Economics of Development
Model for calculating informal credit market
(1 − d)(1 + i) − (1 + ρ) = 0 1 + i = (1+p)/(1-d)
4 distinguishing features of climate change
1. Climate change arises due to the actions of all countries of the world and it impacts on everyone in a heterogeneous way. 2. As climate change happens through the increased stock of greenhouse gases, the negative consequences materialise over very long periods. 3. The consequences of climate change are uncertain as events happen over long periods and are felt across the world. 4. The impacts of climate change are potentially very large and often irreversible, increasing the stakes in getting the policies right.
Strömberg (2007) - 3 stylish facts for international disaster relief
1. Donors tend to provide greater relief for high profile emergencies that receive good news coverage at the expense of more invisible ones. 2. Donors tend to favour historically important allies. 3. Disasters in countries with high importance in the foreign policy of the donor or those with robust economic ties tend to receive higher amounts of aid.
Four axioms that any measure of inequality should satisfy.
1. The identity of individuals should not impact on inequality comparisons. 2. A proportionate increase in population size should not affect income inequality 3. Only relative incomes matter for inequality comparisons 4. A distribution derived from another only by taking away income from the poor and giving it to the rich is more unequal
2 Assumptions of the Instrumental variable approach
1. the instrument must be (strongly) related to the endogenous variable. 2. the instrument must not be related to the outcome variable other than through the endogenous variable
Banerjee et al. (2010) - rural Rajasthan, India
30 villages were assigned treatment B and received both the reliable camp and 1kg of lentils for each immunisation visit and a set of plates for completing the immunisation process. The results show 39 per cent of children aged 1-3 received full immunisation in treatment B villages but only 18 per cent did so in treatment A.
Cole et al. (2013) - Rainfall insurance to farmers in Andhra Pradesh and Gujarat, India
A 10 per cent increase in premiums led to a more than 10 per cent reduction in take up. Endorsement by a trusted agent increases take up.
How could a temporary subsidy for adoption of HYV change the equilibrium of the economy?
A temporary subsidy on HYV will shift the cost of adoption for these crops down. If the subsidy is enough (e.g. shift the curve so point C reflects a lower cost than point A) HYV users increase and as the number of HYV users increase the cost of adoption falls further. Once there are a significant number of HYV users the subsidy is not needed any more, because the cost of adoption is now lower than the traditional crops at the existing number of users. So the government can remove the subsidy. See Figure below.
Davis and Weinstein (2002) - Multiple Steady States
Allied bombing of Japanese cities during the Second World War did not have a significant impact on long-run population trends. Therefore, they find evidence in support of unique steady states for city size rather than multiple steady
Redding et al. (2007) - multiple equilibria
Before division, Berlin airport was the primary hub, but after division, Frankfurt adopted this role. The reunification of the Germany did not reverse this change.
Bernard et al. (2007) - Export
Bernard et al. (2007) show in US Census for Manufacturers that the percentage of firms exporting varies from 2 to 38 across sectors and, on average, 18 per cent of firms export. In their sample, exporters are 11 per cent more productive than non-exporters within manufacturing sectors.
Burgess et al. (2012) - illegal logging
Burgess et al. (2012) propose a theory that firms search to find the most profitable place for logging. Therefore district officials face a downward sloping demand curve for permits. The results suggest that adding a district to a province on average increases the deforestation rate by 8.2 per cent and reduces local wood prices by 3.4 per cent.
What are the characteristics of the loans offered by Spandana? What are the criteria to be eligible for a loan from Spandana?
Characteristics of the loans: group (6-10 women) loans, and members are jointly responsible for repayment. A loan of 10,000 Rupees, repaid over the course of 50 weeks with 24 per cent annual compounded interest rate. Successful repayment by the group secures a second loan of 10,000-12,000 Rupees. Eligibility criteria: female, aged 18-59, lived in the same area at least for one year, have valid identification and proof of address, and 80 per cent of group members should own their homes. It did not require borrowers to start a business, and clients were free to do what they wanted with the money.
Chaudhury et al. (2006) - healthcare provider
Chaudhury et al. (2006) found that 40 per cent of primary health care providers were absent when they made an unannounced visit in Indonesia and India. The absence rate is 35 per cent in Bangladesh and 37 per cent in Uganda.
Piketty and Qian (2009) - Income tax exemption
China - The exemption threshold was, however, fairly fixed in nominal terms, which resulted in an increase in the percentage of the population paying taxes over time. India - Income tax exemptions were annually adjusted in line with nominal income growth. Over a similar period the fraction of the population paying income tax in India was about 2-3 per cent and consequently income tax revenue stayed at about 0.5 per cent of GDP.
Chris Udry - Burkina Faso
Chris Udry (in Banerjee and Duflo, 2011, p.124) has tested this in Burkina Faso where each household member works a separate plot. Empirical findings reject the efficient household model. Plots cultivated by women were allocated less male labour, less child labour and less fertiliser. He argues that, especially in the case of fertilisers, using a little bit more on all plots would have increased output considerably more than using a lot on one (male) plot. By reallocating some fertiliser and a little bit of male labour to plots cultivated by women, the household could have increased output by 6 per cent without increasing expenditure.
Cohen and Dupas (2010) - In Kenya
Cohen and Dupas randomised the offer price of ITNs in 20 prenatal clinics in Kenya. Four clinics served as control, five clinics distributed ITNs free of charge, five charged a price of 10 Kenyan Shillings (Ksh), three charged a price of 20 Ksh and three charged a price of 40 Ksh. The results of the Cohen and Dupas study show that take-up of ITNs falls by 60 percentage points when the price is increased from zero to 40 Ksh. The usage, however, did not show a significant change for groups paying higher prices.
Besley and Persson (2013) - Correlation between the share of income tax in revenue and GDP per capita
Countries with similar top statutory income tax rates have strikingly different income tax revenue as a share of GDP.
De Mel et al. (2013) - Difference in formality and profit
De Mel et al. (2013) followed up businesses over a period of 15-31 months after treatment to see whether formality improves business outcomes. The increase in business profits is only marginally significant for registered firms and survival rates are not different during follow ups. This is despite the fact that a significant number of registered businesses reported having receipt books and advertising in the last six months. Interestingly there was no significant difference in terms of taxes paid by registered and unregistered businesses.
Duflo et al. (2013) - Environmental auditing firms
Duflo et al. (2013) report high corruption in the existing audit arrangements with polluting firms reporting measurements just below maximum standards. Back checks in the control plants revealed 29 per cent of reports were false. The treatment significantly reduced false reports by 23 percentage points
Easterly et al. (2004) - Critic against Burnside and Dollar
Easterly et al. (2004) questioned the robustness of these results and showed that once they included additional observations, even a similar methodology to that used by Burnside and Dollar (2000) yields no significant results. In other words, if the Burnside and dollar data is extended in time, and by countries included, this result does not stand any more.
How reliable are PPP comparisons?
Even with PPP conversions, GDP differences across developed and developing countries could overstate the real gap in living standards. There are two reasons for this. First, home production may account for a larger part of production (and consumption) in developing countries.The second reason why PPP-converted GDP ratios might overstate the real gap is the presence of the informal economy or black market. The share of businesses that are not registered with the government to avoid paying taxes and other duties is much larger in developing countries
Banerjee and Duflo (2010) - 5 stylised facts about informal credit markets in developing countries:
Fact 1: Lending rates as high as 50 per cent per annum are common. This is despite the fact that deposit rates are not very high. In Pakistan the average interest rate was 79 per cent while the marginal cost of funds (for lenders) was estimated to be 48 per cent (Aleem, 1990). Fact 2: Interest rates vary greatly within the same credit market (e.g. Aleem (1990) shows that in Pakistan the standard deviation of interest rates was 38 per cent). Fact 3: The rich are charged lower interest and receive larger loans. Fact 4: Default rates are low and cannot explain the large variations in the interest rates. For example, in Pakistan the default rates are usually close to 1-2 per cent and rarely reach 10 per cent (Aleem, 1990). Fact 5: It does not seem that lenders have high monopoly power. For example, Aleem (1990) does not find high profits for moneylenders in his sample.
Two features of the Big Push Model.
First, the size of the market matters greatly for the industrialisation decision. The second feature of the model, which leads to a multiplicity of equilibria, is the presence of market failures in the labour and capital markets.
Galiani et al. (2005) - privatized water service
Galiani et al. (2005) show that privatised companies expanded the number of connections radically. Furthermore a case study of the privatised water company in Buenos Aires shows large improvements in efficiency of the privatised companies in terms of increased water and sewage production, reduction in spillage and non-stop services during the summer. The results show that infant mortality fell by 8 per cent in privatised municipalities.
Gordon and Li (2009) - Difference in statutory tax
Gordon and Li (2009) further show the top statutory corporate and VAT rates are also rather similar across developing and developed countries. Therefore it does not seem the difference in tax collection (effective tax rates) stems from different statutory tax rates.
Easterly (2007) - On Inequality
He uses suitability of land for sugar relative to wheat as an instrument for inequality. Results showed significant negative OLS coefficient for the effect of inequality on income. Therefore, it seems the evidence here supports a negative impact of inequality on growth.
Explain why the presence of IRS in an industry is not compatible with competitive markets.
IRS is not consistent with price-taking behaviour, because profit-maximising firms equate marginal cost to marginal revenue. In competitive markets firms are price takers (i.e. they are assumed to be small and therefore take the market price as given and sell as much as they can at that price). Therefore, for these, marginal revenue is equal to the price. But IRS implies the marginal cost of production is declining. Therefore the more one firm sells the lower the marginal cost will be. At any market price the firm could expand production and enjoy a marginal cost lower than the price, (i.e. make an operating profit). Furthermore, the profit increases if the firm further expands production (because marginal cost falls further). This suggests the firm would expand until a point where it is not a price taking firm any more.
Goyal (2010) - ITC Limited
ITC introduced internet kiosks in some villages to provide daily data on the price of soy beans offered by agricultural markets and ITC. It further created hubs where farmers could test the quality of the produce and sell it. The policy was gradually implemented in Madhya Pradesh, India, from 2000 to 2004. Since the policy improves farmers' information about prices and increases their trading options (testing and warehousing) intermediaries need to offer a better price to attract farmers. Goyal finds that as soon as an internet kiosk is established in a district the monthly price of soy beans (received by farmers) increases by 1-3 per cent. Furthermore, price dispersion across markets decreased after the intervention.
What are the identification assumptions for the use of land gradient as an instrument for connection to electricity in Dinkelman (2011)
In order for land gradient to be a valid instrument for electricity in a regression of labour supply on having electricity, two assumptions are required. First, land gradient should affect likelihood of being connected to the grid (relevance). This condition is clearly satisfied as seen in first stage estimates in the paper. Second, land gradient should not have any effect on labour supply other than through electricity. This is more tenuous as hilly areas might have different types of crops resulting in different type of labour markets.
Kleven et al. (2009) - tax reporting
In small firms, collusion between employers and employees for tax evasion is feasible and keeping transactions off the books is less costly. Bigger firms with higher turnover and more employees, however, need to keep accurate accounts and collusion is harder to sustain. The process of development and economic growth could lead to the emergence of larger firms and a shift from self employment to salary employment in big firms, leading to a better enforcement environment for tax collection.
With respect to 'gender balance' discuss the central objectives and the main findings of the study.
In the table, tea x post and Orchard x post are the interaction effects between tea regions and post reform, and fruit regions and post reform. Qian argued that women are better at the production of tea, which needs nimble fingers, and men in the production of orchard fruit, which requires heavy lifting. In the early period of agricultural reform in China (1978-80) households were allowed to choose what they wished to produce. Qian uses exogenous increases in the price of tea and fruit, and hence wages in tea production and fruit production, to look at gender ratios. Gender ratio tends to favour girls in tea-producing areas. See the coefficient of gender x post and against them in fruit-producing parts, and the increase in the male fraction in fruit-producing parts after the reform. In regions that were not particularly suitable for either tea or fruit production, gender ratios did not change. The idea is therefore that economic incentives result in a gender imbalance among children. Where daughters are valuable, gender bias is observed less.
Ashraf et al. (2013) - Zambia
In the third treatment, agents receive a star for each condom pack sold and were to be invited to a ceremony if their sales exceeded 216 packs. The results of Ashraf et al.'s (2013) experiment reveals the non-financial incentive treatment (stars) sold twice as many packs as the other groups.
Bjorkman and Svensson (2009) - Uganda
In the treatment group the NGO held meetings with the community and informed them about what they should expect from the facility and the type of services they could expect to receive. In the meeting the NGO. Absence rates fell by 13 percentage points in treated facilities, utilisation of outpatient services increased by 20 per cent, and under fives mortality fell by 33 per cent.
Galor and Zeira (1993) - Parental bequest, skill acquisition
Individuals live for two periods: receiving bequests from parents and leaving bequests for their children. There are 3 possibilities. 1. individuals decide to work as unskilled labourers. bn (x) = α ((1 + r)(x + wn) + wn) if xt < f 2. individuals who decide to invest in human capital and become skilled workers. bs (x) = α ((1 + r) (x - h) + ws). xt ≥ h 3. Does not have enough funds and borrows money to pay for educational investment bs (x) = α ((1 + i) (x - h) + ws). f ≤ xt < h Lending interest rate r smaller than borrowing interest rate i
Deininger and Squire - on Kuznet Inverted U
Introduced country specific dummy variable, and found that country specific factors were found to be creating the U-curve, as opposed to general trends in the time dynamics of inequality. Invalidated Kuznet Inverted U
The Solow model
K = sY - δK . k = sy - (δ + n)k . k = sf (k) - (δ + n)k
Besley - Wassa and Anloga in Ghana
Land rights with and without approval have a similar effect on investment. Having one more right with approval increases the probability of investment in trees by 12 percentage points
Maccini and Yang (2009) - rainfall shock
Maccini and Yang (2009) find there is a significant effect of rainfall shock during a child's birth year on their health and education in rural Indonesia. They find that 20 per cent higher-than-average rainfall during a child's birth year results in a 3.8 percentage point reduction in the likelihood of their reporting poor health and 0.22 more years of schooling.
Jensen (2007) - expansion of mobile network coverage in Kerala, India
On average the introduction of mobile phones reduced the coefficient of variation in the sardine price by 38 percentage points and eliminated wastage completely (reduced by 4.8 percentage points). Therefore the quantity of sardines sold increased by 23 kg while the average price received by fishermen insignificantly decreased by 0.05 Rupees/kg. Fisheries profits, however, increased significantly by 133 Rupees per day (about nine per cent increase on average profits).
Burnside and Dollar (2000) - Effect of aid on growth
Once Burnside and Dollar (2000) controlled for the interaction term, it seems aid is effective in enhancing growth performance in countries that adopted good policies. The 2SLS specification, however, delivers insignificant coefficients even for the interaction terms (see Table 4 in the article). The authors concluded that aid is good for growth when policies are favourable.
Udry (1990) - Survey of four villages in northern Nigeria over a period of one year.
Only 10 per cent of households did not lend and borrow, while 50 per cent both lent and borrowed during the sample period. Despite the high prevalence of lending and borrowing in the sample, only 7.5 per cent of loans originated from formal financial institutions. While 72 per cent of loans for borrowers with a shock had zero or negative realised interest rate, only 39 per cent of loans for borrowers without a shock had zero or negative realised interest rates. If a lender receives a shock, the borrower pays the debt with higher interest and in a shorter timeframe.
Jayachandran (2013) - payments for ecosystem services (PES)
Only 33 per cent of households took up the programme. Correlations in the take up among the control group suggest that owners cutting trees to sell are less likely to take up PES, while owners clearing forest for agriculture are more likely to sign up for PES.
Burgess et al. (2011) - weather fluctuations and mortality in India
Overall Burgess et al. show high temperatures have striking effects on rural mortality in India. The results are consistent with the dependence of rural households on agricultural incomes. Unless new resistant crops are introduced, it is likely that rural mortality increases as a result of more frequent hot days and higher average temperatures.
Pavcnik - uses Chile's trade liberalisation
Pavcnik (2002) reports that the productivity of import competing plants increased by 3-10 per cent more than firms in non-traded sectors after liberalisation. This confirms that firms facing greater competition after liberalisation became more efficient. On the other hand, export-oriented plants did not see productivity gains after liberalisation, potentially because they already had high productivity. She also finds exiting plants are on average 8 per cent less productive than firms continuing to produce post liberalisation.
GINI coefficient
Ratio of the area between the equality line and the Lorenz curve to the area of the triangle under the equality line
Kuznets ratios
Ratio of the share of income of x per cent richest individuals to the share of income for y per cent poorest individuals
Dinkelman (2011) - expansion of the electricity network in South Africa
She used land gradient (hilliness) as an instrument for the likelihood of being connected to the electricity grid. She found female labour force participation increased by nine percentage points and female weekly work hours increased by 8.9 hours between 1996 and 2001 (for the areas with average increase in connections). Her findings support the idea that home production has become less time consuming due to a switch from wood cooking to electric cooking and lighting.
Do Subramanian and Deaton (1996) find any evidence of S-shape between calories and income? Why?
Subramanian and Deaton (1996) show the elasticity of food expenditure and calorie availability with respect to income is falling as household income increases (see non-parametric estimates in paper). This is, however, far from zero elasticity for the rich households in their sample partly because the rich are not so rich in their sample and there is still room for them to increase their caloric intake.
Donaldson (2010) -connected to the railway during 1875-1919 in colonial India
The expansion of the railways reduced effective distances and therefore significantly increased trade volumes for connected areas. To see the impact of this in a reduced form, Donaldson regressed agricultural income on a dummy variable that is equal to one when a district is connected to the railway. Getting a railway connection increased average per acre agricultural income by 16.4 per cent.
Why does Qian use an instrumental variable technique and what is/are her instrument(s)?
The problem might be that the increase in the price of tea might change the reasons for women to pick tea. Families that have preference for girls may switch to tea production. To account for this Qian uses the instrumental variable technique. She uses the average slope of farms in the region as an instrument and finds identical results - see the table on p.1272 of Qian (2008).
Kuznet inverted U hypothesis
The process of development is initially accompanied by rising inequality but as the economy grows compensatory factors start to reduce inequality.
Field (2007) - Titling Program in Peru
The programme was rolled out between 1995 and 2003 and provided property titles to squatters in urban areas free of charge. Field finds a significant effect on squatters in programme areas. Squatter households on average increased their labour supply by 13.5 hours when the titling programme reached their neighbourhood.
Nunn and Qian - impact of US food aid on conflict
The results from Nunn and Qian (forthcoming) show that an increase in US food aid increases the duration of existing internal conflicts.
Frazer (2008) - Used Clothing
The results of instrumental variable estimation shows that a one per cent increase in used clothing imports results in 0.6 per cent decrease in the size of the apparel industry in the recipient country. This is a large effect and could account for 40 per cent of Africa's decline in production of apparel.
De Mel et al. (2013) - test why firms remain informal
The results show no extra registration for firms provided with information and reimbursement of costs relative to the control group. Offering a bonus of 10,000 or 20,000 Rupees resulted in a 17-22 per cent increase in registration and raising the bonus to 40,000 increased registration to 48 per cent (20,000 Rupees is about a month of profits for the median firm). Many of the unregistered businesses in the 40,000 Rupees treatment mentioned that they could not get formal permission from landowners to prove they are legally allowed to run a business on premises.
Dell et al. (2012) - Weather shocks on GDP
The results show that a 1°C rise in temperature leads to a 1.3 percentage points reduction in contemporaneous growth in poor countries but has no effect in rich ones. Interestingly, the contemporaneous effect persists over time, suggesting that temperature shocks have growth effects rather than just level effects.
Results of Spandana
The results suggest that on average the treatment group households are no more likely to start a business but that profits are slightly higher relative to the control group. Per capita monthly expenditure is the same but treatment households increase durable consumption and reduce consumption of temptation goods. The expenditure on education and health seems unaffected. Therefore it seems MFI lending has only a modest effect across several outcomes over a period of two to four years.
Devoto et al. (2012) - Water connection in urban Morocco
The treatment led to more free time, which was used for leisure and socialising and not production or schooling. Furthermore, households increased their water consumption but this did not lead to an improvement in health outcomes.
Duflo et al. (2012) in Rajasthan, India
They randomly assigned 57 schools to treatment and 56 schools to control group. Treatment teachers' received 500 Rs if they attended school fewer than 10 days in a given month and 50 Rs for each additional day. The programme reduced teachers' absence rate by 21 percentage points relative to the control group during the 30 months after the start of the intervention.
Besley and Burgess (2002) - Effect of good government on Disaster relieve
They show that states with higher levels of newspaper circulation are more responsive to food shortages as a result of droughts and floods. In states with higher newspaper circulation, elected state governments spend more on public food distribution programmes (in response to shortages).
HDI (Human Development Index).
This Index combines the three elements of life expectancy, education and income and comes up with an objective measure of societal well-being across countries of the world.
What is meant by the term 'missing women' and what are the likely causes of this phenomenon?
This is a concept first used by A.K. Sen. His argument was that during the West Bengal famine, infant mortality of girls rose dramatically. This is contrary to expectation since usually infant mortality of girls is usually lower than that of boys. Later Sen argued that if we apply conventional sex ratios there should be 250 million more women in China and the Indian subcontinent. The explanation for this is that, when experiencing severe poverty, parents choose between allocating resources to sons or daughters. A preference for sons, for whatever reason, implies that people in these situations feed their sons better than their daughters and provide better health care for sons compared to daughters.
Townsend (1995) - Consumption Smoothing
Townsend (1995) studied surveys from India and Thailand to see if households are fully insured. In three Indian villages a one dollar increase in individual income raised individual consumption by 14 cents. Furthermore, individual consumption is significantly affected by village level income. These show households were able to insure against idiosyncratic risks but that there was far from full insurance because household income still impacts on household consumption. In the set of Thai villages that Townsend (1995) analysed there is less insurance and a dollar increase in household income increases consumption by 34 cents, but the coefficient estimate on the average village income is double that of household income. This shows the inability of the household to insure against aggregate shocks.
Expression for the optimal years of schooling
U(y, S) = m log y - h(S) log y = α + βS h'(S) = γ + φS S*=(mβ - γ)/φ
Verify that sharecropping and a fixed wage contract deliver a level of effort strictly less than the first best (1) but a fixed rent contract achieves the first best.
Under sharecropping ẽ = αHc and with a fixed wage contract ẽ = cw - w = 0. It is clear that both of these are smaller than e* in (1). Effort under the fixed rent contract is ẽ = H/c which is identical to the first best. Intuitively under the fixed rent contract the tenant pays a fixed amount to the landlord, therefore any marginal gain from increased effort accrues to himself. In other words, the tenant becomes a residual claimant to the generated output.
Operation Barga in West Bengal
Under the law, tenants registered with the Department of Land Revenue could not be evicted from sharecropped land as long as they paid the minimum of 25 per cent of output to the landlord. Banerjee et al. (2002) show Operation Barga actually changed the contractual terms. The share of tenants receiving more than 50 per cent of output increased from a pre-reform level of 17 per cent to 39 per cent after the reform.
How did Acemoglu et al. (2001) overcome OLS estimate bias
Using settler morality as an instrument satisfies relevance condition because this variable determined the feasibility of European settlements which in turn affected the type of colonisation strategies followed. Colonisation strategies continue to have an impact on contemporary institutions because of the highly persistent nature of institutions.
Gordon and Li (2009) - why so many businesses decide to remain informal in developing countries
When the benefits of access to credit outweigh the cost of tax payments, businesses choose formality. Therefore a higher tax rate would imply a smaller fraction of businesses choosing to be formal. There might also be heterogeneity in patterns of formality across industries. Sectors that have higher benefits from access to credit remain formal in the presence of higher taxes. Therefore the government might optimally choose to tax these sectors heavily.
Acemoglu et al. (2001) - Property Rights: 3 Stylish Facts
a. There were different colonisation policies that created different institutions (Congo versus Australia). b. Colonisation policies were influenced by feasibility of European settlements in the colony. c. Transplanted institutions persisted even after colonies became independent.
Subramanian and Deaton (1996) - Maharashtra in India
analysed a sample of 5,630 rural households using the National Sample Survey (NSS). Subramanian and Deaton (1996) estimate food expenditure increases by 0.75 per cent when income (total expenditure) increases by 1 per cent, but raises available calories by 0.36 per cent.
Schulz (2004) - Progressa
ased on DID, enrolment increased by 3.4 percentage points across grades 1 to 8. This corresponds to a cumulative gain of 0.66 years of schooling for targeted recipients
Duflo (2001) - on INPRES
built 61,807 new schools between 1973 and 1979 in Indonesia. For each additional school built per 1,000 children, the average years of schooling went up by 0.12 years. Young cohorts received 2.6 per cent higher wages due to the INPRES programme. An additional year of schooling increases wages by around 6.8 to 10 per cent.
Miguel and Roland (2011) - Poverty Trap
compare the heavily bombed districts of Vietnam during the Vietnam War to those that were not destroyed as much. Study points to the absence of local poverty traps and confirms convergence in the long run
Conditional convergence
countries converge to their own steady states depending on their rates of savings, depreciation, population growth and technological progress. low income countries in the sample. In these graphs there seems to be a negative correlation between average growth and initial GDP per capita
La Porta et al. - Legal Protection
countries with common (English) law origin have the highest protection of investors compared to countries with civil (French) law origin. Legal protection of outside investors against corporate insiders limits expropriation by insiders and promotes financial development.
Condition for strategic default
f(k) − (1 + i)(k − w) ≥ f(k) − ηk k ≤ (1 + i)w/((1 + i) − η)
definition of poverty
headcount ratio (HCR). This measure calculates the ratio of the number of individuals living below a level of income relative to the total population. In other words, it shows the percentage of individuals living below a poverty line.
Banerjee et al. (2013) - Microfinance with Spandana
identified 104 suitable slums (where there was no pre-existing MFI and where poor people lived) in Hyderabad, Andhra Pradesh, India. In 52 randomly selected neighbourhoods Spandana opened a branch in 2005.
Optimal effort for tenants. (low yield = l, cost of effort c(e)=1/2ce^2
max e · H + (1 − e) · 0 − 1/2ce^2 e*= h-l/c
Optimal effort for land owners. (low yield = 0, cost of effort c(e)=1/2ce^2
max e · H + (1 − e) · 0 − c(e) e˜[0,1] e*=H/c
Melitz and Trefler (2012) - intraindustry trade
more than 35 per cent of all trade volumes in 2006 was within narrowly defined industries.
three reasons that would violate the exogeneity assumption
omitted variables, reverse causality, measurement error
unconditional (absolute) convergence
regardless of the initial level of output per worker, countries converge to the same steady state level of output per worker. GDP per capita growth rate between 1960-2010 (World Bank) suggest that countries with higher initial GDP per capita had higher subsequent growth. Does not support unconditional convergence
Olken and Singhal (2011) - Informal taxation
shows that a significant share of households in the 10 countries studied pay informal taxes. In several countries 50 per cent of household made some contributions. These informal payments constitute 0.85 per cent of household expenditure in the median country but 15.7 per cent of total taxes paid.
Burgess et al. (2013) - Kenyan road building
significant ethnic favouritism when there were autocratic governments. Favoured areas received government support along many dimensions (not just infrastructure) which made it hard to identify the effect of infrastructure. On other occasions, governments might have a developmental perspective and expand infrastructure in the poorer regions.
Murphy, et al. - Big push
simultaneous industrialization of many sectors can be self-sustaining even if no sector could break even industrialising alone.
Find the steady state of Y = AK^αL^(1-α)
y = Ak^a k = sAk^a - (δ + n)k at steady state k=0 so k*=(sA/(δ + n))^(1/1-a) y = Ak^a = A(sA/(δ + n))^(a/1-a)
