The DIAL Conference on Development Economics, held every two years since 2011, is attended by over 150 researchers meeting to discuss recent contributions from research in development and international economics. This special section focuses on three papers presented at the third edition of the DIAL Conference jointly held by the Institut de Recherche pour le Développement and the Université Paris-Dauphine in Paris. The edition featured presentations of theoretical and empirical research on barriers to development and how to overcome them. The conference covered a wide array of barriers ranging from unfair trade and financial constraints through lack of human capital and poor infrastructure to corruption and poor governance.
The papers selected for this special section take a new and original look at three major challenges faced by developing countries: access to international markets, access to finance, and access to education. Gaelle Balineau revisits the challenge of access to international markets, examining how fair trade goods consumption varies by French consumer income and characteristics. Second, although literature is abundant on migration as a risk-coping strategy, there is still little evidence regarding how access to credit affects migration decisions. Cecilia Poggi’s paper investigates this relationship based on a case study of a Village Fund scheme in Thailand. Last but not least, Liyousew Borga reconsiders the impact of child labour from the angle of cognitive and non-cognitive skills achievements rather than learning outcomes.
1. Fair trade Engel curves
The first article in this special section examines the determinants of fair trade grocery product consumption in France. The question of fair trade product demand and its dynamics is relatively uncharted territory even though it is vitally important to producers, especially producers in the South. Fair trade products form niche markets on which it is impossible to make economies of scale and where producers’ profits can be reduced by excessive certification (for example, fair trade plus organic). This paper uses scanned data on actual purchases by a representative sample of French households to analyse the determinants of the consumption of all fair trade-labelled grocery products (coffee, chocolate, bananas, spices, tea, rice, and so forth).
Among other results, the paper shows that the elasticity of demand for fair trade products decreases with the weekly shopping budget and the number of variants in a specific segment (rice, coffee, chocolate, and so forth).
These findings have clear implications for the development of the fair trade product market and its impacts on producers in developing countries. The paper finds that low- and middle-income consumers represent the highest growth potential, because their expenditure rises faster than their budgets. It also shows that market growth is closely linked to growth in per capita income in importing countries and observes that fair trade producers are vulnerable to economic slowdowns in developed economies. These findings suggest that expanding the number of variants may form an opportunity for fair trade market growth, but that it may involve risk for the producers (higher costs, adverse effects on the least efficient producers, and so forth).
2. Financial constraints and migration decisions
One of the main political challenges in developing countries is how to ease the factors that constrain risk diversification by the poor. In rural areas where agricultural outcomes are risky and unpredictable and access to credit is restricted, migration can be a strategy for households to diversify their sources of income. However, given the cost of migration, those with the ability to migrate are far from the poorest. Cecilia Poggi’s article analyses the link between access to credit and internal migration in poor rural and semi-urban areas in Thailand. Although migration is often said to be credit-constrained, it is not so clear that better access to credit is conducive to migration. Financial constraints also inhibit entrepreneurial capacity. Credit availability here could enhance the development of new local, diversified activities, thereby reducing the benefits of migration as a self-insurance strategy.
The author addresses this research question in the context of rural villages in Thailand. Using long panel data and an instrumental variable strategy to estimate the impact of formal borrowing on internal migration, she shows that internal migration decisions are not credit-constrained in the short-term. In the Thai villages under analysis, the internal migration behaviour of households granted a new loan is not significantly different to the behaviour of those without access to credit. Yet in the medium-term, six years after credit programme implementation, borrowers tend to have fewer household members leaving the village. They have fewer incentives to encourage one of their members to leave the village, suggesting that the opportunity cost of migration increases compared with local income sources.
3. Child labour and skills development
The third paper in this special section focuses on barriers to human capital formation, exploring the determinants of cognitive and non-cognitive skills accumulation by children in developing countries. Borga’s paper addresses this question from an original angle by investigating how children’s cognitive and non-cognitive skills are affected by their present and past allocation of time between educational and non-educational activities, especially work.
The author draws on a decade of Young Lives data on two cohorts of children (born in 2001/2 and 1994/5) in three countries: Vietnam, India, and Ethiopia. There are considerable advantages to the use of these data: the panel dimension enables endogeneity issues to be addressed; the presence of a younger and older cohort in the data means that the effect’s variation can be studied over time; and the coverage of three different countries on two continents strengthens the external validity of the results.
The author finds evidence of a trade-off between time spent working and cognitive achievement, as well as a positive return to the time allocated to studying. The results for non-cognitive skills are in line with those for cognitive skills, with slight differences across the countries. The conclusion arrived at from the distinction between the younger and older cohorts is that returns to investment in early childhood are greater than when the investment is made later in life.