Three Essays on Development Economics

This dissertation combines research on three topics in development economics. The first paper estimates the long-term labor performance outcomes for a worker subjected to a negative labor market shock upon entry. The second paper, based on joint work with Alain de Janvry and Elisabeth Sadoulet, examines the political economy of public goods provision through community driven development projects in the context of decentralization . The third paper analyzes household behavior under multiple shocks in rural China. The first paper looks at the impact of labor market shocks upon graduation on the education/work decision and on subsequent employment status in Indonesia where the Asian financial crisis hit in 1997/8. The work/education decision affects the selection of samples when estimating the later impact. Therefore we use a dual selection model to correct the sample selection bias due to the decision process. We find evidence of persistent impacts on later labor market outcomes for junior high and senior high school graduates measured as the probability of working in the informal sector or the agricultural sector. The second paper identifies the impact of increasing decentralization on community targeting using the unique situation of Zambia's Social Investment Fund (SIF) where the degree of decentralization changed in time and space across districts over the 15 years of program implementation. We find that greater decentralization of SIF's functions to districts that had been deemed to have the necessary level of managerial capacity to deserve decentralization led to more progressive targeting across wards, mildly so at the national level and strongly so within districts. We also observe how local electoral politics gained importance with greater decentralization, with more votes received by the candidate from the majority party in the district council attracting more projects to a ward, and more projects in a ward rewarded by more votes for the councilor from the incumbent party.The third paper examines who is more likely to be exposed to shocks, which ex-post coping strategies are employed, and how shocks affect the welfare of Chinese rural households using detailed information on a variety of shocks and household characteristics. We find that an increase in medical expenditures due to health shocks has a negative impact on non-medical expenditures: durable consumption is negatively associated with health shocks in two relatively wealthier provinces; food consumption shows a similar trend among households in the richest province of the sample. Secondly, households who experienced only health shocks have higher medical expenditures than those who experienced both agricultural and health shocks. This suggests that medical insurance schemes in rural China are absent or not functioning well, and that agricultural shocks are also not well-insured