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3411. 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

3412. The Impacts of Growth and Inequality on Rural Poverty in China

Author:
Guanghua Wan and Yin Zhang
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper analyzes the evolution of poverty in China from the late 1980s to the late 1990s, employing a version of Shapley decomposition tailored to unit-record household survey data. The changes in poverty trends are attributed to two proximate causes— income growth and shifts in income distribution. Different datasets, poverty lines, poverty measures, and equivalence scales are used to examine the robustness of the results. Potential biases arising from ignoring differential regional prices and inflation are also investigated. Notwithstanding some ambiguities in the results, it is consistently found that rural poverty increased in the second half of the 1990s and adverse distributional changes are the main cause.
Topic:
Demographics, Development, and Poverty
Political Geography:
China and Asia

3413. The Inequality-Growth Nexus in the Short and Long Runs: Empirical Evidence from China

Author:
Guanghua Wan, Zhao Chen, and Ming Lu
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper argues that the conventional approach of data averaging is problematic for exploring the growth—inequality nexus. It introduces the polynomial inverse lag (PIL) framework so that the impacts of inequality on investment, education, and ultimately on growth can be measured at precisely defined time lags. Combining PIL with simultaneous systems of equations, we analyze the growth—inequality relationship in postreform China, finding that this relationship is nonlinear and is negative irrespective of time horizons.
Topic:
Civil Society, Development, and Education
Political Geography:
China and Asia

3414. 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

3415. 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

3416. 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

3417. 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

3418. 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

3419. 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

3420. Primary Education in India: Prospects of Meeting the MDG Target

Author:
Bernarda Zamora and Sonia Bhalotra
Publication Date:
07-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper uses two large repeated cross-sections, one for the early 1990s, and one for the late 1990s, to describe growth in school enrolment and completion rates for boys and girls in India, and to explore the extent to which enrolment and completion rates have grown over time. It decomposes this growth into a component due to changes in the characteristics that determine schooling, and another associated with changes in the responsiveness of schooling to given characteristics. Our results caution against the common practice of using current data to make future projections on the assumption that the model parameters are stable. The analysis nevertheless performs illustrative simulations relevant to the question of whether India will be able to achieve the Millennium Development Goal of realising universal primary education by the year 2015. The simulations suggest that India will achieve universal attendance, but that primary school completion rates will not exhibit much progress.
Topic:
Civil Society, Development, and Education
Political Geography:
India and Asia