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61. Fiscal Decentralization and Political Centralization in China: Implications for Growth and Inequality

Author:
Xiaobo Zhang
Publication Date:
09-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
China's current fiscal system is largely decentralized while its governance structure is rather centralized with strong top-down mandates and a homogenous governance structure. Due to large differences in initial economic structures and revenue bases, the implicit tax rate and fiscal burdens to support the functioning of local government vary significantly across jurisdictions. Regions initially endowed with a broader nonfarm tax base do not need to rely heavily on preexisting or new firms to finance public goods provision, thereby creating a healthy investment environment for the nonfarm sector to grow. In contrast, regions with agriculture as the major economic activity have little resources left for public investment after paying the expenses of bureaucracy. Consequently, differences in economic structures and fiscal burdens may translate into a widening regional gap.
Topic:
Development, Economics, and Politics
Political Geography:
China and Asia

62. Measures of Food Insecurity at the Household Level

Author:
Prasanta K. Pattanaik, Craig Gundersen, and Indranil Dutta
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Food insecurity and hunger have traditionally been measured by aggregate food supplies or by variables correlated with food insecurity. Because these measures often poorly reflect individuals' true deprivation, economists have turned to surveys with direct questions about food insecurity. Using these surveys, households have then been classified into broad categories, a classification system which ignores the richness of the multiple questions. In this paper, we propose food insecurity measures, along the lines of the well established poverty measures, which incorporates this richness and allow us to reflect the depth and severity, in addition to the incidence, of food insecurity. Using these indices, we calculate the extent of food insecurity and hunger in the United States. Along with giving a richer picture of food insecurity in the US, these food insecurity measures demonstrates that the ordering of various demographic categories differs depends on the choice of measure.
Topic:
Civil Society, Economics, Human Welfare, and Poverty
Political Geography:
United States

63. Household Financial Assets in the Process of Development

Author:
Patrick Honohan
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Systematic information on household financial asset holdings in developing countries is very sparse; we review some available data and current policy debates. Although financial asset holdings by households are highly concentrated, deeper financial systems are correlated with improved income distribution. For low-income countries, the relevant question for poor households is not how much financial assets they have, but whether they have any access to financial products at all. Building on and synthesizing disparate data collection efforts by others, we produce new estimates of access percentages for over 150 countries. Across countries, access is negatively correlated with poverty rates, but the correlation is not a robust one, thus the supposed anti-poverty potential of financial access remains econometrically elusive. Despite policy focus on the value of credit instruments, it is deposit products that tend to be the first to be used as prosperity increases, before more sophisticated savings products and borrowing.
Topic:
Civil Society, Development, Economics, and Poverty

64. Financial Development, Growth, and Regional Disparity in Post-Reform China

Author:
Zhicheng Liang
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Deepening financial development and rapid economic growth in China have been accompanied by widening income disparity between the coastal and inland regions. In this paper, by employing panel dataset for 29 Chinese provinces over the period of 1990-2001 and applying the generalized method of moment (GMM) techniques, we examine the impacts of financial development on China's growth performance. Our empirical results show that financial development significantly promotes economic growth in coastal regions but not in the inland regions; the weak finance-growth nexus in inland provinces may aggravate China's regional disparities.
Topic:
Conflict Resolution, Development, and Economics
Political Geography:
China and Asia

65. Spatial Convergence in China: 1952-99

Author:
Geoffrey J.D. Hewings, Dong Guo, and Patricio Aroca
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The purpose of this paper is to examine the convergence process in China by taking into account the spatial interaction between factors. The paper shows that there has been a dramatic increase in the spatial dependence of China's per capita GDP in the last 20 years. The consequence of space plays an important role, which is reflected in the influence of a neighbour's condition on the mobility of a province's income distribution from one category to another. The dynamics of the process showed evidence that China's distribution has gone from one of convergence to stratification, and from stratification to polarization.
Topic:
Demographics, Development, and Economics
Political Geography:
China and Asia

66. Institutional Analysis of Financial Market Fragmentation in Sub-Saharan Africa: A Risk-Cost Configuration Approach

Author:
Machiko Nissanke and Ernest Aryeetey
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper examines the source of financial market fragmentation in sub-Saharan Africa in the framework of institutional economics. Based on fieldwork data from Ghana, Malawi, Nigeria, and Tanzania, it analyses financial risk management, the transaction costs for loan screening and monitoring, and contract enforcement. It shows how, faced with various institutional constraints, the range of clientele selected by formal and informal lenders becomes both narrow and at the extreme market-ends. It evaluates the prevailing state of managing risks for market structure, and binding institutional constraints for market transformation and deepening in sub-Saharan Africa.
Topic:
Development, Economics, and Markets
Political Geography:
Africa, Tanzania, Nigeria, Ghana, and Malawi

67. The Determinants of Loan Contracts to Business Firms: Empirical Evidence from a Private Bank in Vietnam

Author:
Robert Lensink and Pham Thi Thu Trà
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper deals with loan contracting from a private bank in Vietnam. We focus on the main loan contract features that the bank uses in lending to business firms, namely loan maturity, collateral and loan interest rate. Based upon the simultaneous equation model of Dennis et al. (2000) and the bank's loan contracting policies, we examine the possible interdependency of the three different loan contract terms. Also, we try to determine which firm characteristics and exogenous factors are relevant for loan contracts. We find strong interdependencies between these contract terms with significant bi-directional relationships between collateral and loan maturity, loan rate and loan maturity, and a uni-directional relationship between loan rate and collateral. The conflicting signs within the collateral–loan maturity relationship and the loan interest rate–loan maturity relationship can be explained by our hypothesis that the choice for a certain loan maturity is primarily determined by borrowers' behaviors, whereas the loan rate and the collateral requirements are primarily determined by banks policies. In addition, our results support the relevance of firm quality, agency costs of debt and relationship lending in loan contract design.
Topic:
Economics and International Trade and Finance
Political Geography:
Vietnam and Southeast Asia

68. Financial Sector Development and Growth: The Chinese Experience

Author:
Mingming Zhou and Iftekhar Hasan
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper documents the financial and institutional developments of China during the past two decades, when China was successfully transformed from a rigid centralplanning economy to a dynamic market economy following its unique path. We empirically examine the relationship between financial development and economic growth in China by employing a panel sample covering 31 Chinese provinces during the important transition period 1986-2002. Our evidence suggests that the development of financial markets, institutions, and instruments have been robustly associated with economic growth in China.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
China and Asia

69. Excess Credit and the South Korean Crisis

Author:
Bassam A. Fattouh and Panicos O. Demetriades
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We provide a novel empirical analysis of the South Korean credit market that reveals large volumes of excess credit since the late 1970s, indicating that a sizeable proportion of total credit was being used to refinance unprofitable projects. Our findings are consistent with theoretical literature that suggests that soft budget constraints and overborrowing were significant factors behind the Korean financial crisis of 1997-98.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
Asia, South Korea, and Korea

70. The Rise and Halt of Economic Development in Brazil, 1945-2004: Industrial Catching-up, Institutional Innovation and Financial Fragility

Author:
Nelson H. Barbosa-Filho, José A.P. de Souza, and Leondardo Burlamaqui
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper seeks to explain the dynamics of Brazilian industrial catch-up in the last 60 years by discussing its background institutional conditions as well as its main macroeconomic features. After a brief introduction, the second section describes how after the institutional innovations introduced during the Vargas' and Kubitschek's administrations, a Brazilian version of the Developmental State was created, releasing the growth potential of the economy during the 1950s. The third section analyses the inflationary crisis and institutional inertia of the mid-1960s, and its solution through the introduction of a new of wave of institutional innovations and conflict management devices, which lead to the Brazilian growth miracle, until the debt crisis of early 1980s signaled its end. The fourth section analyses why the financial crisis, coupled with ineffective institutional changes and unsuccessful macroeconomic stabilization plans lead growth to a halt. It also includes an analysis of the pro-market reforms from the early 1990s onwards. The fifth section concludes the paper offering a brief sketch on how the analytical narrative fits the conceptual framework within which it was performed.
Topic:
Conflict Resolution, Development, and Economics
Political Geography:
Brazil and South America