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GDN FUNDED PAPERS
Contract enforcement in transition
Project : Awards and Medals Competition (AMC)
Author : Yulia Kossykh and Andrei Sarychev
Date : 2000
Description : We tackle, arguably, the central issue in transition - developing contract enforcement institutions. In the world of thin markets and immature legal systems, market failure arises due to contracting problems. Reputation mechanisms and collateralized contracts may alleviate such problems in static environments, but may not be fully effective in evolving, out-of-steady-state transition economies. Building on insights from modern law economics corroborated by recent evidence, we propose a dynamic theory of adjustment of these two mechanisms. We model an economy with no public system of contract enforcement, where restructuring increases both productivity and exposure to hold-up. The fundamental transition conundrum is how to make firms restructure, if the degree of restructuring is unobservable. We show that there exists a decentralized adjustment path along which firms restructure continuously, while signaling that they proceed at the common pace. As the second part of the paper argues, only certain durable assets may serve as collateral, hence, on the adjustment path, collateral is a scarce resource. Consequently, not all socially profitable contracts are realized. Thus, in the aftermath of transition, new contracts are excessively simple to economize on enforcement. The new social mechanisms for preventing violations of contracts take time to develop and will naturally crystallize when restructuring is complete.
Developing women: How technology can help
Project : Awards and Medals Competition (AMC)
Author : Ashima Goyal
Date : 2000
Description : The paper addresses the question of whether women have lower earnings because of intrinsic feminine attributes or because of features of their environment. In a model of household resource allocation and the labor market we show that equilibria satisfy static efficiency but are dynamically inefficient. A small difference in technology of production of the household good, or in preference for it, magnifies relative costs of external work for women. They devote more time to the production of the household good. But this choice lowers human capital embodied in women and changes the perceptions of women's abilities. Women are relegated to low productivity work in a self-reinforcing low-level trap that lowers their self-esteem. But modern information technologies (IT) make flexi-time, high paying, work at home feasible for women. They lower matching costs, compensating for lack of mobility. Women will more easily find jobs that match their preferences and attributes. Society will gain because dynamic inefficiencies will be removed but greater diversity preserved. Since entrenched perceptions take time to change special policies are required. Our model makes it possible to distinguish among the distortion that occur, and identify targeted policy interventions. There is evidence that the predictions of the model are being borne out in the use of IT. It was not the small difference in women's biology and preferences that harmed them as much as the absence of opportunities that matched these qualities. Technological change can, with a little help, remedy this. Since costs of mobility and potential contributions of women are particularly high in developing countries, developing women will hasten development.
Gender, households, and markets inherited land and labour force participation of rural household in the Cordillera Region, Philippines
Project : Awards and Medals Competition (AMC)
Author : Lorelei Crisologo Mendoza
Date : 2000
Description : In the context of a farm household, we perform an empirical test of the unitary model. The key variable in this test is the amount of inherited land of husbands and wives. The evidence from a probit regression allows us to reject the income-pooling hypothesis of a unitary model of the household. The features of the extra-household environment like the legal and customary system of entitlements, the customs and conventions within the community, and the presence of markets determine the distribution of material resources between household members. By defining the rights to, control of, and access to land, human capital and other productive resources, these mechanisms characterise the broader context of opportunities and constraints in which households and their members organise their activities. Through the collective approach, we identify some of the links among social institutions, household relations, women’s land rights, and married women’s participation in the labour force.
Real wealth and experimental cooperation: Evidence from field experiments
Project : Awards and Medals Competition (AMC)
Author : Juan-Camilo Cardenas
Date : 2000
Description : This paper explores how wealth and inequality can affect the effectiveness of selfgoverned solutions to commons dilemmas by constraining groups cooperation. I report here a series of experiments conducted in the field where subjects are actual local commons users. Data about the participants’ actual world explains statistically the wide variation found within and across groups, and usually observed in similar lab experiments. In particular, individual wealth and wealth inequality negatively affected cooperation, particularly for the stage when groups were allowed to have face-to-face communication between rounds. There are implications for a greater awareness of non-material payoff asymmetries affecting cooperation in heterogenous groups, besides the asymmetries of material payoff structures.
Technology and policy impacts on economic performance, nutrient flows and soil erosion at watershed level
Project : Awards and Medals Competition (AMC)
Author : Mohammad Jabbar, Bernard Okumua, John L. Pender, M A Mohamed Saleema and David Colman
Date : 2000
Description : A dynamic bio-economic model is used to examine natural resource use, the resulting nutrient balances and economic outcomes in a poor country under a range of technological and policy intervention scenarios. With limited technological intervention over a twelve year planning period, incomes rise by 50% from a very low base and average per ha nutrient balances stand at –58kgs for nitrogen, -32kgs for phosphorous and –114kgs for potassium. Associated soil losses are 31 tons per ha. With a set of new technologies involving use of new high yielding crop varieties, agro-forestry, animal manure and inorganic fertilizers, construction of a communal drain to reduce water logging and some limited land user rights, results show a tenfold increase in incomes, 20% decline in aggregate erosion levels and an increase in the dependence on livestock for dung manure, oxen draft, milk and ready cash over time. Moreover, a minimum daily calorie intake of 2000 per adult equivalent is met from on-farm outputs and per ha nutrient balances after intervention are as low as –25kgsN, -14kgsP and –68kgsK on the average. There is hence an obvious reduction in nutrient losses despite the higher reliance on the watershed for subsistence food requirements. The bias towards replenishment of nitrogen and phosphorous nutrients at the expense of potassium may, however, not be resolved. Emissions (leaching, gaseous losses, and erosion) could be higher than immissions (atmospheric deposition, nitrogen fixation) in both situations. From a policy perspective, these results imply an increasing need for a more secure land tenure policy than currently prevailing and provision of credit to ensure uptake of the above land management technology packages. They also imply a shift from a general approach to land management to a relatively more site specific approach that emphasizes spatial and intertemporal variability in input use based on land quality. Such variable rate technology may be an efficient nutrient management strategy as it enables farmers to apply optimal rates of fertilizer for each field and in each period. Moreover, residual nutrient loading is simultaneously reduced. Implementation of such a strategy may be difficult in a developing country situation but an attempt to do so may yield results that are significantly better than at present.
Biotechnology to benefit small-scale banana producers in Kenya
Project : Awards and Medals Competition (AMC)
Author : Florence Muringi Wambugu, Margaret Karembu, Michael Njuguna and Samuel Wakhusama Wanyangu
Date : 2000
Description : This project was conceived in response to the rapid decline in banana (Musa) production experienced in Kenya over the last two decades. The decline was brought about by: infestation with Panama disease or Fusarium wilt caused by Fusarium oxysporum f. sp. Cubense (FOC); Black and Yellow sigatoka leaf spot caused by Mycosphaerella fijiensis (Morelet) and Mycosphaerella musicola (Leach) respectively; weevils (Cosmopolites sordidus) / nematode (Radopholus similis) complexes; and, environmental degradation. The common farmer practice of using untreated sword suckers aggravated the problem further. The situation threatened food security, employment and income in banana producing areas. Thus the broad goal of the project was to make available to small-scale resource-poor farmers clean and improved banana seedlings to alleviate the increasing poverty and hunger in Kenya. These farmers make up to nearly 80% of the Kenyan population and their agricultural production, which is mainly subsistence, contributes over 90% of food production in the country. The application of tissue culture (TC) technology to address these constraints, was therefore an appropriate option to ensure availability of clean planting material. The specific objectives of the project were to build and upgrade banana TC capacity in Kenya by (i) systematically introducing the technology to farmers and supporting them with the necessary extension, (ii) establishing public/private sector links to ensure timely availability of the TC materials, (iii) carrying out a technology diffusion study to understand and appropriately respond to any issues that may limit adoption of the technology and (iv) developing a sustainable production-distribution-utilisation system as a means of ensuring food security and creating jobs. To a large extent, the feasibility and appropriateness of the technology within the farming system of smallholder farmers was established. However, several issues relating to the eventual large-scale commercialization of the technology emerged. The first one was the need to include an Integrated Pest Management (IPM) package in order to prolong the orchards’ longevity. Secondly, for farmers to reap maximum benefits, it was found necessary that field management packages to safeguard the health of the plantlets and the environment be included in the technology transfer package. Thirdly, the cost of plantlets was found to be an important limiting factor to technology diffusion. As a result, access to credit for orchard establishment was found to be essential. The project now sees a need to establish a sustainable system of wider evaluation and horizontal technology transfer through involvement of a broad network of partners with comparative advantage to mobilise large-scale impact.
Biotechnology to benefit small-scale banana producers in Kenya
Project : Awards and Medals Competition (AMC)
Author : Florence Muringi Wambugu, Margaret Karembu, Michael Njuguna and Samuel Wakhusama Wanyangu
Date : 2000
Description : This project was conceived in response to the rapid decline in banana (Musa) production experienced in Kenya over the last two decades. The decline was brought about by: infestation with Panama disease or Fusarium wilt caused by Fusarium oxysporum f. sp. Cubense (FOC); Black and Yellow sigatoka leaf spot caused by Mycosphaerella fijiensis (Morelet) and Mycosphaerella musicola (Leach) respectively; weevils (Cosmopolites sordidus) / nematode (Radopholus similis) complexes; and, environmental degradation. The common farmer practice of using untreated sword suckers aggravated the problem further. The situation threatened food security, employment and income in banana producing areas. Thus the broad goal of the project was to make available to small-scale resource-poor farmers clean and improved banana seedlings to alleviate the increasing poverty and hunger in Kenya. These farmers make up to nearly 80% of the Kenyan population and their agricultural production, which is mainly subsistence, contributes over 90% of food production in the country. The application of tissue culture (TC) technology to address these constraints, was therefore an appropriate option to ensure availability of clean planting material. The specific objectives of the project were to build and upgrade banana TC capacity in Kenya by (i) systematically introducing the technology to farmers and supporting them with the necessary extension, (ii) establishing public/private sector links to ensure timely availability of the TC materials, (iii) carrying out a technology diffusion study to understand and appropriately respond to any issues that may limit adoption of the technology and (iv) developing a sustainable production-distribution-utilisation system as a means of ensuring food security and creating jobs. To a large extent, the feasibility and appropriateness of the technology within the farming system of smallholder farmers was established. However, several issues relating to the eventual large-scale commercialization of the technology emerged. The first one was the need to include an Integrated Pest Management (IPM) package in order to prolong the orchards’ longevity. Secondly, for farmers to reap maximum benefits, it was found necessary that field management packages to safeguard the health of the plantlets and the environment be included in the technology transfer package. Thirdly, the cost of plantlets was found to be an important limiting factor to technology diffusion. As a result, access to credit for orchard establishment was found to be essential. The project now sees a need to establish a sustainable system of wider evaluation and horizontal technology transfer through involvement of a broad network of partners with comparative advantage to mobilise large-scale impact.
Liberalization, outward orientation and in-house R&D activity of multinational and local firms: A quantitative exploration for Indian manufacturing
Project : Awards and Medals Competition (AMC)
Author : Aradhna Aggarwal and Nagesh Kumar
Date : 2000
Description : In an increasingly globalizing and knowledge-based world economy, the declining importance of R&D activity in India is a matter of concern. This paper analyzes the determinants of R&D behaviour of Indian enterprises over the 1990s in the context of reforms of 1991 and their impact on the R&D behaviour of MNE affiliates and local enterprises. The analysis suggests that although average levels of spending have gone down, increased competition due to liberalization seems to have pushed local firms to rationalize their R&D activity and make it more meaningful. After controlling for extraneous factors, MNE affiliates reveal a lower R&D intensity compared to local firms, presumably on account of their captive access to the laboratories of their parents and associated companies. The analysis also brings out differences in the nature of R&D activity of MNE affiliates and local firms. Local firms direct their R&D activity towards absorption of imported knowledge and to provide a backup to their outward expansion. MNE affiliates, on the other hand, either focus on customization of their parents’ technology for the local market or on exploiting the advantages of India as an R&D platform for their parents. The paper is concluded with some policy implications of the findings.
Genders and generations in urban shantytown development
Project : Awards and Medals Competition (AMC)
Author : Jeanine Anderson
Date : 2000
Description : From its beginnings, one of the principal challenges for the field of gender and development has been bringing the best of gender theory to bear on the issues of poverty, exclusion, and the limitations on human capabilities and opportunities that we associate with underdevelopment. One notable advance in theorizing gender has been visualizing gender relations as dynamic systems under continuous pressure to change. At the micro level of daily life, gender relations are negotiated on an almost minute-by-minute basis. Structures, categories and rules are distant references most of the time. Such negotiation takes place in a dynamic context where several things are occurring simultaneously. There are local processes of change associated with neighborhoods, workplaces and other face-to-face groups in which men and women are involved; there are processes with far longer cycles that have a kind of directionality (for example, realignments that take place in a country’s geopolitical position); and there are processes at intermediate levels of markets, communities and institutions. Meanwhile, all human beings move through stages of the life cycle and households, too, pass through a cycle from their founding through a second and perhaps third and fourth generation. Most research in the field of gender and development (like most research on development questions in general) considers a restricted range of processes in the intermediate range, often isolating them analytically from other processes that are clearly unfolding simultaneously. The life cycle of development projects tends to be relatively short, and most evaluations of results occur after a period of months or, at most, a few years. Contradictorily, contemporary theories of gender affirm the central importance of value and symbol, aspects that change slowly. This paper uses a case study of a former shanty community on the outskirts of Lima, Peru, to argue the necessity of applying complex models, highly sensitive to over-time processes, to gain an understanding of the relationship between gender systems and development outcomes. The central argument is that development projects, on whatever scale, have to be evaluated in very long time frames, taking duly into account other dynamic processes.
How to face an adverse geography? The role of public and private assets
Project : Awards and Medals Competition (AMC)
Author : Maximo Torero and Javier Alfredo Escobal
Date : 2000
Description : In Peru, a country with an astonishing variety of different ecological areas, including 84 different climate zones and landscapes, with rainforests, high mountain ranges and dry deserts, the geographical context maynot be all that matters, but it could be very significant in explaining regional variations in income and welfare. The major question this paper tries to answer is: what role do geographic variables, both natural and manmade, play in explaining per capita expenditure differentials across regions within Peru? How have these influences changed over time, through what channels have they been transmitted, and has access to private and public assets compensated for the effects of an adverse geography? We have shown that what seem to be sizable geographic differences in living standards in Peru can be almost fully explained when one takes into account the spatial concentration of households with readily observable non-geographic characteristics, in particular public and private assets. In other words, the same observationally equivalent household has a similar expenditure level in one place as another with different geographic characteristics such as altitude or temperature. This does not mean, however that geography is not important but that its influence on expenditure level and growth differential comes about through a spatially uneven provision of public infrastructure. Furthermore, when we measured the expected gain (or loss) in consumption from living in one geographic region (i.e., coast) as opposed to living in another (i.e., highlands), we found that most of the difference in log per-capita expenditure between the highland and the coast can be accounted for by the differences in infrastructure endowments and private assets. This could be an indication that the availability of infrastructure could be limited by the geography and therefore the more adverse geographic regions are the ones with less access to public infrastructure. It is important to note that there appear to be non-geographic, spatially correlated, omitted variables that need to be taken into account in our expenditure growth model. Therefore policy programs that use regional targeting do have a rationale even if geographic variables do not explain the bulk of the difference in regional growth, once we have taken into account differentials in access to private and public assets.
 
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