Income inequality in the process of economic development : An empirical approach

This thesis studies the effect of income inequality on economic growth. This is done by analyzing panel data from several countries with both short and long time dimensions of the data. Two of the chapters study the direct effect of inequality on growth, and one chapter also looks at the possible indirect effect of inequality on growth by assessing the effect of inequality on savings. In Chapter two, the effect of inequality on growth is studied by using a panel of 70 countries and a new EHII2008 inequality measure. Chapter contributes on two problems that panel econometric studies on the economic effect of inequality have recently encountered: the comparability problem associated with the commonly used Deininger and Squire s Gini index, and the problem relating to the estimation of group-related elasticities in panel data. In this study, a simple way to 'bypass' vagueness related to the use of parametric methods to estimate group-related parameters is presented. The idea is to estimate the group-related elasticities implicitly using a set of group-related instrumental variables. The estimation results with new data and method indicate that the relationship between income inequality and growth is likely to be non-linear. Chapter three incorporates the EHII2.1 inequality measure and a panel with annual time series observations from 38 countries to test the existence of long-run equilibrium relation(s) between inequality and the level of GDP. Panel unit root tests indicate that both the logarithmic EHII2.1 inequality measure and the logarithmic GDP per capita series are I(1) nonstationary processes. They are also found to be cointegrated of order one, which implies that there is a long-run equilibrium relation between them. The long-run growth elasticity of inequality is found to be negative in the middle-income and rich economies, but the results for poor economies are inconclusive. In the fourth Chapter, macroeconomic data on nine developed economies spanning across four decades starting from the year 1960 is used to study the effect of the changes in the top income share to national and private savings. The income share of the top 1 % of population is used as proxy for the distribution of income. The effect of inequality on private savings is found to be positive in the Nordic and Central-European countries, but for the Anglo-Saxon countries the direction of the effect (positive vs. negative) remains somewhat ambiguous. Inequality is found to have an effect national savings only in the Nordic countries, where it is positive.

Ohjailusta kilpailuun : Suomen hallitusten kasvu- ja rakennepolitiikka vuosina 1962-1999

The study examines the contents, changes and the causes of changes of the growth and structural policy exercised by Finnish governments in 1962-1999. The policy is evaluated e.g. on the basis of government programmes. It is divided in the study into three phases: the phase of guided economy 1962-77, the transition period 1977-91 and the phase of competitive economy 1991-99. The opening of the economy has been the central factor influencing the contents of the growth and structural policy. When dividing the policy into ten sectors, it was found that the sectors losing weight during the study period are agricultural and forest policies and welfare policy and the sectors increasing weight are labour policy and environmental policy. Though impacts of the changes in the general line of the growth and structural policy could be seen in sector policies, the breaks in sector policies did not necessarily coincide with the breaks in the general line of the policy. In the study, in particular, the impacts of the factors affecting growth and structural policy thinking (political changes, foreign influences and changes in economics) are evaluated. The policy was influenced more by the prevailing ideological climate ("the spirit of time") than by political changes. Until the 1970s foreign influences mainly came from those individual Western European countries, where the role of government planning was important and where the economic development was favourable. Some impacts from socialist countries could be seen at the end of the 1960s and at the beginning of the 1970s. Since the 1980s the role of international organisations became emphasised. Also the impacts of the changes in economics could be seen in the changes in the general line of the growth and structural policy.

The Rocky Road of Social Sustainability : The Impact of Integrated Biodiversity Conservation and Development on the Local Realities in Ranomafana National Park, Madagascar

The objective of this study is to examine the social impacts of the integrated conservation and development project (ICDP) aimed at biodiversity conservation and local socio-economic development in the Ranomafana National Park (RNP), Madagascar. Furthermore, the study explores social sustainability and justice of the ICDP in Ranomafana. This ethnographically informed impact study uses of various field methods. The research material used consists of observation, interviews (key-person and focus group), school children's writings, official statistics and project documents. Fieldwork was conducted in three phases in 2001, 2002 and 2004 in twelve villages around the park, as well as in neighbouring areas of Ranomafana. However, four of those twelve villages were chosen for closer study. This study consists of five independent articles and a concluding chapter. Social impacts were studied through reproductive health indicators as well as a life security approach. Equity and distribution of benefits and drawbacks of ICDP were analysed and the actors related to the conservation in Ranomafana were identified. The children and adolescents' environmental views were also examined. The reproductive health indicators studied showed a poor state of reproductive health in the park area. Moreover, the existing social capital in the villages seemed to be fragmented due to economic difficulties that were partly caused by the conservation regulations. The ICDP in Ranomafana did not pay attention to the heterogeneity of the affected communities even though the local beneficiaries of the ICDP varied according to their ethnicity, living place, wealth, social position and gender. In addition, various conservation actors (local people in various groups, local authorities, tourist business owners, conservation NGOs and scientists) contest their interests over the forest, conservation and its related activities. This study corroborates the same type of evidence and conclusions discussed in other similar cases elsewhere: so called social conservation programmes still cannot meet the needs of the people living near the protected areas; on the contrary, they even have a reverse impact on the people's lives. A fundamental misunderstood assumption in the conservation process in Ranomafana was to consider the local people as a problem for biodiversity conservation. Major reasons for the failure of the ICDP in Ranomafana include a lack of local institutions that would have been able to communicate as equals with the conservation NGOs as well as to transfer the tradition of the authoritarian governance in conservation management together with the over-appreciation of scientific biodiversity, and lack of will to understand the local people's rights to use the forest for their livelihoods.

Political Risk in Credit Evaluation: Empirical Studies and Survey Results

Financing trade between economic agents located in different countries is affected by many types of risks, resulting from incomplete information about the debtor, the problems of enforcing international contracts, or the prevalence of political and financial crises. Trade is important for economic development and the availability of trade finance is essential, especially for developing countries. Relatively few studies treat the topic of political risk, particularly in the context of international lending. This thesis explores new ground to identify links between political risk and international debt defaults. The core hypothesis of the study is that the default probability of debt increases with increasing political risk in the country of the borrower. The thesis consists of three essays that support the hypothesis from different angles of the credit evaluation process. The first essay takes the point of view of an international lender assessing the credit risk of a public borrower. The second investigates creditworthiness assessment of companies. The obtained results are substantiated in the third essay that deals with an extensive political risk survey among finance professionals in developing countries. The financial instruments of core interest are export credit guaranteed debt initiated between the Export Credit Agency of Finland and buyers in 145 countries between 1975 and 2006. Default events of the foreign credit counterparts are conditioned on country-specific macroeconomic variables, corporate-specific accounting information as well as political risk indicators from various international sources. Essay 1 examines debt issued to government controlled institutions and conditions public default events on traditional macroeconomic fundamentals, in addition to selected political and institutional risk factors. Confirming previous research, the study finds country indebtedness and the GDP growth rate to be significant indicators of public default. Further, it is shown that public defaults respond to various political risk factors. However, the impact of the risk varies between countries at different stages of economic development. Essay 2 proceeds by investigating political risk factors as conveivable drivers of corporate default and uses traditional accounting variables together with new political risk indicators in the credit evaluation of private debtors. The study finds links between corporate default and leverage, as well as between corporate default and the general investment climate and measeures of conflict in the debtor country. Essay 3 concludes the thesis by offering survey evidence on the impact of political risk on debt default, as perceived and experienced by 103 finance professionals in 38 developing countries. Taken together, the results of the thesis suggest that various forms of political risk are associated with international debt defaults and continue to pose great concerns for both international creditors and borrowers in developing countries. The study provides new insights on the importance of variable selection in country risk analysis, and shows how political risk is actually perceived and experienced in the riskier, often lower income countries of the global economy.

Perinatal mortality and maternal health in rural China

Background and context Since the economic reforms of 1978, China has been acclaimed as a remarkable economy, achieving 9% annual growth per head for more than 25 years. However, China's health sector has not fared well. The population health gains slowed down and health disparities increased. In the field of health and health care, significant progress in maternal care has been achieved. However, there still remain important disparities between the urban and rural areas and among the rural areas in terms of economic development. The excess female infant deaths and the rapidly increasing sex ratio at birth in the last decade aroused serious concerns among policy makers and scholars. Decentralization of the government administration and health sector reform impacts maternal care. Many studies using census data have been conducted to explore the determinants of a high sex ratio at birth, but no agreement has been so far reached on the possible contributing factors. No study using family planning system data has been conducted to explore perinatal mortality and sex ratio at birth and only few studies have examined the impact of the decentralization of government and health sector reforms on the provision and organization of maternal care in rural China. Objectives The general objective of this study was to investigate the state of perinatal health and maternal care and their determinants in rural China under the historic context of major socioeconomic reforms and the one child family planning policy. The specific objectives of the study included: 1) to study pregnancy outcomes and perinatal health and their correlates in a rural Chinese county; 2) to examine the issue of sex ratio at birth and its determinants in a rural Chinese county; 3) to explore the patterns of provision, utilization, and content of maternal care in a rural Chinese county; 4) to investigate the changes in the use of maternal care in China from 1991 to 2003. Materials and Methods This study is based on a project for evaluating the prenatal care programme in Dingyuan county in 1999-2003, Anhui province, China and a nationwide household health survey to describe the changes in maternal care utilization. The approaches used included a retrospective cohort study, cross sectional interview surveys, informant interviews, observations and the use of statistical data. The data sources included the following: 1) A cohort of pregnant women followed from pregnancy up to 7 days after birth in 20 townships in the study county, collecting information on pregnancy outcomes using family planning records; 2) A questionnaire interview survey given to women who gave birth between 2001 and 2003; 3) Various statistical and informant surveys data collected from the study county; 4) Three national household health interview survey data sets (1993-2003) were utilized, and reanalyzed to described the changes in maternity care utilization. Relative risks (RR) and their confidence intervals (CI) were calculated for comparison between parity, approval status, infant sex and township groups. The chi-square test was used to analyse the disparity of use of maternal care between and within urban and rural areas and its trend across the years in China. Logistic regression was used to analyse the factors associated with hospital delivery in rural areas. Results There were 3697 pregnancies in the study cohort, resulting in 3092 live births in a total population of 299463 in the 20 study townships during 1999-2000. The average age at pregnancy in the cohort was 25.9 years. Of the women, 61% were childless, 38% already had one child and 0.3% had two children before the current pregnancy. About 90% of approved pregnancies ended in a live birth while 73% of the unapproved ones were aborted. The perinatal mortality rate was 69 per thousand births. If the 30 induced abortions in which the gestational age was more than 28 weeks had been counted as perinatal deaths, the perinatal mortality rate would have been as high as 78 per thousand. The perinatal mortality rate was negatively associated with the wealth of the township. Approximately two thirds of the perinatal deaths occurred in the early neonatal period. Both the still birth rate and the early neonatal death rate increased with parity. The risk of a stillbirth in a second pregnancy was almost four times that for a first pregnancy, while the risk of early neonatal deaths doubled. The early neonatal mortality rate was twice as high for female as for male infants. The sex difference in the early neonatal mortality rate was mainly attributable to mortality in second births. The male early neonatal mortality rate was not affected by parity, while the female early neonatal mortality rate increased dramatically with parity: it was about six times higher for second births than for first births. About 82% early neonatal deaths happened within 24 hours after birth, and during that time, girls were almost three times more likely to die than boys. The death rate of females on the day of birth increased much more sharply with parity than that of males. The total sex ratio at birth of 3697 registered pregnancies was 152 males to 100 females, with 118 and 287 in first and second pregnancies, respectively. Among unapproved pregnancies, there were almost 5 live-born boys for each girl. Most prenatal and delivery care was to be taken care of in township hospitals. At the village level, there were small private clinics. There was no limitation period for the provision of prenatal and postnatal care by private practitioners. They were not permitted to provide delivery care by the county health bureau, but as some 12% of all births occurred either at home or at private clinics; some village health workers might have been involved. The county level hospitals served as the referral centers for the township hospitals in the county. However, there was no formal regulation or guideline on how the referral system should work. Whether or not a woman was referred to a higher level hospital depended on the individual midwife's professional judgment and on the clients' compliance. The county health bureau had little power over township hospitals, because township hospitals had in the decentralization process become directly accountable to the township government. In the township and county hospitals only 10-20% of the recurrent costs were funded by local government (the township hospital was funded by the township government and the county hospital was funded by the county government) and the hospitals collected user fees to balance their budgets. Also the staff salaries depended on fee incomes by the hospital. The hospitals could define the user charges themselves. Prenatal care consultations were however free in most township hospitals. None of the midwives made postnatal home visits, because of low profit of these services. The three national household health survey data showed that the proportion of women receiving their first prenatal visit within 12 weeks increased greatly from the early to middle 1990s in all areas except for large cities. The increase was much larger in the rural areas, reducing the urban-rural difference from more than 4 times to about 1.4 times. The proportion of women that received antenatal care visits meeting the Ministry of Health s standard (at least 5 times) in the rural areas increased sharply from 12% in 1991-1993 to 36% in 2001-2003. In rural areas, the proportion increase was much faster in less developed areas than in developed areas. The hospital delivery rate increased slightly from 90% to 94% in urban areas while the proportion increased from 27% to 69% in rural areas. The fastest change was found to be in type 4 rural areas, where the utilization even quadrupled. The overall difference between rural and urban areas was substantially narrowed over the period. Multiple logistic regression analysis shows that time periods, residency in rural or urban areas, income levels, age group, education levels, delivery history, occupation, health insurance and distance from the nearest health care facilities were significantly associated with hospital delivery rates. Conclusions 1. Perinatal mortality in this study was much higher than that for urban areas as well as any reported rate from specific studies in rural areas of China. Previous studies in which calculations of infant mortality were not based on epidemiological surveys have been shown to underestimate the rates by more than 50%. 2. Routine statistics collected by the Chinese family planning system proved to be a reliable data source for studying perinatal health, including still births, neonatal deaths, sex ratio at birth and among newborns. National Household Health Survey data proved to be a useful and reliable data source for studying population health and health services. Prior to this research there were few studies in these areas available to international audiences. 3.Though perinatal mortality rate was negatively associated with the level of township economic development, the excess female early neonatal mortality rate contributed much more to high perinatal mortality rate than economic factors. This was likely a result of the role of the family planning policy and the traditional preferences for sons, which leads to lethal neglect of female newborns and high perinatal mortality. 4. The selective abortions of female foetuses were likely to contribute most to the high sex ratio at birth. The underreporting of female births seemed to have played a secondary role. The higher early neonatal mortality rate in second-born as compared to first-born children, particularly in females, may indicate that neglect or poorer care of female newborn infants also contributes to the high sex ratio at birth or among newborns. Existing family planning policy proved not to effectively control the steadily increased birth sex ratio. 5. The rural-urban gap in service utilization was on average significantly narrowed in terms of maternal healthcare in China from 1991 to 2003. This demonstrates that significant achievements in reducing inequities can be made through a combination of socio-economic development and targeted investments in improving health services, including infrastructure, staff capacities, and subsidies to reduce the costs of service utilization for the poorest. However, the huge gap which persisted among cities of different size and within different types of rural areas indicated the need for further efforts to support the poorest areas. 6. Hospital delivery care in the study county was better accepted by women because most of women think delivery care was very important while prenatal and postnatal care were not. Hospital delivery care was more systematically provided and promoted than prenatal and postnatal care by township hospital in the study area. The reliance of hospital staff income on user fees gave the hospitals an incentive to put more emphasis on revenue generating activities such as delivery care instead of prenatal and postnatal care, since delivery care generated much profits than prenatal and postnatal care . Recommendations 1. It is essential for the central government to re-assess and modify existing family planning policies. In order to keep national sex balance, the existing practice of one couple one child in urban areas and at-least-one-son a couple in rural areas should be gradually changed to a two-children-a-couple policy throughout the country. The government should establish a favourable social security policy for couples, especially for rural couples who have only daughters, with particular emphasis on their pension and medical care insurance, combined with an educational campaign for equal rights for boys and girls in society. 2. There is currently no routine vital-statistics registration system in rural China. Using the findings of this study, the central government could set up a routine vital-statistics registration system using family planning routine work records, which could be used by policy makers and researchers. 3. It is possible for the central and provincial government to invest more in the less developed and poor rural areas to increase the access of pregnant women in these areas to maternal care services. Central government together with local government should gradually provide free maternal care including prenatal and postnatal as well as delivery care to the women in poor and less developed rural areas. 4. Future research could be done to explore if county and the township level health care sector and the family planning system could be merged to increase the effectiveness and efficiency of maternal and child care. 5. Future research could be done to explore the relative contribution of maternal care, economic development and family planning policy on perinatal and child health using prospective cohort studies and community based randomized trials. Key words: perinatal health, perinatal mortality, stillbirth, neonatal death, sex selective abortion, sex ratio at birth, family planning, son preference, maternal care, prenatal care, postnatal care, equity, China