Development Economics

This article examines five common misunderstandings about case-study research: (a) theoretical knowledge is more valuable than practical knowledge; (b) one cannot generalize from a single case, therefore, the single-case study cannot contribute to scientific development; (c) the case study is most useful for generating hypotheses, whereas other methods are more suitable for hypotheses testing and theory building; (d) the case study contains a bias toward verification; and (e) it is often difficult to summarize specific case studies. This article explains and corrects these misunderstandings one by one and concludes with the Kuhnian insight that a scientific discipline without a large number of thoroughly executed case studies is a discipline without systematic production of exemplars, and a discipline without exemplars is an ineffective one. Social science may be strengthened by the execution of a greater number of good case studies.

How did the industrialized nations of North America and Europe come to be seen as the appropriate models for post-World War II societies in Asia, Africa, and Latin America? How did the postwar discourse on development actually create the so-called Third World? And what will happen when development ideology collapses? To answer these questions, Arturo Escobar shows how development policies became mechanisms of control that were just as pervasive and effective as their colonial counterparts. The development apparatus generated categories powerful enough to shape the thinking even of its occasional critics while poverty and hunger became widespread. "Development" was not even partially "deconstructed" until the 1980s, when new tools for analyzing the representation of social reality were applied to specific "Third World" cases. Here Escobar deploys these new techniques in a provocative analysis of development discourse and practice in general, concluding with a discussion of alternative visions for a postdevelopment era. Escobar emphasizes the role of economists in development discourse--his case study of Colombia demonstrates that the economization of food resulted in ambitious plans, and more hunger. To depict the production of knowledge and power in other development fields, the author shows how peasants, women, and nature became objects of knowledge and targets of power under the "gaze of experts." In a substantial new introduction, Escobar reviews debates on globalization and postdevelopment since the book's original publication in 1995 and argues that the concept of postdevelopment needs to be redefined to meet today's significantly new conditions. He then calls for the development of a field of "pluriversal studies," which he illustrates with examples from recent Latin American movements.

Arturo Escobar is the Kenan Distinguished Professor of Anthropology at the University of North Carolina, Chapel Hill. His most recent book is "Territories of Difference".

Average incomes of the poorest fifth of society rise proportionately with average incomes. This is a consequence of the strong empirical regularity that the share of income accruing to the bottom quintile does not vary systematically with average income. In this paper we document this empirical regularity in a large sample of 92 countries spanning the past four decades, and show that it holds across regions, time periods, income levels, and growth rates. We next ask whether the factors that explain cross-country differences in growth rates of average incomes have differential effects on the poorest fifth of society. We find that several determinants of growth --such as good rule of law, openness to international trade, and developed financial markets --have little systematic effect on the share of income that accrues to the bottom quintile.

In the 1990s the concept of social capital-defined here as the norms and networks that enable people to act collectively-enjoyed a remarkable rise to prominence across all the social science disciplines. The authors trace the evolution of social capital research as it pertains to economic development and identify four distinct approaches the research has taken: communitarian, networks, institutional, and synergy. The evidence suggests that of the four, the synergy view, with its emphasis on incorporating different levels and dimensions of social capital and its recognition of the positive and negative outcomes that social capital can generate, has the greatest empirical support and lends itself best to comprehensive and coherent policy prescriptions. The authors argue that a significant virtue of the idea of and discourse on social capital is that it helps to bridge orthodox divides among scholars, practitioners, and policymakers.

Many empirical questions in economics and other social sciences depend on causal effects of programs or policiy interventions. In the last two decades much research has been done on the econometric and statistical analysis of the effects of such programs or treatments. This recent theoretical literature has built on, and combined features of, earlier work in both the statistics and econometrics literatures. It has by now reached a level of maturity that makes it an important tool in many areas of empirical research in economics, including labor economics, public finance, development economics, industrial organization and other areas of empirical micro-economics. In this review we discuss some of the recent developments. We focus primarily on practical issues for empirical researchers, as well as provide a historical overview of the area and give references to more technical research.

Evidence from a broad panel of countries shows little overall relation between income inequality and rates of growth and investment. For growth, higher inequality tends to retard growth in poor countries and encourage growth in richer places. The Kuznets curve-whereby inequality first increases and later decreases during the process of economic development-emerges as a clear empirical regularity. However, this relation does not explain the bulk of variations in inequality across countries or over time.

w o r l d e c o n o m i c scenario for international business over the past two decades, a n d then goes on to examine its implications for the location of foreign direct investment and multinational enterprise activity. It suggests that many of the explanations of the 1970s a n d early 1980s need to be modified a

This Discussion Paper is issued within the framework of IZA's research area Internationalization of Labor Markets. Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions.

This paper presents recent research on access to finance by small and medium-size enterprises (SMEs). SMEs form a large part of private sector in many developed and developing countries. While cross-country research sheds doubt on a causal link between SMEs and economic development, there is substantial evidence that small firms face larger growth constraints and have less access to formal sources of external finance, potentially explaining the lack of SMEs' contribution to growth. Financial and institutional development helps alleviate SMEs' growth constraints and increase their access to external finance and thus levels the playing field between firms of different sizes. Specific financing tools such as leasing and factoring can be useful in facilitating greater access to finance even in the absence of well-developed institutions, as can systems of credit information sharing and a more competitive banking structure.

This paper focuses on a new estimate of Feder (1982)'s model on productivity and externality effect of exports in six Asian countries. Econometric issues are addressed with the use of cross-sectional analysis. The results show that the coefficients of the models reduce substantially when the analysis is adjusted for stationarity. The effect of exports on growth and productivity is found to be positively significant and the export sector is found to have a positive effect on non-export sector. However, the extent of externality effect will depend on several factors such as size, policy orientation of exports, concentration of export products and processing level of exports. ABSTRAK Kajian ini menumpukan kepada suatu anggaran baru model Feder (1982) keatas produktiviti dan kesan luaran sektor ekspot bagi enam buah negara Asia. Isu-isu ekonometrik dibincang apabila analisis silang rentas digunakan. Keputusan kajian ini menunjukkan bahawa pengkali bagi model Feder berkurangan apabila analisis dibuat setelah penyelarasan bagi kepegunan dibuat. Kesan ekspot keatas pertumbuhan dan produktiviti didapati signifikan secara positif dan sektor ekspot didapati mempunyai kesan luaran positif keatas sektor bukan ekspot. Walau bagaimapun, tahap kesan luaran tersebut bergantung kepada beberapa faktor saperti saiz, polisi orientasi ekspot, pemusatan produk ekspot dan tahap pemprosesan ekspot.

A simple application of big-push reasoning suggests that natural resource booms can be important catalysts for development in poorer countries. In this paper we present evidence from seven Latin American countries that natural resource booms are sometimes accompanied by declining per-capita GDP. We present a model with natual resources, increasing returns in the spirit of big push models, and expectations to clarify some of the reasons this may happen.

We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current tradeoffs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product.

Community-based (and driven) development (CBD) projects have become an important form of development assistance, with the World Bank's portfolio alone approximating 7 billion dollars. This paper reviews the conceptual foundations of CBD/CDD initiatives. Given the importance of the topic, there are, unfortunately, a dearth of well-designed evaluations of such projects. There is, however, enough quantitative and qualitative evidence, from studies that have either been published in peer-reviewed publications or have been conducted by independent researchers, to gain some instructive lessons. We find that projects that rely on community participation have not been particularly effective at targeting the poor. There is some evidence that CBD/CDD projects create effective community infrastructure, but not a single study establishes a causal relationship between any outcome and participatory elements of a CBD project. Most CBD projects are dominated by elites and, in general, the targeting of poor communities as well as project quality tend to be markedly worse in more unequal communities. However, a number of studies find a U shaped relationship between inequality and project outcomes. We also find that a distinction between potentially "benevolent" forms of elite domination and more pernicious types of "capture" is likely to be important for understanding project dynamics and outcomes. Several qualitative studies indicate that the sustainability of CBD initiatives depends crucially on an enabling institutional environment, which requires upward commitment. Equally, the literature indicates that community leaders need to be downwardly accountable to avoid a variant of 'supply driven demand driven development'. Qualitative evidence also suggests that external agents strongly influence project success. However, facilitators are often poorly trained and inexperienced, particularly when programs are rapidly scaled up. Overall, a naïve application of complex contextual concepts like "participation", "social capital" and "empowerment"-is endemic among project implementers and contributes to poor design and implementation. In sum, the evidence suggests that CBD/CDD is best done in a context-specific manner, with a long time-horizon, and with careful and well designed monitoring and evaluation systems. Public Disclosure Authorized WPS 3209 2 Community-based development and its more recent variant, community-driven development, are among the fastest growing mechanisms for channeling development assistance. Community-based development is an umbrella term for projects that actively include beneficiaries in their design and management, while community-driven development refers to community-based development projects in which communities have direct control over key project decisions, including management of investment funds. By conservative calculations, the World Bank's lending for such projects has risen from $325 million in 1996 to $2 billion in 2003-or from $3 billion in 1996 to $7 billion in 2003 when lending for an enabling environment for such projects is included. 1

This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects. Based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods, it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts.

Production function models are estimated with a time series of cross-section data on Indonesian weaving establishments. The sources of technical inefficiency are investigated. Three firm attributes are identified as being potentially related to firm efhciency. Tbey are firm ownership, age and size. The importance of these attributes as sources of inefficiency in the Indonesian weaving industry is investigated and the implications of the find,ings discussed.

While the incidence of extreme poverty fell dramatically in China over 1980-2001, progress was uneven over time and across provinces. Rural areas accounted for the bulk of the gains to the poor, though migration to urban areas helped. Rural economic growth was far more important to national poverty reduction than urban economic growth; agriculture played a far more important role than the secondary or tertiary sources of GDP. Taxation of farmers and inflation hurt the poor; local government spending helped them in absolute terms; external trade had little short-term impact. Provinces starting with relatively high inequality saw slower progress against poverty, due both to lower growth and a lower growth elasticity of poverty reduction. D

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Back cover text: If the new fin de siècle marks a recurrence of the real, Bent Flyvbjerg’s Rationality and Power epitomizes that development and sets new standards for social and political inquiry. The Danish town of Aalborg is to Flyvbjerg what Florence was to Machiavelli: a laboratory for understanding the real workings of power, and for grasping what they mean to our more general concerns of social and political organization. Politics, administration, and planning are examined in ways that allow  a rare, in-depth understanding. The reader witnesses, firsthand, the classic and endless drama which defines what modernity and democracy are and can be.

Rural and urban households in developing countries face substantial idiosyncratic and common risk, resulting in high income variability. Households in risky environments have developed sophisticated (ex-ante) risk-management and (ex-post) risk-coping strategies, including self-insurance via savings and informal insurance mechanisms to do so while formal credit and insurance markets appear to contribute only little to reducing income risk and its consequences. Informal credit and insurance, however incomplete, helps to cope with risky incomes. Despite these strategies, vulnerability remains high, and is reflected in fluctuations in consumption. It is clear therefore, that further development of safety nets will be necessary. In this paper, we focus on the opportunities available to households to use risk-management and risk-coping strategies, and on the constraints on their effectiveness.

We focus on the impact of migration prospects on human capital formation and growth in a small, open developing economy. We assume that agents are heterogeneous in skills and take their educational decisions in a context of uncertainty regarding future migrations.

Is the evidence consistent with the predictions of endogenous growth models that the structure of taxation and public expenditure can affect the steady-state growth rate? Much previous research needs to be re-evaluated because it ignores the biases associated with incomplete specification of the government budget constraint. We show these biases to be substantial and, correcting for them, find strong support for the Barro model (1990, Government spending in a simple model of endogenous growth. Journal of Political Economy 98 (1), s103-117, for a panel of 22 OECD countries, 1970-95. Specifically we find that (1) distortionary taxation reduces growth, whilst non-distortionary taxation does not; and (2) productive government expenditure enhances growth, whilst non-productive expenditure does not.

We examine the effect of remittances from abroad on households' schooling decisions using data for El Salvador. Following the massive war-related emigration of the 1980s, remittances became a significant source of household income throughout the 1990s. We use the Cox proportional hazard model to examine the determinants of school attendance. Measuring income from a source that is uncorrelated with parental

In this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse. We show: (1) politicians tend to over-extract natural resources relative to the efficient extraction path because they discount the future too much, and (2) resource booms improve the efficiency of the extraction path. However, (3) resource booms, by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections, increase resource misallocation in the rest of the economy. (4) The overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes. Countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create. Countries without such institutions however may suffer from a resource curse.

We would like to thank Ricardo Sanhueza for superb research assistance. We are greatly indebted to David Wheeler and Manjula Singh for helpful conversations, for making their database available, and for estimating the results based on U.S. data. We would also like to thank Art Small, Tarhan Feyzioglu, and two anonymous referees for very helpful comments. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research or The World Bank.

This study deals with a normative concept of participatory development approach, which originates in the developed world. In particular, it analyses and explains the limitations to the participatory tourism development approach in the context of developing countries. It was found that there are operational, structural and cultural limits to community participation in the TDP in many developing countries although they do not equally exist in every tourist destination. Moreover, while these limits tend to exhibit higher intensity and greater persistence in the developing world than in the developed world, they appear to be a re#ection of prevailing socio-political, economic and cultural structure in many developing countries. On the other hand, it was also found that although these limitations may vary over time according to types, scale and levels of tourism development, the market served, and cultural attributes of local communities, forms and scale of tourism developed are beyond the control of local communities. It concludes that formulating and implementing the participatory tourism development approach requires a total change in sociopolitical, legal, administrative and economic structure of many developing countries, for which hard political choices and logical decisions based on cumbersome social, economic and environmental trade-o!s are sine qua non alongside deliberate help, collaboration and co-operation of major international donor agencies, NGOs, international tour operators and multinational companies.

Growth theory has traditionally assumed the existence of an aggregate production function, whose existence and properties are closely tied to the assumption of optimal resource allocation within each economy. We show extensive evidence, culled from the micro-development ...

Inequality in income and opportunity involves significant economic and social costs. This paper critically reviews the arguments made in the book entitled The Price of Inequality: How Today's Divided Society Endangers Our Future by Professor Joseph Stiglitz. The central theme of this book is that political and economic forces have shaped and reinforced the extent to which concentration of income at the top is generated and protected by institutions in which the rich members of society exert considerable influence in the design and implementation of public policies.

Ð The connections between economic growth (EG) and human development (HD) form two chains. Crosscountry regressions show a signi®cant relationship in both directions, with public expenditures on health and education, notably female, especially important in the chain from EG to HD; and the investment rate and income distribution signi®cant in the HD to EG chain. This gives rise to virtuous or vicious cycles, with good or bad performance on HD and EG reinforcing each other. Evidence over time has strong sequencing implications: countries initially favoring economic growth lapse into the vicious category, while those with good HD and poor EG sometimes move into the virtuous category. Where choice is necessary human development should be given sequencing priority. Ó

for detailed comments and useful suggestions. We also thank Nathan Nunn for providing the digitized version of Murdock's Tribal Map of Africa. This paper draws on material from our previous paper titled "Divide and Rule or the Rule of the Divided? Evidence from Africa". All errors are our sole responsibility. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Is world trade becoming more regionalized, as a result of preferential arrangements such as NAFTA, the Andean Pact and MERCOSUR? If so, is this deviation from the principle of MFN (nondiscriminatory trade policies) good or bad? This paper attempts to answer both questions.

The Seventeen Contradictions is an x-ray of tensions, trends and tendencies in capital and capitalism that empowers us to look forward. Taking the still ongoing 2008 economic crisis as a starting point, Harvey investigates how the capitalist economy that produces such crises is embedded in contradictions. Seventeen of these are discussed throughout the book.

The long-run relationship between financial development and economic growth is Ž . examined in a multivariate vector autoregression VAR framework using 10 sample countries. Difficulties surrounding the cross-country regressions and bivariate time series studies are outlined. The long-run financial development and output relationships are identified in a cointegrating framework through tests of over-identifying restrictions. We find bi-directional causality between financial development and economic growth in all the sample countries, conclusions that stand distinct from those in the existing empirical Ž . Ž . literature. We attribute our findings to: i analysis of a higher dimensional system, ii a Ž . new method of identifying the long-run economic relationships, and iii a new approach to long-run causality testing. q 1999 Elsevier Science B.V. All rights reserved. JEL classification: O16; G18; G28 0304-3878r99r$ -see front matter q 1999 Elsevier Science B.V. All rights reserved. Ž . PII: S 0 3 0 4 -3 8 7 8 9 9 0 0 0 4 5 -0 ( ) K.B. Luintel, M. Khan r Journal of DeÕelopment Economics 60 1999 381-405 382