Abstracts of Kurosaki's English Publications, 3

Abstract: Village-level aggregate shocks such as droughts and floods cannot be perfectly insured by risk sharing within a village. Then, what type of households are more vulnerable in terms of a decline in consumption when a village is hit by such natural disasters? This question is investigated in this study by using two-period panel data for the years 2001 and 2004 from rural Pakistan. We propose a methodology to infer the theoretical mechanisms underlying the heterogeneity of households in terms of their vulnerability, and focus on the difference between the across-household-type difference in marginal response to aggregate shocks and that in marginal response to idiosyncratic shocks. The empirical results obtained indicate that the sensitivity of consumption changes to shocks differs across household types, depending on the type of natural disasters. Moreover, land and credit access are effective in mitigating the ill-effects of various types of shocks. Household heads who are educated or elderly and households with a greater number of working members bear a larger burden of the village-level shocks; however, they are not vulnerable to idiosyncratic health shocks. It is revealed that these patterns may be explained by the coexistence of unequal access to credit markets and risk sharing among heterogeneous households in terms of risk tolerance.

Abstract: This article investigates the effects of weather risk on the off-farm labor supply of agricultural households in a developing country, distinguishing different types of off-farm labor markets. A multivariate two-limit tobit model is applied to data from India. The regression results show that the share of the off-farm labor supply increases with weather risk, the increase is much larger in the case of non-agricultural work than in the case of agricultural wage work, and the increase is much larger in the case of agricultural wages paid in kind than in the cash wage case, suggesting farmers' considerations of food security.

Abstract: This paper empirically investigates the relationship among growth, poverty, and inequality in Thailand and the Philippines, using panel data of provinces compiled from household expenditure microdata. The empirical model attempts to avoid the potential bias due to the fact that the entire distribution of individual-level consumption changes over time and empirical variables for growth, poverty, and inequality are often compiled from the consumption distribution. The system GMM estimation results robustly suggest that inequality reduced the subsequent growth rate of per-capita consumption and differences in inequality explain a substantial portion of the Philippine-Thai difference in growth and poverty reduction since the late 1980s.

Abstract:In this paper, we investigate the gap between the first target of the Millennium Development Goals (MDGs) and the actual allocation of grant aid in the late-1990s and the early-2000s in order to identify necessary policy adjustments to achieve the goal. As a theoretical framework, we extend the poverty-targeting model of Besley and Kanbur (1988) by considering multiple donors and possible strategic interactions among them. To test theoretical predictions, we employ detailed data on grant aid allocation of eleven major aid donor countries and on aid disbursement of six international institutions including the IBRD, IDA, and UN organizations. Four main empirical results emerged. First, both in the late-1990s and the early-2000s, grant allocations from Canada, France, Japan, the Netherlands, and UK are consistent with the necessary conditions of optimal poverty targeting. Second, we found that there is a negative population scale effect for aid allocation, suggesting that strategic motives may also exist. Third, the overall results for multilateral donors indicate that allocation patterns are consistent with the theory of poverty targeting. Finally, there has been a recent improvement in coordination among major donors in reducing global poverty.

Abstract: This paper addresses the question: What kind of households are vulnerable and how are they vulnerable in Pakistan? This question is investigated using two-period panel data (surveyed in 2001 and 2004) covering about 1,600 households in rural Punjab and Sindh, and four rounds of nationally-representative, repeated cross-section data, covering about 15,000 households in each round of 1998/99, 2001/02, 2004/05, and 2005/06. During this period, average consumption initially decreased and then increased. Associated with this change, poverty increased initially and then decreased, and inequality decreased initially and then increased. The vulnerability analysis in this paper focuses on the second period when poverty decreased. Five measures of vulnerability are employed: transient poverty components of observed poverty, decreases in consumption levels, sensitivity of consumption changes to village-level shocks, variance of consumption changes, and the welfare cost of risk simulated under the assumption of a specific utility function.
Empirical results are summarized as follows. Important physical assets in Pakistan, i.e., farmland, livestock, and durable goods, are vulnerablity-reducing in general. The landed households, however, may have difficulty in catching up with the macroeconomic growth rate in a boom. Access to non-farm employment is vulnerablity-reducing. In contrast, access to credit and remittance has mixed effects, probably due to the reverse causality that households hit by adverse shocks seek credit or remittance more eagerly. Education is weakly associated with higher vulnerability. This could be because the welfare level of educated households is higher than uneducated households in general, implying that educated households have larger room for consumption curtailment when hit by an adverse shock. Households with more dependent members are less vulnerable, suggesting the existence of an informal social support or implicit contract for households with more children. Larger households suffer from a larger welfare cost of risk than smaller households do.
Geographically, residents in rural Sindh are more subject to various types of vulnerability than those in rural Punjab, especially northern districts of Punjab. Across the country, however, residents in NWFP and Balochistan suffer a larger cost of welfare loss due to risk, making the difference between rural Sindh and rural Punjab a minor one, and urban residents in Punjab and Sindh are less subject to vulnerability than all others, although we have to be careful since the regional contrasts in vulnerability across Pakistan are not based on panel data. To estimate the welfare cost of risk from repeated cross-section data, we impose restrictions that correspond to the permanent income hypothesis with perfect credit markets, but the dynamics of consumption inequality is not wholly consistent with these restrictions.

Abstract: This paper investigates the repayment behavior of microfinance borrowers in Pakistan using a unique dataset of about 45,000 installments/repayments covering 2,945 microfinance borrower households over the period 1998-2007. In early 2005, the microfinance institution for these borrowers adopted a new system with strict enforcement of punishment against repayment delays/defaults. This reform led to a healthy situation with almost zero default rates, overcoming the previous problem of frequent defaults. We hypothesize that strategic default under the joint liability mechanism --- if one group member is hit by a negative shock and faces difficulty in repayment, the other members who are able to repay may decide to default as well, instead of helping the unlucky member --- was encouraged by weak enforcement of dynamic incentives and responsible for the pre-reform failure. As evidence for this interpretation, we show that a borrower's delay in installment repayment was correlated with other group members' repayment delays, beyond the level explained by possible correlation of project failures due to locally covariate shocks during the pre-reform period. The post-reform period is divided into two sub-periods by an earthquake in October 2005. Analysis of repayment behavior in the post-reform period yields the results that suggest that (1) the relative success under the new system was because of the suppression of strategic behavior among group members, thereby allowing joint liability schemes to function as individual lending schemes de facto and (2) the earthquake only marginally affected the new system in terms of repayment delays.

Abstract: Using a unique dataset obtained from rural Andhra Pradesh, India that contains direct observations of household access to credit and detailed time use, results of this study indicate that credit market failures lead to a substantial reallocation of time used by children for activities such as schooling, household chores, remunerative work, and leisure. The negative effects of credit constraints on schooling amount to a 60% decrease of average schooling time. However, the magnitude of decrease due to credit constraints is about half that of the increase in both domestic and remunerative child labor, the other half appearing to come from a reduction in leisure.

Abstract: This paper investigates the function of various modes of wage payment, focusing on the role of in-kind wages in enhancing household food security when markets are underdeveloped. Historical records from Asian countries, including pre-war Japan and colonial India, demonstrate the importance of in-kind wage payment in the initial phase of economic development. However, there is a paucity of theoretical explanations of in-kind wages in terms of their function and rationale in existing literature. This paper therefore develops a theoretical model that explains labor supply under different labor contracts, by incorporating considerations of food security as the main explanation for in-kind wages. The model predicts that when food security considerations are important for workers, owing to poverty and thin food markets, they tend to work more under contracts where wages are paid in kind (food) than under contracts where wages are paid in cash. This prediction is supported by empirical evidence from rural Myanmar. Estimation results of the reduced-form determinants of labor supply show that workers supply more labor for work paid in kind when the share of staple food in the workers' household budget is higher and the farmlands on which they produce food themselves are smaller.

Abstract: As a case study of globally important agricultural landscapes in the tropics, this chapter investigates changes in land use in the Indo-Gangetic Plains. Although these regions experienced substantial changes in land use and a rapid agricultural growth in the twentieth century, the absolute income level of farmers still remained at the level of low-income countries and the number of the absolute poor was the largest in the world at the end of the twentieth century. With this background, this chapter describes the land-use changes in India and Pakistan, associates the changes with long-term agricultural performance, and shows the importance of crop shifts in enhancing aggregate land productivity, which is a source of growth unnoticed in the existing literature. The use of unusually long-term data that corres-pond to the current borders of India and Pakistan for the period 1901-2004 also distinguishes this study from the existing ones. The growth records of agricultural production and shifts in crop mix indices show that changes in aggregate land productivity were associated structurally with inter-crop and inter-district reallocations of land use. These changes reflected comparative advantage and contributed to the improvement of aggregate productivity. The crop concentration indices were at their highest levels in the early 2000s both in India and in Pakistan, showing the effects of agricultural liberalization policies and farmers' response to these policies.

Abstract: Myanmar's agricultural economy has been under transition from a planned to a market system since the late 1980s and has experienced a substantial increase in production. However, little research is available on the impact of economic policies in this country on agricultural production decisions and rural incomes. Therefore, this paper investigates the impact using a micro dataset collected in 2001 and covering more than 500 households in eight villages with diverse agro-ecological environments. Regression analyses focusing on within-village variations in cropping patterns show that the acreage share under non-lucrative paddy crops was higher for farmers who were under tighter control of the local administration due to their political vulnerability. Simulation results based on the regression estimates show that the loss in rural incomes due to farmers' being forced to grow too much paddy was not negligible.

Abstract: This paper investigates land-use changes in India, Pakistan, and Bangladesh, associates the changes with long-term agricultural performance, and shows the importance of crop shifts in enhancing aggregate land productivity, which is a source of growth unnoticed in the existing literature. The use of unusually long-term data that correspond to the current borders of India, Pakistan, and Bangladesh for the period 1901-2004 also distinguishes this study from the existing ones. The empirical results show a sharp discontinuity between the pre- and the post- independence periods in all of the three countries: total output growth rates rose from zero or very low figures to significantly positive levels, which were sustained throughout the post-independence period. The improvement in aggregate land productivity explained the most of this output growth. To quantify the effect of crop shifts, a decomposition analysis is applied, which shows that the crop shifts contributed to the productivity growth in all three countries, especially during periods with limited technological breakthroughs. The contribution of the crop shifts was larger in India and Pakistan than in Bangladesh. The decomposition results and changes in crop composition are consistent with farmers' response to comparative advantage under liberalized market conditions.

Abstract: This paper presents estimates for agricultural production data in areas currently in India, Pakistan, and Bangladesh from 1901/02 to 2001/02. A salient feature of these estimates is that they correspond to current international borders. The British Empire of India, which was broken up in 1947 (in the so-called "Partition" of the Indian subcontinent), covered areas of what are now India, Pakistan, and Bangladesh. Although a rich accumulation of statistical documents is available from the colonial period, there has been no rigorous attempt to compile statistics corresponding to the current borders during a period that includes years prior to 1947. This is because the Partition broke up the Empire of India not only at the provincial level (for which data are readily available) but also at the district or lower levels of administration. This paper is an attempt to fill this gap, focusing on production in crop farming in India, Pakistan, and Bangladesh. Since neither the states of Pakistan and Bangladesh nor the concept of such nations existed during the early decades of the twentieth century, this exercise is hypothetical to some extent. Nevertheless, because farming activities are carried out on the soil of a region irrespective of its political designation, the estimates presented in this paper could shed new light on agricultural development in the three countries over the long term.