The productivity impact of climate change: Evidence from Australia's Millennium drought

The economic impact of climate change has usually been estimated based on changes in average weather condition and is often measured in terms of immediate loss of output or profit. Yet little is known about the impact of extreme weather event, in particular its impact on productivity in the medium to long term. Using Australia's Millennium drought as a case of extreme weather event and applying the synthetic control method, we show that severe droughts occurred between 2002 and 2010 has brought down agricultural total factor productivity by about 18 percent in Australia over the period, contributing significantly to the country's long-term slowdown of agricultural total factor productivity growth. Our results highlight the significance of productivity impact of extreme weather events that has been overlooked when accessing the economic impact of climate change.     

Land tenure and investment incentives: Evidence from West Africa

The existing literature on the relationship between property rights in land and agricultural investment in Africa has given results that are often confusing and contradictory. I make two clarifying contributions to this literature. First, I pull together existing studies and investigate whether the results they find have been affected by research methods or local contexts. Studies with small sample sizes, those that use binary investment measures, and those that control for household fixed effects are less likely to find a statistically significant link between land tenure and investment. Self-reported tenure security has been a poor predictor of investment outcomes. Second, I test for a relationship between land tenure and agricultural investment in nine data sets from West Africa. While the link between tenure and investment is significant for fallow and tree planting, it is less robust for labor use and other inputs, such as manure or chemical fertilizer.     

The impact of teacher subject knowledge on student achievement: Evidence from within-teacher within-student variation

Teachers differ greatly in how much they teach their students, but little is known about which teacher attributes account for this. We estimate the causal effect of teacher subject knowledge on student achievement using within-teacher within-student variation, exploiting a unique Peruvian 6th-grade dataset that tested both students and their teachers in two subjects. Observing teachers teaching both subjects in one-classroom-per-grade schools, we circumvent omitted-variable and selection biases using a correlated random effects model that identifies from differences between the two subjects. After measurement-error correction, one standard deviation in subject-specific teacher achievement increases student achievement by about 9% of a standard deviation in math. Effects in reading are significantly smaller and mostly not significantly different from zero. Effects also depend on the teacher-student match in ability and gender.     

The impact of environmental regulation on productivity in German industries

The objective of this paper is to adjust a traditional total factor productivity (TFP) measure for the direct effect of environmental regulation on material and capital input. For this purpose we consider the fact that part of material input and pollution abatement capital have not been used to increase output but to cover the cost of using the environment as a factor of production. Therefore TFP growth rates are lower if part of the material input is allocated to abatement activities instead of producing output. We propose to treat compliance with environmental regulation as an unproductive input linked to the use of productive material input. Our aim is to answer and discuss two questions: How to measure the effect of environmental regulation on TFP, and does the effect matter. We examine data from 1975–1991 for ten pollution intensive German industries.We would like to thank Cornelia Oßwald for valuable research assistance. We are especially grateful to two anonymous referees for many helpful comments.     

The economic growth impact of natural disasters in developing countries: Evidence from hurricane strikes in the Central American and Caribbean regions

In this paper we investigate the macroeconomic impact of natural disasters in developing countries by examining hurricane strikes in the Central American and Caribbean regions. Our innovation in this regard is to employ a wind field model on hurricane track data to arrive at a more scientifically based index of potential local destruction. This index allows us to identify damages at a detailed geographical level, compare hurricanes' destructiveness, as well as identify the countries that are most affected, without having to rely on potentially questionable monetary loss estimates. Combining our destruction index with macroeconomic data we show that the average hurricane strike caused output to fall by at least 0.83 percentage points in the region, although this depends on controlling for local economic characteristics of the country affected and what time of the year the storm strikes.     

The impact of temperature on manufacturing worker productivity: Evidence from personnel data

This paper presents novel evidence on the impact of temperature on daily indoor worker productivity in a non-climate-controlled manufacturing environment in China. Combining individual worker productivity data from personnel records with weather data, it documents an inverted-U shaped relationship between temperature and labor productivity. Workers do not increase avoidance behavior. The findings suggest that the economic loss from reduced manufacturing labor productivity due to ambient temperature is quantitatively important, providing new insights into the biological effects of climate factor on human labor. Further, back-of-the envelope calculations indicate that the estimated welfare gains from preventing extreme temperatures are substantial.     

Group interaction, heterogeneity, rules, and co-operative behaviour: Evidence from a common-pool resource experiment in South Africa and Namibia

We present econometric evidence of how sociodemographic characteristics, economic background, group effects, and dynamic personal and group interactions influence the co-operative behaviour of individuals in a social dilemma situation. The data are from a framed common-pool resource experiment conducted in Namibian and South African farming communities. Our estimates suggest complex but stable social dynamics within groups over the course of the game. We conclude that group interactions may be significantly influenced by the degree of sociodemographic heterogeneity. Our study shows that the introduction of rules matters, as it improves co-operation, but that the concrete shape of such rules may be less important than the underlying social interaction.     

Fungibility and the impact of development assistance: Evidence from Vietnam's health sector

The apparent fungibility of aid is a challenge to the evaluation of donor-funded development projects, requiring a comparison of the observed outcomes with the outcomes that would have occurred if the project had not gone ahead. Where projects are targeted on specific geographic areas, counterfactual outcomes in each can differ from observed outcomes because the amount of government spending (gross of aid) differs, the productivity of government spending differs, or both. This paper estimates the benefits of two concurrent World Bank health projects in Vietnam targeted on specific provinces. Estimates are derived from a model linking outcomes (under-five mortality) to government spending before and after the project and in project and nonproject provinces, and are presented for different assumptions regarding fungibility of funds (zero and full fungibility) and the impacts of the project on the productivity of government spending (the project modifies productivity in both sectors equally and in neither sector). The estimated mortality reductions are highly insensitive to the assumed degree of fungibility, but highly sensitive to the assumed productivity effects (the estimates range from 1 to 25%). The wide range reflects the uncertainty due to the lack of a genuine control group of provinces.     

An instrumental variables approach to estimating tax revenue elasticities: Evidence from Sub-Saharan Africa

This paper exploits the significant response of real GDP growth of Sub-Saharan African countries to exogenous international commodity price and rainfall shocks to construct instrumental variables estimates of the tax revenue elasticity IV estimates yield that a 1% increase in GDP increases tax revenues by up to 2.5%.     

AIDS mortality and its effect on the labor market: Evidence from South Africa

This paper investigates how HIV/AIDS has impacted the labor market in South Africa, focusing on its effect on wages and employment. This is done by matching individual level data with group specific cumulative AIDS mortality rates. Exploiting the panel nature of the data, I remove individuals whose productivity is most likely impacted by HIV/AIDS, and find evidence that cumulative AIDS mortality has led to reductions in wages of between 3 and 6% for the African population group (Black South Africans). Furthermore, I also find evidence that the epidemic has lowered employment in South Africa. This result is concentrated among those with the lowest levels of education and employment. Although not large in magnitude, these effects are widespread across a significant portion of the population, contributing to a substantial loss of income throughout the South African economy.     

Consumption risk, technology adoption and poverty traps: Evidence from Ethiopia

Much has been written on the determinants of technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data from Ethiopia. Historical rainfall distributions are used to identify consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just ex ante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertilizer. The lack of insurance or alternative means of keeping consumption smooth leaves some trapped in low return, lower risk agriculture, one of the mechanisms through which poverty perpetuates itself in agrarian settings.     

The impact of urbanization on CO2 emissions: Evidence from developing countries

This paper analyzes the impact of urbanization on CO₂ emissions in developing countries from 1975 to 2003. It contributes to the existing literature by examining the effect of urbanization, taking into account dynamics and the presence of heterogeneity in the sample of countries. The results show an inverted-U shaped relationship between urbanization and CO₂ emissions. Indeed, the elasticity emission-urbanization is positive for low urbanization levels, which is in accordance with the higher environmental impact observed in less developed regions. Among our contributions is the estimation of a semi-parametric mixture model that allows for unknown distributional shapes and endogenously classifies countries into homogeneous groups. Three groups of countries are identified for which urbanization's impact differs considerably. For two of the groups, a threshold level is identified beyond which the emission-urbanization elasticity is negative and further increases in the urbanization rate do not contribute to higher emissions. However, for the third group only population and affluence, but not urbanization, contribute to explain emissions. The differential impact of urbanization on CO₂ emissions should therefore be taken into account in future discussions of climate change policies.     

On the channel and type of aid: The case of international disaster assistance

The aim of this paper is to determine the drivers of a donor's decision on the composition of aid. We apply a dataset on international post-disaster assistance between 2000 and 2007 that includes information on the channel (bilateral vs. multilateral) and type (cash vs. in-kind) of each aid flow. Our results suggest that the choice of the channel and type of disaster assistance is mainly determined by humanitarian aspects, strategic interests and institutional quality. Moreover, we find differences in the allocation behavior between OECD and non-OECD countries.     

Efficiency and equity impacts of rural land rental restrictions: Evidence from India

Recognition of the potentially deleterious implications of inequality in opportunity originating in a skewed asset distribution has spawned considerable interest in land reforms. However, little attention has been devoted to the fact that, in the longer-term, the measures used to implement land reforms, especially rental restrictions, could negatively affect productivity. Use of state level data on rental restrictions, together with a nationally representative survey from India suggests that, contrary to original intentions, rental restrictions negatively affect productivity and equity by reducing scope for efficiency-enhancing rental transactions that benefit poor producers. Simulations suggest that, by doubling the number of producers with access to land through rental, from about 15 million currently, liberalization of rental markets could have far-reaching impacts.     

Tenure security and land-related investment: Evidence from Ethiopia

We use a large data set from Ethiopia that differentiates tenure security and transferability to explore determinants of different types of land-related investment and its possible impact on productivity. While we find some support for endogeneity of investment in trees, this is not the case for terraces. Transfer rights are unambiguously investment-enhancing. The large productivity effect of terracing implies that, even where households undertake investments to increase their tenure security, the level of such investment may be below the social optimum. In Ethiopia, government action to increase tenure security and transferability of land rights can significantly enhance rural investment and productivity.     

The human capital consequences of civil war: Evidence from Guatemala

We combine data from the 2002 National Population Census and the distribution of the number of human rights violations and victims across 22 departments to examine how Guatemala's 36-year-long civil war affected human capital accumulation. The year of birth and the department of birth jointly determine an individual's exposure during school age to three different periods of the civil war, namely the initial period (1960-1978), the worst period (1979-1984), and the final period (1985-1996). We find a strong negative impact of the civil war on the education of the two most disadvantaged groups, namely rural Mayan males and females. Among rural Mayan males, those who were school age during the three periods of the civil war in departments where more human rights violations were committed completed 0.27, 0.71, and 1.09 years less of schooling respectively whereas rural Mayan females exposed to the three periods of the war completed 0.12, 0.47, and 1.17 years less of schooling respectively. Given an average of 4.66 and 3.83 years of schooling for males and females, these represent declines of 6, 15, and 23% for males and 3, 12, and 30% for females. Our results are robust to the inclusion of indicators for department of residence, year of birth, and controls for different trends in education and human development in war-affected and peaceful departments of Guatemala and suggest that the country's civil war may have deepened gender, regional, sectoral, and ethnic disparities in schooling.     

The impact of product market regulation on productivity through firm churning: Evidence from European countries

Productivity performance in European countries has been a policy concern for several decades. This paper shows that productivity can be enhanced by product market policies which, by increasing competition and efficiency, facilitate higher rates of firms’ entry and exit (i.e. firm churning). Drawing on annual country-sector data for the period 2000–2014 across the EU countries, we find that: (i) competition-enhancing regulation is associated with a higher rate of firm churning; (ii) firm churning, in turn, appears to be positively related to higher total factor productivity at the sector level by facilitating the entry of new competitive firms and the exit of less productive ones. Overall, we conclude that stringent product market regulation can be indirectly associated, via its impact on business dynamism, with the somewhat weak productivity performance in a number of EU countries. Thus, our results point towards substantial productivity gains that could follow from the introduction of further competition-enhancing measures in product markets.     

Economic transition and gender differentials in wages and productivity: Evidence from Chinese manufacturing enterprises

We use firm-level data to analyze male–female wage differences in Chinese industry in the late 1990s. Our estimates indicate that employers' discrimination against women was not a significant source of the gender wage gap in Chinese state-owned enterprises. Instead, we find that the relative wage of unskilled female to male workers was higher than their relative productivity. This result indicates that unskilled female workers in the state sector had historically received wage premiums and consequently accounted for a disproportionate share of the sector's labor surplus.     

Carbon dioxide emission and income: A temporal analysis of cross-country distributional patterns

This paper explores the relationship between the inter-country income inequality and CO₂ emission and temporal shifts in such a relationship. It also examines how the mean per capita CO₂ emission and its distributional inequality are related to the corresponding mean and the distributional inequality of income. The analysis is based on a cross-country panel data set at the level of country-group. Here environmental damage is treated as a private good and the technique of Lorenz and specific concentration curve analysis have been used as the basic analytical framework to argue that distributional inequality of income should be an explanatory variable in the Environmental Kuznets Curve relationship, along with the mean income level. In the empirical exercise, Johansen's cointegration analysis technique is used to explore existence of statistically significant cointegrating vector(s) relating mean emission and Specific Concentration Ratio of emission to mean income level and Lorenz Ratio of income, using a set of country-group specific time series data set which covers four country-groups (viz., Africa, America, Asia and Europe) and the World as a whole. The empirical results confirm that the inter-country income inequality has significant effect on the mean emission level and inter-country inequality of emission level for most of the country-groups considered.     

The environmental Kuznets curve when the environment exhibits hysteresis

The relevance and implications of the environmental Kuznets hypothesis are examined in the presence of stock effects and non-linearities associated with pollution generation. Stock effects lead to hysteresis and irreversibilities in environmental quality that are overlooked when emphasis is placed on the flow effects of pollutants only. It is demonstrated here that an optimal growth plan in the presence of stock effects shifts the focus away from prescribing economic growth as a panacea for environmental ills. Implications for currently industrializing economies are discussed.