Determinants of government consumption expenditure in developing countries : a panel data analysis

The paper focuses on the recent pattern of government consumption expenditure in developing countries and estimates the determinants which have influenced government expenditure. Using a panel data set for 111 developing countries from 1984 to 2004, this study finds evidence that political and institutional variables as well as governance variables significantly influence government expenditure. Among other results, the paper finds new evidence of Wagner's law which states that peoples' demand for service and willingness to pay is income-elastic hence the expansion of public economy is influenced by the greater economic affluence of a nation (Cameron1978). Corruption is found to be influential in explaining the public expenditure of developing countries. On the contrary, size of the economy and fractionalization are found to have significant negative association with government expenditure. In addition, the study finds evidence that public expenditure significantly shrinks under military dictatorship compared with other form of governance.

Determinants of inbound tourists in Cambodia : a dynamic panel data approach

Understanding the determinants of tourism demand is crucial for the tourism sector. This paper develops a dynamic panel model to examine the determinants of inbound tourists to Siem Reap airport, Phnom Penh airport, and land and waterway borders in Cambodia. Consistent with the consumer theory of tourism consumption, a 10% increase in the origin country GDP per capita is predicted to increase the number of tourist visits to Siem Reap airport by 5.8%. A 10% increase in the real exchange rate between the origin country and Cambodia is predicted to decrease the number of tourist visits by 0.89%. In contrast, the number of foreign tourists in a previous period has little effect on the number of foreign tourists in the current period. Additionally, the determinants are different by the mode of entry to Cambodia.

The dynamics of spending and absorption of aid : panel data analysis

In September 1999, the International Monetary Fund (IMF) established the Poverty Reduction and Growth Facility (PRGF) to make the reduction of poverty and the enhancement of economic growth the fundamental objectives of lending operations in its poorest member countries. This paper studies the spending and absorption of aid in PRGF-supported programs, verifies whether the use of aid is programmed to be smoothed over time, and analyzes how considerations about macroeconomic stability influence the programmed use of aid. The paper shows that PRGF-supported programs permit countries to utilize all increases in aid within a few years, showing smoothed use of aid inflows over time. Our results reveal that spending is higher than absorption in both the long-run and short-run use of aid, which is a robust finding of the study. Furthermore, the paper demonstrates that the long-run spending exceeds the injected increase of aid inflows in the economy. In addition, the paper finds that the presence of a PRGF-supported program does not influence the actual absorption or spending of aid.

How has financial deepening affected poverty reduction in India? : empirical analysis using state-level panel data

This paper examines empirically whether financial deepening has contributed to poverty reduction in India. Using unbalanced panel data for 28 states and union territories between 1973 and 2004, we estimate models in which the poverty ratio is explained by financial deepening, controlling for international openness, inflation rate, and economic growth. From the dynamic generalised method of moments (GMM) estimation, we find that financial deepening and economic growth alleviate poverty, while international openness and the inflation rate have the opposite effect. These results are robust to changes in the poverty ratios in rural areas, urban areas, and the whole economy.

Marriage as women's old age insurance : evidence from migration and land inheritance practices in rural Tanzania

In a traditional system of exogamous and patrilocal marriage prevalent in much of Sub-Saharan Africa, when she marries, a rural woman typically leaves her kin to reside with her husband living outside her natal village. Since a village that allows a widow to inherit her late husband's land can provide her with old age security, single females living outside the village are more likely to marry into the village. Using a natural experimental setting, provided by the longitudinal household panel data drawn from rural Tanzania for the period from 1991 to 2004, during which several villages that initially banned a widow's land inheritance removed this discrimination, this study provides evidence in support of this view, whereby altering a customary land inheritance rules in a village in favor of widows increased the probability of males marrying in that village. This finding suggests that providing rural women with old age protection (e.g., insurance, livelihood protection) has remarkable spatial and temporal welfare effects by influencing their decision to marry.

Ramadan school holidays as a natural experiment : impacts of seasonality on school dropout in Bangladesh

In 2000, Ramadan school vacation coincided with the original annual exam period of December in Bangladesh. This forced schools to pre-pone their final exam schedules in November, which was the month before the harvest begins. 'Ramadan 2000' is a natural experiment that reduced the labor demand for children during the exam period. Using household level panel data of 2000 and 2003, and after controlling for various unobservable variations including individual fixed effects, aggregate year effects, and subdistrict-level year effects, this paper finds evidence of statistically significant impact of seasonal labor demand on school dropout in Bangladesh among the children from agricultural households.

Can FDI promote export diversification and sophistication of host countries? : dynamic panel system GMM analysis

Recent trade literature highlights the importance of export diversification and upgrading in fostering faster and sustainable economic growth. This study investigates the impact of FDI inflow and stock on the level of export diversification and sophistication in host country's export baskets. By utilizing the dynamic panel data model, we find that the five-year lagged FDI inflow correlates positively with both export diversification and sophistication, and FDI stock makes the positive contribution to export sophistication. These findings provide support for the possibility of successful capabilities transfer to and building by local firms. We also find that these positive impacts of FDI exist only in developing countries.

Tariff reductions and labor demand elasticities : evidence from Chinese firm-level data

International production fragmentation has been a global trend for decades, becoming especially important in Asia where the manufacturing process is fragmented into stages and dispersed around the region. This paper examines the effects of input and output tariff reductions on labor demand elasticities at the firm level. For this purpose, we consider a simple heterogenous firm model in which firms are allowed to export their products and to use imported intermediate inputs. The model predicts that only productive firms can use imported intermediate inputs (outsourcing) and tend to have larger constant-output labor demand elasticities. Input tariff reductions would lower the factor shares of labor for these productive firms and raise conditional labor demand elasticities further. We test these empirical predictions, constructing Chinese firm-level panel data over the 2000--2006 period. Controlling for potential tariff endogeneity by instruments, our empirical studies generally support these predictions.

Do electricity supply constraints matter for comparative advantage? : a neoclassical approach

This paper examines the extent to which electricity supply constraints could affect sectoral specialization. For this purpose, an empirical trade model is estimated from 1990-2008 panel data on 15 OECD countries and 12 manufacturing sectors. We find that along with Ricardian technological differences and Heckscher-Ohlin factor-endowment differences, productivity-adjusted electricity capacity drives sectoral specialization in several sectors. Among them, electrical equipment, transport equipment, machinery, chemicals, and paper products will see lower output shares as a result of decreases in productivity-adjusted electricity capacity. Furthermore, our dynamic panel estimation reveals that the effects of Ricardian technological differences dominate in the short-run, and factor endowment differences and productivity-adjusted electricity capacity tend to have a significant effect in only the long-run.

Industrial agglomeration in Costa Rica : a descriptive analysis

This paper investigates the current situation of industrial agglomeration in Costa Rica, utilizing firm-level panel data for the period 2008-2012. We calculated Location Quotient and Theil Index based on employment by industry and found that 14 cantons have the industrial agglomerations for 9 industries. The analysis is in line with the nature of specific industries, the development of areas of concentration around free zones, and the evolving participation of Costa Rica in GVCs.