Journal Issue: World Bank Economic Review, Volume 20, Issue 3

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Microenterprise Dynamics in Developing Countries : How Similar are They to Those in the Industrialized World? Evidence from Mexico
(Oxford University Press on behalf of the World Bank, 2006-09-01) Fajnzylber, Pablo ; Maloney, William ; Montes Rojas, Gabriel
A rich panel data set from Mexico is used to study the patterns of entry, exit, and growth of microenterprises and to compare these with the findings of the mainstream theoretical and empirical work on firm dynamics. The Mexican self-employment sector is much larger than its counterpart in the United States, which is reflected in higher unconditional rates of entry into the sector. The evidence for Mexico points to the significant presence of well-performing salaried workers among the likely entrants into self-employment, as opposed to the higher incidence of poorer wageworkers among the entrants into the U.S. self-employment sector. Despite these differences, however, the patterns of entry, survival, and growth with respect to age, education, and many other covariates are very similar in Mexico and the United States. These strong similarities suggest that mainstream models of worker decisions and firm behavior are useful guides for policymaking for the developing-country microenterprise sector. Furthermore, they suggest that, as a first approximation, the developing-country microenterprise should probably be viewed as they are in the advanced countries as offering potentially desirable job opportunities to low-productivity workers.
When Is External Debt Sustainable?
(Oxford University Press on behalf of the World Bank, 2006-09-01) Kraay, Aart ; Nehru, Vikram
The article empirically examines the determinants of debt distress, defined as periods in which countries resort to any of three forms of exceptional finance: significant arrears on external debt, Paris Club rescheduling, and non-concessional International Monetary Fund lending. Probit regressions show that three factors explain a substantial fraction of the cross-country and time-series variation in the incidence of debt distress: the debt burden, the quality of policies and institutions, and shocks. The relative importance of these factors varies with the level of development. These results are robust to a variety of alternative specifications, and the core specifications have substantial out-of-sample predictive power. The quantitative implications of these results are examined for the lending strategies of official creditors.
How Endowments, Accumulations, and Choice Determine the Geography of Agricultural Productivity in Ecuador
(Oxford University Press on behalf of the World Bank, 2006-09-01) Larson, Donald F. ; Leon, Mauricio
Spatial disparity in incomes and productivity is apparent across and within countries. Most studies of the determinants of such differences focus on cross-country comparisons or location choice among firms. Less studied are the large differences in agricultural productivity within countries related to concentrations of rural poverty. For policy, understanding the determinants of this geography of agricultural productivity is important, because strategies to reduce poverty often feature components designed to boost regional agricultural incomes. Census and endowment data for Ecuador are used to estimate a model of endogenous technology choice to explain large regional differences in agricultural output and factor productivity. A composite-error estimation technique is used to separate systemic determinants from idiosyncratic differences. Simulations are employed to explore policy avenues. The findings suggest a differentiation between the types of policies that promote growth in agriculture generally and those that are more likely to assist the rural poor.
Will African Agriculture Survive Climate Change?
(Oxford University Press on behalf of the World Bank, 2006-08-23) Kurukulasuriya, Pradeep ; Mendelsohn, Robert ; Hassan, Rashid ; Benhin, James ; Deressa, Temesgen ; Diop, Mbaye ; Eid, Helmy Mohamed ; Fosu, K. Yerfi ; Gbetibouo, Glwadys ; Jain, Suman ; Mahamadou, Ali ; Mano, Renneth ; Kabubo-Mariara, Jane ; El-Marsafawy, Samia ; Molua, Ernest ; Ouda, Samiha ; Ouedraogo, Mathieu ; Sene, Isidor ; Maddison, David ; Seo, S. Niggol ; Dinar, Ariel
Measurement of the likely magnitude of the economic impact of climate change on African agriculture has been a challenge. Using data from a survey of more than 9,000 farmers across 11 African countries, a cross-sectional approach estimates how farm net revenues are affected by climate change compared with current mean temperature. Revenues fall with warming for dryland crops (temperature elasticity of -1.9) and livestock (-5.4), whereas revenues rise for irrigated crops (elasticity of 0.5), which are located in relatively cool parts of Africa and are buffered by irrigation from the effects of warming. At first, warming has little net aggregate effect as the gains for irrigated crops offset the losses for dryland crops and livestock. Warming, however, will likely reduce dryland farm income immediately. The final effects will also depend on changes in precipitation, because revenues from all farm types increase with precipitation. Because irrigated farms are less sensitive to climate, where water is available, irrigation is a practical adaptation to climate change in Africa.
The Primacy of Institutions Reconsidered : Direct Income Effects of Malaria Prevalence
(Oxford University Press on behalf of the World Bank, 2006-06-08) Carstensen, Kai ; Gundlach, Erich
Some recent empirical studies deny any direct effect of geography on development and conclude that institutions dominate all other potential determinants of development. An alternative view emphasizes that geographic factor such as disease ecology, as proxied by the prevalence of malaria, may have a large negative effect on income, independent of the quality of a country's institutions. For instance, pandemic malaria may create a large economic burden beyond medical costs and forgone earnings by affecting household behavior and such macroeconomic variables as international investment and trade. After controlling for institutional quality, malaria prevalence is found to cause quantitatively important negative effects on income. The robustness of this finding is checked by employing alternative instrumental variables, tests of over-identification restrictions, and tests of the validity of the point estimates and standard errors in the presence of weak instruments. The baseline findings appear to be robust to using alternative specifications, instrumentations, and samples. The reported estimates suggest that good institutions may be necessary but not sufficient for generating a persistent process of successful economic development.
The 'Glass of Milk' Subsidy Program and Malnutrition in Peru
(Oxford University Press on behalf of the World Bank, 2006-07-10) Stifel, David ; Alderman, Harold
This study of the Vaso de Leche ('glass of milk') feeding program in Peru looks for evidence that this in-kind transfer program aimed at young children furthers nutritional objectives. The study links public expenditure data with household survey data to substantiate the targeting and to model the determinants of nutritional outcomes. It confirms that the social transfer program targets poor households and households with low nutritional status. Nevertheless, the study fails to find econometric evidence that the nutritional objectives are being achieved.