Search

Begin New Search Publishing Institution Center for Global Development Publication Year within 25 Years

351. Estimating Fully Observed Recursive Mixed-Process Models with cmp

Author:
David Roodman
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
At the heart of many econometric models is a linear function and a normal error. Examples include the classical small-sample linear regression model and the probit, ordered probit, multinomial probit, Tobit, interval regression, and truncated-distribution regression models. Because the normal distribution has a natural multidimensional generalization, such models can be combined into multi-equation systems in which the errors share a multivariate normal distribution. The literature has historically focused on multi-stage procedures for estimating mixed models, which are more efficiently computationally, if less so statistically, than maximum likelihood (ML). But faster computers and simulated likelihood methods such as the Geweke, Hajivassiliou, and Keane (GHK) algorithm for estimating higher-dimensional cumulative normal distributions have made direct ML estimation practical. ML also facilitates a generalization to switching, selection, and other models in which the number and types of equations vary by observation. The Stata module cmp fits Seemingly Unrelated Regressions (SUR) models of this broad family. Its estimator is also consistent for recursive systems in which all endogenous variables appear on the right-hand-sides as observed. If all the equations are structural, then estimation is full-information maximum likelihood (FIML). If only the final stage or stages are, then it is limited-information maximum likelihood (LIML). cmp can mimic a dozen built-in Stata commands and several user-written ones. It is also appropriate for a panoply of models previously hard to estimate. Heteroskedasticity, however, can render it inconsistent. This paper explains the theory and implementation of cmp and of a related Mata function, ghk2(), that implements the GHK algorithm.
Topic:
Development, Humanitarian Aid, Poverty, and Third World

352. Heckle and Chide: Results of a Randomized Road Safety Intervention in Kenya

Author:
James Habyarimana and William Jack
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
In economies with weak enforcement of traffic regulations, drivers who adopt excessively risky behavior impose externalities on other vehicles, and on their own passengers. In light of the difficulties of correcting inter-vehicle externalities associated with weak third-party enforcement, this paper evaluates an intervention that aims instead to correct the intra-vehicle externality between a driver and his passengers, who face a collective action problem when deciding whether to exert social pressure on the driver if their safety is compromised. We report the results of a field experiment aimed at solving this collective action problem, which empowers passengers to take action. Evocative messages encouraging passengers to speak up were placed inside a random sample of over 1,000 long-distance Kenyan minibuses, or matatus, serving both as a focal point for, and to reduce the cost of, passenger action. Independent insurance claims data were collected for the treatment group and a control group before and after the intervention. Our results indicate that insurance claims fell by a half to two-thirds, from an annual rate of about 10 percent without the intervention, and that claims involving injury or death fell by at least 50 percent. Results of a driver survey eight months into the intervention suggest passenger heckling was a contributing factor to the improvement in safety.
Topic:
Development, Economics, Political Economy, and Third World
Political Geography:
Kenya and Africa

353. What Is Poverty Reduction?

Author:
Owen Barder
Publication Date:
04-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
There is a healthy debate about how to achieve poverty reduction in developing countries, but not enough discussion of what we mean by “poverty reduction.” “Poverty reduction” is often used as a short-hand for promoting economic growth that will permanently lift as many people as possible over a poverty line. But there are many different objectives that are consistent with “poverty reduction,” and we have to make choices between them. There are trade-offs between tackling current and future poverty, between helping as many poor people as possible and focusing on those in chronic poverty, and between measures that tackle the causes of poverty and those which deal with the symptoms. Because donors focus on just one dimension of poverty reduction (growth) they marginalise other legitimate objectives such as reducing chronic poverty or providing social services in countries that cannot otherwise afford them.
Topic:
Development, Environment, Humanitarian Aid, Poverty, Third World, and Foreign Aid

354. Blunt Instruments: On Establishing the Causes of Economic Growth

Author:
Michael Clemens and Samuel Bazzi
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Despite intense concern that many instrumental variables used in growth regressions may be weak, invalid, or both, top journals continue to publish studies of economic growth based on problematic instruments. Doing so risks pushing the entire literature closer to irrelevance. We illustrate hidden problems with identification in recent prominently published and widely cited growth studies using their original data. We urge researchers to take three steps to overcome the shortcomings: grounding research in somewhat more generalized theoretical models, deploying the latest methods to test sensitivity to violations of the exclusion restriction, and opening the “black box” of the Generalized Method of Moments (GMM) with supportive evidence of instrument strength.
Topic:
Development, Economics, and Political Economy

355. Rice Price Formation in the Short Run and the Long Run

Author:
C. Peter Timmer
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper analyzes price formation on the world's rice market using simple supply and demand models as a start, but moving to “supply of storage” models—a staple of commodity-market analysis for more than half a century—to explain hoarding behavior and its subsequent impact on prices. The supply of storage model, however, does not account adequately for the influence that “outside” speculators have on prices. This paper quantifies the impact of financial factors and actors on commodity-price formation using very short-run prices and Granger causality analysis for a wide range of financial and commodity markets, including rice. The results are highly preliminary but are also very provocative. Speculative money seems to surge in and out of commodity markets, strongly linking financial variables with commodity prices during some time periods, but these periods are often short and the relationships disappear for long periods of time. Finally, the paper addresses the long-run (since 1900) relationships among the prices of the three basic cereal staples, rice, wheat and corn (maize), which have declined more than 1 percent per year over the past century. The decline accelerated after the mid-1980s; only the recent run-up in cereal prices in 2007–08 returned them to the long-run downward trend. Despite these common features and important cross-commodity linkages, however, price formation for rice has several unique dimensions worthy of further study.
Topic:
Agriculture, Markets, Food, and Financial Crisis

356. The Microeconomic Determinants of Emigration and Return Migration and Return Migration of the Best and Brightest: Evidence from the Pacific

Author:
John Gibson and David McKenzie
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
A unique survey which tracks worldwide the best and brightest academic performers from three Pacific countries is used to assess the extent of emigration and return migration among the very highly skilled, and to analyze, at the microeconomic level, the determinants of these migration choices. Although we estimate that the income gains from migration are very large, not everyone migrates and many return. Within this group of highly skilled individuals the emigration decision is found to be most strongly associated with preference variables such as risk aversion, patience, and choice of subjects in secondary school, and not strongly linked to either liquidity constraints or to the gain in income to be had from migrating. Likewise, the decision to return is strongly linked to family and lifestyle reasons, rather than to the income opportunities in different countries. Overall the data show a relatively limited role for income maximization in distinguishing migration propensities among the very highly skilled, and a need to pay more attention to other components of the utility maximization decision.
Topic:
Economics, Migration, Political Economy, and Immigration
Political Geography:
Australia/Pacific

357. The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence

Author:
David Roodman and Jonathan Morduch
Publication Date:
06-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The most-noted studies on the impact of microcredit on households are based on a survey fielded in Bangladesh in the 1990s. Contradictions among them have produced lasting controversy and confusion. Pitt and Khandker (PK, 1998) apply a quasi-experimental design to 1991–92 data; they conclude that microcredit raises household consumption, especially when lent to women. Khandker (2005) applies panel methods using a 1999 resurvey; he concurs and extrapolates to conclude that microcredit helps the extremely poor even more than the moderately poor. But using simpler estimators than PK, Morduch (1999) finds no impact on the level of consumption in the 1991–92 data, even as he questions PK's identifying assumptions. He does find evidence that microcredit reduces consumption volatility. Partly because of the sophistication of PK's Maximum Likelihood estimator, the conflicting results were never directly confronted and reconciled. We end the impasse. A replication exercise shows that all these studies' evidence for impact is weak. As for PK's headline results, we obtain opposite signs. But we do not conclude that lending to women does harm. Rather, all three studies appear to fail in expunging endogeneity. We conclude that for non-experimental methods to retain a place in the program evaluator's portfolio, the quality of the claimed natural experiments must be high and demonstrated.
Topic:
Development, Economics, Foreign Aid, and Foreign Direct Investment
Political Geography:
Bangladesh, South Asia, and Asia

358. To Formalize or Not to Formalize? Comparisons of Microenterprise Data from Southern and East Africa

Author:
Vijaya Ramachandran, Manju Kedia Shah, Alan Gelb, and Taye Mengistae
Publication Date:
07-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Why do firms choose to locate in the informal sector? Researchers often argue that the high cost of regulation prevents informal firms from becoming formal and productive. Our results point to a more nuanced story.
Topic:
Development, Economics, Markets, and Labor Issues
Political Geography:
Africa

359. Pricing and Access: Lessons from Randomized Evaluations in Education and Health

Author:
Michael Kremer and Alaka Holla
Publication Date:
01-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
This paper surveys evidence from recent randomized evaluations in developing countries on the impact of price on access to health and education. The debate on user fees has been contentious, but until recently much of the evidence was anecdotal. Randomized evaluations across a variety of settings suggest prices have a large impact on take-up of education and health products and services. While the sign of this effect is consistent with standard theories of human capital investment, a more detailed examination of the data suggests that it may be important to go beyond these models. There is some evidence for peer effects, which implies that for some goods the aggregate response to price will exceed the individual response. Time-inconsistent preferences could potentially help explain the apparently disproportionate effect of small short-run costs and benefits on decisions with long-run consequences.
Topic:
Development, Economics, Education, Health, Human Welfare, and Markets

360. Do Regulatory Reforms Stimulate Investment and Growth? Evidence from the Doing Business Data

Author:
Benjamin P. Eifert
Publication Date:
01-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The role of regulatory barriers in inhibiting entrepreneurship, investment and employment creation is an old topic in economics. This study utilizes a five-year panel of data on regulations and procedures from the World Bank's Doing Business project, along with Arellano-Bond dynamic panel estimators, looking for evidence that regulatory reforms lead to higher aggregate investment rates (roughly, factor demand) or GDP growth conditional on investment rates (roughly, factor productivity). It looks both at individual regulatory indicators and more aggregate measures of the incidence of reforms, finding some evidence of positive impacts of regulatory reforms in countries which are relatively poor (conditional on governance) and relatively well-governed (conditional on income). Relatively poor and relatively well-governed countries grow about 0.4 and 0.2 percentage points faster in the year immediately following one or more reforms, respectively. In both subsets of countries, investment rates accelerate by about 0.6 percentage points in the subsequent year.
Topic:
Development, Economics, Markets, Poverty, and Third World