium model where local politicians’ electoral positions are levels of competition in the regional market, heterogenous firms provide campaign finance and compete in the labor market, and voters care about their wages, but are not immune from influence of campaign spending.
Institutions, geography and the development of regional returns to schooling in Mexico
Project : Awards and Medals Competition (AMC)
Author : Eduardo Rodriguez-Oreggia Y Roman
Date : 2005
Description : Using microdata from national urban employment surveys, this paper seeks to trace the development of regional wage differentials in relation to schooling in Mexico and to gauge the effects of institutions and geography on those trends. It quantifies both returns to schooling and skills in various regions of Mexico from 1987 to 2002, and also applies panel data in order to explain regional differences, finding that the said returns to schooling increased at the end of the 1980s but decreased after the period 1993-94, with distance from production centers being the second most important factor, after labor institutions, in determining differences in wages and returns to schooling.
Global Financial Regulatory Harmonization, Central Banks’ Supervisory Effectiveness and Macroeconomic Performance in the West African Monetary Zone (WAMZ) Countries: Analyzing the Role of Institutional Factors.
Project : Awards and Medals Competition (AMC)
Author : Robert Chikwendu Asogwa
Date : 2005
Description : Despite the rigorous efforts to increase the level of compliance with global financial regulatory standards in the West African Monetary Zone Countries, bank performance indicators have continued to worsen. Even overall macroeconomic performance statistics have not shown any appreciable signs of progress. This paper tests the linkage between the observance of global financial regulatory standards on the one hand, and Central Banks‟ performance/Macroeconomic outcomes on the other hand. To date, only two known empirical studies test the relationship between observance of global financial standards and banking stability (eventhough their measures of bank stability no longer reflects the changing African bank portfolio trend). Worse still, no known study has tested the effect of the observance of global financial standards on macroeconomic outcomes (inflation rate , GDP growth or private sector credit growth). The existence of any such linkage is consistent with the views of the New Institutional Economics School “that institutions and their quality of governance- including regulatory features have a significant impact on economic development and stability”. This paper therefore applies this New Institutional framework in testing the effects of the degree of compliance to global financial standards within the WAMZ countries. We separate our institutional factors into two- formal (directly observable) and informal (indirectly observable). Generally, we find that on aggregate, compliance to global financial regulatory standards show very weak effects on performance (Central Bank or Macroeconomic). But when we disaggregate, we find that the informal measures of compliance to global regulatory standards have some noticeable effects on performance (price stability, bank stability and private sector credit growth rate). In contrast, formal measures show no effect at all. Macroeconomic and bank structure variables appear more important as an explanatory variable than others. A critical research challenge ahead, is how to confirm these differences in impact between the formal institutional factors and the informal institutional factors. This may involve the use of in-depth and structured questionnaires on various cadres of Central Bank officials. It may also entail the expansion of the number of countries to embrace all ECOWAS countries or the entire sub-Saharan African Countries.
Think global, act local: social credit based on MDGs
Project : Awards and Medals Competition (AMC)
Author : Marcelo Cortes Neri and Marcel Casal Xerez
Date : 2004
Description : The purpose of the paper is two-fold. The paper compares productivity of Russian firms that have foreign direct investments with productivity of fully domestically owned firms. It also analyses spillovers from foreign-owned firms to domestic firms. Foreign firms are found to be more productive than domestic ones, but productivity of the former is negatively affected by slow progress of reforms in the regions where they operate. It is also found that there are positive spillovers from foreign-owned firms to domestic firms in the same industry, but negative effects on domestic firms that are vertically related to foreign-owned firms. The stock of human capital in regions where foreign firms operate is one of the factors, which helps domestic firms to benefit from the entry of foreign firms.
Can Vietnam achieve one of its millennium development goals? An analysis of schooling dropouts of children
Project : Awards and Medals Competition (AMC)
Author : Vo Tri Thahn and Trinh Quang Long
Date : 2004
Description : The objectives of this study are to identify the underlying determinants of the schooling dropout in Vietnam and to project its trend in the future up to 2015. Our examination is largely based on the three Vietnam’s Living Standard Surveys conducted in 1992/93, 1997/98 and 2001/02 and the conventional framework of educational investment at the household level. The major determinants of the schooling dropout choice by households are found to be variables of child’s characteristics (such as age, working time, primary education, and number of siblings) and household economic situation (such as parental education, household’s per capita expenditure, and cost of schooling). In general, the effects of these determinants on the schooling dropout probability are statistically significant. In particular, the schooling dropout probability has been very sensitive to the changes in the household’s per capita expenditure and the direct costs of schooling, whereas recently the other determinants have had only minor impacts. In terms of schooling, girls have benefited more than boys did from their household's per capita expenditure increase, while they have suffered more than boys did from an increase in the direct cost of schooling. These differences, however, recently have narrowed substantially. The dropout situation is also regional specific and hence, a comprehensive approach is needed to deal with it. Moreover, at present the low quality of education is serious problem. Together with the parents' incorrect perception of and the community’s attitude to education values, this may increase the possibility of children’s schooling dropout. The dropout situation is also very much dependent on the public funding for education, which is still not effective in reducing the household current excessive financial burden and still biased against the poor regions. The projection outcomes of the schooling dropout probability of children in the future up to 2015 is very much depending on the assumptions of the changes in the household’s per capita expenditure and the cost of schooling. When the growth rate of the cost of schooling is much higher (for example, by 1.2 percentage points) than that of the household’s per capita expenditure, the dropout rate would first decrease and increase again after 2010. The tentative assessments suggest that in these cases, there is a chance for Vietnam to achieve the national targets of the primary and lower secondary net enrolment rates in 2010. However, Vietnam could very hardly to achieve the MDG on the universal completion of primary education in 2015 and moreover, the achievements recorded by 2010 would be deteriorated. Regarding the scenarios, where the pace of changes in the cost of schooling is lower than that of the household’s per capita expenditure, the projections seem to provide a rather bright picture in terms of achieving the national education targets in 2010 and the MDG on education in 2015. The projections also show that there is a reason to be more optimistic about the elimination of the gender gap in education by 2010.
Regionalism in West Africa: do polar countries reap the benefits? A role for migration
Project : Awards and Medals Competition (AMC)
Author : Adama Konseiga
Date : 2004
Description : In the present globalization era an increasing attention is paid to the ambiguous relationship between international migration, brain drain, and economic growth, but few papers analyzed the growth impact of skilled migration. The current study filled the research gap by building the first data set on brain drain from seven countries of the western African Union (WAEMU) and highlighted the size of the brain loss toward Côte d’Ivoire and France. Burkina Faso shows a more severe brain drain to Cote d’Ivoire compare to other similar sahelian countries (such as Mali) whereas the reverse holds when considering the destination France. The subsequent empirical strategy of the paper consists in comparing the growth performance of an economy without migration to the counterpart economy. The regional growth convergence analysis that follows is based on an augmented Solow growth model adapted to the new theory of brain drain. Results show higher convergence rate once the brain circulation is accounted for. However, the effect of brain gain holds only for countries with migration outside WAEMU toward an industrialized country (France) and failed when migration, as is the case for Burkina Faso, flows into Cote d’Ivoire the polar economy of the Union. Therefore, migration can be used as a powerful force working toward income convergence between capital-rich and capital-poor countries.
Meeting Millennium Development Goals in Sub-Saharan Africa : the bottlenecks in market access for Africa’s textile and clothing exports
Project : Awards and Medals Competition (AMC)
Author : Moses Kindiki
Date : 2004
Description : The Millennium Declaration to meet Millennium Development Goals (MDGs) pays attention to the special needs of the Least Developed Countries (LDCs), Small Island Developing States and landlocked developing countries. However, the challenge of development in the LDCs remains the most immense. Since 34 of the 49 LDCs are in Sub-Saharan Africa (SSA), in essence the challenge to meet MDGs remains in SSA. To achieve the growth objectives that will ensure poverty reduction in this region, emphasis on sectors which can act as engines of growth, specifically resource based manufacturing/agro-industry and textiles, is necessary. In this regard, favourable international trade becomes crucial. Indeed, while the three most important external resources for meeting MDGs are Official Development Assistance (ODA) (including debt relief), Foreign Direct Investment (FDI) (including remittances) and gains from trade, for LDCs, trade offers the most widely available external resource. This paper argues that Multilateral Trade Regime (MTR) in the textiles and clothing sector has not worked in tandem with the objective of poverty reduction and the meeting of MDGs. Developing countries have lost enormous revenue and incomes as a result of protective markets in the sector in the developed countries since the early 1960s. During the transition to the liberalisation of the sector (1995 to 2004), this has continued. And there is no evidence that the LDCs will gain from the full liberalisation of the sector in 2005. On the contrary, gendered exploitation by global capitalism is likely to take its toll.
Rural households’ vulnerability to HIV/AIDS and economic efficiency in the rainforest belt of Nigeria
Project : Awards and Medals Competition (AMC)
Author : Abayomi Samuel Oyekale
Date : 2004
Description : The spread of HIV to rural areas in Nigeria poses a lot of concern to policy makers due to their perceived higher vulnerability and relevance for national food security. This study analyzed the vulnerability of rural households to HIV/AIDS and its impact on economic efficiency of food production. Data from 515 farming households in 5 states in the Rainforest Belt of Nigeria were used. Results show that many farmers have never gone for HIV test, while in Cross River (CRS), Ogun State (OGS), Oyo State (OYS), Lagos State (LAS), Ebonyi State (EBS), and the combination of all the States (CAS), about 3.02 percent, 7.37 percent, 0.69 percent, 8.98 percent, 5.86 percent, and 4.65 percent of the household members are HIV positive respectively. Income generated by the households reduced by average of 27.09 percent in CAS due to HIV/AIDS and estimation shows thatt food intakes declined by 17.21 percent. In CAS, members are 19.34 percent vulnerable to HIV, while CRS, OGS, OYS,LAS, and EBS have 13.47 percent, 19.78 percent, 6.06 percent, 21.17 percent and 17.20 percent respectively. Regression analysis shows that year of schooling, households size, farming as primary occupation and age significantly lead to reduction in vulnerability, while farm income and distance of public clinic increased vulnerability. Inefficiency significantly increased with HIV infection, market distance, farm days lost, market days lost, while farming experience, use of mulching, and tendency to crop specialization decreased it. Average overall economic efficiency for the HIV positive farmers is 40.66 percent as against the 68.21 percent for the HIV negative. The study recommends that effort set at addressing the problem should include ensuring appropriate arrangement for getting many people confirm their HIV status, promulgation of legislation banning prostitution and poor health service delivery, empowerment of youth, and offer of financial assistance to affected farmers.
Community prepayment of health care and estimation of the willingness to pay in Cameroon: evidence of rural households in the centre region
Project : Awards and Medals Competition (AMC)
Author : Joachim Nyemeck Binam, Valere Nkelzok and Yvette Ebene Onana
Date : 2004
Description : The objective of this research was to assess the willingness to prepay the health care household in the Cameroonian rural areas. To this end, the contingent valuation method was used by means of the bidding game technique on a complete sample of 471 rural households. It emerged that: 21% of the respondents were willing to prepay 4800 CFA francs/person/year for future consumption of certain services offered by health facilities (such as diarrheas, malaria and prenatal consultations); 31% were willing to prepay CFA F 6000/person/year; and 9% were willing to prepay the amount of CFA F 7200/person/year; and 39% CFA F 8400/person/year. In addition, it also emerged that for all the respondents, the average value of the willingness to prepay amounts to 7230 CFA francs /person/year on the one hand and, on the other, 50 % of the respondents are willing to prefinance health care with less than 6000 CFA francs per person per year while 50 % would also be ready to prefinance this same care at more than 6000 CFA francs per person per year. In a second step analysis, the identification of the determinants of the value of the willingness to prefinance health care by means of an ordered probit model mate it possible to discern the characteristics specific to the respondents and health facilities that can affect the value of the willingness to prepay. These are level of income, gender, the tradition of use of health facilities, the community experience and the medical status of the household as attributes specific to the respondents. There are also variables such as the state of cleanliness of the health facility, the availability of essential drugs in the heath facilities and the effective or periodic attendance of a medical doctor in the health facility that are attributes specific to the health facilities. The results of this study suggest that it is possible to do a contingent valuation survey among a very poor population and obtain reasonable, consistent answers. There does not appear to be a major problem with starting point bias. From this research we cannot, of course, judge whether individuals in the villages would in fact pay the amounts they indicated in the survey if the NGOs tried to collect the money. Nevertheless, we believe that the preliminary results of this research strongly suggest that contingent valuation surveys are feasible method for estimating individual’s willingness to prepay for improved health accessibility in rural Cameroon. This has important policy implications for rural health prepayment scheme projects because it seems to show that going into a village and conducting a relatively simple survey can yield reliable information on the population’s willingness to prepay for improved health care accessibility in the rural area. The implication of these preliminary research findings are not, however, limited to the rural health sector. Our research suggests that contingent valuation surveys may prove to be a viable method of collecting information on individual’s willingness to prepay or pay for a wide range of public infrastructure projects and public services in developing countries. Furthermore, given that the survey from which we obtained the data to carry out this research was initiated and conducted partly by an NGO from the perspective of setting up a health care repayment system, we recommend that, on the one hand, with regard to the amount of the value of annual contributions per person, the results having shown that 50% of the respondents agree to prepay less than 6000 CFA francs and 50% more than this sum in general, we recommend the taking into account of this median value as the indicator value,which would, therefore, represent a monthly outlay of 500 CFA francs per person. This sum appears to us to be quite affordable taking into account the economic reality of the region. On the other hand, with regard to the management of the prepayment system, the results of the regression having emphasized a strong positive significant correlation between the value of the willingness to prepay for health care and some characteristics specific to the respondents and to the health facilities, we recommend to NGOs to attach greater importance, with regard to the subscriptions, to the collective rather than individual approach within the family or community framework in order to avoid the risk of adverse-selection. Furthermore, NGOs will have to provoke some passion among the medical staff of the various health facilities for their involvement for the success of the system through the delivery of more efficient and quality services to the people.
 
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