rafmacalaba/datause-encoder-data huggingface dataset:
sharing since the First FC (RBI 2011). Starting with the Ninth FC, a greater emphasis on fiscal discipline has been added to balance the gap-filling approach (RBI 2007).<sup>11</sup> Residual imbalances in the fiscal accounts after the federal transfers, are financed through borrowing. The main borrowing sources are domestic, external, and issuance of loan guarantees. The borrowing channels are multiple and the process complex but are organized around the principles of maintaining sustainability, solvency, and liquidity of the states (for a description, see box 1).<sup>12</sup> The overall control is with the center, under Article 293(3) of the Constitution, which states that if any state government is indebted to the center, it requires the center‘s permission to borrow. Further, the Constitution forbids states from borrowing abroad on their own. Thus, all external borrowing must be on-lent or guaranteed by the center.<sup>13</sup> The limit on the annual amount and sources of borrowing is based on consultations among the center, the state government, the Planning Commission, and the RBI.<sup>14</sup> Previously, after the delinking of plan<sup>15</sup> borrowing and plan grants, states tended to revise their objective of maximizing plan assistance by arguing for higher plan sizes, thereby committing to higher borrowing. This changed considerably with the enactment of FRL targets. Key decision parameters on the demand side include the states‘ financing needs, developmental needs, repayment profile, and, since the early 2000s, its debt sustainability. On the supply side, an important factor is the absorption of liquidity from the market by both the center and states,

> 11 RBI, ―State Finances: A Study of Budgets‖ (2007, 58).

> 12 Solvency refers to the government‘s ability to service its debt without defaulting. It is defined as the condition that the state government‘s net stock of debt does not exceed its ability to pay off that debt at some time in the future (measured by the present discounted value of its future primary surpluses). Liquidity is the ability to meet short-term cash needs (within the year); that is, in each period the state government has enough resources (cashflows) to cover expenditures plus debt service. Debt is considered unsustainable if it will lead to insolvency in the future (see Ley 2011). Also important is the concept of credibility, or the confidence of investors that solvency and liquidity will be maintained.

> 13 External loans are project-based loans, except for some structural adjustment loans, from multilateral development banks at concessional terms.

> 14 Since 2006, the Standing Technical Committee (STC), with representation from the center, state, and RBI, has been making annual projections of states‘ borrowing requirements. The committee considers several factors including the macroeconomic and financial conditions, sustainability of debt, provisions of fiscal responsibility legislation, and fiscal risks from issuance of guarantees.

> 15 India used to have a system of planned development under which grants/assistance was provided to states.

6
specifically, among other things, convergence is found conditional upon a country’s initial human capital stock. Therefore, a poor country on average may grow faster, but only if the poor country’s human capital stock is above the amount initially expected at the level of per capita income.

# **_Reverse Causality_**

Most of the evidence of some sort of relationship between education and growth is based on statistical _correlations_ . From these correlations, it has been generally inferred that higher levels of education cause higher growth. One critique of these findings comes from Bils and Klenow (2000) who suggest reverse causation. Based on a calibrated micro-foundation model, they claim that faster growth induces people to stay longer in school. In other words, the channel from schooling to growth that is assumed to dominate in many models cannot explain all the observed correlation between education and growth. However, the reverse channel provides some explanation. Therefore, in an econometric framework, schooling should be treated as an endogenous input with respect to income. This implies making use of econometric methods for dealing with this problem.

# **_Few Individual Case Studies_**

Recent research has mainly relied on cross-country regression analysis. However, the original motivation of studying economic growth focuses on the time-series dynamics of macroeconomic variables. In addition, the cross-section focus may be inadequate if rates of return to education or the quality of education differ substantially across countries. Unfortunately, with respect to human capital, there are very few studies that analyze a single country over a certain time period.

The exception is a study from Jenkins (1995) using time series data from 1971-1992 for the United Kingdom. Still, the limited size of her time series sample makes it difficult to draw firm conclusions that can be generalized. Also Pissarides (2000) summarizes single case studies for India, Egypt, Tanzania and Chile. Part of an OECD project, these studies were to provide a more thorough test of the relation between human capital and growth in a single country context. For the case of India, the study less plagued with methodological or data problems, the regressions show a significant contribution of human capital on industrial output growth. The estimate suggests that an increase in the average number of years of schooling by 1 year should raise output by about 30 percent.

# **_Magnitude of the Education Effect_**

In the augmented Solow model, the role of education can be inferred from estimates of the regression coefficients. However, with reference to the empirical research reviewed in Sianesi and van Reenen (2003), there is no agreement on its magnitude. In principle, there would be positive empirical evidence in favor of a macroeconomic productivity effect of education if the elasticity of human capital resembles the share

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of large, medium and small countries in the region, Poland, Romania and Moldova, are examined.<sup>8</sup> The total cost savings from eliminating existing power outages may range from 0.5 to 6 percent of GDP. The national benefits from removing all water suspensions would be equivalent to 0.5 to 3 percent of GDP (Figure 18). This justifies some government expenditures for infrastructure developments at the national account level. To improve the reliability and continuity of infrastructure services, the size of installed capacity may need to be augmented. Some technical inefficiency can be minimized by strengthening the utility networks. All the investment and maintenance costs should be accounted for in comparison with the above estimated benefits received by the economy as a whole. Residential consumer welfare gains are also additional.

Table 6. Estimated National Benefits from Infrastructure Quality Improvements

||No. of<br>enterprises|Sample<br>size<br>|Total cost<br>savings by<br>sample firms<br>(US$'000)|National cost<br>savings by<br>firms per GDP<br>(%)|
|---|---|---|---|---|
|Eliminating existin|g duration of electr|icity outages|||
|Poland|731,083|657|15,741|5.8|
|Romania|91,760|278|6,575|2.2|
|Moldova|4,182|86|319|0.5|
|Eliminating existin|g duration of water|suspensions|||
|Poland|731,083|657|2,915|1.1|
|Romania|91,760|278|5,139|1.7|
|Moldova|4,182|86|163|0.3|

Source: Author’s calculation.

Figure 18. Estimated National Benefits from Infrastructure Quality Improvements <!-- Start of picture text --> 7<br>Electricity outages<br>6 Water suspensions<br>5<br>4<br>3<br>2<br>1<br>0<br>Poland Romania Moldova<br>Source: Author’s calculation.<br>improvements (% of GDP)<br>National cost savings by infrastructure quality<br><!-- End of picture text --> 8 These three countries are selected based on a technical note on the BEEPS sampling (World Bank, 2007).
distribution, holding μ and σ constant. Hence, the share of the population that falls below the poverty line, _x_ , for each year, t, starting in the default year, d, is Where δd+t is the cumulative change in GDP relative to the year prior to default.

Having found the expected poverty headcount if growth impacted all individuals across the income distribution equally, we compare this figure with observed poverty headcounts sourced directly from surveys: Excess poverty. After filtering PIP data for observations coming from compatible surveys (i.e. same type of coverage: rural, national, urban) and observations only up to 6 years apart, we obtain 649 observations for change in _excess poverty_ .<sup>30</sup> Of these, only 30 observations occur in the t to t+3 period of a default spell, we use these data for our first descriptive exercise. When looking at the effects of growth in average per capita income on growth, Kraay (2006) finds that much of the variation in poverty can be attributed to “growth in average incomes,” while little is attributable to a high sensitivity of poverty to the same. Dollar and Kraay (2002) find that mean income for the bottom quintile of the distribution grows equiproportionally to overall per capita income.

Yet, the cases we can explore below suggest that, at least on occasion, poverty increases beyond what would be expected for a given GDP decline. Figure 7 below suggests that poverty headcounts are somewhat elastic to income during the first few years of a default. The slight downward slope of the observations within the default window implies that in these cases growth translated to larger than expected changes in excess poverty between surveys. This elasticity is estimated at -0.03% per every 1% change in mean income and it is statistically significant at the

> 30 <mark>Note that the observations for change in excess poverty can thus be taken from occurrences up to 6 years apart, but the window is not fixed. For example, an observation of country X’s change in excess poverty may be the result of comparing excess poverty at t to excess poverty at t-1; while another observation for the same country, or a different one, may come from comparing excess poverty at t+3 to excess poverty at t. The observations are adjusted as an annualized average change in excess poverty for differences > 1 year apart. The distances between surveys for the 649 observations are distributed as follows: 54.73% of the differences come from observations 1 year apart, 13.26% are 2 years apart, 12.8% are 3 years apart, 6.25% are 4 years apart, 7.47% are 5 years apart, and 5.49% are 6 years apart. For the 30 observations within the t to t+3 default window, 70% are 1 year apart, 16.67% 2 years, 10% 3 years, 3.33% 6 years.</mark>

27
2003), lack of clarity in land rights (Bennet 2002), regional economic disparities (Tadjoeddin _, et al._ 2001b), the mis-management of natural resources (ICG 2001; Ross 2002), and the capture of economic power by an ethnic group (Chua 2002).

Table 1 sets out hypotheses about potential factors associated with local conflict. Our hypotheses have been derived from the available international literature and on-going qualitative work (Barron _, et al._ 2004a). We briefly review these factors and suggest mechanisms by which these could be associated with conflict. Section 4 identifies quantitative proxies for each of these hypothesis measures at the village/neighbourhood, sub-district ( _kecamatan)_ , and district ( _kabupaten/kota)_ level.

**<u>Table 1: Local Conflict Incidence Hypotheses</u>**

|Hypothesis Class|Hypothesis|Proxies|
|---|---|---|
|Economic|_Poverty increases conflict_|- Consumption based poverty measure defined at<br>district level (headcount/”depth”)<br>- Relative Poverty of Village (BKKBN) as compared to<br>district average (defined using family planning lists)<br>- Village level share of unemployed|
||_Inequality among individuals increases_<br>_conflict_|- Consumption based Gini coefficient in district|
||_Sudden loss of local income increases_<br>_conflict_|- Number of poor (according to family planning lists)<br>increased in the past year<br>- Natural disaster in thepast threeyears|
||_Economic development increases conflict_|- Does village have electricity?<br>- Share of families that work outside agriculture<br>- Are there residents who live outside of village for<br>work or school?<br>- Are there people who live in this village for work or<br>school who are not residents?<br>- Share of land that changed use in the past three year<br>(total, _sawah_,forestry)|
||_Uncertain property rights increase conflict_|- Share of privately used agricultural land that is titled,<br>non-titled or community land<br>- Variables as above cross with land scarcity indicator<br>(hectare of agricultural land / population)<br>- Mining and/or forestry is main source of household<br>income|
|Social|_Social diversity (ethnicity/religion)_<br>_increases conflict_|- Ethnic or religious diversity in a village<br>- Majority religious group in village differs within sub-<br>district<br>- Ethnic diversity in a sub-district or district<br>- Ethnic “clustering” across villages within sub-district<br>increases conflict|
||_What matters is really the types of diversity._<br>_- inequalities between groups constitute a more_<br>_potent source of violent conflict than_<br>_inequalities among individuals_ (Stewart)|- Number of religious institutions per household in<br>village<br>- Active faith group is present in the village<br>- Differences in educational endowment across major|

7
Béné, C., 2020. Resilience of local food systems and links to food security–A review of some important concepts in the context of COVID-19 and other shocks. Forthcoming in _Food Security_ .

- Devereux, S., C. Béné, and J. Hoddinott. 2020. Conceptualizing COVID-19's impacts on household food security. _Food Security_ ,1-4.

- EPHI (Ethiopia Public Health Institute). 2020. COVID-19 pandemic preparedness and response in Ethiopia. Weekly bulletin number 10 (July 6, 2020).

- FAO (Food and Agriculture Organization), and FHI 360. 2016. Minimum Dietary Diversity for Women: A guide to measurement. Rome: Food and Agriculture Organization (FAO) of the United Nations and USAID’s food and nutrition technical assistance III project (FANTA), managed by FHI 360.

GAIN. 2020. Impact of COVID-19 on Food Systems: A situation report, edition 3. May 13, 2020. Global Alliance for Improved Nutrition, Geneva, Switzerland.

- Gentilini, U., M. Almenfi, P. Dale, A.V. Lopez, U. Zafar. 2020. Social protection and jobs responses to COVID-19: A real-time review of country measures. Working paper <u>https://openknowledge.worldbank.org/handle/10986/33635</u>

- Gilligan, D. 2020. Social safety nets are crucial to the COVID-19 response. Some lessons to boost

- their effectiveness. International Food Policy Research Institute Blog https://www.ifpri.org/blog/social-safety-nets-are-crucial-covid-19-response-somelessons-boost-their-effectiveness (18 June 2020).

- Hirvonen, K., B. Mohammed, B. Minten, and S. Tamru. 2020. Food marketing margins during the COVID-19 pandemic: Evidence from vegetables in Ethiopia." IFPRI-ESSP working paper 149. Washington D.C., Ethiopia Strategy Support Program (ESSP) of the International Food Policy Research Institute (IFPRI).

- <mark>Hoddinott, J. 2006. Shocks and their consequences across and within households in Rural Zimbabwe.</mark> _<mark>Journal of Development Studies</mark>_ <mark>, 42:2, 301-321.</mark>

Korinek, A., Mistiaen, J. A., Ravallion, M., 2007. An econometric method of correcting for unit nonresponse bias in surveys. _Journal of Econometrics_ , 136(1), pages 213-235.

Mahajan, K., S, Tomar, 2020. COVID-19 and Supply Chain Disruption: Evidence from Food Markets in India. Forthcoming, _American Journal of Agricultural Economics_ .

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# Safety and Security

Eraud control. The system must be designed with adequate controls to ensure against unauthorized access or tampering with payment system data. This requires the ability to identify the payee and payer properly and to ensure that amounts or beneficiaries of transfers cannot be altered to the benefit of either party to the transaction or to a third party.

Credit risk control. Payments systems move funds between two parties, often without the receiving party knowing whether the funds exist in the payer's bank. This creates credit risk between the two parties to the transaction, between the two banks and, perhaps, between the central bank and one or more banks. Credit risks should be understood and managed (if not eliminated) for each transaction.

Confidentiality. Payment system users must be confiden **t** hat their payment system data will not be available to unauthorized sources. Data should be protected from access during the transaction and after the payment is processed.

Record **maintenance.** Each party to a payment transaction must be able to prove their role in the transaction to prove payment has been made and provide tax information. The integrity of transaction records must be maitained, and te time frame for record retention must balance cost and access requirements.

### Convenience

The payment system must be convenient for users or they will use cash or other instruments. If the system requires automation for each participant or it requires one or more bank visits each time a payment is made, it may not be usable in developing countries.

### aosts

The design must be the lowest cost to all using parties subject limits on speed, certainty, reliability, safety and convenience and not just the lowest cost. These competing considerations lead to multiple systems to respond to the differen **t** ransaction needs. For example, a system for handling time critical, high value payment requires greater speed and security (at a higher cost) than a system for handling bill payments. It is often cheaper to develop multiple systems than to try to use the most functional system for each payment, regardless of need.

In emerging countries, these elements of an efficient payment system tend to be incomplete in one or more critical ways, be they too slow, lack certainty and reliability and/or have significant security and risk problems. In responding to these inadequacies may need short-term fixes to the current payment system to deal with the most serious problems before an entirely new system, which may take years to implement, is operational.

## 4. What are the operational **chara** of a modem payment system?

The foUowing elements are all necessary processing activities in a modem payment system: Originator processing. The originating bank receives payment instructions (debit or
respectively, for Caribbean and Andean nations. Chinese exports of leather goods, apparel and textiles expanded at a 7.3 percent annual rate, compared with negative rates greater than 8 percent for Mexico and South America; for Latin America as a whole exports in this area declined by more than five percent per year. In machinery and equipment, while China's exports grew by 15 percent annually, exports from Central America contracted at almost 18 percent per year, although the region as a whole performed slightly better.

China's export dynamism has been undeterred by higher tariffs, relative to Latin America, levied in the United States. In 2003, average tariff on manufacturing imports were more than three times higher on Chinese than on Latin American goods. Mexican exports of leather-goods, textiles and apparel paid on average 0.8 percent ad valorem, compared to 9.4 percent in the case of Chinese exports. Of course, averages hide differences in the composition of exports coming from each country and should be read with caution. Still, tariff provisions under the North American Free Trade Agreement (NAFTA), the Andean Trade Preference Act (ATPA) or the Caribbean Basin Initiative (CBI) give a preferential edge to some Latin American nations over China. While some studies demonstrate that indeed tariff preferences (e.g., those under NAFTA) have led to increased exports to the United States, China appears to have a comparative advantage that it is difficult to compensate through low tariffs on Latin American exports.

The picture that emerges from the previous barrage of trade statistics is one showing that China has become a direct competitor with Latin American countries in their prime export destination, and that such competition is rapidly eroding their share of the US market. That appears to be particularly the case for exporters of manufactures, such as Mexico, Central America and the Caribbean, and especially in low-wage industries, like leather-goods, textiles, and apparel. A natural question to ask is how changes in the policy environment would alter the current situation. For one, some of the countries that appear to be more vulnerable to Chinese competition have recently established trade agreements granting them preferential access to the US market ―e.g., 3 CAFTA ― and the region as a whole has contemplated establishing a hemispheric-wide Free Trade Area of the Americas (FTAA). Such initiatives might help the region compete

> 3 The U.S.-Dominican Republic-Central America Free Trade Agreement.

4