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GDN FUNDED PAPERS
Smuggling humans: a theory of debt-financed migration
Project : Awards and Medals Competition (AMC)
Author : Sergei M. Guriev and Guido Friebel
Date : 2004
Description : We introduce financial constraints in a theoretical analysis of illegal immigration. Intermediaries finance the migration costs of wealth-constrained migrants, who enter temporary servitude contracts to pay back the debt. These debt/labor contracts are more easily enforceable in the illegal than in the legal sector of the host country. Hence, when moving from the illegal to the legal sector becomes more costly, for instance, because of stricter deportation policies, fewer immigrants default on debt. This reduces the risks for intermediaries,who are then more willing to finance illegal migration. Stricter deportation policies may thus increase rather than decrease the ex ante flow of illegal migrants. We also show that stricter deportation policies worsen the skill composition of immigrants.While stricter border controls decrease overall immigration, they may also result in an increase of debt-financed migration.
Children at risk in the agricultural sector in Sub-Saharan Africa: Determinants of child labor participation in the cocoa farming of Cote d’Ivoire
Project : Awards and Medals Competition (AMC)
Author : Guy Blaise Ngassam Nkamleu
Date : 2004
Description : This paper investigates child labor issue in the cocoa sector in Cote d’Ivoire, an issue of special interest with regards of the persistent reports that some agricultural goods in developed country export sector are being produced under “exploited” forms of labor practices. The present study is based on a survey done in 2002, over a representative sample of more than 11000 cocoa-households’ members. The analysis takes point of departure in a basic conceptual model and a standard bivariate probit regression aiming to explain the joint decision of children’s schooling and work participation on the cocoa farm. Commenting on the overall findings we disaggregate the “work” definition into the specific labor tasks that constitute the cocoa production process, and examine the way determinants vary for the probability that children participate in each one. Aggregating a number of tasks into one work variable conceals the possibility that background variables to different extents determine the labor participation in different tasks. Study reveals that child labor’s contribution in cocoa farm as well as non-enrollment in school are considerable. More, numerous children are involved in potentially dangerous and/or injurious tasks. The gender dimensions of participation in different tasks of the cocoa farming process are closely examined in the paper, and tasks specific variations in determining the participation of boys versus girls are outlined and help refine the overall results and conclusions. Assessing some possible welfare consequences of the various tasks, the results draw attention to some critical aspects of the ruling definitions of hazardous child labor, and question our typically very different normative perceptions about children’s participation in different labor tasks.The paper ends with recommendations to help designing array of policy instruments to promote good development of children in the agricultural sector in Subsaharan Africa.
Foreign direct investment spillovers and the absorption capabilities of domestic firms in the Argentine manufacturing sector (1992-2001)
Project : Awards and Medals Competition (AMC)
Author : Daniel Chudnovsky, Gaston Rossi and Andres Flavio Lopez
Date : 2004
Description : Argentina received significant amounts of foreign direct investment (FDI) inflows during the 1990s. At the same time, deep structural reforms were introduced, forcing domestic firms to rapidly undertake restructuring processes in order to adapt to the new economic and institutional environment. This paper explores to what extent FDI helped or hindered those restructuring processes, analyzing whether positive (or negative) productivity spillovers arose from the increasing presence of TNCs affiliates. We found that TNCs affiliates had higher productivity levels than domestic firms and that the latter, on average, received neither positive nor negative horizontal and vertical (backward) spillovers from the growing presence of foreign firms in the local economy. However, we also found that domestic firms with high absorption capabilities reaped positive spillovers from TNCs presence while those with low absorption capabilities were more likely to receive negative spillovers. The main policy lesson that arises from these findings is that developing countries which attract significant FDI inflows should not take for granted that domestic firms will benefit from TNCs presence, since this will mainly happen when absorption capabilities are present to be able to receive both horizontal and vertical spillovers.
Does foreign ownership matter for survival and growth? Dynamics of competition and foreign direct investment
Project : Awards and Medals Competition (AMC)
Author : Ksenia V. Yudaeva, Konstantin Kozlov, Natalia Ponomareva and Natalia Melentieva
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. (JEL F2, O3)
Impact of government policies and investment agreements on FDI inflows to developing countries: an empirical evidence
Project : Awards and Medals Competition (AMC)
Author : Rashmi Banga
Date : 2003
Description : The last two decades have witnessed an extensive growth in foreign direct investment (FDI) flows to developing countries. This has been accompanied by an increase in competition amongst the developing countries to attract FDI, resulting in a rise in investment incentives offered by the host governments and removal of restrictions on operations of foreign firms in their countries. This has also led to an ever-increasing number of bilateral investment treaties (BITs) and regional agreements on investments. In this scenario, the question addressed by the study is: How effective are these selective government policies and investment agreements in attracting FDI flows to developing countries and do FDI from developed and developing countries respond similarly to developing host countries’ policies? To answer this, the study examines the impact of fiscal incentives offered, removal of restrictions and signing of bilateral and regional investment agreements with developed and developing countries on FDI inflows to developing countries, after controlling for the effect of economic fundamentals of the host countries. The analysis is first undertaken for aggregate FDI inflows to fifteen developing countries of South, East and South East Asia for the period 1980-81 to 1999-2000. Separate analyses are then undertaken for FDI from developed and developing countries. The results based on random effects model show that fiscal incentives do not have any significant impact on aggregate FDI, but removal of restrictions attracts aggregate FDI. However, FDI from developed and developing countries are attracted to different selective policies. While lowering of restrictions attract FDI from developed countries, fiscal incentives and lower tariffs attract FDI from developing countries. Interestingly, BITs, which emphasize on non-discriminatory treatment of FDI, are found to have a significant impact on aggregate FDI. But it is BITs with developed countries rather than developing countries that are found to have a significant impact on FDI inflows to developing countries.
The performance of state-owned enterprises and newly privatized firms: Does privatization really matter?
Project : Awards and Medals Competition (AMC)
Author : Mohammed Moustafa Omran
Date : 2003
Description : While it is well documented that privatization leads to an improvement in the performance of state-owned enterprises (SOEs) following divestiture, it is argued that many of these studies do not consider the performance of control firms of similar pre-privatization situations, i.e. the performance of SOEs. By matching sample firms (privatized) to control firms (SOEs), we find that privatized firms do not exhibit significant improvement in their performance changes compared with SOEs, which might put into question the benefits of privatization in Egypt. However, the caveat here is that the findings of no significant differences between privatized firms and SOEs might be attributed to one or more of the following reasons: the SOEs specific characteristics, the power of the non-parametric test and/or the small sample size, and changes in the economic system in Egypt and/or the restructuring process of the SOEs. Nevertheless, with all respect to the findings from the statistical tests, the interpretation of the evidence of this study could mean that privatization improved the performance of privatized firms, and this is in turn could have important spillover effects on SOEs. Indeed, a study over a longer period is needed before these results could be considered conclusive.
Attending school, two Rs and child work in rural Ethiopia
Project : Awards and Medals Competition (AMC)
Author : Assefa Admassie Atile and Arjun Singh Bedi
Date : 2003
Description : Rural Ethiopia has amongst the highest rates of children’s labor force activity in the world. Children start assuming household and farm responsibilities as early as four years of age and on average contribute 29-30 hours of labor per week. This paper examines the consequences of working on the formal human capital development of children. In particular, we investigate whether the number of hours worked by children has an effect on school attendance and on their reading and writing ability (RWA). An intermediate step in our analysis is identification of the factors that determine the allocation of children’s time to school and work. A noteworthy aspect here is our assessment of the link between the spread of modern agricultural technologies and child work. In our study we detect a non-linear relationship between hours of work and school attendance/RWA of children. Initially there is a positive link between working and schooling/RWA. However, at between 16-22 hours of weekly work the ability of a child to read and write begins to suffer while school attendance is not affected. Beyond this threshold RWA and school attendance suffer. In terms of determinants we find that agricultural modernization has a mixed effect. While the availability of agricultural machinery reduces the demand for child labor other technologies such as the spread of improved seeds, at least in the short run, increase the burden of work.
The institutional paradox of community based wildlife management
Project : Awards and Medals Competition (AMC)
Author : Richard Hasler
Date : 2003
Description : Over ten years of social and ecological monitoring and evaluation, planning effort, policy change, legislative reform, donor support and pilot design have taken place for community based wildlife management (CBWM) projects in Southern Africa. In the key experiences of Botswana and Zimbabwe practical achievements related to revenue generation, local institution and capacity building and policy reform have taken place. These changes have created the political and administrative space in which wildlife utilization has become an important land use strategy for local people living on communal lands. Devolution of management control of wildlife has however been disappointing and the overall institutional direction of the programs in the last ten years has not been “community based” but towards increasing ad hoc involvement of stakeholders who are not considered to be part of the local community. This involvement is primarily because of their claimed property rights and interests in wildlife and is seen in the region, as necessary preconditions for CBWM to evolve. Paradoxically, in the attempt to achieve those social conditions under which CBWM can work (legislative and policy reform, capacity building, institutional development, direct local economic benefits and enhanced ecological value of local resources), planners, academics and practitioners have encouraged co-management regimes rather than community based management regimes. Powerful actors in stakeholder based wildlife -management (SBWM) include: International Donors, Politicians, Governments, District Councils, NGO’s, Associations, Convention on Trade in Endangered Species (CITES), Technical Committees, Private Sector Hunting / Tourism Operators, and Community Based Natural Resources Management (CBNRM) Forums. Over the last ten years the assumption that co—management is a desirable proxy for community based management has become a tacit understanding or working assumption. The findings of this study suggest however, that powerful players may co-opt the process for their own, sometimes perverse purposes and instead of the hoped for “Political Ecologies of Scale” (Hasler 1995, 2000) occurring, where all levels of society benefit from the promotion of “win/win” good management practices at local level, “a political impasse of scale” may emerge. The paper describes a recent impasse period in Botswana, during which a confusion of jurisdictions arose. From a purely technical point of view, there is clearly a need to involve Governments and Donor agencies in CBWM and SBWM, because policy and legislative change and the devolution of benefits and management will not take place without their support. A fine balance of power therefore needs to be achieved to foster both CBWM and SBWM. This fine balance of power between the state and local communities, private sector and NGO’s is elusive and paradoxical and does not yet exist for CBWM to flourish. The performance of the Ngamiland (Okavango Area) (CBNRM) district forum is evaluated as a possible institutional model for the region. Its relevance as an institutional model to combat the HIV/AIDS pandemic is noted.
Market failures in health and education investment for the young, Mexico 2000
Project : Awards and Medals Competition (AMC)
Author : David Mayer-Foulkes
Date : 2003
Description : Mincerian econometric estimates including health (indicated by stature), schooling and experience show adult human capital has increasing returns in Mexico. These may result from recent pro-market reforms. In addition, probit estimates show that childhood nutrition and health (also indicated by stature), as well as parental education, have substantial and possibly increasing returns in the acquisition of education, as measured by school permanence. Thus the poor are less able to invest in human capital, and constituent elements for a low human capital trap, or for a prolonged transition in intergenerational human capital accumulation, are present in Mexico, affecting 90% of the population. Further, a transition matrix analysis supports the presence of a barrier to education at 9 years of schooling. A numerical policy experiment shows that a 5 cm average increase in stature (which South Korea achieved in one generation) would overcome this barrier and lead to higher levels of education. Thus, to produce effective results pro-market reforms raising returns to human capital must be accompanied with policies supporting nutrition, health and early child development, as well as education, so as to overcome market failures in human capital investment. Policies for long-term growth must address the intergenerational dynamics of human capital accumulation.
The decline in primary school enrolment in Kenya
Project : Awards and Medals Competition (AMC)
Author : Paul Kieti Kimalu, Nancy Nafula, Arjun Singh Bedi and Damiano Kulundu Manda
Date : 2003
Description : Since independence in 1963, Kenya has invested substantial resources in the education sector. For almost twenty five years, these investments and other government policies led to impressive gains in educational access at all levels. However, since the mid to late eighties there has been an erosion in educational participation and a reversal of the gains achieved in previous decades. Motivated by this trend, and the importance attributed to educational acquisition as a means of tackling poverty, this paper uses temporal, cross-section, and pseudo-panel data to assess the plausibility of various factors that may be responsible for the decline in primary school educational enrolment. We consider the role of cost-sharing policies, school input and curriculum reforms, school availability, the expected benefits of education and the spread of HIV/AIDS. The empirical evidence that we assemble shows that reforms in the school curriculum and the policy of cost-sharing are the two main factors responsible for the decline in educational enrolment. An increase in the skill-level of teachers is positively associated with educational enrolment. To ease the fiscal strain and increase enrollment, a policy mix of retaining cost-sharing, hiring skilled teachers, phasing out unskilled teachers and allowing the student-teacher ratio to increase is suggested. Such a policy mix is expected to have a positive impact that is four times larger for the poorest forty percent of households as compared to the richest twenty percent of households.
 
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