"Immiserizing Growth: An Empirical Evaluation"

This paper examines the empirical validity of immiserizing growth in a consistent manner. A straightforward test for immiserizing growth is constructed by using the revealed preference framework of welfare evaluation, together with macroeconomic growth data. We identify 34 episodes of immiserizing growth in the post-war world economy, mostly in Africa and Latin America. This suggests the existence of large distortions that outweigh the gains from growth.

Community Participation, Teacher Effort, and Educational Outcome: The Case of El Salvador's EDUCO Program

Based on a principal-agent model, this paper investigates the organizational structure that made the El Salvador's primary school decentralization program (EDUCO program) successful. First, we employ the "augmented" reduced form educational production function by incorporating parents and community involvement as a major organizational input. We observe consistently positive and statistically significant EDUCO participation effects on standardized test scores. Then we estimated teacher compensation function, teacher effort functions, and input demand functions by utilizing the theoretical implications of a principal (parental association)-agent (teacher) framework. While the EDUCO school teachers receive piece rate, depending on their performance, wage payment is relatively fixed in the traditional schools. Empirical results indicate that the slope of wage equation is positively affected by the degree of community participation. This finding can be interpreted as the optimal intensity of incentive. Hence, teacher's effort level in the traditional schools is consistently lower than that in the EDUCO schools, indicating a moral hazard problem. Community participation through parental group's classroom visits seems to enhance the teacher effort level and thus increases students' academic performance indirectly. Parental associations can affect not only teacher effort and their performance by imposing an appropriate incentive scheme but also school-level inputs by decentralized school management. Our empirical results support the view that decentralization of education system should involve delegation of school administration and teacher management to the community group.economic analysis of social sector reform, the optimal intensity of incentive condition, moral hazard, education production function, fixed effects instrumental variable estimation

Human Capital Investments in Pakistan: Implications of Micro Evidence from Rural Households

A number of cross-country studies suggest that the Pakistani aggregate human capital investments, measured by educational performance, are low relative to other countries of similar per capita income levels. This paper investigates the implications of micro evidence on schooling from rural Pakistan for an understanding of the cases of low human capital investments. The results of school-entrant and dropout regressions using household panel data indicate that the permanent and transitory income movements affect children’s schooling behaviour, indicating credit market imperfections. Hence, the human capital investments in rural Pakistan may be discouraged by poverty, combined with incompletely insured income volatility. Moreover, our analysis points out that there is a distinct gender difference in education.

"Income Risks, Gender, and Human Capital Investment in a Developing Country"

This paper investigates the role of permanent and transitory incomes in educational investments using household panel data from Pakistan. The empirical results indicate that transient poverty is a serious obstacle to human capital investment. Our analysis also points out that schooling response to an income shock is consistently larger for daughters than sons and that there may exist resource competition among siblings. Human capital investment and intrahousehold schooling allocation decisions seem to be affected by a need for self-insurance devices under binding credit constraints. As a by-product, our empirical results are in favor of the investment model of education against the consumption model.

"Obstacles to School Progression in Rural Pakistan: An Analysis of Gender and Sibling Rivalry Using Field Survey Data"

This paper aims to identify the obstacles to school progression by integrating field surveys conducted in twenty-five Pakistani villages, using economic theory and econometric analysis. The full-information maximum likelihood (FIML) estimation of the sequential schooling decision model reveals important dynamics of the gender difference in educational attainment, intrahousehold resource-allocation patterns, and transitory income and wealth effects. We find a high educational retention rate and observe that school progression rates between male and female students after secondary school are comparable. In particular, we find gender-specific and schooling-stage-specific birth-order effects on education. Our overall findings are consistent with the theoretical implications of optimal schooling behavior under binding credit constraints and the self-selection in education-friendly households. Finally, we find serious supply-side constraints on primary education for females.

"Are People Insured Against Natural Disasters? Evidence from the Great Hanshin-Awaji (Kobe) Earthquake in 1995"

We investigate whether people were insured against unexpected losses caused by the Great Hanshin-Awaji (Kobe) earthquake in 1995. The unique household data employed led to several empirical findings under a natural-experimental situation. The complete consumption insurance hypothesis is rejected overwhelmingly, suggesting the ineffectiveness of the formal and/or informal insurance mechanisms against the earthquake. We also investigate possible factors that inhibit full risk-sharing. Transfers may be particularly ineffective as insurance against losses for co-resident households. Households borrow extensively against housing damages, whereas dissavings are utilized for smaller asset damages, implying a hierarchy of risk-coping measures, from dissaving to borrowing.

"Disability and Returns to Education in a Developing Country"

In this paper, we estimate wage returns to investment in education for persons with disabilities in Nepal, using information on the timing of being impaired during school-age years as identifying instrumental variables for years of schooling. We employ unique data collected from persons with hearing, physical, and visual impairments as well as nationally representative survey data from the Nepal Living Standard Survey 2003/2004 (NLSS II). After controlling for endogeneity bias arising from schooling decisions as well as sample selection bias due to endogenous labor participation, the estimated rate of returns to education is very high among persons with disabilities, ranging from 19.4 to 33.2%. The coexistence of these high returns to education and limited years of schooling suggest that supply side constraints in education to accommodate persons with disabilities and/or there are credit market imperfections. Policies to eliminate these barriers will mitigate poverty among persons with disabilities, the largest minority group in the world.

Consumption Insurance and Risk-Coping Strategies under Non-Separable Utility: Evidence from the Kobe Earthquake

Using a unique household-level dataset on the situation after the Kobe earthquake in 1995, we test the full consumption risk sharing hypothesis, relaxing the separability assumption, and examine households' simultaneous choice of risk coping measures. Using multivariate probit estimations, we find that the full consumption insurance hypothesis is strongly rejected and our results indicate that households' utility across different expenditure items is not separable. As for households' choice of risk-coping measures, households borrowed extensively against housing damage, but relied on dissaving to cope with smaller asset damage, implying a hierarchy of risk-coping measures from dissaving to borrowing.

Credit Accessibility, Risk Attitude, and Social Learning: Investment Decisions of Aquaculture in Rural Indonesia

This study examines the factors that influenced poor Indonesian farmers to invest in floating net aquaculture after being relocated due to a reservoir construction project. To compare three primary decision factors, credit accessibility, risk attitudes, and social learning, (i.e., learning effects from others experience), we analyze 16 years of socio-economic retrospective data collected in the field interviews exclusively for this study. Our analysis reveals that credit accessibility and risk attitudes are the most important factors that influence the rate of aquaculture investment. Social learning as well as household education also influences the investment decision significantly. Our results suggest that developmen t projects that involve voluntary investments by a poor populace will be more successful if complementary services to promote credit and insurance accessibility and/or local information sharing are made available, either by the government or the private sector. Also, such support should not cease at the launch of the project but rather continue and in fact evolve to address the changing factors at the different stages of the project.Household investment decision, credit constraints, risk attitudes, social learning, panel data, Farm Management, D1, D8, D12, Q22,

"Demand for non-life insurance: A cross-country analysis"

A number of existing studies on insurance demand report an apparently pathological result that insurance is a luxury good. Using cross-country insurance data and national wealth data, we resolve this spurious puzzle. While we found that the income elasticity of insurance demand is larger than unity, the wealth elasticity of insurance demand is smaller than unity at least for upper-middle and high wealth countries.