The spatial division of labor in Nepal

the authors examine how economic activity and market participation are distributed across space. Applying a nonparametric von Thunen model to Nepalese data, the authors uncover a strong spatial divisionof labor. Nonfarm employment is concentrated in and around cities, while agricultural wage employment dominates villages located further away. Vegetables are produced near urban centers. Paddy and commercial crops are more important at intermediate distances. Isolated villages revert to self-subsistence. The findings of the study are consistent with the von Thunen model of concentric specialization, corrected to account for city size. Spatial division of labor is closely related to factor endowments and household characteristics, especially at the local level.Environmental Economics&Policies,Housing&Human Habitats,Urban Housing and Land Settlements,Agricultural Knowledge&Information Systems,National Urban Development Policies&Strategies,Environmental Economics&Policies,Housing&Human Habitats,Urban Housing and Land Settlements,National Urban Development Policies&Strategies,Crops&Crop Management Systems

Determinants of choice of migration destination

Internal migration plays an important role in moderating regional differences in well-being. This paper analyzes migrants'choice of destination, using Census and Living Standard Surveys data from Nepal. The paper examines how the choice of a migration destination is influenced by income differentials, distance, population density, social proximity, and amenities. The study finds population density and social proximity to have a strong significant effect: migrants move primarily to high population density areas where many people share their language and ethnic background. Better access to amenities is significant as well. Differentials in expected income and consumption expenditures across districts are found to be relatively less important in determining migration destination choice as their effects are smaller in magnitude than those of other determinants. The results of the study suggest that an improvement in amenities (such as the availability of paved roads) at the origin could slow down out-migration substantially.Population Policies,Economic Theory&Research,Transport Economics Policy&Planning,,Inequality

The extent of the market and stages of agricultural specialization

This paper provides empirical evidence of nonlinearity in the relationship between crop specialization in a village economy and the extent of the market (size of the urban market) relevant for the village. The results suggest that the portfolio of crops in a village economy becomes more diversified initially as the extent of the market increases. However, after the market size reaches a threshold, the production structure becomes specialized again. This evidence on the stages of agricultural diversification is consistent with the stages of diversification identified in the recent literature for the economy as a whole and also for the manufacturing sector. The evidence highlights the importance of improving farmers'access to markets through investment in transport infrastructure and removal of barriers to trading.Transport Economics Policy&Planning,Markets and Market Access,Political Economy,Debt Markets,Crops&Crop Management Systems

Foreign Trade Regimes and Import Demand Function: Evidence from Sri Lanka

Time series data for Sri Lanka span periods of pervasive trade and exchange restrictions along with periods of liberalized trade. This paper implements a structural econometric model of aggregate imports which incorporates the implications of the shifts in the policy regime. The results demonstrate that the model outperforms the existing alternatives both on statistical and economic grounds. The estimated elasticities, in contrast to the available evidence, have correct signs, high statistical significance, and plausible magnitudes. The implications for policy analysis like calculation of equilibrium exchange rate are discussed. Special Note: If you are looking for the paper titled "Import Demand Under Trade and Exchange Rate Restrictions: A Structural Econometric Approach with an Application to India", it has been withdrwan temporarily. A revised version will be posted in near future.Trade Policy, Import demand, Sri Lanka, Cointegration, Intertemporal elasticity of substitution

Marketing externalities and market development

The authors use survey data from Bangladesh to present empirical evidence on externalities at household level sales decisions resulting from increasing returns to marketing. The increasing returns that arise from thick market effects and fixed costs imply that a trader is able to offer higher prices to producers if the marketed surplus is higher in villages. The semi-parametric estimates identify highly nonlinear own and cross commodity externality effects in the sale of farm households. The vegetable markets in villages with low marketable surplus seem to be trapped in segmented local market equilibrium. The analysis points to the coordination failure in farm sale decisions as a plausible explanation for the lack of development of rural markets even after market liberalization policies are implemented.Markets and Market Access,Economic Theory&Research,Labor Policies,Environmental Economics&Policies,Health Economics&Finance,Economic Theory&Research,Access to Markets,Markets and Market Access,Environmental Economics&Policies,Health Economics&Finance

Estimating Import Demand Function in Developing Countries: A Structural Econometric Approach with Applications to India and Sri Lanka

Due to the unavailability of time series data on domestic market clearing price of imports, the estimation ofnotional price and income elasticities of aggregate import demand remains a daunting task for a large number of developing countries. This paper develops a structural econometric model of a two goods representative agent economy that incorporates a binding foreign exchange constraint at the administered prices of imports. A theoretically consistent parameterization of the ‘virtual relative price’ of imports circumvents the data problem, and thus enables the estimation of income and price responses by cointegration approach. The price and income elasticity estimates for India and Sri Lanka, in contrast to the extant literature, have correct signs, high statistical significance, and plausible magnitudes.Import Demand, Foreign Exchange Rationing, Virtual price, India, Sri Lanka, Cointegration

Migration, sorting and regional inequality : evidence from Bangladesh

Using household level data from Bangladesh, this paper examines the differences in the rates of return to household attributes over the entire welfare distribution. The empirical evidence uncovers substantial differences in returns between an integrated region contiguous to the country's main growth centers, and a less integrated region cut-off from those centers by major rivers. The evidence suggests that households with better observed and unobserved attributes (such as education and ability) are concentrated in the integrated region where returns are higher. Within each region, mobility of workers seems to equalize returns at the lower half of the distribution. The natural border created by the rivers appears to hinder migration, causing returns differences between the regions to persist. To reduce regional inequality in welfare in Bangladesh, the results highlight the need for improving connectivity between the regions, and for investing in portable assets of the poor (such as human capital).Population Policies,Access to Finance,Rural Poverty Reduction,Poverty Lines,Debt Markets

Cultural Inheritance, Gender, and Intergenerational Occupational Mobility: Evidence from a Developing Economy

This paper presents evidence on intergenerational occupational mobility from agriculture to the nonfarm sector using survey data from Nepal with a focus on the role played by cultural inheritance and gender norms. In the absence of credible instruments, the degree of selection on observables is used as a guide to the degree of selection on unobservables ´a la Altonji et. al. (2005) to address the unobserved genetic correlations. The results show that cultural inheritance plays a causal role in intergenerational occupational correlation between the mother and daughter. In contrast, there is no robust evidence that cultural inheritance is important for sons’ occupation choice. A moderate genetic correlation can easily explain away the estimated partial correlation in non-farm participation between the father and a son.Intergenerational Occupational Correlations, Non-Farm Participation, Gender effect, Cultural Inheritance, Selection on Observables, Selection on Unobservables

The Extent of the Market and Stages of Agricultural Specialization

This paper provides empirical evidence of an U-shaped relationship between the extent of the market (size of the relevant urban market) and the pattern of crop specialization in a village economy. We use the recent two-stage estimator developed by Lewbel (2007) and exploit heteroskedasticity for identification of the causal effects of market size. The results suggest that the portfolio of crops in a village economy becomes more diversified initially as the extent of the market increases. However, after the market size reaches a threshold, the production structure starts to specialize again. This evidence on the stages of agricultural diversification is consistent with the stages of diversification identified in the recent literature for the economy as a whole and also for the manufacturing sector.Structural Change, Agriculture, Crop Specialization, The Extent of the Market, Market versus Home Production, Commercialization

Spatial specialization and farm-nonfarm linkages

Using individual level employment data from Bangladesh, this paper presents empirical evidence on the relative importance of farm and urban linkages for rural nonfarm employment. The econometric results indicate that high return wage work and self-employment in nonfarm activities cluster around major urban centers. The negative effects of isolation on high return wage work and on self-employment are magnified in locations with higher agricultural potential. The low return nonfarm activities respond primarily to local demand displaying no significant spatial variation. The empirical results highlight the need for improved connectivity of regions with higher agricultural potential to urban centers for nonfarm development in Bangladesh.Transport Economics Policy&Planning,Rural Poverty Reduction,Crops&Crop Management Systems,Labor Policies