Most recent papers:

• Trade Liberalization, Market Share Reallocation, and Aggregate Productivity: The Case of the Indonesian Manufacturing Industry.
  Kazunobu Hayakawa, Toshiyuki Matsuura.
  The Developing Economies. August 30, 2017
  We investigate how trade liberalization affects aggregate productivity growth, focusing on market reallocation as well as within‐firm productivity improvement. To this end, using Indonesian plant‐level data from 1993 to 2005, we estimate the plant‐level impact of trade liberalization focusing on productivity, output, and the probability to exit. Then, using the simple dynamic simulation method, we calculate the likely impact if tariff rates remain constant in the initial period. Comparing the actual and counterfactual scenarios, our results show that although within‐plant productivity improvement through tariff reduction has a sizable impact on aggregate productivity growth, the contribution of market share reallocation is less significant.

  August 30, 2017   doi: 10.1111/deve.12138   open full text
• Import Tariff Reductions and Adjustment of Plant's Product Portfolio in the Domestic and Export Market in Korea.
  Yong‐Seok Choi, Chin Hee Hahn.
  The Developing Economies. August 30, 2017
  Using a plant‐product‐matched dataset for Korean manufacturing, this paper examines the effect of import tariff reductions on plants' product portfolios in domestic and export markets. We find that the responses of innovators are quite different from those of non‐innovators, particularly in the domestic market. When import tariffs are reduced, innovators reduce their product scope but increase their average scale of production in the domestic market. By contrast, non‐innovators do not change their domestic product scope significantly, but they experience a decrease in the average scale of production, leading to a significant reduction in domestic shipments. We do not find significantly different responses between innovators and non‐innovators in the export market.

  August 30, 2017   doi: 10.1111/deve.12137   open full text
• Worker Training, Firm Productivity, and Trade Liberalization: Evidence from Chinese Firms.
  Qing Liu, Larry Qiu, Miaojie Yu.
  The Developing Economies. August 30, 2017
  This paper discusses a novel mechanism—worker training—in relation to the effect of output trade liberalization on firm productivity. Using disaggregated Chinese firm‐level production data from 2004 to 2006, we find strong evidence that output trade liberalization boosts firm productivity. More importantly, after controlling for the firm's self‐selection in regards to investment in worker training, our extensive empirical research suggests the following findings. First, with fiercer import competition, firms experience a decrease in profitability and hence are less likely to invest in worker training. Second, less productive firms are more likely to train their workers, as otherwise they would collapse and exit from the market. The lower the firm productivity, the more is invested in the firm's worker training. Finally, the effect of output trade liberalization on firm productivity is more pronounced for firms with more training investment. Such results are robust regardless of various empirical specifications and different measures.

  August 30, 2017   doi: 10.1111/deve.12136   open full text
• Does Trade Liberalization Boost Quality Upgrading? Evidence From Indonesian Plant‐Product‐Level Data.
  Kazunobu Hayakawa, Toshiyuki Matsuura, Sadayuki Takii.
  The Developing Economies. August 30, 2017
  In this paper, we examine the effects of tariff reduction on product quality upgrading by employing Indonesian plant‐product‐level panel data matched with plant‐level data. In particular, the effects of reduction in output tariffs and input tariffs are separately explored. We focus on the apparel industry. By estimating the Berry‐type demand function, we derive product quality indicators based on the Khandelwal methodology, which enables us to isolate changes in prices from quality upgrading. Our findings are as follows. First, a reduction in output tariffs does not affect product quality upgrading. Second, a reduction in input tariffs boosts quality upgrading in general. In particular, this impact is greater for import plants, as is consistent with our expectation that the source of the boost is the import of high‐quality foreign inputs.

  August 30, 2017   doi: 10.1111/deve.12135   open full text
• Introduction to the Special Issue (II).
  Chin Hee Hahn, Dionisius Narjoko, Shujiro Urata.
  The Developing Economies. August 30, 2017
  There is no abstract available for this paper.

  August 30, 2017   doi: 10.1111/deve.12134   open full text
• Trade Protection and Firm Productivity: Evidence from Thai Manufacturing.
  Juthathip Jongwanich, Archanun Kohpaiboon.
  The Developing Economies. May 24, 2017
  This paper examines the effect of trade protection on firm productivity, using the Thai manufacturing sector as a case study. While our main finding is in favor of a liberal trade policy environment, we argue input and output tariffs should be treated separately in examining their impact on productivity. Ceteris paribus, lowering input tariffs potentially has at least two opposite effects. It allows firms to benefit in several ways, enhancing their productivity, while also discouraging their efforts to improve productivity due to the increased level of effective protection. This necessitates caution when pursuing trade policy reform in not placing too much focus on input tariffs while leaving output tariffs untouched. Even though input and output tariffs work differently in promoting firms’ productivity, any trade policy reform process should take both input and output tariffs into consideration in ensuring that trade is actually liberalized.

  May 24, 2017   doi: 10.1111/deve.12128   open full text
• Industry FDI and the Distribution of Plant Productivity: Analysis Using Korean Plant‐Level Data.
  Bo‐Young Choi, Ju Hyun Pyun.
  The Developing Economies. May 24, 2017
  We examine the effects of inward FDI on the distribution of plant total factor productivity. Using Korean manufacturing plant‐level data covering 1990–2007, we find that industry FDI had heterogeneous effects on plant productivity and its distribution in terms of industry characteristics, such as industry concentration index and capital intensity. While sectoral FDI drove up productivity more for plants in industries with low concentration, it had negative effects on productivity especially for the least productive plants in industries with high concentration and high capital intensity. Our results also reveal that the positive effect of FDI was greater for exporters than for non‐exporters.

  May 24, 2017   doi: 10.1111/deve.12127   open full text
• Overseas Expansion and Domestic Business Restructuring in Japanese Firms.
  Keiko Ito, Kenta Ikeuchi.
  The Developing Economies. May 24, 2017
  In this paper, we examine domestic business restructuring by Japanese multinational enterprises by using establishment‐level panel data for the years 2001, 2006, 2009, and 2012. Focusing on the routine‐task intensity of establishments, we examine the impact of restructuring in terms of: (1) what type of establishments are closed or newly established; and (2) what type of establishments increase or reduce their employment when a firm becomes multinational. We measure the skill level of each establishment using occupation‐level routine‐task intensity and occupation composition for each industry. We find that more routine‐task intensive establishments have a greater likelihood of exiting the domestic market when the firm becomes multinational. In the case of continuing establishments, less routine‐task intensive establishments tend to have a higher employment growth rate when a firm becomes multinational. Our results imply that overseas expansion accelerates domestic business restructuring within multinational enterprises and shifts domestic activities toward less routine‐task intensive ones.

  May 24, 2017   doi: 10.1111/deve.12126   open full text
• Exchange Rate Uncertainty and R&D Investment: Evidence from Japanese Firms.
  Keiko Ito, Shoko Haneda.
  The Developing Economies. May 24, 2017
  The Japanese yen is one of the most volatile among developed country currencies. In this paper, we investigate how real effective exchange rate (REER) uncertainty affects firms’ research and development (R&D) investment, using firm‐level panel data for Japanese manufacturing firms for the period 1994–2011. Our results show that firms that are more exposed to REER uncertainty are less responsive to changes in demand conditions. Uncertainty makes firms more cautious when investing, since high uncertainty increases the chances of making a costly mistake. Our finding thus provides evidence of the caution effect of uncertainty. The caution effect also increases the persistence of R&D, implying that R&D investment does not increase much even if firms face favorable demand conditions. Reducing REER uncertainty is important to stimulate R&D investment, especially for firms that are more exposed to international competition and REER uncertainty.

  May 24, 2017   doi: 10.1111/deve.12125   open full text
• Introduction to the Special Issue.
  Chin Hee Hahn, Dionisius Narjoko, Shujiro Urata.
  The Developing Economies. May 24, 2017
  There is no abstract available for this paper.

  May 24, 2017   doi: 10.1111/deve.12131   open full text
• The Impact of Social Safety Net Programs on Household Savings in Colombia.
  Jorge Tovar, Miguel Urrutia.
  The Developing Economies. February 20, 2017
  This paper seeks to understand and quantify how social safety net programs impact household savings in developing countries, considering the case of Colombia using two complementary approaches. The first approach explores how the health regime affects savings in the country. The second evaluates the impact on savings of familias en acción, a major antipoverty conditional cash transfer program. The results suggest that the savings of informal households are higher than those of formal households, because, with little incentive to enter the formal job market, informal households need to cover slightly greater non‐covered risks. The results also show that familias en acción recipients save more than non‐recipients because recipients favorably adjust their expenditure patterns.

  February 20, 2017   doi: 10.1111/deve.12119   open full text
• The Role of Off‐Farm Labor Participation Decisions of Married Farm Couples on Farm Direct Marketing in Taiwan.
  Hung‐Hao Chang, Junlin He, Kannika Saeliw.
  The Developing Economies. February 20, 2017
  Direct marketing from farm producers to consumers has been seen as a viable business option to increase farm income. This study investigates the factors that determine a farm's direct marketing decisions; special attention is paid to understanding the correlation between farm couples' off‐farm labor participation and the farm's adoption of direct marketing strategies. A nationally representative dataset of 3,670 married family farm couples in Taiwan is used as an illustration. A multiple choice treatment effect model is estimated to cope with endogeneity bias. The results indicate a significant association between farm couples' off‐farm labor decisions and the farm's adoption of direct marketing strategies. Moreover, gender difference is evident: farm husband's (wife's) off‐farm work is positively (negatively) associated with the farm's direct marketing decision.

  February 20, 2017   doi: 10.1111/deve.12118   open full text
• Financial and Political Institutional Problems as Instigators of Banking Crises.
  Aytül Ganİoğlu.
  The Developing Economies. November 17, 2016
  The question of why some countries suffer from crises, while others escape them, is challenging. Empirical evidence in the literature suggests that countries with stronger financial institutions are more able to withstand crises. This study empirically investigates whether the probability of crisis depends on the political institutional structure. More specifically, we question whether the failure to democratize polity successfully creates an environment for financial institutional weaknesses, which have the potential to lead to banking crises. It is found that the effectiveness of the prudent supervision of the financial sector in lowering the probability of banking crises is more pronounced in more democratized countries and when the political framework is more institutionalized.

  November 17, 2016   doi: 10.1111/deve.12113   open full text
• Interest Rate Pass‐Through in Mongolia.
  Gan‐Ochir Doojav, Kaliappa Kalirajan.
  The Developing Economies. November 17, 2016
  This study empirically examines the interest rate pass‐through of the money market interest rate to bank lending and bank deposit interest rates in Mongolia using both linear and nonlinear autoregressive distributed lag (ARDL) models. The results from the empirical analysis using data from December 2002 to September 2015 suggest that interest rate pass‐through is generally weaker, slower, and asymmetric in Mongolia. The new findings provide evidence that: (i) interest rate pass‐through has improved over time; (ii) the bank deposit rate has a higher long‐run interest rate pass‐through and slower adjustment than the bank lending rate; and (iii) there is a negative long‐run asymmetric pass‐through with respect to the bank lending rate and a positive long‐run asymmetric pass‐through with respect to the bank deposit rate.

  November 17, 2016   doi: 10.1111/deve.12112   open full text
• Is There any Threshold in the Relationship Between Mother's Education and Child Health? Evidence from Nigeria.
  Meherun Ahmed, Kazi Iqbal.
  The Developing Economies. August 30, 2016
  The literature on mother's education and child health casually observes some nonlinearities and also a threshold in the relationship. Even though this nonlinearity or threshold has significant bearing on policy matters such as quality of education, any rigorous attempt to address this issue is missing in the literature. With height for age z‐score as a proxy for long‐run child health capital, regression results reveal that there are significant effects of mother's education on child health if mothers do not continue past primary school. Rather, poor quality of education at the primary level, especially literacy, is argued to have given rise to this threshold. It indicates that greater public investment in improving quality of education at the primary level is essential for maximizing the nonmarket outcomes of girls’ education in developing countries.

  August 30, 2016   doi: 10.1111/deve.12109   open full text
• Adult Mortality, AIDS, and Fertility in Rural Malawi.
  Dick Durevall, Annika Lindskog.
  The Developing Economies. August 30, 2016
  The future course of fertility is a major determinant of economic development in many sub‐Saharan countries, so understanding how HIV/AIDS affects childbearing is of great interest. We show that fertility responds negatively to female mortality and positively to male mortality and that the overall fertility response is small. The negative effect of female mortality is in line with earlier studies that only focus on women and their infection and mortality risks, while the finding of a positive effect of adult‐male mortality is novel. One interpretation of this finding is that women who perceive a high risk of their husbands' or grown‐up sons' deaths are likely to want to have more children to ensure future support.

  August 30, 2016   doi: 10.1111/deve.12111   open full text
• Can Market Potential Explain Regional Disparities in Developing Countries? Evidence from Turkey.
  Burhan Can Karahasan, Fatma Dogruel, Ali Suut Dogruel.
  The Developing Economies. May 22, 2016
  Regional disparity is one of the important characteristics of the Turkish economy. This study examines the impact of market potential on the regional differences in Turkey by investigating wages in the manufacturing industry for 1987 and 2000. Evidence suggests that market potential is an important determinant of inequality in Turkey. In addition, public–private decomposition reshapes the dispersion of wages supportive of rising heterogeneity in the private manufacturing industry. This increases the explanatory power of market potential, which is observed to be high in western Turkey and diminishes toward eastern Turkey. Our findings highlight that during the postliberalization era of the 1980s, Turkey's regional inequality concern transformed into a structural problem which can be explained by provincial market potential. Moreover, our results underline that the modern geography framework, which has been tested for developed economies, is able to elucidate the regional differences in a developing country suffering from persistent imbalances.

  May 22, 2016   doi: 10.1111/deve.12105   open full text
• Credit Conditions in Pakistan: Supply Constraints or Demand Deficiencies?
  Jameel Ahmed.
  The Developing Economies. May 22, 2016
  This paper attempts to pin down the key drivers of demand for and supply of real private sector credit in Pakistan. I use both the equilibrium and disequilibrium econometric frameworks, specifically tackling the issue of lack of consistency and/or efficiency of joint estimators in the former via the three‐stage least squares technique. On the demand side, I find that higher economic activity provides stimulus to credit whereas inflation dampens it. The stock market seems to play a dual role: as a source of alternative financing, a bullish market negatively impacts credit while, as an indicator of economic expectations, it provides a positive impetus. On the supply side, banks' lending capacity is found to be the major driver of credit while government borrowing has a crowding‐out effect. Pakistan currently faces supply constraints, which might put an additional check on capacity utilization by firms, thus damaging growth prospects. The results have important policy implications.

  May 22, 2016   doi: 10.1111/deve.12106   open full text
• A Comparison between Formal and Informal Mutual‐credit Arrangements.
  Francesco Reito, Salvatore Spagano.
  The Developing Economies. May 26, 2014
  We analyze under what conditions a group of potential entrepreneurs prefer to form a Rotating Savings and Credit Association (ROSCA), or a mutual‐guarantee association, which we interpret in a rotating scheme and call Rotating Savings and Collateral Association (ROSCoA). We argue that: (1) ROSCAs (ROSCoAs) are likely to be more developed in countries with high (low) bank concentration; (2) the individual flow of savings required to participate in a ROSCoA is generally lower than that needed in a ROSCA; (3) under the assumption that members share their project income at the end of each period, ROSCAs and ROsCoAs are sustainable even without the use of sanctioning mechanisms.

  May 26, 2014   doi: 10.1111/deve.12043   open full text
• Informal Credit, Usury, or Support? A Case Study for Vietnam.
  Cuong Viet Nguyen, Marrit Berg.
  The Developing Economies. May 26, 2014
  The informal credit market remains an important source of finance for the poor in Vietnam. Yet, little if anything is known about the impact of informal loans on poverty and inequality, and the Vietnamese government has no policies towards the informal credit market. In the present study paper, we found that the effect of credit from friends and relatives on per capita expenditure is positive but not statistically significant. Meanwhile, the effect of credit from private moneylenders on per capita expenditure is positive and statistically significant. Borrowing from private moneylenders increases per capita expenditure of households by around 15%. Further, it reduced the poverty incidence of borrowers by around 8.5 percentage points in 2006 and significantly decreases the poverty gap index and the poverty‐severity index. Borrowing from private moneylenders also reduces expenditure inequality, albeit at a very small magnitude.

  May 26, 2014   doi: 10.1111/deve.12042   open full text
• Social Globalization and Child Labor: A Cross‐country Analysis.
  Heather Congdon Fors.
  The Developing Economies. May 26, 2014
  While much of the research on child labor focuses on household level factors, macroeconomic factors, such as globalization, have gained increasing attention. This paper contributes to the literature on the role of globalization in child labor by examining a specific aspect of globalization, namely social globalization. The results of the empirical analysis indicate that social globalization does have a significant negative impact on the average incidence of child labor in the cross‐country sample of developing countries. This contrasts with the existing literature on economic globalization and child labor, where, in many cases, no significant effect is found.

  May 26, 2014   doi: 10.1111/deve.12041   open full text
• Competition in Turkish Banking: Impacts of Restructuring and the Global Financial Crisis.
  Canan Yildirim.
  The Developing Economies. May 26, 2014
  This paper investigates the evolution of competition in the Turkish banking industry by taking into account the transformation in the sector in the aftermath of the country's financial crisis of 2000 to 2001 and the global financial crisis. The results demonstrate that the level of competition in the system did not increase despite the restructuring that was undertaken and the increased foreign bank participation. In addition, the level of competition in the sector deteriorated during the global crisis. There is also some evidence that the market power of banks with different ownership characteristics varied and did not converge over time.

  May 26, 2014   doi: 10.1111/deve.12040   open full text
• Political Economy of Service Delivery: Monitoring Versus Contestation.
  Kjell Hausken, Mthuli Ncube.
  The Developing Economies. February 13, 2014
  Many communities suffer limited public goods provision due to civil servants (doctors, teachers, etc.) supplementing their low income with moonlighting activities. Monitors of civil servants commonly also earn low salaries from monitoring and may prefer political contestation for power and prestige. We determine an internal equilibrium for how monitors strike a balance between monitoring and political contestation, and a corner solution where an unresourceful monitor does not monitor. Multiple characteristics, including the intensity of political contestation, are accounted for. Survey data from Tanzania and Senegal are used to show the significance of poor service delivery within education and healthcare services.

  February 13, 2014   doi: 10.1111/deve.12035   open full text
• A Note on the Labor Market Effects of Remittances in Latin American and Caribbean Countries: Do Thresholds Exist?
  Mahalia Jackman.
  The Developing Economies. February 13, 2014
  The labor market effects of remittances have long been examined in the empirical literature. To date, the results have been mixed: some authors observe a negative association between remittances and unemployment while others report that remittances increase unemployment. This study empirically examines the impact of remittances on unemployment using macroeconomic data for a sample of 18 Latin American and Caribbean countries. Specifically, the study tests whether there is a nonlinear relationship between the variables. Results suggest that when the remittance‐to‐GDP ratio is low, remittances have a positive and significant impact on unemployment. However, as they increase, remittances are negatively associated with unemployment. This suggests the possibility that estimations based on the assumption of a linear relationship between remittances and labor may mask the true relationship between the variables.

  February 13, 2014   doi: 10.1111/deve.12034   open full text
• Changing Sources of Household Income, Poverty, and Sectoral Inequality in Sri Lanka, 1990–2006.
  Nandika S. Kumanayake, Jonna P. Estudillo, Keijiro Otsuka.
  The Developing Economies. February 13, 2014
  Comparing dynamic changes in household income and poverty among urban, rural, and estate sectors in Sri Lanka from 1990 to 2006, this study finds that a shift of household income away from farm to nonfarm sources is accompanied by a significant improvement in household income and reduction in poverty, particularly in the rural sector. Major contributing factors are the rise in returns to labor, in general, and educated labor, in particular, due to the development of the nonfarm labor market. Persistently low income among estate households can be explained primarily by the limited availability of nonfarm employment opportunities and the low education levels of working members.

  February 13, 2014   doi: 10.1111/deve.12033   open full text
• Relevance of Own R&D and Sources of Knowledge Transfer for Industrial Innovation in China.
  Wan‐Hsin Liu.
  The Developing Economies. February 13, 2014
  This study investigates industrial innovation and innovation patterns in China with a comparison to the Asian Newly Industrialized Economies (NIEs). It estimates knowledge production functions based on an original firm‐level dataset. Estimation results suggest that even though firms in China carry out various innovation activities at the same time, the innovation pattern found among their counterparts in the Asian NIEs is still relevant for contemporary China. In particular, sourcing knowledge and technologies from their OEM customers still plays a crucial role for Chinese firms' process innovation. In contrast, firms cannot rely on this knowledge source for realizing more sophisticated, knowledge‐intensive innovation outcomes, such as product innovation and patenting, for which their own R&D engagement is more significant.

  February 13, 2014   doi: 10.1111/deve.12032   open full text
• Beliefs, Economic Volatility, and Redistributive Preferences Across Developing Countries.
  Anil Duman.
  The Developing Economies. May 26, 2013
  Beliefs about social competition affect redistributive demands and the responsibility assigned to government regarding public provisions. Given the strong link between beliefs and the extent of support for social protection, it is important to explain the cross‐country differences. The paper analyzes the factors that are crucial in explaining redistributive demands across developing countries with a special emphasis on beliefs about social competition. While ideas about luck versus effort in determining economic prospects are explanatory in every country, our findings also suggest that in societies with high economic volatility the role of beliefs is amplified. Vast fluctuations in economic performance fuel the opinion that economic failure is a result of systemic characteristics, and individuals are not necessarily held fully responsible for their material faiths in such settings. Therefore, government is assigned a greater role in basic provisioning.

  May 26, 2013   doi: 10.1111/deve.12011   open full text
• Technological Change, Job Risk, and Wage Premium: Evidence from Taiwan.
  Jin‐Long Liu, Chia‐Hui Huang, Chih‐Hai Yang.
  The Developing Economies. May 26, 2013
  The paper reports the results of analyzing the effects of technological change and job risk on wage premiums in Taiwan. Using unique individual data combined with industry‐level indices of technological change and fatality rates across industries, the empirical results show that, overall, industries characterized by a higher rate of technological change or fatality pay a higher wage. However, these positive correlations are attributed to the sorting effect in which workers with some specific features choose to find jobs in industries with rapid technological change and higher job risk. Furthermore, this paper reports a positive relationship between education and wages after controlling for individual heterogeneity, showing the existence of education premium in Taiwan.

  May 26, 2013   doi: 10.1111/deve.12010   open full text
• Trade Opening, Fiscal Reforms, Poverty, and Inequality: A CGE Analysis for Bangladesh.
  Bodrun Nahar, Mahinda Siriwardana.
  The Developing Economies. May 26, 2013
  We assess the short‐ and long‐run impacts of tariff reform policies on Bangladeshi households' poverty and income distribution by developing an 86‐sector, four‐factor, and nine‐household‐group computable general equilibrium (CGE) model. The main findings are that the complete removal of tariffs leads to a decrease in overall poverty with rich household groups in a relatively better position. In the short run poverty incidence increases for rural landless, urban illiterate, and low‐educated household groups whereas rural large farmer and urban medium household groups enjoy improvements in all poverty indicators. In terms of income distribution, trade liberalization enhances inequality slightly, but there is a tendency towards more equitable distribution in the long run. The choice of a fiscal compensatory mechanism with consumption tax is likely to play a negative role in terms of poverty and inequality in the short run; however, interestingly, the results are pro‐poor in the long run.

  May 26, 2013   doi: 10.1111/deve.12009   open full text
• Does Aid Unpredictability Weaken Governance? Evidence from Developing Countries.
  Thierry Kangoye.
  The Developing Economies. May 26, 2013
  This paper examines the effects of aid on governance from a different perspective by asserting that aid unpredictability can potentially increase corruption in recipient countries by providing incentives to risk‐averse and corrupt political leaders to engage in rent‐seeking activities. Analyses of data from 80 developing countries over the period 1984–2004 offer evidence that higher aid unpredictability is associated with more corruption as measured by a synthetic index. We also find further evidence that this latter impact is more severe in countries with weak initial institutional conditions. These findings are a supplementary advocacy for the need for better management and better predictability of aid flow in developing countries.

  May 26, 2013   doi: 10.1111/deve.12008   open full text