Journal Issue: World Bank Economic Review, Volume 30, Issue 1
No Thumbnail Available
Volume
30
Number
1
Issue Date
Journal Title
Journal ISSN
1564-698X
Journal
World Bank Economic Review
1564-698X
Journal Volume
Other issues in this volume
Journal Issue Journal Issue
Articles
A Helping Hand or the Long Arm of the Law?
(Published by Oxford University Press on behalf of the World Bank, 2016-01) de Adrade, Gustavo Henrique; McKenzie, David; Bruhn, Miriam
We conducted a field experiment in Belo Horizonte, Brazil to test which government
actions work to encourage informal firms to register. We find zero or negative impacts
of information and free cost treatments and a significant but small increase in formalization from inspections. The local average treatment effect estimates of the inspection impact are larger, providing a 21 to 27 percentage point increase in the likelihood of formalizing. The results show that most informal firms will not formalize unless forced to do so, suggesting that formality offers little private benefit to these firms.
The Decision to Invest in Child Quality over Quantity
(Published by Oxford University Press on behalf of the World Bank, 2016-01) Dang, Hai-Anh H.
During Vietnam’s two decades of rapid economic growth, its fertility rate has fallen
sharply at the same time that its educational attainment has risen rapidly—macro trends
that are consistent with the hypothesis of a quantity-quality tradeoff in child-rearing. We
investigate whether the micro-level evidence supports the hypothesis that Vietnamese
parents are in fact making a tradeoff between quantity and “quality” of children. We
present private tutoring—a widespread education phenomenon in Vietnam—as a new
measure of household investment in children’s quality, combining it with traditional measures
of household education investments. To assess the quantity-quality tradeoff, we
instrument for family size using the commune distance to the nearest family planning
center. Our IV estimation results based on data from the Vietnam Household Living
Standards Surveys (VHLSSs) and other sources show that rural families do indeed invest
less in the education of school-age children who have larger numbers of siblings. This
effect holds for several different indicators of educational investment and is robust to different
definitions of family size, identification strategies, and model specifications that
control for community characteristics as well as the distance to the city center. Finally, our
estimation results suggest that private tutoring may be a better measure of quality-oriented
household investments in education than traditional measures like enrollment, which are
arguably less nuanced and less household-driven.
Learning Dynamics and Support for Economic Reforms
(Published by Oxford University Press on behalf of the World Bank, 2016-01) van Wijnbergen, Sweder J.G.; Willems, Tim
Support for economic reforms has often shown puzzling dynamics: many reforms that
began successfully lost public support. We show that learning dynamics can rationalize
this paradox because the process of revealing reform outcomes is an example of sampling without replacement. We show that this concept challenges the conventional
wisdom that one should begin by revealing reform winners. It may also lead to situations
in which reforms that enjoy both ex ante and ex post majority support will still not
come to completion. We use our framework to explain why gradual reforms worked
well in China (where successes in Special Economic Zones facilitated further reform),
whereas this was much less the case for Latin American and Central and Eastern
European countries.
Economic Shocks and Subjective Well-Being
(Published by Oxford University Press on behalf of the World Bank, 2016-01) Hariri, Jacob Gerner; Bjørnskov, Christian; Justesen, Mogens K.
This article examines how economic shocks affect individual well-being in developing
countries. Using the case of a sudden and unanticipated currency devaluation in
Botswana as a quasi-experiment, we examine how this monetary shock affects individuals’ evaluations of well-being. We do so by using microlevel survey data, which—
incidentally—were collected in the days surrounding the devaluation. The chance
occurrence of the devaluation during the time of the survey enables us to use pretreatment respondents, surveyed before the devaluation, as approximate counterfactuals for post-treatment respondents, surveyed after the devaluation. Our estimates show that the devaluation had a large and significantly negative effect on individuals’ evaluations of subjective well-being. These results suggest that macroeconomic shocks, such as unanticipated currency devaluations, may have significant short-term costs in the form of reductions in people’s sense of well-being.
Does Access to Foreign Markets Shape Internal Migration?
(Published by Oxford University Press on behalf of the World Bank, 2016-01) Hering, Laura; Paillacar, Rodrigo
This paper investigates how internal migration is affected by Brazil’s increased integration
into the world economy.We analyze the impact of regional differences in access to foreign
demand on sector-specific bilateral migration rates between the Brazilian states for the
years 1995 to 2003. Using international trade data, we compute a foreign market access
measure at the sectoral level, which is exogenous to domestic migration. A higher foreign
market access is associated with a higher local labor demand and attracts workers via two
potential channels: higher wages and new job opportunities. Our results show that both
channels play a significant role in internal migration. Further, we find a heterogeneous
impact across industries, according to their comparative advantage on the world market.
However, the observed impact is driven by the strong reaction of low-educated workers to
changes in market access. This finding is consistent with the fact that Brazil is exporting
mainly goods that are intensive in unskilled labor.
The Impact of Vocational Schooling on Human Capital Development in Developing Countries
(Published by Oxford University Press on behalf of the World Bank, 2016-01) Loyalka, Proshant; Huang, Xiaoting; Zhang, Linxiu; Wei, Jianguo; Yi, Hongmei; Song, Yingquan; Shi, Yaojiang; Chu, James
A number of developing countries are currently promoting vocational education and
training (VET) as a way to build human capital and strengthen economic growth. The
primary aim of this study is to understand whether VET at the high school level contributes
to human capital development in one of those countries—China. To fulfill this aim,
we draw on longitudinal data on more than 10,000 students in vocational high school
(in the most popular major, computing) and academic high school from two provinces
of China. First, estimates from instrumental variables and matching analyses show that
attending vocational high school (relative to academic high school) substantially
reduces math skills and does not improve computing skills. Second, heterogeneous
effect estimates also show that attending vocational high school increases dropout, especially
among disadvantaged (low-income or low-ability) students. Third, we use vertically
scaled (equated) baseline and follow-up test scores to measure gains in math and
computing skills among the students. We find that students who attend vocational high
school experience absolute reductions in math skills. Taken together, our findings
suggest that the rapid expansion of vocational schooling as a substitute for academic
schooling can have detrimental consequences for building human capital in developing
countries such as China.
Financial Inclusion, Productivity Shocks, and Consumption Volatility in Emerging Economies
(Published by Oxford University Press on behalf of the World Bank, 2016-01) Bhattacharya, Rudrani; Patnaik, Ila
How does access to finance impact consumption volatility? Theory and evidence from
advanced economies suggests that greater household access to finance smooths consumption. Evidence from emerging markets, where consumption is usually more volatile than income, indicates that financial reform further increases the volatility of consumption relative to output. This puzzle is addressed in the framework of an emerging
economy model in which households face shocks to trend growth rate, and a fraction of
them are financially constrained, with no access to financial services. Unconstrained
households can respond to shocks to trend growth by raising current consumption more
than the rise in current income. Financial reform increases the share of such households,
leading to greater relative consumption volatility. Calibration of the model for pre- and
post–financial reform in India provides support for the model’s key predictions.