Journal Issue: World Bank Economic Review, Volume 26, Issue 3

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Is There a Metropolitan Bias? The Relationship between Poverty and City Size in a Selection of Developing Countries
(Oxford University Press on behalf of the World Bank, 2012-11) Ferre, Celine ; Ferreira, Francisco H.G. ; Lanjouw, Peter
This paper provides evidence from eight developing countries of an inverse relationship between poverty and city size. Poverty is both more widespread and deeper in very small and small towns than in large or very large cities. This basic pattern is generally robust to the choice of poverty line. The paper shows, further, that for all eight countries, a majority of the urban poor live in medium, small or very small towns. Moreover, it is shown that the greater incidence and severity of consumption poverty in smaller towns is generally compounded by similarly greater deprivation in terms of access to basic infrastructure services, such as electricity, heating gas, sewerage and solid waste disposal. We illustrate for one country – Morocco – that inequality within large cities is not driven by a severe dichotomy between slum dwellers and others. Robustness checks are performed to assess whether the findings in the paper hinge on a specific definition of “urban area”; are driven by differences in the cost of living across city-size categories; by reliance on an income-based concept of well-being; or by the application of small-area estimation techniques for estimating poverty rates at the town and city level.
Crises, Food Prices, and the Income Elasticity of Micronutrients : Estimates from Indonesia
(Oxford University Press on behalf of the World Bank, 2012-11) Skoufias, Emmanuel ; Tiwari, Sailesh ; Zaman, Hassan
The 2008 global food price crisis and more recent food price spikes have led to a greater focus on policies and programs to cushion the effects of such shocks on poverty and malnutrition. Analysis of the income elasticities of micronutrients and their changes during food price crises can shed light on the potential effectiveness of cash transfer and nutrition supplement programs. This article examines these issues using data from two cross-sectional household surveys in Indonesia, taken before (1996) and soon after (1999) the 1997–98 economic crisis, which led to a sharp increase in food prices. First, using nonparametric and regression methods, the article examines how the income elasticity of calories from starchy staples as a share of total calories differs between the two survey rounds. Second, the article estimates income elasticities of important nutrients in Indonesia. The analysis finds that, although summary measures such as the income elasticity of the starchy staple ratio might not change during crises, this stability masks important differences across individual nutrients. In particular, income elasticities of some key micronutrients, such as iron, calcium, and vitamin B1, are significantly higher in a crisis year than in a normal year, yet the income elasticities of others—such as vitamin C—remain close to zero. These results suggest that cash transfer programs might be even more effective during crises to ensure the consumption of essential micronutrients. But to ensure that all key micronutrients are consumed, nutrition supplement programs are also likely required.
Impact of SMS-Based Agricultural Information on Indian Farmers
(Oxford University Press on behalf of the World Bank, 2012-11) Fafchamps, Marcel ; Minten, Bart
This study estimates the benefits that Indian farmers derive from market and weather information delivered to their mobile phones by a commercial service called Reuters Market Light (RML). We conduct a controlled randomized experiment in 100 villages of Maharashtra. Treated farmers associate RML information with a number of decisions they have made, and we find some evidence that treatment affected spatial arbitrage and crop grading. But the magnitude of these effects is small. We find no statistically significant average effect of treatment on the price received by farmers, crop value-added, crop losses resulting from rainstorms, or the likelihood of changing crop varieties and cultivation practices. Although disappointing, these results are in line with the market take-up rate of the RML service in the study districts, which shows small numbers of clients in aggregate and a relative stagnation in take-up over the study period.
Economic Geography and Economic Development in Sub-Saharan Africa
(Oxford University Press on behalf of the World Bank, 2012-11) Bosker, Maarten ; Garretsen, Harry
Sub-Saharan Africa's (SSA) physical geography is often blamed for its poor economic performance. A country's geographical location does, however, not only determine its agricultural conditions or disease environment. It also pins down a country's relative position vis-à-vis other countries, affecting its ease of access to foreign markets. This paper assesses the importance of market access for manufactures in explaining the observed income differences between SSA countries over the period 1993–2009. We construct yearly, theory-based measures of each SSA country's market access using the information contained in bilateral manufacturing trade flows. Using these measures, we find a robust positive effect of market access on economic development that has increased in importance during the last decade. Interestingly, when further unraveling this finding, access to other SSA markets in particular turns out to be important.
The Decision to Import Capital Goods in India : Firms’ Financial Factors Matter
(Oxford University Press on behalf of the World Bank, 2012-11) Bas, Maria ; Berthou, Antoine
Are financial constraints preventing firms from importing capital goods? Sourcing capital goods from foreign countries is costly and requires internal or external financial resources. A simple model of foreign technology adoption shows that credit constraints act as a barrier to importing capital goods under imperfect financial markets. In our study, we investigate this prediction using detailed balance-sheet data from Indian manufacturing firms having reported information on financial statements and imports by type of good over the period 1997–2006. Our empirical findings shed new light on the micro determinants of firms' choices to import capital goods. Baseline estimation results show that firms with a lower leverage and higher liquidity are more likely to source their capital goods from foreign countries. Quantitatively, a 10 percentage point improvement of the leverage or liquidity ratio increases the probability of importing capital goods by 11 percent to 13 percent respectively. Different robustness tests demonstrate that these results are not driven by omitted variable bias related to changes in firm observable characteristics as well as ownership status. These findings are also robust to alternative specifications dealing with the potential reverse causality issues.
Coffee Market Liberalisation and the Implications for Producers in Brazil, Guatemala and India
(Oxford University Press on behalf of the World Bank, 2012-11) Russell, Bill ; Mohan, Sushil ; Banerjee, Anindya
The standard approach to modelling the relationship between world and producer prices of coffee does not incorporate the effects of changing government policies and market structures. These changes have led to large structural breaks in the relationship between the prices implying the standard estimates are biased. We model coffee prices in Brazil, Guatemala and India allowing for the structural breaks and show that the liberalisation of coffee markets has benefited producers substantially both in terms of a higher share of the world price of coffee and higher real prices. This suggests that calls to re-regulate coffee markets may be misplaced.
Implications of COMTRADE Compilation Practices for Trade Barrier Analyses and Negotiations
(Oxford University Press on behalf of the World Bank, 2012-11) Yeats, Alexander J.
U.N. Commodity Trade (COMTRADE) statistics have major shortcomings for many analyses relating to tariffs and other trade barriers. The use of a cost-insurance-freight valuation base for these data results in an upward (sometimes severe) bias in the implied dutiable value of imports for countries that utilize free-on-board tariffs. This problem can be greatly exacerbated by the “general” trade system procedure used to compile the U.N. statistics, as opposed to the “special” trade practice used for the World Trade Organization Integrated Database. U.S. International Trade Commission statistics show that the combined effects of these biases can reach magnitudes that preclude the legitimate use of COMTRADE for many tariff-trade simulations or related trade negotiations.