The Developing Economies

Volume 42, Number 4 (December 2004)

■ The Developing Economies Volume 42, Number 4 (December 2004)
■ B5
■ 105pp
■ December 2004

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Book Reviews


Yong-Min Kim and Ki Seong Park, "The Effects of Workers' Region of Birth on Labor Market Outcomes in the Republic of Korea," pp. 461-78.
In this paper, we investigate empirically whether there are differences in labor market outcomes according to workers' region of birth. We also investigate whether wage differentials by region of birth are due to taste discrimination, statistical discrimination as measurement error, or both of these things. The empirical analyses based on the Korean Labor and Income Panel Study (KLIPS) data show the following. First, Honam-born workers have a higher migration ratio to other regions than Youngnam-born workers. Second, workers born in other regions have a higher propensity to become contingent workers and are paid significantly lower wages than Seoul/Kyonggi-born workers. Finally, our empirical tests support the third hypothesis that wage differentials by region of birth are attributable partly to statistical discrimination as measurement error and partly to taste discrimination. We rejected a hypothesis based solely on taste discrimination as well as a hypothesis based solely on statistical discrimination as measurement error.

Kulwant Rai and N. R. Bhanumurthy, "Determinants of Foreign Institutional Investment in India: The Role of Return, Risk, and Inflation," pp. 479-93.
The present study examines the determinants of foreign institutional investments (FII) in India, which by January 2003 almost exceeded U.S.$12 billion. Given the huge volume of these flows and their impact on the other domestic financial markets, understanding the behavior of the flows becomes very important, especially at a time of liberalizing the capital account. By using monthly data, we found that FII inflow depends on stock market returns, inflation rates (both domestic and foreign), and ex-ante risk. In terms of magnitude, the impact of stock market returns and the ex-ante risk turned out to be the major determinants of FII inflow. Unlike some of the other investigations of this topic, our study has not found any causative link running from FII inflow to stock returns. Stabilizing stock market volatility and minimizing the ex-ante risk would help to attract more FII, an inflow of which has a positive impact on the real economy.

Hayfa Grira, "The Determinants of Grade Attainemtn in Low-Income Countries Evidence from Rural Bangladesh," pp. 494-509.
This paper presents an econometric analysis of the effects of child health on school enrollment and grade attainment in Bangladesh. It improves on past studies in a number of ways mainly by incorporating into its analysis the endogenous nature of child health. The results challenge the conclusions found in the literature. First, it finds that in Bangladesh, a child's health and his/her probability of being enrolled in school are at best weakly related. Second, it shows that once enrolled, nutritional deficiencies retard substantially school progress: Underweight children tend to be in lower grades than well-fed children of the same age. It is estimated that a one standard deviation improvement in weight-for-age would be expected to reduce the grades behind by about 0.25 years or about 13.5 percent of the actual years completed. Finally, the estimates suggest that the weight-for-age indicator appears as the best predictor of nutritional status.

Sung Jin Kang, "Are Private Transfers Crowded Out by Public Transfers? The Case of Nepal," pp. 510-28.
Using household data from Nepal for 1995/96, this paper investigates the motives underlying private transfers and examines whether or not public transfers crowded out private transfers and the resultant effects on income inequality. The estimation results of Probit and Tobit models show that the private transfers received were altruistically motivated while public transfers exerted no crowding-out effect. Although the probability of receiving private transfers decreases with household size, having more children or more elderly members of the family increases the probability as well as the amount of transfers. By contrast, the age of the household head does not appear to be a significant factor. Furthermore, the study shows that public transfers did not contribute to a lowering of income inequalities among households. These findings suggest that the government of Nepal should design its public transfer schemes in order to improve the effectiveness and efficiency of its social safety net programs.