http://repub.eur.nl/res/concept/jel-O12/ Recent publications classified by JEL Code O12 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/34709/ 2012-01-01T00:00:00Z Micro and small enterprises (MSEs) in developing countries are typically considered to be severely credit constrained. Additionally, high business risks may partly explain why the capital stocks of MSEs remain low. This article analyzes the determinants of the capital stocks of MSEs in poor economies focusing on credit constraints and risk. The analysis is based on a unique, albeit cross-sectional but backward‐looking, micro data set on MSEs covering the economic capitals of seven West‐African countries. The main result is that capital market imperfections indeed seem to explain an important part of the variation in capital stocks in the early lifetime of MSEs. Furthermore, the analyses show that risk plays a key role in capital accumulation. Risk-averse individuals seem to adjust their initially low capital stocks upwards when enterprises grow older. MSEs in risky activities owned by wealthy individuals even seem to over-invest when they start their business and subsequently adjust capital stocks downwards. As other firms simultaneously suffer from capital shortages, such behavior may imply large inefficiencies. Lange, S. Lay, J. Grimm, M. http://repub.eur.nl/res/pub/38423/ 2012-01-01T00:00:00Z We investigate the returns to capital and capital accumulation using panel data of Peruvian micro enterprises (MEs). Marginal returns to capital are found to be very high at low levels of capital, but rapidly decreasing at higher levels. The dynamic analyses of capital accumulation in MEs suggest that credit constraints explain a major part of the variation in firm growth. We find a very large positive effect of household non-business wealth on capital stocks of MEs. We also show a sizable effect of risk on accumulation and pronounced interactions between wealth and risk. The presented evidence is consistent with poorly endowed entrepreneurs who operate in imperfect capital markets and a very risky environment. Grimm, M. Göbel, K. Lay, J. http://repub.eur.nl/res/pub/38555/ 2012-01-01T00:00:00Z Introduction. The immediate goal of the National Rural Employment Guarantee Scheme (NREGS) is to ensure a social safety net for vulnerable groups by providing a fall-back source of employment when other alternatives are scarce. However, its long-term goals are to create durable rural assets and infrastructure which meet local needs and help address chronic poverty and to foster a model of governance based on the principles of grass-root democracy and transparency (Ministry of Rural Development, 2008). While several papers have examined pertinent aspects of the functioning of the programme, such as targeting (Jha et al., 2009), impact on consumption (Ravi and Engler, 2009) and various implementation issues including corruption (Rai, 2008; Institute of Applied Manpower Research, 2008) there is limited work on the quality and upkeep of the infrastructure built through the programme and indeed whether the constructed projects meet local needs. ... Roy, J. Bedi, A.S. http://repub.eur.nl/res/pub/26694/ 2011-07-01T00:00:00Z Empirical evidence suggests that regional disparities in income are often very wide, that these disparities do not necessarily disappear as economies grow and that these disparities are themselves a major driver of growth. We use a novel approach based on multilevel modelling to decompose the sources of inequality in household incomes in Burkina Faso. We show that differences in income across space are explained not only by the spatial concentration of households with favourable characteristics but to a large extent also by disparities in community endowments. Climatic differences across regions do matter, also, but to a much smaller extent. On the basis of the findings, it would be worth assessing the potential effects of policies which build and enhance infrastructure that connects communities complemented by interventions targeted to specific villages that particularly lag behind. Gräb, J. Grimm, M. http://repub.eur.nl/res/pub/34714/ 2011-01-01T00:00:00Z Abstract: This paper investigates the dynamics of the informal sector in Madagascar during a period of fragile growth. Overall, the behavior of informal firms in terms of earnings, employment and capital accumulation points to a degree of heterogeneity which goes beyond a simple dualistic model and even a more refined model that would distinguish between an upper entrepreneurial and a lower subsistence tier within the informal sector. However, in line with the dualistic model, the informal sector indeed fulfils a labor absorbing function in times of crisis. During the growth period we see capital accumulation in most of the sectors and lots of evidence that households expand their activities. However, this happens mainly through the creation of new firms instead of the expansion of existing ones, which is consistent with much higher returns at very low levels of capital. More rapid expansion can be observed in sectors that operate with lower capital intensity, which is also consistent with risk or credit constraints as major deterrents to expansion. While there is some indication that total factor productivity increased over time, returns to capital and labor where not higher at the end of the observation period than at the beginning. Returns are also rather low at high levels of capital. These findings point to a limited growth potential of the informal sector as a whole. The heterogeneity in capital returns hints at large inefficiencies in allocating capital across informal firms. Grimm, M. Lay, J. Vaillant, J. Roubaud, F. http://repub.eur.nl/res/pub/34804/ 2011-01-01T00:00:00Z Height-for-age (HA) and weight-for-age (WA) of children are standard measures to study the determinants of stunting and short-term underweight. Rather than studying these indicators separately, this paper looks at their interaction and therefore at the dynamics of height and weight. Considering HA a child's health stock and WA nutritional investment, we develop an overlapping generations model. The main features of the model are self-productivity of health stocks and the dynamic complementarity between past health stocks and contemporaneous nutrition. We test the model's predictions on a Senegalese panel of 305 children between 0 and 5 years over three periods. To control for endogeneity and serial correlation we employ different GMM methods. We find evidence of self- productive health stocks and that child health produced at one stage raises the productivity of nutritional inputs at subsequent stages. Our results indicate that child health is quickly depleted and needs constant updating. Simulations based on our estimates show that a positive nutritional shock during the first six months of life is essentially depleted at the age of 2. Consequently, sustainable development and nutrition programs have to be long-term and yield higher returns if they reach babies in the early months of infancy. Wagner, N. Rieger, M. http://repub.eur.nl/res/pub/20326/ 2010-09-02T00:00:00Z Recent concepts such as ‘megaregions’ and ‘polycentric urban regions’ emphasize that external economies are not confined to a single urban core, but are shared among a collection of nearby and linked cities. However, empirical analyses of agglomeration and agglomeration externalities have so far neglected the multicentric spatial organization of agglomeration and the possibility of the ‘sharing’ or ‘borrowing’ of size between cities. The authors take up this empirical challenge by analyzing how different spatial structures, in particular the monocentricity – polycentricity dimension, affect the economic performance of US metropolitan areas. Ordinary least squares and two-stage least-squares models explaining labor productivity show that spatial structure matters: polycentricity is associated with higher labor productivity. This appears to justify suggestions that, compared with more monocentric metropolitan areas, agglomeration diseconomies remain relatively limited in the more polycentric metropolitan areas, whereas agglomeration externalities are to some extent shared among the cities in such an area. However, it was also found that a network of geographically proximate smaller cities cannot substitute for the urbanization externalities of a single large city. Meijers, E.J. Burger, M.J. http://repub.eur.nl/res/pub/19534/ 2010-04-01T00:00:00Z Conceptually, the degrees of spatial and functional integration and urban complementarities in economic network relations are hypothesised to be important. In this paper, data on interfirm relations in the Dutch Randstad are used to test conditions for integration and the existence of economic complementarities. A clear hierarchy is observed in the different types of spatial interdependencies in the Randstad, in which the central place model prevails. Furthermore, no evidence is found for the functional integration of municipalities in the Randstad. It is concluded that, at this moment, the Randstad does not function as a spatially and functionally integrated region and that spatial economic policy can better focus on smaller regions within the Randstad. This also calls into question the applicability of the urban network concept in general, as the Dutch Randstad is usually seen as a prime example of an economically successful polycentric urban system. Oort, F.G. van Burger, M.J. Raspe, O. http://repub.eur.nl/res/pub/22539/ 2010-01-01T00:00:00Z SUMMARY Women's bargaining power is generally analyzed only with individual level and household level variables. We add a third level, namely institutional bargaining power. We define this as bargaining power which one party freely derives from unequal social norms. In the bargaining literature there is a common paradoxical finding, namely that more access to and control over individual resources sometimes decreases rather than increases women‟s bargaining outcomes. With household survey data from Ethiopia and making use of multi-level modeling and an aggregate model with interaction terms, we suggest that this paradoxical effect can be explained by very unequal gender norms – gendered institutions – at the group level. In our case, we used ethnic groups to show that in groups where gender norms are very unequal, individual and household level bargaining power variables effects are mediated by ethnic gendered institutions. A policy implication of our findings is that gender policy may become more effective with shifting the emphasis from a largely individual approach to an institutional approach to support women's empowerment. Staveren, I.P. van Mabsout, R. http://repub.eur.nl/res/pub/34781/ 2010-01-01T00:00:00Z Abstract – Previous research has shown that in many low and middle income countries micro and small entrepreneurs achieve relative high marginal returns to capital but show only very low reinvestment rates. Existing research is rather inconclusive about the possible causes. We explore whether forced solidarity, i.e. abusive demands by the family and kin hinder entrepreneurs to save and to invest. We start from a relatively simple theoretical model in which households consume and pursue different income generating activities, mainly the production of goods and services and the engagement in dependent wage work outside the household. Value added of the household business is subject to a solidarity tax imposed by the household’s wider family and kin-group. In this model a higher solidarity tax leads to a reallocation of productive resources away from household production to other income generating activities and leisure. We use an original data set of West-African migrant entrepreneurs to see whether the empirical observation is consistent with the predictions of the model. We find some evidence that family and kinship structures within the city enhance labour effort and the use of capital. However, closeness to the area of origin seem to have adverse effects on both. Grimm, M. Gubert, F. None Koriko, O. Lay, J. Nordman, C.J. http://repub.eur.nl/res/pub/17431/ 2009-12-08T00:00:00Z Recent concepts as megaregions and polycentric urban regions emphasize that external economies are not confined to a single urban core, but shared among a collection of close-by and linked cities. However, empirical analyses of agglomeration and agglomeration externalities so-far neglects the multicentric spatial organization of agglomeration and the possibility of ‘sharing’ or ‘borrowing’ of size between cities. This paper takes up this empirical challenge by analyzing how different spatial structures, in particular the monocentricity – polycentricity dimension, affect the economic performance of U.S. metropolitan areas. OLS and 2SLS models explaining labor productivity show that spatial structure matters. Polycentricity is associated with higher labor productivity. This appears to justify suggestions that, compared to relatively monocentric metropolitan areas, agglomeration diseconomies remain relatively limited in the more polycentric metropolitan areas, while agglomeration externalities are indeed to some extent shared among the cities in such an area. However, it was also found that a network of geographically proximate smaller cities cannot provide a substitute for the urbanization externalities of a single large city. Meijers, E.J. Burger, M.J. http://repub.eur.nl/res/pub/16214/ 2009-06-29T00:00:00Z The current debate on polycentric urban development suggests that inter-firm relations are important for the creation and sustainment of urban networks. Conceptually, the degrees of spatial and functional integration and urban complementarities in economic network relations are hypothesised to be important. However, the theoretical economic rationale has not been convincingly tested. In this paper, we use data on inter-firm relations in the Dutch Randstad to test conditions for integration and the existence of economic complementarities within this region. Contrary to the ‘polycentricity hypothesis’, we observe a clear hierarchy in the different types of spatial interdependencies in the Randstad, in which the central place model prevails. Furthermore, we do not find evidence for the functional integration of municipalities in the Randstad. We conclude that at this moment the Randstad does not function as a spatially and functionally integrated region, and that spatial economic policy can better focus on smaller regions within the Randstad when urban economic complementarities and integration are desired. This also calls into question the applicability of the urban network concept in general, as the Dutch Randstad is usually seen as a prime example of an economically successful polycentric urban system. Oort, F.G. van Burger, M.J. Raspe, O. http://repub.eur.nl/res/pub/18721/ 2009-04-01T00:00:00Z I analyze the impact of food price inflation on parental decisions to send their children to school.* Moreover, I use the fact that food crop farmers and cotton farmers were exposed differently to that shock to estimate the income elasticity of school enrolment. The results suggest that the shock-induced loss in purchasing power had an immediate effect on enrolment rates. Instrumental variable estimates show that the effect of household income on children’s school enrolment is much larger than a simple OLS regression would suggest. Hence, policies to expand education in Sub-Saharan Africa should not neglect the demand side. Grimm, M. http://repub.eur.nl/res/pub/18725/ 2009-02-01T00:00:00Z Empirical evidence suggests that regional disparities in incomes are often very high, that these disparities do not necessarily disappear as economies grow and that these disparities are itself an important driver of growth. We use a novel approach based on multilevel modeling to decompose the sources of spatial disparities in incomes among households in Burkina Faso. We show that spatial disparities are not only driven by the spatial concentration of households with particular endowments but to a large extent also by disparities in community endowments. Climatic differences across regions do also matter, but to a much smaller extent. Gräb, J. Grimm, M. http://repub.eur.nl/res/pub/18745/ 2007-11-01T00:00:00Z There is a well-known debate about the respective roles of geography versus institutions in explaining the long-term development of countries. These debates have usually been based on cross-country regressions where questions about parameter heterogeneity, unobserved heterogeneity, and endogeneity cannot easily be controlled for. The innovation of Acemoglu, Johnson and Robinson (2001) was to address this last point by using settler mortality as an instrument for endogenous institutions and found that this supported their line of reasoning. We believe there is value-added to consider this debate at the micro level within a country as particularly questions of parameter heterogeneity and unobserved heterogeneity are likely to be smaller than between countries. Hence, we examine the determinants of economic development across villages on the Indonesian Island of Sulawesi and find technology adoption to play a crucial role. We show that geography-induced migration together with population size foster through their effect on institutions technology adoption. Grimm, M. Klasen, S. http://repub.eur.nl/res/pub/34775/ 2007-01-01T00:00:00Z Previous poverty assessments of Burkina Faso neglected some important methodological issues. They were therefore misleading and led to the so-called 'Burkinabè Growth-Poverty Parado', i.e., increasing poverty despite sustained macro-economic growth and constant inequality. We estimate that poverty significantly decreased between 1994 and 2003, i.e., growth was in contrast to what previous poverty estimates suggested 'pro-poor'. However, we also demonstrate that between 1994 and 1998, poverty indeed increased despite a good macro-economic performance. This was caused by a severe drought and the devaluation of the CFA Franc, which led to a profound deterioration of the purchasing power of the poor, an issue, which was also overseen by previous studies. Grimm, M. Günther, I. http://repub.eur.nl/res/pub/8145/ 2006-11-30T00:00:00Z It is one of the most popular and debated topics in economic science: economic growth. Where do high or low growth rates come from and how do the mechanisms that underlie economic growth work? Who gains and who loses? Uncertainty has a negative impact on economic growth, directly through negatively affecting the effectiveness of R&D, and indirectly through reducing the level of openness of a country. The process of R&D can continue indefinitely if an economy is able to constantly reduce its coss by having access to a pool of general knowledge that is sufficiently large. Dynamic welfare effects oflowering trade restrictions are much more important and much larger for an economy if it involves changing the share of new innovations and goods that are introduced. The more open a small developing economy is, the larger the dynamic welfare gains are. Obsolescence can be introduced successfully in a horizontal endogenous growth model via incorporating maintenance costs. When teh size of the maintenance cost sector increases at the expense of the production and R&D sectors, growth rates drop. Berden, K.G. http://repub.eur.nl/res/pub/1128/ 2004-01-21T00:00:00Z Entrepreneurial activities in transition economies go beyond (technical) entrepreneurship. In an environment of institutional and procedural uncertainty entrepreneurs need to select business partners, choose a mode of governance that stabilizes long term business relations, and settle for such property rights regime that best matches the entrepreneurial endeavour. Bases on fieldwork in China the paper shows how entrepreneurs combine their predisposition for social relations with economic reasoning when they embed firms in one location, in mixed forms of relational and contractual governance, and specific ownership structures. The empirical research points to alternative economic concepts which allow further analysing the interaction between individual entrepreneurship and the emergence of market conforming institutions. Krug, B. Hendrischke, H. http://repub.eur.nl/res/pub/15875/ 2002-11-01T00:00:00Z In the present paper we address the relationship between business ownership and economic development. We will focus upon three issues. First, how is the equilibrium rate of business ownership related to the stage of economic development? Second, what is the speed of convergence towards the equilibrium rate when the rate of business ownership is out-of-equilibrium? Third, to what extent does deviating from the equilibrium rate of business ownership hamper economic growth? Hypotheses concerning all three issues are formulated in the framework of a new two-equation model. We find confirmation for the hypothesized economic growth penalty on deviations from the equilibrium rate of business ownership using a data panel of 23 OECD countries. An important policy implication of our exercises is that low barriers to entry and exit of businesses are necessary conditions for the equilibrium seeking mechanisms that are vital for a sound economic development. Carree, M.A. Stel, A.J. van Thurik, A.R. Wennekers, A.R.M. http://repub.eur.nl/res/pub/15878/ 2001-04-01T00:00:00Z A recent literature analyzing the dynamics of firms and industries suggests that the contribution of new and small firms to the dynamics of competition is significantly greater than found in a static analysis. Policy makers have responded by implementing a wide range of programs to reduce barriers to new-firm startup. At the same time, a number of European countries have maintained systems of collective agreements imposing industry-wide standards on the deployment and remuneration of inputs, particularly labor. The purpose of this paper is to examine whether the ability to deviate from the industry standards practiced by the incumbent firms promotes the viability of small and new firms. We examine this using a longitudinal data base from the Netherlands, where a system of rigid industry-wide collective agreements was abandoned in favor of greater flexibility. Whether or not the ability of small firms to deviate from the standards and practices of the incumbent firms in the industry promotes their viability in the Dutch context is instructive to other European countries, such as Germany and France. The latter countries have identified the startup of new firms as a central policy goal, but have maintained systems of industry-wide collective agreements. The important finding emerging from this paper is that wage flexibility promotes the viability of small firms and thus can be considered to be an instrument of competition policy in a dynamic context Audretsch, D.B. Leeuwen, G. van Menkveld, A.J. Thurik, A.R.