Published Research

Journal Articles

Does trust extend beyond the village? Experimental trust and social distance in Cameroon

Alvin Etang, David Fielding and Stephen Knowles

Experimental Economics, 2011, vol 14, pp 15-35

Abstract

In this paper we use experimental data collected in rural Cameroon to quantify the effect of social distance on trust and altruism. Our measure of social distance is relevant to everyday interactions: subjects in a Trust Game play with fellow villagers or someone from a different village. We find that significantly more money is sent when the players are from the same village. Other factors that influence transfers at least as much as the same-village effect are gender, education and membership of rotating credit groups. To test whether Senders are motivated by altruism, they also play a Triple Dictator Game. Senders transfer significantly more money on average in the Trust Game than in the Triple Dictator Game. However, there is also a social distance effect in the Triple Dictator Game. Results from a Risk Game suggest that Trust Game transfers are uncorrelated with attitudes to risk.

JEL Codes: C93, O12, Z13

Key words: Experiment, trust game, dictator game, risk game, social distance, Cameroon

Dangerous interactions: problems in interpreting tests of conditional aid effectiveness

David Fielding and Stephen Knowles

The World Economy (forthcoming)

Abstract

There is now a substantial empirical literature examining the determinants of aid effectiveness. A large part of this makes inferences based on a regression incorporating aid (as a share of recipient GDP) interacted with some institutional or policy variable. Recently, some authors have questioned the statistical robustness of such regressions. We explore aid-policy interaction terms in the context of a simple theoretical model, showing how different non-linearities may be conflated. The resulting difficulties in the interpretation of aid-growth regressions are illustrated in the context of a seminal paper in the conditional aid effectiveness literature. Our aim is to re-emphasize the importance of grounding regressions in growth theory, which is essential to the correct interpretation of nonlinearities in empirical growth models.

JEL classification: O19, O40

Keywords: growth, aid effectiveness

Social capital and cross-country environmental performance

Hari Bansha Dulal, Roberto Foa and Stephen Knowles

Journal of Environment and Development, 2011, vol 20, pp 121-144.

Abstract

Previous empirical work on the effects of social capital on measures of environmental performance across countries has been limited by data on social capital only being available for a relatively small number of countries. This paper makes use of a new data set measuring different dimensions of social capital for a much larger number of countries to analyse the relationship between social capital and the environment across countries. There is evidence that some aspects of social capital are associated with better environmental performance.

JEL Classifications: Z10, Q50

Keywords: cross-country, environment, social capital, gender

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Which institutions are good for your health? The deep determinants of comparative cross-country health status

Stephen Knowles and Dorian Owen

Journal of Development Studies, 2010, vol 46, pp 701-723.

Abstract

We extend the literature on the deep determinants of economic development by focusing on life expectancy, instead of income per capita, as an indicator of economic development, and by examining the role of informal, as well as formal, institutions. Our empirical results suggest that formal and informal institutions are substitutes. Improving informal institutions has positive effects on life expectancy that are statistically significant for most countries and stronger than the effects of improving formal institutions. The gains from improving informal institutions are greatest for countries in which institutions are weakest. Geographical factors also help explain cross-country variation in life expectancy.

JEL Classifications: O10, I10

Key words: Life expectancy, health, deep determinants, institutions, social capital, geography

Trust and ROSCA membership in rural Cameroon

Alvin Etang, David Fielding and Stephen Knowles

Journal of International Development, 2011, vol 23, pp 461-475.

Abstract

A key element of Rotating Saving and Credit Associations (ROSCAs) is the trust which members must place in each other, and which replaces formal financial contracts in places where financial transactions costs are high. However, there is very little evidence on the relationship between trust and ROSCA membership. We address this issue using new experimental data from rural Cameroon. We find large and statistically significant differences between trust among ROSCA members and trust among other people. However, the demographic characteristics associated with ROSCA membership are rather different from the ones that explain variations in the level of experimental trust.

Key words: Trust, Reciprocity, Economic Experiments, ROSCAs

Social capital, egalitarianism and foreign aid allocations

Stephen Knowles

Journal of International Development, 2007, vol 19, pp 299-314

Abstract

This paper explores the issue of whether countries that have higher levels of social capital, and/or are more egalitarian, are more generous in terms of donating foreign aid. The empirical results suggest that, in countries with a more equal distribution of income, aid allocations by the government are higher, but donations to non-government aid organisations by the private sector are lower. There is a positive correlation between the level of social capital and aid allocated by both the government and the private sector.

JEL Classifications: F35, Z13, O1

Keywords: Social capital, trust, inequality, foreign aid

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Quantifying compliance costs of small businesses in New Zealand

W. Robert J. Alexander, John D. Bell and Stephen Knowles

New Zealand Economic Papers, 2005, vol 39, pp 37-50

Abstract

This paper reports on a small-scale study of the compliance costs of small New Zealand businesses. Participating firms were asked to keep a record of both time spent and expenditure directly incurred over a thirteen-week period. This differs from previous studies that rely on a firm’s recall of how much time has been spent on compliance over the previous year. The results suggest that New Zealand small businesses, on average, spend less time, but a similar amount of money, on compliance than has been indicated in previous studies. A number of firms do perceive compliance to be a major issue, and in some cases this perception prevents firms from expanding.

JEL classifications: M13, M21

Inequality and economic growth: the empirical relationship reconsidered in the light of comparable data

Stephen Knowles

Journal of Development Studies, 2005, Vol 41, pp 135-159

Abstract

All of the recent empirical work on the relationship between income inequality and economic growth has used inequality data that are not consistently measured. This paper argues that this is inappropriate and shows that the significant negative correlation often found between income inequality and growth across countries is not robust when income inequality is measured in a consistent manner, using data from the World Income Inequality Database. However, evidence is found of a significant negative correlation between consistently measured inequality of expenditure data and economic growth for a sample of developing countries.

JEL Classification: O4

keywords: Income inequality, Distribution of expenditure, Economic growth

Total Factor Productivity, Per Capita Income and Social Divergence

Quentin Grafton, Stephen Knowles and Dorian Owen

Economic Record, 2004, Vol 80, pp 302-313

Abstract

The paper introduces the concept of social divergence, defined as the social barriers to communication and exchange between individuals and groups within a society, and analyses its impact on total factor productivity (TFP) and per capita income. Using a cross section of 27 developing countries, TFP and per capita income are separately regressed on measures of social divergence that include the distribution of personal expenditures, ethnolinguistic diversity, religious diversity and an educational Gini coefficient. The results indicate that higher levels of social divergence are associated with both statistically and economically significantly lower levels of TFP and per capita income.

JEL classification: O4, C2, P0

Key Words: social divergence, total factor productivity, per capita income

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Social capital and national environmental performance: a cross-sectional analysis

R. Quentin Grafton and Stephen Knowles 

The Journal of Environment and Development, 2004, Vol 13, pp 336-370

Abstract

Using cross-country data from a sample of low, middle and high-income countries, the paper explores the empirical relationships between national measures of social capital (civic and public), social divergence and social capacity upon various indicators of national environmental performance. The results suggest that the mere existence of social capital, as measured by trust, civic engagement and associational activity, is not a sufficient condition for improved national environmental outcomes. The findings indicate, one, how social capital is applied and whether it is directed to environmental stewardship is important in determining its national impact, two, the significance of public social capital and effective national environmental policies in decoupling the link between environmental degradation and economic activity and, three, the possible link between effecitve environmental policies and public social capital and higher levels of per capital income.

keywords: social capital, environmental performance, cross-sectional analysis

Government intervention and economic performance in East Asia

Stephen Knowles and Arlene Garces

Economic Development and Cultural Change, 2003, vol 51, 451-477

Abstract

Previous empirical work on the effect of government intervention on economic performance has used government spending as a proxy for intervention. This proxy is imperfect as many East Asian economies have low levels of government spending but high levels of government intervention. This paper uses different proxies for government intervention and includes them in a neoclassical growth model to examine the effect of intervention on output per worker, using cross-country data. High levels of government ownership are found to be negatively correlated with the level of output per worker, and weak evidence is found of a negative correlation between high levels of price controls and output per worker. Once government consumption is measured in local prices there is no evidence of any significant correlation between government consumption and output per worker.  

JEL classifications: O40, H30

key words: government intervention, economic growth, output per worker, price controls, government ownership, government spending

Are educational gender gaps a brake on economic development? some cross-country empirical evidence

Stephen Knowles, Paula K. Lorgelly and P. Dorian Owen

Oxford Economic Papers, 2002, vol 54, 118-149.

Abstract

This paper derives and estimates a neoclassical growth model which includes female and male education as separate explanatory variables. The model is also reparameterised so that education enters the model as a gender gap. The theoretical model suggests that the interpretation of the coefficient on educational gender gaps depends crucially on what other education variables are included in the equation. Our empirical results suggest that female education has a positive and significant impact on labour productivity across countries. The role of male education is less clear.

JEL classification : O40, I12.

keywords : economic growth, productivity, education, human capital, gender gaps.

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Are the Penn World Tables Data on Government and Investment Being Misused?

Stephen Knowles

Economics Letters, 2001, vol 71, 293-298

Abstract

This paper argues that it is inappropriate to measure G/Y and I/Y using Penn World Tables data. The Penn World Tables impose a set of international relative prices on the data, which are inappropriate for assessing the sizes of the government and investment sectors. It is argued that it is preferable to measure these ratios using local prices. It is shown that the empirical results of Barro and Lee (1994) are sensitive to whether G/Y and I/Y are measured in local or international prices.

JEL classification: O40

keywords: Penn World Tables, international prices, economic growth; investment; government consumption

Abstract

Barro and Lee (1994) and Barro and Sala-i-Martin (1995) find that real per-capita GDP and both male and female education have important effects on fertility in their cross-country empirical studies. In order to assess the robustness of their results, we subject their estimated models to specification and diagnostic testing, examine the effects on the model of using the improved Barro and Lee (1996) cross-country data on educational attainment of the population aged 15 and over, and compare the different specifications used by Barro and Lee and by Barro and Sala-i-Martin. The results obtained suggest that their fertility equations do not perform well in terms of diagnostic testing, and are very sensitive to the use of different vintages of the educational attainment proxies and of the Summers-Heston cross-country income data. A robust explanation of fertility, to link with empirical growth equations, has, therefore, not yet been found; further work is required in this area.

Abstract

Motivated by the observation that many countries with an active industrial policy also have a lax competition policy, this paper argues that restricting firm numbers may be a means of rendering industrial policy more effective. A simple model is set up in which a subsidy is desirable to correct a general externality but may induce over-entry. Restricting the number of firms then renders the subsidy policy more effective in correcting the externality problem.

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Does agriculture contribute to economic growth? some empirical evidence

Hunter Humphries and Stephen Knowles

Applied Economics, 1998, vol 30, 775-781

Abstract

This paper augments the Solow-Swan model of economic growth to include the share of the labour force working outside the agricultural sector as a labour augmenting variable in the aggregate production function. The cross-country empirical results suggest that transferring labour from the agricultural sector to other sectors of the economy is associated with economic growth. This result is robust to using instrumental variables to control for the potential endogeneity of the relative size of the agricultural labour force.

Abstract

Models of endogenous economic growth typically assume that aggregate production is characterised by increasing returns to scale, often as a result of the accumulation of physical and human capital. In this paper, an international data-set on formal educational attainments is used to disaggregate total employment in order to estimate a Cobb-Douglas aggregate production function. The function is estimated, using a pooled cross-section time-series model, for a selection of high income OECD countries for five years in the period 1960-85.The estimation results suggest that increasing returns to scale prevailed.

keywords: aggregate production function, economic growth, education, OECD

Abstract

A structural growth equation is formulated incorporating education and health as labour-augmenting variables in an aggregate production function. Although the model is an extension of the neoclassical framework, with diminishing returns to physical capital, growth rates in output per worker need not be identical across countries, even in their steady states. Cross-country empirical estimates suggest a strong positive relationship exists between growth and health (as proxied by life expectancy), even after allowing for possible simultaneity, consistent with evidence on the productivity enhancing effects of improved health status. By contrast, the relationship between output per worker and education is not significant.

JEL classification: O40, I12.

keywords: growth, education, health, human capital, life expectancy

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Which level of schooling has the greatest economic impact on output?

Stephen Knowles

Applied Economic Letters, 1997, vol 4, 177-180

Abstract

An assessment is made of whether primary, secondary or tertiary education has the greatest impact on national income. An aggregate production function is estimated for a cross-section of 77 countries which disaggregates the labour force on the basis of the highest level of schooling attained. The results imply that for both high-income and less developed countries that the marginal product of labour increases with each successive level of schooling. Tertiary education has the greatest economic impact.

Abstract

This paper examines the effects of incorporating a proxy for health capital in Mankiw, Romer and Weil's empirical growth model. Results suggest a stronger and more robust relationship between income per capita and health capital, than between income per capita and educational human capital.

JEL classification: O47, O15, I12
keywords: growth, health, education, human capital

Agenda, 1995, vol 3, 223-5

Stephen Knowles

Rivista Internazionale di Scienze Economiche i Commerciali (International Review of Economics and Business), 1993, vol 60, 513-542

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Chapters in Books

The fundamental determinants of health and education: institutions versus geography

Michael Jones, Stephen Knowles and P. Dorian Owen

In Institutions and Market Economies: The Political Economy of Growth and Development, W.R. Garside (editor), Palgrave Macmillan, Basingstoke, 167-185 (2007).

Is Social Capital Part of the Institutions Continuum and is it a Deep Determinant of Development?

Stephen Knowles

In Advancing Development: Core Themes in Global Economics, G. Mavratos and A. Shorrocks (editors), Palgrave MacMillan, London (2007).

Social Divergence and Productivity: Making a Connection

Quentin Grafton, Stephen Knowles and Dorian Owen

In The Review of Economic Performance and Social Progress: Towards a Social Understanding of Productivity, A. Sharpe, F. St-Hilaire and K. Benting (editors), Institute for Research on Public Policy and Centre for the Study of Living Standards, Montreal and Ottawa: 203-226 (2002)

Government intervention and growth in East Asia 

Arlene Garces and Stephen Knowles

In Asian Nationalism in an Age of Globalisation (Roy Starrs editor), Curzon Press, Surrey, 2001.

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