rafmacalaba/datause-encoder-data huggingface dataset:
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Mitchell, Donald and Mwombeki Baregu (2011a). “The Tanzania Cashew Sector: Why Market Reforms Were Not Sustained.” Draft. Washington, D.C.: The World Bank.

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Ochieng, C. M. O. (2010). “The political economy of contract farming in tea in Kenya: the Kenya Tea Development Agency (KTDA), 1964-2002.” In B. Harriss-White and J. Heyer (Eds.), _The Comparative Political Economy of Development: Africa and South Asia._ New York: Routledge.

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5 Figure 2 shows the evolution of key indicators in Indonesia. The unemployment rate shows a slight upward trend over the last decade. Except for 2006, the three turnover rates are contained within a trendless band over the same period.

The percentage of all labor market participants who experienced a job separation in the previous year is shown in Figure 2 as the turnover rate, which is an indicator of the degree of employment rigidity. Except for 2006, the turnover rate consistently lies in the range between 6.0 to 8.0 percent. The largest proportion of all job separations was voluntary.

Of the involuntary job separations, lay-off or business failure was cited by the majority of individuals as the main reason for the job separation.<sup>5</sup> With one exception, involuntary separations consistently range between 2.0 and 3.0 percent of annual employment. Of all persons who experienced a job separation, the majority were wage and salary employees working in the formal sector. For nine of the ten years, from 1999 to 2008, they consistently represent between 50 and 75 percent of all job separations. Except for 2006, the range of employee separations falls between 3.7 and 5.6 percent of annual employment.

Overall, Figure 2 indicates that, despite the legislative changes to severance pay regulations, turnover rates have been constant. Hence, the data do not support the claim that labor market flexibility has been compromised by the increases in severance pay introduced with the legislative changes.

It is important to note that only a small share of the working population in Indonesia is covered by severance pay regulations because most labor market participants are employed in the informal sector. Of formal sector employees, most job separations tend to be voluntary. The majority of formal sector employees who do separate from their jobs are eligible for severance. Few of these employees, however, collect their full entitlement to severance pay.

Actual practice departs substantially from the statutory regulations; the costs of severance pay are much lower than those implied by the severance statutes. As a result,

> 5 Similarly, voluntary separations form the majority of responses in the IFLS (2007) survey. Involuntary job separations accounted for 21.8 percent of all separations and these respondents cited two main reasons: company closed/relocated/restructured; fired for other reason.
can play in financing SMEs and the accompanying debate on the relative effectiveness of relationship and. transaction based lending mechanisms in financing SMEs.

SMEs are far from a monolith class of enterprises. There is no universal agreement even on the definition of SMEs.<sup>3</sup> Thus there is wide heterogeneity among SMEs both with respect to their profiles and financing needs. In section IV, we focus explicitly on this heterogeneity and differentiate between informal SMEs and formal SMEs. We also discuss the role of young small firms and gazelles in the growth of an economy. An important part of this debate is the existence of the missing middle in developing countries. We discuss the latest research that points to the existence of a missing large rather than a missing middle.

We conclude in Section V by highlighting areas where additional research would be most effective and conclude with policy implications of the existing body of theoretical and empirical evidence on SME financing in developing countries.

# **II. Access to finance as an obstacle for SMEs – What do the data say?**

The data on financing patterns of firms are typically obtained from commercial vendors such as Thomson Reuters (e.g. Worldscope database) and drawn from the balance sheet and cash flow statements of publicly traded firms across the world. Thus, data on the sources of financing for private unlisted firms, in

> 3 See Ayyagari, Beck, and Demirguc-Kunt (2007) for the different definitions of SMEs across countries.

5
# **1 Introduction**

Air transport is increasingly important to the global economy. Be it for exports of perishable goods, such as Kenyan cut flowers, or the movement of highly specialized component parts within transnational production networks, the ability to move goods quickly, reliably, and at a reasonable price is a crucial ingredient in the trade performance of a wide range of countries. The economic importance of air transport was highlighted by the eruption of Iceland's Eyjafjoell volcano in April 2009, which severely disrupted air traffic—including freight—into and out of Europe. Press reports indicate that Kenyan farmers were forced to dump stocks of fresh food and flowers destined for European markets, at a cost of some $3.8m per day.<sup>4</sup> Our aim in this paper is to analyze one aspect of the global air transport system that has received relatively little attention from economists and policy experts to date: its character as a network industry, and thus the importance of _connectivity_ as an overall measure of the level of service—frequency of flights, reliability, and diversity of destinations—available to end users. Connectivity is increasingly emerging as a key policy concept, particularly in international forums such as ASEAN and the Asia-Pacific Economic Cooperation, yet it currently lacks a rigorous empirical framework that would allow policymakers to undertake cross-country comparisons, or track progress through time. Our approach aims to help fill that void, using air transport as an example.

This paper builds on and extends two recent efforts at measuring connectivity in economically important sectors. Whereas UNCTAD (2007) adopts an intuitive but ad hoc approach to developing a connectivity indicator for liner shipping based on a weighted average of capacity and utilization data, we embed our approach in a rigorous network analysis framework. In addition to being more consistent, our approach also has the advantage of taking account of the hub-and-spoke nature of the global air transport

> 4 <u>http://news.bbc.co.uk/2/hi/8629623.stm.</u>

2
The rest of the paper is organized as follows. The following section 2 briefly places the modeling approach in the context of the existing literature about the causes of informality. The structural model is presented in Section 3. The data from Labor Force Surveys used for the estimation of the structural parameters of the model is discussed in Section 4, which also includes a discussion of the data used in the simulations. Section 5 presents the results from the estimations as well as from the simulations. Section 6 concludes.

# **2 Informality and Mobility Costs**

There are two leading views about fundamental drivers of informal employment in developing countries. The first view argues that workers in the informal sector have been excluded from the formal sector by some sort of barrier to entry, such as labor market rigidities and excessive regulation. This view is associated with the early work of De Soto (1989), and was labelled the “romantic” view by Laporta and Shleifer (2008) as it emphasizes that informal employment “is potentially extremely productive, and is held back by government taxes and regulation, as well as by lack of secure property rights and access to finance” (La Porta and Shleifer, 2008).

The second view has its origins in the work of Lucas (1978) and Rauch (1991) on managerial skills and entrepreneurial ability. This approach views informality as the result of a self-selection decision that maximizes individuals’ comparative advantage in each sector. Under this rational-choice view, workers and firms optimally choose the sector based on expected pecuniary and non-pecuniary benefits associate with each sector.

The model presented in this paper captures the two views of informality. We incorporate workers’ decision to enter the informal sector in a dynamic discrete choice model with rational expectations. The model is an extension of Artuc _et al_ . (2010). In each period, workers 4
## **Chapter 4**

# **Nigeria’s March towards Stronger Economic Management**

### **4.1 Nigeria before the Reforms**

Nigeria has long been famous for its large development potential, rich natural resources and an ultimately tragic set of outcomes due to mis-governance and conflicts. With a population of more than 100 million, and proven oil reserves of 36.2 billion barrels, it appears to have the strongest economic potential of all African States. However, in 2000, Nigeria had a GNP per capita of US$300, lower than the per capita income during 1960, the year of independence. In 2000, 66% of the population lived in below the dollar-a-day poverty line. It is in this context that General Abacha died in 1998 and a democratically elected government assumed power in May 1999.

During the post-independence period, Nigeria had suffered through chronic economic mismanagement and corruption. The discovery of petroleum had manifested itself as a tragic resource curse by obliterating non-oil exports as well as creating rent-seeking governance behavior on the part of the political elite. In the 1990s, the World Bank lamented that stronger price of oil had continuously led to wasteful spending by the government. When the oil price fell in 1998-99, lack of oil receipts led to a threat of current account crisis. As late as 2002, the IMF was stating that 2001-02 were marked by large macro imbalances, with a large fiscal and current account deficit. Large government spending in the face of oil price booms was seen as the culprit for such fiscal mismanagement.

Monetary policy was tightened in 2002, which stemmed the tide of inflation. The 2002 IMF consultation document states that the government had started controlling the budget in 2002, and yet further improvement was warranted. By September 2002, foreign exchange reserves had fallen to around $7 billion. During this period, the IMF noted that progress on structural reform, including on trade barriers had not moved ahead. It is also notable the CPIA ratings for debt policy in Nigeria during the period of 1999-2001 were the weakest, with Nigeria getting a 1, the lowest rating score for external debt management.

Poverty in Nigeria had always been a major concern, and the 2003/04 living standards measurement survey showed that 54% of the population was living below the 1 dollar a day poverty line.

16
# _7.2 Result overview_

Table A9 in the Appendix shows our estimates of the percentage variations in household energy demand corresponding to a +1, +2, +3, +4 and +5°C increase in the average seasonal temperature. Estimates are provided for the 140 GTAP9 regions, but they are available for more countries.

A quick inspection of the table reveals that: (i) household demand for electricity rises, especially in the hot countries, as this source of energy is mainly used for air conditioning. The highest relative growth is expected in the African countries; (ii) household demand for energy from oil products dramatically decreases in all countries, especially in cold countries; (iii) the effect on household demand for energy from gas is positive (negative) in mild and cold (hot) countries.

**Table 4** . Long run temperature elasticities from De Cian et al. (2013)

|**Season**|**Climate**|**Electr.**|**Gas**|**Oil.P.**|
|---|---|---|---|---|
|Winter|_Cold_|-0.085|-0.422|-0.406|
||_Mild_|-0.085|-0.422|-0.406|
||_Hot_|-0.085|-0.422|-0.406|
|Spring|_Cold_|0.522|0.686|-0.395|
||_Mild_|-0.077|0.686|-0.395|
||_Hot_|0.263|0.686|-0.395|
|Summer|_Cold_|-0.321|-1.008|-0.912|
||_Mild_|0.2|-1.008|-0.912|
||_Hot_|0.174|-1.008|-0.912|
|Fall|_Cold_|-|0.685|0.0002|
||_Mild_|-|0.685|0.0002|
||_Hot_|-|0.685|0.0002|

**Table 5** . Share of energy demanded for heating and cooling purposes, by energy source and climate region.

Source: U.S. Residential Energy Demand Database (www.eia.gov)

||**Elect**|**ricity**|**Gas**|**Oil P.**|
|---|---|---|---|---|
|**Climate**|Heating|Cooling|Heating|Heating|
|_Cold_|8%|5%|72%|88%|
|_Mild_|9%|17%|56%|86%|
|_Hot_|7%|28%|48%|86%|

17
While there is no objective basis for determining whether or not a particular level of expenditure on utility services is affordable, the threshold of 5% of income as a reasonable limit for expenditure on water is often used in Latin America. Moreover, analysis of household survey data suggest that the poorest households rarely spend more than 5% of income on water (Figure 5). In the case of electricity, there is no comparable threshold in widespread usage, however analysis of household survey data suggest that poor households rarely spend more than 6-8% of income on electricity (Figure 6).

**Figure 5: Household survey evidence on water expenditure by quintile**

<!-- Start of picture text --> 12%<br>10%<br>8% 1st quintile<br>2nd quintile<br>6% 3rd quintile<br>4th quintile<br>4% 5th quintile<br>2%<br>0%<br>Uruguay Argentina Paraguay Mexico Colombia<br>Expenditure as percentage income<br><!-- End of picture text --> Source: Own elaboration from LSMS household survey data

**Figure 6: Household survey evidence on electricity expenditure by quintile**

<!-- Start of picture text --> 12%<br>10%<br>8%<br>1st quintile<br>2nd quintile<br>6%<br>3rd quintile<br>4% 4th quintile<br>5th quintile<br>2%<br>0%<br>Source: Own elaboration from LSMS household survey data<br>Uruguay Guatemala Argentina Colombia<br>Expenditure as percentage household income<br><!-- End of picture text --> 16
travelers were put ashore by cruise liners, but in the early 1980s, this achievement was wiped out by media coverage of political violence. Albeit not in the short term, the potential for expanding tourism is large given the beauty, culture, and beaches of the country and not to forget Haiti’s proximity to the United States. Further research is needed in order to have a growth strategy.

Coffee is the primary peasant export and is well integrated in traditional agriculture. If production of Haitian Bleu (high quality coffee) can be extended to all parts impact could be substantial (Lundahl 2004). Coffee production has received some attention from European NGOs, which have promoted fair trade arrangements that bypass monopolies to the benefit of cooperative producers. Newer export crops like avocados and mangoes have been produced in recent years, and there is potential for crops such as spices. With investment, more efforts could be undertaken taking advantage of Haiti's climate and its close geographical location to the U.S. market.

Mangoes have advanced to become the most traditional agricultural product next to coffee. As many farmers all over the country produce mangoes there is a potential for increased exports. Export firms are investing in different kinds of facilities that will allow them to develop new varieties of mango products (Lundahl 2004).

This section on demographic trends and economic growth showed that the population growth rate increased in the last two decades although the fertility rate fell. In the last two decades the rural population has flocked to urban Haiti, especially to the metropolitan area. In 2003, 40 percent of the Haitians lived in urban areas up from 25 percent in 1982. The rural areas experienced a fall in the total population share. Rural indigent households have a smaller household size than metropolitan indigent households. In nonpoor households the average number of children under age 15 is 50 percent lower than those of extremely poor households. Economic growth has been poor in the last decade, and GDP per capita was reduced by roughly 50 percent, with agriculture being the hardest hit.

# **3.  Data and Methodology**

This section presents data sources and the methodologies used in the paper to analyze poverty and labor markets in Haiti.

## **Data**

Haiti is completing the first comprehensive household survey that covers both rural and urban areas. National household data are critical for making informed decisions on alleviating urban and rural poverty in Haiti. The analyses in this paper are based on the national households survey ( _l’Enqueête sur les Conditions de Vie Haïti_ — the Haiti Living Conditions Survey (HLCS)) from 2001 (still unreleased). Population data are from publications produced by the statistical office ( _Institut Haitien de Statistique et d’Informatique—_ IHSI). The survey was undertaken in all nine regions ( _department)_ and is 13
Bank 1975) recommended this change. The second change was to move from projects focused on one city to national programs, as occurred in the Tanzania project in 1978. This nation-wide orientation became a common feature of subsequent sites and service projects. A few years later in 1981, the Bank made its first completely non-shelter urban loan to Côte d’Ivoire. This project was to begin a totally separate branch of Bank support that included issues such as municipal finance, urban management and inter-governmental relations. In retrospect, it is somewhat surprising that it was a full decade after Bank Urban lending began that an urban loan without a shelter component was finally made. This non-shelter related share of urban lending has grown rapidly and now comprises 55 percent of total urban lending.

In 1980 a third type of shelter project, one that over time would become increasingly important, was developed. We refer to this type of project as a policy-based loan, one that views the project as a way of embodying accompanying policy changes in a specific investment.<sup>11</sup> An example of such lending is the Mexican project of 1992 which focused on reforming local housing market regulations to make the housing being financed more affordable.

The Bank began a fourth type of shelter project in 1982 in Zimbabwe when a project was designed which gave central emphasis to the method of financing the investments. The project was financed through privately owned building societies that carefully monitored loan recovery. Housing finance projects were to become a significant portion of Bank shelter assistance in the 1980s and have now become an active line of IFC business. Finally, in the late 1980s and early 1990s, following earthquakes in Mexico and Iran, shelter assistance for countries hit by disasters became more than just an occasional project.

> 11 - See the Housing and Land Thematic Group website: <u>http://www</u>

> <u>int.worldbank.org/jsp/sectors_view.jsp?tab=2&gwitem=474019</u> for a definition of policy-based lending as well as details on all projects data reported here.

6
Completing tertiary education confers substantial benefits on graduates. The premium in annual earnings compared to people who have at least secondary education is about 200 percent for all countries, except Nicaragua where it is about 175 percent (Figure 12Figure ). In the OECD, the premium in annual earnings for adults who have graduated from tertiary education is 153 percent compared to earnings of those who have just secondary education.<sup>20</sup> There is little variation between 2001 and 2009 (except Nicaragua, where there was a sharp fall) and, indeed, little variation across countries in this premium. The high private returns to tertiary education suggested by these premiums should encourage individuals to invest in tertiary education. A similar signal is conveyed by unemployment rates which are in general lower for those with tertiary education than for the labor force as whole (Figure 13Figure ). The exception is, again, Nicaragua in 2009, where the unemployment rate for graduates is significantly higher.

Figure 14 shows, for all six countries, the advantage conferred on average by tertiary education on life-time incomes: workers with secondary and primary education are essentially stuck in low-paying jobs, with little increase in income over their lifetime, while those with tertiary education enjoy not only a higher starting income, but also continued increases over their working life. Again, Nicaragua appears to be an exception, where tertiary education graduates have higher incomes, but these do not seem to increase with experience.

> 20 OECD at a Glance 2011.  Relative earnings of the population with income from employment (2009 or latest available year).

22