Emmanuel Jimenez and Donald Cox. 1989 "The Relative Effectiveness of Private and Public Schools, Evidence from Two Developing Countries." Living Standards Measurement Study, Working Paper No. 60, World Bank, Washington, D.C.

Abstract

We estimate quality differences between private and public secondary schools in two developing countries: Colombia and Tanzania. Quality is measured by student performance on standardized achievement tests. We focus on the sample-selection aspects of making quality comparisons. Estimated sample-selection effects suggest that Colombian students sort themselves by type of institution (private or public); but Tanzanian students appear to be selected by a hierarchical mechanism, with the worst students entering private institutions. These effects are consistent with the different institutional frameworks for educational choice in these countries.

For each country, private schools offer achievement advantage. By standardizing for differences in student and school attributes, private-school students have higher achievement test scores.

Wim Vijverberg. 1989 "Labor Market Performance as a Determinant of Migration." Living Standards Measurement Study, Working Paper No. 59, World Bank, Washington, D.C.

Abstract

Are migrants more productive workers than nonmigrants? It is an old question, which is further complicated by the fact that one should distinguish productivity at (rural) places of origin from that at (urban) places of destination. In principle, one would like to determine productivity of workers regardless of their migration status and then compare workers who choose to migrate with the overall population. Even recent empirical studies yield no conclusions for such unconditional comparison, since they only examine productivity of workers, given their migration status. In a comparison of migrants with nonmigrants, both observed and unobservable productivity factors are relevant. This paper focuses more on the unobservable factors and their correlation between places of origin and destination. A human capital model of migration demonstrates that more productive workers at the origin would choose to migrate only if the correlation between origin and destination factors is strongly positive. Longitudinal data drawn from the Côte d'Ivoire Living Standards Survey, 1985-86, are used to examine the pattern of migration in the light of labor market performance both of wage employees and non-farm self-employed workers. It is found that, indeed, the more productive workers migrate. Furthermore, the general direction of migration is toward cities. The conclusion is therefore that rural areas lose their productive workers and that urban areas may gain in productivity from the geographical shifts in population.

Sandra Rosenhouse. 1989 "Identifying the Poor: Is "Headship" a Useful Concept?" Living Standards Measurement Study, Working Paper No. 58, World Bank, Washington, D.C.

Abstract

Policymakers concerned with the amelioration of poverty have singled out female-headed households as one of the key target groups deserving intensified attention. Studies have found that households headed by women are more common among the poor. Research conducted to examine the characteristics and well-being of these households, however, has employed a definition of headship commonly used in surveys, namely, that the head is the person other household members recognize as the head of household. The term "head of household" was originally introduced in surveys to avoid double counting of household members in household rosters, and, as generally applied, fails to reflect any of the elements of the definition of headship: regular presence in the household, overriding authority, and primary economic support.

This paper examines the characteristics of households reported to be headed by women to show the limited value of reported headship in reliably identifying the economic support base of the household. To be relevant for policymaking, the concept of headship should be defined on the basis of economic support. This paper presents one example of an indicator of headship which reflects work that is done to support the household. The concept of the working head helps investigators identify more clearly women supporting households in extreme circumstances than does the idea of the reported head, because it draws attention to the overall disadvantage of female heads: the lower return on their market hours of work and the overall work burden they carry to attain a given level of consumption for their household.

Harold Alderman and Paul Gertler. 1989 "The substitutability of Public and Private Health Care for the Treatment of Children in Pakistan." Living Standards Measurement Study, Working Paper No. 57, World Bank, Washington, D.C.

Abstract

To evaluate how imposing or raising user fees at government health care facilities will affect access to medical care, the distribution of effects across income groups as well as the availability of other providers of medical care must be considered. This study uses a nested multinomial logit model to study the substitutability of public and private care providers in the treatment of children's illnesses in urban Pakistan. Although the poor are more price responsive than the general population, reduced use of government clinics following a price rise will lead to greater use of private care providers rather than to an increase in self-care or the forgoing of care. Thus the private sector is likely to handle most of the patients who shift away from publicly provided health care following an increase of user fees in urban Pakistan, provided that prices do not rise in the private sector because of increased demand.

Paul Glewwe and Dennis de Tray. 1989 "The Poor in Latin America during Adjustment: A Case Study of Peru." Living Standards Measurement Study, Working Paper No. 56, World Bank, Washington, D.C.

Abstract

This paper provides a general overview of the effects of structural adjustment programs on the poor and then turns to a specific country setting, Peru, as a means of illustrating the discussion. It is a companion paper to a parallel study of an African country, Côte d'Ivoire.

The depth of Peru's economic problems makes it likely that the Peruvian economy will have to undergo major adjustments in the near future. Among the options policy makers will consider are: realignment of the various exchange rates, trade liberalization, removal of price distortions, and reduction of government expenditures. The analysis presented here shows how household level data can be used to assess the effect of various policy options on the welfare of the poor.

Several features of Peru's poor have important implications for programs designed to reduce the effect of adjustment on those groups. First, most poor households are located in rural areas; second, most subsidies that affect rural areas don't reach the rural poor; third, the rural poor often produce much of what they consume. These facts suggest that correcting many of the distortions affecting Peru's agricultural sector may not directly harm the poor. For Peru's urban poor, the case is more complicated, but the conclusions much the same. Regarding food subsidies and taxes, were all of these dropped the net (immediate) effect may well be favorable as the prices of wheat and wheat products, a major staple, would decline substantially. Other government programs, including those related to health and education, could be changed in ways that would benefit the poor and, in some cases, reduce overall public sector expenditures.

Victor Levy and John L. Newman. 1989 "Wage Rigidity: Micro and Macro Evidence on Labor Market Adjustment in the Modern Sector." Living Standards Measurement Study, Working Paper No. 55, World Bank, Washington, D.C.

Abstract

Aggregate data on wages and employment may provide misleading indicators of labor market conditions. They may suggest inappropriate wage policies in the face of the rising unemployment experienced in many developing countries during the 1980s. Such increases in unemployment are often attributed to wage rigidities. A cursory review of aggregate data for the modern sector in Côte d'Ivoire would support this view, suggesting that employment declined during the 1979-84 recession due to an increase in real wages. Examination of disaggregated data from two labor force censuses of the modern sector, however, shows that real wages declined for specified classes of labor. The work force was characterized by greater education, training, and experience; workers with a given level of attributes received a lower real wage by the end of the recession than before it. Despite this drop in real wages, employment in the modern sector declined.

This working paper is available only in French. For an English language version of the paper, see the World Bank Review, Vol. 3, No. 1, January 1989, pages 97-117.

Paul Gertler and Paul Glewwe. 1989 "The Willingness to Pay for Education in Developing Countries: Evidence from Rural Peru." Living Standards Measurement Study, Working Paper No. 54, World Bank, Washington, D.C.

Abstract

In recent years, citing the low price elasticity of demand for schooling, some economists have advocated increasing school fees to raise revenue for educational improvements in developing countries. But elasticities alone are not enough - one must estimate the willingness to pay for schooling improvements to see whether higher fees are in fact desirable. Using a rigorous theoretical model of the demand for schooling and the principle of compensating variations, we calculate the willingness to pay for new secondary schools in rural Peru. We find that rural Peruvian households are indeed willing to pay fees high enough to more than cover the operating costs of opening new secondary schools in their villages. This is even true of the poorest quarter of the income distribution.

Martha Ainsworth. 1989 "Socioeconomic Determinants of Fertility in Cote d'Ivoire." Living Standards Measurement Study, Working Paper No. 53, World Bank, Washington, D.C.

Abstract

This paper examines the Impact of schooling and income on fertility in Côte d'Ivoire using data from the 1985 Côte d'Ivoire Living Standards Survey. The first part presents graphically the correlations between fertility and area of residence, female schooling and household income. The second part estimates a reduced form equation in which the number of children ever born is regressed on the mother's age and schooling, the location of the household and household income variables. This equation is estimated using ordinary least squares (OLS), maximum likelihood Tobit and a Poisson count model.

For the entire sample, female schooling lowers fertility, while household income raises it. Among the subsample of urban women, only the negative effect of schooling is observed; among the subsample of rural women only the positive effect of household income is observed. The absence of a schooling effect among rural women is attributed in part to the low proportion of women with any schooling. When the sample is broken into three age cohorts, the negative effect of schooling on fertility is observed for the youngest and middle cohorts (ages 15-24 and 25-34, respectively), while the positive effect of income is observed for the middle and oldest cohorts (25-34 and 35+, respectively). This suggests that a fertility decline may be underway among young educated women. Experimentation with different specifications of the schooling variable shows that schooling has a negative effect on fertility even during the early primary years, although the negative effect of secondary schooling is even greater.

The robustness of the results to the choice of income variable is also examined. Three income measures are used: the value of household consumption per adult (a proxy for permanent income); household income per adult; and household nonlabor income per adult. Results were most robust for the permanent income measure, less so for current income and insignificant for nonlabor income. Exclusion of all income variables from the fertility regression lowers the coefficient on schooling and, for rural women, renders it insignificant.

Jacques van der Gaag, Morton Stelcner and Wim Vijverberg. 1989 "Public-Private Sector Wage Comparisons and Moonlighting in Developing Countries: Evidence from Cote d'Ivoire and Peru." Living Standards Measurement Study, Working Paper No. 52, World Bank, Washington, D.C.

Abstract

The continuing economic crises faced by developing countries have placed public employment and compensation under increased scrutiny. Since the government wage bill forms a high proportion of recurrent public spending, cutting it is often viewed as an attractive way of reducing fiscal deficits. This can be accomplished by paring employment or by reducing salaries of civil servants. Most countries have maintained employment but have allowed salaries to erode through inflation. Whether this is the best approach to reducing the wage bill depends heavily on the answer to a deceptively straightforward question: are government workers overpaid vis-a-vis wage earners in the private sector? There are surprisingly few empirical studies that deal systematically with this issue for developing countries. The small body of research that does exist uses standard Ordinary Least Squares (OLS) regression techniques and shows mixed results in terms of both direction and magnitudes of wage differentials.

This study analyzes public-private sector pay differentials in two developing countries, Côte dlvoire and Peru, using unusually comprehensive micro data sets - the 1985 Côte d'lvoire Living Standards Survey (CILSS) and the 1985/86 Peru Living Standards Survey (PLSS).¹ Explicit attention is given to the endogeneity of sector choice. We estimate switching regressions models using Full Information Maximum Likelihood (FIML) and compare the results to those obtained using OLS. For both countries, we find striking differences between the OLS and FIML estimates. The OLS results suggest that public sector wages are higher than private sector wages, but the FIML estimates show that public sector wage offers are well below those in the private sector. Thus, an important methodological conclusion of our study is that standard OLS regressions on samples of public and private sector employees are likely to yield seriously biased estimates of pay structures, and hence a wrong assessment of the wage gap.

We further explore our main finding that public sector wages are "too low" by considering the commonly observed phenomenon of moonlighting" (double jobbing). After finding that moonlighting is more prevalent among government workers than among those In the private sector, we consider whether our FIML estimates of the public-private wage gap can help explain why government workers are likely to have second jobs. Our probit analysis shows that the wage disadvantage of civil servants is an important determinant of moonlighting. We consider this as additional confirmation of our main finding that public sector wages are lower than private sector wages. We conclude that a further erosion of public sector wages can be expected to result in more moonlighting by civil servants.

Our research has an important policy message: Fiscal pressures will continue to call for reductions in the government wage bill via reductions in pay or in employment. Our evidence suggests that the time has come to prescribe the latter acknowledging that, of the two approaches, it is likely to be less palatable in the short-term but more effective in the long-run.

¹ The CILSS was conducted jointly by the World Bank and the Direction de la Statistique of the Ministère de l'Economie et des Finances of Côte d'lvoire. The PLSS was sponsored by the World Bank, Instituto National de Estadística and the Central Bank of Peru.

John Strauss and Kalpana Mehra. 1990 "Child Anthropometry in Côte d'Ivoire: Estimates from Two Surveys, 1985-86." Living Standards Measurement Study, Working Paper No. 51, World Bank, Washington, D.C.

Abstract

Child heights, weights and weights given height are tabulated for the Côte d'Ivoire using the Living Standards Survey data for 1985 and 1986. The major finding is the low incidence of stunting (low height for age) relative to other West African nations. Important regional variation exists, but in the poorer Savanna region levels of stunting are still somewhat lower than in other rural areas of West Africa. Wasting (low weight given height) is more in line with other West African countries, but is far lower than found in South Asia.

Several patterns appear in bivariate relationships between certain household and community factors and the incidence of low height or weight. Parental education and height, and relationship of the child to the household head seem especially important.

Karim Laraki. 1989 "Food Subsidies: A Case Study of Price Reform in Morocco." Living Standards Measurement Study, Working Paper No. 50, World Bank, Washington, D.C.

Abstract

This paper presents an analysis of the costs and benefits of food subsidies in Morocco. It focuses on ways to reduce the financial costs without adversely affecting the standard of living and nutritional status of the poor. Part I describes the organization of the food-subsidy program in Morocco and presents descriptive statistics on food-consumption patterns there. It thus provides background material for Part II, which discusses the methodological issues involved in estimating the welfare and nutritional effects of price and tax reforms in developing countries. A model for estimating price elasticities from cross-sectional data is applied to results from the 1984-85 household consumption survey to quantify the effects of modifying the food-subsidy program in Morocco. Both real income and nutritional effects are used to evaluate the Moroccan program and, by extension, similar ones elsewhere.

Christopher Scott and Ben Amenuvegbe. 1989 "Sample Designs for the Living Standards Surveys in Ghana and Mauritania." Living Standards Measurement Study, Working Paper No. 49, World Bank, Washington, D.C.

Abstract

I. Ghana Living Standards Survey: Recommended Sample Design. The Ghana Living Standards Survey (GLSS) was launched in 1987 by the Ghana Statistical Service. This report presents the planned sample design. A sample of 200 census enumeration areas WEAs) should be selected for the GLSS with probability proportional to the number of census households. Before the year's survey operations begin a field operation will be carried out in each selected EA to list all households. Two hundred "workloads" will be distributed among these 200 EAs by a process akin to systematic reselection of the EA sample, taking into account the number of households listed in comparison with the number in the census in each EA. The number of workloads thus obtained would be 0, 1 or 2 (possibly sometimes 3) in each EA. Each workload corresponds to the 16 households, which will then be selected systematically from the listing in the EA. This will lead to a self-weighting sample with 200 workloads of 16 households - total sample of 3200, distributed over somewhat less than 200 EAs. Implicit stratification will be introduced by systematic selection of EAs from a list prearranged in a significant geographical order. Half of the 200 EAs will be dropped at the end of each year and replaced by a new 100. Each EA is retained in the sub-sample for two years; during this period the same household sample is maintained unchanged within this EA.

II. The Mauritania Living Standards Survey: Proposed Sample Design. The following sample design is proposed. A self-weighting, stratified, two-stage sample of 1600 households will be selected, covering the whole sedentary population of Mauritania but excluding nomads.

The primary sample units will be the enumeration areas (EAs) demarcated for the 1987 population census. The EAs, or more precisely the area units (AUs), will be divided before selection into 4 strata: Nouakchott City, Other towns, Rural River, Rural other.

A sample of 100 AUs will be selected with probability proportional to the number of dwelling units (M. in the i-th AU) reported by the census cartographers in each AU. However, this basic scheme will be modified in the case of Nouakchott City where the number of AUs selected will be doubled and the number of households selected in each will be halved. This modification will lead to the selection of 121 AUs in the whole sample. Enumerators will be sent to the selected AUs to make a list of all sedentary households M! in the i-th AU).

It is desired to interview 16 households exactly in each AU (8 in Nouakchott) and this set is termed the workload. However, if M- and M! differ a fixed workload is not compatible with self-weighting. A 2nd phase of sampling is therefore planned in which AUs are "re-selected" from the initial sample with probability proportional to M!/M. but without changing the total sample size. The discrepancy between M. and M. may result in some AUs now being selected twice and others not being selected at all. The number of times an AU is selected in the 2nd phase shows the number of workloads to be selected in that AU. This will lead to a self-weighting sample with a number of workloads which is always a whole number and usually 1. One team of interviewers will be allocated for each workload (or for 2 workloads of 8 households, in the case of Nouakchott).

The workloads must be allocated among the 10 survey periods ("months") in such a way as to minimize interviewer travel and to maintain a sample distribution which is roughly representative for each month. Finally, the calculated numbers of households will be selected in each EA by systematic sampling from the lists made by the enumerators. For sampling error computation the CLUSTERS program is recommended. This requires specification of the stratification which is to be assumed by the computer, which will involve some combining of strata. The necessary specifications should be drawn up as soon as possible after the selection of workloads so that information can be added to the data file specifying the stratum to be assumed for each AU (and hence for each household).

Paul Glewwe and Jacques van der Gaag. 1988 "Confronting Poverty in Developing Countries: Definitions, Information and Policies." Living Standards Measurement Study, Working Paper No. 48, World Bank, Washington, D.C.

Abstract

This paper examines several commonly used definitions of poverty. We first propose a definition based on the theory of welfare economics and contrast it with other definitions that are often used in empirical studies. We then examine household survey data from Côte d'Ivoire to see whether these different definitions choose the same people as poor. The general finding is that they often do not choose the same people. This implies that different definitions of poverty will often lead to different policy recommendations. The paper then provides a general discussion of poverty-reducing policies, and demonstrates the use of household survey data to formulate and evaluate specific policies.

Paul Glewwe and Dennis de Tray. 1988 "The Poor during Adjustment: A Case Study of Côte d'Ivoire." Living Standards Measurement Study, Working Paper No. 47, World Bank, Washington, D.C.

Abstract

The impact of structural adjustment programs on the poor in developing countries has received a great deal of attention in recent years. This paper provides a general overview of the issues involved and then analyzes the impact of structural adjustment on the poor in Côte d'Ivoire. Several conclusions can be drawn from the Ivoirian case. Many of the poor may be little affected by structural adjustment policies because most of them are subsistence farmers in rural areas. Consequently, the cost of safeguarding the poor during structural adjustment may not be very high. In practice, however, it may be very difficult to identify the poor and to implement the needed interventions. Household survey data can be extremely useful in assessing the effects of structural adjustment on the poor and designing appropriate policies on their behalf.

Wim Vijverberg. 1988 "Nonagricultural Family Enterprises in Côte d'Ivoire: A Developing Analysis." Living Standards Measurement Study, Working Paper No. 46, World Bank, Washington, D.C.

Abstract

Non-agricultural self-employment is an important part of the economy in Côte d'Ivoire. About one third of the households, one fourth of all male workers and more than one half of all female workers are self-employed and engaged in non-agricultural self-employment. A good understanding of the impact of public policy is therefore not possible without an analysis of non- farm family enterprises.

Studies on the income generated by non-agricultural enterprises are scarce in comparison to analyses of wage earnings and farm production. Also, without sufficient empirical support, family enterprises are usually considered a part of the so-called informal sector, the lower segment of a segmented economy, where one finds undesirable jobs with low pay and little prospect of advancement.

This paper describes family enterprises in Côte d'Ivoire in the light of this issue. Family enterprises have indeed some characteristics that are usually associated with the informal sector: They are quite transitory; they are small; they use a labor-intensive mode of production; and the family workers employed by them are uneducated. However, to classify all family enterprises as being in the informal sector does injustice to some large, productive, profitable, and capital intensive enterprises. Moreover, family enterprises are not typically operated by low-income households, and the isolation that one would associate with a segmented economy is contradicted by the fact that many self-employed workers reside in households where other members hold a wage job or operate a farm.

Further evidence suggests that capital is in shortage. In particular, few enterprises use large capital items such as vehicles and buildings. However, to subsidize these items will likely benefit only the largest enterprises.

There is a general lack of education among self-employed workers. Only one fourth is reported to be literate. Given this, even basic education is likely to be beneficial. The relative prevalence of apprenticeship training among the non-agricultural self-employed suggests a demand for vocational skills, which, if provided in conjunction with the basic curriculum, may encourage students to become entrepreneurs rather than wage employees as seems to be the case at present.

Since low-income households are not the only ones to operate family enterprises, policies directed at family enterprises to alleviate poverty need to be especially targeted at the poor.

Paul Gertler and Jacques van der Gaag. 1988 "Measuring the Willingness to Pay for Social Services in Developing Countries." Living Standards Measurement Study, Working Paper No. 45, World Bank, Washington, D.C.

Abstract

We provide a methodology for the ex ante evaluation of the welfare effects of proposals to use user fees to finance improved access to social services in developing countries. The analysis requires estimation of demand functions, from which price elasticities and the willingness to pay for improved access can be obtained. The willingness to pay is the maximum price that can be charged without reducing individuals' welfare and utilization of medical services. The estimation is complicated by the problem that governments in developing countries often are the dominant suppliers of social services in their countries, and provide these services free of charge so that there is little price variation in the data. We show how variation in individuals' private time prices can be used to identify all of the parameters of the demand functions.

The methodology is used to evaluate the possible implementation of the user fee plan for medical care clinics in rural Côte d'Ivoire. Our results show that it is likely to have highly regressive welfare effects. Specifically, the policy is shown to increase the welfare and medical care utilization of individuals in the top half of the income distribution, while reducing the welfare and medical care utilization of individuals in the bottom half of the income distribution.

Angus Deaton and Dwayne Benjamin. 1988 "The Living Standards Survey and Price Policy Reform: A Study of Cocoa and Coffee Production in Côte d'Ivoire." Living Standards Measurement Study, Working Paper No. 44, World Bank, Washington, D.C.

Abstract

Cocoa and coffee are the most important crops in the Côte d'Ivoire; they account for almost half of agricultural land use, for the occupation of almost 40% of Ivoirian households, for some 60% of export earnings and as much as 40% of government revenue. The paper is concerned with two related questions, first, what determines coffee and cocoa yields, and second, how should the government determine the farmgate prices for the two crops. The first is of increasing concern because further expansion of cocoa and coffee planting is likely to be limited, so that further growth in output will depend more on increases in productivity. The second question is central to policy reform in the Côte d'Ivoire, and involves issues of efficiency in agricultural production, the distribution of income between farmers and others, and the legitimate needs of the government for revenue. Heavy use is made throughout the paper of the data from the 1985 Living Standards Survey of households in the Côte d'Ivoire. Agricultural data from the survey are compared with those from other sources, and while the fit is not perfect, we find no reason to be more than usually cautious in using the LSS data to look at cocoa and coffee production and the characteristics of cocoa and coffee farmers. We use the survey data to estimate yields in relation to the maturity of the tree stands, and obtain good results. It is also found that very much higher yields are associated with the use of fertilizer and insecticide inputs, and we speculate on a number of possible explanations, including the possibility that the effects are real. The LSS data are ideal for assessing the likely first round effects on the distribution of income of raising cocoa and coffee prices. Cocoa and coffee farmers are mostly smallholders, and although rarely among the poorest, are also not the richest people in the country. A large fraction of both harvests comes from households in the middle of the distribution of living standards, so that price increases are not likely to have major impacts on inequality. The paper concludes with a discussion of the broader questions of price setting, including the tax differentials between the two crops, and the degree to which the government of the Côte d'Ivoire should shield its farmers from international price fluctuations.

Wim Vijverberg. 1988 "Profits from Self-Employment: A Class Study of Côte d'Ivoire." Living Standards Measurement Study, Working Paper No. 43, World Bank, Washington, D.C.

Abstract

Self-employment is an important mode of activity in most if not all less developed countries. Even outside the agricultural sector, a significant portion of the labor force makes a living through self-employment. Until recently, such self-employed workers were often viewed as less productive individuals, who, rejected in their search for salaried work, are forced by poverty to do "something" to survive. Their status in the urban environment was essentially like that of the subsistence farmers in the midst of a developing agricultural economy based on cash crops: they were left behind.

Recent research has indicated that the non-agricultural self-employed fill a niche in the economy that large industry cannot fill. The goods and services that they produce may well be a necessity to society, or at least, they are in demand. Those "unproductive" workers may well be a necessary part of the infrastructure within which large-scale industry can flourish.

This raises many questions that were previously ignored: why do self-employed workers end up in self-employment? Do they choose to, or do they have no alternative? This paper addresses the issue that is basic to these questions: how productive are non-agricultural enterprises? If labor and capital inputs are productive, the self-employed may well choose their mode of employment with a rational motive. If labor and capital are not productive, the older more negative view may yet hold true.

In Côte d'Ivoire, self-employed labor is not unproductive, though marginal returns are somewhat less than the wage rate of equivalent salaried workers. Capital yields extremely high returns, possibly above 100 percent per month. Assuming that the financial market is hard to access for an Ivoirian with some but only little funds, such person may be well off to establish his own enterprise and gain the large returns to capital that offset the somewhat lower returns to labor.

This paper finds a weak positive effect for only the education component of human capital. This may be caused by the fact that the Ivoirian self-employed have received much less education than the threshold level of about five years that research on agricultural production has uncovered.

Paul Glewwe. 1987 "The Distribution of Welfare in Peru in 1985-86." Living Standards Measurement Study, Working Paper No. 42, World Bank, Washington, D.C.

Abstract

This paper examines the distribution of welfare in Peru in 1985-86 as measured by (adjusted) per capita consumption expenditures. The data employed are from the 1985-86 Peru Living Standards Survey. It is primarily descriptive in nature, but possible explanations of patterns observed are given at several points. The major findings are:

l. There is a strong correlation between education and welfare, which highlights the importance of education policies.

2.The urban population is clearly better off than the rural population, and the majority of the poor are found in rural areas, most often as self-employed agriculturalists.

3.Poor households have as many, if not more, working members as a fraction of total members, as a typical Peruvian household.

4.Within urban areas, heads of poor households are primarily sales and service workers industrial and craft workers, both self-employed and employed by private firms.

Morton Stelcner, Jacques van der Gaag and Wim Vijverberg. 1987 "Public-Private Sector Wage Differentials in Peru: 1985-86." Living Standards Measurement Study, Working Paper No. 41, World Bank, Washington, D.C.

Abstract

Fiscal deficits and external debts have placed public sector employment and compensation under increased scrutiny as developing countries confront the economic crises of recent years. Although much attention has been given to the overall problem of growing public expenditures, there have been few research efforts addressed to a basic question: Do public sector workers with the same productivity traits earn more than their private sector counterparts? The answer to this question has important policy implications because reducing the government wage bill, which comprises the major portion of recurrent public spending, is often viewed as an attractive means to reducing budget deficits. In many countries, this is accomplished by allowing the salaries of government employees to be eroded by inflation, while maintaining the level of employment.

Surprisingly, there is little systematic empirical evidence on public-private sector pay comparability in developing countries, and most of the existing findings show mixed results in terms of both direction and magnitude of wage differentials. Moreover, most studies are based on statistical procedures, such as ordinary least squares regression, that do not take into account the process by which the wage earners with different personal characteristics are likely to be employed in the public rather than the private sector, i.e., selection bias.

This study considers how wage differentials between male wage earners in the two sectors are generated using recent (1985/86) data for Peru (The Peru Living Standards Survey). Explicit attention is given to the endogeneity of sector choice. A switching regression model is used to consider the question of whether government workers enjoy a "pure" wage advantage or economic rent. We find that this is not the case if selectivity corrected estimates of wage functions are compared. In fact, in metropolitan Lima, public sector wages are well below those in the private sector, while in other urban areas there is no significant wage differential. The estimation procedure and results of this study should serve as useful resources for formulating wage and employment policies in developing countries, especially wage and employment reforms in the public sector.